POB - Review

Topic: The Nature of Business

Direct produc on

Direct production means that human beings provide what they needed for themselves and
their families. This was the way in which early human beings satisfied their wants and needs.

Subsistence economy

A subsistence economy, is an economy in which the people barely meet their everyday
needs. It is often seen as a major factor for poverty in developing nations. This is because the
people of the society do not trade with other groups, this may be for a vary of reasons but a
major one being their isolation. If the people of the society do not produce enough food, or not a
variety the people will become sick and contract disease.
The people also do not have everyday items that we take for granted, such as ipods, TV's,
computers, fashionable clothes and shopping malls. This is because the people do not produce
enough surplus to trade with, sometimes not even producing a surplus at all.

However with the creation of tools human learnt how to master their environment by introducing
simple specialisation. This increased people’s ability to produce resulting in the production of
surplus is poverty.

Barter

Trade in the earliest times was conducted by means of barter, i.e. the exchange of goods and
services for other goods and services. For example if house hold A had a cow and household B
had a goat then trade could take place if house hold A wanted what Household B had to trade and
country B wanted what house A had to trade.

This was not very convenient for the following reasons.

1. The other party might not have anything that you wanted in exchange for what they
wanted to trade.
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 2. There was the problem of unequal value where one party’s goods might not be available
in convenient units or of the right value. For example it might not be good offering a cow
in exchange for a chicken.

3. It was very difficult to establish the relative value of the goods being exchanged since
there was no common measure of value.

Barter and contemporary society

Barter has now virtually died out, but barter still takes place between friends or countries e.g.
Trinidad trading petroleum for Jamaica’s sugar.

Advantages

1. Surplus production could be disposed of through the barter system

2. Barter enabled a person to get what he/she did not have or could not produced
themselves.

3. It set the stage for the system of trade that exists today.

4. Countries with foreign currency problems can barter and so save well needed foreign
currency for use on vital items such as drugs for the sick.

The Development of Money

1. Early civilisations – Direct production – no exchange needed – production only to satisfy

the need of self and family

2. Production of tools – surplus – barter

3. Durable items such as beads and shells were used in exchange

4. Development of precious metals; copper, gold and silver coins used as currency,

5. Paper developed as currency because metal was too expensive, too risky to deal with

6. Cheques and cheque deposits were used next to reduce the risks – still used today

7. Plastic money in the form of credit and debit cards and electronic money through
electronic transfers marks a trend towards a cashless society.
 Money as we know it today was invented because barter was so inconvenient, the use of money
spread rapidly. We usually think of money as coins and notes, but in fact other things have been
used as money including cattle, shells, beads etc. The first money consisted of gold or silver
coins, and their value was that of the weight of gold or silver that they contained.

The growth of money in trading opened the door for economic growth and development of
societies.

In/Direct Produc on

Direct production is the production of goods for one's personal use. For example; a person
farming corn only for his family. Indirect production is whereby one produces his goods for
sale e.g a cash crop farmer.

Specialisa on and Division of Labour

Division of labour is a process whereby the production process is broken down into a sequence
of stages and workers are assigned to particular stages.

Specialisation exist where a community, group, or organization under which the members most
suited (by virtue of their natural aptitude, location, skill, or other qualification) for a specific
activity or taskassume greater responsibility for its execution or performance.

Division and specialisation of labour allowed each person to do the job for which he or she is
best suited.

Advantages of Division of labour are:

1. It leads to specialisation and increase of skills. Doing the same job over and over makes
people better at it.

2. Production is speeded up.

3. Pore use can be made of machines

4. There is an increase in output

5. There is usually an increase in quality

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6. Usually cost less per unit of output

7. There will often be less use of manual labour.

8. There is a greater opportunity to use machines and automated methods of production.

9. Less time is needed for training the worker: this is a benefit of both employer and
employee.

10. Because of savings in time and cost, the working week can be made shorter and everyone
enjoys a higher standard of living.

11. Management too can become more specialised.

Disadvantages of Division of Labour are:

1. Work can become monotonous and boring

2. Workers can lose pride in their work. No longer can a worker say “that I made all myself.

3. It can lead to bad relations between the employer and the employee.

4. Other skills possessed by the workers are not utilised, thus limiting the creativity of the
workers.

5. If a key worker is absent then the assembly line could be greatly interrupted thus
reducing production targets.

6. Some firms are either too small and cannot afford the capital to put in place the kind of
equipment and machinery that would enhance production
Bills of Exchange

This is another instrument that can be used to settle debts. A bill of exchange is an unconditional
order in writing addressed by one person to another, signed by the person giving it, requiring the
person to whom it is addressed to pay on demand or at a fixed or determined future time a certain
sum of money to a specific person or to a bearer.

