Question

These questions refer to the two views or theories of the firm that were presented and discussed throughout the course, the Stakeholder View and the Ownership View.

1. Provide one example of a business adopting the ownership theory into their business model. Be sure to clearly indicate how their actions illustrate the definition of the ownership theory. Apply the concept of short-term vs. long-term thinking in your response.

Answer 1

The example of a Company which adopts ownership theory is Apple Inc. lets know what is ownership theory is. Ownership theory is proposed by Milton Friedman in which he said that the only duty of company is to increase the wealth or maximize their profit while doing business with transparency and no fraud.Management are responsible for acting in the best interest of shareholders means owners of the company.

so this theory applies to Apple Inc because Apple manufacture and sells iphones, Ipads and other electronic items to customers at very expensive prices while the manufacturing cost is very low as company outsource its manufacturing in Foxconn Company to reduce its labor cost, manufacturing cost still Company charges triple prices of its products as compared to other companies like xiaomi, Lenovo etc.

This shows that Company have the potential to sell its products at low prices but sells them at high price to maintain its brand image as premium company and increase profit of its owners.This strategy is based on Long term thinking because in long term thinking company focus on long terms goals like selling products at high price can lower the sell in short run but when time goes by and customer start to understand the value of products and service then Company Apple earns more profit in long run. this is not possible in short run because short run because if you charge lower price in a year or two then increase your product's price then customer start to switch to other brands.