1. Advantages Of Wealth Maximization
2. Advantages And Disadvantages Of Profit Maximization Pdf
3. Benefits Of Profit Maximization

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Disadvantages of Marginal Costing. The disadvantages, demerits or limitations of marginal costing are briefly explained below. The total costs cannot be easily segregated into fixed costs and variable costs. Moreover, it is also very difficult to per-determine the degree of variability of semi-variable costs. Some of the disadvantages that can result from a company becoming overly focused on profit maximization are the ignoring of risk factors, a lessening or loss of transparency and the compromising of ethics and good business practices.

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Every business aims to earn a profit, but companies exist for other reasons as well, such as providing meaningful livelihoods and working toward social and economic well-being. Profit maximization strategies place clear, focused attention on the process of earning as much as possible. In the process, however, they may lose sight of other goals and aspects of a company's vision.

Risk and Reward

Running a business comes with ongoing risks and, the more you aim to earn, the greater the level of risk you take. To increase sales and maximize profit in a retail store, you must stock up on inventory and invest in marketing to get customers in the door. However, it's impossible to always accurately forecast demand, so you may end up with a glut of items that nobody really wants, reducing the profits that you were trying to maximize.

Increasing profit also usually requires added staffing to handle the extra volume, but if your projections aren't accurate you'll likely find yourself overstaffed with a bloated payroll. However, if you make the right choices and your risks pay off, the extra profit you earn will go a long way towards paying yourself well, paying down debt and investing in the future.

A Question of Focus

When focusing on maximizing profit, you may find yourself having to make choices that run counter to your values. You may earn extra money in the short term if you cut corners and use lower quality materials, but you'll likely create a lower quality product. Aside from the financial issue of losing customers when your substandard products don't meet their needs, you'll also end up taking less pride in your offerings and compromising your values if you've built your business on quality and integrity.

Maximizing profit can also be achieved by making employees work harder without paying them extra, or using materials that are harmful for the environment, such as nonrecyclable packaging. Of course you can put the extra money you earn towards doing good, such as donating to charity or investing in clean technologies. But it's simpler and more straightforward to avoid doing harm in the first place, even if that means earning less profit.

Long Term vs. Short Term

Profit maximization has the potential to bring in extra money in the short term, while lessening your long-term earnings. If you devote most of your resources to satisfying one demanding client who wants all of your inventory right now, you run the risk of alienating loyal, long-term clients who aren't as demanding but may spend more over time.

If you outfit a facility quickly and cheaply to meet an immediate demand, you may lose out on the opportunity to build a larger facility that takes longer to build, but will yield better earnings in the future.

About the Author

Devra Gartenstein founded her first food business in 1987. In 2013 she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.

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Your employees are arguably your company's most important asset. They provide the face that your business projects to its customers, and they will come through for you in emergencies and in the face of opportunities as long as you give them good reason to be loyal. However, your company's human resources need to be fostered and cultivated if they are to bring your business the greatest possible advantage.

TL;DR (Too Long; Didn't Read)

The advantages of human resource planning hinge on the importance of building skills and retaining talent. The disadvantages of workforce planning include the time and expense you'll dedicate to extra training.

Advantages of Human Resource Planning

Advantages Of Wealth Maximization

• Building skills. Human resource planning helps your staff to do their jobs better. If you invest in providing the training and education necessary to build skills and increase capacity, your company will be able to achieve more high-quality work with the people you currently have on staff rather than having to rely on outside contractors.
  
• Increasing retention. If you show your employees that you value them enough to invest time and resources in giving them the tools they need to grow, they're more likely to stay with your company over time. Not only will you make their jobs more interesting, but you will also show them that you value their work and their tenure.
  
• Predictability. Your business faces enough day-to-day uncertainties from market conditions, the economic climate and supply-chain issues. Devoting thought and planning to giving your employees what they need to do a good job and stay with your company over time lessens some of these inevitable uncertainties by providing an extra degree of certainty in scheduling, staffing and handling your ongoing workload.

Disadvantages of Human Resource Planning

• Expense. It costs money to train and invest in your staff. Whether you're paying for dedicated training or diverting employee hours from tasks that are more likely to directly increase your incoming revenue, human resource planning may likely decrease your bottom line in the short term before it increases your profits in the long term.
  
• Unpredictability. Although human resource planning has the potential to give your business a greater degree of stability by building the skills of your workforce, there is no guarantee that the workers you train will stay with your company long enough for you to reap the benefits of your investment.
  
• Illusion of certainty. While human resource planning can make your workforce better able to do their jobs, you may be training personnel to perform functions that become obsolete as your company and your industry evolve. This can give you a false sense of security and may prevent you from reacting quickly enough to developments.

Leveraging Advantages, Mitigating Disadvantages

Advantages And Disadvantages Of Profit Maximization Pdf

The pros and cons of human resource management often come down to how well you implement your training programs and how effectively you manage your expectations. Management and planning are certainly important, but formal programs cannot take the place of genuine engagement and goodwill. Your human resource planning shouldn't be a stand-alone effort but rather part of a bigger-picture strategy that improves engagement and builds a strong workplace culture.

Choose your training programs carefully. Make sure they are appropriate for the resources you are able to invest and the effort your employees can be expected to make relative to their job descriptions. If you pay minimum wage, it is unreasonable to expect your staff to practice or read on their own time. Similarly, if you employ trained medical professionals, it doesn't make sense to train them in basic hygiene.

Benefits Of Profit Maximization

Combine human resources training with clear messages about what you can and cannot expect from these efforts. Training and education can make your staff more effective in some areas, but they can't be substitutes for resourcefulness and adaptability.