A bill could be used where the seller sends the buyer a bill of exchange for the amount due. The
buyer accepts this by signing his name across its face, thereby establishing a legally binding
obligation to pay the amount of the bill on the date specified ( a period of 3 – 6 months).

The bill, then, is a negotiable instrument.

Credit cards

A credit card is a plastic credit card with a magnetic strip. Holders of a valid card have the
authorisation to purchase goods and services up to a predetermined amount, called a credit limit.
The vendor receives essential information from the cardholder, the bank issuing the card actually
reimburses the vendor, and eventually the cardholder repays the bank through regular monthly
payments. If the entire balance is not paid in full, the issuer can legally charge interest fees on the
unpaid portion.

Electronic Funds Transfer (EFT) is a system of transferring money from one bank account
directly to another without any paper money changing hands. One of the most widely-used EFT
programs is Direct Deposit, in which payroll is deposited straight into an employee's bank
account, although EFT refers to any transfer of funds initiated through an electronic terminal,
including credit card, ATM, Fedwire and point-of-sale (POS) transactions. It is used for both
credit transfers, such as payroll payments, and for debit transfers, such as mortgage payments.

Telephone banking is a service provided by a financial institution, which allows its customers to
perform some banking transactions over the telephone.
Most telephone banking services use an automated phone answering system with phone keypad
response or voice recognition capability. To ensure security, the customer must first authenticate
through a numeric or verbal password or through security questions asked by a live
representative. With the obvious exception of cash withdrawals and deposits, it offers virtually
all the features of an automated teller machine: account balance information and list of latest
transactions, electronic bill payments, funds transfers between a customer's accounts
An e-commerce payment system facilitates the acceptance of electronic payment for online
transactions. Also known as a sample of Electronic Data Interchange (EDI), e-commerce
payment systems have become increasingly popular due to the widespread use of the internet-
based shopping and banking.
Over the years, credit cards have become one of the most common forms of payment for e-
commerce transactions

What is a Business?

A business is an organisation that provides goods or services, or both, with the aim of
making a profit. It could be a commercial or industrial organisation. Notwithstanding the fact
that there are also non-profit organisations such as government owned schools, service clubs and
churches the objective of a business is to realise a profit.

Reasons for establishing a business

1. To achieve financial independence

2. To work for oneself and to be one’s own boss

3. To make a profit

4. To obtain power

5. To lay the foundation for a family legacy

6. To gain personal freedom

7. To respond to changes in personal situation

8. To put a creative idea into operation

9. To respond to the desire for self-actualisation

10. To achieve financial independence.

Functions of a business

1. To provide goods and services

2. To make a profit; the term profit means the excess of sales (revenue) over the cost of
doing business.

3. To provide income to government

4. To create employment

Factors of production

Factors of Production consist of Land, Labour, Capital and Entrepreneurship

Land (Natural resources): These include coal, oil, minerals, stone, fertile soil, timber, fish in
the seas and water which we drink.

Labour (Human resources): Labour describes all forms of work of hand or brain needed to
transform natural resources into a form useful to man.This consists of skill, semi-skilled, and
unskilled labour.

Capital (Financial resources):This consist of the money needed to buy land, machinery and
equipment and to pay the worker who provide the labour.

Entrepreneur; Is the person who is courageous, creative and one who is prepared to take the
risks of starting his own business. Such a person is usually innovative and may create new
products and services, introduce new technology or a new method of production.

Profits

Profit is defined as the excess of income over expenditure, especially in business

Profit is calculated using the following formula:

Total profit = Total revenue – Total cost

Loss
Business loss is a state that occurs when a company fails to generate enough revenue to cover all expenses
associated with the operation of the business. That is Loss occurs where expenses exceeding sales or
revenues.

Loss is calculated using the following formula:

Total loss = Total revenue – Total cost and a loss would exist where Total cost is greater than total
revenue.

Trade

Business organisation

A business organisation involves individuals, companies or corporations who engage in

industrial or commercial activity with a view of making a profit. Although there are non-profit
organisations such as government owned schools, service clubs and churches, the objective of a
business is to make profits.

Market

A market is a group of buyers and sellers of a specific good or service. A market usually does
not refer to a physical location for the buying and selling of products. Economists use the word
"market" to describe a mechanism of exchange between buyers and sellers of a good or service.
Definition: A market is any place where the sellers of a particular good or service can meet
with the buyers of that goods and service where there is a potential for a transaction to take
place. The buyers must have something they can offer in exchange for there to be a potential
transaction. A market consist of 4 important elements;

• Buyers

• Sellers

• Goods and services

• price
Economy
The economy encompasses everything related to the production and consumption of goods and
services in a country.It consists of the economic systems of a country; the labor, capital, and
landresources; and the manufacturing, production, trade, distribution, and consumption of goods
and services of that country.
A market based economy may be described as a spatially limited social network where goods
and services are freely produced and exchanged according to demand and supply between
participants (economic agents) by barter or a medium of exchange with a credit or debitvalue
accepted within the network. Capital and labor can move freely across places, industries and
firms in search of higher profits, dividends, interest, compensations and benefits. Rent on land
allocates this generally fixed resource among competing users.

