How Managerial Economics Can Help To Grow your Business?

“It is easy to date an earthquake, but not an economic decline." (William Edwards Deming, American management consultant)

The existence of competent management is indeed one of the hallmarks of a successful company. It is a fact that no company can gain economic growth without the multiple frameworks of managerial analysis. Economics is a treasure chest of theories and exploration tools that really can aid management in reaching a firm decision and structuring their business to suit. There is no denying that managers often attempt to run extra miles for the economic security of their business.

As per the managerial economics assignment pdf by the Journal of Managerial Economics and Business Strategy, managerial economics is stretching its approach towards a period where no scope of “economic decline” prevail. And the reason behind this growth is the expanded use of managerial economics. Managers must determine how to best employ the best decision-making framework when limited resources. It will add more space for "plentiful resources," which will ease the concerns over adequate decision-making. Let’s know how this can be done!

What is Managerial Economics?

Many managerial economics research papers provide different sets of definitions of managerial research. A definition quoted by Prince and colleagues in the Journal of Managerial Economics explained Managerial economics is a simple combination of two variables "managerial" and "economics." The meaning of the two words explains why managerial economics is essential to a broad set of decision-makers. The managers should strive to fully comprehend the objectives of managerial economics in order to achieve the right judgments at the right time.

Every company, big or small, relies on managerial economics to design the best available decision to double their company's profits. It is the manager's responsibility to make the best decisions for converting loss into profit.

By digging deeper into managerial economics research papers, a definite meaning of managerial economics can be obtained. It concludes that managerial economics blends economic theory, principles, and well-known operational processes to help managers make more informed decisions, typically those preparing for their business development.

The idea of Managerial economics will benefit the users to identify specific factors objectives to narrow down at a conclusion. It aids the managers to merge economic theory into the business approach to smooth decision-making to achieve desired targets. Before we look at how managerial economics might grow business, let us first discuss some value-added benefits of managerial economics.

1. Managerial economics help to analyse demand and forecasting.

It is a fact that the company's revenue can be obtained via the conversion of active inputs into possible outputs. External factors such as income and prices need to be evaluated while analysing the demand. With the help of this study, management would be able to capitalize on the current opportunities and increase the firm's market position. The analysis aids by forecasting how managers project future prices for a specific product.

2. Managerial economics help to analyse cost and production.

The concept of cost analysis provides clear information between the cost-output relationship and linear programming. With the knowledge of these variables, it is clear that the company's management examines the reasons that cause cost variations. The organization subsequently utilizes estimates to make decisions, such as product price. However, production analysis is a form of the physical entity. It involves assessing the favourable production determinants and determining the ideal mixture to reflect the lowest cost. In the event that input prices rise, the management looks beyond and tries out alternatives. A statement from The Economic Times can be added wherein a leading innovator company, Samsung, claims their operating profit increased to 53.3%. They followed the production strategy to expand their production as per the growing demands of the product.

3. Managerial economics help in better pricing.

Price is a critical part of Managerial Economics for every company, as a firm’s cash earnings are mostly influenced by its price structure. However, it is always challenging due to the competitive market based on the exact pricing. Therefore, the managers must ensure that price occupies a significant position among the essential parameter of marketing. When we have said that managerial economics supports cost analysis, it is apparent that it ensures better pricing analysis for significant revenue earnings. Better pricing will always contribute to better economic growth.

4. Managerial economics help in capital and profit management.

It is known that the sum of a company's capital explains all of its assets. Owing to this fact, capital management is most often considered a strenuous activity. Basic competence is the management as well as control for capital costs, and for this, the Equi-marginal principle can be implicated. The main goal of capital management is to make sure that capital is recycled in a viable manner. It suggests to the management that whenever the managerial earnings are lower, cash should be kept in reserve.

Now when the concept of capital management is evident, profit will eventually happen. It will determine the business growth. Capital management would also imply that the company must start by evaluating its financial decisions and establishing the most active capital budgeting practices. So, capital and profit management are dependent factors where capital is directly proportional to business profit. So, the mantra for the growth of any business is to apply a continuous flow of capital management for a higher profit.

Final words

The ultimate goal of managerial economics is to raise the end profitability of your corporate entity by genuinely understanding the finances accessible, feasible investment possibilities, forecasting, understanding rivals and their tactics. Before coming to a conclusion of the best business strategy, managers need to measure the existing cons and then explore the ways to dissolve the gaps. All in one, an excellent managerial economics idea will help the managers to increase their profits and grow their business. 

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