This document contains a student's term paper submission for a Corporate Finance course. It includes a cover page with the course and student details, a letter of transmittal to the professor, a table of contents, and the beginning of the paper itself. The paper discusses the objectives of the firm, including its meaning and importance. It covers the SMART criteria for objectives, factors that influence objectives, and the hierarchy of objectives within a firm from aims to individual targets.

2. Course name: Corporate Finance
Course code: 7202
Date of submission: 10/08/2014
Submitted to:
Santi Narayan Ghosh
Professor
Department of Accounting & Information Systems
Faculty of Business Studies
University of Dhaka
Submitted by:
A. B. M. Abdullah
Department of Accounting & Information Systems,
MBA 16th Batch, Section – C
ID-16010
Serial No-03

3. Letter of Transmittal
Department of Accounting & Information Systems
University of Dhaka
August 10, 2014
Santi Narayan Ghosh
Professor
Dept. of Accounting & Information Systems
University of Dhaka
Subject: Submission of final term-paper
Dear Sir,
I am delighted to submit my term-paper on ‘Objective of the Firm’. This paper has been
prepared according to your authorization. To prepare this paper, I have gone through many
articles, reports, journals and research papers for collecting necessary information.
I am thankful to you for assigning me for preparing such a paper that will increase my
knowledge in different areas of business.
Sincerely Yours,
A. B. M. Abdullah
Serial-03
ID-16010

4. Table of Contents
Contents Page Number
Acknowledgement 01
Executive Summary 01
Introduction 02
Literature Review 03
PART 1 Objectives of the Firm: Fundamentals & Nature 05 - 09
1.1 Meaning of firm 05
1.2 Objectives of a firm 05
1.3 Importance of objectives 05
1.4 SMART objectives 06
1.5 Direct and indirect benefits of SMART objectives 07
1.6 Factors influencing the formulation of firm’s objectives 07
1.7 Hierarchy of objectives in a firm 08
PART 2 Objectives of the Firm: Operational, Time-based & Others 10 - 14
2.1 Operational objectives 11
2.2 Time-based objectives 12
2.3 Other objectives 13
PART 3 Objectives of the Firm: Major Areas 15 - 21
3.1 Economic objectives 16
3.2 Social objectives 17
3.3 Human objectives 19
3.4 National objectives 20
Conclusion 22
Bibliography 23

5. Acknowledgement
Firstly, I give my thanks to the Almighty Allah for giving me patience and capability of
collecting information. I am heartily grateful to my instructor Prof. Santi Narayan Ghosh whose
encouragement, guidance and support from the initial to the final level enabled me to complete
this paper. I would like to extend my thanks to all those writers, researchers, journalists and
bloggers whose works provide me with all the necessary information.
Executive Summary
The term ‘Firm’ includes any organization or association of people which have legal operations
in a locality or in a country. These firms are fundamentally those entities which serve the
economic objectives of a group of people. But besides the economic objectives these firms have
to serve some other objectives also.
Firms have different objectives at different level of organizational settings, for example-top level
objectives, divisional objectives, departmental objectives and individual employee objectives.
All these objectives are important for the survival and growth of a firm. Again, all these
objectives are influenced by some social, economic, legal, cultural, national and international
factors.
As being economic entities, firms have three broad categories of objectives- (1) Operational
objectives (for example- profit maximization, sales maximization, utility maximization, growth
maximization, personal welfare maximization, social welfare maximization etc.), (2) Time-based
objectives (for example- long-term objectives, medium-term objectives and short-term
objectives) and (3) Other objectives (for example- qualitative objectives, strategic objectives,
ethical objectives, CSR objectives etc.).
Again, a firm has to deal with a lot of stakeholders. As a result, it has to fulfill its objectives in
different areas especially in four areas, for example- (1) Economic objectives (for example-earning
profit, creating customers, innovations etc.), (2) Social objectives (for example-supplying
desirable goods at reasonable prices, providing fair remuneration to the employees,
ensuring good working conditions, employment generation, fair returns to the investors, social
welfare etc.), (3) Human objectives (for example- worker welfare, developing human resources,
participative management, worker-management co-operation etc.) and (4) National objectives
1