Producer

A producer is a person who creates economic value, or produces goods and services for sale.
Producers play a huge role in any economic system. This is because producers are the entities
who are involved in making goods and services. Producers include privately businesses as well
as publicly own enterprises.

A consumer may be a person or group, such as a household.

The consumer is the one who pays to use the goods and services produced. As such, consumers
play a vital role in the economic system of a nation. In the absence of their effective demand, the
producers would lack a key motivation to produce, which is to sell to consumers.

Enterprise

A company (business) organised for commercial purposes; business firm, directed towards profit.
Private enterprise is based on capitalism.

Capital - All buildings, equipment and human skills used to produce goods and services. It refers
to the assets such as equipment, buildings and any improvement to existing structures or plant
and machinery to be used to improve production as well as the money used to acquire natural
and human resources.
Exchange - Trading goods and services with others for other goods and services or for money
(also called trade). When people exchange voluntarily, they expect to be better off as a result.

Commodity:
• A commodity is the term used to describe any marketable item product to satisfy wants
and needs.
 SECTION 2

Internal Organisa onal Structure of Business

Business Units

1. Sole Trader/Sole Proprietorship

2. Partnerships

3. Companies

• Private Joint Stock Companies

• Public Joint Stock Companies

4. Coopera ve Socie es

5. Franchises

6. Joint Ventures

Sole Trader/Sole Proprietorship

In a sole proprietorship one person owns the business. This type of business may be operated
by the proprietor (owner) alone or may employ several persons.

In a sole trader enterprise the owner and the business are one and the same in the sense that the
business is not a separate entity from the owner.

This form of business is the most common form of business unit because:

• They are most often small businesses

• They are easy to establish and operate.

• Very little capital s needed for starting up a Sole proprietorship.

Advantages

1. Easy to establish

2. Customers receive special attention

3. Profits are not shared

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 4. There may be a personal incentive to succeed

Disadvantages

1. Sole proprietorship has unlimited liability in the sense that all losses and debts
incurred by the business must be borne by the owner. In other words if the business
does not generate profits then the owner may have to sell even his personal
possessions in order to pay off his/her debts.

2. The sole Proprietor may have problems in raising capital; because of the lack of
collateral needed to obtain a loan.

3. The Sole Proprietor may have limited management skills in managing a business.

4. There may be a lack of competitiveness because of the small scale of operation – lack
of economies of scale.

5. Lack of continuity if the owner dies

6. Long working hours and the proprietor may be unable to take vacations.

Partnership

A partnership is a business that is jointly owned by the parties involved. 2 to 20 persons can
come together to form a partnership.

Characteristics

• All partners contribute to the financial capital of the business

• Share the profits and the losses

• All the partners are fully responsible for the business’s debts and if one partner cannot
pay his or her share then the loss will fall on the other partner or partners.

• Need to register the business with the Registrar of Companies:- Name, Type and address
of the business, the partners names, and date of the partnership agreement (deed) if one
exist.
 Partnership Agreement or Deed

As with a Sole Proprietorship, a Partnership requires few formalities to start. The partners can
make whatever arrangements they like between themselves, on the running of the business and
sharing of profits. It is always advisable to have a written partnership agreement or deed.

This saves a lot of arguments and disputes arising between partners. A partnership deed sets out
the rights of each partner as to;

• The contribution of capital to the business of each of the partners.

• The division of profits.

• The responsibility of each partner in the business

• The procedure for the admission of new partners into the business.

• What happens when a partner dies or leaves the partnership; or retires.

Partnership Act of 1890

If no partnership deed exist or if it does not cover the par cular point at issue, and the ma er
comes up before the Courts, then the law assumes that the rules laid down in the Bri sh
Partnership Act of 1890 apply; there are:

1. Pro ts and losses must be shared equally among all the partners.

2. All partners can bind the business in contract e.g. place orders for goods which will then
have to be paid from out of partnership funds.

3. No interest will be paid on partners’ capitals or charged on drawings (money they have
withdrawn from the business).

4. No partner will be en tled to a salary.

5. All books associated with the Partnership must be kept at the place of business.

6. All decisions must have a majority vote.

7. In prac ce these rules are o en altered in the partnership deed. As some partners may
contribute a larger capital than others, it is quite common to allocate pro ts in
propor on to capital and to allocate interest on capitals. Some partners known as
sleeping partners may only contribute capital but take no ac ve part in the running of
the business to compensate partners that do take part in the running of the business,
they may be paid a salary in addi on to their share of pro ts.
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 Types of Partnerships

There are two types of Partnership arrangements:

• General or Ordinary Partnership

• Limited Partnership

General Partnership

In this arrangement all the partners have responsibility for the general running of the business
and have unlimited liability. If the business fails the partners like the sole trader may have to use
their personal resources to cover the rm’s debts.

