9780321818171_berk_ch03

When should managers give their workers a pay

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Unformatted text preview: is required, is it better to rent or purchase the facility? When should managers give their workers a pay increase? These are a few examples of the kinds of choices managers face every day. Our objective in this book is to explain how to make decisions that increase the value of the firm to its investors. In principle, the idea is simple and intuitive: For good decisions, the benefits exceed the costs. Of course, real-world opportunities are usually complex, and so the costs and benefits are often difficult to quantify. Quantifying them often involves using skills from other management disciplines, as in the following examples: Marketing: to determine the increase in revenues resulting from an advertising campaign Economics: to determine the increase in demand from lowering the price of a product Organizational behaviour: to determine the effect of changes in management structure on productivity Strategy: to determine a competitor’s response to a price increase Operations: to determine production costs after the modernization of a manufacturing plant For the remainder of this text, we will assume that we can rely on experts in these different areas to provide this information so that the costs and ben...
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