6. (for example- optimum utilization of resources, national self-reliance, development of small
scale industries, development of backward areas etc.).
Thus, the objectives of a firm can be determined from different point of views. But there is no
doubt that a firm must be sincere in discharging all these objectives for long-time survival,
growth and prosperity. If any firm does the otherwise for short-term gains, it will face very
unfavorable outcomes in future.
Introduction
Background: Today’s world is rapidly advancing. As a result, the economic activities of people
are also increasing on a large scale. In this situation, firms (mainly the business organizations
and associations) are the main center of all these economic activities. Traditionally the main
objective of a firm was to maximize its profits. But now-a-days, this traditional motive of firms
is changing and firms are becoming more welfare-oriented. Firms are now required to fulfill their
social, humanitarian, national and many other objectives for long-term survival. In fact, the
changing demands of people, public awareness, human right concerns, environmental concerns
have jointly made the firms change their motives.
Purposes: The purposes of this paper are to:-
 Define ‘firm’ and its objectives.
 Describe the importance, levels and nature of firm’s objectives.
 Discuss the operational, time-based and other classifications of firm’s objectives.
 Identify the areas where the firm needs to extend its objectives.
Methodology & limitations: This paper has been prepared based on content analysis.
Information has been collected from different books, articles, journals, websites and blogs. All
the collected information has been analyzed to identify the objectives of firm and other
influential factors. The objectives of a firm are described broadly and in an organized manner.
The main limitation of this paper is that all the information has been collected from secondary
documents. Moreover, this paper has been prepared within a limited time and with my limited
knowledge.
2

7. Literature Reviews
Baumol, W. (1959) pointed out that the objective of a firm is to maximize the sales revenue not
the profit. His research focused on the behavior of manager-controlled businesses. Baumol
argued that annual salaries and other perks might be closely correlated with total sales revenue
rather than profits. Companies geared towards maximizing revenue are likely to make frequent
and extensive use of price discrimination (or yield management) as a means of extracting extra
revenue and profit from consumers.
Burris, T. (2004) has identified six strategic business objectives, for example- (1) Increasing
market share, (2) Strengthening market share, (3) Increase and improve physical resources, (4)
Increasing productivity, (5) Innovation and (6) Action planning.
Chendroyaperumal, D. C. (2009) concluded in his research paper that firms vary in activities,
structure and size, but they all have the same contents, same functions (causal relationships) and
objective.
Dolenc, P., Stubelj, I. and Laporsek, S. (2006) mentioned, “Today firms operate in an
environment where capital is a scarce resource. A firm is usually established with goals and
entrepreneurial motives that are defined with psychological factors such as independence, need
of achievement, sensation of control and risk. Nevertheless, a firm cannot survive in a long-run if
it does not follow the financial objective of shareholder value maximization, which enables a
firm to gather the necessary capital resources on the market.”
Lankoski, L. (2008) holds the view that there are increasing calls for combining the
environmental and social objectives of business with profit objective. But these types of
combinations do not always bring about win-win situations for the firm. Therefore, combining
all these objectives under a win-win situation requires much effort from the management of the
concerned firm.
Root, N. G. (2014) says, “Your business objectives are the results you hope to achieve and
maintain as you run and grow your business. As an entrepreneur, you are concerned with every
aspect of your business and need to have clear goals in mind for your company. Having a
3

8. comprehensive list of business objectives creates the guidelines that become the foundation for
your business planning.
4

