Managers play greatest roles in ensuring business growth and sustainability. The responsibilities of the managers vary depending on the operations undertaken by the organization. Consumers perform crucial roles in determining the future of a company because entry and exit of goods and services define market structure in a given region (Jhally, 2014, p. 21). This paper analyses an interrelation between consumers and the management. Effects of consumer sovereignty will be evaluated and a link is made to identify its implications on the attainment of business goals and progress. This paper also identifies the differences between profit maximization and wealth maximization in relation to economic prosperity.
Consumer Sovereignty and Production
Internal and external factors determine the progress of any business organization. Internal factors include consumers and organizational culture. Government policies affect the operations of an organization externally. Consumer priorities change shopping patterns in the organization. Consideration of the buyer's needs is crucial in a business set up. Consumers choose commodities based on their preferences (PLC, 2011, p. 5). Buyer preference affects the production of new products in the company. Consumer sovereignty is the power of the buyer to manipulate and impact the market forces, which is demand and supply (PLC, 2011, p. 8). Frequent consumers determine the production in an organization. Privatization of business institutions has resulted in this consumer factor because most all companies are competing retain their potential customer. The stiff competition between organizations drives them to consider the demands of the buyers. Adam Smith is one of the Economists who advocated for consumer sovereignty in business operations. Consumers have freedom of production; therefore, a producer applies the principles of liberty to produce varying types of goods and services to meet the needs of his/her consumers.
The consumers reveal their tastes and desires to the potential producers via with the influence of price model mechanism. Scarcity of resources and an increase in the number of wants from the buyers characterises most economies in the world. The shortage of resources makes it difficult for people to meet their needs. The concept of priority applies to the selection of essential products from the varying types offered produced in the company. Customers' preferences drive them to buy the goods even with higher prices, therefore, enabling the enterprise to make a lot of profit from the business transactions. A competent manager analyses the type of products and services that are urgently required by the consumers, therefore, setting appropriate prices for each item and service. Profit maximization relies on both internal and external factors. Tesco Company has made a lot of business progress after championing the needs of its customers and producing goods based on the preferences of these potential clients (PLC, 2011, p. 7). Critical analysis of the choices made by the buyers helps in the determination of the market demand since it influences production and supply of the finished products. Those products with higher demands are likely to be produced in large quantities to meet the needs of the consumers.
The concept of alienation is one of the productive economic tools that describe the effects of consumer sovereignty and preference on profit maximization. In his theoretical model, economists proposed that crucial spheres of influence like culture, environment, socioeconomic factors and social ambitions affect historical development of the people, therefore, impacting their sovereignty. Failure of consumer sovereignty does not lead to discrepancies on the social outcomes of an individual buyer. Smith proposed on the need to balance the rate of production with market demand to increase business profits and reduce wastages (Jhally, 2014, p. 23). Adam Smith also recommended for an analysis of the social and political factors that may affect profit maximization. Government policies may affect the sovereignty of the consumers especially if the government is responsible for regulating all business operation.
The market structures majorly define various ways in which different companies operate. The market place comprises of demand and supply forces. Market structures vary between companies due to their ability to retain customers and attain the market demands; therefore, the characteristics of a market relative to the buyers' preferences define the position of a company in the market places. Competition is another component of market structure because different companies in Britain compete for the available markets both locally and internationally. In a perfect match, companies compete in the marketplaces without having control of the prices of their goods and services. In a market arena, charging higher rates will force buyers to purchase those products sold at lower prices. A large number of both sellers and buyers creates a freedom entry and exit of commodities within the market structure (PLC, 2011, p. 12). Fair competition between Tesco and other British companies is characterized by a more substantial number of sellers and customers, homogenous products and free movement of products within the marketplace. These factors make the products and services perfect substitutes, therefore, leading to an ideal elastic demand and supply curve.
The second market structure observed in Britain is a monopolistic business competition. Monopoly is an imperfect competition whereby a particular company takes advantage of high product demand. This market structure arises when one company is producing some products and services solely. The companies have control over the prices of the goods and services in the market. Most restaurants in the country are monopolistic because they produce unique products (Lukic, 2016, p. 27) the uniqueness arises from the difference in the types of recipes possessed the various restaurants. The menu provided in the multiple restaurants is different. Each organization is improving the quality of its foods to retain more customers and have an advantage over other restaurants.
