Sales volume maximization model. Alternative models of company “behavior” in the market

Minimization model transaction costs(R. Kousa)

Controlling concept.

Controlling– modern methodology for coordinating management activities, further development management accounting.

Independently from each other, various researchers and business practitioners have developed the following forms of controlling:

• Improving intra-company document flow within the framework of management accounting using information technologies(R. Mann, E. Mayer, H. Vollmuth)
• Making decisions at the strategic and operational levels after analyzing information from all services involved in the credit risk management system (H. Burr, P. Preissler)
• The planning process in the form of cycles, which allows you to select the most appropriate cost and budget management solutions (D. Khan, D. Schneider, P. Horwarth)
• The process of managing a risk management system for the purpose of regulation within the planned framework (A. Schmidt, J. Weber, A. Zund)

Target models of corporate finance. Functions of corporate financial management. Financial management mechanism. Contents of financial management, its tasks.

1. Profit maximization model (A. Cournot). Implementation of this target model was ensured by achieving equality of indicators marginal income And marginal cost enterprises.

4. Model for maximizing the growth rate of an enterprise. This model includes not only the maximization of sales volume, but also the growth rate of the operating profit of the enterprise, the main proportions of the distribution of this profit and the most important structural parameters of the financial condition of the business entity.

5. Model for providing competitive advantages. The advantages of this concept: it reflects the results of the activities of almost all of its main services - competitive advantages can be achieved through the development of a new product, improving the quality of goods and services, effective marketing, etc.

6. Value added maximization model. Advantages: allows you to maximize economic interests not only employees, but also the owners of the enterprise.

7. Model for maximizing the market value of an enterprise. Covers all main areas of financial activity - investing, financing, asset management and cash flows, and accordingly allows you to assess the quality of the entire range of financial decisions made.

Functions of corporate financial management:

Financial management realizes its goals and objectives through the implementation of certain functions.

These functions are divided into 2 main groups:

• Functions of financial management as a management system
• As a special area of ​​enterprise management

Lecture 03/01/12:

The group of functions of financial management as a management system includes:

• Development financial strategy enterprises. In the process of implementing this function, a system of goals and indicators of financial activity for the long term is formed, tasks for the near future are determined, and a policy for the enterprise’s actions in the main directions of its financial development is developed.
• Creation organizational structures , ensuring acceptance and implementation management decisions in all areas of financial activity.
• Formation of effective information systems, providing justification for alternative management decisions. In the process of implementing this function, external and internal sources information, constant monitoring of the financial condition of the enterprise and market conditions is organized financial market.
• Carrying out analysis and planning in the main areas of financial activity of the enterprise, subsidiaries, “responsibility centers”, branches; generalization of the results of the financial activities of the enterprise as a whole and in the reserve of its individual areas.
• Development of an effective system for stimulating the implementation of management decisions in the field of financial activities. Involves the formation of a system of rewards and sanctions for achieving established targets. financial indicators, standards, tasks.
• Exercising effective control over the implementation of management decisions in the field of financial activities. The implementation of this function is associated with the creation of an internal control system at the enterprise, the definition of a system of controlled indicators, and a prompt response to control results.

In the group of functions of financial management as a special area of ​​enterprise management, the main ones are:

• Asset Management– identifying the real need for certain types of assets, optimizing the composition of assets, choosing effective forms and sources of their financing.
• Capital Management– determination of the total capital requirement to finance the assets of the enterprise being formed, optimization of the capital structure.
• Investment management– formation of the most important directions investment activities enterprises, assessment of the investment attractiveness of individual real projects, selection of the most effective of them.
• Cash flow management– formation of incoming and outgoing flows Money enterprises, efficient use of temporarily free monetary assets.
• Financial Risk Management– identification of the main financial risks, assessment of the level of these risks and the volume of financial losses associated with the risks.
• Anti-crisis financial management- constant monitoring of the financial condition of the enterprise in order to timely diagnose signs of a financial crisis; determination of the scale of the crisis and the factors causing it.

