The Relevant of Managerial Economics to FFI

The Relevant of Managerial Economics to

PT. Frisisan Flag Indonesia.

 

The major reason for studying managerial economics is that it is useful. Knowledge of economics helps us make wise choices. Managerial economics (also called applied microeconomics), on the other hand, deals with how decisions should be made by managers to achieve the firm’s goals–in particular, how to maximize profit. These decisions, or their result, may or may not be beneficial from society’s viewpoint. Although important, such welfare consequences are of secondary consideration in managerial economics.

 

There is no difference theory between managerial economics and regular economics. The difference is in the way the economics theory is applied. Economics might be best described as a way of thinking about problems-a logical system for processing and using information. Since study case is in large part concerned with economic theory and its application, we might take time to explain how much and why theory is used. No doubt you have heard statements such as “That’s OK in theory, but how about the reality world?” The fact is that theory is designed to apply to the real world; it allows us to gain insights into the problems that would be impossible to solve without theoretical structure. We can make predictions from theory that will hold in the real world even though the theoretical structure abstracts from many actual characteristics of the world.

 

With more than 85 years history in Indonesia, PT Frisian Flag Indonesia is the market leader in Indonesian dairy industry committed to produce high quality nutritious products and to provide the best services to consumers and business partners in Indonesia.

It all started in 1922 with the “Friesche Vlag” milk brand or well known by Indonesian as Susu Bendera, imported from Cooperative Condensfabriek Friesland of the Netherlands – now Royal Friesland Foods.

 

As the international dairy based nutrition specialist, FRISIAN FLAG INDONESIA produces and markets a wide range of products including powder milk, ready to drink milk and sweetened condensed milk. The company operates two state of the arts production facilities in Pasar Rebo and Ciracas in Jakarta. The Pasar Rebo plant produces powder milk and Ciracas plant produces liquid milk and sweetened condensed milk.
   
FRISIAN FLAG INDONESIA’s milk production process utilizes advanced technology and good sterilization practices from beginning to end to avoid contamination in its manufacturing process – a practice known as Good Manufacturing Practices (GMP).

FRISIAN FLAG INDONESIA complies with the highest world class manufacturing standard and certification to ensure the production of best quality products for consumers. The whole supply chain process, from buying the materials to the distribution of the final products to distributors and wholesalers, is controlled by a certified HACCP (Hazardous Analysis Critical Control Point) and the ISO 9001; 2000 system and ISO 14000 systems.

The commitment of FRISIAN FLAG INDONESIA is providing the best high-quality products and services to Indonesian consumers and business partners.

1. To be the leading brand for dairy based nutrition with products and product formats accessible for consumer in all SES in Indonesia.

2. To be caring employer for our employees offering competitive salaries & opportunities for personal development to talented employees.

3. To achieve a sustainable & satisfying net result for our shareholder.

For obtaining those visions, FRISIAN FLAG INDONESIA is considering keeping the factory open an additional factory. So we need some information for the decision. The first piece of information is the additional (or incremental) cost of remaining open the additional factory. These additional cost could be estimated by calculating the added labour required, the additional cost of electricity and gas, perhaps added maintenance and management cost, and many other costs that would be incurred unless the additional factory open. Note, that the overhead or fixed cost must be paid by the factory regardless of how long the factory remains open and therefore should be ignored.

 

Next, the additional sales revenue that can be expected from remaining open must be estimated. The factory manager must consider in making this estimation any sales lost during the regular operating factory because of remaining open the additional factory.

If the additional sales expected from staying open longer exceed the expected additional cost, the factory should stay open the additional factory. If the added costs exceed the expected additional sales revenue, the factory manager should not extend its additional factory operation. The decision is based only on additional (marginal) revenues and additional (marginal) cost.

 

This example illustrates a maximization problem-maximizing profit. However, the manager is also faced with maximization problems, most frequently the problem of how to minimize cost.