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Engineering Economics & Management

Engineering Economics & Management. Decision Making process. Identifying a Problem: Identifying Decision Criteria: Allocating Weights to the Criteria: Developing Alternatives: Analyzing Alternatives: Selecting an Alternative: Implementing the Alternative:

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Engineering Economics & Management

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  1. Engineering Economics & Management

  2. Decision Making process • Identifying a Problem: • Identifying Decision Criteria: • Allocating Weights to the Criteria: • Developing Alternatives: • Analyzing Alternatives: • Selecting an Alternative: • Implementing the Alternative: • Evaluating decision Effectiveness:

  3. Identifying a problem • Every Decision start with a problem. Swedish college students need new computer for lab because their old ones are not perfect working and increase number of computer. Now we have a problem purchase new computer.

  4. Identifying Decision Criteria • First of identified a problem , he or she must identifying the criteria that are important or relevant to resolving the problem. So administration decides after careful consideration that Memory and Storage Capabilities Battery , Warranty, display Quality.

  5. Allocating Weights to the Criteria • Memory Storage 10 • Battery Life 8 • Carrying Weights 6 • Warranty 4 • Display Quality 3

  6. Allocating weights To The Criteria Memory storage B/L W Display/Q HP 10 3 8 5 Dell 10 7 6 10 Apple 8 7 8 7

  7. Developing Alternatives • The forth step in the decision-making process requires the decision maker to list alternatives that could resolve the problem.

  8. Analyzing Alternatives Memory storage B/L W Display /Q Total HP 100 24 32 15 171 Apple 80 56 32 21 189 Dell 100 56 24 21 201

  9. Selecting Alternatives • The six step in the decision-making process is choosing the best alternative or the one that generated the highest total. So best alternatives is Dell. So administration decided to purchase dell computer.

  10. Implementing the Alternative In the decision making process, after assessment all feature select best alternative is Dell computer. So purchase the Dell computer.

  11. Evaluating Decision Effectiveness • The Last step in the decision-making process involves evaluating the outcome or result of the decision to see whether the problem was resolved. If the evaluation shows that problem still exists, then administration needs to assess what went wrong.

  12. Strategic Management process • Identifying the Organization's Current Mission, Goals, and Strategies: • Doing an External Analysis • Doing an internal Analysis • Formulating Strategies • Implementing Strategies • Evaluating Results

  13. Identifying the organization current Mission, Goals, and Strategies • Every organization needs a mission a statement of its purpose. Defining the mission forces managers to identify what it’s business to do. In this step organization set the current mission, goals and strategies.

  14. Doing an External Analysis • Analyzing the external environment including all competitors, distributers, buyers, suppliers ,Location , demographic, Political/Legal, social, technology and Global Components.

  15. Doing an Internal Analysis • The internal analysis, which provides important information about an organization’s specific resources and capabilities. An Organization’s resources are its assets include financial, physical, human and intangible that it use to develop, manufacture, and deliver product to customer.

  16. Formulating Strategies • As managers formulate strategies They should consider the realities of the external environment and their available resources and capabilities in order to design strategies that will help an organization achieve its goals.

  17. Implementing Strategies • Once strategies is formulated and the must be implemented. No Matter how effectively an organization has planned its strategies, performance will suffer if the strategies are not implement properly.

  18. Evaluating Results • The final step in the strategic management process is evaluating results. How effective have the strategies been at helping the organization reach its goals. After assessment management understand strategy is good or bad.

  19. Components of a Mission Statement • Customer • Markets • Concern for survival, growth, and profitability: financial Stability • Philosophy: What are the firm basic belief, values. • Product or services • Technology

  20. Components of a Mission Statement • Self Concept: Major competitive advantage and core competencies. • Concern for Employees: Are employee a valuable asset of the firm.

  21. Types of Organization • Sole Proprietorship organization • Partnership Organization • Joint Stock Organization • Private Limited Company • Public Limited Company

  22. Sole Proprietorship Organization • A single person own it. In this type of organization the individual owner supplies the capital needed to run the organization. He alone enjoys the profit and is responsible to pay all the losses or Liabilities.

  23. Advantages/Disadvantages • Availability of capital for investment is limited • The proprietor acts strictly to his decisions • Disadvantages: • Limited amount of capital can be invested. • In case of loss, investor has to bear it alone.

