Skip to main content
SpringerLink
Log in

The Goal

  • Chapter
  • First Online:
True Profit!

  • 523 Accesses

Abstract

In this chapter we will deal with the economic aspects of earning profits and of profit orientation. We will explore the ethical questions surrounding profit in Chap. 4.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
eBook
USD 24.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 32.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    See Goldratt [1].

  2. 2.

    The idea from William R. Baumol, that managers should pursue revenue maximization, is also widely known. Baumol says: “Businessmen see some connection between scale and profit. In my dealings with them I have been struck with the importance they attach to the value of their sales.” Baumol [2]. For a deeper discussion, see also Sandmeyer [3] and Anderson [4]. This working paper can be found on numerous homepages.

  3. 3.

    Drucker [5].

  4. 4.

    Drucker has also interpreted profit as the cost of future risks, by asking: “What is the minimum profitability needed to cover the future risks of the business?,” Drucker [6].

  5. 5.

    We refer the reader to the standard text Keeney and Raiffa [7]. There are also several journals devoted to this theme, such as Journal of Multi-Criteria Decision Making, International Journal of Multicriteria Decision Making, Multiple Criteria Decision Making.

  6. 6.

    See Kaplan and Norton [8].

  7. 7.

    See Schäffer and Weber [9].

  8. 8.

    See “Transformation der Tech-Riesen,” Frankfurter Allgemeine Zeitung, May 4, 2019, p. 24.

  9. 9.

    See “Softbank Takes a $4.6 Billion Hit from WeWork,” New York Times, November 6, 2019; see also https://www.wsj.com/articles/the-money-men-who-enabled-adam-neumann-and-the-wework-debacle-11576299616.

  10. 10.

    Thiel [10].

  11. 11.

    Buzzell and Gale [11].

  12. 12.

    Farris and Moore (editor) [12].

  13. 13.

    Ailawadi et al. [13].

  14. 14.

    Lee [14].

  15. 15.

    Edeling and Himme [15].

  16. 16.

    Edeling [16].

  17. 17.

    See Sklenarz et al. [17].

  18. 18.

    Ibid., p. 9.

  19. 19.

    Lanzillotti [18].

  20. 20.

    Scott Armstrong and Green [19]; see also Scott Armstrong and Collopy [20].

  21. 21.

    Rego et al. [21].

  22. 22.

    Miniter [22].

  23. 23.

    Cespedes [23].

  24. 24.

    Chu et al. [24].

  25. 25.

    See Rieger [25].

  26. 26.

    Schulze [26].

  27. 27.

    See Rappaport [27].

  28. 28.

    Rappaport [28].

  29. 29.

    “Chinas Kaffeehauskette expandiert—Luckin will Starbucks auf den zweiten Platz verdrängen”, Frankfurter Allgemeine Zeitung, January 4, 2019, p. 19.

  30. 30.

    “YouTube CEO takes on TV, Web Rivals,” The Wall Street Journal, June 8, 2016, p. B5.

  31. 31.

    Mankins [29].

  32. 32.

    See Simon [30].

  33. 33.

    For a deeper treatment, see Blanpain et al. [31].

  34. 34.

    Mizik and Jacobson [32]; see also “Myopic Marketing Management: Evidence of the Phenomenon and Its Long-Term Performance Consequences in the SEO Context,” Marketing Science, May–June 2007, pp 361–379 as well as Mizik [33].

  35. 35.

    See Emminghaus [34]; as well as Brockhoff [35].

  36. 36.

    See Lahlou [36].

  37. 37.

    See “Efficiencies of Scale May Be a Myth,” Harvard Business Review, March–April 2019, p. 22; see also Ertan et al. [37].

References

  1. Goldratt, E. P.  (1992). The Goal, Great Barrington: North River Press.

    Google Scholar 

  2. Baumol, W. J. (1967). Business Behavior, Value and Growth, revised edition, New York: Harcourt, Brace & World, 45.

    Google Scholar 

  3. Sandmeyer, R. L. (1964). Baumol’s Sales-maximization Model: Comment, American Economic Review, 54, 1073–1080.

    Google Scholar 

  4. Anderson, W.L. (unpublished). Profit maximizing versus revenue maximizing firms? Only Time will Tell, working paper, College of Business, Frostburg State University, Frostburg.

    Google Scholar 

  5. Drucker, P. (2001). The Essential Drucker, New York: Harper Business, 38.

    Google Scholar 

  6. Drucker, P. (1975, February 5). The delusion of ‘profits’. The Wall Street Journal, 10.

    Google Scholar 

  7. Keeney, R. L, & Raiffa, H. (1993). Decisions with Multiple Objectives: Preferences and Value Tradeoffs,  Cambridge: Cambridge University Press.

    Book  Google Scholar 

  8. Kaplan, R. S., & Norton, D. P. (1996). The Balanced Scorecard: Translating Strategy into Action, Boston: Harvard Business School Press.

    Google Scholar 

  9. Schäffer, U. & Weber, J. (2019). Kennzahlen sollten die Realität zeigen, Frankfurter Allgemeine Zeitung, 16.

    Google Scholar 

  10. Thiel, P. (2014). Zero to One: Notes on Startups or How to Build the Future, London: Virgin Books, 591

    Google Scholar 

  11. Buzzell, R. D., & Gale, B. T. (1987). The PIMS Principles: Linking Strategy to Performance, New York: The Free Press.

