Why Short Term Profit Maximization by a Business Does Not Always Work

2012 ◽  
Author(s):  
Anthony J. Fejfar
Keyword(s):  
Profit Maximization ◽  
Short Term

Roche and Tamiflu®: Doing Business in the Shadow of Pandemic

2017 ◽  
pp. 1-22 ◽  
Author(s):  
Timothy Feddersen ◽  
Jochen Gottschalk ◽  
Lars Peters
Keyword(s):  
Patent Protection ◽  
Antiviral Drug ◽  
Profit Maximization ◽  
Human Infection ◽  
Western World ◽  
Short Term ◽  
Bird Flu ◽  
Global Pandemic ◽  
Life Threatening ◽  
Spanish Flu

The spread of bird flu outside of Asia, particularly in Africa and Europe, topped headlines in 2006. The migration of wild birds brought the virus to Europe, where for the first time it spread to productive livestock, bringing it closer to the Western world. Due to today's globalized and highly interconnected world, the consequences of a potential bird flu pandemic are expected to be much more severe than those of the Spanish flu, which killed 50-100 million people between 1918 and 1921. A vaccine for the bird virus is currently not available. As of July 2006, 232 cases of human infection had been documented, mostly through direct contact with poultry. Of those, 134 people died. The best medication available to treat bird flu was Roche's antiviral drug Tamiflu. However, Tamiflu was not widely available; current orders of government bodies would not be fulfilled until the end of 2008. Well aware that today's avian flu might become a global pandemic comparable to the Spanish flu, Roche CEO Franz Humer had to decide how Roche should respond. While the pharmaceutical industry continued its research efforts on vaccines and medications, Tamiflu could play an important role by protecting healthcare workers and helping to contain the virus---or at least slow down its spread. Due to patent protection and a complicated production process with scarce raw ingredients, Roche had been the only producer of the drug. Partly in response to U.S. political pressure, in November 2005 Roche allowed Gilead to produce Tamiflu as well. Even so, it would take at least until late 2007 for Roche and Gilead to meet the orders of governments worldwide. The issue was a difficult one for Roche: What were the risks; what were the opportunities? If a pandemic occurred before sufficient stockpiles of Tamiflu had been built up, would Roche be held responsible? What steps, if any, should Roche take with respect to patent protection and production licensing in the shadow of a potential pandemic?Students will weigh the benefits of short-term profit maximization against the risks that a highly uncertain event could pose to a business and consider nonstandard approaches to mitigate these risks. Students will discuss the challenges of addressing low-probability, high-impact events; potential conflicts with the short-term view of the stock market and analyst community; and challenges of the patent protection model for drugs for life-threatening diseases.

scholarly journals Relevancy of Corporate Financial Policies and the Profit Maximization View of Islamic Banks

2012 ◽  
Vol 3 (6) ◽  
pp. 184-193 ◽  
Author(s):  
John Taskinsoy
Keyword(s):  
Agency Theory ◽  
Profit Maximization ◽  
Share Price ◽  
Financial Policy ◽  
Islamic Banks ◽  
Short Term ◽  
Financial Policies ◽  
Policy Conflicts ◽  
Banking Institutions ◽  
Controversial Nature

This paper examines relevancy of corporate financial policies and documents similarities and/or differences of how profit maximization goal is viewed by Islamic banking institutions (IBIs). Management of the firm is ultimately responsible for maximizing profits and increasing shareholder value, however this challenging task may get plagued by agency problems as well corporate financial policy conflicts. Agency problem is real and it is assumed to occur in most companies worldwide. However, the theory’s controversial nature and its narrow focus have not really convinced many scholars whether agency theory in fact provides any broad benefits to firm’s stakeholders or not. Scholars seem to be divided into two camps on agency theory. Some authors think that agency theory pays too much attention to short-term goal of share price valuation and it hardly provides any real answers to firm’s real problems. On the other hand, some proponents of this theory believe agency theory’s useful impact on capital markets.

scholarly journals Coordinating contracts as an instrument of supply chain profit maximization under short-term financing necessity

