**2015 ECONOMICSB** 1.1.1 Business Objectives

Theme 1 Markets, Consumers and Firms

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  • Created by: RosyKid
  • Created on: 25-03-16 23:42
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  • BUSINESS OBJECTIVES 1.1.2
    • Profit Maximisation
      • A firm profit maximises when they are operating at the price and output which gains the greatest proft
      • Firms aim to maximise profits
        • Profit = Total Revenue - Total Costs
          • profit is the reward an entrepreneur yield when they take risks
      • "Profit is the financial return or reward that entrepreneurs aim to achieve to reflect the risk that they take"
      • Some firms may decide to profit maximise in the long term, since consumer don't like rapid price changes
        • Private Limited Companies (PLC's) are keen to profit maximise because if they don't reach financial targets they could lose shareholders
          • So, they are more likely to have short run profit maximisation because they need to continuously keep shareholders happy
    • Sales Maximisation
      • When the firms aims to sell as much as possible without making a loss
      • Not- for-profit organisation, such as charities, may aim to work at this level
      • Popular in competitive markets also
        • because some firms want to achieve rapid market growth
    • Satisficing
      • When a firm does not seek maximum profit or sales but achieves a good enough level of profit that ensures survival without stress or worry
        • and enough profit to keep shareholders happy
    • OTHER Objectives
      • Survival
        • Short Term objective:
          • Most likely for a small business or a new business entering the market
          • Or for the firms in the market at a time of crisis e.g. recession
      • Cost Efficiency
        • Can be a firms main objective
        • Essential for firms in competitive markets, cost efficiency ensures they aren't competed out of the market
        • The more efficient a firm is, the lower the average costs
          • Gives firms a competitive advantage
            • because they can afford to charge lower prices and therefore, compete against rivals
      • Employee Welfare
        • Ensures making sure pay and conditions are good
        • Employee Loyalty
          • Therefore, Employees are less likely to leave
        • Happier employees = more motivated employees = increased production and quality
      • Social Objetives
        • relates to Corporate Social Responsibility (CSR)
        • Important when the business aims to create benefits for the society and local area by pursuing social, environmental or ethical goals

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