Course name: Corporate Finance

Course code: 7202

Date of submission: 10/08/2014

Submitted to:

Santi Narayan Ghosh

Professor

Department of Accounting & Information Systems

Faculty of Business Studies

University of Dhaka

Submitted by:

A. B. M. Abdullah

Department of Accounting & Information Systems,

MBA 16th

Batch, Section – C

ID-16010

Serial No-03

Letter of Transmittal

Department of Accounting & Information Systems

University of Dhaka

August 10, 2014

Santi Narayan Ghosh

Professor

Dept. of Accounting & Information Systems

University of Dhaka

Subject: Submission of final term-paper

Dear Sir,

I am delighted to submit my term-paper on ‘Objective of the Firm’. This paper has been

prepared according to your authorization. To prepare this paper, I have gone through many

articles, reports, journals and research papers for collecting necessary information.

I am thankful to you for assigning me for preparing such a paper that will increase my

knowledge in different areas of business.

Sincerely Yours,

A. B. M. Abdullah

Serial-03

ID-16010

Table of Contents

Contents Page Number

Acknowledgement 01

Executive Summary 01

Introduction 02

Literature Review 03

PART 1 Objectives of the Firm: Fundamentals & Nature 05 - 09

1.1 Meaning of firm 05

1.2 Objectives of a firm 05

1.3 Importance of objectives 05

1.4 SMART objectives 06

1.5 Direct and indirect benefits of SMART objectives 07

1.6 Factors influencing the formulation of firm’s objectives 07

1.7 Hierarchy of objectives in a firm 08

PART 2 Objectives of the Firm: Operational, Time-based & Others 10 - 14

2.1 Operational objectives 11

2.2 Time-based objectives 12

2.3 Other objectives 13

PART 3 Objectives of the Firm: Major Areas 15 - 21

3.1 Economic objectives 16

3.2 Social objectives 17

3.3 Human objectives 19

3.4 National objectives 20

Conclusion 22

Bibliography 23

1

Acknowledgement

Firstly, I give my thanks to the Almighty Allah for giving me patience and capability of

collecting information. I am heartily grateful to my instructor Prof. Santi Narayan Ghosh whose

encouragement, guidance and support from the initial to the final level enabled me to complete

this paper. I would like to extend my thanks to all those writers, researchers, journalists and

bloggers whose works provide me with all the necessary information.

Executive Summary

The term ‘Firm’ includes any organization or association of people which have legal operations

in a locality or in a country. These firms are fundamentally those entities which serve the

economic objectives of a group of people. But besides the economic objectives these firms have

to serve some other objectives also.

Firms have different objectives at different level of organizational settings, for example-top level

objectives, divisional objectives, departmental objectives and individual employee objectives.

All these objectives are important for the survival and growth of a firm. Again, all these

objectives are influenced by some social, economic, legal, cultural, national and international

factors.

As being economic entities, firms have three broad categories of objectives- (1) Operational

objectives (for example- profit maximization, sales maximization, utility maximization, growth

maximization, personal welfare maximization, social welfare maximization etc.), (2) Time-based

objectives (for example- long-term objectives, medium-term objectives and short-term

objectives) and (3) Other objectives (for example- qualitative objectives, strategic objectives,

ethical objectives, CSR objectives etc.).

Again, a firm has to deal with a lot of stakeholders. As a result, it has to fulfill its objectives in

different areas especially in four areas, for example- (1) Economic objectives (for example-

earning profit, creating customers, innovations etc.), (2) Social objectives (for example-

supplying desirable goods at reasonable prices, providing fair remuneration to the employees,

ensuring good working conditions, employment generation, fair returns to the investors, social

welfare etc.), (3) Human objectives (for example- worker welfare, developing human resources,

participative management, worker-management co-operation etc.) and (4) National objectives

2

(for example- optimum utilization of resources, national self-reliance, development of small

scale industries, development of backward areas etc.).

Thus, the objectives of a firm can be determined from different point of views. But there is no

doubt that a firm must be sincere in discharging all these objectives for long-time survival,

growth and prosperity. If any firm does the otherwise for short-term gains, it will face very

unfavorable outcomes in future.

