What is Theory of Firm

A firm is to be considered as an effective tool for the production and distribution of goods and services, in the very common and least level the theory of the firm show case the responsibilities and relationship of any company towards the factors which are either the directly or indirectly involved.

In the theory of the business the goal and object of the business is defined in which the firm is predicted with the nature of the firm’s existence, behavioral structure and its relationship with market, theory of firm mainly rely on the two things that how to face future uncertainty and tries to hypotheses the future expected value of the firm.

The factors which are directly and indirectly involved with the company are discussed below:


The Customer puts a major impact on the company as Firm is Directly involved with the customers as it is the customer for whom the company produces the products and it is customer who purchase the product of the company and with the satisfaction with the company’s product customer by purchasing more and more products of the company it increase the sale of the company and ultimately it increase the profit of the company.


Supplier is factor through which company receives the raw materials and produces the products for the general public to satisfy the ends and want of the customers, supplier is a factor which makes enable to any company to utilize the resources such as machinery, land, working force and anything by providing raw material the supplier has a great impact on the company specially in the price matter as if there is less bargain from the supplier the cheaper the price will be of product.


In the management there is a position named as manager, the person who hold this position is responsible for the managing organization committed employees, those persons who are committed with the company the manager is a leader who leads them by just indicating the way towards success but he also do not let down those persons who by morally are down he encourage themselves and try to bring them in the main stream.


Another factor which has great impact on the company is the society from where the company avails the potential and competitive work force and the responsibility of company toward the society is to provide them a qualitative and reasonable priced products.

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