Managerial Economics and Its Application in Banking Sector a Case of NMB Essay

Is a branch of economic science that applies microeconomic analysis to specific duty decisions. It bridges economic surmisal and political economy in practice. managerial economics provides a set of tools, techniques, methodologies, guidance and insights that bed helper in making better and value-adding decisions in business and for analyzing decision problems and developing criteria for choosing the surmount possible solution to problems. Consumer BehaviorIs the mucklevass of how individuals, groups, and organizations select, spoil, apply and dispose of goods, works, ideas, or experiences to make full their take ins and wants (Kottler, P Keller, K. L. 2009) Consumer Behaviour Referred to as the study of when, why, how, where and what lot do or do not buy crossways. It blends elements from psychological science, sociology, social, and anthropology and economics. it flacks to catch the buyer decision making process, twain individually and in groups.It studies charact eristics of individual consumers much(prenominal) as demographics and behavioural vari ables in an attempt to understand masss wants. It as vigorous tries to assess influences on the consumer from groups much(prenominal)(prenominal) as family, friends, reference groups, and society in human existence(a). break and Belch define Consumer Behaviour as the process and activities spate engage in when searching for, selecting, purchasing, using, evaluating, and disposing of harvest-festivals and processs so as to satisfy their needs and desires. contractIs the offspringingness and powerfulness to barter for a output. Consumers occur get hold of for a product for a product is reflected in the lead tailor Demand Curve Is a occupancy showing the relationship between the damage of a product or promoter of production and the metre ingested per time period. The take away swerve is usually downward sloping, since consumers bequeath want to buy more as set decrease s. Shift in collect curve Is a movement of the entreat curve from sensation position to an whatever separate(prenominal) (left or right) as a result of some economic change new(prenominal) than impairment.A given demand curve is always drawn on the ceteris paribus assurance that all other factors affecting demand (income, taste, etc) argon held constant. If any of these changes, however, then this will bring about a tack in the demand curve. For instance if income make ups, the demand curve will shift to the right, so that more is now demanded at separately expense than formerly. Application of managerial scheme in the place of work a case of issue Microfinance beach Managerial economicals theories are too applicable in commiting sectors, National Microfinance Bank as a case study.Some of the theories which are applicable to National Microfinance Bank are price theories, Demand compendium and theory of consumer behavior. Pricing theory National Microfinance Bank has always maintained a price strategy for its products that keep them affordable to the general public. The swears aim is to c over at the same level or be miserable the key competitors, mainly CRDB and NBC. This strategy has worked well and resulted in a remarkable growth of NMB Personal deems as well as NMB aura Cards.For some products, price influences consumers perception of overall quality (Kerin R. A et al 2004) Penetration Pricing National Microfinance Bank intaked penetration pricing in setting a junior-grade initial price on a new product to appeal outright to the mass market, for sheath NMB Internet Banking, has started for bodied Customers with unloose accommodation, compared to other Banks which fox accommodation and transaction requitals, this has rund legion(predicate) corporate customers to convince to tie this serve up and hence increase the deposits for the avow during this hard time of Economic Crisis.Also with launching of Mobile Banking wh ich came with low initial pricing for cash transfers works, equalisers and patois narrative enquiries, has encouraged numerous customers to present for the serve well to its affordability, with now over 150,000 customers find registered for NMB Mobile Banking. There were as well no charges for ATMs in counterweights and cuss statements enquiries while other Banks do fix charges in rest periods and buzzword statement enquiries. From world-class February, 2010 NationalMicrofinance Bank has introduced new tax guide whereby for the first time NMB charges Tshs 50/= for Teller withdrawal fee and Tshs century for ATM mini statement. Demand Analysis Refer to the demand theory as want, need or desire for a product backed the funds to purchase it. referable to graduate(prenominal) demand of consumers, the bank has been forced to add some products to stand the consumers demand. Up to inaugural January, 2010 the bank has over 134 branches all over the country, 276 ATMs and diverse product and attend tos. Some of the new products and usefulnesss which introduced to collect the consumers demand were as follows.NMB Junior Account Is the account whereby a customer fecal matter get extra bonus supra normal interest rate, no assistant fee, quarterly interest payment and it encourages nest egg for future use. NMB savant Account As the bank mootn the high demand of students to exempt their property they fixed to undersurfacedid NMB student Account. By looking in their dough they put affordable first step balance of Tshs 2,000/= only. Many students now opt for this typeface of account. Money Transfer Is the transfer of money through and through nimbles phone. As today world is more advanced in technology, bank decided to introduce this service to stir the customers demand.Customers can be able to sensible horizon their balances, recharge their mobiles phone, transfer of money through ATM and Mobile Banking. This product is of high demand nowadays as more customers enrolled in this programme. Internet Banking Through this service the consumers can easily put one over the approach shot to their bank account, National Microfinance Bank has introduced this service starting with Corporate Customers, where in adjoining phase will be able to do transactions through this service. No registration fee at 1st phase where corporate customers can moot their account transactions and print their bank statement online.Demand for NMB Internet Banking has been change magnitude over payable to many of the corporate customers has a lot of operations and vast network country wide, and many requires online statement to change their operations including selling of distinguishable products afterward making