Applied Economics for Managers

Project 1: Applied Economics for Managers  Start Here

Transcript

Scenario

You have recently been hired as an economic analyst by Maryland Creative Solutions LLC (MCS), a company specializing in mergers, acquisitions, and consulting. Prepare for your first day by reviewing your job description below: 

Job Description

Position Title

Economic Analyst

Reports To

Frank Marinara, Senior Partner Finance

Job Overview

The Economic Analyst provides support to Maryland Creative Solutions by performing client assessments, financial reporting, and development models for economic analysis.

Responsibilities and Duties

· Develops and maintains models to support economic analysis and investment decision making, long- and short-term planning, enterprise valuation, portfolio evaluation, mergers & acquisitions, strategy, and competitor analysis.

· Supports the assessment and recommendation of improvements to the financial and performance planning systems (including external and management reporting systems).

· Supports senior management in performing ad hoc analysis and supports the CFO to manage the company's financial framework.

· Prepares presentations to the board of directors and shareholders and supports preparation of internal presentations and financial analyses.

Qualifications (Preferred but not required)

· Education: Bachelor’s

· Experience: 2–3 years’ experience preferred with business finances

· Skills include: financial reporting, presentation development, planning, and evaluation

· Team player, creative thinker, fiscally responsible

Maryland Creative Solutions (MCS) is an equal opportunity employer and complies with all applicable federal and state laws regarding nondiscrimination. MCS is committed to a policy of equal opportunity for all persons and does not discriminate on the basis of race, color, national origin, age, marital status, sex, sexual orientation, gender identity, gender expression, disability, religion, ancestry, political affiliation or veteran status in employment, educational programs and activities, and admissions.

You’ve been in your new analyst role with Maryland Creative Solutions, LLC for a few days and are finally getting used to the rapid workflows and office culture. After a competitive bidding process, MCS has signed a consulting contract with ExxonMobil. You receive an email from senior partner, Frank Marinara, tasking you with your first assignment to support the project.

INBOX (1 NEW EMAIL)

From: Frank Marinara, MCS Senior Partner

To: You

Now that you've settled in, I need your help with an industry analysis. ExxonMobil accepted our consulting bid, and now the CFO needs us to conduct an assessment of its positioning within the oil and gas industry. I would like your expertise in developing the analysis by using tools such as a supply and demand graph. We need to know the price and quantity of crude oil where equilibrium exists, and it will be helpful to discover the market structure of the industry as a whole. I will need this done by the end of this week.

If that goes well, I'll also need you to look into price elasticity so we can advise the client on a pricing strategy for one of its local franchisee stations.

Three weeks from now, I’d like you to attend a special projects meeting with senior consultants from across MCS. Keep in mind, you will be the only employee in the meeting that is not on the senior consultant level, so please be as prepared as possible. The meeting has been called to discuss a new pricing strategy that MCS is proposing for ExxonMobil. Come ready to discuss risk within the oil and gas industry and have specific ideas for developing a pricing strategy

Finally, I'll be asking you to develop an executive summary based on your work on this project.

Follow the project steps to get started on the industry analysis for ExxonMobil.

Best,

Frank

Click Step 1 to begin your work on this project.

When you submit your project, your work will be evaluated using the competencies listed below. You can use the list below to self-check your work before submission.

· 1.3: Provide sufficient, correctly cited support that substantiates the writer’s ideas.  

· 1.6: Follow conventions of Standard Written English.  

· 1.7: Create neat and professional looking documents appropriate for the project or presentation.    

· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.

· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.

· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.

· 3.4: Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making.

· 5.3: Create, implement, and evaluate a personal leadership development plan.

· 6.2: Evaluate strategic implications for domestic and international markets of an organization's industry.

· 10.1: Apply relevant microeconomics principles to support strategic decisions for the organization.

· 12.1: Assess market risk and opportunity.

Project 1: Applied Economics for Managers  Step 1: Complete Skills Gap Analysis

As you’re about to get started on your assignment, the Human Resources department at MCS sends you an email with an attachment requesting that you complete a self-evaluation of your skills.

INBOX (1 NEW EMAIL)

From: Jennifer Craylin, Human Resources Generalist

To: You

I hope this email finds you well, and that you are settled in at Maryland Creative Solutions. It is Human Resource policy to request your completion of a performance self-evaluation. Please use the attached skills gap analysis file to self-evaluate your work-related knowledge and skills before beginning work on your assigned projects.

The skills gap analysis will help you identify the skill areas you want to enhance. You will be completing another self-evaluation in Project 5 to measure the gains in competencies you have developed through working with MCS.

