Alternative Theories to Profit Maximization
Alternative theories to profit maximization ranging from perfect competition to strict monopolies.
Companies and The Market
Most companies are profit oriented. Companies survive and live on profit. Even governmental institutions, NGO's and NPO's are profit oriented, what they do with profit is different though. Saying this means that companies seek always to be at a position where profit is maximized. As we know by now this happens when MC=MR but this is an always changing point as supply and demand are dynamic, effectively meaning that if firms get it right once they can't just do the same eternally, they still need to adapt to every market factor as a new change is a new reality all together that needs to be studied and addressed. All of these changes happen in what is called the market, where suppliers and consumers meet to reach a level that suits the interests of both parties involved.
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
In all of these we are also considering that there are no "market distortions" as I tend to call them which are very common in developing (or third world) countries in a very blatant way, and less common and much more hidden in developed countries. These are the issues with fraud and corruption
Companies and The Market
Most companies are profit oriented. Companies survive and live on profit. Even governmental institutions, NGO's and NPO's are profit oriented, what they do with profit is different though. Saying this means that companies seek always to be at a position where profit is maximized. As we know by now this happens when MC=MR but this is an always changing point as supply and demand are dynamic, effectively meaning that if firms get it right once they can't just do the same eternally, they still need to adapt to every market factor as a new change is a new reality all together that needs to be studied and addressed. All of these changes happen in what is called the market, where suppliers and consumers meet to reach a level that suits the interests of both parties involved.
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
In all of these we are also considering that there are no "market distortions" as I tend to call them which are very common in developing (or third world) countries in a very blatant way, and less common and much more hidden in developed countries. These are the issues with fraud and corruption
References: [1] Sloman J. and Sutcliffe M., Economics for Business Third Edition, page 212, Table 11.1 [2] Transparency International, 2005 Corruption Perceptions Index (CPI), [internet] Accessed on: 13th November 2005, http://www.icgg.org/corruption.cpi_2005.html [3] Professional Jewler Magazine Archive, De Beers Suspends Operations in Angola, [internet] Accessed on: 13th November 2005, http://www.professionaljeweler.com/archives/articles/2001/aug01/0801dn3.html [4] Angola News Online, Edition #16 8 June 1998, [internet] Accessed on: 13th November 2005, http://www.africa.upenn.edu/Newsletters/angno16.html [5] Diamond Industry Annual Review, De Beers Signs New Angolan Agreement, [internet] Accessed on: 13th November 2005, http://www.pacweb.org/e/images/stories/documents/addendum%20angola%202005-english.pdf [6] Professional Jewler Magazine Archive, Lev Leviev 's Angolan Connection, [internet] Accessed on: 13th November 2005, http://www.professionaljeweler.com/archives/articles/2002/feb02/0202dn1.html