1. Managerial Economics and Organizational Architecture, 5e Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved. McGraw-Hill/Irwin Managerial Economics and Organizational Architecture, 5e Chapter 1: Introduction

2. 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

3. Managerial Economics and Organizational Architecture, 5e Organizational Architecture Objectives Assignment of decision rights Methods of compensation Performance evaluation of individuals and units 1-3

4. 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

5. Managerial Economics and Organizational Architecture, 5e The Economic Perspective Economics provides a framework for analyzing decisions How do individuals make choices? the role of incentives How can managers structure organizational architecture to motivate employees? incentive conflicts and opportunistic behavior 1-5

6. 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

7. 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

8. 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

9. Managerial Economics and Organizational Architecture, 5e Book Overview Basic concepts Managerial economics Designing organizational architecture Application of organizational architecture 1-9