Complete your preliminary skills gap analysis by the end of Week 1. Carefully follow the instructions below:

· Use the attached skills gap analysis file to self-evaluate your course-related knowledge and skills before beginning your work with MCS. Use the Week 1 worksheet to complete this step.

· From each major category, select a gap you would like to work on reducing during the next 10 weeks to help you achieve your long-term career goals.

· Decide what activities you will engage in to acquire the knowledge and hone the skills you have identified. Think creatively, and consider all appropriate resources, such as conferences, books, free online classes, mentorship, coaching, observation, professional associations and groups, networking, volunteering, and journaling.

· In the text box provided in the skills gap analysis file, include a summary of no more than 200 words describing the gaps you will work to reduce and the activities you will pursue to do so.

· Submit your updated skills gap analysis to the submission folder located in the final step of this project.

Thank you,

Jennifer

ATTACHMENTS

· Skills Gap Analysis Instrument

When you have completed Step 1, proceed to Step 2, where you will examine supply and demand.

Step 2: Create a Supply and Demand Graph

The first assignment Frank has given you is to develop an industry analysis through a supply and demand graph. In order to develop the graph, you will need to understand demand, supply, and the demand curve and utility. You should also be able to identify the point of equilibrium. The graph will be used to help the client, ExxonMobil, determine where they stand within the oil and gas industry.

Frank has passed along some data he has gathered to help you create a supply and demand graph for the oil and gas industry. This graph will be used as part of a comprehensive analysis to advise the client about optimal production levels. View Frank’s data and read the instructions on the Supply and Demand Graph worksheet of the Project 1 Excel Workbook, which you will access below. You will use different sheets from this workbook in the subsequent steps of this project.

To help ExxonMobil, you must determine what economic model best describes the oil and gas industry. Is this industry in perfect competition? Is it an oligopoly? Or a monopoly? In order to make this determination, read about perfect competition, oligopoly, and monopoly. You should also read competition production and pricing decisions, monopoly production and pricing decisions, and price discrimination.

Here is an illustrated example of a supply and demand graph with the point of equilibrium:

Equilibrium Price of Coffee

When we combine the demand and supply curves for a good in a single graph, the point at which they intersect identifies the equilibrium price and equilibrium quantity. Here, the equilibrium price is $6 per pound. Consumers demand, and suppliers supply, 25 million pounds of coffee per month at this price.

Source: Demand, Supply, and Equilibrium is licensed under CC BY-NC-SA 4.0.

When you have finished this step during Week 2 of the course, post the Project 1 Excel Workbook to the submission folder located in the final step of this project.

When you have completed Step 2, proceed to Step 3, where you will examine costs, pricing, elasticity, and the production function.

Licenses and Attributions

Demand, Supply, and Equilibrium is licensed under CC BY-NC-SA 4.0.

Step 3: Analyze Cost, Pricing, Elasticity, and the Production Function

In your second week on the job, you’re beginning to realize the responsibilities and complexities of your job, and you’re glad to have completed the supply and demand graph you created. As you come into work, you see a voicemail from flashing on your office phone—it’s Frank:

Voicemail from Frank

“Good morning. I just wanted to say you really did a great job developing that supply and demand graph. I would like it if you could deepen your involvement with this client by applying the concepts of elasticity of demand and elasticity of supply  to maximize the ExxonMobil’s profits by solving several cost and revenue functions. These are commonly used in the oil and gas industry and are recognized industry standards.

“Exxon is concerned about a franchisee store in Fitzhugh, Maryland. The owner is having trouble maintaining profits while managing price changes. They’d like MCS to offer advice on price cuts for that franchise and determine the individual station’s profit maximizing price using the production function.

“I’ll provide with data that describes the gas station franchise operations and competition. You can find this data in the Profit Maximization worksheet of the Project 1 Excel Workbook you used in the last assignment (Step 2). Complete the tables in that file and answer the client’s questions about price elasticity of demand, the impact of price cuts on revenue, and the profit maximizing price.

“The embedded tables show the quantity of gallons of oil sold by the franchise as well as the price per gallon. You’ll need to solve for marginal cost (MC), total revenue (TR) and marginal revenue (MR), and profit using the formulas provided in the worksheet. To complete the profit maximization calculations correctly, it is important for you to understand how to calculate average total cost and opportunity cost.

“Finally, I’d like you to calculate the profit maximizing price by using the profit maximization formula. This information will help you determine the appropriate price per gallon of oil to achieve maximum profits for the client.

“Please reach out if you have any questions. Thanks so much.”

Access the data and read the instructions within the Profit Maximization worksheet of the Project 1 Excel Workbook to complete this assignment. When you have finished answering the questions, post the workbook to the submission folder located in the final step of this project. Complete this task during Week 2.