    Google Scholar 

  12. Farris, P. W., & Moore, M. J. (eds) (2004). The Profit Impact of Marketing Strategy Project: Retrospect and Prospects, Cambridge: Cambridge University Press.

    Google Scholar 

  13. Ailawadi, K. L., Farris, P. W., & Parry, M. E. (1999). Market Share and ROI: Observing the Effect of Unobserved Variables. International Journal of Research in Marketing, 16(1), 31.

    Google Scholar 

  14. Lee, J. (2009). Does Size Matter in Firm Performance? Evidence from US Public Firms. International Journal of the Economics of Business, 16(2), 200.

    Google Scholar 

  15. Edeling, A., & Himme, A. (2018). When Does Market Share Matter? New Empirical Generalizations from a Meta-analysis of the Market Share-Performance Relationship. Journal of Marketing, 82(3), 1–24.

    Google Scholar 

  16. Edeling, A. (2015). Does Market Share Matter? New Empirical Generalizations from a Meta-analysis, working paper, Economics and Social Science Faculty, University of Cologne.

    Google Scholar 

  17. Sklenarz, F. A., Himme, A., & Edeling, A. (2019). Digital transformation and marketing performance measurement–How the ‘old’ market share-performance relationship does not hold anymore. In: Paper presented at the annual conference of the European Marketing Academy, Hamburg.

    Google Scholar 

  18. Lanzillotti, R. F. (1958). Pricing Objectives in Large Companies, The American Economic Review, 48(5), 921–940.

    Google Scholar 

  19. Armstrong, J. S., & Green, K. C. (2007). Competitor-oriented Objectives: the Myth of Market Share. International Journal of Business, 12, 117–136.

    Google Scholar 

  20. Armstrong, J. S., & Collopy, F. (1996). Competitor Orientation: Effects of Objectives and Information on Managerial Decisions and Profitability. Journal of Marketing, 2, 188–199.

    Google Scholar 

  21. Rego, L. L., Morgan, N. A., & Fornell, C. (2013). Reexamining the Market Share-Customer Satisfaction Relationship. Journal of Marketing, 77, 1–20.

    Article  Google Scholar 

  22. Miniter, R. (2002). The Myth of Market Share: Why Market Share Is the Fool’s Gold of Business,  New York: Crown Business.

    Google Scholar 

  23. Cespedes, F. V. (2014). Aligning Strategy and Sales: The Choices, Systems, and Behaviors that Drive Effective Selling, Boston: Harvard Business Review Press, 45.

    Google Scholar 

  24. Chu, W., Chen, C., & Wang, C. (2008). The Market Share–Profitability Relationships in the Securities Industry. The Service Industries Journal,  28(6), pp. 813–826

    Google Scholar 

  25. Rieger, W. (1928). Einführung in die Privatwirtschaftslehre, 1st edn (unchanged 2nd edn (1959)), Palm & Enke, Nuremberg: Palm & Enke.

    Google Scholar 

  26. Schulze, H. (2019). Excellence Wins, Grand Rapids: Zondervan, 32.

    Google Scholar 

  27. Rappaport, A. (1986). Creating Shareholder Value: A Guide for Managers and Investors, New York: The Free Press.

    Google Scholar 

  28. Rappaport, A. (1998). Creating Shareholder Value: A Guide for Managers and Investors, New York: The Free Press, foreword.

    Google Scholar 

  29. Mankins, M. (2017). Stop focussing on Profitability and Go for Growth. Harvard Bus Rev. Accessed on 1 May 2017, https://hbr.org/2017/05/stop-focusing-on-profitability-and-go-for-growth

  30. Simon, H. (2016). Negative Preise – ein neues Phänomen, Marketing Review St. Gallen, 2, 76–81.

    Google Scholar 

  31. Blanpain, R., Bromwich, W., Rymkevich, O., & Senatori, L. (eds) (2011). Rethinking Corporate Governance: From Shareholder Value to Stakeholder Value, New York: Wolters Kluwer.

    Google Scholar 

  32. Mizik, N., & Jacobson, R. (2007). The Cost of Myopic Management. Harvard Business Review, July-August, p. 22

    Google Scholar 

  33. Mizik, N. (2010). The Theory and Practice of Myopic Management. Journal of Marketing Research, 47/August, 594–611.

    Article  Google Scholar 

  34. Emminghaus, A. (1868). Allgemeine Gewerkslehre, Berlin: F. A. Herbig, S. 69.

    Google Scholar 

  35. Brockhoff, K. (2013). Was bedeutet eigentlich ‘Shareholder Value’?, speech, WHU Koblenz, June 5.

    Google Scholar 

  36. Lahlou, I. (2019). Corporate Board of Directors: Structure and Efficiency, Cham: Springer Nature.

    Google Scholar 

  37. Ertan, A., Lewellen, S., & Thomas J. K. (2018). The Long-run Average Cost Puzzle. Accessed 1 May 2018 on https://ssrn.com/abstract=3178202

Download references

Author information

Authors and Affiliations

  1. Bonn, Nordrhein-Westfalen, Germany

    Hermann Simon

Authors
  1. Hermann Simon
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Hermann Simon .

Rights and permissions

Reprints and permissions

Copyright information

© 2021 The Author(s), under exclusive license to Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Simon, H. (2021). The Goal. In: True Profit!. Copernicus, Cham. https://doi.org/10.1007/978-3-030-76702-0_3

Download citation

Publish with us

Policies and ethics

Search

Navigation