The traditional role which has been played by economists, has been restricted to forecast economic issues, outline the ways in which they can be economically tackled and finally contribute towards economic policy-making.
Hence, one can criticize that economists play an advisory role rather than actively contributing to the production process in the economy. Furthermore, when other professionals work hard to produce whatever goods or services, economists keep advising how to do things. However, that era has gone away. Economists are required to not only forecast the economy but also contribute to business strategy.
Currently, economists’ business involvement has been limited to banks and finance companies. Many commercial banks have dedicated one of their board seats for economists.
Their duty could be to analyze investment opportunities, especially at stock market and bond market, minimize the risk which could be caused by government's economic policies such as budget and monetary policy. However, we can find out very rarely business organizations in which economists’ involvement is highly considered.
Relevance
Any business has to be operated in the economy, cannot avoid economics and its impact. Large corporations which are very sensitive to economic trends, have no economists on their board. Dr. Indrajith Coomaraswamy, governor of the Central Bank, served as a non-executive director at John Keells Holdings, Deshal De Mel, an economic advisor at the Finance ministry, was senior economist at Hayleys, can be considered exceptional examples where conglomerates in the country were concerned on the contribution of economists.
Economics trains people to see the big picture as well as divide that into parts and analyze through macroeconomics and microeconomics respectively.
Economics, being one of the oldest management subjects, laid the foundation for plenty of modern management theories such as consumer behavior.
Philip Kotler, considered the father of modern marketing and holding both master's and doctorate in economics, saw marketing as an essential part of economics, emphasizing that demand is influenced not only by price but also advertising and sales promotions.
Every subject and business is interrelated in this globalized world. Hence, let me explain how an economist can contribute to business strategy in the areas of marketing and human resource management.
Marketing
The study of consumer behavior is a big part in both economics and marketing. Economics is concerned as to why consumers buy products. Almost every marketing theory is based on utility theory which says consumers buy products to maximize their satisfaction.
Economists have to be good marketers that know how to maximize consumers’ satisfaction. Any product or service that is below consumer's budget line and generates lower utility than money, will not be bought by consumers.
Marketing strategy means the plan set by the company to reach the target customers based on market segmentation and turn them into consumers that buy company's products frequently. Economists should be able to make this marketing plan viable by introducing utility-maximizing products.
HRM
Labor is one of the production factors discussed in microeconomics. What Human Resource Management (HRM) is concerned is how labor can be trained to deliver the best service for consumers. Labor economics looks at supply and demand at the labor market and understands patterns of wages, employment and income.
The quality of labor which is caused by training and motivation can increase the quality of products, meaning that more cash inflows will ensure more productions and employments in the economy.
Human resource strategy means a set of traditional HR functions such as recruiting, training and succession planning to strategically contribute to the goals and future aspirations of the company, further creating comparatively advantageous workforce for the company. Economists should be there to advice on labor market trends, wages and any policy related to HRM.
Way forward
Experts are extinct in multi-disciplinary business environment, making the place for generalists.
Hence, economists also have to go beyond traditionally demarcated boundaries which can be said to have lowered employability of economists.
Business economics should be made popular in order to enable economists to contribute towards both policy-making and business strategy.
(Amila Muthukutti is an economist)
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