Behavioral Economics

Topics: Management, Strategic management, Business Pages: 5 (1604 words) Published: January 20, 2013
Behavioral Economics
Cicero Seisdedos

PB535 – Business and Financial Literacy
Professor: Dr. Nancy Wood, PhD
December 09, 2012

Behavioral Economics is an extremely important field of psychology; it seeks to expand the current tools that researchers use in economics and finance to introduce new models of human behavior that are adequately founded in psychological research. The Behavior Economics is crucial in business decision making process. The knowledge in Business and Financial Literacy is very important for their direct application to Business and Consulting Psychology. Understanding Financial Management which includes: profit & loss, cash flow, balance sheets, ratios, ROI, working capital, budgeting, financial planning, and corporate finance; and Business Management that includes: business strategy, strategic market management, micro-economic analysis, sustainable competitive advantage, strategic positioning, diversification, acquisitions, mergers, and technology management, will allow the consultant to help businesses increase their profits and improve their company’s culture. Business Management and Strategy

Business Strategy is a management plan of action that an organization put in place in order to achieve a particular goal or a set of goals and objectives, this strategy can help the organization differentiate itself from its competitors. In order for a company to differentiate itself from their competitors, they need to successfully implement a strategy that will determine the market that the business will compete, the investment needed, the strategies required to compete in that specific market and the strategic resources or competencies that underline the strategy by providing a important sustainable competitive advantage (SCA) (Aaker, 2001).  Budgeting and Financial Planning

There are many vital managerial tools that assist in managing a successful business. Budgeting is the most common and widely used tool for planning and control; it is essentially a guideline that focuses on spending, it can breaks down all the business’ expenses in different categories, per example, utilities, payroll, taxes, materials, equipment, etc, also all the income that the business expect to receive in a certain period of time, this period of time is usually yearly, monthly or sometimes weekly. Once the manager has all the estimated income and expenses for that period of time, the budget will start to take shape. The budget goal is to subtract all the expected expenses from the expected income for the same period and still have a positive cash balance. A budget should not be a rigid and fixed tool from which you may never deviate (Wood, 2012). The Financial Planning focuses on allocating resources efficiently, specifically achieving long range goals. In summary, while the budget focuses on the daily functioning of the organization, the future depends greatly on the financial planning which in turn relies on budgeting in order to be effective. Corporate Finance 

The Corporate Finance addresses how organizations face their financial obligation, to intelligently invest their resources, achieve the correct combination of financing to fund their investments and return a profit to the investors; hence achieving value maximization. When a company invests in a project or multiple projects, this project will generate expenses and will create revenue for the company, but what is a project? Project is any activity that generates a series of cash flows for the organization. The company uses the revenue in excess of expenses to fund new projects, improve existing projects or pay its investors (Spiegel, 2000). Per example, applying a low-cost strategy, businesses can remove all frills and extras from its products and services (Aaker, 2001), making the organization more competitive and profitable. Financial ratios 

The Financial Ratios are practical indicators of a company’s financial and performance...

References: Aaker, D. (2001). Developing business strategies (6th Ed.). New York, NY: John Wiley and Sons, Inc.
Berman, K. & Knight, J. (2008). Financial Intelligence For HR Professionals. Boston, MA: Harvard Business Press.
Fernandez-Huerga, E. (Sep2008). The economic behavior of human beings: The institutional/post-Keynesian model. Journal of Economic Issues (Association for Evolutionary Economics, 42 (3), 709-726.
 Gitman, L. J. (2009). Principles of managerial finance. (12 ed.). Boston, MA: Addison-Wesley.
Goodman, G. F. (2012). Engagement marketing: How small business wins in a socially connected world. Hoboken, NJ: John Wiley & Sons.
Holden , P. (2010). Economies of scale: a quick explanation [Video file]. Retrieved from YouTube website:
Marks, M
Marks, M., & Mirvis, P. H. (2012). Applying OD to Make Mergers and Acquisitions Work. OD Practitioner, 44(3), 5-12.
Shook, L., & Roth, G. (2010). Downsizings, mergers, and acquisition: Perspectives of human resources development practitioners.  Journal of European Industrial Training 32(2), 135-153.
 Spiegel, M. (2000). Principles of corporate finance. Unpublished raw data, Yale School of Management, Retrieved from
 Wickramasignhe, V. & Karunaratne, C. (Mar2009). People management in mergers and acquisitions in Sri Lanka: employee perception. Journal of Human Resource Management, 20 (3), 694-715.
Wood, N. (2012). Behavioral Economics. [PowerPoint slides].  Retrieved from
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay about Behavioral Finance – Emerging Trend
  • History, Application, and Outlook of Behavioral Finance Essay
  • Behavioral Finance Essay
  • Behavioral Finance Essay
  • Introduction to Behavioral Economics Essay
  • A Survey of Behavioral Finance Summary Essay
  • Economics Essay
  • Essay on Managerial Economics

Become a StudyMode Member

Sign Up - It's Free