What Economic Conditions Are Relevant In Managerial Decision Making And How They Are Related With – Essay Example
Managerial Decisions Management of an organization is the scaffold and skeleton that builds and supports its business as well as identity in the market. Efficiency of a management is assessed on how quick they perform a planned action with maximum perfection. A decision taken at the right time for a right purpose can turn the business line to a fast track profit zone. When large organizations take a long process of decision making, they consider various elements like quality of the decision, acceptance, time for execution and the market trends. As major decisions are aimed at making a long term profit inflow, a manager has to refer situations of the business in and outside the organization.
Economics has correlated profit and risk proportions in every business. As “Profit is the reward for risk”, a manager has to decide on how profitably he can manage risk. The management performs a number of case studies and market researches to understand the economic condition of various markets. Production cannot be paused or slowed down for lack of information about economic speculation by experts. As Keats & Young (2006, p.205) state, production function is an important part of economic analysis of the firm as it serves as the foundation for the analysis of the cost”. Therefore managerial decision making usually involves some of the factors relevant to economic conditions like;
a) price of the product and quantity of the commodity to be produced
b) choice between purchase and manufacture of a product for sale
c) durable effect of market acquisition with improved production techniques
d) continued availability of raw materials without changes in price
e) maintenance of stock and management of human resources for future years
f) methods of promotion campaigns and advertising through media
Although every management is very much aware of risk, they have essentially nothing to do with changing economic climates that result in financial problems. Regardless of economic loss, a firm might continue its operation if it has a ‘positive contribution margin’; but a firm that has only ‘negative contribution margin’ ought to cease its business (Keat, Young, 2006, p.317). However, an efficient manager can take tactical measures to overcome risk factors like dropping trend of business out put, poor conditions, shortage of resources, inaccurate techniques, inappropriate schedules and absence of expertise. Economic conditions of the market are influential to the risk factors of every organization. Since management has the responsibility to settle each risk factor, all the managerial decisions are to be taken after due consideration of each possible measure to eliminate any upcoming threat.
Keat, P.G. & Young, P.K. (2006). Managerial Economics: economic tools for today’s decision makers. Pearson Prentice Hall.