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Although Businesses Have Common Factors, The Objectives Of A Business Are Extremely Variable.

2201 words - 9 pages

Economics Assignment - 2003If one were to ask a general member of the public what a business or a firm is, one is likely to be given an example: WH Smith, Tesco, Leisure Centres, British Gas and so on. All of the aforementioned businesses have common factors, they all provide products in the form of goods or services, for example, books, food, fitness training, utilities etc. some of the products provided by businesses are needed by customers, they are in essence providing necessities, for example, basic food, and clothing. Some businesses on the other hand provided products which customers can be persuaded to want through advertising. For Example, luxury food, fashion clothing, or a holiday etc. A business may therefore be defined as; "an organisation which provides goods or services which satisfy customer needs and wants". (Fardon, Adcock et al, p13, 2000)Although businesses have common factors, the objectives of a business are extremely variable. For Example, firms like WH Smith or Tesco are likely to be most interested in profit gain; their overall business objective is likely to be profit maximisation. Leisure Centres on the other hand, are likely to be more interested in the service, which they are able to offer to the public; therefore Leisure Centres' business objectives are likely to be geared toward social benefit.Alongside profit maximisation and social benefit, there are three further objectives, which a firm may wish to pursue. Namely, Revenue Maximisation, Company Growth, and Utility Maximisation. What follows is a detailed description of each of the aforementioned objectives.PROFIT MAXIMISATIONThe objective of profit maximisation brings with it an imperative question to be considered in great detail; should businesses maximise profits? As we will see in more detail later, businesses have a social responsibility. They need to aim to reduce pollution, improve safety levels, and preserve jobs etc. firms, in the effort to maximise profits, go against many social ethical issues, for example, if materials needed by a firm can be found cheaper abroad, profit maximising firms will by from countries whose political regimes, the UK public may not approve of. (Reekie, Allen, Crook, 1992). It is argued however that in order to pay attention to aspects, such as, pollution levels, and preservation of jobs etc, the firm needs to be financially stable, in other words they need to be making a profit. The importance of profit is just one aspect of the profit maximising position of a firm, which adopts the profit maximising objective. What follows is an illustrative description of calculations and diagrams used within the profit maximising objective.When marginal revenue, the extra total revenue gained by selling one more unit (per time period) equals or exceeds marginal costs, the additional cost of producing one more unit, the profit of the firm has been positive. (Sloman and Sutcliffe, 2001) the above description of how profit is calculated can...

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