GOALS OF PRODUCERS

Businesses have a variety of goals that they try to achieve.

PROFIT MAXIMISATION - People take a risk to start a business, in return for the risk they take they expect tp make a profit. Most businesses have a goal to make as much profit as possible.

SALES MAXIMISATION - Many firms are interested in selling as much of their product as possible and therefore gain market share. Often when a firm is starting out it may forego profits in the short term in order sell as much as possible so that it can get its product recognised. Sales maximisation will often lead to profit maximisation.

PRIDE IN PRODUCING QUALITY GOODS - Sometimes a producer will focus on producing the highest quality commodity possible. They do this to target a market where consumers are willing to pay more for high quality goods.

PRIDE IN OFFERING GOODS AT LOW PRICES - Some firms will aim to provide commodities at the cheapest price possible.

SATISFICING - This is where the producer is satisfied with the level of profit they are making and may focus on other goals such as quality of life, having a more relaxing life style.

PROVIDING A COMMUNITY SERVICE - Some producers may want to help the community by providing a service that others are not willing to provide. Voluntary organisations often have providing a community service as their sole aim. Other profit orientated firms may also have a goal of proving a community service such as providing employment for people within the community.

BUSINESS SUCCESS OR FAILURE

Any production involves taking risks. Firms need to try and decide what to sell, who to sell it to, where to sell and produce it and for how much. Before they try and sell their product to consumers, producers can never be sure whether their product will succeed or fail. Market research can help to reduce this risk.

The diagram below shows the lifecycle of a typical product. Initially its costs the firm a lot of money to develop the product before they can put it on the market. They will be making a loss during this phase of the product.

Eventually the product can be introduced into the market and it will start to make a profit. But unless they further develop the product or change the product in some way demand for it will fall off as competitors enter the market and better alternatives are developed. The company can employ an extension strategy to try and prolong the life of the product.

THE DOMINO EFFECT - This is where if a business fails it may lead to other businesses failing. Ads one business fails the other businesses that relied on it may also fail. Also with the loss of jobs as a result of the failure other businesses in the community will now have less income as people spend less money.

THE ECONOMIC CYCLE

The economy goes through periods of growth or booms and periods of low growth (recessions) it may even go through periods of severe recession or depression where it has negative growth. The diagram below shows the economic cycle.

During a recession many businesses may fail causing other businesses to fail as well (the domino effect) this will help cause the economy to go into a recession.