Essential Management Principles and Economic Fundamentals

Management Decisions and Daily Operations

Steps to Channel Daily Actions

• Planning: Establishing goals and resources.
• Organization: Distributing resources between tasks and defining responsibilities.
• Human Resources Direction: Establishing clear leadership through policy, incentives, and rewards.
• Control: Verifying actual results against the plan, identifying deviations, and correcting them.

Essential Managerial Skills

• Technical: Knowledge of the subjects in which they work.
• Human: Ability to understand, persuade, and motivate.
• Conceptual: Understanding the interaction with the environment.

Types of Decisions

• Routine: Known issues in an environment of certainty.
• Adaptive: Taken to adapt to gradual changes.
• Innovative: Addressing seismic shifts.

The Decision-Making Process

1. Diagnosis: Identify the problem and its causes.
2. Review: Evaluate alternatives.
3. Comparison: Compare alternatives.
4. Criteria: Establish selection criteria.
5. Selection: Choose alternatives according to the chosen criterion.
6. Implementation: Execute the chosen alternative.
7. Evaluation: Assess the results.

Managerial Levels

Top Management

• Pilots the company.
• Makes high-level managerial decisions with high uncertainty.
• Handles new and unfamiliar problems.
• Requires the greatest intellectual resources.

Middle Management

• Acts as a hinge, applying high-level decisions and gathering information from lower levels.
• Work becomes more routine and predictable further down the chain of command.

First-Line Management

• Resolves ordinary problems.
• Maintains contact with productive resources.

The Nature of Managerial Work

Interpersonal Roles

• Figurehead: Visible leader of the company.
• Leader: Influences the behavior of other members (motivation).
• Liaison: Creates networking.

Informational Roles

• Monitor: Searches for encoded/implied and formal/informal information.
• Disseminator: Spreads external information to the organization.
• Spokesperson: Represents the company to third parties.

Decisional Roles

• Entrepreneur: Impulses innovation.
• Disturbance Handler: Takes remedies to problems.
• Resource Allocator: Assigns resources.
• Negotiator: Negotiates solutions to conflicts.

Fundamental Principles of Economics

• Opportunity Cost: What you sacrifice to get something. Used to explain the benefits of specialization and trade. Comparative advantage occurs if a country produces a good with a lower opportunity cost; Absolute advantage occurs if it produces at a lower cost.
• Marginal Principle: At a higher level of activity, if the marginal benefit is greater than the marginal cost, we choose the level where marginal benefit equals marginal cost.
• Diminishing Returns: If we are in the short term with fixed or variable production factors, adding a variable factor results in production increasing at a decreasing rate.
• Diffusion Effect: The costs and benefits of producing or consuming goods affect more than just the person or company involved.
• Reality Principle: What matters is the real value of money or income measured in purchasing power.