OBJECTIVES, COSTS & REVENUES: The Objectives of Firms
'Objectives, Costs & Revenues' Section Next Topic
What you need to know...
- You should understand that the models that comprise the traditional theory of the firm are based upon the assumption that firms aim to maximise profits.
- You need to understand the MR=MC profit maximising rule.
- You should also understand the satisficing principle and know that firms have a variety of other possible objectives.
- Firms moving away from targeting profit maximisation #1
- Firms moving away from targeting profit maximisation #2
- Departing from the objective of pure profit maximisation
The objectives of businesses
Whilst in theory firms will target profit maximisation, in reality firms pursue alternative objectives. Tutor2u provides some useful notes and diagrams to help explain the profit maximising rule and the reasons why firms may depart from profit maximisation.
The Body Shop: Alternative Objectives
The Body Shop represents one example of a firm which has objectives based on their strong beliefs on how the environment and the people in the supply chain should be treated.
Can you find another company with a more ethically and socially responsible outlook on their operational objectives?