Role and Responsibilities of Managerial Economist A managerial economist can play a very important role by assisting the Management

in using the increasingly specialized skills and sophisticated techniques which are required to solve the difficult problems of successful decision making and forward planning. That is why, in business concerns, his importance is being growingly recognized. In developed countries like the U.S.A., large companies employ one or more economists. In our country (India) too, big industrial houses have come to recognize the need for managerial economists, and there are frequent advertisements for such positions. Tatas and Hindustan Lever employ economists. Indian Petrochemicals Corporation Ltd., a Government of India undertaking, also keeps an economist. Let us examine in specific terms how a managerial economist can contribute to decision making in business. In this connection, two important questions need be considered :What role does he play in business, that is, what particular management problems lend themselves to solution through economic analysis?How can the managerial economist best serve management, that is, what are the responsibilities of a successful managerial economist? Role of Managerial Economist One of the principal objectives of any management in its decision making process is to determine the key factors which will influence the business over the period ahead. In general, these factors can be divided into two category, viz., (i) External and (ii) Internal. The external factors lie outside the control management because they are external to the firm and are said to constitute business environment. The internal factors lie within the scope and operations of a firm and hence within the control of management, and they are known as business operations. To illustrate, a business firm is free to take decisions about what to invest, where to invest, how much labour to employ and what to pay for it, how to price its products and so on but all these decisions are taken within the framework of a particular business environment and the firms degree of freedom depends on such factors as the governments economic policy, the actions of its competitors and the like. Environmental Studies An analysis and forecast of external factors constituting general business conditions, e.g., prices, national income and output, volume of trade, etc., are of great significance since every business from is affected by them. Certain important relevant questions in this connection are as follows :What is the outlook for the national economy? What are the most important local, regional or worldwide economic trends? What phase of the business cycle lies immediately ahead?

What about population shifts and the resultant ups and downs in regional purchasing power? What are the demands prospects in new as well as established markets? Will changes in social behavior and fashions tend to expand or limit the sales of a companys products, or possibly make the products obsolete? Where are the market and customer opportunities likely to expand or contract most rapidly? Will overseas markets expand or contract, and how will new foreign government legislations affect operation of the overseas plants? Will the availability and cost of credit tend to increase or decrease buying? Are money or credit conditions ahead likely to be easy or tight? What the prices of raw materials and finished products are likely to be? Is competition likely to increase or decrease? What are the main components of the five-year plan? What are the areas where outlays have been increased? What are the segments, which have suffered a cut in their outlay? What is the outlook regarding governments economic policies and regulations? What about changes in defense expenditure, tax rates, tariffs and import restrictions? Will Reserve Banks decisions stimulate or depress industrial production and consumer spending? How will these decisions affect the companys cost, credit, sales and profits?

Reasonably accurate answers to these and similar questions can enable management to chalk out more wisely the scope and direction of their own business plans and to determine the timing of their specific actions. And it is these questions which present some of the areas where a managerial economist can make effective contribution. The managerial economist has not only to study the economic trends at the macro level but must also interpret their relevance to the particular industry / firm where he works. He has to digest the ever growing economic literature and advise top management by means of short, business like practical notes. In a mixed economy like India, the managerial economist pragmatically interprets the intentions of controls and evaluates their impact. He acts as a bridge between the government and the industry, translating the governments intentions and transmitting the reactions of the industry. In fact, government policies charge out of the performance of industry, the expectations of the people and political expediency.

Business Operations A managerial economist can also be helpful to the management in making decisions relating to the internal operations of a firm in respect of such problems as price, rate of operations, investment, expansion or contraction.

Certain relevant questions in this context would be as follows :What will be a reasonable sales and profit budget for the next year? What will be the most appropriate production Schedules and inventory policies for the next six months? What changes in wage and price policies should be made now? How much cash will be available next month and how should it be invested? Specific Functions A further idea of the role of managerial economists can be seen from the following specific functions performed by them as revealed by a survey pertaining to Britain conducted by K.J.W. Alexander and Alexander G. Kemp :Sales forecasting. Industrial market research. Economic analysis of competing companies. Pricing problems of industry. Capital projects. Production programs. Security/investment analysis and forecasts. Advice on trade and public relations. Advice on primary commodities. Advice on foreign exchange. Economic analysis of agriculture. Analysis of underdeveloped economics. Environmental forecasting.

The managerial economist has to gather economic data, analyze all pertinent information about the business environment and prepare position papers on issues facing the firm and the industry. In the case of industries prone to rapid technological advances, he may have to make a continuous assessment of the impact of changing technology. He may have to evaluate the capital budget in the light of short and long-range financial, profit and market potentialities. Very often, he may have to prepare speeches for the corporate executives.