2020 ◽  
Vol 13 ◽  
pp. 57-94
Author(s):  
Irina Berezinets ◽  
◽  
Tatyana Voronova ◽  
Nikolay Zenkevich ◽  
Natalia Nikolchenko ◽  
...  
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Wholesale Price ◽  
Profit Maximization ◽  
Revenue Sharing ◽  
Expected Profit ◽  
Short Term ◽  
Bank Financing ◽  
Revenue Sharing Contract ◽  
Credit Financing

In this paper the problem of the supply chain expected profit maximization under the assumption of the short-term financing necessity for one of the supply chain parties using a coordinating contract is considered. The solution is derived for a two-echelon supply chain under the assumption of product demand being distributed as uniformly. A revenue-sharing contract with bank financing and a modified revenue-sharing contract with trade credit financing are explored. It is stated that none of the studied contracts is coordinating, as they do not provide the supplier’s expected profit maximum. The conditional coordination of supply chain with a modified revenue-sharing contract with trade credit financing is considered if the supply chain and the retailer’s expected profit maximum are reached and the supplier’s expected profit is greater than in case of application of a modified wholesale price contract with trade credit financing and a revenue-sharing contract with bank financing. It is proved that it is beneficial for both supply chain parties and the problem of the supply chain expected profit maximization under the assumption of the short-term financing necessity for one of the supply chain parties can be solved using a modified revenue-sharing contract with trade credit financing.

scholarly journals A LOAN PORTFOLIO EVALUATION OF DISTRICT CENTRAL COOPERATIVE BANKS: A CASE STUDY OF UTTAR PRADESH

2020 ◽  
pp. 14-20
Author(s):  
Monika
Keyword(s):  
Rural Areas ◽  
Profit Maximization ◽  
Uttar Pradesh ◽  
Small Scale ◽  
Credit Institution ◽  
Short Term ◽  
Agricultural Credit ◽  
Rural People ◽  
Self Employment ◽  
Cooperative Banks

Indian Cooperative Banks are the world largest credit institution which serve the credit need of more than 120 million farmers(Rangarajan,1972). These cooperative banks are established to serve for the welfare of rural people and not for the profit maximization. Indian cooperative credit These banks provide credit under various areas such as, agriculture, lives stock, milk, self-employment, setting up small-scale units, personal finance etc. Indian Agricultural Cooperative credit institution are broadly categories in to two types, short term and long term agricultural credit institution. The short term agricultural credit institution have three tire federal structure, at the apex level: State Cooperative Banks, District Central Cooperative Banks at district level and Primary Agricultural Credit Societies, at root level. The District Central Cooperatives Banks(DCCBs) act as intermediary, it provide short and medium term loan to the rural sector. There are total 364 DCCBs operating in country (RBI report, 2017-18), out of which 50 DCCBs operating in Uttar Pradesh (NAFSCOB, 2017-18). The present study evaluate the agricultural and non-agricultural loan distribute by DCCBs of UP for the period of 2013-14 to 2016-17. For the purpose of the study, District Central Cooperative Banks (DCCBs) of UP were divided into 18 zone as per their administrative classification. The study revealed that there is volatility among the zone and some zone performed well in development of rural areas. KEYWORDS: Cooperative Banks, rural people, agriculture, lives stock, milk, self-employment

scholarly journals Friedman Doctrine: Maximizing Profits is Neither Good for Society Nor Even for the Shareholders

2021 ◽  
Vol 7 (3) ◽  
pp. p153
Author(s):  
Y. Datta
Keyword(s):  
New York ◽  
Free Market ◽  
Profit Maximization ◽  
New York Times ◽  
Ronald Reagan ◽  
Short Term ◽  
The Great Depression ◽  
The Social ◽  
Good For

