Management Theory Review: Business Conceptualization - Management Insights from Economics, Engineering Economics, Managerial Economics, Industrial Economics

January 18, 2018

Business Conceptualization - Management Insights from Economics, Engineering Economics, Managerial Economics, Industrial Economics

Principles of Management Revision/Review Articles - List

Every manager must have the ability or skills of identifying business opportunities and providing providing goods and services at profit in the light of the business opportunity.

Identifying and evaluating a business opportunity means demand is to be estimated. Economics subject has its special focus on analysis of consumer demand. Managers have to use the economics theory to come out with demand forecasts for potential businesses and existing businesses. Actually Philip Kotler, the celebrated author of the book Marketing Management, is an economist by education and he said he worked in marketing as marketing is economics.

In the economics subject, production cost analysis is also undertaken. Ideas like economies of scale, marginal diminishing productivity etc. are important theories in production economics which are to be used by managers.

Economics has subareas which are more focused on specific issues related to businesses. Engineering economic analysis deals with the profitability analysis of income expansion and cost reduction expenditures proposed by engineers in the production systems. It can be used for expenditure or investment proposals made by any body like repairs to house or automobiles etc. Even investment in shares and bonds can be analyzed using methods of engineering economic analysis.

In managerial economics, Joel Dean described the application of economic analysis to many managerial decision making like advertising expenditures and pricing decisions when multiple products are there etc.

Industrial economics examines why certain industries have higher profit margins at a point time. Monopoly and Oligopoly may be the reasons for higher profits. Hence creating barriers to entry becomes a competitive activity for firms. But on the other hand, society tries to support more competition.

Managers have to acquire the relevant theories from various economics subjects and be on the lookout for new theories that support their work.

Even accounting tools are used in business conceptualization as proforma income statements, balance sheets and cash flows statements need to be prepared to submit to financial organizations to fund a business.