Introduction

Background: Today’s world is rapidly advancing. As a result, the economic activities of people

are also increasing on a large scale. In this situation, firms (mainly the business organizations

and associations) are the main center of all these economic activities. Traditionally the main

objective of a firm was to maximize its profits. But now-a-days, this traditional motive of firms

is changing and firms are becoming more welfare-oriented. Firms are now required to fulfill their

social, humanitarian, national and many other objectives for long-term survival. In fact, the

changing demands of people, public awareness, human right concerns, environmental concerns

have jointly made the firms change their motives.

Purposes: The purposes of this paper are to:-

Define ‘firm’ and its objectives.

Describe the importance, levels and nature of firm’s objectives.

Discuss the operational, time-based and other classifications of firm’s objectives.

Identify the areas where the firm needs to extend its objectives.

Methodology & limitations: This paper has been prepared based on content analysis.

Information has been collected from different books, articles, journals, websites and blogs. All

the collected information has been analyzed to identify the objectives of firm and other

influential factors. The objectives of a firm are described broadly and in an organized manner.

The main limitation of this paper is that all the information has been collected from secondary

documents. Moreover, this paper has been prepared within a limited time and with my limited

knowledge.

3

Literature Reviews

Baumol, W. (1959) pointed out that the objective of a firm is to maximize the sales revenue not

the profit. His research focused on the behavior of manager-controlled businesses. Baumol

argued that annual salaries and other perks might be closely correlated with total sales revenue

rather than profits. Companies geared towards maximizing revenue are likely to make frequent

and extensive use of price discrimination (or yield management) as a means of extracting extra

revenue and profit from consumers.

Burris, T. (2004) has identified six strategic business objectives, for example- (1) Increasing

market share, (2) Strengthening market share, (3) Increase and improve physical resources, (4)

Increasing productivity, (5) Innovation and (6) Action planning.

Chendroyaperumal, D. C. (2009) concluded in his research paper that firms vary in activities,

structure and size, but they all have the same contents, same functions (causal relationships) and

objective.

Dolenc, P., Stubelj, I. and Laporsek, S. (2006) mentioned, “Today firms operate in an

environment where capital is a scarce resource. A firm is usually established with goals and

entrepreneurial motives that are defined with psychological factors such as independence, need

of achievement, sensation of control and risk. Nevertheless, a firm cannot survive in a long-run if

it does not follow the financial objective of shareholder value maximization, which enables a

firm to gather the necessary capital resources on the market.”

Lankoski, L. (2008) holds the view that there are increasing calls for combining the

environmental and social objectives of business with profit objective. But these types of

combinations do not always bring about win-win situations for the firm. Therefore, combining

all these objectives under a win-win situation requires much effort from the management of the

concerned firm.

Root, N. G. (2014) says, “Your business objectives are the results you hope to achieve and

maintain as you run and grow your business. As an entrepreneur, you are concerned with every

aspect of your business and need to have clear goals in mind for your company. Having a

4

comprehensive list of business objectives creates the guidelines that become the foundation for

your business planning.

5

PART 1

Objectives of the Firm: Fundamentals & Nature

1.1 Meaning of firm

In this paper, the objectives of a firm will be discussed broadly. Here, the term ‘firm’ has

represented any kind of economic entity. Any kind of business organizations- sole

proprietorships, partnerships and companies all are considered as firms. Basically, all these firms

are commercial entities which sell goods and services to the customers. Again, another important

characteristic of firms is that they are legal undertakings because no illegal undertakings,

organizations and associations fall under the concept of firm.

1.2 Objectives of a firm

Firms are not established without any reason. A firm has many objectives which include:-

Desired outcomes from individuals, groups and organizations

Broad goals or strategies which the organization seeks to adopt in order to achieve its

primary aims

The specific intended outcomes of organizational strategy

The objectives of a firm can also be broadly classified as primary objectives and secondary

objectives. The primary objectives are ultimate objectives or long term objectives. Primary

objectives are also known as strategic objectives. For example, target for being market leader or

growth target are primary objectives of a firm. The secondary objectives on the other hand are

those objectives that support the primary objectives. These are also called tactical objectives.

They are generally short term in nature. For example, increasing the current year’s sale,

minimizing the current year’s costs, advertising and so on are secondary objectives of a firm.

1.3 Importance of objectives

For various reasons, objectives are important for a firm. Firstly, objectives are clear statements of

what needs to be achieved. Secondly, objectives focus on all the target groups and individuals.

6

Thirdly, objectives are the means of measuring performance. Finally, objectives guide all the

actions undertaken by the firm.

