SALES MAXIMIZATION GOAL

Ø  SALES /REVENUE MAXIMIZATION GOAL
BUSINESS/MANAGERIAL ECONOMICS

Ø  SHASHI AGGARWAL ECONOMICS AND LAW CLASSES

Ø  MEANING OF SALES MAXIMIZATION GOAL

• SALES MEANS TOTAL REVENUE EARNED BY THE FIRM FROM THE SALE OF GOODS
• BAUMOL IN HIS BOOK,” BUSINESS BEHAVIOR,VALUE AND GROWTH” HAS GIVEN A THEORY OF SALES MAXIMIZATION
• ACCORDING TO THIS THEORY, ONCE PROFITS REACH ACCEPTABLE LEVELS, THE GOALS OF THE FIRMS BECOMES MAXIMIZATION OF SALES REVENUE RATHER THAN MAXIMIZATION OF PROFITS.
• DEFINITION
• BAUMOL,” THE SALES MAXIMIZATION GOAL SAYS THAT MANAGERS OF FIRMS SEEK TO MAXIMIZE THEIR SALES REVENUE SUBJECT TO THE CONSTRAINTS OF EARNING A SATISFACTORY PROFITS.
• ONCE ACCEPTABLE LEVEL OF PROFIT IS OBTAINED THEIR GOAL SHIFT TO SALES MAXIMIZATION IN PLACE OF PROFIT MAXIMIZATION.
• FIRMS DO NOT IGNORE PROFIT ALTOGETHER. THEY DO ASPIRE TO ATTAIN GENERAL LEVEL OF PROFIT
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• CONDITIONS OF REVENUE OR SALES MAXIMIZATION
• IN ORDER TO MAXIMIZE TOTAL REVENUE BY THE SALES OF GOODS, A FIRM PRODUCES THAT MUCH QUANTITY WHERE MARGINAL REVENUE BECOMES ZERO. IF THE FIRM PRODUCES MORE THAN OUTPUT TOTAL REVENUE WILL BE LESS THAN MAXIMUM.
• EXPLANATION
• ARGUMENT IN FAVOR OF SALES MAXIMIZATION

1. GOAL OF MAXIMIZATION OF SALES IS A MORE REALISTIC GOAL
2. MORE PRACTICAL
3. LOANS ARE GRANTED ON THE BASIS OF QUANTUM AND VALUE OF SALE
4. STRONG POSITION IN THE MARKET

• CRITICISM

1. BASED ON MINIMUM LEVEL OF PROFIT BUT IT IS DIFFICULT TO DECIDE
2. UNREALISTIC ASSUMPTIONS
3. LIMITED SCOPE