The deliverable for this step is:
- Identify economic questions that firms must address.,
- Evaluate decision making, centered around the VBM, within a chosen industry. Prepare a problem statement within your specific industry.
In Week 1, we reviewed industrial organization, or market structure, which is the primary economic tool for industry analysis. It provides a framework for relating profitability to demand, level of competition, and firm behavior. Using the economic theory of market structure, identify a component of the market that is a threat to the health of the organization you are looking at.
Organizations face a multitude of challenges. You will find it helpful if you take one challenge and focus on it. For example, is it shifting demand? Or perhaps a new technology that is disruptive and changes the company’s cost structure? Another might be some legislation making its way through Congress that affects the organization’s ability to make certain decisions.
The Context of the Problem
For the problem statement, take the position of the person indicated in the problem scenario you have chosen. Place yourself in that person’s shoes. Given that person’s mandate, whether it be to increase share price, stabilize market share, increase cash flow, or any other goal, how would this leader perceive this challenge? Furthermore, how would a virtuous leader respond to the challenge? For example, the VBL approach talks about framing. How do you frame the problem statement so that it is ethically, as well as strategically, solid?
Investigating the Problem
The more specific the problem statement is, the easier it is to address it. In fact, half the battle is articulating the problem in a short statement. Express it as an “elevator speech,” that is, imagine you meet someone in an elevator and you have 60 seconds to explain your thought before the person reaches their floor. Often, simply thinking about how to put the problem succinctly in words suggest possible avenues for addressing it.