Managerial economics and organizational architecture 5e ch001

Managerial Economics and Organizational Architecture, 5e Chapter 1: Introduction... Overall Purpose• Provide a framework for analyzing organizational problems • Provide basic managerial

Managerial Economics and

Organizational Architecture, 5e

Chapter 1: Introduction

Overall Purpose

• Provide a framework for analyzing

organizational problems

• Provide basic managerial economic

concepts

• Apply these concepts to operational

decisions

Organizational Architecture

Objectives

• Assignment of decision rights

• Methods of compensation

• Performance evaluation of individuals and

units

Managerial Economics Objectives

• Which markets to enter

• Product differentiation

• Production choices

• Pricing decisions

• Market analysis and competitor behavior

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?

Economic Darwinism

• Only the fittest survive

• competition encourages efficient decisions

• maximizing shareholder value

• firms must adapt or close

Economic Darwinism

• Firms “benchmark” successful practices

• best practices are emulated

• Appropriate organizational architecture

can

• lower costs

• ensure high quality production

Economic Darwinism

• Existing architecture is not random

• Surviving architectures are optimal

relative to competitors

• As environments change, the appropriate

architecture changes

Book Overview

• Basic concepts

• Managerial economics

• Designing organizational architecture

• Application of organizational architecture