  24. Partnership • A partnership organization is one, which is formed by a group of persons with mutual understanding and confidence. The maximum number of shareholders is 20. • Advantages:- • Liabilities are divided • Capital is much greater than in the sole proprietorship organization. • Disadvantages:- • The major disadvantage lies in the situation when the partners do not trust each other.

  25. Joint Stock Companies • These companies have limited liabilities. In this system the capital is contributed by a large number of persons. It is voluntary association of individuals for profit, have a capital share divided into transferable shares of different values. Each share has equal value. The person who purchase the share is called shareholders. The managing body known as Board of Directors is elected by these shareholders.

  26. Advantages / Disadvantages • Advantages: • Liabilities are Limited • Great potentials of expansion • Good managing capabilities can be exercised • Disadvantages: • Large numbers of legal formalities are to be fulfilled • Decision Taken is very difficult.

  27. Private Limited Companies • Two or more persons can form this type of company. The maximum number of membership is 50. The government does not interfere the working of the system.

  28. Public Limited Company • The public limited company authorized by after the approval of Governments. Check and balance .The public limited company is subjected to grater control and supervision of the Government, which is necessary protect the interest of the people's. The shares of these companies are offered in the stock exchange.

  29. Types Of Share There are two types of shares (a) Common Shares (b)Preferred Shares

  30. Common stocks • Common Stocks: As the name suggests, t his type of stocks are quite common. It is the basic stock a corporation issues. Buying a common stock will give you an advantage of owning the equity in the company. It has varied dividends/ or returns. Not only this, as one of the shareholders in the company, you have your say in voting for the board members as well.

  31. Preferred Stocks • Preferred Stocks: These stocks are usually between Common stock and bond. These stocks represent some degree of ownership in a company but usually don’t come with the same voting rights. Each share of preferred stock is normally paid a guaranteed dividend which receives first priority over common stock holders in the event of liquidation. Preferred shareholders always receive their dividends first and, in the event the company goes bankrupt, preferred shareholders are paid off before the common stockholders.

  32. Preferred Stocks Types • The Preferred Stocks are further sub-divided into 4 categories: • Cumulative Preferred Stocks: This is more of a savings stock. In the case of cumulative stocks, if for some reason the dividends cannot be paid out one year, it is added to the dividends the following year and paid out in one larger amount. • Non-cumulative Preferred Stocks: In this case, the dividends skipped one year are not added to the following years’ dividends. • Callable/ Participating Preferred Stocks: These shares may receive higher than normal dividend payments if the company turns a larger than expected profit. • Convertible Preferred Stocks: This type gives you (stockholder) the right to convert your stocks into a fixed number of common stocks irrespective of market price.

  33. Joint venture • An association of two or more individuals or companies engaged in a business enterprise for profit without actual partnership or incorporation; also called a joint adventure.

  34. Stock Exchange • Definition: • Organized and regulated financialmarket where securities (bonds, notes, shares) are bought and sold at prices governed by the forces of demand and supply. Stock exchanges basically serve as (1) primary markets where corporations, governments, municipalities, and other incorporated bodies can raise capital by channelingsavings of the investors into productive ventures; and (2) secondary markets where investors can sell their securities to other investors for cash.

  35. stock exchange • all listed and tradingparties. Trades in the older exchanges are conducted on the floor (called the 'trading floor') of the exchange itself, by shouting orders and instructions (called open outcry system). On modern exchanges, trades are conducted over telephone or online. Almost all exchanges are 'auction exchanges' where buyers enter competitivebids and sellers enter competitive orders through a trading day. Some European exchanges, however, use 'periodic auction' method in which round-robin calls are made once a trading day. The first stock exchange was opened in Amsterdam in 1602; the three largest exchanges in the world are (in the descending order) New York Stock Exchange (NYSE), London Stock Exchange (LSE), and the Tokyo Stock Exchange (TSE). Called also stock market.

  36. Theory of Production • Production theory is the study of production, or the economic process of converting inputs into outputs. Production uses resources to create a good or service that is suitable for use, gift-giving in a gift economy, or exchange in a market economy. This can include manufacturing, storing, shipping, and packaging. Some economists define production broadly as all economic activity other than consumption.

  37. Theory of Production • They see every commercial activity other than the final purchase as some form of production. • Production is a process, and as such it occurs through time and space. Because it is a flow concept, production is measured as a “rate of output per period of time”. There are three aspects to production processes.

