Objectives Of Firms

• What are firms often involving?

  Thousands of people directly
• Why do not all people involved in an enterprise have the same goals?

  Different roles lead to different rewards
• What do entrepreneurs expect from their business risks?

  Profit
• How are managers rewarded in a firm?

  With a salary and benefits
• What motivates employees in a business?

  Job security and decent wages
• What does the local community hope for from a business?

  Job provision without excessive costs
• What does the government hope for from firms?

  Survival, prosperity, and growth
• What is the dominant goal of private enterprise?

  Profit maximisation
• What is profit maximisation?

  Achieving the highest possible profit
• What is normal profit?

  Profit sufficient to keep supplying
• What does super-normal profit mean?

  Profit in excess of normal profit
• What does MC=MR signify?

  Level of output for profit maximisation
• What is satisficing behaviour?

  Making enough profit to satisfy shareholders
• Why does satisficing occur?

  Management may have other objectives
• What is the principal-agent problem?

  Conflicts of interest between owners and managers
• What does divergent aims mean in a firm?

  Not everyone seeks the same objectives
• What does sales volume maximisation mean?

  Selling as many products as possible
• What is the output level for sales maximisation?

  Where total revenue covers total costs
• What does revenue maximisation aim for?

  Maximum possible revenue from sales
• What is the output level for revenue maximisation?

  Where MR=0
• What is market share?

  Increasing a firm's share of the market
• Why is survival a significant objective for some firms?

  To endure in competitive markets
• What does shareholder value mean?

  Increasing the value of the business
• What are ethical goals in business?

  Goals related to environment and fair trade
• What is a co-operative?

  A business maximizing welfare of stakeholders
• What is the primary aim of customer service in firms?

  Ensuring 100% customer satisfaction
• What are potential conflicts between business goals?

  Maximising profits vs. other goals
• What is the private sector?

  Firms owned by individuals
• What is the public sector?

  Firms owned by the state
• What is a not-for-profit organization?

  Does not earn profits for owners
• How do the objectives of firms change over time?

  As they grow from small to large firms
• What are the main business objectives discussed in Theme 3?

  • Profit maximisation
  • Satisficing
  • Sales volume maximisation
  • Revenue maximisation
  • Market share
  • Survival
  • Shareholder value
  • Ethical goals
  • Customer service
• What are the conflicts between business goals?

  • Profit maximisation vs. sales maximisation
  • Profit maximisation vs. ethical goals
  • Sales maximisation vs. revenue maximisation
• What types of firms are specified in the material?

  • Private sector
  • Public sector
  • Not-for-profit
• What is the significance of the principal-agent problem?

  • Conflicts of interest between owners and managers
  • Divergent aims within the firm