For Grade 8C
Discuss whether profit is always the only main objective for any business.
(Please check: Period October 15th to 20th)
Please write your comment on this changed question.
November 4th to November 11th, 2013
Write here your answer in 500 Words.
Profit is not always the main objective of a business, some of them are increase market share, customer satisfaction, employee happiness, social responsibility ,etc. The first is increase market share, if your market share is higher or bigger, so that's mean that your percentage of the total people is bigger, if the total percentage is bigger so thats mean more people buy your product. Second is customer satisfaction,While customer satisfaction has a direct link to sales and profit, positive customer satisfaction also increases brand loyalty and brand recognition. You want your customers to be happy buying from your store or using your services, because that means they will come back. It also means they will tell others about your store . Having a customer telling people that he has been using your services for 2 years is a good asset for a business. Forth is social responsibility, As part of the swing from stockholder to stakeholder, concepts of social responsibility came into play. One of the underlying reasons people want to be successful is because they want to leave a legacy. Creating a socially responsible and community beneficial business is one of the ways to make your mark on the world.
ReplyDeleteAn economy thrives when businesses are successful and diversified. A business is called successful when it earns profits, but profit is just one objective that a business wants to achieve over time, other pressing objectives that may emerge.
ReplyDeleteMost businesses aim for profit maximization, it is because it is the bottom line of a business. Profit helps grow a business and it makes its owners become more economically stable. It can be said that profit is the chief motivating factor in operating a trade, since it provides numerous remuneration for the business itself as well as the owners. Profit is the objective of businesses which keeps it running day after day. There are very least businesses who do not aim for profit.
There is the presence of consequences of profit maximization. If a company pursues a profit maximization strategy, it creates an environment where price is a premium and cutting costs is a primary goal. This, in turn, creates a perception of the company that could lead to a loss of goodwill with customers and suppliers. It also creates an expectation of shareholders to see immediate gains, rather than realizing profits over time.
However, there are other objectives other than profit that are also important to a business. The first one is meeting financial goals. When a business grows in size, its objective may change from just earning profit to increasing its market size and making greater sales of its number of units produced. Similarly, if a business is new and there is the presence of heavy competitions in the market, the objective of the business may be to survive, even if it has to sell at break-even prices. On the other hand, if the business faces falling profits, it may try to reduce its costs or increase its revenues.
Another objective is the strategic plan in the running of a business. A business must decide how to meet the demands of its customers. They may adopt a strategy of product differentiation, where it competes by giving customers a unique or superior product. The other option is the strategy of cost effectiveness, giving customers product with a cheaper price or more value for their money.
There are businesses who aim for charity or other social responsibilities instead of earning as much profit as possible. For example, society expects businesses to serve them goods and services of the quality and prices they demand, and consumers expect them to consider human rights, animal rights and the environmental impact of said goods. When organizations follow policies to purchase natural extracts from third-world countries that are experiencing economic strife, they may achieve their goal of delivering safer products to their customers while lifting economy of those countries.
Meeting the expectations of stakeholders’ may also be a business objective. Businesses must consider the objectives of their stakeholders. These stakeholders are employees, customers, suppliers, investors and governments. The objectives of employees are to earn better wages and learn new skills, customers want higher quality for a reasonable price, governments want businesses to pay taxes and create employment also to increase competition between businesses, suppliers want prompt payments and the public may want businesses to produce less pollution and reduce negative externalities.
In conclusion, profit isn’t always the main objective of a business. There are other existing objectives for business to stay running. However, it is said that profit maximization is most of businesses’ goals throughout the economy.
Profit isnt always the main objective of business. Well yes, most companies aim for an increase in profit to expand and expand. But it doesnt always work like this. Different businesses have different objectives. Because different people aim for different things.
ReplyDeleteSometimes to be profitable isnt the best in running a business. Some people may think that expanding or increasing market share is the best objective. Because by expanding, it can also affect profit.
There are also some companies that aim for charity or different social responsibilities instead of increasing profit. This can be done by lowering the price so that different people can buy the goods or services. well sometimes this can be an advantage as by lowering price, demand will be higher and more people will purchase the goods or services. Therefore, they can also be 'profitable' by not aiming to be 'profitable'.
Sometimes the main objective of a business is to satisfy people with the goods and services.
Profit is the surplus remaining after total costs are deducted from total revenue, and the basis on which tax is computed and dividend is paid. It is the best known measure of success in an enterprise. Profit will never be the only main objective of a business. The objectives for business may change overtime but there are also some different objectives that all businesses must have also. They are to grow in size and also to increase their market share among the other firms. Now I will discuss the objectives of the business one by one.
