Hello, welcome back. In this video, we're going to be discussing business  objectives. Okay, different business objectives. Corporations have different  motives for how they strategically plan profit maximization is one where  corporations look to maximize profit. They want to make sure that marginal cost  equals marginal revenue. Anything above what is budgeted or forecast is known as marginal. So we look to increase marginal revenue and marginal cost to  make sure that the profit, the revenue that we're bringing in increases our profit  maximization. That's what this objective does. Sales revenue maximization, we  want to potentially brand our company, get the marketing out there, saturate the  market with our branding and our marketing in order to boost our sales revenue, potentially we could cut prices, or maybe reduce our costs, right, to reduce our  prices, so that we can maximize sales revenue, undercut the competition in  pricing, therefore selling more units, potentially driving higher sales revenue  business growth. You want to take market share and continue to grow your  business, expand it, and as this happens, you will be able to reinvest more into  your business. Therefore, hopefully taking a greater portion of the market share,  so a potential or a total sales figure as a percentage of your entire industry will  equal your market share. So, a percentage of total sales in your industry,  whatever you capture there, is your market share. So, you want to take more  market share, a lot of times this happens in infant stages or startup stages,  right? You go through the business life cycle, and as you grow, you continue to  take more market share, hopefully being able to dominate your space. Business  survival, a lot of times firms get in trouble, they over leverage, which means they take on too much debt. They take on too much debt, they have to spend a lot of  their free cash flow to pay down that debt, right. So then they become very  defensive and become in a survival situation, because their free cash flow is  going to pay down debt, and then they're not able to pay out shareholders as  much as far as dividends are concerned, or reinvest into their business and  grow it, so they turn defensive, and they kind of shift into a survival mode, so to  speak, so not for profit, right, their business objectives is to serve the  community, right. They want to make sure that services and goods are provided  at a cheap cost that are beneficial to consumers, like CLI, offering free high quality ministry training, also the business enterprise for free. So it's a net  positive win-win for all the consumers involved, for that, so great example of  nonprofit objectives, public sector, state-owned businesses. Right, you see a lot  of utilities are state owned, things of that nature, so they are there to maybe  make sure that prices don't get out of control and make sure that those sectors  are regulated to ensure that consumers are protected, so let's look at the  example of profitability in the world airline industry. So, the most profitable  airlines in the world in 2014 net profit in billions of US dollars, right? American  Airlines 2.9 billion, United Arab Emirates 1.5 Japan Airlines 1.3 and so on,  Southwest 1.1 Air China 0.7 and this is in US dollars, right? So you can see that 

the net profit of commercial airline worldwide has been very volatile, particularly  in 2008 and 2009 Obviously, we were going through turbulent time in American  economy, worldwide economy was very shaken in 2009 with the financial  collapse, so obviously there wasn't a lot of airline travel, but it has recovered  well, and in 2015 it was obviously the most profitable it's been in over 10 years,  so it really probably went into defense mode in 2008 They didn't have a lot of  free cash flow, right? They were probably having to leverage up to maintain  operations, burn through whatever free cash that they might have, instead of  distribute. That back to investors, right. So we saw a recovery in 2009 and then  a slow incremental recovery through 2015 which it finally broke out. So you can  kind of see how different times in the economic cycle, how those positions will  shift as far as business executives are concerned, so here we'll talk about  market share, right? Market share for handsets, as far as cell phones are  concerned. So we want to look at the manufacturers in UK in June 2014 right?  So you can see the dominant player at this time in the mobile handset space  Samsung dominated at 31.8 with Apple at 22.9 Well, in 2018 I think that this  probable market share has probably reversed, right? Apple's overtaken  Samsung, and then we've got Nokia, Sony, HTC, all battling it out for the bottom  rung of market share, so you've seen Apple really aggressively change their  iPhones, you've seen how they've kind of adopted the Samsung model with  bigger screens and a higher quality phone, better protection cybersecurity wise,  then the Samsung, so you can see how Apple innovated and took market share  from Samsung, and is now the leader in that space. So some reasons for  different objectives, managerial objectives, revenue or sales growth, instead of  profit maximization, right? Maybe profit, profit maximization is down the line for  them somewhere, right? So they really need to grow their revenues, they really  need to grow their sales, so they're going to increase cost during this time, but  they may be able to take that investment, turn it into a return later down the line  through greater profit margin. Okay, achieve a satisfactory profit or return for  shareholders, right? So now they've now they've gained their profits, right now  we're able to reinvest or return the dividends back to the shareholders. So  information failures, bounded rationality, lack of accurate information on  marginal costs and revenue. So maybe we aren't reporting accurately, maybe  there's a breakdown or failure in how our metrics are being broadcast across the firm, so we may not have the right information, so we may not be able to  maximize our profit potential through marginal cost and revenue, and they may  not equal, therefore that is not maximized cost plus pricing. Okay, variable profit  is a common tactic, right? So they want to make sure that we have the average  cost plus they're going to price in the variable profit, right? So that way we're  going to give them a base price plus the profit baked into the price, so therefore  we're maximizing our profit potential through breaking in that variable profit  margin, and if marginal cost and marginal revenue are equal, that variable profit 

