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Governing business activity - Essay Example

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Governing business activity

A firm is an arrangement of individuals, resources – both physical, as well as financial and a great deal of information. They exist to carry out various constructive tasks in the society, through production and distribution of goods and services. These tasks are accomplished by utilizing society’s resources such as land, labor, capital and providing adequate profits for the work done, in return (Hirschey, 2009).
Smaller firms are usually managed by a single owner, who is in charge of all the key decisions made and hence are more likely to dominate the decisions in their favor, by taking decisions which are profitable to them. Thus, both the short term as well as long term goals of a smaller firm could be profit maximization alone. Larger firms on the other hand, are owned by the shareholders but managed by "business managers" who are in charge of all key decision making within the company. Thus, as compared to smaller firms, the larger firms may deviate from the conventional profit maximization objective, to pursue other equally important goals such as sustainable development, improving quality of their products, environmental protection etc. which are in the larger interest of the society as a whole. However, such goals are merely short term objectives, as objectives other than profit maximization may serve the community at large, but it does not help the firm in sustaining its competitive positioning in the industry. Furthermore, under the Corporate Social Responsibility agenda, which has recently gained widespread popularity and acceptance, it is considered obligatory for firms, to contribute towards development of the society as a whole rather than pursuing their selfish motives of earning profits. But according to Sternberg (2000, Pp. 41):
“The Social Responsibility of any business is to increase its Profits. For any ...Show more

Summary

The assumption that profit maximization is the ultimate objective of all organizations has been frequently debated by scholars and academics alike partly because it’s accurate analyze would help the economists in understanding the behavior of firms i.e., what factors motivate…
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Governing business activity essay example
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