9. 5
PART 1
Objectives of the Firm: Fundamentals & Nature
1.1 Meaning of firm
In this paper, the objectives of a firm will be discussed broadly. Here, the term ‘firm’ has
represented any kind of economic entity. Any kind of business organizations- sole
proprietorships, partnerships and companies all are considered as firms. Basically, all these firms
are commercial entities which sell goods and services to the customers. Again, another important
characteristic of firms is that they are legal undertakings because no illegal undertakings,
organizations and associations fall under the concept of firm.
1.2 Objectives of a firm
Firms are not established without any reason. A firm has many objectives which include:-
 Desired outcomes from individuals, groups and organizations
 Broad goals or strategies which the organization seeks to adopt in order to achieve its
primary aims
 The specific intended outcomes of organizational strategy
The objectives of a firm can also be broadly classified as primary objectives and secondary
objectives. The primary objectives are ultimate objectives or long term objectives. Primary
objectives are also known as strategic objectives. For example, target for being market leader or
growth target are primary objectives of a firm. The secondary objectives on the other hand are
those objectives that support the primary objectives. These are also called tactical objectives.
They are generally short term in nature. For example, increasing the current year’s sale,
minimizing the current year’s costs, advertising and so on are secondary objectives of a firm.
1.3 Importance of objectives
For various reasons, objectives are important for a firm. Firstly, objectives are clear statements of
what needs to be achieved. Secondly, objectives focus on all the target groups and individuals.

10. Thirdly, objectives are the means of measuring performance. Finally, objectives guide all the
actions undertaken by the firm.
1.4 SMART objectives
All the objectives of firms should have five basic characteristics. These characteristics are
precisely called SMART. In this term, S = Specific, M = Measureable, A = Agreed, R = Realistic
and T = Time related or time scaled. The explanations of all these characteristics are presented in
as follows:
6
Characteristics Explanations
Specific  An explicit statement of the required outcome of the objectives
 A clear statement
 not something vague etc.
Measurable  A tangible target
 Objectives should be stated in number terms
 A measurable objective can be assessed against the plan
 But does not rule out qualitative objectives etc.
Agreed  Agreed with the people concerned rather than imposed
 Participation and agreement of the employees
 increasing commitment to achieving the objectives etc.
Realistic  Achievable objectives
 based on an assessment of the organization’s resources and capabilities
 Unrealistic or unachievable aims are likely to be ignored or to de-motivate
employees etc.
Time related  Objectives should be expressed in terms of the date by which it is to be
achieved
 Completion dates should be specified
 Interim performance measurement date should be specified etc.
Table 1.1: Explanation of SMART objectives in a farm

11. 1.5 Direct and indirect benefits of SMART objectives
There are many direct and indirect benefits that a firm gets from SMART objectives, for
example:-
 Proper implementation of the firm
 Providing a clear focus on decision making
 Setting appropriate target
 Motivating employees
 Facilitating control and actual performance
 Providing means for evaluating and improving performance
 Reducing uncertainty in the firm
 Creating a sense of unity among the employees of the firms etc.
1.6 Factors influencing the formulation of firm’s objectives
There are many inside and outside factors that influence the formulation and determination of
objectives of a firm. Those influential factors are as follows:
 Age of the firm
 Size and legal status
 Ownership structure of the firm
 Views of owners and managers specially top management
 Market conditions and holding of market share
 Legislation of the courtly
 State of the overall economy
 Competition and competitive advantages
 Risk and manager’s/owner’s attitude to risk
 Corporate culture in the firm and in the overall industry
 Favourable or unfavourable political factors
 Social attitudes towards the firm etc.
7

12. 8
1.7 Hierarchy of objectives in a firm
Figure 1.1: Hierarchy of objectives
1.7.1 AIMS
The overall purpose of the firm is called the aim. Generally it is the long-term goal a firm tries to
achieve. Different firms have different aims. For example, consider that a show manufacturing
company has good profitable business in the market. The XY Company has a long term goal of
being the market leader in the region/country. This long term goal is considered as the aim of the
firm.

