Answer to Question #43088 in Microeconomics for Huyen

Question

The following is a quote from a New Straits Times article:"If a company makes product donations to the school - computers for instance - then the image of a company goes up as graduate students use the company’s products.”
Is such action consistent with a company’s objective of profit maximisation? Discuss in brief

Answer 1

If a company makes product donations to the school - computers for instance - such action is consistent with a company’s objective of profit maximiяation, because if more people start to buy the products of this company, the demand for them increases and with the time the price for this products and so the profit will increase too. To maximize this profit the company should produce such quantity, for which marginal revenue equals marginal cost, and to sell as more as possible products with the help of marketing, which are produced. In our case the kind of marketing strategy is described, which is a process that can allow an organization to concentrate its resources on the optimal opportunities with the goals of increasing sales and achieving a sustainable competitive advantage.

So, in our case this marketing strategy will tend to sales and profit increase, but the company also needs to make other steps to maximize its profit, but not only to increase its sales.