3. Business objectives Flashcards
profit maximising
MC=MR
dividends up, and retained profits as a source of finance
sales revenue maximisation
MR=0
Sales volume maximisation
AC=AR
to gain market share without losing money
how to grow as a business
expanding product range
merging or taking over
increase market share by maximising sales
utility maximisation
economic agents act in their own interests, firms maximise profit, consumers maximise the utility from an economic decision
non maximising objectives
profit satisficing
corporate social responsibility
profit satisficing
just enough profit so shareholders are happy, managers may not be bothered, the reward for profit is not as high as the rewards shareholders get for profits,
marginal cost
change in total cost/
change in quantity
marginal revenue
change in total revenue/
change in quantity
law of diminishing returns
at some point in the production process, adding more units leads to a fall in marginal output
internal economies of scale
risk bearing
bank loans
managerial - specialise and divide labour
technological
bulk buying
external economics of scale
local roads expanded, extra lanes
universities, research centres in the area, more skilled workers
diseconomies of scale
control - harder to monitor the productivity
communication- workers feel excluded, lose motivation as they have less feedback from managers ect.
profit max cons
key stakeholders harmed
investigations may happen
other objectives may be more appropriate to gain market share
revenue max reasons
economies of scale
predatory pricing, sacrifice profit
principle agent problem
brand loyalty
