BT Notes by Akshay Lal

Syllabus
• Business Organisation, Stakeholders and External Environment
• Business Organisational Structure , Functions & Governance.
• Accounting and Reporting Systems, Controls & Compliance.
• Leading And Managing Individuals and Teams.
• Personal Effectiveness and Communication
• Professional Ethics in Accounting And Business
CHAPTER 1 –
Business Organisations And Their Stakeholders
• Organisation – “Is a social arrangement which pursues collective
goals, which controls its own performance and which has a boundary
separating it from its environment”.
• Features
➢Performance
➢Objectives (SMART – Specific ,Measurable, Attainable, Realistic, Timely)
➢Systems and Procedures
➢Transforms Inputs into Outputs
➢Creates Synergy
How Organisations Differ ?
• Ownership – Private Sector Vs Public Sector (Owned by Govt)
• Control – Owners or Persons Appointed by Owners.(Shareholders and
Directors)
• Profit Vs Not for Profit Organisations.
• Size – Small Family Business to MNCs.
• Sources of Finance – Issue Shares or Borrowing from banks.
• Legal Status – Limited Vs Unlimited Liability
• Activity – Manufacturing , Energy , Agriculture , Servicew Industries
etc.
A )Limited Companies
• The liability of shareholders will be limited to the amount of capital
contributed, even though they are the owners.
• Directors are appointed by shareholders of the company.
- Executive Directors – Responsible for day to day running of company
- NEDs – Provide an overall guidance
• Operational management - usually consists of career managers
who are recruited to operate business.
TYPES OF LIMITED COMPANY
PRIVATE LIMITED COMPANY
• Number of Shareholders are
less.
• Shares cannot be transferred
without the consent of
shareholders.
• Directors themselves hold a
substantial portion of shares.
• Raising funds by Founder ,
venture capitalists etc.
PUBLIC LIMITED COMPANY
• Number of Shareholders are
more.
• Shares are directly offered to
general public.
• Directors are appointed by
shareholders and they may or
may not be shareholders.
• Fund is directly raised from
public.
LIMITED COMPANIES
Advantages
• Separate Legal Entity
• No restrictions on Size.
• More money is available for
investment.
• Limited liability.
Disadvantages
• Shareholders have less
PRACTICAL POWER.
• Legal compliance costs –
Statutory Audit fees.
PUBLIC SECTOR
• This comprises of all organisations owned and run by govt and local
govt.
• Armed Forces , Schools , Railways etc.

FEATURES
• Accountability – Ultimately to Parliament.
• Funding – Taxes and charges. Sometimes they borrow too.
• Demand – Most of the services are always in demand.
• ADVANTAGES
• Cheaper finance – As the
borrowing is backed by govt
guarantees , they avail finance at
less interest rates.
• Fairness – Ensures Equality.
• Economies of Scale – Spread the
cost.
• DISADVANTAGES
• Inefficiency May be ignored as
taxpayers bears losses.
• Political Interference
• Cost – Public will not wish to
bear the cost of making a service
so perfect.
NON GOVERNMENTAL ORGANISATIONS
• An NGO is a legally constituted organisation of people acting together
independently from any form of government.
• Aim is not a commercial one , may have political aims , but are not
political parties.

• FEATURES
• Staffing by volunteering
• Funds from Grants or Contracts
• Skills in media relations
CO-OPERATIVE SOCIETIES AND MUTUAL
ASSOCIATIONS
• Co-operatives are business owned by their workers or customers, who share
profits.

• FEATURES
• Open Membership
• One Member –One Vote ,democratic control.
• Distribution of Surplus in proportion to purchases.

• Mutual Associations – Similar to cooperatives, but they are owned and controlled
by their members rather than outside investors.
• Eg- Credit Union – Financial institutions owned and controlled by themselves.

STAKEHOLDER
Stakeholders are individuals or
groups that, potentially have an
interest in what the organisation
does.
PRIMARY STAKEHOLDERS
Those who have contractual
relationship.
SECONDARY STAKEHOLDERS –
Not having such a relationship.
• TYPES OF STAKEHOLDERS
• Internal Stakeholders
(Employees , Management)
• Connected Stakeholders
(Shareholders, Suppliers ,
Customers, Bankers)
• External Stakeholders
(Government, Professional
Bodies)
Stakeholder Conflicts
- Conflict between interest of stakeholders.
• Managers & Employees – Money , Promotion, Benefits.
• Bankers – Adherence to loan agreements, Security of loan.
• Suppliers – Prompt payment , profitable sales
• Customers – Goods as promised , Other benefits.
• Govt - Jobs ,Tax
• Professional Body – Member Ethics

• SHAREHOLDERS – INCREASE IN SHAREHOLDERS WEALTH

STAKEHOLDER MAPPING – POWER AND
INTEREST
• Commonly Known as Mendelow Matrix.
Low High
High
C D
Low P
A B O
W
E
INTEREST
R
• D – Key player, Strategy must be acceptable to them. E.g. – Major customer
• C – Keep Satisfied, they are capable of moving to D. Eg – Institutional Shareholder
• B – Keep Informed. E.g. : Trade Union representatives.
• A –Minimal Effort
Measuring Stakeholder Satisfaction
• Measuring the success which an organisation achieves in satisfying
stakeholder interests is difficult , because they are QUALITATIVE ,
rather than QUANTITATIVE

• Employees – Staff Turnover , Job vacancies

• Government – Pollution Measures , Promptness of filing annual
returns