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Business Objectives

By messi21 Sep 22, 2010 744 Words
Relevance and implication of business objectives models in terms of Nepalese enterprise. Ans: In much of economic theory, it is assumed that a business aims to maximise profits.In reality, most businesses which are run for “commercial gain” do have profit maximisation as an important objective – since the shareholders have taken a risk investing in the business and require a return (profit) to compensate them for their risk. Profit maximization is the process by which a firm determines the price and out put level that returns the greatest profit. In the context of nepalese enterprises , most of the firm aim for profit maximization model.most of the business are profit oriented business try to maximise profit are the business who enjoy monopoly market. Nepal lever limited, Nepal telecom are few business who follow profit maximisation model. They tend to increase their profit by increase the price of the product rather than increasing the sales whenver there is increase in cost of production. Sales maximisation theory This model argues that businesses try to maximise sales or revenues rather than profits. There are several possible motives for such an objective ,they are * Grow or sustain market share

* Ensure survival
* Discourage competition specially new entrants
* Cover larger market
In the context of Nepal, sales maximisation model is followed by the business which has stiff competition in the market.coco-cola and pepsi-cola ,they both are two big companies which sells similar kind of product and has similar product price. So these company try to maximise sells to earn profit . they tend to cover huge market and try beat their competitor interms of sales. Olive Williamson’s model of managerial discretion In this model, Williamson argues that management act to further their own interests – in other words to achieve personal utility rather than to meet the interests of outside investors. Businesses run with this kind of objectives tend to deliver high levels of remuneration to management rather than the highest possible profits. In this model williamson argues that the most important motives of businessmen are desires for salary,security,dominance, and professional excellence. This can be gained by additional values of expenditure on staff, managerial emoluments and discreationary investement. He also stated that all these factors provide additional utility which managers aim to maximise. In the context of nepal managerial discretion models is used in the most of the big business like banking business, Gorkha brewery etc. in the banking business ,Bank,and most of the private company managers work in favor of maximizing their utility for the effective performance, which maximizes the profitability of the organization. The big private and public company’s managers demand bigger power, job security,social status and these factor plays and important role for company’s performance and their individual performance Satisficing model plays least impact managerial decision making. It is the traditional way of thinking about how firms operate. In satisficing model the firm wants to maximize the sales with deliberate level of profit.Satisficing behavior involves the owners setting minimum acceptable levels of achievement in terms of business revenue and profit. In Nepal ,small or medium scale business owned by individual or partnership firm tend to apply satisficing model. Mostly they make some profit constraint based on their aspiration and if the profit level goes below that constraint they rather minimize the sales or stop producing the product since these sort of business lack huge capital and their target market is mostly very limited or less .managers or owners are staisfied to follow certain pattern and tend to stick to that satisfactory level. Cyert and March’s Behavioral theory argue that a behavioral theory of the firm requires attention to organizational goals, expectations, choice, and control. Only through these characteristics can one truly understand how firms function. Their sub theory on organizational goals focuses on how coalitions of individuals bargain to determine the goals of the greater organization. While the goals of individuals within a coalition may be disparate, so long as the resources available are greater than the demands of the members, the coalition, and thus the organization, will be feasible. The organisational slack gives caution in difficult times.behavioural theory are better suited to the problem dealing with the individual firm and those requires numerical results.We can take an example of banks where bonus shares and additional dividends provided by banks as well are based on this very model of managerial decision in business organizations.

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