Oligopoly also determines the market structure of most of the UK companies. Oligopoly is a scenario whereby few companies are competing imperfectly. The involved organization influences the market prices of the products and services. Product entry into the market arena is difficult due to the ability of the producers to control product prices. If a particular company is making a lot of profits from the sale of some goods, other organizations will venture into the production of those commodities to create a fair competition within a marketplace, therefore, improving the structure. The ability of an organization to satisfy the needs of consumers leads to business success. Tesco Company is one of those organizations that have strategies on the various ways of improving business transaction through consumer engagement (Lukic, 2016, p. 58). Through this plan, Tesco has reached out more than thirty thousand buyers all over the country. These consumers provide different various regarding the quality of goods produced in Tesco. The ability to consult from clients enables the company to produce foodstuffs that will gather for the needs of all people (PLC, 2011, p. 76). Some consumer requires products that are free from too many sugars and cholesterol because of the related health conditions. Macdonald Company deals with recruitment of professional Real estate personnel in United Kingdom. Macdonald invites applicants from all countries in the world (Hall et al, 2016, p. 62). Macdonald Company enjoys the monopoly because it is the leading organization in recruiting the Real estate workers. On the other hand British Airways operates on online booking and management of all operations undertaken in the organization. The market structure of British airways relies on the quality services provided to clients within and beyond the premises of the company.
Comparing and Contrasting Profits Maximization and Product Maximization
Economics and financial management focus on attaining business objectives and improving general performance in the organization. Proper utilization of funds and resources lead to both profit and wealth maximization in the business organization. Profit maximization is an aim of increasing the profits from all business transaction while wealth maximization is the ability to accelerate the worth of all entities in the organization. Profit maximization aims at achieving short term objectives for the organization while wealth maximization focuses on attaining long term objectives (Lukic, 2016). Wealth maximization is therefore crucial in ensuring business sustainability and growth. Another difference is that the process of profit maximization is typified by the concern to gain more massive amount of returns and profits from the business operations. On the other hand, wealth maximization focuses on its ultimate goal of boosting the market value of all the shares in the organization. Profit maximization acts as a guideline for computing the efficacy of all operational entities while wealth maximization offers an advantage in achieving a significant share in the market structure.
Profit maximization and wealth maximization are two different business concepts that have a closer interrelation because they are complementary to one another. There are some similarities between the two financial concepts. The increase of the value of the products and goods due to wealth maximization leads to profits maximization (Hall et al, 2016, p. 32). Wealth maximization focuses on the increment of business stock, therefore, increasing the returns after the transaction. In most of the companies and financial institutions, profit maximization depends on the objectives and achievements made from the wealth maximization.
The Superiority of Wealth Maximization over Profit Maximization
Wealth maximization has accepted in all business fields because of its focuses on the interests of the producers, shareholder, and consumers, unlike profit maximization that considers the plans of the owners alone. Wealth maximization is superior to profit maximization due to the difference in sustainability levels of their goals to the business organization (Lukic, 2016, p. 25). Wealth maximization improves the management of shareholders' utilities. Wealth maximization is an appropriate strategy because it considers the time value of capital and other business resources unlike in profit maximization.
On the other hand, profit maximization does not consider the time value of money. The wealth maximization encourages innovation and product promotion, therefore, leading to increased quality of products and services offered in the organization. Change promotes business performance and customer satisfaction.
The general nature of wealth maximization eliminates the exploitation of workers and consumers. Profit maximization is a plan made by the company to solely gather for its needs and achieve significant returns from any business activity. Business operations are faced by a lot of obstacles due to scarcity of resources, imperfect competition, incompetent employee, inappropriate planning and environmental constraints. Through wealth maximization, a company is able to minimize negative impacts resulting from these risks (Lukic, 2016, p. 104). The ability to reduce these barriers relies on the fact that wealth maximization considers the dangers related to prospective earning unlike in the profit maximization.
Economic Prosperity in the United Kingdom
Environmental policies provide a framework for analyzing economic growth in the c...
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