Question

M2: Discussion on the Goals of the Firm (Sections 40, 58)

In Module 1 and Module 2, we learn about possible goals of the firm in some detail. However, you must have realized this issue merits more in-depth analysis. In this discussion you are all encouraged to participate and contribute your thoughts on what should be the goal of a firm. Feel free to describe the aspects you have observed in your work experience.

Your discussion participation will be evaluated by the attached rubric.
Click here to see how to view the rubric for a graded discussion. (Links to an external site.) The categories and points are as follows:
I. Quality of Posts (50 points)
II. Quantity of Posts (20 points)
III. Timeliness of Posts (20 points)
IV. Professionalism (10 points)

Answer 1

The business objective defines its category and goal. So here we are discussing different types of business objective base categories:

1. Non-profit/co-operative: here this type of business looking for social welfare with a greater reaches out to society to provide more welfare with a minimum existable profit.

2. Increase market share/sales maximization: this is a verity of a competitive firm type where the firm wants to increase its profit in terms of market share. here the firm wants growth maximization along with the long-run profit maximization.

3. Profit maximization: this type of firm is basically monopolistic firms who want to maximize their profit by any means. i.e through a) product differentiation orb) through price discrimination.

4. Profit satisficing:  there is a separation of ownership and control. Those who own the company (shareholders) often do not get involved in the day to day running of the company. the owners may want to maximize profits, the managers have much less incentive to maximize profits because they do not get the same rewards. Therefore managers may create a minimum level of profit to keep the shareholders happy, but then maximize other objectives, such as enjoying work, getting on with other workers. This is the problem of separation between owners and managers. this problem can be resolve by giving managers share options and performance-related pay although in some industries it is difficult to measure performance.

5. Social environmental concerns: A firm can choose extra expense not to harm the environment or products not tested on animals. Alternatively, firms may be concerned about local community / charitable concerns.

Among all these types of the firm on the basis of their objectives, the co-operative and environmental concern firms are good at their objectives, whereas for other 3 verities of objective base firms should modify their objective to have sustainable growth.

i) Non-profit maximizing means moving from MC=MR. this concept may not be justified some of the cases in practical world.

ii) Many real world examples like to gain market share the firm some time decrese its price. so at this point he/she can''t maximize its profit.

iii) firm should focus on long run rather than short run excess profit.

iv) Business survival in hard time. it should be one of the main objective of the firm as present situation is highly volatile.

v) Breaking into new business, where the decision maker of the firm should have fore vision so tha before reaching the decling zone the firm should plan for the new business option to sustain in the market.