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

Is a branch of economics that applies microeconomic digest to specific business decisions. It bridges economic theory and economics in practice. managerial economics provides a set of tools, techniques, methodologies, guidance and insights that finish function in making better and value-adding decisions in business and for analyzing decision problems and developing criteria for choosing the best possible solution to problems. Consumer BehaviorIs the sight of how undivideds, groups, and organizations select, buy, part and jactitate of goods, benefits, ideas, or experiences to satisfy their needs and wants (Kottler, P Keller, K. L. 2009) Consumer Behaviour Referred to as the national of when, why, how, where and what heap do or do not buy intersection points. It blends elements from psychological science, sociology, social, and anthropology and economics. it attempts to guess the buyer decision making process, both individu every(prenominal)y and in groups.It studies chara cteristics of individual consumers much(prenominal) as demographics and behavioural variables in an attempt to understand battalions wants. It to a fault tries to assess influences on the consumer from groups such as family, friends, speech groups, and society in general. Belch and Belch define Consumer Behaviour as the process and activities people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of growths and at operates so as to satisfy their needs and desires. containIs the provideingness and ability to purchase a product. Consumers total inquire for a product for a product is reflected in the hire curve pray Curve Is a situation showing the relationship between the care of a product or factor of production and the bar pick outed per time period. The demand curve is ordinarily downward sloping, since consumers impart want to buy more as set decreases. Shift in demand curve Is a movement of the demand curve from one position to an new(prenominal) (left or right) as a result of round economic change another(prenominal) than scathe.A presumptuousness demand curve is always drawn on the ceteris paribus assumption that all other factors affecting demand (income, taste, etc) are held constant. If all of these changes, however, then this will bring about a shift in the demand curve. For recitation if income increases, the demand curve will shift to the right, so that more is straight demanded at each price than formerly. Application of managerial theory in the place of work a subject area of guinea pig Microfinance bound Managerial Economics theories are as well as applicable in banking sectors, depicted object Microfinance Bank as a content study.Some of the theories which are applicable to subject area Microfinance Bank are set theories, aim Analysis and theory of consumer behavior. price theory National Microfinance Bank has always maintained a pricing strategy for its products that keep t hem affordable to the general public. The banks propose is to remain at the same level or below the lynchpin competitors, mainly CRDB and NBC. This strategy has worked well and resulted in a significant suppuration of NMB Personal papers as well as NMB ATM Cards.For some products, price influences consumers perception of overall quality (Kerin R. A et al 2004) Penetration set National Microfinance Bank used penetration pricing in compass a low sign price on a spick-and-span product to appeal immediately to the mass market, for example NMB Internet Banking, has started for bodily Customers with drop registration, compared to other Banks which have registration and transaction fees, this has caused more incarnate customers to convinced to join this service and therefore increase the deposits for the bank during this life-threatening time of Economic Crisis.Also with launching of fluent Banking which came with low initial pricing for money transfers serve, balances and bank statement enquiries, has encouraged many customers to level for the service to its affordability, with now over 150,000 customers have registered for NMB Mobile Banking. There were also no charges for ATMs in balances and bank statements enquiries while other Banks do have charges in balances and bank statement enquiries. From 1st February, 2010 NationalMicrofinance Bank has predated new tariff guide whereby for the first time NMB charges Tshs 50/= for Teller withdrawal fee and Tshs 100 for ATM miniskirtskirt statement. Demand Analysis Refer to the demand theory as want, need or desire for a product backed the money to purchase it. referable to higher(prenominal) demand of consumers, the bank has been forced to add some products to fulfil the consumers demand. Up to 1st January, 2010 the bank has over 134 branches all over the country, 276 ATMs and different product and run. Some of the new products and services which introduced to meet the consumers demand were as fo llows.NMB Junior Account Is the account whereby a customer can overprotect extra bonus above normal interest rate, no service fee, quarterly interest payment and it encourages savings for future use. NMB student Account As the bank seen the high demand of students to save their money they stubborn to unclouded NMB student Account. By looking in their earnings they give affordable unciviling balance of Tshs 2,000/= only. Many students now opt for this eccentric person of account. Money Transfer Is the transfer of money through mobiles phone. As instantly world is more advanced in technology, bank decided to introduce this service to meet the customers demand.Customers can be able to view their balances, load their mobiles phone, transfer of money through ATM and Mobile Banking. This product is of high demand nowadays as many customers enrolled in this programme. Internet Banking through and through this service the consumers can easily have the access to their bank account, N ational Microfinance Bank has introduced this service starting with Corporate Customers, where in next degree will be able to do transactions through this service. No registration fee at 1st phase where corporate customers can view their account transactions and print their bank statement online.Demand for NMB Internet Banking has been increasing cod to many of the corporate customers has a caboodle of operations and vast network country wide, and many requires online statement to simplify their operations including selling of different products after making collections through NMB. Demand function As it is a form of notation that links the subject variables, measuring rod demanded with various fencesitter variables that determine bar demanded such as price of a product, income, price of switch over products and advertising.Changes in any of these independent variables will affect measuring stick demanded differently. As to relate with our case study, this demand function w ill also apply. Price is an independent variable that determines quantity demanded of some product. In order to penetrate the market NMB offered free of charge in checking balance, mini statement and cash withdraw. It only charges Tshs 400 per month for personal accounts as service fee regardless of how many propagation someone 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 beginning 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. advert is another independent variable that determines quantity demanded of some product. Advertisement is an art of keeping people aware with some product or service you need people to screw.NMB Mobile Banking launched September, 2009, up to October, 2009 few customers were registered to this servi ce and few were aware of this service, so NMB decided to engage in enunciatement 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 date 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 such 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. decisive of Demand Demand for a good or service is decided by many different factors.In relation to our case study, they also applied as follows The price of the Commodity The amount one buys will depend on the price. The lower the price of the commodity the greater the quantity they will buy. In NMB there is no charge for opening account for regimen salaried workers, this plays a high demand for government employees to open account with NMB, after they enroll with NMB they enjoy using other products such as NMB Junior, NMB Bonus account and NMB mobile which have initial price, this tend to increase number of customers.As the lower the price of the commodity, the greater the quantity he will buy, this 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 close products, demand Increase when con sumers 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 save due to surplus they have. Price of Related goods When the prices of related goods change demand whitethorn 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 decreased 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. callable to high tax on the machines imported and experts operating those machines, NMB rises the ATM charges that causes a slightly fall in demand of that service due to those charges. surmise 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 the fixed income and fixed prices of the goods, the consumer has to decide whether to buy a limited 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 basis of the economic theory of consumer behavior consumers admit 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 services, meshing 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 surve y 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 according 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 attracted 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 sawing machine that advertisement and compare with the really life they saw the importance of it and employed in that mobile service. As they see they can buy LUKU take down in late hours, they can transfer money at any time they wish using their mobile phones, check balance and mini statement without going counter.