Managerial Economics and Organizational Architecture, 5e
Managerial Economics and
Organizational Architecture, 5e
Chapter 1: Introduction
McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Managerial Economics and Organizational Architecture, 5e
Overall Purpose
• Provide a framework for analyzing
organizational problems
• Provide basic managerial economic
concepts
• Apply these concepts to operational
decisions
1-2
Managerial Economics and Organizational Architecture, 5e
Organizational Architecture
Objectives
• Assignment of decision rights
• Methods of compensation
• Performance evaluation of individuals and
units
1-3
Managerial Economics and Organizational Architecture, 5e
Managerial Economics Objectives
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Which markets to enter
Product differentiation
Production choices
Pricing decisions
Market analysis and competitor behavior
1-4
Managerial Economics and Organizational Architecture, 5e
The Economic Perspective
• Economics provides a framework for
analyzing decisions
• How do individuals make choices?
• the role of incentives
• How can managers structure
organizational architecture to motivate
employees?
• incentive conflicts and opportunistic behavior
1-5
Managerial Economics and Organizational Architecture, 5e
Economic Darwinism
• Only the fittest survive
• competition encourages efficient decisions
• maximizing shareholder value
• firms must adapt or close
1-6
Managerial Economics and Organizational Architecture, 5e
Economic Darwinism
• Firms “benchmark” successful practices
• best practices are emulated
• Appropriate organizational architecture
can
• lower costs
• ensure high quality production
1-7
Managerial Economics and Organizational Architecture, 5e
Economic Darwinism
• Existing architecture is not random
• Surviving architectures are optimal
relative to competitors
• As environments change, the appropriate
architecture changes
1-8
Managerial Economics and Organizational Architecture, 5e
Book Overview
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Basic concepts
Managerial economics
Designing organizational architecture
Application of organizational architecture
1-9