This paper is an attempt at a critique of Milton Friedman’s article titled: “A Friedman doctrine—The Social Responsibility of Business is to Increase Its Profits” published in the New York Times Magazine fifty years ago. The publication of this doctrine sparked a revolution. Ronald Reagan found it a powerful platform from which to launch his radical free-market agenda. The event marked a turning point when America embarked on a journey towards unfettered capitalism.Encouraged by the Friedman doctrine American CEOs chose a path toward profit maximization/maximizing shareholder value: a mindset that favored risk aversion and a short-term focus on cost reduction vs. long-term need for innovation, quality and customer satisfaction. And it is this historic psychological shift that has contributed so much to America’s industrial decline.Economic inequality in America has been going up persistently since 1974, squeezing the middle class. America’s income inequality has now widened so much that it rivals the highest level recorded in 1928 that led to the Great Depression of 1929. Friedman’s essay has three major flaws. First, it is offered as a doctrine not a theorem. Second, it is grounded in the moral philosophy of self-interest—and greed. Third, it does not distinguish between short-term and long-term shareholders.Friedman’s theory of profit maximization is too difficult, too unrealistic--and immoral.Based on an extensive analysis, we have come to the conclusion that profit maximization is neither good for society nor even for the shareholders.

scholarly journals Why is there resistance to works councils in Germany? An economic perspective

2017 ◽  
Vol 41 (3) ◽  
pp. 540-561 ◽  
Author(s):  
Steffen Müller ◽  
Jens Stegmaier
Keyword(s):  
Risk Aversion ◽  
Empirical Research ◽  
Profit Maximization ◽  
Economic Effects ◽  
Literature Analysis ◽  
Economic Perspective ◽  
Short Term ◽  
Works Councils ◽  
The Impact

Recent empirical research generally finds evidence of positive economic effects for works councils, for example with regard to productivity and – with some limitations – to profits. This makes it necessary to explain why employers’ associations have reservations about works councils. On the basis of an in-depth literature analysis, this article shows that beyond the generally positive findings, there are important heterogeneities in the impact of works councils. The authors argue that those groups of employers that tend to benefit little from employee participation in terms of productivity and profits may well be important enough to shape the agenda of their employers’ organization and have even gained in importance within their organizations in recent years. The authors also discuss the role of deviations from profit-maximizing behavior like risk aversion, short-term profit-maximization and other non-pecuniary motives, as possible reasons for employer resistance.

Opportunities and Challenges for CSR Mainstreaming in Business Schools

2016 ◽  
Vol 6 (2) ◽  
pp. 1-29 ◽  
Author(s):  
Dima Jamali ◽  
Hanin Abdallah ◽  
Farah Matar
Keyword(s):  
Business School ◽  
Management Education ◽  
Business Schools ◽  
Profit Maximization ◽  
School Curriculum ◽  
Future Generations ◽  
Short Term ◽  
Critical Juncture ◽  
Challenges And Opportunities ◽  
Paradigmatic Change

Extant literature has highlighted that business schools have been accused of promoting an educational ethos that emphasizes shareholder value and the pursuit of short-term profits and thereby preparing overly competitive future generations interested in profit maximization. This paper highlights the importance of integrating CSR into the mainstream of business schools' curricula, arguing for the responsible role that business schools should play but also emphasizing the strategic case for such integration. The paper analyzes the main challenges and opportunities that both hinder and facilitate mainstreaming of CSR at the heart of the business school curriculum and the role that the Principles of Responsible Management Education (PRME) can potentially play in this regard. The paper illustrates these drivers and constraints in the context of one specific business school in Lebanon that has successfully experimented with CSR mainstreaming, leading to a nuanced reflection on the possibilities of a real paradigmatic change in the context of higher management education at this critical juncture and what it is going to take to catalyze a real transformation beyond “bells and whistles” and mere rhetoric.

