Alternative Objectives of Business Firms

Every entrepreneur is to act rationally. A business firm aims to achieve satisfactory return rather than maximizing profits.

There are multiple objectives of a business firm:

Profits ( Highest Priority) Sales Maximization Increasing Market share Building good business reputation Financial stability & liquidity Maintenance of good labor relations Job Satisfaction Leisure & Piece of mind

 Profits ( Highest Priority)

Fear of attracting business rival Fear of provoking governments anger on egalitarian(equal/fair) grounds Maintaining good public relation by having a thought that some average profit is better than maximum profit Profit is indispensable for firms survival in competitive world All Other objectives depend on firms ability to make profit Basis for predicting certain aspects of firms behavior & is the most reliable measure of firms efficiency

Staff Maximization
Large corporations are largely run by professional managers creating a separation b/w ownership & management. Therefore the shareholders seek to satisfy their own utility/worth by having more staff to be employed in the Organization.

 Sales Maximization
Managers salaries & earnings are tied with sales not profit Larger sales revenue for a firm to expand Capture new market, increase competitive strength & earn business reputation Enable to earn more profit Banks & Financial Institution emphasize at sales revenue while financing a proposal Trend in sales revenue is the true indicator of performance of a firm

Growth Maximization
Increase in employment of managerial staff at a rate which maximize growth Enables the firm to fulfill its plans for creation of new product, expansion of market, influencing consumer behavior Growth of demand for firm's product & supply of capital to the firm, maximizes managers own utility & that of owners

 Managerial Utility Maximization

Deriving intrinsic satisfaction of managers individual, social & business status Managers maximize their own utility subject to satisfactory profit because minimum profit is necessary to satisfy shareholders or else managers job security is endangered Firms seeks to maximize utility by quantifiable variables like salary, slack earning, prestige, power, job security, professional excellence,etc.

Satisfying behavior towards environment

Happy workforce reward the firm through lower staff turnover, better productivity & higher profits Lay-offs are a short term gain but a long term loss Groups( stakeholders) existing in the business environment having high & low expectations from the firm