John M., a recent graduate of the College of Business Administration, received an inheritance of $100,000 from his grandfather. He is considering three investment proposals for the inheritance that have equal risk. Each alternative involves an initial investment of $100,000. The expected income is distributed as follows.

Questions:

A. What will be the net present value (i.e., discounted cash receipts minus discounted cash flows) of each proposal at a discount rate of 12%?

b. How does the distribution of cash flow over time affect net present value?

Solutions

b. The longer the expected number of years in which the cash flow will be received, the lower its present value will be. Thus, Proposition 2, which states that we can expect more cash flow sooner, will be more valuable than Propositions 1 or 3. Proposition 3, which states that we can hope for a large amount annual income than in sentences 1 or 2, but attributing this amount to more late date, will have the least value.

Maximizing the owner's wealth. The owner's wealth is measured by the firm's share price. Therefore, the profit maximization model involves a firm attempting to maximize the market value of one share of its stock. The fundamental approach to valuing a stock can be expressed as

where V is the capitalized value per share;

E is the expected earnings per share, i.e. earnings (total income - total costs) divided by the number of shares payable (this is not the same as a dividend per share, unless all of the company's earnings are distributed as dividends, which is unlikely);

r is the capitalization rate, or the required rate of return.

This approach is universally used when estimating the value of a stock fund by investors who multiply the estimated return by a factor called the ratio "price-income", attitude "time-income" or an animator "price-income" to estimate the value of a given joint stock fund. The price-earnings ratio is simply the reciprocal of the capitalization rate, r (i.e. 1/r).

A firm's decision-making process is largely determined by the relationship between earnings per share, E, and its required rate of return, r (r reflects the risk the firm assumes is associated with specific proposal investments). Thus, suppose that the firm's cost of capital is such that the owner requires a rate of return on his investment of 20%. If a firm's earnings per share are $1, then the firm's capitalized cost will be

Suppose now that the firm has the opportunity to invest in a project that will increase earnings per share by 20 cents, but will also increase risk to the point where a cautious investor would require a return of 25%. Earning increased returns will be very tempting for managers until they evaluate the impact capitalized cost of ordinary shares. Due to the increased risk, the capitalized value of the common shares will decrease to

The decision criterion is obvious - the proposed project will increase income by 20%, but the required rate of income will increase to 25% (from 0.20 to 0.25). Accordingly, the owner's wealth, as measured by the value of the shares, will decrease. That is why the axiom of business will be that the higher the risk, the higher the profit should be. Otherwise, you should not start a risky project.

The present value of a firm's future earnings represents the value of the firm at any given level of risk (the level of risk is included in the discount rate, r). Therefore, maximizing the present value of profit is the same as maximizing the owner's wealth. The profit maximization model thus shows that the firm's management apparatus seeks to maximize the present value of future profits at a given level of risk.

Limitations of the profit maximization model. The principles underlying the profit maximization model help us understand what a firm's strategy should be, how it should make decisions, and choose the timing of its actions. In a world in which the timing of investments is critical to success, this model allows us to gain greater insight into a firm's likely behavior. However, the profit maximization model, like any model, provides a simplified abstract version. IN real world there are many difficulties limiting its adequacy. This is because, in addition to the lack of comprehensive information, such a model requires that the firm can accurately predict the magnitude and time distribution of the stream of future profits, which c. at best it is very difficult to do, and at worst it is impossible. In addition, there are many legal, ethical and social constraints that limit the firm's overarching pursuit of profit. Within these constraints, the firm strives to have optimal profits.

This means that the firm does not necessarily seek to maximize profits, but instead tries to balance its desire for profit with other goals and objectives - short-term and long-term, economic and non-economic. Achieving these goals, as well as increasing profits, will allow it to maximize the benefits received, which do not necessarily have to be limited to maximizing profits.

Recognition of this circumstance led to the creation of a number of alternative models based on the motives of the company's behavior other than profit maximization.

These models, having extremely important to understand the behavior of the company, can be divided into four general class models:

Maximizing sales;

Maximizing growth;

Managerial behavior;

Maximizing added value (Japanese model).

