Objectives of firm

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Information about Objectives of firm

Published on February 15, 2014

Author: prashantranka

Source: slideshare.net

Amity Global Business School PRESENTATION ON : OBJECTIVES OF FIRM Presented by: Prashant Ranka B.B.A.3rd sem. Date : 05/09/2012

What is a Firm? A firm (also known as enterprise or firms) is an organization engaged in the trade of goods, services, or both to consumers. Firms are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Firms may also be notfor-profit or state-owned. A Firm owned by multiple individuals may be referred to as a company.

Firm objectives  Firm objectives are the goals of Firms – what the firms wants to achieve. All firms have their own objectives. I

Firm objectives importance  It is of great importance for a firms to have well- defined objectives. These objectives will help the firms to be clear about what it wants to achieve or where it wants to go.  With objectives, the performance of a firms can be assessed according to a standard, that is to say, how effectively the firms has achieved its objectives

Major objectives 1. 2. 3. 4. 5. There are five major types of firm objectives: Survival, Profit Maximization, Growth, Sales Revenue Maximization, Image and Social responsibility.

Survival   Survival objective is essential for any firm because nowadays market is very tough. Surviving in the world of competition is very important of every firm. A firm has to keep running if it wants to stand at his place.

Profit maximization    Profit maximization means increasing profit as much as possible or producing a level of output which brings the most profit for the firms. Usually, the main objective of a private sector firms is to maximize its profits. However, things may be different for a public sector firms. The main objective of a public sector firms may be to supply the best service in the past, although nowadays, they are offering services in a more and more sectors.

Growth      To survive, no growth may mean ‘final death’. To introduce new products in order to meet customer changing needs. To reduce risks of firm: In fierce competition, if a firm can not become strong enough, it is more likely to be eaten up by other stronger competitors. To have low costs and more profits on a larger scale (economy of scale). To make employees, managers, and owners all feel happy and secure.

Sales Revenue Maximization Reasons: Sometimes, when managers and employees are paid according to their sales revenues rather than created profit, sales revenue maximization may become the main objective of the firm. The firm wants to enlarge the market share first and then benefits in the long run. Shortcomings: This may be a shortcoming for a firm. Profit maximization for a firm should be more important than sales revenue maximization in whatever situations.

Image and Social Responsibility  Image and social responsibility have become more and more important objectives of firms. There are some reasons why firms must consider image and social responsibility to be their objectives which are illustrated in the following table:

Possible Reasons Brief Explanations Government legislation Many laws have been passed to protect workers’ health and safety, reduce discrimination against disabled workers and protect the environment Competitive pressure Increasing competition has become a challenge for modern businesses. If customers think badly of a business, then the business is finished. The business’s market share will be taken over by other companies Sustainable development Paying attention to image and social responsibility is key to long term development


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