Profit maximisation is achieved when the difference between total revenue and total cost is at its greatest.
YES profit maximisation is important to a business like Approved Foods because.....
Profits may have been used as a source of finance to expand from market trader to ‘the largest online retailer’.
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They may need to expand further as orders grow and may need profit to achieve this, rather than rely on bank loans, which incur interest.
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Not having to pay interest gives more finance to spend within the business, perhaps for sourcing a wider range of food products to make the business more attractive to online customers.
Profit is a measure of success, therefore important for a new business to attract investors.
On the other hand.....
Increased customer satisfaction and building a loyal customer base may be more important than
profit maximisation, given that they have grown from
a market stall to ’60,000 sq ft warehouse’.
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This will be particularly important if the business is faced with increased
competition.
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Satisfied customers are unlikely to shop elsewhere for these types of products and may infact tell other people about the business saving marketing costs.
Also, they are offering large discounts ‘ 60-70% on each shop’, so gross profit margins are likely to be small; sales revenue maximisation may be more important.
