The traditional assumption of profit maximisation can certainly be questioned as regards the ability and willingness of firms to pursue such an objective. This question was brought particularly into focus with the divorce of ownership from control in modern joint-stock companies and the unlikelihood that constraints upon managers would force them to retain profit as their sole objective. Managerial theories set out alternative models of behaviour with management assumed to seek the maximisation of its own utility through, for example, the maximisation of either sales revenue or growth. The choice of such an objective then impacts upon the firm’s price and output. In contrast, the behaviouralists focus upon the complexity of a modern business organization and question whether the firm should be seen to have a single goal. Instead, there emerge a number of goals, with top management seeking satisfactory levels of attainment for each goal rather than a strategy of maximisation.
Nevertheless, in all our alternative theories, profit still plays an important role as a constraint upon managerial behaviour. It is also an important source of investment and future growth. Profit therefore remains pivotal in explaining the strategic decisions of the business organisation.
It is also relevant to distinguish between short- and long-run behavioural objectives of the firm. For example, although the firm might pursue a short-run strategy of sales revenue maximisation as a means of increasing market share (and in the short run be willing to sacrifice profit to do so), the long-term strategy might be to maximise profit. Specifically, having captured a larger share of the market and having eliminated, or taken over, much of the competition, the firm can then achieve the benefits of greater profitability. Profit-maximising behaviour could therefore remain as a long-term objective