Objectives of a business

Question 1

what is profit maximisation ?
and why would a business use this as there goal

Answer 1

profit maximisation is when a firms main objective is to maximise profits, (MC=MR)

a business will use this to:
-re-invest
-dividend for shareholders
- lower costs
-reward fore entrepreneurship

Question 2

what is the principle economic agent problem ?

Answer 2

arises from the conflict between the objectives of the principles and their agents, who take decisions on their behalf.
principle(shareholders) agent(manager).

Question 3

what is profit satisficing ?

Answer 3

satisficing profit is making enough profits just to satisfy stake holders

Question 4

what is revenue maximisation and why would a firm use this as there main goal ?

Answer 4

revenue maximization is when a firm, focuses on maximizing a firms revenue. (MR=0)

firms would use revenue maximisation :
-economies of scale
-predatory pricing
-‘principle agent problem’ (managers may get perks for their jobs if they bring in greater revenue

Question 5

whatis growth maximisation ? and why would a firm use this as there model ?

Answer 5

growth maximization is when a firm focuses on the growth, without making a loss (AC=AR)

why?
-Economies of scale
-limiting pricing
-principle agent problem
-greater market dominance

Question 6

list non-maximisation objectives

Answer 6

-social welfare
-corporate social responsibility(CSR)

Question 7

what is social welfare?

Answer 7

some firms may follow the objective of social welfare, in order to help society. e.g charities

Question 8

what is corporate social responsibility and the adv of using this maximisation ?

Answer 8

• actions that a firm takes in order to demonstrate its commitment to behaving in the public interests
  e.g promoting community programs and voluerteerting

firms may demonstrate CSR to enhance reputation of a firm and boost market position.

ADV:
- increase customer retention
-build reputation
-differing yourself from competition
-media and good interest
saving operating costs

Question 9

list a few barriers to entry?

Answer 9

• brand loyalty
  -vertical intergration
  -economies of scale
  -geographical location
  -patent
  -being the first mover