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Cyert and marchs

behavioural theory
Business firms are the collusive form
of different parties with different
Satisfying all these conflict goals of
stake holders is the main goal of any
business firm.

This theory describe in the following

Objectives of different groups held in
a firm
Definition of the firms
Goal formation
Goal of the firm
Means of conflicts resolution
Process of decision making

1.Objectives of different groups

held in a firm
Manager- higher power, prestige,
Shareholders- maximum profit
Consumer- quality goods with low
Banker- security of loan and expect
to pay back on time
Input suppliers- high and contineous

2.Definition of firm
Collusion of various parties having
different conflict goals
Satisfying all goals at the same time
is not possible by the firm
Firm fulfill that objective at first
which have greater priorities

3.Goal formation

Aspiration of stake holders

Past achievement
Growth of firm
Achievement from other similar firm
by the stake holders

4.Goal of the firm

Production goal:

for smooth and continuous

production so that ensure employment , growth, cost
management etc.

Inventory goal:

supply at least minimum

inventory for production and sales department for
smooth production and sales activities

Sales goal :

Sales in large quantity for

sustainable revenue generation

Profit goal: set by the top level management to

pay dividend to shareholders, payment for loan and
interest and to satisfy other parties

5. Means of conflicts
Money payments : given to stakeholders in the form of
salary, wages, interest, dividend, commission etc.
Slack payments : additional benefits and facilities (i.e.
Side payments : for certain department along with
salaries . For example; payment made for research
department for new innovation
Continuous attention on demand: it helps to
minimize long term conflict by making appropriate policy
Decentralization of decision making : it increases
the attention of all sub-groups on the firm which help to
run business positively.

6.Process of decision
By top level management they allocate budget to
the different parties according to their bargaining power
- top level management focuses on two basis while
allocating fund i.e. budgetary condition of the firm and
whether the particular project improve the existing
condition of firm or not?
By low level management- they concern about the
utilization of fund. It depends upon past experience,
mistake, previous decision of the firm etc.
- the effective utilization of resources and success of a
project depends upon the decision making capacity of the
low level management.

Market uncertainty ; which is arises
due to change in market condition
i.e. demand
Competitors uncertainty ;it arises
due to the action and reaction of the
competitors, this uncertainty can be
minimized by the negotiation
between competitors.