be_1 organisations

8/7/2019 BE_1 Organisations

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Organizations

and their Objectives

Business Environment


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CATEGORIES OF ORGANISATION Organisation

An arrangement of people, pursuing commonpeople, pursuing commongoals, achieving results and standards ofgoals, achieving results and standards ofperformanceperformance.

Business involves people and resources to do oneof two things such as make (produce) items or goodsto be sold and provide services to be sold.

All organisations are affected by

the environment, government, individual


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Legal Form


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Sole Traders Features

A one-man business - risks

No separate legal entity

Small capital base

Owner is both entrepreneur and manager of business.

Examples as grocery shops, boutiques, barbers, etc.

Advantages

No formal procedures to start

Commitment and motivation

Close and quick to respond

Independence and self-reliance

Disadvantages

Total personal liability

Succession and illnesses

Financial

Skill


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Partnership Features

2 to max 20 owners or partners

No separate legal entity

A partnership agreement state the rules and avoidingpossible future disputes among the partners

Examples; dentists, lawyers accountants, architects, etc.

Advantages

More funds available & enhanced credit standing

Sharing of expertise, skills, experience, business contacts,etc. amongst the different partners

Sharing of risks

Disadvantages

Unlimited liability

Limited life

Dilution of control - each partner is held responsible for thedecisions of the other partners. All acts by any partner are

legally binding on all the partners


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Companies or Corporations Distinct artificial persons created in order to separate legal

responsibility for the affairs of a business from the personal affairsof the individuals who own or operate it. (Limited Liability)

Features Separate legal entity

Creation by incorporation - by lodging the MOA (companys constitution),

the AOA (regulations for management of company) Ownership by shares.

Public limited companies (plc) & Private limited companies (Ltd orLimited)

Advantages Limited liability of shareholders, ease of ownership transfer

perpetual life, wider source of capital Specialised management expertise and skills.

Disadvantages Higher cost and difficulty in running organisation

More government regulations - comply with Companies Act

Lack of secrecy information to shareholders, investors, gov.,

competitors, Taxation


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Companies or Corporations Private company

ownership is limited to between 2 and 50

shareholders cannot transfer their shares without consent

of the company

shares are not sold to the public

Public company

a minimum of 7 shareholders and no limit for maximum

shares are sold in public (sold on stock exchange)


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SIZESize can be viewed in terms of:

Numbers employedVolume of output, sales, revenue

Assets employedProfits earnedNet worth in real terms


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Type of Businesses Small businesses - a sole trader/partnership; sell

locally; employ less 50; e.g. computer trainers,solicitors and accountants. Etc.

Medium-sized businesses - employ between 50 and250; operate local and/or national level; e.g.

manufacturers, clothing, furniture, etc.

Large businesses have many factories/officesand outlets in one or more cities/countries;manufacturers, retail food outlets, financecompanies, etc.

National businesses - have household names;recognisable logos; large in size (workforce 250 ormore); branches/factories in major towns/cities.

Multinational - sells worldwide and operate in more

than one country.


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Advantages of a large organisation:

Sufficient resources to command a significant marketshare.

Wide variety of products, customer services, attractivecareer, develop high-quality personnel, for future topmanagement positions

Can provide for greater division of work and specialisation

Likely continuity of goods or services, management

philosophy, customer relations, not prone to sudden policychanges, etc.


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Disadvantages of a large organisation:

Management hierarchy -- problem of communication;control, direction by management

Widely diversified range of products or services - difficultto integrate common objective, management philosophyand culture

Time in maintenance of organisation administration,losing sight of setting objectives, planning

Tendency of ingrown and inbred - political, group- think,resistance to changes and developments

Junior management tasks (routine and boring). poorcareer development, earnings, rewards, promotioninformation, etc.


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ECONOMICACTIVITY


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Economic ActivityLevel of activity

1. Primary sector consists of industries that produce raw materials,such as crops and minerals.

Examples: oil extraction, wood felling, coal mining company

2. Secondary sector consists of industries that use the raw materialproduces by the primary sector, involved in manufacturing orconstruction, they manufacture the finished article or parts for furtherassembly and manufacture.

