Managerial Economics

Topics: Monetary policy, Central bank, Inflation Pages: 9 (2480 words) Published: August 21, 2013
Managerial Economics
Exam at EMBA program at Cotrugli Business School Belgrade

Prepared by: Enor Cerimagic

Date: January 2013

Managerial Economics

Prepared by: Enor Cerimagic

CONTENT

SECTION A:
Question 1
Provide a specific example of a poor decision that cost your company money. Identify the key decision-maker, and explain what happened. Did that person have the right incentives? Did they have sufficient knowledge? Explain how an improvement in incentives mechanisms and/or knowledge systems could prevent similar mistakes being made in future.

SECTION B:
Question 4
In response to the global financial crisis central banks across the world have cut interest rates. Why? What are the main arguments against rate cuts?

SECTION C:
Question 5
Many economic commentators believe that the dollar is weak at the moment. Why is this? What are the key drivers of foreign exchange markets? What do you think will happen to the dollar in future?

2/8

Managerial Economics

Prepared by: Enor Cerimagic

SECTION A:
Question 1
Provide a specific example of a poor decision that cost your company money. Identify the key decision-maker, and explain what happened. Did that person have the right incentives? Did they have sufficient knowledge? Explain how an improvement in incentives mechanisms and/or knowledge systems could prevent similar mistakes being made in future.

For almost twelve years I have been working for international pharmaceutical companies. During this period of time with different companies’ philosophies, I have been able to realize that most of business or business related projects, which have been generated and led from regional offices or headquarters, without market specific modifications and inputs were usually, at least, more expensive. Sometimes, it can lead to project failure or project poor results. Local apples or a foreign strawberry... does not matter, if result will come, if business opportunities will be recognised, if strategy will be improved and revenue/profit will grow. Although, nice apple and strawberry salad should be able to satisfy both - taste and flavour or result and cost. Decision by our Regional manager (RM) has been made to engage consulting agency from Hungary to lead the project of Profiling, Segmenting and Targeting (PST) physicians and pharmacies in Adriatic Region, which includes Bosnia and Herzegovina. Main purpose of project was to determinate clients who will be segmented, related to current strategy, and targeted based on their potential and their adaption stage. Pareto principle (after Vilfredo Pareto, Italian scientists, 1848-1923), which states that 80% of our revenue/profit comes from 20% of our clients, was undisputed project goal for recognition. We have intended to cover 90% of total universe of doctors and pharmacies in country, and to profile them based on their potential and loyalty. In the project, further analysis included also our internal capacity, internal sales results (national and in territories) and market segments value and volume shares (national and in bricks).

100 90 80 70

80/20 RULE

SALES

60 50 40 30 20 10 0 0 10 20 30 40 50 60 70 80 90 100

20% CLIENTS

80% RESULTS

CLIENTS

3/8

Managerial Economics

Prepared by: Enor Cerimagic

In preparation stage we have alarmed RM that in B&H IMS data (traditional market data in pharmaceutical industry) does not exist with recommendation and suggestion that local agency should be engaged for project execution, what would give us an opportunity to hire the agent based on references (adverse selection) and to monitor further actions. Also, local agencies are operating with valuable market data on daily basis. So, our intention was to decentralise project, but RM insisted on Hungarian agency for entire region. Result - project realisation lasted for five months, instead of three, with additional costs for market data from different sources and additional costs of...
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