Although firms may pursue a variety of goals,the assumption that primary goal of strategy is to maximize profits over the long term may be justified by:
A)The fact that in today's intensely competitive markets,firms must focus on profit maximization in order to survive
B)The external pressures on firms that arise from (i)strong competition in product markets and (ii)the threat that firms that do not maximize profits will be acquired by firms that do
C)The legal requirement on Boards of Directors to ensure that companies are operated in the interests of their shareholders
D)Shareholder pressure on CEOs to maximize profits.

Question

Quizplus · Accepted Answer

The external pressures on firms from strong competition and the threat of acquisition from other firms that maximize profits are reasons to believe that the primary goal of strategy is to maximize profits in the long term. A and D are also partly correct, but the main reason is the external pressures on firms, rather than just the internal pressures or legal requirements. C is not a complete explanation as the legal requirement to operate in the interests of shareholders does not necessarily imply that the primary goal of strategy is to maximize profits.

Although Firms May Pursue a Variety of Goals,the Assumption That