Strategic Management
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The statement that adopting a simple profit-maximizing perspective can have positive impacts for a firm (Barney & Hesterley, 2006) stirred debates in recent decades.
Profit maximization was ever considered as the legitimate objective of a firm because it was based on the cardinal rule of efficiency. It is assumed that under perfect competition environment allocation of resources shall be based on the goal of profit maximization. A firms performance was evaluated in terms of profitability. Investors perception of companys performance can also be traced through this way.
Indeed, profit maximization has been criticized on many accounts. From an initially strategic perspective, it is contradicted by values towards a broader stakeholder orientation. External environment have great influence on realization of profit maximization. Different forces in industry also prevent company maximizing profit. Behaviors seeking profit maximization do increase profit to some extent but never maximize profit. Simply adopting a profit-maximization perspective, in practice, is more than likely to be difficult, unachievable and immoral. It has thrown up a series of issues simultaneously.
Hence, the objective of this essay is to dialectically dissert on the profit maximization statement. Since it is unrealistic in practice, the paper also aims to seek appropriate ways to balance different interest groups and generate more social value rather than profit maximization.
In order to achieve these objectives, this paper is structured as follows: firstly, there is a brief introduction of the profit maximization concept. The next stage attempts to critically discuss its impacts on business including analysis of its unreality, and finally, it will redefine the appropriate perspectives needed for a firm in conjunction with suggested ways for business to attain sustainable development.