tailieunhanh - Optimal Decisions Using Marginal Analysis

This chapter introduces the analysis of managerial decision making that will occupy us for the remainder of the book. The chapter is devoted to two man topics. The first is a simple economic model (., a description) of the private, profit-maximizing firm. The second is an introduction to marginal analysis, an important tool for arriving at optimal decisions. Indeed, it is fair to say that the subsequent chapters provide extensions or variations on these two themes | C H A P T E R 2 Optimal Decisions Using Marginal Analysis Government and business leaders should pursue the path to new programs and policies the way a climber ascends a formidable mountain or the way a soldier makes his way through a mine field: with small and very careful steps. ANONYMOUS The rapid growth in franchising during the last three decades can be explained in large part by the mutual benefits the franchising partners receive. The franchiser (parent company) increases sales via an ever-expanding network of franchisees. The parent collects a fixed percentage of the revenue each franchise earns (as high as 15 to 20 percent, depending on the contract terms). The individual franchisee benefits from the acquired know-how of the parent, from the parent’s advertising and promotional support, and from the ability to sell a well-established product or service. Nonetheless, economic conflicts frequently arise between the parent and an individual franchisee. Disputes even occur in the loftiest of franchising realms: the fast-food industry. In the 1990s, there were ongoing conflicts between franchise operators and parent management of McDonald’s and Burger King. These conflicts were centered on a number of recurring issues. First, the parent insisted on periodic remodeling of the premises; the franchisee resisted. Second, the franchisee favored raising prices on best-selling items; the parent opposed the change and wanted to expand promotional discounts. Third, the parent sought longer store hours and multiple express lines to cut down on lunchtime congestion; many franchisees resisted both moves. Conflict in Fast-Food Franchising1 1 We begin this and the remaining chapters by presenting a managerial decision. Your first job is to familiarize yourself with the manager’s problem. As you read the chapter, think about how the principles presented could be applied to this decision. At the chapter’s conclusion, we revisit the problem and discuss possible .