It is thus clear that in practice managerial economists perform many and varied functions. However, of these, marketing functions, i.e., sales forecasting and industrial market research, has been the most important. For this purpose, they may compile statistical records of the sales performance of their own business and those relating to their rivals, carry our analysis of these records and report on trends in demand, their market shares, and the relative efficiency of their retail outlets. Thus while carrying out their functions; they may have to undertake detailed statistical analysis. There are, of course, differences in the relative importance of the various functions performed from firm to firm and in the degree of sophistication of the methods used in carrying them out. But there is no doubt that the job of a managerial economist requires alertness and the ability to work under pressure. Economic Intelligence Besides these functions involving sophisticated analysis, managerial economist may also provide general intelligence service supplying management with economic information of general interest such as competitors prices and products, tax rates, tariff rates, etc. In fact, a good deal of published material is already available and it would be useful for a firm to have someone who understands it. The managerial economist can do the job with competence. Participating in Public Debates Many well-known business economists participate in public debates. Their advice and views are being sought by the government and society alike. Their practical experience in business and industry ads stature to their views. Their public recognition enhances their stature in the organization itself. Indian Context In the indian context, a managerial economist is expected to perform the following functions :Macro-forecasting for demand and supply. Production planning at macro and micro levels. Capacity planning and product-mix determination. Economics of various productions lines. Economic feasibility of new production lines/processes and projects.

Assistance in preparation of overall development plans. Preparation of periodical economic reports bearing on various matters such as the companys productlines, future growth opportunities, market pricing situation, general business, and various national/international factors affecting industry and business.

Preparing briefs, speeches, articles and papers for top management for various Chambers, Committees, Seminars, Conferences, etc. Keeping management informed economic/industrial matters. o various national and international developments on

With the adoption of the New Economic Policy, in 1991, the macro-economic Environment in India is changing fast at a pace that has been rarely witnessed before. And these changes have tremendous implications for business. The managerial economist has to play a much more significant role. He has to constantly gauge the possibilities of translating the rapidly changing economic scenario into viable business opportunities. As India marches towards globalization, he will have to interpret the global economic events and find out how his firm can avail itself of the carious export opportunities or of establishing plants abroad either wholly owned or in association with local partners.

Responsibilities of Managerial Economist Having examined the significant opportunities before a managerial economist to contribute to managerial decision making, let us now examine how he can best serve the management. For this, he must thoroughly recognize his responsibilities and obligations. A managerial economist can serve management best only if he always keeps in mind the main objective of his business, viz., to make a profit on its invested capital. His academic training and the critical comments from people outside the business may lead a managerial economist to adopt an apologetic or defensive attitude towards profits. Once management notices this, his effectiveness is almost sure to be lost. In fact, he cannot expect to succeed in serving management unless he has a strong personal conviction that profits are essential and that his chief obligation is to help enhance the ability of the firm to make profits. Most management decisions necessarily concern the future, which is rather uncertain. It is, therefore, absolutely essential that a managerial economist recognizes his responsibility to make successful forecasts. By making best possible forecasts and through constant efforts to improve upon them, he should aim at minimizing, if not completely eliminating, the risks involved in uncertainties, so that the management can follow a more orderly course of business planning. At times, he will have to reassure the management that an important trend will continue; in other cases, he may have to point out the probabilities of a turning point in some activity of importance to management. In any case, he must be willing to make considered but fairly positive statements about impending economic developments,

based upon the best possible information and analysis and stake his reputation upon his judgment. Nothing will build management confidence in a managerial economist more quickly and thoroughly than a record of successful forecasts, well-documented in advance and modestly evaluated when the actual results become available. A few corollaries to the above proposition need also be emphasized here. First, he has a major responsibility to "alert management at the earliest possible moment" in case he discovers an error in his forecast. By promptly drawing attention to changes in forecasting conditions, he will not only assist management in making appropriate adjustment in policies and programs but will also be able to strengthen his own position as a member of the management team by keeping his fingers on the economic pulse of the business. Secondly, he must establish and maintain many contacts with individuals and data sources, which would not be immediately available to the other members of the management. Extensive familiarity with reference sources and material is essential, but it is still more important that he knows individuals who are specialists in particular fields having a bearing on his work. For this purpose, he should join professional associations and take active part in them. In fact, one of the best means of determining the caliber of a managerial economist is to evaluate his ability to obtain information quickly by personal contacts rather than by lengthy research from either readily available or obscure reference sources. Within any business, there may be a wealth of knowledge and experience but the managerial economist would be really useful if he can supplement the existing know-how with additional information and in the quickest possible manner. Again, if a managerial economist is to be really helpful to the management in successful decision making and forward planning, he must be able to earn full status on the business team. He should be ready and even offer himself to take up special assignments, be that in study teams, committees or special projects. For, a managerial economist can only function effectively in an atmosphere where his success or failure can be traced not only to his basic ability, training and experience, but also to his personality and capacity to win continuing support for himself and his professional ideas. Of course, he should be able to express himself clearly and simply and must always try to minimize the use of technical terminology in communicating with his management executives. For, it is well-known that if management does not understand, it will almost automatically reject. Further, while intellectually he must be in tune with industrys thinking the wider national perspective should not be absents from his advice to top management.