Question

The stakeholders of a business have conflicting interests resulting in several different business objectives. Discuss the various objectives a firm may have, using illustrations and empirical evidence or case evidence where appropriate.

Answer 1

Now shareholders and manager of business are same persons. Managers and workers are hired by firm to accomplish objective of firms, but the over the period of time, varied objectives of firm have emerged:

• Profit maximization: Each and every firm seeks to maximize its profits.
• Sales maximization: Managers in firm always try to maximize the sale of product. Managers are not concerned about the profits of firm. There is conflict between the objective of shareholders and objectives of managers.
• Environmental protection: Many firms pay significant resources and means to protect environment against any kind of degradation.
• Profit satisficing : firm needs only minimum level of profit.

To sum up, there might be varied objectives of firms in short run but over the long run, every firm has one objective that is profit maximization.