1
Global Economic Environment
In today's world, economic theories and concepts are powerful tools for analyzing
business opportunities and problems and making the right decisions based on all the acquired
knowledge. Thus, the role of the concept known as managerial economics must be considered
(Hirschey & Bentzen, 2016). Every business seeks to gain a competitive edge and capture a
large market share, and business decisions are anchored on integrated economic theories.
Hence, the best options that are most likely to improve the firm's profitability interval are
chosen. This report discusses the principles of managerial economics applied at Alinea
Restaurant.
It is, therefore, important for any business to make the right decision at the right time,
preferably in the first instance, especially in restaurants, since the industry has relatively low
entry barriers. For the firm and its managers to benefit from the opportunities, the latter has to
make decisions that capitalize on its strengths. The restaurant industry's broad nature is
characterised by fierce competition, fickle customers, and constant pressure for change. It
becomes necessary because managerial economics provides the structure to study consumer
behaviour, market trends, and cost analysis.
The subject of managerial economics helps the Alinea Restaurant to set appropriate
menu prices, forecast the demand and control the expenses to enhance customer satisfaction.
That is, there is a capability of organizing an effective restaurant where cost, high quality,
delicious offers, and extraordinary services can be in harmony and reach an optimal level. By
employing economic principles, Alinea can make decisions that benefit its strategic goals
while using the available data collection.
To collect actual data, the owner and head chef of the restaurant, Grant Achatz,
answered several questions with a focus on several key topics. Preliminary interviews help to
understand how Alinea navigate challenges such as establishing the positioning on the
2
market, strategy pricing, or seeking and obtaining ingredients. The results were examined and
put together in this report to show how managerial economics is applied practically in a real-
world context and how abstract ideas are translated into actual business procedures.
Company Description
Chicago, Illinois's Alinea Restaurant opened its doors in May 2005. By combining
innovation, quality, and strategic leadership, Alinea has maintained its market presence in the
face of fierce competition from major players in the industry like Gibson, McDonald's, and
Levy. According to recent financial reports, Alinea employed over 200 people across all its
locations, bringing in $13.6 million in revenue. Through its chain of restaurants, the company
provides a varied menu that includes salads, sandwiches, and seafood (Alinea.com, 2018).
The founder and owner of the business, Grant Achatz, has managed strategic mergers,
acquisitions and reorganizations to grow Alinea's market share. The purchase of Moto
Restaurant in January 2016 was one such acquisition. Alinea is one of the nation's top-
performing local restaurants, having been one of just two to be awarded three Michelin stars
in November 2010. It received the AAA Five Diamond Award and was ranked ninth on the
Pellegrino World's Best 50 Restaurants list 2017 (Alinea.com, 2018). The business gains a
competitive edge by exceeding customer expectations through creativity and innovation.
Furthermore, as the conducted interview disclosed, Alinea employs a strong decision-making
process that values managerial economic concepts.
Grant Achatz is a well-known businessman and one of the most well-known chefs in
the world. He has significantly influenced the restaurant industry and authored multiple
editorials. For instance, in October 2008, Achatz and coauthor Nick Kokonas published
"Coffee Table Book," a cookbook that included over 100 recipes. One of the most influential
people on the planet, Achatz has received numerous accolades for his modernist and avant-
garde cooking.
3
He started his long career in the restaurant business as a young child, working in his
parent's Michigan diner. In a BBC News interview, Achatz stated that he began working with
his family as soon as he could walk (Alinea.com, 2018). After earning his degree from the
Culinary Institute of America, he spent five years working at the French Laundry, rising to
the position of chef de cuisine. Achatz opened Alinea in 2004, fulfilling his dream of
improving American cuisine. The business is a good fit for this interview because it has
developed into one of the most well-known eateries in the US (Alinea.com, 2018).
Interview Questions and Answers
Name of Interviewee: Grant Achatz
The interviewee works for Alinea Restaurants.
Interviewee's contact details: [email protected] or 212-410-9879 for
Chef's Network.
Give a brief description of your field.
"I am the founder and owner of Alinea Restaurant, one of the world’s best dining places in
the United States."
