Running head: GLOBAL ECONOMIC ENVIRONMENT 1
Global Economic Environment
Tina Walker
Liberty University
BUSI 620
Fall 2018
GLOBAL ECONOMIC ENVIRONMENT
Global Economic Environment
Introduction
Managerial economics is an essential concept in today’s business environment. It
involves the application of economic theories and concepts for appropriate decision
making in analyzing various business problems and opportunities (Hirschey & Bentzen,
2016). All businesses are striving to gain a competitive advantage for a significant market
share. The management relies on the integrated economic theories to justify their
decisions made in relation to the business operations. The best alternative is always
preferred to optimize on the firm's profitability. This report will assess the application of
managerial economics at Alinea Restaurant. Quality and timely decisions are vital to the
success of any business. The restaurant industry is one of the highly competitive sectors
due to lack of entry barriers. Managers and leaders must be capable of making the right
decisions that will help in the maximization of the firm’s strengths for the utilization of
the available opportunities. Raw data was collected by interviewing the head chef and the
company's owner, Grant Achatz on various thematical questions. The findings were
analyzed and comments from the researcher compiled in this report.
Company Description
Alinea Restaurant is based in Illinois, Chicago, in the United States. It was opened
in May 2005, and it has managed to sustain its survival in the market despite the
existence of severe competition in the sectors from giants such as McDonald, Gibson,
Levy and many others. The recent financial reports show that Alinea had revenue of
$13.6M and over 200 workers in all its outlets. The organization provides seafood,
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sandwiches, and salads in a chain of restaurants that it owns and operate ("Alinea.com",
2018). The company has gone through various structuring and reorganizations under the
leadership of the founder and the owner, Grant Achatz. Alinea has expanded its
operations and grown its market share through mergers and acquisitions. For instance, in
January 2016, the firm bought Moto Restaurants based in Chicago. It is one of the best-
performing local restaurants in the United States. Alinea was awarded 3 Michelin stars in
November 2010. This made it be one among the only two restaurants of such rating
during that time. In 2017, the organization received AAA Five Diamond Award, and it
was ranked number 9 on the Pellegrino World's Best fifty restaurants ("Alinea.com",
2018). The company embraces creativity and innovation to satisfy and exceed their
customer’s needs. Its value proposition creates a competitive advantage over the rivals.
Also, Aliena adopts proper decision-making process with an appropriate appreciation of
the managerial economic concept as revealed with the interview conducted.
Grant Achatz is a great entrepreneur and one of the worldwide's most recognized
chefs. He has written several editorials in his career and is highly useful in the restaurant
industry. For example, Achatz and his co-author, Nick Kokonas published a hardcover
titled Coffe Table Book in October 2008 featuring over 100 recipes. Grant Achatz has
received various awards for his emotional, innovative and modernist cuisines. He is
among the most influential people in the world. He also has a good history in his career
that has given him excellent experience. Achatz spent all his life working in a restaurant
since his childhood. During an interview with the BBC News, Achatz stated that he began
this profession as soon as he could walk since his parents owned a diner in Michigan and
he spent all his childhood working alongside his family ("Alinea.com", 2018). He
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graduated from Culinary Institute of America and worked for five years at the French
Laundary before rising to chef de cuisine. In 2004, Grant started pursuing his dream and
built a restaurant, Alinea with a vision of refining the dining in America ("Alinea.com",
2018). The business has grown and become one of the most-recognizable restaurants in
the US, and this was the reason why the organization was selected for the purpose of this
interview.
Interview Questions and the answers obtained
Interviewee name: - Grant Achatz
Interviewee’s place of employment: - Alinea Restaurants
Interviewee's email address and phone: - chef’s network at 212-410-9879 or email
Please describe your field. – “Am the founder and the owner of Alinea Restaurant, one of
the world’s best dining place in the United States.”
What is your current job title? - Head chef
What factors motivate your firm?
i) Competitive compensation – Our business ensures adherence to the National
Labor Relation Act by ensuring the rewarding of the employees beyond the
minimum wage. This is meant to boost the morale of the workers as well as
helping them in meeting their basic needs.
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ii) Recognition – Every rational human being would want to be appreciated for
their good deeds. It helps in encouraging them to keep up the spirits and even
instill an intrinsic desire for other employees to achieve the set targets. Our
business has got different ways of recognizing employees have performed
well. For instance, the use of bonuses, allowances, and trophies are used
continuously for this purpose.
iii) Employees’ involvement – Alinea is a business owned by the employees as
they are always given a chance to have their views considered. Workers at all
levels are involved in the decision making of the firm where applicable. There
is a free vertical communication as described by our organizational culture.
iv) Opportunity for growth – Our business values more the employees' career
development. The staffs have a chance to advance their studies while still
working for the company. We also have programs that provide sponsorship to
some of our employees to expand their knowledge.
v) The sense of belonging and many others – Alinea is one of the most
recognized restaurants in the United States. Working in the firm create a
motivating factor to the employees due to the sense of belonging. Most people
tend to associate the success of their organization to their own, and hence they
are determined in maximizing such opportunities.
