Business Objectives

Question 1

Objective: To maximise profit

Answer 1

To profit maximise, they will produce q where MR = MC., at price where q hits the demand curve.

We might expect small firms which are run by their owners to be trying to do this because its their own capital they are investing therefore risking in the business

Question 2

Objective: To maximise revenue

Answer 2

To maximise revenue, they will produce to the point where MR = 0, i.e. q1. Between q and q1, the cost of producing each extra unit is going to me more than the profit made, therefore total profit will fall.

We might expect large firms to try to do this, that are always looking to expand and get the largest market share possible, therefore gaining the most control in the market.

Question 3

Objective: To survive

Answer 3

We might expect this from:
1- New businesses - because these businesses are trying to get established on the market
2- Businesses in financial trouble e.g. Debenhams failed, HMV is surviving.

Question 4

Objective: Social and ethical objectives

Answer 4

Not just interested in making a profit, but they want to do good for society.

E.g. charities

Question 5

What are the 5 types of business stakeholders? And why do they have an interest in the success of a business?

Answer 5

1-Shareholders/owners = There provided the business with the initial capital, therefore they want the largest profit possible.

2-Customers = Looking for value for money

3-Suppliers = Tescos is one of their main customers - they depend on Tesco’s success

4-Employees = Good pay and working conditions e.g. Job security, benefits etc.

5-Community:

• Local community - Jobs the business would create
• Government - Tax revenue
• Environment - Protect it, recycling, reducing waste etc.

Question 6

Whats a satisficer?

Answer 6

Many businesses now claim rather than simply maximising profit for shareholders, they are trying to keep all of their stakeholders happy, even if in the short term they make less profit.

These businesses are called satisfiers. They are trying to keep everyone happy. There are long term benefits to this including better production (If workers are treated fairly, they will be more motivated, therefore more productive, therefore price of unit may fall etc.)