Strategic Management with The Key Focus on The Topic of Profit Essay

Strategic Management with The Key Focus on The Topic of Profit Maximisation - Essay Example Keeping in view the two above mentioned definition of business and profits, a simplistic conclusion is; the more profit, the better it is. But it is not practical option when evaluated with the perspective of other stakeholders of the business. The business does not have the investor as the only stake holder. The customers, suppliers, regulatory body, competitors, unions and society at large are the stake holders of the business and the organisations must consider all of them when conducting businesses and devising the profit plans. For instance, an airline while operating its flights, should consider the pollution effects it puts on the environment, the noise its take off and landings produce, which can disturb the citizens. It is, therefore, operating flights at night in US is legally prohibited. There are two approaches of profit maximisation i.e. increasing revenues and decreasing costs. The next sections discuss these two options in detail. Profit Maximisation though Revenue Inc rease It is important to note here that business sector earns revenues by customers, who consider the price of the product or service as the cost. Customers invest their hard earned income in buying goods and services. The price for businessman is cost for customers who incur this cost to fulfil the need for which product or service is designed. The interest of customer is to pay as low price for the product as possible. On the other hand, the interest of the businessman is to charge as high a price as possible. This trade off between the interest of purchaser and seller is set at an equilibrium price at which the seller receives considerable amount of profit and the buyer fulfils his needs at an... The author of the essay concludes that the answer to the question whether the organisations should adopt simple profit maximisation approach cannot be explicitly given in affirmation or negation. A balance is required between the profit orientation and societal orientation. It is because organisations operate in the society and they are ethically bound to share their gains with the entities that support generation of the profits. The clear cut statement is; in no circumstances the organisation should operate in losses. Attaining profits is the core objective; however, maximisation of profits can be compromised based on the environmental conditions and requirements. The case of monopolistic competition is discussed in the above paper. It is an unlikely situation for all the stakeholders except the business owners. This approach is minimized in the theories and practices of all times of business sector. In short, the business sector, that drives investment and economy, should focus on win-win conditions for all stake holders. It is pretty fair to state that the major chunk of profit remains in the hands of investor while rest of the stake holders get the returns of cost in terms of satisfied need or other intangible benefits. The focus of business sector should be achieving the realistic equilibrium whereby they can balance out the demand and supply of its products and services. Both the deviation and shift from equilibrium will lead to undesirable outcomes for the business sector and all other stake holders as well.

Why might firms with exposure to foreign markets use foreign currency Coursework

Why might firms with exposure to foreign markets use foreign currency derivatives - Coursework Example A derivative is defined as ‘an instrument whose price is derived from, or depends on, the price of another asset’ (Hull 2009:779). When a company receives foreign currency against supply of services or goods to a foreign based importer, it acknowledges some kind of foreign exchange risk, since there is a possibility of fluctuation between currencies of both exporter and importer from the time of entering into the contract and receipt of funds from the foreign importer. Thus, in case of companies with substantial export earnings, it should assess the quantum of its forex exposure, create a road map for how to minimise that risk, to employ hedging strategies to minimise any substantial loss that may be encountered due to future forex fluctuations in the currencies where it is likely to receive from its foreign importers. (Bragg 2010: 207). For instance, if a company has quoted its export values in US$ and during the interval period where a foreign importer is under obligat ion to pay the exporter, if the dollar appreciates against the exporter’s currency, then the importer might be paying with a decreased –value currency, which creates the company to account for a foreign exchange loss at the time of receipt of funds. (Bragg 2010: 208). As per Froot, Scharstein and Stein (1993), if the level of capital investment of a company is high, the chance for employing forex derivatives in its risk management policy is always on the increase. (Froot, Scharstein and Stein 1993:1631). ... ers of the international companies opt these derivatives so as to take the positions in the anticipation of revenues (speculation) or employment of these instruments to minimise the risk inherent with day to day management of their company’s cashflow hedging).( Aswathappa 2010 :543). The probable advantages from employing forex derivatives are reliant on the anticipated exchange rate movements. Thus, it is essential to comprehend why the exchange rate moves over time before employing the forex derivatives for risk coverage. Different Kinds of Forex Derivatives Forex Forwards: Forward is comprised of spot transactions that have been retained for less than 180 days but held over 48 hours when they due for payment and paid at the current prevailing spot price. If you minus the bid price with that of ask price, then you can arrive at the transaction cost. Forex swaps are financial transactions associated with the swapping of two currency amounts on a particular date and a reverse exchange of the analogues' amount at an afterward date. The main objective is to administer currency risks and liquidity by executing forex transactions at the most apt time. In fact, the underlying currency is borrowed and lent concurrently in both currencies, for instance, by selling Euro for US$ for spot value and consenting to reverse the deal at an afterdate. (Brickford& Brickford 2007:7) Forex Futures: A future can be illustrated as a standardised contract to sell or buy a particular asset at a price previously consented to and at a fixed future date. Forex futures are standardised financial instruments that are negotiated in organised markets. Forex futures have many probable benefits but also have many probable risks. Forex futures markets are not only heavily regulated but also