Department of Management Studies

JNNCE, Shimoga – 577204 (Karnataka)

Subject: Managerial
Economics

Seminar On
“BEHAVIOURAL THEORIES OF
Under the Guidance of
THE FIRM’’
Presented By
Dr. Santhosha Miss. AISHWRYA JANNU R
Assistant Professor I Semester (JN Section)
Department of Management Studies Department of Management Studies
JNNCE, Shimoga JNNCE, Shimoga

11-12-2018
 Behavioural theory of the firm is a
composition of number of theories that have
emerged with in economics, sociology,
business and management studies
 Behavioural theory deals with the issues of
how firms behave in a market place and what
determines the inter-firm relationships.
 Simon’s satisficing
model
 Cyert and march’s
behavioural theory of
the firm
 According to simon, in an uncertain business
world and coniflicting goals,manegers can
only at satisficing rather than maximising.
 In real world data avilable is regarded as
inaccurate and inadequate.
 The manegment therefore determines a
satisfactory aspiration level on basis of its
experience and judgement about future
uncertainty
 Simon argues that mangers in most cases
have imperfect knowledge and inadequate
information on the basis of which to take
decisions.
 In fact, it perfect knowledge and complete
information were not available, the
calculations involved in the decision making
process would be too complex to be
practicable; and that given this and the other
inevitable uncertainties surrounding the
decision making process.
 In reality, business people can never be
confident wheather they are maximizing
profits or not.
 Instead, business people “satisfice” rather
than maximize, that is there is aim is to earn
just satisfactory profits.
 In analysing the behaviour of the firm, simon
compares the organisational behaviour with
individual behaviour.
 According to him, a firm, like an individual,
has its aspiration level in keeping with its
needs, drives and achievement of goals.
 The firm aspires to achieve a certain
minimum or ‘target’ level of profits.
 Its aspiration level is based on its different
goals such as production, price, sales, profits,
etc., and on its past experience.
 Firms have to incur cost in acquiring information
in present.
 Objectives of the maximizing either profit, or
sales, or growth act as constraints to rational
decision making.
 The firm has to operate under “BOUNDED
RATIONALITY”.
 Can only aim at achieving a satisfactory level of
profit, sales and growth.
 Cyert and march opinion that a large scale
corporate type of firm exists these days.
 They regard the modern business firm as a
complex organisation in which the decision
making process should be analysed in
variables that affect organisational goals,
expectations, and choices.
 They look at the firm as an organisational
coalition of managers, workers, suppliers,
customers, and so on.
 PRODUCTION GOAL
 INVENTORY GOAL
 SALES GOAL
 MARKET-SHARE GOAL
 PROFIT GOAL
 SALES GOAL
It aims at meeting the demand of coalition
members who is connected to salesmen
There success depends on their ability to maintain
and expand the sales

 MARKET - SHARE GOAL

This goal is alternative to the sales goal
and arises from the sales department. It is
interested in the comparative success of the
organisation and its growth.
 PRODUCTION GOAL
According to this goal production
should not fluctuate too much nor fall below
and accepted level.

 INVENTORY GOAL
This goal originated mainly from the
inventory department, represents the demand
of coalition members who are connected with
inventory. It related to output and sales area.
 PROFIT GOAL
This goal is set by top management in
order to satisfy the demands of share holders.
Aspiration level with the respect to the money
amount of profit. This goal is related to pricing
and resource allocation decisions.
 The decision making involves a complex
group or organisation.
 It consist of various individuals whose
interest may conflict with each other
 The group is called oragnisational coalition
and includes managers, stock holders,
workers, consumers, and so on
 All the individuals participate in setting the
goals of an organisation