Which job title do you currently hold?
Head Cook
What factors motivate your firm?
i) Competitive Compensation
Our business ensures adherence to the National Labor Relations Act by rewarding
employees beyond the minimum wage. This boosts worker morale and helps them meet
their basic needs.
ii) Recognition
Every rational human being wants to be appreciated for their good deeds. It
encourages them to maintain high spirits and instils an intrinsic desire in other employees
4
to achieve set targets. Our business has various ways of recognizing well-performing
employees, such as bonuses, allowances, and trophies.
iii) Employees’ Involvement
Alinea is a business owned by the employees, as their views are always considered.
Workers at all levels are involved in decision-making where applicable. There is free vertical
communication, as described by our organizational culture.
iv) Opportunity for Growth
Our business highly values employees' career development. Staff members can
advance their studies while still working for the company. We also have programs that
sponsor some employees to expand their knowledge.
v) Sense of Belonging
Alinea is one of the most recognized restaurants in the United States. Working at the
firm creates a motivating factor for employees due to the sense of belonging. Most people
tend to associate the success of their organization with their own, making them determined to
maximize such opportunities.
How does your firm's hierarchy affect managerial decision-making and economics?
Any business's success depends on its ability to make informed decisions. These
decisions are supported by managerial economics, which boosts productivity and
effectiveness. This shows that management and the company's success are closely related. An
organization's hierarchy is crucial to managerial and economic decision-making. Information
is communicated inside and outside Alinea based on its organizational structure and culture.
Alinea firmly believes that staff involvement can greatly improve the company's
operations, and as such, it values input from staff members at all levels. Although top
management is ultimately responsible for making strategic decisions, they actively consider
suggestions and ideas from their staff. This means encouraging 'employee participation' will
5
reduce 'resistance to change' because employees will feel valued and understand the need for
change. Staff participation increases productivity as employees are encouraged to bring their
suggestions to the table and work cohesively to grow the business.
That being said, Alinea has an evident and focused hierarchy structure that sometimes
influences decision-making when a situation requires immediate action. The decision-making
performance may be impaired in such circumstances because it can be challenging to
incorporate the operational staff in the process. At this point, knowledge of managerial
economics can come in handy to senior managers. They must step up to the occasion and
efficiently rely on economic principles, applying changes within the firm that would enhance
its productivity given the circumstances. They have to think strategically and anticipate all
the possible consequences of any particular decision, amalgamate and analyze data and draw
sound conclusions.
In principle, it has been shown that the concept of hierarchy in Alinea has the effect of
minimizing the number of people between the decision maker and the implementation of a
decision as well as streamlining corporate planning and control processes; however, it
indicates that members of the upper echelon of corporate hierarchy need to have extensive
knowledge in managerial economics. Since they must make their decisions while ensuring
the company remains productive and efficient within its environment regardless of the level
of challenge and change, their decisions would need to factor in the operative and strategic
plan. Since inclusivity and authoritative decision-making are crucial for Alinea to remain
relevant and profitable in this highly competitive line of business, both must be equally
emphasized and practised in the restaurant.
In your firm, how do managerial economics, business strategies, and implications
relate?
At Alinea, we understand that managerial economics helps to create the best possible
6
business strategies by bridging the gap between integrated fields. The competitive landscape
of Alinea Restaurant and the company's aims and objectives to optimize sales volume and
profits determine its strategic direction. To ensure our competitiveness, we apply managerial
economics to assess current affairs and make wise decisions. Various quantitative methods
are vital resources for making the best business decisions.
Our approaches to business planning are centred on achieving both short- and long-
term goals. Growing our business in the international market is one of our main long-term
objectives. Managerial economics offers principles and an appropriate methodology for
developing and executing strategies. Following establishing our goals based on a situational
analysis of our competitors, we devote sufficient resources, including human capital, to
achieving these objectives.
How does managerial economics help global managers?
As previously mentioned, managerial economics is crucial to the success of every
business. Managers need a solid understanding of this concept to make prudent decisions and
enhance their firms' competitiveness. Before venturing into the international market,
analysing the global business environment and developing appropriate strategies is essential.
