3.2.1: Business Objectives

Question 1

Who can determine business objectives?

Answer 1

-Shareholders.
-Managers.
-Workers (trade union).
-The state (through regulation, taxes/subsidies and direct control).
-Consumers (businesses sell what consumers want to buy).
-Pressure groups.

Question 2

What are the different business objectives?

Answer 2

-Profit maximisation.
-Sales maximisation.
-Revenue maximisation.
-Satisficing.

Question 3

Why would firms profit maximise?

Answer 3

-It is in the interest of owners and shareholders to maximise returns.
-Firms can generate funds for investment (e.g. Apple, pharmacies).
-Profits can help firms survive a slowdown during a recession.

Question 4

Where should firms profit maximise in a diagram?

Answer 4

MC = MR.

Question 5

Why would firms revenue maximise?

Answer 5

-Justification to shareholders for managerial rewards.
-Amazon follow an objective of revenue maximisation, with their aim being to dominate the market. Amazon earned £120bn revenue in 2015.

Question 6

Where should firms revenue maximise in a diagram?

Answer 6

MR = 0.

Question 7

Why would firms sales maximise?

Answer 7

-Size is linked to security of the business.
-Increases market share and pushes other firms out of business.

Question 8

Where should firms sales maximise in a diagram?

Answer 8

AC = AR.

Question 9

What is satisficing?

Answer 9

A decision-making process in which an individual or organisation settles for a satisfactory solution rather than striving for the optimal solution.