Reference no: EM132155225

Module Overview:

Economically, the world is getting smaller. Companies depend more and more on international markets to sell goods and services. The more complex the economic system, the harder it is to project the future, especially, understand the risks associated with investments.

As a manager, you must respond and build flexibility into your company to best adapt to the changing environment. You should make projections and plan for contingencies to maximize the probability of success. For example, a company may own several different lines of hotels, high-end expensive hotels and lower-end casual hotels designed for long distance travelers and families.

Based on budgets and forecasts, management may want to focus marketing and promotion efforts on business travels at the high-end expensive hotels. What if there is an unexpected economic turn where business travelers from targeted clients have budgets significantly cut and cannot stay at these expensive hotels anymore?

Management may quickly need to change the marketing efforts and begin to invest in tools that will attract more casual guests and markets into your high-end products for lower rates, which will reduce profitability, but keep rooms filled at a volume significant enough to cover costs.

In this module, you will be introduced to the principles of risk, and how they impact supply, demand, price, and ultimately investor returns.

Module Readings

Complete the following readings early in the module:

Module overview

From your course textbook, Managerial economics: Economic tools for today's decision makers, read the following chapters:

Demand Estimation and Forecasting

The Theory and Estimation of Production

The Theory and Estimation of Cost

From the Argosy University online library resources, read:

Lawler, E. E., III, & Toole, E. (Eds.). America at work: Choices and challenges. Gordonsville, VA: Palgrave Macmillan.

Assignment: Discussion-Assessment of Risks

Risks are common for all firms, but there are different levels of risks in different industries and in different countries. The differences in risks from firm to firm or industry to industry are called unsystematic risks. Consequently, individual firms and industries deal with risks in different ways.

Tasks:

Consider two companies that deal in two entirely different industries, such as Microsoft, which is a technology company, and Caterpillar Inc., which manufactures heavy equipment.

Respond to the following questions:

Explain how the risks and the approaches to anticipate these risks differ for each company.

Analyze the kinds of risks that are most intimidating for each.