Week 8: Goal of the firm?
In Chapter 22S, Dr. Eli Goldratt states that “THE GOAL OF THE FIRM IS
TO MAKE MONEY”. Do you agree or disagree with this statement? Support your position with at least two examples of companies that may or may not follow this statement.
Make sure you check out the Week 8 Web Links before you attempt to answer this question. Keep your initial posting to between 350-500 words and your response posting between 100 and 150 words.
Week 8 Discussion: Goal of the Firm
The statement by Dr. Goldratt, “The goal of the firm is to make money” is not enough to explain the purpose of a company (Jacobs & Chase, 2020). It is not a statement that has a definitive agreement or disagreement stance. A company has many purposes; providing employment, and increasing sales, out of which making money is a primary goal as well as the ultimate goal (Forbes.com, 2022). Other than this, some of the key objectives of a firm are such as surviving in the long run, profit maximization, maximization of sales as an alternative to the goal of maximizing profit, maximizing the growth rate at a balanced pace, etc. Also, the goals can be classified according to the units of the firm, namely, production goal, inventory goal, sales level goal, market share goal, and profit goal (Economicsdiscussion.net, 2022). For a firm to exist it must make a profit to keep running, to cover costs, and to further production, but for some that may not be the main goal for the company to exist. Many pride themselves in achieving accolades such as best customer service in the industry, the most innovative product, and other such titles. A business could be founded on the idea to solve a problem with their product and/or services or aim to fulfill a social responsibility through their company and make the company or the person money to compensate for their skill and keep the firm running. But it is true nobody goes into business to lose money, the profits are required to keep up business and provide a source of income, non-profit organizations that do go into business without the thought of profits rely on the generosity of donations and grants to operate (Uschamber.com, 2021). For example, Tesla Inc. is more focused on proving itself to be an innovative manufacturer of eco-friendly vehicles; its focus is more on sustainability than profitability which can be seen from its fluctuating and declining net income over the years (Medium.com, 2020). On the other hand, profitability allows a business to stay in business; Toys R Us had been a leading retail chain of toys for kids for years, and they were able to provide jobs for many across the world. With the recent market changes, they began to lose their profitability and were forced to declare bankruptcy and finally close down for good (Cnbc.com, 2018). This shows how money is an essential component of a business.
The statement by Dr. Goldratt of the goal being to make money and be profitable despite having other roles and aims within the agendas of the firm is true but it is only a primary goal to ensure that the firm makes sufficient money to be able to continue being in business and fulfill the other goals of the firm.
References:
Cnbc.com (2018). Toys R Us built a kingdom and the world’s biggest toy store. On Friday, its stores close for good. Retrieved from https://www.cnbc.com/2019/01/26/toys-r-us-built-a-kingdom-and-the-worlds-biggest-toy-store-then-they-lost-it.html [Retrieved on February 28, 2022]
Economicsdiscussion.net (2022). 5 Major Goals of Business Firms. Economics Discussion Discuss Anything About Economics. Retrieved from https://www.economicsdiscussion.net/business-economics/5-major-goals-of-business-firms/7124 [Retrieved on February 28, 2022]
Forbes.com (2022). Is The Goal of a Corporation to Make Money? Forbes. Retrieved from https://www.forbes.com/sites/stevedenning/2011/09/26/is-the-goal-of-a-corporation-to-make-money/?sh=1411ac7054ed [Retrieved on February 28, 2022]
Jacobs, Chase, F. R. R. B. (2020). Loose Leaf for Operations and Supply Chain Management (16th ed.) [E-book]. McGraw-Hill Higher Education (1/7/2020).
Medium.com (2020). A case study on Tesla, Inc: The world’s most exciting Automobile company. Medium. Retrieved from https://medium.com/@ashleylobo98/a-case-study-on-tesla-the-worlds-most-exciting-automobile-company-535fe9dafd30 [Retrieved on February 28, 2022]
Uschamber.com (2021). Non-profit vs. Not-for-Profit vs. For-Profit: What’s the Difference? CO – by US Chamber of Commerce. Retrieved from https://www.uschamber.com/co/start/strategy/nonprofit-vs-not-for-profit-vs-for-profit [Retrieved on February 28, 2022]
