Benchmark case study
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Analysisofaneconomicscasestudy.edited1.docxRunning head: ECONOMICS CASE STUDY 1
ECONOMICS CASE STUDY 10
Analysis of an economics case study
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Introduction
Economics is an inevitable part of any industry or business. Managerial economics is a vital component of corporate organizations. It focuses on how individuals make optimal decisions in different situations underpinning much of both the elective and core curriculum. Managerial economics give relevant insights into how organizations should be structured in terms of management. A good management structure seeking to maximize the firm value should understand the market as it is vital in achieving the set goals and objectives. The first part of managerial economies examines how managers make their daily decisions about running their businesses when their products are sold in an efficiently working market. It also addresses the type of industries that are more likely to be efficient, either by design or default. In our paper, we will focus on the case of Marie Preston in the Purple Cloud Company and try to come up with informed business decisions related to this case.
Summary of the current environment
Marie Preston rose to the position of Purple Cloud CEO through a well-organized organizational coup that forced out A. Nathan Tecnoti, a co-founder shortly after the resignation of co-founder Chris Christianson. Preston got the favor of the Board of Directors, who shared her vision of expanding the company globally with a strong, coordinated brand. Preston's vision included retaining an efficient corporate office responsible for global strategy emphasizing cost management, sales volume, and efficiency. Despite the prevailing economic uncertainty, Preston managed to convince the Board of Directors to widen the business strategy by developing new products and enhanced services for supporting those new products. The new products aimed at addressing the spiking number of security breaches experienced by business clients in the world. Production of the new products would assist in the entry of Purple Cloud into the global business markets. The introduction of the products would revolutionize the customer service and cybersecurity industry.
The central management structure of Purple Cloud has adequately supported its marketing emphasis on consumers’ product sales. Preston has managed to grow Purple Cloud from a $100MM to $500MM organization quickly. Preston advocated for entry into India, which was accepted by the Board. They also agreed on the need for superior customer service that would benefit their current and prospective customers. Preston did not consult the other stakeholders in making some company decisions. This could have resulted in a significant management issue in the company. The other stakeholders may feel segregated in the company's management, thus prompt adverse implications such as withdrawal of shares. Consulting and involving all stakeholders in any decision-making process is crucial. It brings a strong sense of ownership among all stakeholders and arrives at an informed decision that would help the company realize its vision and mission.
Purple Cloud has employed social media in its marketing to support and market its consumer products. The marketing team's consumer data could help in the marketing aspect and decision-making by the company's management. Purple Cloud was considering producing a new product that would suit big corporations' cybersecurity needs in a bid to expand and dominate the cybersecurity industry in the world. A friendly business-customer relationship needs to be fostered and maintained to create confidence in the industry. That good relationship with a customer leaves the customer with the urge to buy more from the business, resulting in more business sales. Economies of scale help businesses in reducing their cost of operations. Reduced operations cost would lead to the company realizing more returns (He, Wang & Akula, 2017).
Viable strategic actions
In view of the case study, various strategic actions can be implemented to improve the organization's overall performance. One is cost management through the use of the ABC accounting technique. This could be well utilized in introducing a new product as it helps analyze the cost of production and its market viability. Second is using an interactive leadership style that will lay a foundation for adequate consultation before making decisions in the organization. Purple cloud should adopt an effective cost management strategy that would help track the usage of their resource in product production (Dąbrowski, 2017). Several cost accounting methods can be used to collect, analyze, and evaluate a company's spending and investing habits or profit-making organization. These methods inform the management of ways of streamlining the production process to cut down on costs while maintaining production levels. Among the methods and tools of accounting, the activity-based costing (ABC) method is the most preferred by management in increasing profitability by saving the business money, time, and resources. Activity-based costing (ABC) is one of the emerging trends in the accounting aspect of an organization. The activity-based costing is preferred over the other traditional accounting methods because of its efficiency and logicality in the production process. Purple Cloud should apply the activity-based costing method in managing the production process to maximize production, increase their profitability level, and overall performance of the company (Tseng, Chiu & Liang, 2018).
Businesses should adopt efficient strategies in their management structure to improve the functionality and maximize their productivity. An increase in productivity leads to more output; thus, more sales translating to increased profits. Profitability is the primary motivator for manufacturing organizations. An organization undertakes many activities during its functions in offering services or products. Organizations avoid making losses in favor of profits. Businesses heavily rely on inventive and strategic accounting methods to stay profitable in the ever-competitive global market. Accounting is an integral component of the management structure of any organization. Accounting helps the management of organizations in tracking how resources are being used. Accounting focuses on the expenditures and revenues of the organizations. Expenditure tackles the cost of production and other expenses incurred in executing the operations of the organization. On the other hand, revenue is what is earned by the organization from its business activities.
Implementing the viable strategic actions
Implementation of these strategic actions requires good leadership skills that will enable the organization employees to share in the organization's vision. Purple Cloud should adequately train its leaders' ineffective management of projects in the company. The leadership skills of a project manager are essential for the success of any project. Projects on cybersecurity by Purple Cloud require a very competent leader with exceptional skills for it to be completed. Project management involves various aspects like project time management, resource, and budget allocation. Excellent project management skills help ensure that the managers make right and informed decisions while responding to the ever-changing projects' nature and tackling risk factors in an appropriate approach. They generally increase the chances of a project's success by a significant margin. Being ethical is still another quality required as it sets a benchmark and standards that the team members will follow.