13. 9
1.7.2 Mission statement
A statement of the business’s core aims, phrased in a way to motivate employees and to stimulate
interest by outside groups. It’s an attempt to condense the purpose of the business’s existence
into one statement. Suppose, XY Company wants to maximize the value of the shareholder’s
equity, it is represented through a mission statement of the company.
1.7.3 Corporate objectives
These are the targets which the firm wants to achieve in the way of fulfilling its aim. For
example, XY Company wants to increase its net profit of all divisions by 10% per year.
1.7.4 Divisional objectives
These are the specific targets set for each divisions. For example, XY Company has three
divisions of business operation. The company is planning to increase sales in each division by
20% and to reduce overhead in each division by 10%.
1.7.5 Departmental objectives
These are the targets set for each department. For example, Marketing department: Increase sales
by 10%, Finance department: Reduce Long-term borrowing by 5%, R&D: Develop one
innovative product each year etc.
1.7.6 Individual targets
Targets or goals set for every individual related to the form. For example, every salesman has
been assigned with a target that each of them will have to increase the sales by 100 units per
month.
At the end of this chapter, it can be said that setting appropriate objectives is very important for a
firm. While, setting objectives for a firm, it should also be kept in mind that business objectives
are influenced by many factors and none of those factors should be overlooked. A firm should
select the most appropriate objectives of it and deploy mechanisms to achieve them. These will
ensure long-term survival of a firm.

14. 10
PART 2
Objectives of the Firm: Operational, Time-based & Others
For survival, a firm has to fulfill many objectives. These objectives are, in many cases, very
different from one another. They differ in operational activities, time frames of completion and
purposes. Based on their origins objectives of firms a firm can be grouped into three categories.
All the objectives of a firm directly or indirectly fall under any of these three categories. These
three categories of firm’s objectives are as follows:
No. Category of
objectives
Firm’s objectives
1 Operational objectives Profit maximization
Sales maximization
Utility maximization
Growth maximization
Personal welfare maximization
Social welfare maximization
2 Time-based objectives Long-term objectives
Medium-term objectives
Short-term objectives
3 Other objectives Qualitative objectives
Strategic objectives
Ethical objectives
CSR objectives
Table 2.1: Categories of business objectives
All these objectives will be discussed in this chapter.

15. 11
2.1 Operational objectives
2.1.1 Profit maximization
Profit maximization is sometimes considered as the guiding principal of a firm. Profit
maximization is the highest difference between total revenue and total costs of a firm. Every for-profit
firm tries to maximize this difference because it is important for achieving growth and
long-term sustainability of the firm. Sometimes, firms sacrifice other objectives to maximize
profit which does not bear any good result. So, while fulfilling profit maximization objective,
firms should be very careful to their other objectives.
2.1.2 Sales maximization
Another important operational objective of a firm is sales maximization. This objective is
sometimes considered as an alternative to profit maximization in many firms. To fulfill this
objective, firms tries to increase their sales volumes through advertising, providing better quality
products & services and customer services. Although it is not always true, many people think
that sales maximization necessarily ensures profit maximization.
2.1.3 Utility maximization
Owner, managers, customers, creditors and other stakeholders have different interest in a firm.
All of them try to maximize their own interest. Since the resources and capabilities of a firm are
limited, it cannot provide all maximum services to all these stakeholders. But the firm should
consider the needs of all these stakeholders and try to meet them in the best possible way to
maximize the utility of the stakeholders.
2.1.4 Growth maximization
Forms pursue no single but multiple goals such as sales maximization, utility maximization etc.
but among these objective, managers keep the prime objective to achieve the top level or the
highest possible level of growth in output. They also try to improve their prestige, technical
superiority and market power. They take the help of effective advertising on a large scale to
influence the consumer in order to attain growth.

