Strategy Management

A traditional economic viewpoint holds that the maximization of profits is the objective of the firm. Although this goal has frequently been challenged, McGuire notes that it "has remained firmly embedded in the sea of economic thought." [positive arguments begining]

In the purely competitive industry, one may have only two options: either maximize profits or suffer a loss.

The monopolist or oligopolist may be able to exercise some discretion over whether to maximize profit.

Defenders of the traditional approach agree that the firm strives after other goals (growth, security, survival, good labor and community relations, etc.) but maintain that it can achieve them only by maximizing profits.

The argument that the profit maximization motive is no longer the sole guiding beacon guiding the firm's behavior.

Apparently profit continues to have a role, but is joined by other goals that are coordinated with it. [negtive arguments begining]

Introduction:

What is Strategic Management? According to Fred, R. David (2006), Strategic Management is "an art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objective." Strategic Management is widely welcomed by the business world is associated with the benefits it enjoys. Applying strategic management allows firms to be proactive than reactive in shaping its own future, and also provide accesses to profitability enhancement; to identification, priorization and exploitation of opportunities; to minimize the effect of adverse condition and changes etc (Wit & Meyer, 2010).

In the development of strategic management, there are many theories formed and applied sequentially. Raduan, Jegak, Haslindam and Alimin (2009) noted in their work that strategic management theories stem primarily from the systems perspective, contingency approach and information technology approach of the Management Theory. Further, they pointed out that the common strategic management theories noted and applicable are the profit-maximizing and competition-based theory, the resource-based theory, the survival-based theory, the human resource-based theory, the agency theory and the contingency theory.

In this assignment, efforts will be made to explore and demonstrate whether adopting a simple profit-maximizing perspective can have positive impacts for a firm. In the first section, we will look at the shareholder value perspective to examine the argument. In the second section, we will start from the stakeholder values perspective to demonstrate the argument. At the end, conclusion will be provided to summary which perspective the author inclines to hold.