The sales maximization model is probably the most widely known alternative to the profit maximization model. It is easy to understand and is supported by intuitively attractive real-life examples. Rigorous empirical testing, however, does not support the sales maximization hypothesis. This is especially true for the long-term objectives of the company.

Scholars have provided many reasons why firms may prioritize cash receipts from sales.

1. A change in sales requires greater changes in trading methods and production technology than will be justified by equivalent changes in profits.

2. The firm's management may feel that failure to increase sales is damaging the company's reputation and its relationships with consumers, financial institutions and employees.

3. The firm's management may feel that failure to increase sales will reduce the company's market power and make it more vulnerable to competitors.

4. Since in most cases managers are employees rather than owners of the firm, evaluations of management performance will be more sensitive to the level of sales than to the level of profits (as long as acceptable profit levels are maintained).

Proponents of the sales maximization model recognize that some minimum level of profit is necessary, but they believe that a firm seeking to maximize sales chooses to sacrifice some or all of its profits above a certain minimum in order to increase sales. Thus, Japanese companies give great importance increasing their influence on the world market, so they pursue a dumping price policy (i.e., they sell products abroad at prices lower than those charged in their country). Many believe this is a tactic aimed at the United States. Japanese chipmakers, for example, have been accused of dumping their products entering the United States either directly or through intermediaries such as Hong Kong. Although dumping can be effective in increasing market share, the practice is considered illegal in the United States.

Another example can be given with the fall in the exchange rate of the US dollar against the Japanese yen (second half of the 80s). Logically, Japanese automakers would have to raise the price of their products sold in the United States in order to maintain their profit levels. Instead, they chose to keep the dollar price constant, accepting lower profits to maintain their market share. This behavior constitutes important factor V international trade. However, the nature of such facts suggests that firms here may sacrifice immediate profits in favor of maximizing distant ones. Maximizing long-term profits in in this case forms part of their strategy aimed at maintaining an advantageous position in competition that can bring greater profits in the distant future.

Introduction 3 1. The concept and essence of sales volume 5 2. The sales volume maximization model 12 3. The advantages and disadvantages of the sales volume maximization model 17 Conclusion 27 References 29

Introduction

The relevance of this topic lies in the fact that the larger the volume, the easier it is to buy and sell a large (or small) number of goods. For every transaction there must be a seller and a buyer. For a product to be sold, it must be sold by a seller; and in order to sell, there must be a buyer who will buy it. There may be some confusion here because you can often hear the phrase: - “Sellers control the market.” - "The volume of sales exceeds the volume of purchases." - “This is a day with a lot of shopping!” Buyers control the market when the price is pushed higher. The volume of purchases is the volume of transactions that took place at the ask price. This is the lowest stated price at which sellers are willing to sell. If someone buys at this price, this indicates that the product is in demand (by that market participant), and this is called purchase volume. Sellers control the market when the price is pushed lower. Sales volume is the volume of transactions completed at the bid price. This is the highest listed price at which buyers are willing to buy. If someone wants to sell at this price, this indicates that the product is not in demand (by that market participant), and this is called sales volume. Volumes are usually displayed at the bottom of the price chart. The purpose of this work is to study the content of the sales volume maximization model, its advantages and disadvantages. In this case, the following main tasks can be identified: - consider the concept and essence of sales volume; - study the sales volume maximization model; - identify the advantages and disadvantages of the sales volume maximization model. The object of this study is profit maximization. The subject is the content of the sales volume maximization model, its advantages and disadvantages. The scientific and practical significance of the work lies in the possibility of applying its results in practice. In the work, the works of such domestic and foreign scientists as: Akulov, V.B., Basovsky, L.E., M. Gordon, M. Jensen, W. Mikling were used. The work consists of an introduction, three chapters, a conclusion, and a list of references.