1.4 SMART objectives

All the objectives of firms should have five basic characteristics. These characteristics are

precisely called SMART. In this term, S = Specific, M = Measureable, A = Agreed, R = Realistic

and T = Time related or time scaled. The explanations of all these characteristics are presented in

as follows:

Characteristics Explanations

Specific An explicit statement of the required outcome of the objectives

A clear statement

not something vague etc.

Measurable A tangible target

Objectives should be stated in number terms

A measurable objective can be assessed against the plan

But does not rule out qualitative objectives etc.

Agreed Agreed with the people concerned rather than imposed

Participation and agreement of the employees

increasing commitment to achieving the objectives etc.

Realistic Achievable objectives

based on an assessment of the organization’s resources and capabilities

Unrealistic or unachievable aims are likely to be ignored or to de-

motivate employees etc.

Time related Objectives should be expressed in terms of the date by which it is to be

achieved

Completion dates should be specified

Interim performance measurement date should be specified etc.

Table 1.1: Explanation of SMART objectives in a farm

7

1.5 Direct and indirect benefits of SMART objectives

There are many direct and indirect benefits that a firm gets from SMART objectives, for

example:-

Proper implementation of the firm

Providing a clear focus on decision making

Setting appropriate target

Motivating employees

Facilitating control and actual performance

Providing means for evaluating and improving performance

Reducing uncertainty in the firm

Creating a sense of unity among the employees of the firms etc.

1.6 Factors influencing the formulation of firm’s objectives

There are many inside and outside factors that influence the formulation and determination of

objectives of a firm. Those influential factors are as follows:

Age of the firm

Size and legal status

Ownership structure of the firm

Views of owners and managers specially top management

Market conditions and holding of market share

Legislation of the courtly

State of the overall economy

Competition and competitive advantages

Risk and manager’s/owner’s attitude to risk

Corporate culture in the firm and in the overall industry

Favourable or unfavourable political factors

Social attitudes towards the firm etc.

8

1.7 Hierarchy of objectives in a firm

Figure 1.1: Hierarchy of objectives

1.7.1 AIMS

The overall purpose of the firm is called the aim. Generally it is the long-term goal a firm tries to

achieve. Different firms have different aims. For example, consider that a show manufacturing

company has good profitable business in the market. The XY Company has a long term goal of

being the market leader in the region/country. This long term goal is considered as the aim of the

firm.

9

1.7.2 Mission statement

A statement of the business’s core aims, phrased in a way to motivate employees and to stimulate

interest by outside groups. It’s an attempt to condense the purpose of the business’s existence

into one statement. Suppose, XY Company wants to maximize the value of the shareholder’s

equity, it is represented through a mission statement of the company.

1.7.3 Corporate objectives

These are the targets which the firm wants to achieve in the way of fulfilling its aim. For

example, XY Company wants to increase its net profit of all divisions by 10% per year.

1.7.4 Divisional objectives

These are the specific targets set for each divisions. For example, XY Company has three

divisions of business operation. The company is planning to increase sales in each division by

20% and to reduce overhead in each division by 10%.

1.7.5 Departmental objectives

These are the targets set for each department. For example, Marketing department: Increase sales

by 10%, Finance department: Reduce Long-term borrowing by 5%, R&D: Develop one

innovative product each year etc.

1.7.6 Individual targets

Targets or goals set for every individual related to the form. For example, every salesman has

been assigned with a target that each of them will have to increase the sales by 100 units per

month.

At the end of this chapter, it can be said that setting appropriate objectives is very important for a

firm. While, setting objectives for a firm, it should also be kept in mind that business objectives

are influenced by many factors and none of those factors should be overlooked. A firm should

select the most appropriate objectives of it and deploy mechanisms to achieve them. These will

ensure long-term survival of a firm.

10

PART 2

Objectives of the Firm: Operational, Time-based & Others

For survival, a firm has to fulfill many objectives. These objectives are, in many cases, very

different from one another. They differ in operational activities, time frames of completion and

purposes. Based on their origins objectives of firms a firm can be grouped into three categories.

All the objectives of a firm directly or indirectly fall under any of these three categories. These

three categories of firm’s objectives are as follows:

No. Category of

objectives

Firm’s objectives

1 Operational objectives Profit maximization

Sales maximization

Utility maximization

Growth maximization

Personal welfare maximization

Social welfare maximization

2 Time-based objectives Long-term objectives

Medium-term objectives

Short-term objectives

3 Other objectives Qualitative objectives

Strategic objectives

Ethical objectives

CSR objectives

Table 2.1: Categories of business objectives

All these objectives will be discussed in this chapter.

