Economics

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Chapter 01 - Introduction

CHAPTER 1

INTRODUCTION

CHAPTER SUMMARY This chapter introduces the book. It begins with the collapse of Enron Corporation in 2001. This example illustrates how a company’s organizational design can affect its profit and likelihood of survival. It points to three critical elements of organizational design, which we refer to as organizational architecture. These elements include the assignment of decision rights, the reward system, and performance evaluation system. The chapter discusses the basics ideas behind economic analysis and how this framework can be used by managers to make better organizational, production, and pricing decisions. The chapter introduces the important concept of economic Darwinism and provides an overview of the book. CHAPTER OUTLINES MANAGERIAL ECONOMICS AND ORGANIZATIONAL ARCHITECTURE Organizational Architecture Economic Analysis Academic Application: R&D and Executive Turnover Managerial Application: Economic Incentives and the Subprime Mortgage Crisis Managerial Application: Creative Responses to a Poorly Designed Incentive System ECONOMIC DARWINISM Managerial Application: Economic Darwinism—General Motors and Chrysler Survival of the Fittest Economic Darwinism and Benchmarking PURPOSE OF THE BOOK Managerial Application: Transfers of Organizational Architecture across the Global Economy Our Approach to Organizations Overview of the Book TEACHING THE CHAPTER Chapter 1 is an important chapter since it introduces the perspective that is used throughout the rest of the text. There are several Managerial Applications that can be used to generate class discussion. The examples from this chapter can also be referred to as these concepts are reintroduced later in the text.

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Chapter 01 - Introduction

There are two Self-Evaluation Problems and three Review Questions at the end of the chapter that can be used for class discussion to determine whether students understand the fundamental concepts of...
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