Conclusion

The sales maximization model is the most widely known alternative to the profit maximization model. According to this alternative, when profits reach acceptable levels, some companies tend to prioritize revenue rather than profit. Sales revenue, according to the managers of such companies, reflects the positive attitude of customers towards the company’s products, competitive position company on the market and its growth, and all these indicators indicate the viability of the company. If sales decline, any advantage the company has is eroded and its competitiveness weakens. In addition, company managers are interested in increasing sales volume, since there is a lot of evidence that their wage has a closer relationship with the scale of a company's operations than with its profit. Thus, the sales volume maximization model cannot be used as the main objective function of the enterprise. The advantages of this target concept of the enterprise is that it reflects the results of the activities of almost all of its main services - competitive advantages can be achieved through the development of a new product, improving the quality of goods and services, effective marketing, optimal pricing policy, cost reduction, etc. In addition, competitive advantages ensure the formation of excess profitability of the enterprise. At the same time, this target criterion for the functioning of an enterprise has a number of disadvantages: - the concept of “competitive advantage” is characterized by a number of indicators that are very difficult to integrate into a single meter; - competitive advantage characterizes the relative position of an enterprise within a specific industry, while a significant part of enterprises are diversified; - an enterprise can maintain a competitive advantage only in a relatively short period time. Thus, ensuring competitive advantages can be considered as a task of the main functional management systems but not as the main goal of the enterprise.

Bibliography

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The goal of managers is to strengthen their position in the company, to achieve career growth(from a low-level manager to the president or general manager of the company) and corresponding decent remuneration. The position of a manager in a company largely depends on how the owners evaluate his (or her) activities. Of course, the owners are interested in profit - this is their income. But if the profit generated exceeds the minimum limits set by the owners, then how far should the profit increase extend? This opens up space for managers to operate.

The value of the maximum (potential) profit is very difficult to establish. It depends on too many factors: technology and costs, resource prices, the behavior of competitors, the desires and capabilities of consumers, many of which are beyond the control of the company. Therefore, it is easier for owners to draw a conclusion about the quality of the manager’s work not on the basis of profit values, but focusing on the company’s sales volumes. The greater the sales volume and the greater the company's market share, the more successful its manager is - this is the common belief of the owners. Accordingly, managers will strive to maximize not profit, but sales volume.

What is the difference? The fact is that, as we already know, profit is the difference between total revenue and total costs. And since a company can produce several dissimilar products at the same time, changes in sales volume can be traced based on changes in total revenue without taking into account production and sales costs.

Problem explaining the concept

Let's consider next example. The company's costs and revenues are presented below:

Sales volume, pcs.	Costs, thousand rubles	Revenue, thousand rubles

Let's calculate the profit for each sales level. Profit = Revenue - - Costs:

If the firm were to maximize profits, its sales volume would be 30 units. and she would have made a profit of 50 thousand rubles. If the company pursues the goal of managers - maximizing sales volume either in kind or in monetary terms (revenue maximization), then it will produce more: 50 or 40 units, respectively.

Let us now analyze the situation in general view. Let's compare the results that a company gets when maximizing total revenue and maximizing profit.

Profit maximization, as we saw earlier, means finding a volume of output that satisfies the condition: MR(Q) = MC(Q). When maximizing total revenue, the firm strives to produce

L"T'P f X

so much that: -= 0, or work in the area where MR(Q) = 0.

Usually, marginal cost firms are not zero. Already based on this fact, we can conclude that production volumes will differ in these two situations. For the case when the marginal revenue function is decreasing, and this happens when the firm has monopoly power in the market, profit maximization and total revenue maximization lead to different optimal characteristics company behavior: Q,

Thus, we have proven that the volume of production when maximizing total revenue will always be greater than when maximizing profit; In case of maximizing revenue, the company will overproduce the product. Since the natural limit to overproduction is the state of demand, the company’s focus on maximizing total revenue can be characteristic either for a short-term period, or for a company operating in conditions of unsaturated (and even scarce) demand.

At the same time, a decrease in sales leads to a number of negative aspects for the manager and for the company as a whole, which makes it difficult for the company to transition from maximizing sales to other possible goals.

Disadvantages of declining sales that limit choice similar option managerial behavior are as follows.

