ALIYU OBABIOLORUNKOSI GAFAAR

UNIVERSITY OF LAGOS BUSINESS SCHOOL

EXECUTIVE MBA PROGRAMME
THIRD SEMESTER, 2022/2023 SESSION

MANAGERIAL ECONOMICS (EMB 833)

ASSIGNMENT 1

Assignment Questions:

1. Is the economics function at GTE essential to

management planning? Try to list the various
possible uses management can make of the
output of its economists.
2. How do economic inputs become a part of
management’s decisions?
3. Why do you suppose that GTE economists use
the services of outside economic consulting
firms? In what areas would these services be
helpful?
4. Determine from this review the kinds of
knowledge and the backgrounds GTE
economists should have.

FACILITATOR: PROF. N. I. NWOKOMA

DISCUSSION QUESTION 1:

Is the economics function at GTE essential to management

planning? Try to list the various possible uses management can
make of the output of its economists.

The economics function at GTE is essential to management planning,

particularly concerning its impact on the overall strategy of the
organization. The economics function at such a large corporation
comprises specialized professionals responsible for analyzing
economic factors and their impact on the decisions made by the
organization.

The economics function is responsible for a range of activities,

including forecasting economic trends and identifying risks or
opportunities in the financial market. Corporate Economists also
identify key metrics to track the company's performance, including
pricing strategies, supply and demand, production, costs, revenues,
and profits. The economics unit works closely with appropriate
personnel within the GTE parent company and service corporation to
coordinate the use throughout GTE of economic forecasts and
econometric forecasting techniques. This includes advice and aid in
developing sophisticated forecasting systems for use in production
scheduling market planning and budgeting. Additionally, this function
works with other departments within the organization, such as sales,
marketing, operations, and finance, to ensure that management
decisions are soundly based on economic principles.

With the help of its corporate economists, GTE can get insights into
macroeconomic trends and how they will impact the company's
overall strategy. The functions can provide actionable economic data
and analysis to enable informed decision-making by management to
achieve optimal performance.
In summary, the economics function at GTE plays an essential role in
management planning. This function provides analysis on economic
trends that can directly and indirectly impact the company's policies.
When the organization understands this department's insights, they
can better understand overall economic trends and adjust their
strategy accordingly to optimize the probability of the success of the
desired outcomes.

Listed below are some possible uses of the outputs of the GTE
economists by management:

1. Strategic Planning: Management can use the economists' outputs

for strategic planning by analyzing economic trends and
conditions that can impact the organization's long-term goals
and objectives.
2. Pricing decisions: Businesses depend on the value they offer to
their customers, and corporate economists help to analyze
pricing decisions by providing information on pricing elasticity,
production costs, and consumer demand trends that management
can incorporate in their pricing strategies.
3. Marketing decisions: Management can use corporate
economists' output to analyze market trends, customer tastes,
and preferences to develop marketing strategies that are aligned
with changing macroeconomic conditions.
4. Forecasting and Budgeting: The corporate economists develop
short-range forecasts covering one to two years and long-range
forecasts covering five years for the United States economy,
other major industrialised nations and the American telephone
and electronics industries. The forecasts are developed using
sophisticated econometric models. Inputs are drawn from
sources both inside and outside the company. These forecasts
provide insights on the potential risks and uncertainties that
might alter the business environment.
5. Communication of Forecasts to GTE Management: Economic
forecasts and assumptions are communicated to GTE
management by means of regular “Economic Outlook” letters
issued by the Corporate Economists with the purpose of
providing all GTE subsidiaries with a uniform set of
assumptions regarding the outlook for business conditions,
inflation, real growth, interest rates and other economic
variables for use in the annual preparation of budgets and five-
year plans. The “Economic Outlook” letters provide evaluations
of the probable impact on GTE businesses of changes in the
both the local and global economic environments as well as
information on changes in the business outlook for the
consideration of group and subsidiary managements in decision
making throughout the year.
6. Furnish Supplemental Economic Reports: The corporate
economists issue “Weathervane Reports” or “Economic
Highlights” memos to supplement the regular “Economic
Outlook” letters. These additional letters are intended to keep
GTE management informed on an immediate basis of changes
in the outlook for interest rates, inflation, government policy,
housing starts and other significant topics affecting GTE.
7. Review Budgets and Five-Year Plans: The corporate economists
review the budgets and five-year plans submitted by operating
groups and subsidiaries to determine reasonableness in light of
original economic assumptions and subsequent changes in the
economic outlook. In conjunction with the evaluation of
subsidiary plans, the function is developing a GTE corporate
model to interpret the effects of external economic conditions
upon profitability of the corporation and its subsidiaries. This
model will also be used to provide GTE management with
“what if” analyses of alternate economic conditions.
8. Operational Decisions: GTE Economists can provide insights
into the cost-benefit analysis of the business's production
decisions, capital investment decisions, and supply chain
logistics which can be helpful to management in making
informed decisions.
9. Risk Analysis: Corporate Economists can support management
in the identification and assessment of potential risks associated
with company operations. This can help the company’s
management develop contingency plans to mitigate these risks.
10. Market Analysis: Through various techniques such as
regression analysis, costing analysis, and forecasting,
economists can help GTE management identify strategic
opportunities that may arise as a result of market changes.

To conclude, we posit that the outputs of the company’s economists

can be used by GTE management for several decision-making
processes, including strategic planning, pricing, marketing,
forecasting, budgeting, supply chain management, and risk
mitigation. Therefore, we opine that incorporating its economists'
input into the decision-making process will enable GTE
management make well-informed decisions.
DISCUSSION QUESTION 2:

How do economic inputs become a part of

management’s decisions?

