Definition Of Profit Maximization
Definition Of Profit Maximization: Profit maximization refers to the process whereby companies focus on maximizing profit or getting the best possible profit in their particular kind of business.
Profit maximization tehniques include:
>> Cost minimization
>> Waste reduction
>> Lean manufacture
>> Flat organization structure
>> Labour reduction through investment in
>> Labour cost reduction
>> Reduction of organizational fat by focusing on the company's core business
>> Product profit margin increase through value optimization
>> Developing new markets
>> Product line extension
The truth is that shareholders want increase in dividends year in, year out. If the business is not competitive enough to consistently deliver shareholder value, shareholders are quick to jump ship to other companies that can give them better returns on their investment.
This puts immense pressure on the leadership of blue chip companies or conglomerates to deliver. Competition is stiff, the business climate can be tough. Yet shareholders won't take anything short of consistent growth of their investment.
For dividends to grow, organizations must find creative ways to sell more, spend less, and create greater value for shareholders.
That is why profit maximization is a term you will hear virtually every day in profit oriented organizations.
The pressure is huge!
This pressure has compelled some companies to abandon some of their social responsibilty commitments to society. There is no valid excuse for doing that. Instead, the organization's leadership team should look for inovatie approach to profit maximization.
Sometimes, injecting fresh blood into the system helps. Fresh blood . . . with experience and proven track record for leadership success and creativity . . . come into the business with a fresh pair of and ideas that ca turn things around.
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