Management Economics

1. Critically evaluate economic data as a guide to policy making within an international, national and organisational context.
2. Apply a number of different economic concepts (supply and demand, price elasticity, cost analysis) with respect to managerial decision making in organisations.
3. Analyse the impact of government policy on markets and its effect on the managerial decisions.

Assignment Guide

Follow this guide to complete your report. I’ve bullet pointed the concepts and factors you will consider when conducting the analysis, accept these as hints! Bullet pointing makes the assignment look complicated, but it is not. It is a simple task. The experience you gain from working on this assignment is invaluable! Most of the information (data and major events) you need in order to complete this assignment can easily be found on past news articles about your chosen company – I expect you to become avid business news readers by the time you finish this assignment.

Your analysis should start with the study of the company’s history, description of its activities, the industry it operates in, types of services and products it produces, business environment it operates in, main markets and other aspects of company’s business profile.

You should choose a product or a product range as a first step. For example, Procter and Gamble has gazillions of products, you will not have time and resources to study its products. Thus, choose, say, baby wipes product range and keep your focus on it.

1. Pick a business that you know something about or can find information on. Describe the business and its main product or service.

• What is your chosen product?
• Why did you choose it?
[10 marks]

2. Identify Demand and Market Equilibrium. For each of the factors that influence Demand, describe how your main product or service is affected. Does the factor indicate that demand is increasing or decreasing?

• Price of substitutes – What is a substitute for the product or service? Is the substitute’s price increasing or decreasing? How does this affect demand for your product or service?
• Price of complements – What is a complement for the product or service? Is the complement’s price increasing or decreasing? How does this affect demand for your product or service?
• Consumer Income – Is consumer income increasing or decreasing? How does this affect demand for your product or service?

• Consumer tastes & preferences – How are consumer preferences changing? How does this affect demand for your product or service?
• Consumer expectations of price (of your product or service.) – Looking ahead, do consumers expect the price of your product or service to increase or decrease? How does
this affect demand for your product or service?
• Demographics – Number of Consumers (Buyers) – Is the number of buyers increasing or decreasing? How does this affect demand for your product or service?

[20 marks]

3. For each of the factors that influence the Price Elasticity of Demand, describe how your main product or service (described in 2 above) is affected. Does the factor indicate demand is more elastic or more inelastic?

• Substitution Effects. Luxury vs. Necessity – From the consumers point of view is this a luxury or a necessity? Does this factor indicate demand is more elastic or more inelastic?
Income effects. Percentage of income – Does the purchase of the good or service represent a large or small portion of the consumer’s income? Does this factor indicate demand is more elastic or more inelastic?

• Given your analysis, what pricing policy should the business employ? Why?

[20 marks]

Word count guideline:

1. Describe the business (10 mark) 300 – 360 words
2. Identify Demand and Market Equilibrium (20 marks) 1,100 – 1,320 words
3. Indicate demand is more elastic or more inelastic (20 marks) 1,100 – 1,320 words

Try to use graphs or tables plotting/showing the trends for the past five years. Data on sales, costs, profit margin, employee numbers, market share etc. could be used. These are easily collected or computed using the annual reports of the companies. Below, I provided a list of the sources of data, the list is not exhaustive. So, try using other data sources.

Markets and firms for consideration (the list is not exhaustive)

Accountancy PwC, E&Y
Air travel Virgin, British Airways
Automobile GM, Ferrari
Aircraft engineering Rolls Royce, Boeing
Aircraft Airbus, Boeing
Banking & Financial Barclays, Goldman Sachs
Brewers Carlsberg, Diageo

Electrical retail Curries, Best Buy

Fast food McDonalds, Burger King
Food retail Wall Mart, Tesco
Food and personal care Procter & Gamble
Furniture Ikea
Handset Apple, Samsung
Home DIY B&Q, Homebase
Hospitality Accor Hotels, Radisson Hotels
Household Appliances Zanussi, Indesit Company
Microprocessors Intel, AMD
Mobile phone network Vodafone, Verizon
Oil & Gas Extraction BP, ConocoPhillips
PC HP, Dell
Pharmaceuticals Astra-Zeneca, Pfizer
Restaurants Domino’s, Itsu
Soft drinks Cadbury Schweppes, Coca Cola
Sportswear Nike, Adidas
Sugar British Sugar, Tate & Lyle
Tobacco BAT, Imperial Tobacco Group
Tyres Goodyear, Michelin Group
TVs Samsung, Panasonic
Publishing Penguin Random House, Hachette Livre
Bookies Paddy Power Betfair, William Hill