ReplyDeleteThe first business objective is profitability. It is the ability to continually generate revenues from the sale of it’s goods and services that exceeds the cost. Profit is important to business because it motivates entrepreneur to set up and run business organization. Some business also aims for profit maximization by increasing the price of their goods and lower the cost of their production. The second business objective is the importance to increase the size of their business. Business owners and managers may want to increase the size of their business, to increase sales, market share and profits. Growth of a business will be easier if demand for goods or services is rising, if not that business can only expand by attracting customer for it’s competitor. The third business objective is to increase their market shares. Market share measures the proportion of total sales revenue or turnover that’s attributable to the firms. New business entrants my initially lower their price and spend more on advertisement to gain market share. Increasing market share will achieve higher sale and in the future increase the price to gain more profit. Those are the 3 main business objectives but the business objectives may change overtime. For new businesses, survival is the most important objective to be successful in the future. Survival is also the most important objective for the large and established business during the inflation or economic recession. Technology may also change the business objective overtime.
So the conclusion is that profit will not be the only or main business objective but there are also some other important business objective that businesses must consider while running their business.
Every business is started to earn profits as it is essential for the survival and growth of business. Profit earning should be regarded as the main objective of business unit. The need of profit in business is left to cover the cost of production and also create a surplus for undertaking expansion and diversification work. There are consequences of profit maximization. If a company pursues a profit maximization , the company will cut costs by any means for profit. This creates an image of the company that it tricks customers, and exploits resources for profit.
ReplyDeleteWhy is profit maximization always a primary objective of a firm?
I. Profit is essential for the growth of business enterprise. Profit is regarded as the main source of growth for business enterprise because it provides finance for expansion and running the business.
II. Profit is required to meet the individual as well as the social requirements of the trader.
III. Profit helps in fulfilling various social goals because a business is expected to serve various sections of the society like the consumers and the laborers.
IV. Profit is regarded as a good measure of efficiency of the organisation because the performances of a business unit is judged from the angles of profit.
Why is Profit Maximisation Sometimes Opposed?
I. It leads to exploitation of workers and consumers. For more profit, the businessman may exploit the worker by paying less and may exploit the consumers by providing them less quality products.
Other Business objectives other than profit maximization.
I.Satisficing: Satisficing behaviour involves the owners setting minimum acceptable levels of achievement in terms of business revenue and profit e.g. a target rate of growth of sales
II. Sales Revenue Maximisation
III. Managerial Satisfaction
IV. Constrained Sales Revenue Maximisation
V. Charity Work
So sometimes, a business will not only aim for profit. It can also aim for different objectives.
Matthew Jonathan jelek!
DeleteEvery new business will always have an objective. There are many kinds of objective such as to increase the productivity which means the company produce as many amount of goods , or to incrase the sales which means business try to make and sale all kinds of goods example : samsung, so samsungtry to make all kinds of handphone and gadgets which they make the goods from a low cost until the high cost and from the low quality until the good quality.
ReplyDeleteBut to open a new business, of course the business and theowner itself have their mainobjective, and the main objective of a business is profit. In business, all comapny are competing to invent and sell the best product so that many people want to buy their productn and if people buy their product more, they also will got more profit and this is the main objective why an individual wanted to open a new business.
Every business is started for earning profit because profit is the acid test of every business, profit can be made when exchange of goods take place, so every business has the objective of production of goods , but actually profit itself means thefinancial return or reward that entrepreneurs aim to acieve to reflect the risk that they take. Profit can be got by the total revenue – total expenses. Most entrepreneurs incest in order to make return, theprofit earned by a business can be used to measure the success of that investment. An entrepreneurs will invest more on a business if they see that they will fot a largeamount of return/profit from the business.
If a business don’t have an objective to earn as many profit as possible, their objective is for charity. Charity means a business organization work and earn profit but the profit is not returned or divided through the shareholders or owner but it is given to the person in need that the business have agreed to give their profit to. Usually this kind of business organization is from a church, for example a church try to sell a food stand in front of thechurch, then afetr the food are all sold, the profit are not given to the owner oppositely, the profit is given to the person or organization that allthe church organization has agreed to give their profit to.
A business type that the ibjective is to earn more profit is sold=e trader. Sole trader is a business that made up only of 1 person / owner. The objective of a sole trader is to got a profit for the living of the owner. The example of a sole trader is corner shop such as a food stand in the malls. They try to sell at a relatively high price but they try to have a minimum cost to make the product. To got profit is total revenue – total cost , so if the business have a large amount of revenue with also large amount of cost the business will just earned a small amount of profit but if the business earned a largeamount of revenue with a small amount of cost it means business have a large amount of profit earned, and a sole trader usually do that kind of thing because their objective is not to be well known or increase market share but their objective is to earn as many profit as possible for theowner.