• 1. A snowball effect occurs: a reduction (even temporary) in sales volume leads to a decrease in the popularity of the company as a whole among consumers.
• 2. The firm’s relationship with banks and the capital market changes: a decrease in output means a decrease in confidence in the firm as a reliable borrower, which reduces the firm’s ability to use capital market funds and, therefore, reduces overall financial resources companies.
• 3. A reduction in output and sales leads to losses of distributors and some distribution channels, which can ultimately result in a decrease in the company’s sales efficiency.
• 4. A possible consequence of a firm's declining market share due to decreased sales is its loss of market power.
• 5. As a result of a decrease in output, the company becomes vulnerable to changes in the business situation in the economy; it becomes more susceptible to fluctuations in economic conditions.
• 6. Sales volume is a criterion for demonstrating the performance of a company for shareholders (especially potential ones). Consequently, a reduction in output leads to a decrease in the volume of investment in a given company, and can also be reflected in a fall in the price of the company's shares on the stock exchange.

So, we see that the transition from maximizing sales to a goal that requires reducing output encounters very great difficulties that jeopardize the position of the company as a whole in the market. Therefore, it is difficult to expect that such a transition can be carried out in the short term with normal conditions functioning of the company. If a company produces too many goods, then only extraordinary circumstances (crisis, etc.) can stop it.

In addition, the amount of profit affects the position of managers indirectly, through the payment of bonuses for work or through the dissatisfaction of owners with the activities of the manager and the reduction of additional cash receipts, and the position of the manager is directly affected by administrative expenses accountable to the manager, since they are used to pay for company cars, office equipment and the managers’ quarters, everything that constitutes the “prestige” of the work. Therefore, both the amount of profit and the level of administrative expenses will be equally significant for managers. Moreover, if the amount of profit depends not only on the efforts of the manager, but also on other factors beyond his control, then the amount of administrative costs is almost entirely determined by the manager himself.

Managers who maximize their own wealth will always spend more on administrative needs, and the firm's profits will be smaller than if the firm were maximizing profits. And although in the short term the output of such a firm may not differ from the output of a profit-maximizing firm (a large amount of administrative expenses is quite achievable through the redistribution of existing profits), in the long term the focus on increasing administrative expenses leads to a fall in output.

As in the case of an individual owner, the coincidence of interests in maximizing utility and maximizing profit is possible provided that profit is the only criterion for the activities of managers, while administrative expenses do not have a significant impact on their position in the company. This is possible, for example, when managers are also the owners of the company.

Task illustrating the problem

The company sells goods for monopoly market, the demand for which is equal to: P(Q) =

100-Q. It is known that the total costs of the company are: rC(Q) =

=|q 2 +ioq.

• 1. What sales volume will be typical for the company if it maximizes profits? What is this maximum profit?
• 2. If the company is managed by a manager seeking to maximize sales volume (in monetary terms - TR), what sales volume will he choose? What will be the company's profit now?
• 3. The owner of the company sets a minimum criterion for profitability: profit should not be lower than i = 700 thousand rubles. What sales volume will be established by the company managed by the same manager? Is this limit on profits effective?
• 4. On next year the owner of the company sets another minimum criterion for profitability: profit should not be lower than i = 900 thousand rubles. What sales volume is now achieved by the company managed by the same manager? Is this limit on profits effective?

Solution

1. The firm’s profit function is obtained as the difference between its revenue and costs:

ll y dp f 90 - 3Q = Oh,

The maximum profit will be at - = 0, i.e. ^

From here we get the value of the maximum profit

2. In pursuing the goal of maximizing sales, the company takes into account only the total revenue function:

The first order condition for maximum sales volume is

The optimal sales volume for this purpose will be Now the profit will be equal to

Thus, we clearly see that when maximizing sales, profit is significantly less than its maximum value.

3. If the owner sets the minimum profitability criterion at the level k = 700, a manager seeking to maximize sales volume will sell the same number of units of goods Q maxT „ = 50 thousand units that we established in the previous calculation, since the resulting profit satisfies the owner’s profitability criteria: I p,a, 7*Yu) > *(Q) = 700 thousand rubles.

Therefore, this profit limit is not effective. The manager does not change his behavior (see figure).

