Th3.2: Sales Maximisation Flashcards
What does Robin Marris suggest?
that managers aim to maximise the growth of their company above any other objective because their salary may be linked to the size of the company
It is often easier for people to judge the…
level of growth achieved rather than the level of profit - this will increase the prestige of the business
Why is size often linked to security?
it is believed large firms can survive rough periods much easier and are less likely to get into financial trouble overnight
Growth will also increase…
market share and may push other firms out of business - will enable a firm to have more market power and power over prices
What are long term firms are more likely to…
profit maximise
What kind of strategy is this?
a short term strategy
What will the firm want to do in order to sales maximise?
get the highest level of sales possible without making a loss
Why will they aim for normal profits?
they want to ensure sufficient returns to keep the owners happy
Refer to PP
Look at Graph 26. As a result, they would produce at…
AC = AR
How do prices and output differ to how they would be under profit maximisation?
prices are lower and output is higher than they would be under profit maximisation
What is the problem with both sales maximisation and revenue maximisation?
it necessitates a fall in price, which other firms may copy and so there may be no or little increase in revenue or sales - important in oligopoly. also bring lower profits
