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The organization is distinct from its environment. Performance is monitored against the goals and adjusted if necessary to ensure the goals are accomplished. An organization as a social arrangement which pursues collective goals. which control its own performance and which has a boundary separating it from its environment. Key Points Social arrangement Collective goals Controls performance Boundary Description Individuals gathered together for a purpose. Reasons why organization exist. The organization has goals over and above the goals of the people within it. Pooling of expertise . Pooling of physical Individual or company pooling limited resources (4Ms) together to attain some objectives.ENVIRONME NT Definition of organization.
g. by people working on their behalf or indirectly by government. Synergy advantage A team’s output is better than an individual.Individuals complementing their skills. . Control Individuals as owners themselves. owned by private owners/ shareholders as for public sector. Ownership E. Difference between organizations. expertise. : Private sector. experience. government is the owner. Power Centre Individual rarely has the power to influence events on a large scale whereas a group of people can certainly influence decisions. etc in their attempt to attain some results. Activity What does the organization do or what is their core business? Manufacturing? Service? Legal status / Size What is the status of the company as defined by the Companies Act? • Unlimited companies either sole proprietorship or partnership. No individual is all-rounder No individual is capable of satisfying his/her needs. Therefore organizations are formed to offer a variety of products and services.
government funding. for example WWF World Wild Life System A system is a collection of interrelated parts which had taken together forms a whole such that: • • The collection has some purpose A change in only of the parts leads to a change in some other parts.• Limited companies either private or public: A limited company is format to limit the liabilities of its owner would only be held liable up to and only limited to the amount of shareholdings that they hold in the company. industry or low use of technology such as sundry/ sundry shop. . Technology High use of technology such as I. Profit / Non-profit orientated • • Profit Non-profit = = Company Charity.T. Source of finance Where does the company find money to finance their organization? Borrowing. share issues.
the court & the jury Connected and interacts with its environment Takes in influences and influences from its environment Stable system which is nevertheless continually changing / evolving Their relationship with the environment is in some degree restricted Eg: government in general. ministries in the government An open system • • • Semiclosed system • • Environment influences on organizations Environment is everything outside the boundary of an organization. . The well being of the organization depends primarily on the coordination of these sub-system / parts. Distinctio n A closed system • • • Description Isolated from its environment and independent of it thus no environmental influences affect the behavior Eg: medical research.An organization is a system made up of Departments Sub-systems These sub-systems / parts are interrelated & interdependent. NASA.
Tax law – terms and conditions theft. VAT Legal and regulatory factors affect particular industries.: ruling government.g. house rates . Employment law 5. bribery reporting requirements equal opportunity safety procedures personal data corporation tax payment. if the public interest is served. Health & safety 6. labours rates. It is an important influence at local and national economic activities and here are some of the factors and impacts: Factor Overall growth or fall in Gross Domestic Product • Or Description demands for goods & services Local economic trends • Type of industries. diplomatic relationship with other countries Economic environment Government policy affects the whole economy. Company law 4. Data protection 7. This is either of the two reasons: • • The industries are effectively. E. Law of contract 2. Government is responsible for creating a stable framework in which business can be done. Criminal law 3. monopolies Large sum of public money are involved Government is another key influence on the P environment.Macro Environment Politico-legal environment (bank) Legal framework that affect every companies: 1.
need to carry out a demography study – study of human population and human population trends. Thus. therefore affecting trading activity. A natural order of things. High rate weaken the purchasing power of money One needs more money to purchase / buy Eg: suppliers to government will be directly affected. Inflation rate • • • Government spending The business cycle • • Socio-cultural environment All the stakeholders of a company form the society where the business operates.Interest rate • • • How much does it cost to borrow money (affects cash flow) Some companies carry a high level of debt Rising of it affect customers’ mortgage payments Concern the purchasing power of money. a mixed of good & bad times. Development Growth Age distribution Description Size of population. The young The youth The aged .
Household and family structure Basic social unit Size determine by number of children. Social structure Nature of employment Technological environment Technology can contribute to overall economic growth.Geography Concentration of population into certain geographical areas. Employees are looking for quality working life and employers are looking for the ways to reduce cost. Technological impact Music Type of product / services that are made Movie(cartridge) and sold Magazine Description DVD / MP3 DVD E-mag Way the products are made From labour intensive intensive capital/machine . Population broken down into a number of subgroups with different attitudes and access to economic resources. whether elderly parents live at home. etc. Our study focus on information technology and telecommunications.
Way services are provided Ways the firms are managed Means of communication From labour intensive intensive capital/machine Advancement of IT has provided employer more confident to delegate & decentralize From manual to electronic Micro Environment The five competitive forces model Prof. The easier it is. the more threat it is. . Porter Industries & marketplace The 5CFs Barriers to new entrants Description How easy or difficult for a potential company to enter the market / industry.