11

2.1 Operational objectives

2.1.1 Profit maximization

Profit maximization is sometimes considered as the guiding principal of a firm. Profit

maximization is the highest difference between total revenue and total costs of a firm. Every for-

profit firm tries to maximize this difference because it is important for achieving growth and

long-term sustainability of the firm. Sometimes, firms sacrifice other objectives to maximize

profit which does not bear any good result. So, while fulfilling profit maximization objective,

firms should be very careful to their other objectives.

2.1.2 Sales maximization

Another important operational objective of a firm is sales maximization. This objective is

sometimes considered as an alternative to profit maximization in many firms. To fulfill this

objective, firms tries to increase their sales volumes through advertising, providing better quality

products & services and customer services. Although it is not always true, many people think

that sales maximization necessarily ensures profit maximization.

2.1.3 Utility maximization

Owner, managers, customers, creditors and other stakeholders have different interest in a firm.

All of them try to maximize their own interest. Since the resources and capabilities of a firm are

limited, it cannot provide all maximum services to all these stakeholders. But the firm should

consider the needs of all these stakeholders and try to meet them in the best possible way to

maximize the utility of the stakeholders.

2.1.4 Growth maximization

Forms pursue no single but multiple goals such as sales maximization, utility maximization etc.

but among these objective, managers keep the prime objective to achieve the top level or the

highest possible level of growth in output. They also try to improve their prestige, technical

superiority and market power. They take the help of effective advertising on a large scale to

influence the consumer in order to attain growth.

12

2.1.5 Personal welfare maximization

People do not start a firm or invest in a firm without any reason. They also have some financial,

social and other objectives, for example, they want to increase their wealth, increase their

prestige, develop their skills etc. Sometimes, they try to achieve their desired outcomes through

the firm. As a result, the welfare of the owners/investors also becomes an important objective of

a firm.

2.1.6 Social welfare

A firm operates in a particular social set up. It gets all the required elements from the society. As

a result, ensuring social welfare has become an important objective of the firm. Creating

employment, protecting environment, promoting social & cultural activities, helping the poor &

disabled people- are some of the way by which a firm can maximize social welfare.

2.2 Time-based objectives

2.2.1 Long-term objectives

Long-term objectives are like long-term aspirations of the owners/managers. These objectives

require a period of at least five years or more to be fulfilled. A long-term objective may be

divided into several short-term or medium-term objectives. Suppose, XY Company wants to be

market leader in a particular area and it will take a long time for the company to fulfill this

objective. Again, this broad objective will be divided into several short-term and medium-term

targets/objectives.

2.2.2 Medium-term objectives

Medium-term objectives have less time periods than the long-term objectives. These objectives

generally have more than one year but less than 5-years’ time period. These objectives need

timely reviews and amendments. These objectives also have several short-term objectives. A

medium-term objective of XY Company is establishing a marketing network in a new area which

requires a time period of 3 years.

13

2.2.3 Short-term objectives

These objectives require the very short period of time. Generally, they require at best one year or

less time period to be achieved. For example, XY Company wants to increase the current year’s

sales by 10%. This objective requires a time period of one year or less. So, it is a short-term

objective.

2.3 Other objectives

2.3.1 Qualitative objectives

Sometimes, firms set their objectives to achieve technological leadership, to improve customer

satisfaction, to increase the efficiency of management and to gain reputation. These

targets/objectives cannot be measured in terms of number or money. These objectives can be

considered as the qualitative objective of firms.

2.3.2 Strategic objectives

Strategic objectives are those objectives that have effect on the overall firm. These objectives are

long-term in nature but the specialty of strategic objectives is that they have effect on the whole

firm. Business may have several strategic objectives taking place during the same time. Firms

usually set these objectives to achieve growth, to increase market share to provide better

customer services than the rivals and to enhance image & reputation.

2.3.3 Ethical objectives

Ethics are the moral principles that guide the decisions and strategy of a firm. A firm following

the codes of ethics treats its employees, customers, stakeholders and the environment in a

responsible manner. Hence, ethical objectives of a firm are those objectives which fall under the

ethical behavior. For example, a firm may have objectives to provide more financial benefits to

its employees or a firm may have objectives to ensure best environmental practices.

