Different their products, through ways such as research

Different economic theorieshave claimed that firms will do as much as possible to maximize their profitaccording to Duflo & Karlan, 2012. In 2013, Nekipeloy stated that the”maximisation of economics profit is driving motive of a firm’s activityaccording to the neoclassical theory”, which has been led to profitmaximisation becoming one of the objectives of a firm. Many firms have seenprofit maximization, which is described by Black, Hashimzade and Myles (2017)as an “act of making as much profit as possible for a business”, as a way ofimproving and growing their firm.

Various firms believethat a maximisation of profits would “lead to an economically efficient orwelfare maximising outcome” (Hussain, 2012), and give them an “incentive and areward” (Northrop 2013), these could resulting to an increase in the wealth ofmanagers and other stakeholders of the business, or the business improving thequality of their products, through ways such as research and development, whichcan ultimately increase their customer loyalty. Although firms want tomaximise profit, the owner and the managers may not always have the sameambition to increase profit, this is known as the principal-agent problemwhich, according to The Economist (2012), is defined as “the tendency ofmanagers to run companies to suit their own interests rather than the interestsof their owners or customers”, due to this, profit maximisation may no longerbe the main objective of a firm (Black, Hashimzade and Myles, 2017). Thoughowners may want to maximise profit, managers may want to focus more on improvingthe motivation of the employees.

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In 2008, Delmar and Wiklund stated that a “managers’ growth motivation has a unique influence on firms outcome measured as growthin sales”, which would be beneficial for the business, in the short and longterm. However, the principal agent problem could affect a firm in many ways,one being that it can show a lack of communication between the managers and theowners, and resulting to a lack of information being passed across the firm.This could then reflect negatively on the business and eventually result in areduction in motivation and also profit. However, this problem can besolved with the help of corporate governance and…. According to Saha (2014) firmobjectives “need not be limited to profit maximisation only”, so they shouldfocus on other objectives as well such as the objective of a monopolisticmarket structure.

A monopoly, which Doyle (2016) describes as “anon-competitive market situation in which there is only on seller” not onlywant to make supernormal profit in both short and long run, but also want toincrease their market share so that they can gain monopoly power and act asprice makers and influence the price of the products in their particularmarket. A downside of increasing market share is….Another objective of a firmis to “maximise revenue” (De Donder, Roemer, 2009) unlike profit…There is also some managerialobjectives, such as “utility maximization” (Fort, 2015) which could result inthem increasing thing like their prestige and status. However, managersshouldn’t always assume that maximising their preference satisfaction will alsomaximise the chances of their firms’ chances of survival, reported by Cohen,2013, as it could result in…..Firms have manyresponsibilities other that maximising their profit, such as performing in anethical way, and having a corporate social responsibility, which is seen “as acrucial element to the survival and development of a business” by Martí-Borbolla & Ortiz-Arango (2016). In 2014 the ACCAPR stated thatbehaving ethically, and having corporate social responsibility can benefitfirms in many ways,  one of them beingthat it makes employees want to stay with the business, resulting to areduction in labour turnover and therefore an increase in productivity. Anotheradvantage from the ACCAPR (2014) suggested is that when a firm is ethical, itcan attract investors and keep their share prices high, thereby protecting thebusiness from any takeovers.

Firms shouldn’t always be seton maximising their products, as it could resolve in many problems for thefirm. One of them being that maximising profit may not always help with thegrowth of a business, as it could lead to a business facing a loss due to thefact that they may have to increase the price of the products. If a firmsproducts are price elastic ” a good that is affected by the change in price”,then it could lead to a reduction in the number of new customers and customerloyalty that a firm will have, especially in the future, because customers willend up going to business’ that sell an alternative products at a cheaper price. Figure 1 The Importance of Price Elasticity of Demand (Doyle, 2016)    Figure 1 shows that if prices increase from P2 to P0, thenthe Quantity demanded would decrease from Q2 to Q0, which suggests that even asmall change in the price of an elastic product, would dramatically decreasethe level of the demand. This concept links to another responsibility of afirm, apart from making profit, firms are responsible of meeting the needs ofboth their internal and external stakeholders. Stakeholders are defined as “aperson who has a legitimate or vested interest in the activities of anorganisation” (Heery & Noon 2017). In this case, the customers are thefirms’ external stakeholders, so the firm needs to make sure that theirproducts are what the customers would want.



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