Maximizing Profits as the Main Goal Essay -- Economics Business Manage

Maximizing Profits as the Main GoalThe traditional surmisal (neoclassical) trains that blind drunks primaryobjective is to maximize profits. That is if the firm is possessor concealled. This assertion is based on that firms checks the outputand price decisions. Also, that firm takes completely necessary actions toearn the greatest profit possible. The managerial theory assumes firmsdo not necessarily act in order to maximize profits. The canonic tenetbehind this is the separation of ownership from management, complexityof the organisation and the firms manager maximizes his own utilityand growth rather than profits. The flat coat for this is that managers may be judged by the level of sales receipts. I get out be providingsupporting arguments for and against this confidence that the firmsmain indigence is to maximise profits and draw a conclusion byanalysing the firms conduct as well as further discussing thetheories of firms.Profit maximising assumption is based on two premises, firstly thatowner is in control of day-to-day management of the firm and secondlythat the main desire of owners is to make a higher profit then theamount they invested in the firm. Since this assumption is based ontwo assumptions, therefore if these two premises breakt hold is itunderstandable to believe that firms goals is not to maximize profits.Well, this provide depend on the motivation of individual firms.If a firms ownership and control are in the hands of a maven personor small groups of people, then its reasonable to assume that thefirms owners goal is to maximize profits. But most of at presents firmsare owned by shareholders and other large cooperation, notwithstanding day-to-daycontrol of the firm is under management. Therefore, the objectives ofmanagements may differ from the shareholders and conflicts may arise.For physical exertion Baumal (1959) suggest that the manager-controlled firm islikely to give way sales revenue maximization, as its main goal t hanprofit maximization favoured by shareholders (Applied economic science 7thed. p54). Also, studies of 177 firms between 1985 and 1990 by Conyonand Gregg (1994) found that the pay of enlighten administrator of large firms inUK was mostly related to sales growth.Other studies have found that profit was the most importantdeterminant of executive income. For example A survey by ManagementToday in 1990 asse... ..., argued that unheeding of how actual firms may behave and constraints on rationality they may be subject to, the survivingfirms are those who attained high profits. Due to the potency ofthese arguments, we tend to accept profits maximization theories arejustifiable.BibliographyAlchian, A (1950), Uncertaintity. Evolution, and stinting Theory,Journal Of Political Economy. 58(3), 211-221.Buzzel, R, & Gale, B. (1987). The PIMPS Priciples, Strategic PlanningInsitute.Conyon, M & Gregg, P. (1994). pay back at the top a study of thesensitivity of top film director remuneratio n to company specific shocks,National Institute Economic Review, August.Friedman, Milton (1953), establish in Positive Economics, Chicago ChicagoUniversity Press.Griffith, Alan & Wall, Stuart (1997). Applied Economics An antecedent Course. 7th Ed.Lipsey & Chrystal (1999). Priciples of Economics. 9th Ed.Marris, R. (1964) The Economic Theory of Managerial Italism,Macmillan.Sloman, J (2003).Economics. prentice Hall. 5th edWilliam, K. Objectives. Can be found onhttp//william-king.www.drexel.edu/top/prin/txt/MPch/firm2.html.Accessed 4th of February 2005.