4. If the owner sets the minimum profitability criterion at the level of i tsh = 900, the previous volume is 50 thousand units. will not be able to meet this profitability criterion.

Let's calculate the volume of sales that the manager needs to realize in order to make a profit of at least 900 den. units

Using the profit formula and equating its value to 900, we will find the optimal sales volume

Thus, a manager striving to maximize sales volume and having a limit on the amount of profit i = 900 thousand rubles, will sell (see figure) approximately 47 thousand units. goods, i.e. the amount that lies in between

This profit limit is more effective compared to the previous year, since it forces the manager to change output in a direction more favorable to the owner.

Every society faces three major and interrelated problems:

1. What goods should be produced and in what quantities, when should they be produced

2. How exactly to produce these goods, that is, technology and what resources to use, what to give priority to: intelligence or muscles

3. For whom to produce, i.e. how to distribute these goods among individual consumers and what kind of consumers they are: individuals or companies. For the production of any product (provision of services) it is necessary

the presence of four factors: land, capital, labor, entrepreneurial talent. It is the entrepreneur who combines the first three factors to produce goods for profit. Entrepreneurial activities are already as diverse as human needs. All the numerous manifestations of entrepreneurship can be reduced to the following:

Production - is the most important type entrepreneurial activity aimed at the production of goods and provision of services. This activity is carried out by enterprises that produce various products, create works, provide services, create spiritual benefits (training, painting, music);

Commercial entrepreneurship involves commodity-money and trade-exchange operations. Representatives are various trading establishments selling consumer goods and means of production;

Financial is an activity in the field of monetary relations. The object of purchase and sale is money, currency, securities. Among these types of entrepreneurship, manufacturing is important.

because if you do not produce anything, then there is nothing to consume, sell, or exchange. Therefore, in the future we will focus specifically on manufacturing entrepreneurship. Organizational production entrepreneurship is carried out in firms. This is where the entrepreneur makes decisions about what to produce and how to produce it in order to maximize profits. However, the company exists in a certain market environment and its behavior is influenced not only by internal, but also external factors. To achieve its goal, the company is forced to produce certain models of behavior.

There are many models that explain the behavior of business firms in terms of tasks and goals. Among them: a profit maximization model, a sales maximization model, a growth maximization model, a managerial behavior model and a value added maximization model.

. Profit maximization model provides that main goal of the firm is to maximize the value of the firm in the long run. Since the value of a firm in the long run is determined by the stream of future income, which may or may not meet the firm's expectations, the model contains the present value of future money and the concept of risk.

. Current value. The old saying that a bird in the hand is better than a pie in the sky directly relates to the value of money, since money loses some of its value over time. The main reasons for this phenomenon are:

Inflation, which occurs because a general increase in prices causes the value of the currency to fall;

A risk that grows over time due to uncertainty about the future. Most people strive to avoid risk, and therefore value money that they have today more highly than money that they should have in the future;

Liquidity bias. Liquidity is a measure of how quickly assets can be sold and cash raised. Investors are prone to liquidity, and therefore prefer existing money

This means that you need to know the future value of money in order to make decisions about the efficient use of resources now. The concept of present value is based on the principle of compound interest. Pripus. The incentive is that the investor has 1,000 UAH and invests it in the bank at 10% per annum. How to determine the value of money after three years?

Similarly, at the end of the third year the value of money will be 1,000 UAH (1 i) 3= 1,331 UAH

If the future value of money is denoted by FV (Future Value), the current value is PV(Present Value), and the number of years in n then we have a formula for calculating the future value of money

F.V.=PV(1 i)n .

The reverse process to compound interest is called discounting. If we expect that the amount of money after three years will be equal to 1,000 UAH (1 i) 3, then the discounted current value is 1,000 UAH in the conditions interest rate i will be:

1,000 (1 i) 3 / (1 i) 3 = 1,000 UAH

In general, the present value (PV) of future profits n has the form: PV = n / (1 i)n .

