3.1.1 The objectives of firms

• What guides the strategic decisions and overall business performance of firms?

  Objectives of firms
• Profit maximization is achieved when Marginal Cost equals Marginal Revenue
• At what point does a firm maximize its profit?

  $MC =$$MR$
• Revenue maximization involves selling as much as possible at optimal prices.
• Match the firm objective with its example:

  Profit maximisation ↔️ MC = MR</latex>

  Revenue maximisation ↔️ Offering discounts

  Sales maximisation ↔️ Running a promotion

  Market share maximisation ↔️ Innovation and marketing
• What is the goal of sales maximisation?

  Sell the largest quantity
• Market share maximization aims to increase the firm's percentage of the total market.
• What is the primary aim of revenue maximization?

  Maximize total revenue
• Profit maximization focuses on achieving the highest possible profit after accounting for expenses
• What is the primary objective of profit maximization for firms?

  Highest possible profit
• Profit maximization occurs when Marginal Cost equals Marginal Revenue.
• Profit maximization is achieved when Marginal Cost (MC) equals Marginal Revenue
• What are three alternative objectives of firms besides profit maximization?

  Revenue, sales, market share
• Match the alternative objective with its definition and goal:

  Revenue Maximisation ↔️ Max total revenue, higher revenue

  Sales Maximisation ↔️ Max quantity sold, increased sales

  Market Share Maximisation ↔️ Increase market percentage, higher market share
• Revenue maximization aims to maximize total revenue by optimizing sales at specific prices.
• One benefit of revenue maximization is increased market share
• How does revenue maximization differ from profit maximization?

  Focus on total revenue
• A retail store offering discounts to boost sales volume is an example of revenue maximization.
• What is the strategic objective of market share maximization?

  Increase market percentage
• Firms can maximize market share by improving product quality
• Market share maximization focuses on sales volume regardless of immediate profit margins.
• What are the two main growth strategies for firms?

  Organic and inorganic
• Organic growth involves internal expansion through increased sales
• Inorganic growth involves mergers, acquisitions, and strategic alliances.
• Match the growth strategy with its description and advantages:

  Organic Growth ↔️ Internal expansion, controlled growth

  Inorganic Growth ↔️ External expansion, rapid diversification
• What is the primary difference between short-term and long-term objectives?

  Time horizon
• Short-term objectives focus on immediate profit
• Long-term objectives are vital for sustainable growth.
• What does corporate social responsibility (CSR) emphasize for companies?

  Ethical and sustainable operations
• Environmental stewardship is a key aspect of CSR.
• Which company is known for its commitment to sustainability and ethical sourcing?

  Patagonia