What is the relevance and impact of your firm's hierarchy on managerial decision
making and economics?
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The key to success in every business is based on the ability to make an
appropriate decision. Managerial economics provides a rationale for the various decisions
made leading to improved efficiency for higher production. This signifies that there is a
substantial connection between the management and the firm's performance. Firm's
hierarchy is essential to the managerial decision making and economics. Alinea's
organizational structure and culture defines the flow of communication within the
company and outside. As much as we value employees involvement, strategic decisions
are formulated by the top management with views from the staff at all levels. This is
meant to address the threat of resistant change which is common in most organizations.
Workers are encouraged to share their ideas for the improvement and success of the
entity. However, the impact of the hierarchy might be felt where urgent decisions are to
be made. In such situations, it might be difficult to involve staffs at the operational level
as it lowers the decision-making process. Managers at the top level are forced to use their
expertise in the managerial economics to make the most prudent decisions for the
betterment of the firm’s productivity depending on the current situation.
For your firm, what is the link between managerial economics, business strategies, and
formulating implications?
At Alinea, we acknowledge that the managerial economics bridges the gap
between two integrated fields for the formulation of most appropriate business strategies.
The strategic direction of the Alinea Restaurant is defined by the competitive set and the
firm's goals and objectives to maximize the sales volume and profits. Our firm applies the
concept of managerial economics in analyzing the existing situation and coming up with
the most prudent decisions ensuring against those of our competitors. Different
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quantitative techniques are used as essential tools for optimizing the business decisions.
Our business planning strategies concentrate on the maximization of both long-term and
short-term objectives. Expanding operations in the global environment are one of our
primary long-term goals. Managerial economics provides a guideline and proper
approach to strategy formulation and implementation. After setting our targets depending
on the situational analysis versus that of our rivals, we then focus on the allocation of
adequate resources including the human capital.
How can an understanding of managerial economics help managers in global
environments?
As mentioned previously managerial economics is vital to the success if every
business. Managers need to have a better understanding of the concept for prudent
decision making and increasing the competitiveness of their firms. Before making a
decision to venture into the international market, it is vital first to analyze the global
business environment and come up with appropriate strategies. We have witnessed many
organizations which have been successful in the local market but fails in the foreign
market. An article by Lapaige (2009) pointed out that the most critical thing is to
acknowledge the diversity in consumers’ needs and develop proper strategies to satisfy
those needs. Every market has a unique feature which business owners and the
management ought to understand before making a move to expand into the global
operations. More specifically, the restaurant industry varies from one country to another
in terms of economic factors and customers' preferences and taste. The managers also
need to analyze the competition in the global environment to assess their potential in
exploiting the available opportunities.
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In your opinion, can novice entrepreneurs-self educate themselves in managerial
economics to be able to run successful firms?
Not at all, the concept of managerial economics can be complicated to novice
entrepreneurs. It requires acquizations of sufficient knowledge and skills to learn how to
make sound business decisions for the success of the firm. The business environment is
surrounded by numerous uncertainties which require a thorough understanding of various
factors that may directly or indirectly influence the firm’s payoff. Therefore, I don't think
that such entrepreneurs are capable of educating themselves on managerial economics
and be successful in running their firms. Also, the scope is broad, and it needs an
intensive understanding which can only be acquired through formal education. Unlike
leaders, good managers are made and not born.
Comments
From the above interview, it is revealed that the success of Alinea Restaurant is
directly linked to the initiatives of the owner Grant Achatz to acknowledge the
importance of managerial economics in decision making. As the head chef and the
manager of the business, he is capable of making prudent decisions based on the analysis
of the current situation. The level of competition in the restaurant industry is extremely
high, but Alinea has managed to acquire and retain a significant market share. The
company's profitability is also high compared to its rivals. Meagher & Wait (2007)
connoted that the knowledge in managerial economics provides a decision criterion for
making business decisions. Alinea Restaurants creates a competitive advantage in various
aspects through the direct or indirect application of business economics theories. For
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example, Grant stated that the company uses several tactics to ensure a motivated
workforce. Kalay (2015) argued that employees are the most valuable assets that an
organization can have since they determine the success or failure of the firm. Alinea has
received various awards, and it is recognized as the world's best restaurant. All these have
been achieved by ensuring the high value of the products and services attained with a
well-motivated workforce. Use of different motivating tools is essential to ensure the
employees' needs are met at various levels. Maslow's hierarchy of needs provides that
workers are driven to work to meet their needs which are grouped in different levels.
Also, Grant Achatz values the power of managerial economics in decision making.
Appropriate organizational structure and culture have been adopted to improve efficiency
in the firm. Optimal solutions are prioritized to maximize the firm's productivity. The
competitive advantage created provides the business with an opportunity prosper in the
global economic environment.
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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. doi:
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, 12(22), 35. doi:
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