Examples: processing oil to produce petrol, chemicals, gas, etc.,construct buildings, building roads, etc.

3. Tertiary sector consists of distribution and service industries,involved in passing the goods from the producer to the consumer.

Examples: banking, tourism, hairdressing, teaching, office cleaning, taxadvice and the media.


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Economic ActivitySome important terms in economics:

Gross domestic product a measure of economic activity in a country.

De-industrialisation often used to describe the long-term decline in the importance of

manufacturing industry and the secondary sector in general.

Trade surplus / deficit an excess of exports over imports / when imports are greater than

exports.

Exchange rate the price of one currency in terms of another. If LI can buy you $1.50 in US

dollars, then the pound-dollar exchange rate is 1.50.

Sunrise industries:

rising new industries, such as information technology and genetics.T

heirimportance is increasing worldwide.

Sunset industries: gradually dying industries. In the Western economies they include heavy

industries such as steel and shipbuilding, whose prices have beenundercut for many years by more efficient producers in Korea and othercountries in the Pacific.


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THE PUBLICAND PRIVATE SECTORS

Private sector organisations

are usually set up for personal gain and

are funded by shares issued, loans from

banks, overdrafts etc. They are not ownedby the state or run by the state.

Public sector organisations

are usually set up in the interests of the

community and are funded wholly orpartly by the Government from public

funds and are answerable to a

government department or the Treasury.


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Private Sector Organisations

that seek profit for their proprietors

Sole traders

Partnerships

Private companies (not quoted on the stock market)

Public companies (plcs, mostly quoted on the stock market)


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with objectives other than purely profitCo-operatives

is the result of a voluntary linking together of consumers, producers or retailersinto a trading organisation, which is then used to represent its constituentmembers in the marketplace.

Features: Separate legal entity, Ownership by members

Management by management committee - elected by the members

Profits - divided among the members (dividends, bonus, etc.) or allocated toother funds constituted by the co-op.

Types Wholesale or retail of goods

Farming co-operatives

Producer co-operatives

Advantages: Benefits in production - Bulk buying, cost, negotiation, etc. Marketing - Joint advertising, promotional campaigns, patron, etc.

Disadvantages: Size - In rural areas, too small in terms of membership, capital resources and

business turnover, leading to many failures.

Inexperienced and incompetent management.

Keen competition from rival institutions.


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with objectives other than purely profit

Voluntary Organisations Non-profit driven, non-statutory, autonomous and run by individuals who

do not get paid for running the organisation

Features: Non-profit making

Dependent upon their members and supporters to survive

Individuals who do not make their living from their involvement

Type Charities

Criteria to be a charity:

a. Must fit under one of the four heads of charity: relief of poverty,education, religion, other purposes (public works, recreational and leisurefacilities, etc,

b. Public benefit


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THE PUBLIC SECTOR Refers to all publicly funded or publicly owned

bodies

Characteristics they are government owned and controlled

they are engaged in commercial (business) activities

they have socio-political goals alongside their primaryeconomic goals.

Organisations are owned by state (centralgovernment and/or local government)

Some provided services paid for by taxation,others levy charges on users directly (usually withsubsidy)

Examples: Civil service agencies, schools, armedforces, public libraries


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THE PUBLIC SECTOR Normally engaged in some form of

business related to utilities (e.g. water, gas, electricity, transportation,

communications)

A

dvantages Benefit consumers - main aim is not to earnprofits but provide services (protected frommonopolies or high prices)

Sense of responsibility to public

Large-scale enterprise (economies of scale)

Disadvantages Lack initiatives

Bureaucracy and lack flexibility


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The public sectorReasons for the growth of the public sector and

public spending

Industrialisation and urbanisation - pressures forincreased government intervention

Population profile Changes, old people, etc.

Political parties - Competition for public support bypromising better activities, services (health care,transport, etc.)

Pressures groups - to improve services

Welfare state - designed for society with people havingpaid employment, not with high levels of unemployment,as is now common.

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