However, it should be remembered that this formula is used in cases where future income is considered reliable. In the case where future income cannot be considered guaranteed, you must use the discount rate r, which is defined as i plus a risk premium that compensates for it. Thus, the value of r reflects the degree of risk

Regardless of which variable is used (i or r), the model maximizes the present value of the discounted income stream

. Notes on the Profit Maximization Model. The principles embedded in the profit maximization model allow us to understand what the company's strategy should be, how it makes decisions and takes into account the influence of time. However, there are certain comments that limit the adequacy of this model:

1. The firm can accurately predict the magnitude and time distribution of the future income stream

2 there are social, legal, ethical restrictions on the desire of the company to maximize profits. This means that in fact the company is trying to have not maximum, but optimal profit. Recognition of these circumstances has led to the emergence of alternative models based on other motives for the behavior of firms.

. Sales Maximization Model stipulates that a firm that seeks to maximize sales agrees to give up profits that are above a specified minimum in order to increase sales

Researchers give reasons why firms may provide benefits to increased sales:

1. Changes in sales are more sensitive to changes in trading methods and production technologies than changes in income

2 managers of the company admit that the lack of growth in sales leads to a decrease in the company's influence in the market and reduces its competitiveness. In addition, the company's image and its relations with consumers suffer. financial institutions and employees.

3. In most cases, the firm's managers are employees and the evaluation of their work is more sensitive to the level of sales than to the level of profit (as long as an acceptable level of profit is maintained)

notes on the sales maximization model is that firms are willing to give up short-term profits in favor of maximizing long-term profits. Maximizing long-term profits in this case is part of their strategy, directly aimed at maintaining competitive advantages that can bring greater profits in the future.

According to growth maximization models Once a firm reaches a level of output that consistently maximizes profits, output must remain constant as long as costs and demand remain the same. Under these conditions, the company has no reason to further increase production and sales.

However, in real life demand and costs do not remain unchanged. Typically, growth is financed either through earnings, or through borrowing, or through both; in the long run, a firm's growth rate will depend on its income stream. Obviously, while the differences were not in the short-term interests of firms that maximize revenue or profit growth, their long-term interests will be the same.

Thus, it is possible notice that a decision to maximize growth will be a decision to maximize profits in the long run

. Model of managerial behavior highlights the difference between the interests of owners and managers. She argues that managers seek to maximize their own wealth. So, there are fundamental contradictions between the interests of the owners and the management of the initiative, since by maximizing their own benefit, the managers reduce the benefit of the owners.

IN modern conditions the model is becoming more and more practical significance, as more and more company owners are faced with manifestations of opportunistic behavior of managers. Confirmation of the opportunism of managers is the increase in the item “administrative and managerial expenses” because most often managers are deprived of the opportunity to maximize their income in cash, but they have the opportunity to increase their well-being in another way: use modern office equipment, have a prestigious car, etc. in.

comments This model is that the owners of the company must organize the remuneration of managers in such a way that a large part of their wages depends on final results activities of the company, for example, the procedure for income.

. Value Added Maximization Model (Japanese Model) is a long-term concept aimed at maximizing the benefits of all participants: managers, workers, suppliers and shareholders. Its rising philosophy is that the main goal of a private company is to reward its employees (both managers and ordinary employees). The rewards include not only increasing wages, but also the pleasure of producing high-quality products. Since wages and other personnel costs are components of added value, management and labor will be partners who pursue the same goal - maximizing added value.

The model has significant restrictions since it can only be used in... Japan. It is based on an understanding of harmonious and coordinated relationships between workers and managers, between government and business. The model requires a corporate environment, stimulates corporate training, friendly relations and the dedication of all employees to corporate values. In other countries, managers usually equate the corporation with special authorities. They see themselves as monarchs in their company.

Each of the models considered is based on various bottom-up assumptions regarding the goals of the company, which determine the pattern of management behavior of the company and the process of developing management decisions. The harmonious organization of the corporation, which is provided for in the model of maximizing added value, is the most promising. However, in the future, the profit maximization model will be used, since it is precisely this the best way explains the behavior of most Ukrainian firms. Although the profit maximization model has certain shortcomings, it provides insight into the relationship between costs and benefits in both the short and long term. In addition, without profit it is impossible to survive in a competitive environment.