Objectives of Business Firm

Submitted by
Lekshmi Priya.C.
I Year MBA
 FIRM/ORGANIZATION
Environment in which
individuals, working together in
groups, efficiently accomplish
selected aims.
 Business objectives are
something which a business
organization /firm wants to
achieve or accomplish over
a specified period of time.
 In other words
business objectives
are the stated,
measurable targets of
how to achieve
business aims.
 A business firm is an
organization designed
to make profit, and
profit are the primary
measure of its
success.
PROFIT MAXIMIZATION AS OBJECTIVE OF THE FIRM

Most reasonable and analytically

most productive business objective.

Its strength lies in the fact that this

assumption “has never been
unambiguously disproved”.

Greater predictive power.

Why going for alternative objective?

Firms with substantial monopoly

position, either short run or
permanent has a discretion in pricing
unlike firms which are under pure
competition ,such firms must make
crucial policy on profit standards.
 Deviationist tendencies that appear when
profit motive is attenuated.
Keith Powlson
i. More energy is spend in expanding sales
volumes and product lines than in raising
profitability.

ii. Subordinates spend too much time and

money to the needs of job security in the
absence of any imaginative venture.

iii. Executives cater more to the need of job

security in the absence of any reward for
imaginative venture.
 CHOOSING A STANDARD
To keep out potential competition.
To maintain liquidity and avoid debt.
To keep antitrusters happy.
To restrain wage pressures and price controls.
For long term growth.
Departmental profit standards.
Bonus plans for management.
 The reason for limiting profit.
To discourage potential competitors.

To woo the voting public and restrain the zeal

of antitrusters.

To restrain wage demand of organized labor.

To maintain customer good will.

To keep control undiluted.

To maintain pleasant working conditions.

Hence Profit maximization
gives way to profit
optimization/ Reasonable
profit / the long run profit.
Hence the alternative objectives!!
Maximization of sales revenue.
Maximization of firms growth.
Maximization of managerial utility function.
Making satisfactory rate of profit.
Long run survival of the firm.
Entry prevention and risk avoidance.
Ethos.
Diversification.
Thank you……