Assumption of profit maximization is a powerful driving force for many organizations

Usually the aim of all organisations and their purpose of existence are to maximize profits unless it is a non-profit organisation. Every company and organisation wants to run on a profitable basis so as to get maximum advantage. The main objective of the business is profit maximization. The managers too need to have a clear objective to follow, that is, they should be aware of the purpose of the company and what they have to do in order to achieve it successfully. The object of profit maximization is quite clear and is clearly related to all the managers so that they have a clear prospective of the company’s goals. When explained what managers need to do in order to gain the objective of the company, managers are more active and hard working which is why the objectives should be made clear to them in order for them to be followed correctly and precisely or in other words managers should know the goal or purpose which they are working towards. At the same time profit maximization is a single over-riding objective in corporations since it is the sole reason for the existence of corporations. These profits have to be divided among the directors and shareholders which is the reason why maximum profits need to be attained so that each person, that is, the shareholders and directors, gets a healthy share or amount of the profit. The corporation runs and undergoes daily transactions on a day to day basis so as to achieve their objective successfully and in order to make sure the managers are on their toes for making the company a success. If the objective is not made clear to them or if profit maximization is not given so much importance then the managers might take the business very lightly and might not make as many efforts as they re capable of making.bas

The objective of profit maximization is the sort of objective that can be measured. It can be measured in terms of the success of the corporation as well as in monetary terms. Shareholders can keep track of monetary gains or the levels of profit that the corporation has made through records as well as performance charts etc. They can keep check of the amount that has been paid to the directors and the amount that has been given to them and can thus measure profits. Managers can be held to account by shareholders, that is, if there is any problem which is evident in the business or if the objective of profit maximization is not being achieved properly and by full efficiency then the managers would be answerable to the shareholders since the shareholders being the investors have the right of knowing the on goings of the corporation. There is also an assumption where it is believed that profit maximization leads to efficient allocation of resources. This is quite true and it means that when the objective of the corporation is to increase profits, the resources are allocated more efficiently and effectively, that is, resources such as labour can be used to its full extent and can be put to use in the right areas and at the right positions. Other resources such as raw material or capital can also be put to effective use. Investments are used more appropriately and carefully while each and every resource is used to its full abilities and its full capabilities. Furthermore it is concluded that profit maximization is still a powerful driving force in an organisation since it gives a clear objective to managers and helps in the efficient allocation of resources.

Authors Websites :

About the Author
Disclaimer: The services provided are meant to assist the buyer by providing a guideline and the product provided is intended to be used for research or study purposes.