37. You are to identify an industry or business in which you are interested.This

Question

37.   You are to identify an industry or business in which you are interested.This could be a career interest area or even an organization that could serve as the context for your Capstone Project. What economic principles and associated analytical perspectives/tools are most helpful in deeply understanding the changes that are occurring in the strategic context of the industry in question? Provide a specific example of an economic insight that could be gained and subsequently leveraged to heighten the organization's competitive performance. What are some of the kinds of macro-economic changes that will be difficult to predict with existing economic models?           

Explanation / Answer

In order to understand the changes that are occurring in the strategic context of the industry economies of scale is a great economic tool that help in deeply understanding these changes. It Shows how the average cost curve of the firm changes with the change in the level of the output.

Initially it falls with the increase in the level of output of the firm and then reaches a minimum point. The modern theory states that the shape of the curve is L shaped as opposed to the earlier theory which states that the shape of the curve is U shaped.

Fall in the average cost of production helps in improving the competitive advantage of the firm and increase its profits. Some of the uncertain events occuring in the economy that might impact cost of production of the firm can not be predicted by the existing macro economic models

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