“All businesses should earn profits; if they do not, they are in an unhealthy state and at risk of disappearance. But there is an important question: should one aim for an adequate level of profit, or must one always reach for the stars by seeking the highest possible profit?…
Here is one argument against the target of maximum profitability: as it grows, a business can generally widen its profit margins, because its expansion gives it bigger shares of its markets and thus greater pricing power…
Thus, half a century ago, the doyen of management theory Peter Drucker wrote:
Profit serves three purposes. [First] It measures the net effectiveness and soundness of a business's efforts. It is indeed the ultimate test of business performance.
[Second] It is the "risk premium" that covers the costs of staying in business - replacement, obsolescence, market risk, uncertainty ... the task of a business is to provide adequately for these "costs of staying in business" by earning an adequate profit—which not enough businesses do.
Finally, profit insures the supply of future capital for innovation and expansion, either through ploughing back of profits or by attracting capital from outside investors.”
What are the pernicious consequences of the pursuit of maximum profits? The best solution would be a radical change in prevailing attitudes.
distributistreview.com
UPS is fine! Adequate profits. They don’t have to have maximum! The servile state is hurting UPS profits. Post Office !