What are the main business objectives and what are the reasons for them?

Profit Maximisation

Firms may aim to profit maximise to be able to pay dividends to shareholders and have money to invest in the future growth of the company, ensuring the firm's long-term viability.

The point of short-run profit maximisation is where marginal revenue is equal to marginal cost. Marginal revenue is the revenue gained from the next unit sold, marginal cost is the additional cost of producing another unit. When marginal revenue is greater than marginal cost, the next unit will be profitable (i.e. marginal profit is positive). However, once marginal cost exceeds marginal revenue, the next unit would cost more than the revenue it would generate, thus marginal profit would become negative and total profit would begin to fall. This is why profit maximisation is at the point where MC=MR.

The above diagram demonstrates that the profit-maximising quantity is quantity Q where MR=MC. The price (P) is the point on the AR (Average Revenue i.e. price) curve with quantity Q.

Revenue Maximisation

A rise in revenue is likely to be a positive indicator as this indicates that the firm’s income is rising. Banks may be more willing to lend to these firms that have high revenues and thus high incomes as they may see them as more stable. As a result, banks may offer lower interest rates on loans for these firms, likely leading to lower loan repayments if the firm chooses to borrow from these banks as the interest rate is lower. Furthermore, firms may revenue maximise in order to gain market share. As a result, many firms aim to maximise revenue as long as there is some profit left over for the shareholders/owners.

Revenue maximisation occurs at the point where MR=0. Any movement further down the MR curve would result in MR becoming negative, meaning that TR (Total Revenue) falls.

The point of revenue maximisation is at quantity Q where MR = 0, which is at price P. 

Sales Maximisation

Firms may seek to sales maximise to achieve as much rapid growth as possible. Furthermore, firms may seek to sales maximise to gain large amounts of market share. Sales maximisation may also result in large gains in economies of scale.

To maximise sales, firms want to sell as much as possible, whilst breaking even. Hence the firm is likely to make a normal profit.

The point of sales maximisation is at quantity Q and price P where AC=AR.

Satisficing

Satisficing is a strategy that aims to achieve satisfactory outcomes rather than the perfect solution. For example, profit satisficing is where a firm will achieve a satisfactory level of profit rather than aiming to increase profit to its maximum level at any cost. Firms may profit satisfice so that they can provide a fair return for shareholders, whilst also taking into account the requirements of other stakeholders such as employees.

Firms may satisfice for other reasons, such as setting attainable goals rather than setting extremely difficult goals that may prove costly. Moreover, satisficing may help to set clear outcomes in a complex environment.