OBJECTIVES OF BUSINESS FIRM

1. MAXIMIZATION OF SALES REVENUE 2. MAXIMIZATION OF THE FIRMS GROWTH RATE

3. MAXIMIZATION OF MANAGERS UTILITY FUNCTION 4. SATISFICING BEHAVIOUR

5. LONG-RUN SURVIVAL OF THE FIRM 6. ENTRY PREVENTION AND RISK AVOIDANCE

SALES REVENUE MAXIMIZATION

1. Salary and other earnings of managers are more

closely related to sales revenue than profits

2. Banks and financial corporations look at sales

revenue while financing the corporation

3. Trends in sales revenue is a readily available

indicator of the performance of the firm

4. Increasing the sales revenue enhances the

prestige of the managers while profits go to the owners

5. managers find profit maximization a difficult job to perform consistently over time and at the same level 6. Growing sales strengthen competitive spirit of the firm in the market and vice versa

MAXIMIZATION OF FIRMS GROWTH RATE GROWTH

Growth rate of demand for firms products

Growth rate of capital supply to the firm

BALANCED GROWTH RATE

Leads To

Managers Utility Function

Salary Power Job Security Prestige Status

Ownerss Utility Function

Output Capital Market Share Profit Public Esteem

MAXIMIZATION OF MANAGERS UTILITY FUNCTION

Non-quantifiable variables Prestige Power Status Job Security Professional excellence Quantifiable variables Salary Slack Earnings

SATISFICING BEHAVIOUR
SHAREHOLDERS MANAGERS WORKERS INPUT SUPPLIERS

FIRM

Satisfies the expectations of

CUSTOMERS
BANKERS TAX AUTHORITIES

LONG RUN SURVIVAL

The primary goal of a firm is long run survival and maximize its profits in the long run

ENTRY PREVENTION AND RISK AVOIDANCE

1. Profit maximization in the long run Motive Behind Entry Prevention

2. Securing a constant market share

3. Avoidance of risk caused by unpredictable behaviour of new firms

OPERATIONAL GOALS

PRODUCTION GOALS SALES GOAL

INVENTORY GOALS MARKET SHARE GOALS

PRODUCTION GOALS