Profit Maximization Theory: The Social Responsibility Of Business

Profit Maximisation Theory

On well-known economic theory, the aim of company and corporations is to maximise shareholder value (Vranceanu, 2014). This concept has been advance by neo-classical economist Milton Friedman and was published in The New York Times in 1970. In the article called “The Social Responsibility of Business is to Increase its Profits”, the economist key statement is that businesses have “only one social responsibility - to use it resources and engage in activities designed to increase its profit so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud” (Friedman, 1970). Also, the second important key point highlighted by the economist in the article,

In business organization, maximizing profit is a crucial key point for shareholders as it is a short-term strategy for achieving both goal of increasing customer's’ satisfaction and profit. Every company has it own clear strategy to obtain the targeted market share, pricing is an effective strategy that can be set up by business organization to attain their goal. Price is an important element of the Marketing Mix 4 P’s as it is a way for a company to cover its expenses and different cost (fixed and variables) but also a way to differentiate itself from competitors, increase the product’s value perception, affects the consumer behaviours, modify consumers’ buying

To be able to get low prices companies have to deal with their own costs of production, storage, taxes and shareholders’ requirements about performance that’s why they are often choosing a maximizing way to be sustainable and profitable over the time.

Profitability can only be reached by answering consumer’s expectations about the products or service which includes key element like manufacturing it, control of the supply chain, transportation, delivering resources, return policy, etc.

Because there are a lot of definition and interpretations of what CSR is, it is hard to establish a frame and that’s why it is important for businesses to clarify the nature and the implications of CSR in their business field. Is CSR about respecting the law and the different regulations as it is supported by Milton Friedman or does it mean to go deeper in the subject and integrate the different stakeholders of the company and their place in the business.

Implementing CSR practices in companies’ strategies is often the results of high investments and so there is a big economic impact for