Source of Data/Information

https://www.census.gov/ – data on US businesses

https://fred.stlouisfed.org/ – data on macroeconomic indicators

https://www.ons.gov.uk/ – data on UK businesses http://www.statista.com/ – data on various indicators for various countries

http://stats.oecd.org/ – data on social and economic indicators, OECD countries

http://www.oecd-ilibrary.org/statistics – statistical tables, reports, etc.

Useful web sites/links

http://marketrealist.com/page/12/?tx=content-type&tm=overviews#article-919858

http://www.oecd.org/economy/

https://www.retaildetail.eu/en

http://finance.yahoo.co.uk

http://www.farmbusinesssurvey.co.uk/

Suggested Readings

Aigner-Walder, B. (2015) Effects of the Demographic Changes on Private Consumption: An Almost Ideal Demand System Analysis for Austria. Journal of Economic and Social Studies, 5, 1, 33-57

Andreyeva, T., Long, M. and Brownell, K. (2010) The Impact of Food Prices on Consumption: A Systematic Review of Research on the Price Elasticity of Demand for Food. American Journal of Public Health, 100, 2, 216-222.

Bagwell, K. (2005) The Economic Analysis of Advertising. Columbia University Discussion Papers No. : 0506- 01

Baker, J. (2003) Competitive Price Discrimination: The Exercise of Market Power Without Anticompetitive Effects (Comment on Klein and Wiley). Articles in Law Reviews & Other Academic Journals. Paper 278.

Ellickson, P. (2013) Market Structure and Performance. International Encyclopedia of the Social & Behavioral Sciences, Forthcoming; Simon School Working Paper No. 13-21

Foot, D. and Gomez, R. (2006) Population aging and sectorial growth: the case study of the UK, 2006- 2026. OJBE, 5:1

Griffith, G. (2003) The Impact of Supermarkets on Farm Suppliers. The Australian Economic Review, 37, 3, 329–336

OECD (2015), OECD Employment Outlook 2015, OECD Publishing, Paris. Available at: http://ifuturo.org/documentacion/Employment%20outlook%202015.pdf

OECD (2015) GENERAL ASSESSMENT OF THE MACROECONOMIC SITUATION. OECD Economic
Outlook Volume 2015/1

Rauch, D. and Schleicher, D. (2015) Like Uber, But for Local Governmental Policy: The Future of Local Regulation of the ‘Sharing Economy’. George Mason Law & Economics Research Paper No. 15-01. Available at: http://ssrn.com/abstract=2549919

Cigliano, J. (1980) Price and Income Elasticities for Airline Travel: The North Atlantic Market, Business Economics, pp. 17–21.

Heien, D. and Pompelli, G. (1989) The Demand for Alcoholic Beverages: Economic and Demographic Effects, Southern Economic Journal, pp. 759–769.

Shapiro, M. (1987) Measuring Market Power in U.S. Industry, NBER Working Paper, No. 2212.

Further Guidelines

The report should be well structured and presented, making appropriate use of reading materials, graphs and footnotes, and with full referencing.

In general, all pieces of work should display the following desirable characteristics as much as possible:

• Answer focuses on question(s) asked
• Degree to which the answer covers all aspects of question
• Degree to which answer exhibits understanding and knowledge of relevant theoretical (and empirical) literature and of policy issues
• Degree to which answer demonstrates consistency, coherence and purposeful analysis
• Appropriate use of graphs (and statistical methods)
• Analytical and critical ability – ability to go beyond the descriptive and the immediately obvious
• Depth and breadth of the analysis
• Originality (i.e. synthesis of a fair amount of material and being more than a rehash of some text or texts)
• Assessment of the importance of the topic under discussion
• Evidence of the use of a variety of sources
• Clarity of explanation
• Conclusions that cover the main issues and which offer a critical assessment of the work undertaken and relevant policy implications
• Appropriate referencing o Use Harvard style (find the Harvard style guide on blackboard)
• Overall quality of presentation

NOTE: The guidance offered below is linked to the five generic assessment criteria overleaf.

