Profit as a business objective.
Profit as a business objective.
Profit is the financial benefit or the value that you realize when your earnings from a business exceed the costs and expenses incurred to run that business. Profit belongs to the owners of the business, and thus, the owners get to decide whether the profit should be re-invested or distributed among themselves. Profit is the reward one gets for taking risks in the business. Let's see how Profit acts as a business objective.
Having a single business objective is no more the market scenario of a business world. Because of the dynamic nature of the business environment, there has been rapid development in business standards in the modern world. That's why business enterprises pursue multiple objectives rather than a single objective, one of them being the Profit motive.
People say, and we believe, that private enterprises are primarily motivated by the objective of profit. It's absolutely correct.
People also say that all other objectives are secondary or facilitative objectives and are meant to be auxiliary to the profit motive. We do not believe them, because we know profit alone cannot remain primary objective in long run. Other factors start kicking in after the business reaches a certain level of growth in the market.
Profit is the bloodline of the entity.
Yes.
But that doesn't mean profit alone is sufficient. Because after a certain level of growth, an entity starts to focus on sustaining rather than immediate returns, and thus pursues other objectives such as survival, stability, growth and like. These objectives also change with the changes in the environment.
We will talk about these factors in the next ripple.
What basically happens is that organisations monitor the changes in the environment, analyse their impact on their own goals and activities and translate their assessment in terms of specific strategies. In general, all organizations aim for optimum utilization of resources and economy in operational costs.
In the market, because of the cut throat competition, the businesses may not be able to make enough profits to sustain their business since they have to cut off other entities to sustain themselves. But if the entities tend to grow the market range, they can create value for the entity without cutting off each other and effectively contributing to the growth of the economy at the same time.
That's something to think about.
So, if profit alone is not sufficient, what are the other factors that need to be considered. Take a look at the next article for the factors that need to be considered by the business in the long run vis a vis profit motive.
What do you think about this ripple? Let me know in the comments.
Thank You!
