MRC 1513 ECONOMIC ANALYSIS
WORKSHOP 1A
Question 1:
Although managerial economics is based primarily on microeconomics, explain why it is also important for managers to understand macroeconomics.
Answer:
Felda Technoplant Sdn Bhd is a subsidiary of Felda Holdings Berhad and was established on 22 June 2005 as a management agency for FELDA settler plantations. Among its main activities is replanting estates, managing immature and mature plantations as well as providing oil palm planting materials for estate replanting purposes.
Almost 90% of the replanting area is planted with oil palm and the remaining planted with rubber. Thus we are subject to risks inherent to the plantation industry. These include damage from pests, outbreak of diseases such as ganoderma, fire or natural disasters, unscheduled interruption in palm oil milling and rubber tapping operation, climate condition, downturns in the global, regional and national economies, changes in law and tax regulations affecting palm oil and rubber and the competitive needs of labour with other industry.
Movement of commodity price in local and international market influence the price of Fresh Fruit Bunch (FFB) and rubber. This will affect managerial decision whether continuing the normal field operations or take certain mitigation action focusing only to harvesting work while other work activities such weeding and fertilizing being stop until the operational cost becomes more viable.
As an example, in 2008 the FFB selling price drop to average RM300 per tonne while the fertilizer prices increase by 200% and becomes 60% of planters total cost of production. During that time Felda Technoplant had to reduce 30% of its fertilizer application programme. The introduction of minimum wage at RM 900/month starting 1st January 2013 by government also increases the labour and production costs. Failing to abide by the