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Discuss entry-prevention and Risk-avoidance as Business Objective.

Discuss entry-prevention and Risk-avoidance as Business Objective

Answers

Martin
It is argued that the motive behind entry-prevention may be any or all of the followings

i. profit maximisation in the long-run;

ii. securing a constant market share; and,

iii. Avoidance of risk caused by unpredictable behaviour of new firms.

The advocates of profit maximization as business objective argue, however, that only profit-maximizing firms can survive in the long-run. Firms can achieve all other subsidiary objectives and goals easily only if they can maximize their profits. Another argument is that prevention of entry may be the major objective in the pricing policy of the firm, particularly in the case of limit pricing. But the motive behind entry- prevention is to secure a constant share in the market, which is compatible with profit maximization.
marto answered the question on April 17, 2019 at 05:49

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