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Profit Maximization College - Essay Example

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Profit Maximization College

As it is visible from the hierarchical structure that there is a person at the top, e.g. CEO or President followed by department managers, and assistant managers and so on till the floor worker, for example, in the organization; the organizational objectives are formulated by the person at the top and based on these organizational objectives (that are generally long term in nature), the short term ones are derived ensuring that they are aligned with the organizational objectives and by no means violated the same3,4.
Traditionally, there has been just one basic organizational objectives i.e. making profit and it was considered the sole reason for the existence of an organization. Accordingly, it was also considered that it is the objective of profit that derives other objectives that are considered frontrunners by many organization; objectives such as growth, survival, market share, etc. were all considered derivatives of profits. Thus, organizations were considered profit making or maximizing machines5.
Off late, the thoughts have changed radically; mainly factors such as increasing customer awareness and globalization impact have led organizations to stress lesser on profits and more on other variables such as customer satisfaction, and so on. It can be said that things have turned around; as profit drove variables, now variables drive profits. For example, increasing market share or customer satisfaction or supply chain relations, etc. have mainly been the drivers of profit of late6. Following is the brief explanation of why profits are no more the area under highlight; there has been less stress on profit maximization and its popularity has declined amongst the most common objectives for organization today:

1. More Attraction towards Stability of Profits
Profit maximization has been an attractive phenomenon amongst the stakeholders, particularly the investors. But lately, the investors have realized the worth of stable profits, rather than having big time highs and lows. Following the same, they have laid more stress towards stabilization rather than hi-low-growth-patterns; considering the same, investors have been taking out money from many of the instable companies and investments of late have increased to more stable global firms such as Toyota and Nissan because of the charm and attraction in stability of profits7. This is a major reason why organizations are moreover stressing these days on stable profits rather than profit maximization to ensure the investor trust and inflows of investment. Profit maximization can prove to be risky; of course lesser risk implies lesser gain but ensuring that the profit position is maintained is essentiality in itself today8.

2. Long term Supply Chain Relationship Management
Previously, the trend has been towards selecting the suppliers with reduced pricing in order to ensure that the cost of input is lower, thus, accordingly, the cost of output is on the lower side as well. Now times have changed; now more stress is being paid on the supply chain relations in order to ensure loyalty in the supply chain and no compromises on the quality of the output that is being circulated. Even if it costs on the higher side, supply chain management ensures that there is a binding force, a relationship, between customer and the vendor, which ...Show more

Summary

An organization can be considered a group of individuals working together to achieve a common goal; the group size may be very large. However, the size is not of much relevance because of the fact that each individual performs his or her assigned task to ensure that the ultimate goal i.e…
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Profit Maximization College Essay essay example
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