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Adopting a Simple Profit-Maximizing Perspective Can Have Positive Impacts for a Firm - Assignment Example

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The paper "Adopting a Simple Profit-Maximizing Perspective Can Have Positive Impacts for a Firm" discusses that firms should make such decisions that help the company to maximize the value of the company and make a strategy that will have a positive impact for the firm and its owners…
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Adopting a Simple Profit-Maximizing Perspective Can Have Positive Impacts for a Firm
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Extract of sample "Adopting a Simple Profit-Maximizing Perspective Can Have Positive Impacts for a Firm"

Download file to see previous pages The owner of the maximization of profit sets non-profit aims and ideas for its firm managers. The more the load a firm sets on returns and profits, it does not think much about the expenditure, which leads to maximize the profits of the firm (Kaneda & Matsui, 2003). Firms that do not maximize their profit are probably more out competing by a proficient rival or acquired by people who can get a better evaluation from it by following different plans and strategies (Romer, 2006). Managers are usually changed or fired if they fail to maximize firm’s profit which therefore shows that the profit maximization depends on behaviours of managers that should be consistent and it seems to be staying for long in that firm with the maximization of profits if managers adopt simple profit-maximizing perspectives (Romer, 2006). Majority of firms subsist to maximize its profit and its production activities are not limited to the firm itself. Nearly all firms are motivated to maximize their profit and decrease their cost, which makes a positive impact on that firm (Karl, 2007). Firms usually set primary objectives through a number of different choices to maximize its profits, they take some basic decisions to increase its profits that includes how much output they need to supply, which technology they must use to produce, and how much input they may need to demand. The profit-maximizing firms will decide the technology it has to use to minimize the cost of production, which has a positive impact on that firm (Karl, 2007). The profit of the firm and its determinants is a comprehensive topic of research in the industrial organization field. 
The advance literature describes two models in the competitive model of the firm’s profit. The first model is the structure conduct performance model (SCP) that describes the extent of concentration in the industry, decides the behavior of the firm and its profitability (Stierwald, 2009). The higher concentration of the firm involvement can lead to higher profits and if the there is a difference between the characteristics of the firm such as level of efficiency, quality management and structure of organization, than the profitability of the firm is affected. The second model is the effect model, which states that within the industry, the firms are heterogeneous and they can be differentiated with their efficiency level. The firms that are more productive have a competitive benefit over the firms that are less productive and those firms earn high profits due to that high productivity (Stierwald, 2009). It is difficult that this requirement can regularly be fulfilled by the firms as auditors have different figures related to profit and in order to maintain the profit maximization strategy, the firm should have the regular and clear procedure of auditing.  ...Download file to see next pagesRead More
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