Many organizations succeed locally but fail internationally due to inadequate market analysis.
According to Lapaige (2009), the most critical aspect is recognizing the diversity in
consumers' needs and creating strategies to meet those needs.
Business owners and managers must understand each market's unique characteristics
before expanding globally. In the restaurant industry, economic factors, customer preferences,
and tastes vary significantly from one country to another. Therefore, managers must analyze
global competition to assess their potential for exploiting available opportunities.
Can new entrepreneurs self-teach managerial economics to succeed?
7
For inexperienced business owners, the idea of managerial economics may seem
complicated. To make wise business decisions crucial to a company's success, one must
acquire a significant amount of information and expertise. Because of the uncertainty in the
business environment, it is imperative to have a thorough understanding of all the variables
that can directly or indirectly affect a firm's profitability. As such, inexperienced business
owners cannot learn enough about managerial economics to run their companies profitably.
This field's breadth necessitates a deep comprehension that can only be attained via formal
education. Effective managers are created, not born, unlike leaders.
Comments
Alinea Restaurant's owner, Grant Achatz, acknowledged the importance of managerial
economics in decision-making, which he said in the interview directly contributed to the
establishment's success. He thoroughly analyses the situation before making an informed
decision in his roles as manager and head chef. Alinea faces fierce competition in the
restaurant industry, but it has managed to secure a substantial portion of the market and has
outperformed its rivals in terms of profitability.
According to Meagher and Wait (2007), managerial economics expertise is essential
for making wise business decisions. Alinea gains a competitive edge through business
economics theories' direct or indirect application. For instance, Kalay (2015) characterized a
motivated workforce as an organization's most valuable asset, determining its success or
failure. Grant Achatz uses a variety of strategies to guarantee this. Alinea's many accolades
and ranking among the greatest restaurants in the world attest to the high calibre of its goods
and services, which are provided by an enthusiastic staff.
Various motivational techniques are applied to cater to the needs of workers at
different levels. According to Maslow's hierarchy of needs, employee motivation is based on
meeting needs, which are categorized into several levels. Grant Achatz and his management
8
group at Alinea know how critical it is to take care of these requirements to keep employee
morale and output high. For example, they meet safety and physiological needs by offering
competitive salaries and benefits and social and esteem needs by promoting a positive and
inclusive workplace culture. Opportunities may mean creating chances for self-actualization,
promotions, and career advancements that benefit employees.
Grant Achatz sees to it that he successfully implements suitable systems and
environments that will assist him in functioning optimally. He finds it useful as an essential
tool that can be applied in decision-making. Achatz acknowledges the buying behaviour and
market trends while clamping down costs to sustain Alinea’s long-term aims. Using this
strategy, the company will set up its productivity at the optimum level by identifying the best
course of action to help it establish a competitive advantage, thereby liberating prosperity in
the global economy.
Thus, the Alinea case demonstrates that this kind of economics needs to be
indispensable in managers’ decisions. In the case of Grant Achatz, the application of
economic theory is favourable in terms of its ability to encourage employees and achieve
high productivity levels. The application of economic theory is also known to lead to higher
earnings and improved competitiveness of the restaurant in the market. Economics benefits
Alinea by enabling it to enhance its position as the best offer within the restaurant industry
with stiff rivalry.
9
References
Alinea.com. (2018). Retrieved from https://alinearestaurant.com/site/people/
Hirschey, M., & Bentzen, E. (2016). Managerial economics. Andover: Cengage Learning.
Kalay, F. (2015). The impact of strategic innovation management practices on firm
innovation performance. Pressacademia, 2(3), 412-412.
https://doi.org/10.17261/pressacademia.2015312989
Lapaige, V. (2009). Evidence-based decision-making within the context of globalization: A
"Why–What–How" for leaders and managers of healthcare organizations. Risk
Management and Healthcare Policy, 2, 35. https://doi.org/10.2147/rmhp.s4845
Meagher, K., & Wait, A. (2007). Decision-making within organizations. Retrieved from
http://wwwdocs.fce.unsw.edu.au/economics/news/VisitorSeminar/wait.pdf
