Objectif privilégié de l’entreprise
Volume : 22-4 (1967)
The Basic Objective of the Firm
Most of the firm's specialists teach and have taught that profit maximization is a fundamental assumption in the micro-economic theory. Following the economic culture prevailing in a capitalist society, one must admit in addition to this fundamental assumption the fact that a firm seeks profits. However the results of many surveys conducted among top firm executives led to the conclusion that most of them do not seek profit maximization but the sales volume, the share of the market, etc. It is even pretended that one single firm seeks for many objectives at the same time.
However it seems evident that only one objective can represent the final criterion of decision. It is called the basic objective which is pretended not to be different from profit maximization. Certainly the existence of sub-objectives or constraints to be respected by the firm in evaluating them in the terms of the basic objective is recognized.
This proposition is deduced from three main assumptions. In the first place nobody can deny the fact that a serious executive wishes to act rationaly i.e. to optimize its decisions. In the second place, he needs to situate himself at a medium level of abstraction in a step of the decision-making process. He cannot only consider profit maximization : neither can he get lost in the detail of each specific decision. Finally, in order to be sufficiently operational, the basic objective must be the best common denominator to all the other objectives which then become sub-objectives or contraints.
Those three assumptions can allow the deduction of the following proposition : profit maximization seems to be the best basic objective of the firm. In fact, only profit represents the result of all the economic activities of a firm.