Q).

Profit making is the primary goal of any business

organization-explain the statement with adequate examples drawn from different fields of your choice in support or against the above statement.

The Theory of Firm under Managerial Economics identifies profit maximization as the primary driving force behind the operation of a firm. Profit is generally defined as an excess of revenue earned by the firm as compared to the costs incurred by it. In view of the huge financial investment involved in the setting up of a businessthe large amount of loans required to be taken from banks, the infrastructure costs and other establishment costs, the consideration of profit maximization as the primary goal of a firm seems much justified. However, as the CEO of any company would testify-profit is not the end-point of a business rather; it is only the starting point. Initially a firm requires to concentrate on earning profit in order to consolidate its position in the market and create a place for itself among its many competitors. In fact, throughout the life of the firm, profit-earning continues to remain an essential condition for the smooth operation of the firm as it ensures that the firm stays in business. But, as the firm begins to gain considerable market share, other factors begin to assume importance as well as, in the present business environment, no firm can hope to thrive on profit motive alone. At this point, it is crucial to identify the existence of two kinds of firms or organizations- for-profit and non-profit organizations. The former refers to organizations whose primary goal is to make money or profits while the latter indicates organizations which concentrate on various activities meant to promote social welfare and the overall well-being of the community and its people and is concerned with money only as much as is required to keep the organization in operation. Non-

profit organizations include NGOs and other charitable institutions as well as government enterprises whose main purpose is to serve the people and to contribute to their welfare. The Rural Electrification Corporation Limited, a government-owned enterprise which finances and promotes electrification projects in Indias vast rural hinterland, is a case in point. Other examples include the Life Insurance Corporation of India (LIC), the largest state-owned life insurance company in India, and also the country's largest investor. It is fully owned by the Government of India and it funds close to 24.6% of the Indian Government's expenses and is synonymous with financial security for many Indians. Mention must also be made of the Housing and Urban Development Corporation Limited (HUDCO), which is a government-owned corporation in India under the administrative control of the Ministry of Housing and Urban Poverty Alleviation, charged with building affordable housing and carrying out urban development. There are also several NGOs (non-government organizations) who work towards the betterment of the people like Child Relief and You (CRY)-a charity organization which works for the welfare of children, India Literacy Project-a volunteer based non-profit organization dedicated to the cause of literacy in India and Deepshikha-an institute for child development and mental health. While such non-profit organizations contribute to the growth and development of the society and the nation as a whole, the profitseeking organizations also are not far behind in doing their bit for societal development. In fact, the concept of Corporate Social Responsibility(CSR)-a form of corporate self-regulation integrated into a business model which functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its support to law, ethical standards, and international norms and embraces responsibility for the impact of its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere and, proactively promotes the

public interest by encouraging the inclusion of public interest into corporate decision-making- is fast emerging as the growing business need of the hour with most of the reputed private firms emphasizing on their role and contribution in promoting the same. Examples of corporates engaging in CSR can be drawn from all fields-starting with telecommunication, to banking to even the IT sector. Wipro for example, has started the Applying Thought in Schools initiative, through which it has built a network of social organizations committed to education reform. It has also formed the Eco Eye as a result of which they incorporate better ecological balance in every project that they execute. Telecom giant Bharti Airtel Ltd. also emphasizes on its commitment to CSR by organizing material collection drive and blood donation camps for the underpriviledged and helping in the rehabilitation of the Tsunami victims. Other examples include the E-Choupal initiative of ITC Ltd by which internet kiosks were set up in villages to allow farmers access to an efficient and transparent alternative to the traditional mandi for marketing their produce. Then there is the Environment Protection Awareness Programme of Kotak Mahindra Bank and the commitment towards CSR of Maruti Suzuki Ltd and Larsen & Tourbo Ltd. This is not only to claim a larger market share or to win the favour of their targeted customers and emerge as an industrial leader, but also to build a good reputation of the company as a corporate committed to the social cause-giving back to the people who have ultimately helped them scale new heights in the business world. In fact, the contributions that the corporates make to the social cause, also work to their advantage as it increases their goodwill before the public eye and augment their brand value. In reality, these are the real assets to a company which even without featuring in the accounting books of the company, are prized by it. This is because of the economic impact that brands have. They influence the choices of customers, employees, investors and government authorities. In a world of abundant choices, such

influence is crucial for commercial success and creation of shareholder value. Even non-profit organizations have started embracing the brand as a key asset for obtaining donations, sponsorships and volunteers. Goodwill on the other hand reflects the prudent value of the business beyond its assets-the reputation of the firm and how it is perceived by its clients and its peers. Thus, a good brand value and goodwill ensure the sustainability of the firm and secures its place in the market. In this sense the ultimate goal of an organization is not profit maximization, but brand value maximization as profit-earning only helps the company to make its place in the market while brand value helps it to retain that place. As Collins and Porras have rightly commented in Built to Last- "Profitability is a necessary condition for existence and a means to more important ends, but it is not the end in itself for many of the visionary companies. Profit is like oxygen, food, water, and blood for the body; they are not the POINT of life, but without them there is no life."

-by MOUMITA CHATTERJEE