The State of Training: Learning, Institutional Innovation, and Local Boards for Training and Adjustment in Ontario, Canada

2001 ◽  
Vol 33 (10) ◽  
pp. 1871-1891 ◽  
Author(s):  
Tod D Rutherford
Keyword(s):  
Labour Market ◽  
Profit Maximization ◽  
Free Rider ◽  
Institutional Innovation ◽  
Labour Markets ◽  
Short Term ◽  
Knowledge Based ◽  
Market Governance ◽  
Learning Region

This paper critiques the learning-region literature on two related points. The first is that the learning-region analysis of labour markets is theoretically underdeveloped, because it underestimates the difficulty of overcoming systematic skill mismatches, underinvestment, and free-rider practices which characterize unregulated labour markets. Second and relatedly, because it does not link the problematic nature of labour-market governance to the conflicts and contradictions of state policy, the learning-region literature effectively ‘depoliticizes’ policymaking. The paper draws on a case study of the development of local boards for training and adjustment in Ontario, Canada, and develops an alternative framework utilizing a critical governance perspective which stresses how knowledge and learning must be seen as part of state accumulation and hegemonic strategies. Such strategies are contingent on the representation of stakeholders, in particular business, and current attempts to develop decentralized associational networks are often part of what Jessop terms metagovernance. In the case of Canada, decentralization from the federal to provincial scales is viewed as crisis and cost driven and in many ways antithetical to stakeholder governance. Thus in Ontario, the development of a stakeholder-based form of labour-market governance has been marginalized by shifts in state-accumulation strategies and the inability and disinterest of business in representing itself in such stakeholder institutions. Furthermore, the local boards' generation of knowledge based on inclusionary networks and information is at odds with a state and business emphasis on knowledge derived from exclusive networks and geared to short-term profit maximization.

scholarly journals EXPLORING THE RELATIONSHIP BETWEEN SHORT-TERM BORROWINGS AND PROFITABILITY IN CHINA: THE MODERATING ROLE OF CASH CONVERSION CYCLE

2021 ◽  
Vol 22 (3) ◽  
pp. 675-694
Author(s):  
Faisal Mahmood ◽  
Han Dongping ◽  
Zahoor Ahmed ◽  
Umeair Shahzad ◽  
Nazakat Ali ◽  
...  
Keyword(s):  
Generalized Method Of Moments ◽  
Profit Maximization ◽  
External Financing ◽  
Short Term ◽  
Full Sample ◽  
Conservative Strategy ◽  
Cash Conversion Cycle ◽  
The Relationship ◽  
Moderating Role

This study focuses on the moderating role of the cash conversion cycle (CCC) and its components while investigating the relationship between short-term borrowings and profitability in Chinese firms. The generalized method of moments (GMM) approach is employed on the panel data over the period 2000 to 2017. The findings reveal a significant moderating role of CCC and its components in the short-term borrowings and profitability relationship. Specifically, the firms following a conservative strategy in CCC and its components, adopt the same strategy in the external financing which lies in the long-term borrowings. Consequently, such firms require less short-term borrowings compared to the full sample. However, the firms following an aggressive strategy in the CCC and its components, do not follow the aggressive strategy in external financing that lies in the short-term borrowings. Instead, these firms adopt the conservative strategy for profit maximization and require less amount of short-term borrowings compared to the full sample. Finally, several policy options are proposed to achieve the optimum relation between short-term borrowings and profitability.

Collective Diversification : Manchester Cotton Merchants and the Insurance Business in the Early Nineteenth Century

1991 ◽  
Vol 65 (2) ◽  
pp. 379-414 ◽  
Author(s):  
Robin Pearson
Keyword(s):  
Nineteenth Century ◽  
Eighteenth Century ◽  
Profit Maximization ◽  
Short Term ◽  
Early Nineteenth Century ◽  
Long Run ◽  
Fire Insurance ◽  
Insurance Business ◽  
Economic Infrastructure ◽  
Economic Considerations

It has been claimed that the diversified mercantile capitalist of eighteenth-century Britain was replaced by the specialist industrialist of the nineteenth. This study of Manchester cotton merchants who moved into fire insurance in the 1820s examines the neglected strategy of collective diversification. It argues that the merchants' decision to diversify cannot be explained by short-term financial or economic considerations arising out of the insurance or cotton markets and only partly by long-run issues such as profit maximization and constraints on growth. Collective diversification is best understood as part of a broader attempt to create a system of interlocking services by an urban oligarchy seeking both to improve the economic infrastructure of their region and to consolidate the economic and political power of their group.

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