Now that you have completed Step 3, proceed to Step 4, where you will discuss pricing strategies.

Step 4: Discuss Pricing Strategies

The days are passing quickly now. Week 3 starts slow, but an email from Maryland Creative Solutions’ Managing Director, Elisa Izuki, changes the pace.

INBOX (1 NEW EMAIL)

From: Elisa Izuki, Managing Director

To: You and Frank Marinara, MCS Senior Partner Finance

Good afternoon,

I am requesting your attendance at the upcoming senior partner meeting. The primary objective of this meeting is to discuss a new pricing strategy for ExxonMobil. Based on your analysis last week of the oil and gas industry’s economic model, I’d like you to contribute your insights to the project meeting. Looking forward to having a productive and informative working session.

Sincerely,

Elisa

This is a big moment for you, as you are the only employee in the meeting that is not at the executive level. This is your time to shine!

As the meeting approaches, Frank briefs you on the key points of discussion:

· MCS has been tasked by ExxonMobil with identifying a new pricing strategy. You should incorporate the increase in the price of oil and the increase in revenue for ExxonMobil into your strategy, with the viewpoint of maximizing economic efficiency. Assume that your fellow classmates are participants in the MCS project meeting. Use the Pricing Strategies Discussion section in this classroom to discuss pricing strategies for ExxonMobil. Give credit to any sources you use.

· Later in the week, you have a follow-up meeting with the project team to help ExxonMobil reach a point of profit maximization. Respond to your fellow classmates’ original discussion posts and support your statements by crediting any sources you use.

During Week 3, submit one original posting of at least 250 words in the Pricing Strategies Discussion by Saturday and post two responses of at least 50 words each to other discussion participants by Tuesday. See MBA discussion guidelines.

When you have finished Step 4, proceed to Step 5, where you will present your recent findings in an executive summary and PowerPoint presentation.

Step 5: Prepare Executive Summary and PowerPoint Presentation

Your busy third week on the job isn’t over yet. After a busy morning of ad hoc team meetings, you’re greeted in your office with a phone call from Frank.

Phone Call from Frank

“Hi again. I’ve got news about our client.

“ExxonMobil is looking to increase revenue by 10 percent and possibly reduce costs. I’m going to need an executive summary based on the analysis you’ve done for this client so far and your recommendations for ExxonMobil’s goal of a 10 percent increase in revenue. This executive summary, along with citations for any sources you use, should be about one page long.

“Please also prepare a brief PowerPoint presentation highlighting your analysis and recommendations. The executive summary and PowerPoint presentation should demonstrate your ability to think critically. This is your chance to be recognized for your knowledge in the accounting and finance field.

“Thanks again!”

Post your executive summary and PowerPoint presentation in the submission folder located in the final step of this project. Complete your PowerPoint presentation during Week 3 using this Project 1 PPT Template.

When you have completed Step 5, proceed to Step 6, where you will submit all work for Project 1.

Step 6: Submit Your Work

Thank you for all your work with Maryland Creative Solutions. Take note of the recommended delivery dates in the table below:

Recommended Project Delivery

	Submission week	Deliverable	File-naming protocol
Step 1	Week 1	Skills gap analysis	lastname_firstname_skills_gap_analysis.docx
Step 2	Week 2	Supply and demand graph worksheet	lastname_firstname_supply_and_demand graph.xlx
Step 3	Week 2	Profit maximization worksheet	lastname_firstname_profit maximization sheet.xlx
Step 4	Week 3	Pricing strategies discussion	Submit discussion post in the Pricing Strategies Discussion section in Step 4
Step 5	Week 3	Executive summary and PowerPoint	· lastname_firstname_executive summary.docx · lastname_firstname_executive_powerpoint.ppt

ALWAYS DO YOUR BEST @ MCS

When you submit your project, your work will be evaluated using the competencies listed below. You can use the list below to self-check your work before submission.

· 1.3: Provide sufficient, correctly cited support that substantiates the writer’s ideas.  

· 1.6: Follow conventions of Standard Written English.  

· 1.7: Create neat and professional looking documents appropriate for the project or presentation.    

· 3.1: Identify numerical or mathematical information that is relevant in a problem or situation.

· 3.2: Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.

· 3.3: Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.

· 3.4: Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making.

· 5.3: Create, implement, and evaluate a personal leadership development plan.

· 6.2: Evaluate strategic implications for domestic and international markets of an organization's industry.

· 10.1: Apply relevant microeconomics principles to support strategic decisions for the organization.

· 12.1: Assess market risk and opportunity.