16. 12
2.1.5 Personal welfare maximization
People do not start a firm or invest in a firm without any reason. They also have some financial,
social and other objectives, for example, they want to increase their wealth, increase their
prestige, develop their skills etc. Sometimes, they try to achieve their desired outcomes through
the firm. As a result, the welfare of the owners/investors also becomes an important objective of
a firm.
2.1.6 Social welfare
A firm operates in a particular social set up. It gets all the required elements from the society. As
a result, ensuring social welfare has become an important objective of the firm. Creating
employment, protecting environment, promoting social & cultural activities, helping the poor &
disabled people- are some of the way by which a firm can maximize social welfare.
2.2 Time-based objectives
2.2.1 Long-term objectives
Long-term objectives are like long-term aspirations of the owners/managers. These objectives
require a period of at least five years or more to be fulfilled. A long-term objective may be
divided into several short-term or medium-term objectives. Suppose, XY Company wants to be
market leader in a particular area and it will take a long time for the company to fulfill this
objective. Again, this broad objective will be divided into several short-term and medium-term
targets/objectives.
2.2.2 Medium-term objectives
Medium-term objectives have less time periods than the long-term objectives. These objectives
generally have more than one year but less than 5-years’ time period. These objectives need
timely reviews and amendments. These objectives also have several short-term objectives. A
medium-term objective of XY Company is establishing a marketing network in a new area which
requires a time period of 3 years.

17. 13
2.2.3 Short-term objectives
These objectives require the very short period of time. Generally, they require at best one year or
less time period to be achieved. For example, XY Company wants to increase the current year’s
sales by 10%. This objective requires a time period of one year or less. So, it is a short-term
objective.
2.3 Other objectives
2.3.1 Qualitative objectives
Sometimes, firms set their objectives to achieve technological leadership, to improve customer
satisfaction, to increase the efficiency of management and to gain reputation. These
targets/objectives cannot be measured in terms of number or money. These objectives can be
considered as the qualitative objective of firms.
2.3.2 Strategic objectives
Strategic objectives are those objectives that have effect on the overall firm. These objectives are
long-term in nature but the specialty of strategic objectives is that they have effect on the whole
firm. Business may have several strategic objectives taking place during the same time. Firms
usually set these objectives to achieve growth, to increase market share to provide better
customer services than the rivals and to enhance image & reputation.
2.3.3 Ethical objectives
Ethics are the moral principles that guide the decisions and strategy of a firm. A firm following
the codes of ethics treats its employees, customers, stakeholders and the environment in a
responsible manner. Hence, ethical objectives of a firm are those objectives which fall under the
ethical behavior. For example, a firm may have objectives to provide more financial benefits to
its employees or a firm may have objectives to ensure best environmental practices.
2.3.4 CSR objectives
These objectives are also very important for a firm. Now-a-days, firms perform many CSR
activities in the areas of social, humanitarian, environmental, medical, arts and cultural fields.

18. Again, firms may have one or more objectives behind these CSR activities. The important
objective of CSR activities is to increase brand image & reputation.
At the end of this chapter it can be said that a firm is both a social unit and an economic unit. It
operates through a group of people who works in a continuous basis to achieve a particular
objective or set of objectives. It is not mandatory that all firms have similar objectives because
the setting of objectives in a firm depends much on the situation, capability and resource
availability. Whatever the objectives are, a proper classification of them helps the firm to review
the objectives, to measure the performance and to take corrective actions. Again, through a
proper classification of objectives, owners/managers can understand the relative importance of
each objective.
14

19. Objectives of
Business
Firms
Social
Objectives
Objectives National
15
PART 3
Objectives of the Firm: Major Areas
Every business firm has certain objectives which regulate and generate its activities. Objectives
are needed in every area where performance and results directly affect survival and prosperity of
a business firm. As a result, a firm is to device plans to fulfill all its objectives in all those areas
and at the same time it is to measure the achievements. Various objectives of business firms may
be classified into four broad categories as follows:
Economic
Objectives
Human
Objectives
Figure 3.1: Broad areas of firm objectives

