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Discuss the Maximisation of firm’s growth rate as an alternative objective.

Discuss the Maximisation of firm’s growth rate as an alternative objective.

Answers

Martin
According to Robin Marris, managers attempt to maximise a firm’s balanced growth rate, subject to managerial and financial constraints.

Marris defines firm’s balanced growth rate (G) as:

G = GD = GC

where GD and GC are growth rate of demand for the firm’s product and growth rate of capital supply to the firm, respectively.
Simply stated, a firm’s growth rate is said to be balanced when demand for its product and supply of capital to the firm increase at the same rate. Marris translated these two growth rates into two utility functions: (i) manager’s utility function (Um), and (ii) business owner’s utility function (Uo), where:

Um = f(salary, power, job security, prestige, status)

Uo = f(output, capital, market-share, profit, public esteem).

The maximisation of business owner’s utility (Uo) implies maximisation of demand for the firm’s product or growth of the supply of capital.
marto answered the question on April 17, 2019 at 05:47

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