Buisness Objectives And Growth Flashcards
4 influences of firms
Shareholders
Workers
Directors and managers
Consumer
objectives of shareholders
maximise profit
objectives of directors and managers
maximise sales or revenue
objectives of workers
higher wages and job security and improved conditions
consumer objectives
lower prices and high service quality
what point is maximum revenue
Productive efficiency
Why might firms want to maximise revenue
An increased revenue will lead to a greater percentage market share which will increase the prestige of managers and directors of that firm
Sales Maximisation point on revenue and costs diagram
Price = AC meets AR
Advantages of sales maximisation
Break even to increase sales
Profit satisfying
making enough money to satisfy the firms 4 influencers
What does profit satisfying mean for a firm
When a firm has made a decreased rate of profit and then satisfies other objectives.
lego has profit satisfied and has invested in making its product recyclable
Reasons why a firm grows
- more sales profit
- more market power
- diversified product
- economies of scale
- objectives of owners
Reasons why a firm may not grow
- not financed
- legal restrictions
- niche markets
- personalised products
- diseconomies of scale
- profit satisfaction
Examples of diseconomies of scale
Alineation
Beauroacy
Communication
Divorce of ownership and control
When shareholders own businesses which are controlled by differnt people, usually managers and directors
Principle agent problem
principle (person in charge) is the shareholder(s)
Agent is the director
This leads to an asymmetrical information over the running of the firm
Agent may pursue goals which are different to the goals of the principle.
Such as giving increased bonuses rather than more profit to the shareholders
Public sector firms
firms owner by the government
NHS, BBC
Private sector firms
Owned by shareholders
For profit firms
looking for profit
- apple
- Barclays
not for profit firms
firms not looking for a profit
oxfam
