Ways of profit maximization

Every private sector business organization tries to maximize its profits.

Profit maximization means that a business organization will not only try to make a profit, but it will try to make as large a profit as possible. This is often not true for government organizations and other public-sector organizations. When we speak about maximizing profits as being the principal objective of a business, we should remember that we are talking about private sector organizations only.

There are many ways to maximize profit. Which method and how many are used depends on the situation and chosen strategy. One way is to minimize the cost of production. For instance, it may be cheaper to use machines instead of workers. In this case, workers will usually be laid off and machines will start doing what people did before.

Another way is to dominate the market, as for instance, when one company basically holds a monopoly on the market in supplying certain goods. Often there are several giant companies competing, each one trying to dominate as great a share of the market as possible. Domination of the market can itself become one of the principal business objectives. That is so because such domination not only increases profits, but also gives stability and security to the business.

Corporate growth is also a way of maximizing profits, for a company's expansion helps it to gain market domination. But growth, as an objective in itself, may actually work against maximizing profit, especially if all the money is constantly invested into growth and profits are considered of secondary importance.