Managerial Economics and Its Application in Banking Sector a Case of Nmb

Topics: Supply and demand, Economics, Consumer theory Pages: 8 (2879 words) Published: January 9, 2011
Managerial Economics
Is a branch of economics that applies microeconomic analysis to specific business decisions. It bridges economic theory and economics in practice. Managerial economics provides a set of tools, techniques, methodologies, guidance and insights that can help in making better and value-adding decisions in business and for analyzing decision problems and developing criteria for choosing the best possible solution to problems. Consumer Behavior

Is the study of how individuals, groups, and organizations select, buy, use and dispose of goods, services, ideas, or experiences to satisfy their needs and wants (Kottler, P; Keller, K.L. 2009) Consumer Behaviour

Referred to as the study of when, why, how, where and what people do or do not buy products. It blends elements from psychology, sociology, social, and anthropology and economics. it attempts to understand the buyer decision making process, both individually and in groups. It studies characteristics of individual consumers such as demographics and behavioural variables in an attempt to understand people’s wants. It also tries to assess influences on the consumer from groups such as family, friends, reference groups, and society in general. Belch and Belch define Consumer Behaviour as the process and activities people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to satisfy their needs and desires.

Is the willingness and ability to purchase a product. Consumer’s total demand for a product for a product is reflected in the demand curve Demand Curve
Is a line showing the relationship between the price of a product or factor of production and the quantity demanded per time period. The demand curve is usually downward sloping, since consumers will want to buy more as price decreases. Shift in demand curve

Is a movement of the demand curve from one position to another (left or right) as a result of some economic change other than price. A given demand curve is always drawn on the ceteris paribus assumption that all other factors affecting demand (income, taste, etc) are held constant. If any of these changes, however, then this will bring about a shift in the demand curve. For example if income increases, the demand curve will shift to the right, so that more is now demanded at each price than formerly.

Application of managerial theory in the place of work a case of National Microfinance Bank Managerial Economics theories are also applicable in banking sectors, National Microfinance Bank as a case study. Some of the theories which are applicable to National Microfinance Bank are pricing theories, Demand Analysis and theory of consumer behavior. Pricing theory

National Microfinance Bank has always maintained a pricing strategy for its products that keep them affordable to the general public. The bank’s aim is to remain at the same level or below the key competitors, mainly CRDB and NBC. This strategy has worked well and resulted in a significant growth of NMB Personal Accounts as well as NMB ATM Cards. For some products, price influences consumers’ perception of overall quality (Kerin R.A; et al 2004)

Penetration Pricing
National Microfinance Bank used penetration pricing in setting a low initial price on a new product to appeal immediately to the mass market, for example NMB Internet Banking, has started for Corporate Customers with free registration, compared to other Banks which have registration and transaction fees, this has caused many corporate customers to convinced to join this service and hence increase the deposits for the bank during this hard time of Economic Crisis. Also with launching of Mobile Banking which came with low initial pricing for money transfers services, balances and bank statement enquiries, has encouraged many customers to register for the service to its affordability, with now over 150,000 customers have...

References: Kerin R.A; et al (2004) Marketing the Core
Ngowi, H.P. Managerial Economics Handouts 2008
National Microfinance Bank Commercial Department
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