Threats of substitutes Alternatives that serve the same purpose. Stakeholders Stakeholders are groups. More substitutes more competition for an organization. the greater the level of competition. corporations or individual who have an interest or a stake as well as ability to influence the well being and future course of action of the organization. Stakeholders Internal stakeholders • • Description They are stakeholders who are employed by / involved in the running of the organization. employee. Bargaining power of suppliers More supplier more bargaining power Bargaining power of buyers Customers can go to substitutes instead the organization only Rivalry amongst the existing competitors The more players/ competitors. CEO . Eg: management.
bankers No direct link with an organization financially or in the running of the company.Connected stakeholders • • They are stakeholders who have a financial link with the organization. Guides the standard setting process. Offshoot of ASB. Responsible for the issue of Financial Reporting Standards (FRSs) Lay down prescribed accounting treatments where a variety approaches might be taken. Aim: ensure that users can compare the accounts of different companies. customers. (assistant) The Accounting • Standard Boards (ASB) • • The Urgent Issues Task Force (UITF) • . Eg: shareholders. suppliers. Accounts showed must be true and fair view. Eg: competitors. Appoint external independent auditors to audit the accounts. pressure group External stakeholders • • Company law (Companies Act 1985) • • • • • Companies are required to publish accounts annually for distribution to their shareholders. public at large. government. Companies Act also set formats for company account and states what information must be disclosed. A copy of accounts must be lodged with the Registrar of Companies (RoC) and is available for inspection by any member for public. Non-statutory regulation N-S R The Financial Reporting Council (FRC) • • Description Its chairman appointed by the government.
1. 3.• Role: assist ASB but unsatisfactory / conflicting interpretations have developed. It includes representatives from many countries including UK and USA. members and shareholders of the company and published as part of the accounts. A limited company must engage a chartered certified accountant to examine the financial statements to whether the accounts present a ‘true and fair view’ and comply with the Companies Act. International Accounting Standards Committee (IASC) attempts to coordinate the development of international accounting standards. 3. Accounts of a limited company are required to be audited by the Companies Act. 2. Auditing regulations An audit defined as an independent examination of & expression of opinion on the financial statement of an enterprise. It is more extensive that the disclosure requirements of the Companies Acts. 2. . ASB will support international standards by incorporating them within the UK standards The Stock Exchange regulations 1. 3. A company whose securities are traded in this market is ‘quoted’ or ‘listed’ company. At the conclusion of their audit work. 2. International accounting standards 1. auditors issue a report addressed to the owner. Stock Exchange is a market for stocks and shares.
1. Corporate governance Defined as the way the management of a firm is influenced by many stakeholders (including owners. Audit work is governed by Auditing Standards which issued by the Auditing Practices Board. It will affect the work of the accounts of organizations that runs a PAYE system or is registered for VAT. shareholders and creditors). 2. processes and responsibilities involved in running an organization & the way it’s organized and directed at BOD. Taxation 1. since returns are required every month for payroll and every three months for VAT. Different economies have systems or corporate governance that differs in the relative strength of influence exercised by the stakeholders & how they influence the management. Timing of accounting work in important.4. Keeping records and submitting returns of payroll work to the Inland Revenue and the Department of Social Securities (DSS). Info must be ready in time with these requirements. . 3. Also refers to the systems.
Should consist of non-executive directors . ensuring that all the above are done within the law Shareholders • • They appoint the directors to be the BOD. High profile scandals and frauds exposed because shareholders in listed companies have insufficient influence and insufficient knowledge of how the company is being run. The guiding principle in the development of system of governance is accountability. overseeing management processes and reporting to shareholders iv.2. formulating and setting strategic aims ii. 4. Auditors • • Acts independently of directors and shareholders Objective: checking system on the processes and reporting system relate to company’s financial statement. Sphere Directors • Actions & Responsibilities Responsible for: i. 1. The Cadbury Committee on corporate governance using Code of Best Practice (The Cadbury Code). Corporate governance key problem : How can the providers of capital ensure that the directors act in the capital providers’ interest? 2. providing the leadership to implement them iii. 3. Separation of the post of chairman and chief executive 2. Main provisions of the Code: 1. Appoint auditors to oversee the directors to satisfy themselves that an appropriate governance structure is in place.
Audit committees meet external auditors at least annually without executive directors 5. Executive directors’ contracts should not exceed 3 years without shareholders’ approval for reappointment 7.3. . BOD should have separate remuneration committee made up entirely of non-independent non-executive directors 4. Directors’ emoluments disclosed in accounts / annual reports 6. Provisions are mainly concerned with limiting the powers of executive directors and making them more accountable to the shareholders. Funds available to non-executive directors who wants independent professional advice 5.