2.3.4 CSR objectives

These objectives are also very important for a firm. Now-a-days, firms perform many CSR

activities in the areas of social, humanitarian, environmental, medical, arts and cultural fields.

14

Again, firms may have one or more objectives behind these CSR activities. The important

objective of CSR activities is to increase brand image & reputation.

At the end of this chapter it can be said that a firm is both a social unit and an economic unit. It

operates through a group of people who works in a continuous basis to achieve a particular

objective or set of objectives. It is not mandatory that all firms have similar objectives because

the setting of objectives in a firm depends much on the situation, capability and resource

availability. Whatever the objectives are, a proper classification of them helps the firm to review

the objectives, to measure the performance and to take corrective actions. Again, through a

proper classification of objectives, owners/managers can understand the relative importance of

each objective.

15

PART 3

Objectives of the Firm: Major Areas

Every business firm has certain objectives which regulate and generate its activities. Objectives

are needed in every area where performance and results directly affect survival and prosperity of

a business firm. As a result, a firm is to device plans to fulfill all its objectives in all those areas

and at the same time it is to measure the achievements. Various objectives of business firms may

be classified into four broad categories as follows:

Figure 3.1: Broad areas of firm objectives

Objectives of

Business

Firms

Economic

Objectives

Human

Objectives National

Objectives

Social

Objectives

16

3.1 Economic objectives

Business firms are basically economic entities. As a result, its primary focus is rested on

economic factors in reality. Economic objectives of a business firm are discussed below:

3.1.1 Earning profits

A business firm is established for earning some income. It is the hope of earning profits that

inspires people to start business. Profit is essential for the survival of every business unit. Just as

a person cannot live without food, a business firm cannot survive without profit. Profits enable a

businessman to stay in business by maintaining intact the wealth producing capacity of its

resources. Profit is also necessary for the expansion and growth of business. Profits ensure

continuous flow of capital for the modernization and extension of business operations in future.

Profit also serves as the barometer of stability, efficiency and progress of a business enterprise.

3.1.2 Creating customers

Profit is not generated by natural forces. It arises through the efforts of the businessman to satisfy

the needs and wants of the customers. A businessman can earn profits only when there are

enough customers to buy and pay for his goods and services. There is only one valid definition of

business purpose; to create a customer. The customer is the foundation of a business firm and

keeps it in existence. It is to supply the customer that society entrusts wealth-producing resources

to a business enterprise. (Drucker, 1993)

No business firm can succeed without providing customers value for their money. Business

exists to satisfy the wants, tastes and preferences of customers. In order to earn profit, business

must supply better quality goods and services at reasonable prices. Therefore, creation and

satisfaction of customers is an important economic objective of business. Business creates

customers through advertising and salesmanship. It satisfies the needs of customers by producing

the required goods and services and by creating utilities.

3.1.3 Innovations

Business is an organ of dynamism and change. In these days of competition a business firm can

be successful only when it creates new designs, better machines, improved techniques, new

17

varieties, etc. Modern science and technology have created a great scope for innovation in the

business world. Innovation is not confined to the invention of a new machine or new product

only. It comprises all efforts made in perfecting the product, minimizing the costs and

maximizing benefits to customers. It involves improvements in management, production, selling,

servicing, methods of personnel and accounting etc.

Business firms invest money, time and efforts in Research and Development (R&D) to introduce

innovations. They develop new technologies, introduce new designs & new tools and find out

new processes to minimize costs and to satisfy ever increasing wants of customers. In order to

create customers, business has to explore new markets and attract more customers. It has also to

retain old customers by providing better services to them.

3.2 Social objectives

A business firms does not exist in air. It is a part of society. It cannot survive and grow without

the support of the society. Business must therefore discharge social responsibilities in addition to

earning profits. According to Henry Ford, "The primary aim of business should be service and

subsidiary aim should be earning of profit." The social objectives of business are as follows:

3.2.1 Supplying desired goods at reasonable prices

Business is expected to supply the goods and services required by the society. Goods and

services should be of good quality and these should be supplied at reasonable prices. It is also the

social obligation of business to avoid malpractices like boarding, Black marketing and

misleading advertising.

3.2.2 Fair remuneration to employees

Employees must be given fair compensation for their work. In addition to wages and salary a

reasonable part of profits should be distributed among employees in recognition of their

contributions. Such sharing of profits will help to increase the motivation and efficiency of

employees.