Profitability is the ability to continually generate revenues from the sale of its’ goods and services that exceeds the most.
ReplyDeleteDifferent types of business organizations have different objectives. Most private sector organizations tend to aim for profit maximization. On the other hand, public sector firms would aim for welfare maximization. Although it is kind of true about, the amount of profit made would influence the drive to continue expanding the size of a business or the progress made of sales sold.
There are some other objectives business organizations they could aim for besides profit. Those are, to grow in size and to increase market share.
Business owners and managers might want to increase the size of their firms when they are successful. One of the ways to accomplish this goal is by increasing its sales, market share and profit. Knowingly, growth is easily done when the demand for goods or services is rising. If the market of goods and services is not in a high demand, business can only expand by attracting customer for its competitor.
People tends to get confused what is the increase market share, it is, measure the proportion of total sales revenue or turnover that’s most attributable to firms. This objective can be done as new business entrants might initially lower its price and spend more on advertisement. Not to mention, the increase of market share will achieve higher sale ad in the future, an increase in price, which will gain the profit.
As for new business, its main objective should be survival. If they aim for profit maximization, they may not be able to survive in the business world.
All in all, other objectives could support the amount of profit made in a business. Thus, profit maximization should be one of the main objectives of ongoing and successful business to be achieved. Profit could help increase the drive on companies to expand in size and many more.
Monique 8C
A business objective can be defined as a specific target the business wants to achieve. Firms held between the society all have the same inclination to obtain a successful business. Achieving the success through objectives and other statements or goals remains simultaneous for the business.
ReplyDeleteRelying on the corporation's size, objective will meet the changing economic conditions on the size of the corporation.
The standard assumption to this is that businesses strive for profit maximations; the process which an organization decides the output and price level, in exchange getting receiving the greatest profit. Firms tend to make this assumption besides the importance of market survival and social responsibilites, making profit have the most significance of objective of the organization in the market.
Profit and profitability may be seen as absolute requirements to the firm. Non-profit firms must even strive hardly for profit. However, this does not sum up that business only aim in making profit. Profitability really is a fundamental something by itself which is well spoken of in particular of an optimal size than as maximum. Achieving profit benefits both the business by earning more money and society in to fulfilling their needs and wants. It supports and boosts the basic functions in their marketing and innovation.
Some organizations such as charities, are not aiming for any profit, as their main aim is to provide or raise funds for the needy. Other business objectives involved in increasing in size and market share, provide the best utilities for their customer; to name a view. However, business objectives vary between firms and their sizes, and by time.
For instance, a start up small business aims for survival through the first year. After being successful, the business change its aims and sets itself on increasing their profits or growing in size.
More number of companies have picked on a different goal. They view their bottom line as more reformally different. Pleasing their customers through more innovation has been made their bottom line. Making profit is the result, not the goal, of their activities. The fascinating part is that when they managed things this way, they earn far more profit than companies focusing their priorties on making money (Forbes 2011)
Truth is that the basic aim of a firm isn’t necessarily to make money, and as there are many types of organizations out there, we could not exactly be sure if it is the main aim. It is true that it is the goal of existing managements, and of lot of other companies in the Fortune 500. But it’s a choice made by those firms, not a necessary fact.
Indeed, profit maximization may be the main objective for most businesses. In fact, some small businesses are comfortable with their size and doesn’t want to increase their size as long as they keep on earning profit. Profit is important, because it will doubles the earning of our income. For example, most MNC companies are from the United States. However, profit is not the only main objective for most businesses. There are some organizations that doesn’t necessarily focus on receiving profit, or in other words profit maximization.
ReplyDeleteCharities and fundraisers is one of the examples of an organization that doesn’t focus on receiving profit maximization. They are organizations that help others in need by asking for money to donate. However, the amount of that money is according to the person who donated it.
This organization aims for welfare. Why welfare? Because they don’t ask for much, just the enough amount of money to help those people that are in a worse situation that we are.
There are also some businesses that aims something more differently. Such as, increasing market share. Market share is also important hence profit maximization.
One of the examples include, capitalization. Some business owners prefer having mechanic workers more than labour. Therefore, those type of business owners normally aim for capitalization in order to have more capital in their business. This is because technology has increased greatly, they are more cheaper, faster and accurate in making the goods, and doesn’t need wages. However, they are rather expensive. That is why some are likely to prefer having capitalization as their objective, at the moment.
There are some public companies who are also aiming for the welfare of the society. Those kinds of companies, are mostly managed, controlled and owned by the government.
But, there are companies that are focusing on profit maximization. In fact, most commonly companies’s objectives is profit maximization. This explains why some companies want to increase their size. It is because they will have more consumers who have high demand for their products and in result, they will earn higher revenue and profit.
