business objectives and growth

• Firms maximise profit:


  MC= MR
• Market share measure revenue 


  MR=0
• Sale maximisation


  AC=PRICE
• Sales maximisation


  Maximisation sales without making a loss
• Profit satisficing:


  The company makes enough profit to satisfy its influences
• reasons to grow:

  • sales & profit
  • increase market power
  • EOS
  • objective
• Reasons to stay small

  • no finance to grow
  • profit satifice
  • Dis EOS
• Divorce of ownership and control

  Managers/ directors of a firm are different from the owners of the firm
• Divorce of Ownership and control

  LINK TO asymmetric information
• The principal-agent problem


  Agent pursues different objectives to the principal
• types of firms


  Private = Profit

  Public = Not for Profit
• Other business objectives: survival, reputation, quality social welfare
• Consequences of this divorce:

  Short-Termism: Pressure from shareholders can lead to decisions that neglect long-term investments in R&D

  Agency problems: Managers inflicting own self interest