A very warm welcome to the prototype of a new software tool called Kaelo II. Kaelo III, commercial application is currently under construction. The origin of the word is Romany gypsy, meaning ‘black in colour’, and I first heard the word Kaelo used by my grandmother on naming her black Irish collie pup. The software will help to guide you through some of the fundamental concepts deployed in managerial economics as taught through the auspices of Manchester Business School. The software is supported by a series of Briefing Notes available for download at www.patrickmcnutt.com.

Why use Kaelo?

The Kaelo layout has been designed to facilitate the navigation across the various menus and sub-menus; there are illustrations provided that will capture a range of economic concepts such as indifference relationships, pricing and revenues, demand and elasticity. The Marris model of management behaviour is introduced as an explanator of firm valuation based on organic growth through product diversification. The balance to be achieved within the Marris model between the demands of capital, dividend payments to shareholders and expenditure on R&D, is examined and applied in a real world ‘living’ case history with Diageo. Additional real world cases will be distributed at the residential Workshops conducted by Professor Patrick McNutt.

One of the more interesting applications within Kaelo is discussion on basic non-cooperative game theory. It provides a basic template for non-coperative sequential games as an explanator of oligopoly behaviour in some markets. The on-going competition between Sony and Microsoft in the evolving vide-games market is presented as a working case history. A game dimension is outlined to assist CEOs in playing a game and to encourage them to deploy the architecture of game theory in describing their markets. A Prisoners Dilemma scenario is linked into the menu as a challenge to the reader.

But there is an intersting application of game theory introduced in this version of Kaelo. Signalling is the term used to characterise the business financials within a company wherein signals or text messages related to the financials are extracted from the commentary provided by the media and indeed from the commentary and press conferences hosted by CEOs. A ‘signalling box’ of selected text and words, and their likely impact on the shareprice, is provided coupled with an archived commentary on Diageo. Readers are then encouraged to visit the web portals of the leading business channels in order to apply the signalling idea.

Additional menus appear in Kaelo to carry forward the economic and mangement concepts into the concentration ratios as deployed in competition policy and modern antitrust. While Kaelo complements the executive support materials located on my web portal it also complements the e-learning initiatives for the Managerial Economics module under the auspices of the Manchester Business School at www.mbs-worldwide.ac.uk.

The design team behind Kaelo is led by James Petch, Phil Boulton, Dan Perry and Patrick McNutt. Kaelo is a prototype version and we welcome your feedback on how it can be improved. Please note that we are working on new developments for Kaelo as we strive to integrate e-leaning tools with on-line discussions and course work support with a direct everyday application to modern companies and businesses.