18

3.2.3 Ensuring good working condition

It is the obligation of business to provide healthy and safe work environment for employees.

Good working conditions are beneficial to the organization because these help to improve the

productivity of employees and thereby the profits of business. Employees work day and night to

ensure smooth functioning of business. It is, therefore, the duty of employers to provide hygienic

working and living conditions for workers.

3.2.4 Employment generation

Business firms should provide the opportunity for employment to the members of the society. In

many countries, unemployment has become a serious problem and the Governments are unable

to offer jobs to all. Therefore, the creation of employment opportunities is a significant service to

the society. If unemployment problem increases, the socioeconomic environment cannot be

congenial for the growth of business activities.

3.2.5 Fair return to investor

Business is expected to pay fair return to shareholders and creditors in the form of dividend and

interest. Investors also expect safety and appreciations of their investment. They should be kept

informed about the financial health and future prospects of business.

3.2.6 Social welfare

Business should provide support to social, cultural and religious organizations. Business

enterprises can build schools, colleges, libraries, hospitals, sports bodies and research

institutions. They can help non-government organizations (NGOs) which render services to

weaker sections of society.

3.2.7 Payment of government taxes

Every business enterprise should pay taxes (income tax, sales tax, excise duty, customs duty,

etc.) to the government honestly and at the right time. These direct and indirect taxes provide

revenue to the Government for spending on public welfare. Business should also abide faithfully

19

by the laws of the country. Thus, businessmen should pursue those policies and take those

actions which are desirable in terms of the objectives and values of their society.

3.3 Human objectives

Business is run by people and for people. Labor is a valuable human element in business. Human

objectives of business are concerned with the well-being of laborer. These objectives help in

achieving economic and social objectives of business. Human objectives of business are given

below:

3.3.1 Worker welfare

Business must recognize the dignity of labor and human factor should be given due recognition.

Proper opportunities should be provided for utilizing individual talents and satisfying the needs

of workers. Adequate provisions should be made for their health, safety and social security.

Business should ensure job satisfaction and sense of belonging to workers.

3.3.2 Developing human resources

Employees must be provided the opportunities for developing new skills and attitudes. Human

resources are the most valuable assets of business and their development will help in the growth

of business. Business can facilitate self- development of workers by encouraging creativity and

innovation among them. Development of skilled manpower is necessary for the economic

development of the country.

3.3.3 Participative management

Employees should be allowed to take part in decision making process of business. This will help

in the development of employees. Such participation will also provide valuable information to

management for improving the quality of decisions. Workers' participation in management will

promote in industrial democracy.

20

3.3.4 Worker management co-operation

Business should strive for creating and maintaining friendly employer-employee relations so as

to ensure peace and progress in industry. Employees should be treated as honorable individuals

and should be kept informed about the important policies of the firm.

3.4 National objectives

National objectives of business are as follows:

3.4.1 Optimum utilization of resources

Business should use the nation's resources in the best possible manner. Judicious allocation and

optimum utilization of scarce resources is essential for rapid and balanced economic growth of

the country. Business should produce goods in accordance with national priorities and interests.

It should minimize the wastage of scarce natural resources.

3.4.2 National self-reliance

It is the duty of business to help the government in increasing experts and in reducing

dependence on imports. This will help a country to achieve economic independence. This

requires development of new technology and its application in industry.

3.4.3 Development of small scale Industries

Big business firms are expected to encourage growth of small scale industries which are

necessary for generating employment. Small scale firms can be developed as ancillaries, which

provide inputs to large scale industries.

3.4.4 Development of backward areas

Business is expected to give preference to the industrialization of backward regions of the

country. Balanced regional development is necessary for peace and progress in the country. It

will also help to raise standard of living in backward areas. Government offers special incentives

to the businessmen who set up factories in notified backward areas.

21

Thus, it can easily be understand that a firm has to consider many objectives in different areas.

But all these areas fall under the above four broad areas. In fact, the successes, growth existence

of a firm depend upon how much it is attentive to perform all these objectives. If any firm

neglects any of these objectives, it will suffer in the long run.

22

Conclusion

The objectives of a firm are clearly defined targets that are set by the management, owners or by

the investors. The directions and modes in which a firm should operate are come from those

objectives. Management of the firm plans to meet these objectives and keeps track of progress

and deviations. Firm’s objectives are in fact a blend of needs of various stakeholders who are

affected by the activities of the firm.

