THE FIRM

ROLE OF THE FIRM IN THE

SOCIETY

To marshal the resources of capital and labor

Allocate the scarce resources to competing
activities
Direct the transformation process so that useful
goods and services are produced
Distribute the products to members of society in
the market place
 The firm is rewarded with the profit that it
seeks when it effectively serves societys
desires for goods and services.
Reward-profit drives economic system for
the benefit of all
Employment
Payment of taxes
Allocate resources in an efficient manner
 Firms must make decisions with regard to
volume, price, quality and timely
production to meet consumers tastes and
preferences that often change.
Firms may not always have the information
that they need in decision making but
nevertheless must operate despite
uncertainties.
 Objectives of a firm
Desired outcomes from individuals, groups and
organizations
Broad goals or strategies which the organization
seeks to adopt in order to achieve its primary aims
The specific intended outcomes of organizational
strategy
 Importance of objectives
Objectives are clear statements of what needs to
be achieved.
Objectives focus on all the target groups and
individuals.
Objectives are the means of measuring
performance. Finally, objectives guide all the
actions undertaken by the firm.
 Profit maximization
Profit maximization is sometimes considered as
the guiding principal of a firm. Profit
maximization is the highest difference between
total revenue and total costs of a firm. Every for-
profit firm tries to maximize this difference
because it is important for achieving growth and
long-term sustainability of the firm.
 Sales maximization
This objective is sometimes considered as
an alternative to profit maximization in
many firms. To fulfill this objective, firms
tries to increase their sales volumes through
advertising, providing better quality
producFts & services and customer
services.
 Utility maximization
Since the resources and capabilities of a
firm are limited, it cannot provide all
maximum services to all these stakeholders.
But the firm should consider the needs of all
these stakeholders and try to meet them in
the best possible way to maximize the
utility of the stakeholders.
 Growth maximization
Forms pursue no single but multiple goals
such as sales maximization, utility
maximization etc. but among these
objective, managers keep the prime
objective to achieve the top level or the
highest possible level of growth in output.