  38. Factor Of production • DefinitionSave to FavoritesSee Examples • Resourcesrequired for generation of product  or services, generally classified into four majorgroups: (1) Land (including allnatural resources), (2) Labor (including all human resources), (3) Capital (including all man-made resources), and (4) Enterprise (which brings all the previous resources together for production). • These factors are classified also as management, machines, materials, and money (this, the 4 Ms), or other such nomenclature. More recently, knowledge has come to be recognized as distinct from labor, and as a factor of production in itsown right.

  39. Land • Land including all natural resources. Land is a natural & primary factor of production. Land is not created by mankind but it is a gift of nature. So it is called as natural factor of production. Land mean surface of earth. • On the surface (Agricultural land) • Below the Surface (Mineral, resources, rocks, ground water etc) • Above the surface (climate, rain , space monitoring etc)

  40. Characteristics and Feature of Land • Land is free gift of nature: Land is free gift of nature to mankind. It is not a man-mad factor but it is a natural factor. • Land is primary factor of production: • Land has perfectly inelastic supply: Fixed in quantity. Neithe it can be increased nor decreased. Simply, you can not change size of the earth. But from individual point of view, its supply is relatively elastic.

  41. Characteristics and Feature of Land • Land has site of Location Value. • Land earns rent a reward for its use • Land has no social cost :- Land is no created by society by putting any efforts and paying and price.

  42. Labour • What is Labour and Labourer ? Meaning ↓ • Usually, the term 'Labour' is used for 'worker'. But, technically, it is not correct. Labour and Labourer (worker) are two different things. Labour is an ability to work. Labour is a broad concept because it includes both physical and mental labour (as per above picture). Labour is a primary or human factor of production. It indicates human resource. • Labourer is a person who owns labour. So labourer means worker. It is a person engaged in some work.

  43. Characteristics and Feature of Labour

  44. Depreciation • Depreciation is computed at the end of an accounting period (usually a year), using a method best suited to the particular asset. When applied to intangible assets, the preferred term is amortization. • 2. Commerce: The decline in the market value of an asset. • 3. Economics: The decrease in the economic potential of an asset over its productive or useful life. • 4. Foreign exchange: The reduction in the exchange value of a currency, either by a government or due to weakening of the underlying economy in a floating exchange rate

  45. Depreciation • de·pre·ci·a·tion • noun1.decrease in value due to wear, decay, decline in price ,etc. • 2.such a decrease as allowed in computing the value of property for tax purposes. • 3.a decrease in the purchasing or exchange value of money. • 4.a lowering in estimation.

  46. Bank • An establishment authorized by a government to accept deposits, payinterest, clear checks, make loans, act as an intermediary in financial transactions, and provide other financial services to its customers.

  47. Bank • Definition of 'Bank' • A financial institution licensed as a receiver of deposits. There are two types of banks: commercial/retail banks and investment banks. In most countries, banks are regulated by the national government or central bank.

  48. Banking • A company's financial dealings with an institution that provides business loans, credit, savings and checking accounts specifically for companies and not for individuals. Business banking is also known as commercial banking and occurs when a bank, or division of a bank, only deals with businesses. A bank that deals mainly with individuals is generally called a retail bank, while a bank that deals with capital markets is known as an investment bank.

  49. Commercial Bank • Definition of 'Commercial Bank' • A financial institution that provides services, such as accepting deposits, giving business loans and auto loans, mortgage lending, and basic investment products like savings accounts and certificates of deposit. The traditional commercial bank is a brick and mortar institution with tellers, safe deposit boxes, vaults and ATMs. However, some commercial banks do not have any physical branches and require consumers to complete all transactions by phone or Internet. In exchange, they generally pay higher interest rates on investments and deposits, and charge lower fees

  50. Characteristics / Features of a Bank • Characteristics / Features of a Bank ↓ • 1. Dealing in Money • Bank is a financial institution which deals with other people's money i.e. money given by depositors. • 2. Individual / Firm / Company • A bank may be a person, firm or a company. A banking company means a company which is in the business of banking. • 3. Acceptance of Deposit • A bank accepts money from the people in the form of deposits which are usually repayable on demand or after the expiry of a fixed period. It gives safety to the deposits of its customers. It also acts as a custodian of funds of its customers.4. Giving Advances • A bank lends out money in the form of loans to those who require it for different purposes.

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