Purple cloud has strived to increase its capital by accumulating their profits. Thus, they should maintain the profitability of their organization to ensure it continues to survive and grow. Profits in an organization are usually used to expand on the operations of the organization. Expanding on operations helps an organization acquire a large market share, which is a great asset. A large market share means more sales for the organization's products and, in turn, more profits. Increased profitability would motivate Purple Cloud’s shareholders to invest more in the organization, thus boosting its capital. Consumers act in very many different ways in the market. The differences in consumer behaviors result from individual factors such as lifestyle, nature of the consumer, and culture. Economist or market researchers try to learn about these consumer actions in the market through consumer behavior. The study of consumer behavior helps a company in coming up with a sound customer service delivery system. Good customer services meet customer needs and arouse the need to purchase more of the commodities or services.
In evaluating the business analytics data, the cost management strategic plan can reduce costs while increasing production, thus more sales that translate to enhanced profitability. Maintaining a firm's value is very important as it would ensure the company's continuity and growth. The value of a firm can always be affected by various factors. Several factors can affect the value of a business. One of the significant factors is finance, which needs to be managed through a well-formulated budget. Poor management of funds may result in a financial crisis that may threaten the existence of the company. The company needs to control its costs and expenditure in the best way possible. External factors such as the competitors, economic state, and government affect its value in many ways. Competitors can beef up the competition, pushing the business out of the market due to instability. Purple Cloud needs to be aware of the changing trends in the market and make structural changes in their operations for them to remain competitive in the global market (Kimmel, Weygandt & Kieso, 2018).
Recently, the corporate structural restraints on crimes and recklessness have been weakened while maintaining global competitiveness. In present times corporate activities are undertaken without any account of ethical implications, thus causing societal problems. Many companies have the obligation of only serving their investors by focusing on exclusively making profits. Consequently, the companies' senior managers are being rewarded by hefty compensations for their perceived bottom-line contributions. Critics have tried to argue whether corporates and organizations should be moral in carrying out their daily activities. My absolute take on this argument is that corporates and organizations should incorporate moral principles in their operations as it has both short and long-term benefits.
One benefit is that it creates a good reputation in the surrounding community, among individual investors and other businesses, which is a crucial determinant of companies worthwhile. Reputation is a valuable company asset, as it is tough to rebuild once lost. Businesses should build and retain a good reputation and image by operating on an ethical foundation related to employees' fair treatment, conserving the surrounding environment, and accepting customer treatment and favorable price practices. Thus, the corporate outcomes are used to determine the right, as opposed to the inputs, in terms of ethical standards. There being a notion of right which hinder peoples' action, although it can be overridden under certain circumstances as stated by deontological ethics. In corporate advertising, businesses tend to praise their products and services over the competitors, which boosts their profitability. Ethical frameworks should be possessed with business owners, board members, and company CEOs because a proper frame can shape the entire organization. Good corporate social responsibility enhances its reputation and builds a loyal customer base, which translates to increased sales and profit. A company can still maintain its profitability while adhering to the best ethical code of business operations.
The strategic actions have several implications that can be legal and ethical. A company that morally runs its operations increases its productivity as stakeholders take pride in their contribution towards achieving the company's goals. Once all stakeholders are considered, they feel the company is owned by all of them collectively. The feeling of ownership among the stakeholders generally boosts their morale and brings out their full potential in undertaking their duties, thus increasing their productivity. The productivity of a corporation helps in determining its growth and development in the competitive business world. In the recent past, when most people would publicly hold corporations, embraced in their mission, pronouncements, and code of conduct a responsibility to serve several stakeholders: their stakeholders, who are the investors, their customers, as well as employees, suppliers, and the community surrounding their business. All stakeholders play a significant role in ensuring the business's success; therefore, they need to be equally considered in the business's operations.
Moreover, corporate morality is essential as it ensures harmony and fair play between company stakeholders. It helps make good people who, in turn, make a good society and enhance peaceful coexistence. The infrastructure that enables businesses to grow and succeed is built not solely by corporations but also by the communities. Moral objectivism directly opposes ethical relativism by asserting that moral principles may differ between cultures, but some moral principles are valid universally, whether they are recognized universally. Different companies may have their moral principles on which they operate but have some moral principles that bind them all in their operations.
Therefore, firms are advised to make their businesses as valuable as possible through proper planning in advance. It is crucial for managers to vividly understand the strengths and weaknesses of their companies for adequate planning. Good managers increase the chances of business success by a significant margin. Being ethical is still another quality required as it sets a benchmark and standards that the team members in the business will follow. Proper team management is a crucial skill for business managers. This skill enables the managers to effectively direct and coordinate team members in attaining the set business goals and objectives. Good management would lead the business in the right direction, thus ensuring its success and high valuation. Governments and other financial institutions should come up with policies that can help companies in improving their value. Oppressive government policies such as increased taxes can lead to firms' collapse, which can be detrimental to the economy.
As noted above, businesses should regularly review their policies and strategic actions to identify their strengths and weaknesses. A regular review would help the organization work on its weaknesses and double up its strengths, thus improving its overall productivity. The business ethics field has been influenced by the increasing awareness of the communities' roles in ensuring the success of businesses, not mentioning the corporate health importance of addressing social inequalities and environmental degradation.
References
Dąbrowski, J. (2017, September). Towards an adaptive framework for goal-oriented strategic decision-making. In 2017 IEEE 25th International Requirements Engineering Conference (RE) (pp. 538-543). IEEE.
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2018). Financial accounting: Tools for business decision making. John Wiley & Sons.
Tseng, M. L., Chiu, A. S., & Liang, D. (2018). Sustainable consumption and production in business decision-making models.
