Question

Please explain the Five (5) main goals of the firm and kindly give atleast one example for each.

the 5 main goals of the firms are:
1. production goal
2. inventory goal
3. sales goal
4. share-of-the-market goal
5. profit goal

thank you.

Answer 1

1. Production Goal:

The production goal represents in large part the demand of those coalition members who are connected with production. It reflects pressures towards such things as stable employment, ease of scheduling, development of acceptable cost performance and growth. This goal is related to output decisions.

2. Inventory Goal:

The inventory goal represents the demands of coalition members who are connected with inventory. It is affected by pressures on the inventory from salesmen and customers. This goal is related to decisions in output and sales areas.

3. Sales Goal:

The sales goal aims at meeting the demand of coalition members connected with sales, who regard sales necessary for the stability of the organisation.

4. Market-Share Goal:

The market-share goal is an alternative to the sales goal. It is related to the demands of sales management of the coalition who are primarily interested in the comparative success of the organisation and its growth. Like the sales goal, the market-share goal is related to sales decisions.

5. Profit Goal:

The profit goal is in terms of an aspiration level with respect to the money amount of profit. It may also be in the form of profit share or return on investment. Thus the profit goal is related to pricing and resource allocation decisions.

While taking the decisions regarding the price, output, and sales strategy the business firms are guided by the five goals. Cyert and March are of the opinion that although all goals must be satisfied in any organization, there is an implicit order of priority which is reflected in the way search activity takes place. If one of the goals is not met and the individual responsible for that is not satisfied, a search will be made for a means to meet that goal.

The aspiration levels of the individuals within the firm which determine these goals, change over time as a result of organisational learning. Thus these goals are regarded as the product of a bargaining- learning process in the organisational coalition. But it is not essential that the different goals may be resolved amicably. There may be conflicts among these goals. The organisational coalition is thus a coalition of conflicting interests.

The conflicting interests can be reconciled by the distribution of ‘side payments’ to members of the coalition. Side payments may be in cash or kind, the latter being mostly in the form of ‘policy side payments’ i.e., the right to take part in the policy decisions of the organisation. But the actual amount of total side payments is not fixed for the coalition but depends upon the demand of the members and on the form of the coalition. Demands of coalition members equal actual side payments only in the long run. But the behavioural theory focuses on the short-run relation between side payments and demands and on the imperfections in factor markets.

In the short run, new demands are being constantly made and the goals of the organisation are continually adapted, to a greater or lesser extent, to take account of these demands. The demands of the members of the organisational coalition need not be mutually consistent. But all demands are not made simultaneously, and the organisation can remain viable by attending to demands in sequence. A problem will arise when the organisation is not able to accommodate the demands of its members even sequentially, because it lacks the resources to do so.