Grade Booster student workshops are back in cinemas for 2022. Learn more


Study Notes

Behavioural Theories of the Firm

A Level, IB
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Behavioural theories of the firm consider alternatives to profit maximisation as a business objective. This study note explains.

3 reasons why a business may adopt objectives other than profit maximisation

  1. Desire the gain and protect market share
  2. Social / ethical / environmental objectives
  3. Need to generate cash-flow during economic recession

2 consequences of this for different stakeholders

  1. Possible fall in the share price and lower dividends in the short term for shareholders
  2. Consumers may pay lower prices if a firm moves away from profit maximisation

1 example of a business adopting such objectives

  1. Pubs having to focus on growing revenue and maintaining cash-flow when adopting to changing consumer spending patterns and preferences (e.g. competing with low-priced alcohol available from the supermarkets

Boston House,
214 High Street,
Boston Spa,
West Yorkshire,
LS23 6AD

Tel: +44 0844 800 0085

© 2021 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.