1. Engagement with Literature Skills
   Your work must be informed and supported by scholarly material that is relevant to and focused on the task(s) set. You should provide evidence that you have accessed an appropriate range of sources, which may be academic, governmental and industrial; these sources may include academic journal articles, textbooks, current news articles, organisational documents, and websites. You should consider the credibility of your sources; academic journals are normally highly credible sources while websites require careful consideration/selection and should be used sparingly. Any sources you use should be current and up-todate, mostly published within the last five years or so, though seminal/important works in the field may be older. You must provide evidence of your research/own reading throughout your work, using a suitable referencing system, including in-text citations in the main body of your work and a reference list at the end of your work.

Guidance specific to this assessment:

2. Knowledge and Understanding Skills
   At level 5, you should be able to demonstrate: sound knowledge and critical understanding of the wellestablished concepts and principles of the subject area and the way in which those principles have developed; knowledge of the main methods of enquiry in the discipline. Knowledge relates to the facts, information and skills you have acquired through your learning. You demonstrate your understanding by interpreting the meaning of the facts and information (knowledge). This means that you need to select and include in your work the concepts, techniques, models, theories, etc. appropriate to the task(s) set. You should be able to explain the theories, concepts, etc. meaningfully to show your understanding. Your mark/grade will also depend upon the extent to which you demonstrate your knowledge and understanding.

Guidance specific to this assessment:

3. Cognitive and Intellectual Skills
   You should be able to critically analyse information, and propose solutions to problems arising from that analysis, including the critical evaluation of the appropriateness of different approaches to solving problems. Your work must contain evidence of logical, analytical thinking, evaluation and synthesis. For example, to examine and break information down into parts, make inferences, compile, compare and contrast information. This means not just describing what! But also justifying: Why? How? When? Who? Where? At what cost? At all times, you must provide justification/evidence for your arguments and judgements. Evidence that you have reflected upon the ideas of others within the subject area is crucial to you providing a reasoned and informed debate within your work. Furthermore, you should provide evidence that you are able to make sound judgements and convincing arguments using data and concepts, with an understanding of the limits of knowledge, and how this influences analyses and interpretations. Sound, valid conclusions are necessary and must be derived from the content of your work. Where relevant, alternative solutions and recommendations may be proposed.

Guidance specific to this assessment:

4. Practical Skills
   At level 5, you should be able to use/deploy a range of established techniques within the discipline, and apply underlying concepts and principles outside the context in which they were first studied, including, where appropriate, the application of those principles in an employment context. You should be able to demonstrate how the subject-related concepts and ideas relate to real world situations and/or a particular context. How do they work in practice? You will deploy models, methods, techniques, and/or theories, in that context, to

assess current situations, perhaps to formulate plans or solutions to solve problems, or to create artefacts, some of which may be creative. This is likely to involve, for instance, the use of real world artefacts, examples and cases, the application of a model within an organisation and/or benchmarking one theory or organisation against others based on stated criteria. You should show awareness of the limitations of concepts and theories when applied in particular contexts.

Guidance specific to this assessment:

5. Transferable Skills for Life and Professional Practice
   Your work must provide evidence of the qualities and transferable skills necessary for employment requiring the exercise of personal responsibility and decision-making. This includes demonstrating: professional development to advance existing skills and acquire new competences that will enable you to assume significant responsibility within organisations; that you can initiate and complete tasks and procedures, whether individually and/or collaboratively; that you can use appropriate media to effectively communicate information, arguments and analysis in a variety of forms to specialist and non-specialist audiences; fluency of expression; clarity and effectiveness in presentation and organisation. Work should be coherent and wellstructured in presentation and organisation.