20. 16
3.1 Economic objectives
Business firms are basically economic entities. As a result, its primary focus is rested on
economic factors in reality. Economic objectives of a business firm are discussed below:
3.1.1 Earning profits
A business firm is established for earning some income. It is the hope of earning profits that
inspires people to start business. Profit is essential for the survival of every business unit. Just as
a person cannot live without food, a business firm cannot survive without profit. Profits enable a
businessman to stay in business by maintaining intact the wealth producing capacity of its
resources. Profit is also necessary for the expansion and growth of business. Profits ensure
continuous flow of capital for the modernization and extension of business operations in future.
Profit also serves as the barometer of stability, efficiency and progress of a business enterprise.
3.1.2 Creating customers
Profit is not generated by natural forces. It arises through the efforts of the businessman to satisfy
the needs and wants of the customers. A businessman can earn profits only when there are
enough customers to buy and pay for his goods and services. There is only one valid definition of
business purpose; to create a customer. The customer is the foundation of a business firm and
keeps it in existence. It is to supply the customer that society entrusts wealth-producing resources
to a business enterprise. (Drucker, 1993)
No business firm can succeed without providing customers value for their money. Business
exists to satisfy the wants, tastes and preferences of customers. In order to earn profit, business
must supply better quality goods and services at reasonable prices. Therefore, creation and
satisfaction of customers is an important economic objective of business. Business creates
customers through advertising and salesmanship. It satisfies the needs of customers by producing
the required goods and services and by creating utilities.
3.1.3 Innovations
Business is an organ of dynamism and change. In these days of competition a business firm can
be successful only when it creates new designs, better machines, improved techniques, new

21. varieties, etc. Modern science and technology have created a great scope for innovation in the
business world. Innovation is not confined to the invention of a new machine or new product
only. It comprises all efforts made in perfecting the product, minimizing the costs and
maximizing benefits to customers. It involves improvements in management, production, selling,
servicing, methods of personnel and accounting etc.
Business firms invest money, time and efforts in Research and Development (R&D) to introduce
innovations. They develop new technologies, introduce new designs & new tools and find out
new processes to minimize costs and to satisfy ever increasing wants of customers. In order to
create customers, business has to explore new markets and attract more customers. It has also to
retain old customers by providing better services to them.
17
3.2 Social objectives
A business firms does not exist in air. It is a part of society. It cannot survive and grow without
the support of the society. Business must therefore discharge social responsibilities in addition to
earning profits. According to Henry Ford, "The primary aim of business should be service and
subsidiary aim should be earning of profit." The social objectives of business are as follows:
3.2.1 Supplying desired goods at reasonable prices
Business is expected to supply the goods and services required by the society. Goods and
services should be of good quality and these should be supplied at reasonable prices. It is also the
social obligation of business to avoid malpractices like boarding, Black marketing and
misleading advertising.
3.2.2 Fair remuneration to employees
Employees must be given fair compensation for their work. In addition to wages and salary a
reasonable part of profits should be distributed among employees in recognition of their
contributions. Such sharing of profits will help to increase the motivation and efficiency of
employees.

22. 18
3.2.3 Ensuring good working condition
It is the obligation of business to provide healthy and safe work environment for employees.
Good working conditions are beneficial to the organization because these help to improve the
productivity of employees and thereby the profits of business. Employees work day and night to
ensure smooth functioning of business. It is, therefore, the duty of employers to provide hygienic
working and living conditions for workers.
3.2.4 Employment generation
Business firms should provide the opportunity for employment to the members of the society. In
many countries, unemployment has become a serious problem and the Governments are unable
to offer jobs to all. Therefore, the creation of employment opportunities is a significant service to
the society. If unemployment problem increases, the socioeconomic environment cannot be
congenial for the growth of business activities.
3.2.5 Fair return to investor
Business is expected to pay fair return to shareholders and creditors in the form of dividend and
interest. Investors also expect safety and appreciations of their investment. They should be kept
informed about the financial health and future prospects of business.
3.2.6 Social welfare
Business should provide support to social, cultural and religious organizations. Business
enterprises can build schools, colleges, libraries, hospitals, sports bodies and research
institutions. They can help non-government organizations (NGOs) which render services to
weaker sections of society.
3.2.7 Payment of government taxes
Every business enterprise should pay taxes (income tax, sales tax, excise duty, customs duty,
etc.) to the government honestly and at the right time. These direct and indirect taxes provide
revenue to the Government for spending on public welfare. Business should also abide faithfully

