The researcher of this descriptive essay mostly focuses on the discussion of the topic of strategic management and analyzing the issue of profit maximisation. The key statement of the paper is adopting a simple profit-maximising perspective…can have positive impacts for a firm…
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Keeping in view the two above mentioned definition of business and profits, a simplistic conclusion is; the more profit, the better it is. But it is not practical option when evaluated with the perspective of other stakeholders of the business. The business does not have the investor as the only stake holder. The customers, suppliers, regulatory body, competitors, unions and society at large are the stake holders of the business and the organisations must consider all of them when conducting businesses and devising the profit plans. For instance, an airline while operating its flights, should consider the pollution effects it puts on the environment, the noise its take off and landings produce, which can disturb the citizens. It is, therefore, operating flights at night in US is legally prohibited. There are two approaches of profit maximisation i.e. increasing revenues and decreasing costs. The next sections discuss these two options in detail. Profit Maximisation though Revenue Increase It is important to note here that business sector earns revenues by customers, who consider the price of the product or service as the cost. Customers invest their hard earned income in buying goods and services. The price for businessman is cost for customers who incur this cost to fulfil the need for which product or service is designed. The interest of customer is to pay as low price for the product as possible. On the other hand, the interest of the businessman is to charge as high a price as possible. This trade off between the interest of purchaser and seller is set at an equilibrium price at which the seller receives considerable amount of profit and the buyer fulfils his needs at an...
The author of the essay concludes that the answer to the question whether the organisations should adopt simple profit maximisation approach cannot be explicitly given in affirmation or negation. A balance is required between the profit orientation and societal orientation. It is because organisations operate in the society and they are ethically bound to share their gains with the entities that support generation of the profits.
The clear cut statement is; in no circumstances the organisation should operate in losses. Attaining profits is the core objective; however, maximisation of profits can be compromised based on the environmental conditions and requirements. The case of monopolistic competition is discussed in the above paper. It is an unlikely situation for all the stakeholders except the business owners. This approach is minimized in the theories and practices of all times of business sector.
In short, the business sector, that drives investment and economy, should focus on win-win conditions for all stake holders. It is pretty fair to state that the major chunk of profit remains in the hands of investor while rest of the stake holders get the returns of cost in terms of satisfied need or other intangible benefits.
The focus of business sector should be achieving the realistic equilibrium whereby they can balance out the demand and supply of its products and services. Both the deviation and shift from equilibrium will lead to undesirable outcomes for the business sector and all other stake holders as well.
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