When considering what the aims and objectives of the private sector are, the easily apparent answer is to maximize the profits for shareholders and owners. This is accurate but the ways that these aims are to be achieved provides more detailed objectives. The nature of the private sector in a market economy means that consumers are best served if companies are competing to provide the best products and services at the lowest possible prices.
Perfectly Competitive Markets
A price taker is a company or individual who operates in a sector of the economy where she has no control whatsoever over the price that she can charge for her good or service. A price maker is an individual who operates in a sector where producers have, to a greater or lesser extent, some control over the prices they charge. In a price taking market, the profit will normally be just enough for the company or individual to stay in business. A perfectly competitive market is price taking; a market that is easy to enter and exit and standardize products.
Because the opportunities for making extra profits are severely limited under perfect competition, all firms will shape their aims and objectives to move beyond a perfect competition market. Therefore there are few perfectly competitive markets and they usually only exist in the production of some agricultural and primary products. In order to become price makers and increase profits, firms will try to differentiate their products and services by using tactics such as packaging, branding and advertising. The features of this type of market are similar to those for perfect competition except that products are not standardized. It is the structure in which the majority of companies operate.
Oligopolies and Monopolies
The market structure for oligopolies and monopolies is one consisting of a small number of firms for the former and only one company for the latter. To be able to operate in markets such as these is a prevailing objective for private sector companies because the opportunities to be price makers and make extra profits are much greater. Of course, this is not good news for consumers who must pay more, so governments often regulate prices and competition or even break up monopolies.
While it is not the aim of every business to grow and expand, it can be considered a general aim and a general outcome of a market economy. If it were not so, we would not see consistent GDP growth both year by year and era by era. Once a company has reached a certain size, it is often the most profitable decision to go public and be listed on the stock market. Present owners can cash in and still retain control while the company gets a huge boost of funds for expansion. Growing companies to this size is often a major private sector aim.
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