The Goals of Firms - 39

Let's say your chain of retail stores sells one in every ten of video cassette recorders sold in Australia. In years of economic growth, your competitor's sales will rise; but so will your's. In bad years, their sales will fall as your's do. You have developed a solid customer base, and are likely to be in business for the long term.

Some firms look to increase their productive capacity and their capital assets rather than increase sales or profits. If you decide to follow this management objective, your shareholders may not be paid a dividend for a considerable time. However, your firm will be in position to become a large producer in the medium term, and make even larger profits.

Some firms may deliberately run at breakeven point (to make no profit), selling their production at low prices to stop a new entrant into the market from becoming established. Other firms may decide that you can deal with competitors well if you have a happy workforce, good relationships with unions and a good standing in the community. This means that profits may be less than what could be obtained with a different style of management; but, you as a shareholder or manager want a quiet life, not one full of confrontations with unions and other groups.