3.1 Business Objectives Flashcards
Explain Profit Maximisation Objective
Firms aim to make a large amount of revenue with the lowest level of costs.
This could be used for reinvestment back into the company, extra incentives for workers or increased utility.
Explain Sales Revenue Maximisation Objective
Firms aim to gain the most amount of revenue.
This is to increase the market share and can also lead to high levels of brand loyalty thus increasing demand for their product in the long run
Explain Sales Volume Maximisation Objective
Is a strategy to sell as much product as possible, without receiving a loss.
This is usually achieved by lowering the price and is therefore mostly used by Non-Profit Organisations.
Explain Growth Maximisation Objective
When a firms average revenue (price) is equal to the average cost of production.
This leads to the maximum output produced whilst still leading to normal profits.
This is done to increase market share and increase monopoly pricing power
Explain Utility Maximisation Objective
When a firms management focusing on their own satisfaction as oppose to maximising growth or profits.
This can be done through an increased workforce, to decrease workload.
Or an increase in wage/bonuses to incentivise workers.
Explain Profit Satisficing
Comes from the terms “satisfy” and “suffice”.
Where firms make enough profit to satisfy shareholders and owners.
This is usually used when other objectives are prioritises, such as social responsibility, utility maximisation or customer satisfaction.
Explain Social Welfare
This is where the objective of a business is to benefit society, including customers and employees.
They focus on local communities and the environment.
Explain Corporate Social Responsibility
Where social and environmental concerns are integrated into a company’s operations.
Some examples are donating to nonprofits, volunteer work and supporting employees mentally.
Evaluate maximisation objectives
Maximisation objectives are essential for companies looking to grow at an exponential rate.
They focus solely on things that will selfishly benefit the company and defers other objectives such as employee wellbeing or utility.
This is all in the hopes of increasing the company’s value or market share.
Evaluate non-maximisation objectives.
non-maximisation objectives are where firms prioritise alternatives such as employee welbeing or social responsibilities.
They are highly beneficial for keeping motivation and incentivisation high therefore keeping highly skilled workers in the long run.
This leads to increased levels of long run production.
Also many of these objectives lead to better consequences for society and the environment
Name the factors which influence the choice of Objectives
Stakeholder expectations,
Customer expectations,
Employee expectations,
Environmental choices,
Growth expectations.
