Business Objectives Flashcards
Stakeholder
Anyone who has an interest (or is affected by) in any business activity.
The Stakeholder has control over a firms decision making.
How do Stakeholders affect decision making?
Owners and Shareholders - Increase business growth through expanding and other decision making.
Directors and Managers - may lead to divorce of ownership
Workers - Trade union for higher wages, better working conditions etc
The Government - Government regulation could influence decision making eg stop exploiting workers to increase profit, taxation, environment, consumers etc.
Consumers - Consumer Sovereignty (Exists when the economic system allocated resources totally according to preferences of consumers)
Pressure Groups - A group of individuals that work together with a common belief and strong policies that try to influence business activity eg Oxfam.
Business Objectives
Profit Maximisation - Occurs when the difference between TR and TC is at its greatest.
Profit Satisficing - Making sufficient profit to satisfy the demands of owners, such as stakeholders.
Revenue Maximisation - Occurs when TR is highest and MR is zero.
Sales Maximisation - Occurs when the volume of sales is greatest.
Short run maximisation implies that firms will adjust both price and output in response to changes in the market, this is generally believed by neo-classical economists.
Cost Plus Pricing
Technique adopted by firms of fixing a price for their products by adding a fixed percentage profit margin to the long run average cost of production.