The economics unit provides professional advice, information and

analytical services to the top management of GTE and to their staff.
This information flow consists of fulfilling requests from
management and from self-initiating analysis based on relevance to
the corporation’s overall operations.

The economics unit works closely with appropriate personnel within

the GTE parent company and service corporation to coordinate the
use throughout GTE of economic forecasts and econometric
forecasting techniques. This includes advice and aid in developing
sophisticated forecasting systems for use in production scheduling
market planning and budgeting.

These economic inputs are key factors that impact management

decisions, helping managers to make informed and effective decisions
to address problems or opportunities in the business environment.

Below are some ways these economic inputs become a part of

management's decisions:

 Market Demand: Managers analyze market demand as a

significant economic input to identify customer behavior,
preferences, and needs. They use this information to develop
strategies for pricing, production, and marketing. By
understanding the market demand, managers can decide which
products to offer, how much to produce, and how much to
charge for them.
 Production Costs: Production costs provide insight into the cost
of raw materials, labor, and overhead costs involved in creating
a product. Managers use this information to assess the cost-
effectiveness of different production methods. By analyzing
production costs, managers can determine the appropriate
pricing strategy, the most cost-efficient methods of production,
and the optimal inventory levels to maintain.
 Financial Resources: Managers assess the financial resources
available to the organization to make decisions about
investments, budgeting, and financial planning. They use data
related to the company's financial position, including sales
revenue, profits, and cash flow, to identify investment
opportunities. By considering the organization's financial
resources, managers can determine the feasibility of new
projects, assess the risk associated with them, and determine
whether to launch them.
DISCUSSION QUESTION 3:

Why do you suppose that GTE economists use the

services of outside economic consulting firms? In
what areas would these services be helpful?

Corporate economists in large organizations like GTE may use the

services of outside economic consulting firms for a number of
reasons, including:

1. Expertise: Consulting firms often have specialized knowledge

and expertise that may not be available within the company.
This can be particularly helpful for large organizations that have
a wide range of economic issues to address.
2. Objectivity: Consulting firms are often seen as more objective
than in-house economists. This can be important when dealing
with sensitive issues like antitrust, compliance or restructuring.
3. Cost-effectiveness: External consultants can be a more cost-
effective solution than hiring additional full-time employees.
Large organizations may not have the resources or expertise to
address some complex economic issues in-house.
4. Time management: External consultants can work more
efficiently and provide faster results because they are focused
solely on the project at hand.
5. Risk management: Consulting firms can help large organizations
manage risk by providing insights into future economic
conditions and identifying potential threats to the business.
6. Reputation management: Corporate economists can use
consulting firms as a credible source of information for the
media and other stakeholders, helping to manage the
organization's reputation.

In summary, external economic consulting firms can provide

organizations like GTE with specialized expertise, objectivity, cost-
effectiveness, time management, risk management, and reputation
management.
The services of external economic consultants can be helpful to GTE
corporate economists in various areas, including:

 Economic Forecasting and Analysis: External economic

consultants can help GTE economists in preparing economic
forecasts and conducting economic analyses on various aspects
of the business. This can include analyzing market trends,
assessing the impact of economic policies on the business, or
creating economic models for decision-making.
 Industry and Market Analysis: External consultants can also
help GTE economists in analyzing specific industries and
markets. This can include understanding the competitive
landscape, evaluating consumer behavior and preferences, and
identifying potential opportunities and threats.
 Regulatory Compliance: Economic consultants can assist GTE
corporate economists in ensuring compliance with various
economic regulations, including antitrust laws, environmental
regulations, and labor laws.
 Risk Management: External consultants can help GTe’s in-house
economists in identifying and managing economic risks,
including financial risks, market risks, and operational risks.
 Strategic Planning: The external consultants can also assist GTE
corporate economists in developing and executing strategic
plans. This can involve identifying areas for business growth,
analyzing potential mergers and acquisitions, and evaluating the
financial implications of various strategic initiatives.

Overall, the external economic consultants can provide valuable

insights and expertise to GTE economists across a range of areas,
enabling them to provide more informed and effective decision
options to the management.
DISCUSSION QUESTION 4:

Determine from this review the kinds of knowledge

and the backgrounds GTE economists should have.

Based on this review, my understanding is that GTE corporate

economists should have extensive knowledge and backgrounds in
economics, finance, and business management. Specifically, they
should have:

a. Expertise in Micro and Macro Economics: A strong foundation

in micro and macroeconomics is crucial for corporate
economists as it helps them analyze and predict market trends,
understand the impact of government policies on the
organization, and identify potential growth opportunities.
b. Financial Acumen: GTE’s in-house economists are expected to
have strong financial knowledge in areas such as accounting,
corporate finance, and risk management. They should be able to
prepare budgets, conduct financial analysis, and assess
performance metrics.
c. Analytical and Problem-Solving Skills: GTE economists must
be able to analyze complex economic data, identify trends, and
develop insights that help solve business challenges. They must
have advanced statistical and mathematical skills that enable
them to build and use financial models for decision-making.
d. Business Knowledge: Corporate economists in a large
organisation like GTE should have a strong understanding of the
organization's industry, competition and strategies. They need to
be familiar with the organization's products, services and
operations, as well as the markets and customers it serves.
e. Good Communication Skills: Communication is key for GTE
corporate economists since they interact with different
departments, stakeholders and senior management. They should
be able to present complex financial issues in a clear, simplified
and concise manner that is understandable by non-experts.
 f. Technology Skills: GTE economists must be proficient in using
relevant software tools such as spreadsheets, statistical
programs, and database management systems to aid in data
analysis.

Overall, a strong understanding of economics, finance and business

management, coupled with excellent analytical, ICT and
communication skills and business acumen, are essential requirements
for GTE corporate economists.