collections through NMB. Demand exploit As it is a form of musical note that links the figureent variables, bill demanded with various(a) unconditional variables that determine bill demanded such as price of a product, income, price of substitute products and advertising.Changes in any of these fencesitter variables will affect measuring stick demanded oppositely. As to relate with our case study, this demand authority will in like manner apply. Price is an independent variable that determines quantity demanded of some product. In order to penetrate the market NMB commotioned free of charge in checking balance, mini statement and cash withdraw. It only charges Tshs 400 per calendar month for personal accounts as service fee regardless of how many times soulfulness use that service.NMB introduces charges for withdrawal of Tshs 500 through ATM per month previously it was Tshs 400, balance check cost Tsh 50, ATM mini statement cost Tshs 100. This burn down in price charges affects the quantity demanded. This shows that price is an independent variable to quantity demand. As the price rises the quantity demand goes down. advertizing is another independent variable that determines quantity dem anded of some product. Advertisement is an art of safekeeping people aware with some product or service you need people to know.NMB Mobile Banking launched September, 2009, up to October, 2009 few customers were registered to this service and few were aware of this service, so NMB decided to engage in advertisement for this service through posters, Television, Radio, Brochures, Newsletters, promotions, the records shows high response of people to use NMB Mobile Banking from November till to season as over 150,000 customers have registered to this service compared to 100,000 registered in previous months. This shows that advertisement affects quantity demanded as many customers were able to use that service due to awareness of that service advertisement.Moreover, price of a substitute product is another Independent variable that determines quantity demanded of some product. NMB offers free charges in registration for Internet Banking for Corporate Customers compared to other banks s uch as NBC and CRDB which have registration fee, and due to its large network country wide, these caused many corporate customers to be convinced to join NMB Internet Banking services and hence quantity demanded of this service to be high due to the above factors. Determinant of Demand Demand for a good or service is determined by many different factors.In relation to our case study, they also applied as follows The price of the goodness The heart one buys will depend on the price. The lower the price of the trade good the great the quantity they will buy. In NMB there is no charge for wantoning account for government activity salaried workers, this plays a high demand for government employees to open account with NMB, after they enroll with NMB they hump using other products such as NMB Junior, NMB Bonus account and NMB mobile which have initial price, this tend to increase event of customers.As the lower the price of the commodity, the greater the quantity he will buy, thi s also cause many government employees to open account with NMB, this is where ceteris paribus and vice-versa will apply. Consumer Income As consumers Income change, the demand for goods and services will change. For most products, demand Increase when consumers have larger incomes. In relation to our case study, NMB main customers were from government salaried workers. This tends to increase the demand for them to bear due to surplus they have. Price of tie in goods When the prices of related goods change demand may Increase or decrease, ceteris paribus.This also applies in NMB as many people were in belief that DECI SACCOS pays higher Interest, they withdraw their money from their accounts and transfer to DECI SACCOS accounts, and quantity demanded for NMB services fall during that period. Taxation levels on goods Higher taxes on goods causes rise in their prices and hence cause the demand for the products to fall and vice versa. Due to high tax on the machines merchandise an d experts operating those machines, NMB rises the ATM charges that causes a approximately fall in demand of that service due to those charges.Theory of consumer behavior and its applications in NMB Consumer behavior is how consumers allocate their money incomes among goods and services. A consumer is a unit of consumption and one of the agents in the commodity market. A consumer has a certain amount of income he can use to buy goods and services from the market. given over the fixed income and fixed prices of the goods, the consumer has to decide whether to buy a particular good and what amount of it to buy. So, the consumer faces the problem of choice of commodity.This problem can be solved on the flat coat of the economic theory of consumer behavior consumers engage the best bundle of goods they can afford. This applies also in our case study as how people allocate their money in the different services offered by NMB example they choose to use ATM services, mobile banking ser vices, internet services and different bank accounts offered. This theory helps bank to improve in their strategies by looking in the psychology of how consumers think, feel and select between different alternative products offered. They sometimes conduct a survey to know how customers perceive their services.Surveys can be in different groups users example to students, farmers, government employees, individual person and different organizations used NMB services. The results obtained help to improve some services and sometimes to know what they need and introduce new product check to their needs. They tried to compare their services offered with other banks they offer. Moreover the psychology of how consumer is influenced by his or her environment e. g. culture, family, signs, media etc. This also applies in our case study as NMB has many branches all over the country compared to other banks.When they win to get customers they tried to offer good services to them as being attracte d to convince their families and other co-workers to join with their bank. They use also media to advertise their products as they have advertisement which shows the importance of mobile banking. When people saw that advertisement and compare with the really life they saw the importance of it and prosecute in that mobile service. As they see they can buy LUKU even in late hours, they can transfer money at any time they paying attention using their mobile phones, check balance and mini statement without going counter.