will be maximized. Many small firms are lifestyle businesses for owners, so  we've got small businesses, startups, right? So it's a sole proprietorship. I have  full control, but I have full risk, right? And I run my life based around this  particular business, whatever it may be. So that is kind of what I do. This is my  sole proprietorship. This is I'm the single owner, I'm the manager, I have a few  employees, and that's a lifestyle business. State-owned corporations, state  owned corporations are likely to have a range of different economic, social and  political objectives to serve the consumer, to look over the welfare for the  citizens, so state owned corporations will try to allocate resources most  effectively to ensure that citizens are provided for, so reasons for sales revenue  maximization. The objective of maximizing sales revenue rather than profits was developed by economist William Baumol, whose work focused on the decisions  of manager-controlled businesses, his research found that annual salary,  salaries, and perks were more closely linked to sales revenue than operating  profits. Companies geared toward maximizing revenue are likely to make  frequent use of price discrimination to extract extra revenue and marginal profit  from consumers, so we can go back to adding in the variable profit to the  average cost, and we can bake in that cost through, and this is known as price  discrimination, so we can extract the revenue and the marginal profit from  consumers through price discrimination. Right, a business might also aim to  maximize sales revenue rather than profits to deter the entry of new rivals into  an industry. Right, so maximize sales instead of profits. You want to dominate  the space, take as much sales revenue, as much market share as you can,  right. And then they can see that you're the dominant player, and that may deter  new entrants from entering your market, right. And maybe taking share away  from you, so that you can prove to the market that you have it essentially  dominated. You may deter them right, so they don't want to compete with you. If  a firm decides to aim to maximize sales revenue rather than profits, one  consequence can be a reduction in the value of the firm's shares, since the rate  of profits are likely to be lower. So investors and shareholders, they want profit  maximization because they want to have that free cash flow return back to them  through dividends, right? So they want to maximize profit, so that can be added  to the bottom line on owner's equity, and then distributed back through, and as  far as dividends, so through dividends they can, you know, so investors  obviously want them to have greater profit because they'll have free, greater free cash flow, so they can return that dividend. Number of worldwide active Amazon customer accounts from 1997 to 2014 Now you can see the exponential growth  over that 17 year period, and it's continuing to grow exponential today as they  are becoming a major conglomerate across all industries, essentially. So they're  trying to take share and a lot of diversified industries in order to grow revenues,  grow profit, and also spread out risk from any one industry. Right, so Amazon is  one of the biggest e-tailers in the world, with a global reach and scope. Amazon 

is an international e-cursed company, e-commerce company offering online  retail computing services, consumer electronics, digital content, as well as other  local services, such as daily deals and groceries. So, just kind of a recap of who  Amazon is, so you can see how their accounts have grown, right? So, that has  translated into billions and billions and billions of dollars in sales revenue, right,  and Amazon does a very good job of staying lean and controlling their costs, so  their marginal cost and marginal revenue are very close to equilibrium. I would  say as much as you possibly can be. They have some really great management. So, here are the different ranges of the range of business objectives, so let's  look at profit maximization, right, maximizing revenue, sales growth, market  power, right, social aims. How are they going to help the welfare of the  community, reputation, right? They want to improve the reputation with the  community, business survival, we talked about being defensive, improve cash  flow, right. We want to maximize profitability, right. So, therefore, we'll have more cash to either reinvest in the business, pay down debt, or distribute back to  shareholders. Different managerial aims, there may be different goals for  different managers, right, so they have different conflicts on how to run the  business, but hopefully they can come to a resolution increasing returns on  equity, right? So they want to make sure that they are getting the most out of  their dollar in their operation. Okay, so these are just different business  objectives. So most commercial businesses are profit-seeking, but they are not  profit maximizers. Okay, satisfying is the, is probably the most common  approach that businesses take across markets. Objectives affect the conduct of  firms in markets, and this affects outcomes in terms of economic efficiency,  actual and potential threats from commercial rivals is important in the behavior  of businesses in real-world contestable imperfect markets. Increasingly, firms  are given more emphasis to social value, as well as to narrow measures of  shareholder return, businesses have social dimension, so all of these things  overall, they companies are looking to implement their strategy to meet their  goals, meet their objectives, right, whatever those different objectives may be,  right, so overall, those aims are going to be the driver for the outlook of the  company, and what they look to move forward with in the future, and how they  will continue to compete in the market. So, again, the key concepts we'll run  through them. Profit maximization: profits are maximized at an output where  marginal cost equals marginal revenue. Revenues are maximized at an output  where marginal revenue equals zero, producing the largest amount possible,  consistent with earning normal profits. Is sales maximization is satisficing,  satisficing involves the owners of a business, shareholders setting minimum  acceptable levels of achievement in terms of revenue and profit. Businesses  with profits reinvested for social aims, profit people in the planet are social  enterprises.



Last modified: Monday, July 13, 2026, 8:28 AM