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 • • • • • 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 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 • • • • Basic concepts Managerial economics Designing organizational architecture Application of organizational architecture 1-9 ... the appropriate architecture changes 1-8 Managerial Economics and Organizational Architecture, 5e Book Overview • • • • Basic concepts Managerial economics Designing organizational architecture. .. managers structure organizational architecture to motivate employees? • incentive conflicts and opportunistic behavior 1-5 Managerial Economics and Organizational Architecture, 5e Economic Darwinism... ensure high quality production 1-7 Managerial Economics and Organizational Architecture, 5e Economic Darwinism • Existing architecture is not random • Surviving architectures are optimal relative