It has been found that firms which are more sincere in fulfilling their objectives are more

successful than the others. Firms should identify its objectives properly and be active in fulfilling

them. Especially the objectives related to the customers, society and nation should be given more

emphasis because any non-compliance with these objectives will bring heavy bad days for the

firm and the firm will not exist for long.

Sometimes firms are more reluctant to perform the objectives which are not related to maximize

profit. They think that a high emphasis on these objectives will incur much cost and thus reduce

hamper profitability. But performance of these objectives will enhance brand image of the firm

and the customers will be more loyal to the brand. Again, the firm will get more advantages

compared to its rivals. All these will ensure long-term profitability and long-term sustainability

of the firm.

23

Bibliography

1) AmosWEB Encyclonomic WEB*pedia. FIRM OBJECTIVES [Online]. Available at:

http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=firm+objectives

[Accessed 22 May 2014].

2) Burris, T. (2004). Six Strategic Business Objectives [Online]. Available at:

http://smallbusiness.chron.com/six-strategic-business-objectives-14492.html [Accessed

08 July 2014].

3) Business Dictionary. Long term objective [Online]. Available at:

http://www.businessdictionary.com/definition/long-term-objectives.html [Accessed 31

May 2014].

4) Baxi, P. (2008). Defining Long Term Business Objectives [Online]. Available at:

http://www.insidebusiness360.com/index.php/defining-long-term-business-objectives-2-

27237/ [Accessed 08 May 2014].

5) “Business Objectives,” PowerPoint Presentation, 2012, Available at: http://mrb-business-

studies.wikispaces.com/Unit+1+-+Business+and+the+enviornment.

6) “Business Strategy – Business Objectives.” PowerPoint Presentation, Tutor2u. Available

at:http://www.tutor2u.net/business/presentations/strategy/businessobjectives/default.html.

7) Chendroyaperumal, D. C. (2009). Corporate Social Responsibility and Firm’s Objectives-

A Synthesis. Department of Management Studies Saveetha Engineering College,

Chennai.

8) Chendroyaperumal, D. C. (2008). Firm’s Objectives: A Synthesis. Department of

Management Studies Saveetha Engineering College, Chennai.

9) Dolenc, P., Stubelj, I. and Laporsek, S. (2006). What is the Objective of a Firm?

Overview of Theoretical Perspectives. University of Primorska, Faculty of Management

Koper, Science and Research Centre of Koper.

10) Drucker, P. (1993). The Purpose of a Business. The Practice of Management.

11) Griffiths and Wall. (2011). Firm Objectives & Firm Behaviour. Economics for Business

and Management 3rd edition. Pearson Education Limited.

12) Jensen, M. C. (2001). Value Maximization, Stakeholder Theory, and the Corporate

Objective Function. The Monitor Group and Harvard Business School.

24

13) Lankoski, L. (2008). Multiobjective Firms and the Management of Trade-offs.

Department of Economics and Management. University of Helsinki.

14) Mayuri Pujare, “Objective of Firm,” PowerPoint Presentation, 2014, Available at:

http://www.slideshare.net/mayuripujare9/objective-of-firm-30346858.

15) “Organizational Objectives,” PowerPoint Presentation, 2011, Available at:

http://kcvi.limestone.on.ca/Teachers/HDavies/Downloads/IB%20Year%201/FOV1-

00106853/.

16) Shahil Mahajan, “Objectives of Business Firms,” PowerPoint Presentation, 2009,

Available at: http://www.slideshare.net/mahasahil/objectives-of-firms.

17) Singh, S. (2012). What are the objectives of business? [Online]. Available at:

http://www.preservearticles.com/2012022323596/what-are-the-objectives-of-

business.html [Accessed 06 May 2014].

18) Small Business Co. UK (2006). Short-, medium-and long-term objectives [Online].

Available at: http://www.smallbusiness.co.uk/starting-a-business/ideas-and-business-

planning/27759/short-mediumand-longterm-objectives.thtml [Accessed 02 May 2014].

19) Raj, R. (2012). Know how goals, objectives and tasks differentiate [Online]. Available at:

http://objectiveli.com/blog/know-how-goals-objectives-and-tasks-differentiate/#

[Accessed 05 May 2014].

20) Root, N. G. (2014). 10 Most Important Business Objectives [Online]. Available at:

http://smallbusiness.chron.com/10-important-business-objectives-23686.html [Accessed

08 May 2014].