As a manager, the core function of your role is organizing your team around a common goal or business objective. Managing your team isn’t the only aspect of carrying out this mission, though. You’re also responsible for identifying opportunities and mitigating challenges to help blaze a path toward success.
On top of leadership and management skills, several fundamental business skills—including those related to economics—are highly valuable to any manager’s toolkit. While economics might not appear to be deeply related to managing a team at first glance, it becomes clear upon closer inspection that basic economic concepts and principles can be strategically leveraged to take your business to the next level.
With this in mind, below are five economics skills all managers need to maximize their effectiveness and lead their firms to success.
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Economics Skills and Knowledge for Managers
1. Understanding of Economic Concepts and Frameworks
To be a successful manager, you need a fundamental knowledge of how markets work and the ability to appreciate how the markets in which you operate are structured and how changes to them impact your business.
With this knowledge, you can better understand the competitive landscape your business is part of, along with the internal and external forces that impact its performance. Economic concepts—such as supply and demand, competition, and differentiation—are closely tied to the decisions you’re responsible for making as a manager.
2. Ability to Assess Demand
To be an effective manager, it's important to apply your economics knowledge to assess demand and gain a competitive advantage in the market. To develop this skill, you need a firm understanding of the basic concepts of demand and how to apply them to your business.
There are different techniques to evaluate demand and customer willingness to pay. Direct approaches include:
- Surveys and focus groups, in which firms directly ask consumers about their preferences.
- Auctions, which reveal a consumer’s willingness to pay by demonstrating the maximum price or bid they feel an item is worth. Several types of auctions are useful, including open outcry auctions (or English auctions), sealed second-price auctions (or Vickrey auctions), and sealed first-price auctions.
Additionally, there are several indirect methods of assessing demand, including conducting experiments and relying on the revealed preference principle, which leverages historical data to examine consumers’ past purchasing decisions.
Using these techniques to evaluate demand, you can leverage your findings to make strategic business decisions. For example, you can use your understanding of market demand to set prices for your firm’s products or services. Taking an evidence-based approach to setting prices can lead to more effective decision-making and help ensure maximum revenue.
3. Ability to Conduct and Interpret Economic Analysis
As a manager, you need to perform an economic analysis of your business and the market in which it operates. General analytical skills can prove helpful in this area, however, skills surrounding specific statistical analysis methods are also necessary.
Conjoint analysis, for instance, is a method used to evaluate the importance of specific product features to customers. Performing this analysis allows you, as a manager, to determine which features are most important to customers—and therefore worth the time and money your firm must invest to develop them.
Relative cost analysis is a method that allows managers to benchmark their firms’ costs for activities in their business models against competitors. Such an analysis can enable you to uncover opportunities to maximize revenue or gain a competitive advantage.
4. Ability to Communicate Findings
As a manager, it’s your responsibility to set your team, department, or organization on the path toward success. It’s likely, however, that there are other stakeholders involved in making important business decisions.
Strong written and verbal communication skills are necessary to align key players and improve decision-making and ultimate outcomes. Learning to create effective data visualizations can also be a powerful communication skill when presenting findings to decision-makers. After all, the work you put in to analyze the market and identify opportunities can go to waste if not properly conveyed to others.
5. Strategic Thinking
Finally, you need to apply your understanding of the market in which you compete and craft a strategy to position your offering for success. Strategic thinking skills are essential when making decisions using findings from analyses and your understanding of economic concepts.
Strategic thinking skills encompass the ability to think critically about a complex problem and plan for the future, and they include strong communication, analytical skills, problem-solving, planning, and management. Employers highly value this combination of skills, and it’s easy to see why. Approaching your work with a strategic mindset can enable you to discover opportunities and unlock the power of economics.
Developing Your Economics Skills
By developing these five skills, you can strategically leverage the power of economics to identify opportunities and further your firm’s success. Keep in mind: While some skills are needed to apply economics to a managerial role, developing your knowledge of economics can shift your way of thinking about business challenges.
Studying economics through online courses, independent study, or formal education is an effective means of developing economics skills and shifting toward a strategic mindset. The online course Economics for Managers, for example, is designed to instill the knowledge and skills managers need to become more effective in their roles. Participants gain an understanding of the building blocks of economics and markets—including supply and demand, price elasticity, willingness to pay, and willingness to sell—and learn how to use it to craft impactful business strategy.
Are you interested in unlocking the power of economics within your role? Explore Economics for Managers, an eight-week online course designed to enable you to drive critical business decisions using the foundations of economics.
