Profit maximization ignores other stakeholders and overstates the rewards for owners only. Profit is considered as a reward for capital and profit maximization gives the image that the business entity is the domain for owners only. In the actual world, a business cannot succeed without the fullest cooperation and coordination of labour, government, consumers, and community. Assumption of profit maximization ignores the stake of these groups (Singh, n.d). Profit maximization also misleads managers to the point where they can jeopardize the survival of the company. For the sake of maximizing momentary profits, managers may take those decisions that can harm the future survival and reputation of the company.
They may ignore executive development, research and development, long-term investments, pushing against easily profitable products etc. These activities can threaten the long-term success and survival of the business (Singh, n.d). Profit maximization is incoherent with the recent trends of businesses. Professionalization, diffusion of shareholders’ ownership, distinctive technostructure, growth and development of institutional shareholding are some of the latest trends in businesses (Singh, n.d). The overtones of profit maximization are capitalistic in nature. Profit maximization may end in mistreatment with the poor by the rich.
It also heightens inequalities in the distribution of wealth and income. Such factors lead to numerous social problems (Singh, n.d). It has been observed that profit maximization has been subjected to a lot of criticism. The primary reason behind this is the fact that in the real world, profit maximization has established a negative perception among customers. Customers usually believe that firms that are longing for maximizing profits usually ignores the rights of stakeholders and keep on with their efforts to maximizing profits and earning higher returns.
In this way, they break all the ethical boundaries and violate ethical practices, standards and norms. The subsequent sections of this paper include mathematical calculation of profit maximization as well as its implication in the real world.
Please type your essay title, choose your document type, enter your email and we send you essay samples