Friday, November 14, 2014

Why is wealth maximization a better operating goal than profit maximization?

Why is wealth maximization a better operating goal than profit maximization?
Everyone knows that profit is the life blood of every organization.Profit maximization is the primary or main objective oforganizations, but under the method of profit maximization thepurpose is to increase sales and profit. Less importance is givenfor consumer interest. Any queries against product or services isnot considered and importance will be less per this method. So atthe beginning organizations may be successful in its goal ofearning high profits, but the organization will definitely sufferloss in future. Wealth maximizing means increasing fame, goodwillor reputations by providing importance to consumer preferences andwealth of society. By providing importance to consumer preferencesorganizations get queries, the need of changes in products that areinnovative activities, after sale services, etc. With thisimportant information product or service quality can be increased.Though sales will increase and demand will increase; goodwill alsoincreases. By this, more of the shareholders, employees will beattracted towards the organization. After that, the lifetime of thecompany increases also. Organization's like NIKE and REEBOK areexamples that are following the wealth maximization method. Wealthmaximization is the better goal than profit maximization.

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