23. by the laws of the country. Thus, businessmen should pursue those policies and take those
actions which are desirable in terms of the objectives and values of their society.
19
3.3 Human objectives
Business is run by people and for people. Labor is a valuable human element in business. Human
objectives of business are concerned with the well-being of laborer. These objectives help in
achieving economic and social objectives of business. Human objectives of business are given
below:
3.3.1 Worker welfare
Business must recognize the dignity of labor and human factor should be given due recognition.
Proper opportunities should be provided for utilizing individual talents and satisfying the needs
of workers. Adequate provisions should be made for their health, safety and social security.
Business should ensure job satisfaction and sense of belonging to workers.
3.3.2 Developing human resources
Employees must be provided the opportunities for developing new skills and attitudes. Human
resources are the most valuable assets of business and their development will help in the growth
of business. Business can facilitate self- development of workers by encouraging creativity and
innovation among them. Development of skilled manpower is necessary for the economic
development of the country.
3.3.3 Participative management
Employees should be allowed to take part in decision making process of business. This will help
in the development of employees. Such participation will also provide valuable information to
management for improving the quality of decisions. Workers' participation in management will
promote in industrial democracy.

24. 20
3.3.4 Worker management co-operation
Business should strive for creating and maintaining friendly employer-employee relations so as
to ensure peace and progress in industry. Employees should be treated as honorable individuals
and should be kept informed about the important policies of the firm.
3.4 National objectives
National objectives of business are as follows:
3.4.1 Optimum utilization of resources
Business should use the nation's resources in the best possible manner. Judicious allocation and
optimum utilization of scarce resources is essential for rapid and balanced economic growth of
the country. Business should produce goods in accordance with national priorities and interests.
It should minimize the wastage of scarce natural resources.
3.4.2 National self-reliance
It is the duty of business to help the government in increasing experts and in reducing
dependence on imports. This will help a country to achieve economic independence. This
requires development of new technology and its application in industry.
3.4.3 Development of small scale Industries
Big business firms are expected to encourage growth of small scale industries which are
necessary for generating employment. Small scale firms can be developed as ancillaries, which
provide inputs to large scale industries.
3.4.4 Development of backward areas
Business is expected to give preference to the industrialization of backward regions of the
country. Balanced regional development is necessary for peace and progress in the country. It
will also help to raise standard of living in backward areas. Government offers special incentives
to the businessmen who set up factories in notified backward areas.

25. Thus, it can easily be understand that a firm has to consider many objectives in different areas.
But all these areas fall under the above four broad areas. In fact, the successes, growth existence
of a firm depend upon how much it is attentive to perform all these objectives. If any firm
neglects any of these objectives, it will suffer in the long run.
21

26. Conclusion
The objectives of a firm are clearly defined targets that are set by the management, owners or by
the investors. The directions and modes in which a firm should operate are come from those
objectives. Management of the firm plans to meet these objectives and keeps track of progress
and deviations. Firm’s objectives are in fact a blend of needs of various stakeholders who are
affected by the activities of the firm.
It has been found that firms which are more sincere in fulfilling their objectives are more
successful than the others. Firms should identify its objectives properly and be active in fulfilling
them. Especially the objectives related to the customers, society and nation should be given more
emphasis because any non-compliance with these objectives will bring heavy bad days for the
firm and the firm will not exist for long.
Sometimes firms are more reluctant to perform the objectives which are not related to maximize
profit. They think that a high emphasis on these objectives will incur much cost and thus reduce
hamper profitability. But performance of these objectives will enhance brand image of the firm
and the customers will be more loyal to the brand. Again, the firm will get more advantages
compared to its rivals. All these will ensure long-term profitability and long-term sustainability
of the firm.
22

27. Bibliography
1) AmosWEB Encyclonomic WEB*pedia. FIRM OBJECTIVES [Online]. Available at:
http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=firm+objectives
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