Should Business Follow The Profit Motive Only? - Essay Prowess

Should Business Follow The Profit Motive Only?

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Should Business Follow The Profit Motive Only?

Profit motive refer to the driven force behind an action or efforts of business enterprises with the desire to earn more profit. Therefore, it simply means that the overall aim of the business is to make profit maximization and earning the greatest possible profit as a result of its competitive strength and strong management team. In many private businesses, the owners focus too much on profit which affects all activities of the business (Renee, 2014). When businesses are motivated solely by profits, it may benefit or result to unhealthy business environment. The paper will discuss both advantages and disadvantages of profit motives in a business.

Advantages

Profit motive can help a business in raising customer’s satisfaction as it needs or no additional marketing cost to convince the customers to buy their goods. Customers tend to increase their trust and loyalty towards the existing business. The revenue generated from the increased number of customers and sales ends up being profit. This profit helps the owners of the business to improve the service delivery to their customers and by doing so they receive a positive impact to their businesses. This can help the business to gain more customers, thus increasing the chances of the businesses to operate in the long-run (Prakash & Raj, 2005). In addition, the business can be in a position to have an efficient use of its resources.

A small business owner will try to increase his effort on utilize the available resources allowing it to maximize its profit. A wise use of organization’s resources means allocating resources where they can generate revenue and clear all the expenditures that occur in the operation. When a company balances the dept and its income, it can increase its competitive forces hence increase its sustainability in the market. Innovation is another factor that most organizations consider in their production process. Better innovations in an organization will enhance the services provide to the customers and also reduce the cost of production. Innovation can be achieved by a company if it has the potential to buy modern and efficient machines that improves the production and delivery process. Revenue growth of a company always leads to higher profit. Increased revenue of a company can help to maintain its percentage of gross margin (revenue minus cost of goods sold then divide by the revenue). Innovation can also bring new ideas as well as variety of products in the market. Innovation has been proven to be an important tool that contributes to growth of a business as customers are always looking for improved products and services that gives better solutions to their needs. Therefore, innovation can lead to both revenue generation as well as increase the profit of a company.  The overall goal of profit maximization is directly related to innovation (Prakash & Raj, 2005).

An example of a non-profit motive company is Coca Cola Company that has several initiatives to support the needy in our society. In addition, the massive profitable Wall Street makes modest salaries and also improving their services to the communities. Therefore, companies should focus on creating values for all and not only their shareholders. Such companies accelerate the growth of the economy in all sectors. As the economy grows, so will the companies and create a long-term value for their shareholders (Matthew, 2014).

Disadvantages

When a business becomes motivated solely by profit, it tends to fails or have poor business environment that results to a disaster to the economy. Businesses do not act for the interest of the company, but what the executives managers decides the activities to be carried out by the organization. For instance, the employees can be awarded with higher salaries when the company makes large profits with fewer expenses.  However, since the profit of a company can be realized after several years and the employees only work for few years, the executives of these companies focus on short-term gains to its workers. Some of the long-term and other unrealized cost can hinder operation of a company while unaccountable costs, such as pollution and abuse of the workers have impact to the society (Renee, 2014).

In most cases, when price motive is viewed as the main objective of the company, it will lead the owner and the employees to have unethical behaviors such as; exaggerating the benefits of the organization’s products to the customers. The company can also give false information about their competitor’s products or services in order to make more sales. If a company is has a price motive, it is likely to lower its cost of production that may lead to defective products. Such unethical behaviors may have a short-run positive effect on profit and revenue, but risk the company in the long-run. Pursuing a profit maximization strategy can also have a risk to the expectations and the goodwill of the customers. Since the company is profit motivated, it will try to cut its costs by employing unqualified workers who in returns give low quality services to the clients. The share holders may see immediate gains and forget the future of the company. In addition, people working in companies with price motive are driven by the desire look good to the supervisors, co-workers and fear of failure (Matthew, 2014). Top management overemphasis on control in operation and decision-making. This can challenge the abilities to create a collaborative workplace that is focused on shared vision and goals. Good example of a companies with profit obsession are Bank of America, Citigroup and other big American companies that are finding ways to fire people and cut costs (Pantin, 2013). On the other hand, most of the energy sectors are always after profit and they forget to maintain a clean environment for the future generations. Therefore, profit should not be used to measure the success of the business, but how such organizations serve our society.

Conclusion

The paper shows that profit-making is the center of capitalist enterprise that sometimes leads to failure of the business. Therefore, companies should understand the various factors that may favor profit-making as well as the factors that slow down or block its success. Companies that maintain the relationship of their shareholders and provide quality products at fair prices tend to create a good image to the society. This allows them to increase the loyalty of customers towards their services and thus expand the market share. Therefore, it is important for the businesses to step back and understand why it needs to fulfill its role to the society for it to exist. Profit should not be used to measure the success of the business, but how such organizations serve our society. The company’s decision makers should not be served by short-sighted profiteering, but ethical professionals who focus on building up an enduring entity with socially responsible behaviors.

Reference

Matthew, Geiger. (2014). Should Profit Be the Only Motive of Business? Retrieved: https://www.linkedin.com/pulse/20140706200006-50642561-should-profit-be-the-only-motive-of-business

Pantin, Travis. (2013). “Milton Friedman Answers Phil Donahue’s Charges.” Nysun.com: The New York.

Prakash, V & Raj, M (2005). Business Environment. New Delhi: Anmol Publication Pvt. Ltd.

Renee O’Farrell (2014). Advantages & Disadvantages of Profit Maximization.  Demand Media Retrieved: http://smallbusiness.chron.com/advantages-disadvantages-profit-maximization-11225.html

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