Running Head: Reflection on why Managers need working Knowledge of Micro Economics Prior to Formulating Strategy.
ECON521 – Economics of Organizational Architecture and Strategy
As many know management is a basic essential to any organization. Many different things fall under management in order to fulfill every aspect of that position. You don’t have to be a college Graduate in order to be a manager, but you do have to have many skills. When being a manager you must know how to cultivate a team, you must have great listening skills, you must be able to empower your staff, and have knowledge in an overall structure of an organization.
Microeconomics plays a part of management.
Roughly speaking, microeconomics deals with economics decisions made at a low, or micro, level. More precisely, I would define microeconomics as "the analysis of the decisions made by individuals and ...view middle of the document...
It is known that strategy is generally a medium for realization of organizational objectives. Objectives stress the state of being there whereas Strategy stresses upon the process of reaching there.
Evaluating the general economic and industrial environment in which the organization operates. This involves an overview of the organizations competitive position. An organization must practically fix the measurable target values for some of the organizational objectives.
The idea behind this is to compare with long term customers, so as to evaluate the contribution that might be made by various product zones or operating departments.
Performance analysis includes discovering and analyzing the gap between the planned or desired performance. A serious evaluation of the organizations past performance, present condition and the desired future conditions must be done by the organization. This serious evaluation identifies the degree of gap that persists between the actual reality and the long-term goals of the organization. An effort is made by the organization to estimate its probable future condition if the current trends persist.
The best course of action is actually chosen after considering organizational goals, organizational strengths, potential and limitations as well as the external opportunities.
Understanding the forces that shape industry competition is the starting point for developing strategy. Every company should already know what the average profitability of its industry is and how that has been changing over time. The five forces reveal why industry profitability is what it is. Only then can a company incorporate industry conditions into strategy. The forces reveal the most significant aspects of the competitive environment. They also provide a baseline for sizing up a company’s strengths and weaknesses. Most importantly, an understanding of industry structure guides managers toward fruitful possibilities for strategic action, which may include any or all of the following: positioning the company to better cope with the current competitive forces; anticipating and exploiting shifts in the forces; and shaping the balance of forces to create a new industry structure that is more favorable to the company.