In conclusion, profit is important. However, not all organization have their eyes focused on receiving profit because there are many different types of business. Such as, public limited company, private sector, public corporation, charities, fundraisers, sole trader, and many more. Different types of businesses that comes along with different objectives as well. However, profit IS the most common objective, but not the objective for ALL business.
Profit is the money earned to the business after price of sales is reduced by cost of sales. Business main aim is to make profit. People form business to earn money for their living. The money is earned from the profit. Although making profit is the main objective, there are also other objectives that a business look up to be successful.
ReplyDeleteMost business would want to grow in size. Growing in size is more likely to become more famous, increase capital, increase labor, etc. Most important thing is to increase productivity of the business. Providing better training to the labor, giving rewards, can do these providing fringe benefits, increase the job satisfaction and capitalization. These help business to earn more profit. They will try to earn as much profit as they can. This is called profit maximization. Reducing the cost of sales does this.
Increasing market share can also result earning profit. Market share is the percentage of an industry or market's total sales that is earned by a particular company over a specified time period. Taking the company’s sales over the period and dividing it by the total sales of the industry over the same period calculate market share. This metric is used to give a general idea of the size of a company to its market and its competitors.
Those are the main objectives of a business. But there are other objectives, which increases success of the business. A way to increase sales is to produce something that consumers demanded. Business must decide how to meet the demands of its customers. They may adopt a strategy of product differentiation, where the business competes by giving customers a unique or superior product. The other option is to adopt a strategy of cost effectiveness, giving customers a cheaper product or more value for their money. These basic goals help guide the strategic objectives that businesses set.
Business also corporate social responsibilities. Businesses must meet many social responsibilities. For example, society expects businesses to serve them goods and services of the quality or prices they demand, and consumers expect businesses to consider human rights, animal rights and the environmental impact of said goods. For example, when organizations follow policies to purchase natural extracts from third-world countries that are experiencing economic strife, they may achieve their goal of delivering safer products to their customers while lifting the economy of those countries. Some organizations, such as Unilever and Shell, respond to social responsibilities by setting up programs in disaster-stricken areas of the world.
Businesses must consider the objectives of their stakeholders. These stakeholders include employees, customers, suppliers, investors and governments. The objectives of employees are to earn better wages and learn new skills; customers want better quality for a reasonable price; governments want businesses to pay taxes and create employment; suppliers want prompt payments and the general public may want businesses to produce less pollution. A business may try to achieve all these objectives at any given point in time.
My conclusion is that business main aim is to make profit but it’s not the only aim of a business.
Kevin 8C
THE OBJECTIVE OF THE FIRM
ReplyDeleteIn this , we assume that the objective of the firm is to maximize its value to its shareholders. Value is represented by the market price of the company’s common stock, which, in turn, is a reflection of the firm’s investment, financing, and dividend decisions.
Profit Maximization vs. Wealth Maximization
Frequently, maximization of profits is regarded as the proper objective of the firm, but it is not as inclusive a goal as that of maximizing shareholder wealth. For one thing, total profits are not as important as earnings per share. A firm could always raise total profits by issuing stock and using the proceeds to invest in Treasury bills. Even maximization of earnings per share, however, is not a fully appropriate objective, partly because it does not specify the timing or duration of expected returns. Is the investment project that will produce $100,000 return 5 years from now more valuable than the project that will produce annual returns of $15,000 in each of the next 5 years? An answer to this question depends upon the time value of money to the firm and to investors at the margin. Few existing stockholders would think favorably of a project that promised its first return in 100 years. We must take into account the time pattern of returns in our analysis.
Another shortcoming of the objective of maximizing earnings per share is that it does not consider the risk or uncertainty of the prospective earnings stream. Some investment projects are far more risky than others. As a result, the prospective stream of earnings per share would be more uncertain if these projects were undertaken. In addition, a company will be more or less risky depending upon the amount of debt in relation to equity in its capital structure. This risk is known as financial risk; and it, too, contributes to the uncertainty of the prospective stream of earnings per share. Two companies may have the same expected future earnings per share, but if the earnings stream of one is subject to considerably more uncertainty than the earnings stream of the other, the market price per share of its stock may be less.
For the reasons above, an objective of maximizing earnings per share may not be the same as maximizing market price per share. The market price of a firm’s stock represents the focal judgment of all market participants as to what the value is of the particular firm. It takes into account present and prospective future earnings per share, the timing, duration, and risk of these earnings, and any other factors that bear upon the market price of stock. The market price serves as a performance index or report card of the firm’s progress; it indicates how well management is doing in behalf of its stockholders...........................
My conclusion is that business aim is to have max profit but they have some other objectives also
Michael 8C