Limited Partnership

The provisions of a Partnership Act allow for the forma on of a limited partnership, where a
minimum of one partner must have unlimited liability. This means that if the business fails then
the partner with unlimited liability is responsible for the debts of the business.

In a limited partnership:

• One partner may not be required to be ac vely involved in the running of the business,
even though that partner has contributed capital to the business.

• The inac ve partner is called a sleeping partner but shares in the pro ts of the business.

• If the business should become bankrupt then the inac ve partner is liable for the debt
incurred by the business only to the tune of the sum invested in the business. The other
partners have to bear the debts involved.

Advantages

• Easy to form and manage

• The enterprise might be much larger than a sole trader as more capital can be
contributed by partners. Larger rms bene t from economies of scale.

• The partnership increases the ability of the partners to obtain nancing for the business.

• Liability does not rest solely with one person as in the case of the sole trader.

• A be er distribu on of the workload as partners can be employed to areas for which

they are best suited and experienced,

• No corporate taxes are levied on the business.

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 Disadvantages

• Each partner has to take responsibility for the acts of other partners, as each partner can
legally bind the business in contract.

• Decision making is slower and even di cult because partners may not agree on a
par cular approach to solve a business problem.

• Partners have unlimited liability except for the limited partner.

Limited Company (Joint Stock Companies)

There are two types of limited companies:

• Private Joint Stock Companies

• Public Joint Stock Companies

The limited companies are so called because the shareholders who are the owners of the
company have limited liability for the company’s debts."Limited by shares" means that the
company has shareholders, and that the liability of the shareholders to creditors of the company is
limited to the capital originally invested.

Private Company
A company whose shareholders may not exceed 50 in number and whose shares may not be
offered for public subscription, .i.e. a company in which a small group of shareholders control all
of the shares. These shareholders tend to hold onto the company's stock and, in any case, no
shares are publicly traded. Privately held companies are, by their nature, impervious to hostile
takeovers and proxy wars. They tend to be more stable than other companies because their share
prices are not determined by (sometimes irrational) investment decisions, but by the value of the
company itself. However, privately held companies do not have access to as much working
capital as corporations with more shareholders have.

Types of shares

A company may have many different types of shares that come with different conditions and
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There are Three main types of shares:

• Ordinary shares are standard shares with no special rights or restrictions. They have the
potential to give the highest financial gains, but also have the highest risk. Ordinary
shareholders are the last to be paid if the company is wound up.
• Preference shares typically carry a right that gives the holder preferential treatment when
annual dividends are distributed to shareholders. Shares in this category receive a fixed
dividend, which means that a shareholder would not benefit from an increase in the
business' profits. However, usually they have rights to their dividend ahead of ordinary
shareholders if the business is in trouble. Also, where a business is wound up, they are
likely to be repaid the par or nominal value of shares ahead of ordinary shareholders.
• Cumulative preference shares give holders the right that, if a dividend cannot be paid
one year, it will be carried forward to successive years. Dividends on cumulative
preference shares must be paid, despite the earning levels of the business, provided the
company has distributable profits.

Preference shares
Preference shares (prefs) are legally shares, but they are very different from ordinary shares.:
• Dividends on preference shares have to be paid before dividends on ordinary shares.
• Dividends on ordinary shares may not be paid unless the fixed dividends on
preference shares is paid first.
• Dividends are fixed like bond coupons, although there are usually provisions to not
pay, or delay payments.
• Preference shareholders have a higher priority if a company is liquidated than
ordinary shareholders, although a lower priority than debt holders.
• In the case of cumulative prefs, if the dividend is not paid in full, the unpaid amount
is added to the next dividend due.
• Preference dividends are fixed, so they do not participate in increases (or decreases)
in profits as ordinary shareholders do.

Definition of 'Debenture'
A type of debt instrument that is not secured by physical asset or collateral. Debentures are
backed only by the general creditworthiness and reputation of the issuer. Both corporations and
governments frequently issue this type of bond in order to secure capital. Like other types of
bonds, debentures are documented in an indenture.
 Cooperatives - are jointly owned commercial enterprises (usually organized by farmers or
consumers) that produce and distribute goods and services and are run for the bene it of
its owners.
The four principles of Cooperatives are:
1. Open Membership: All member of the public can join a cooperative.
2. Democratic control: All major decisions are taken collectively by members,
each of whom only has one vote irrespective of the amount of capital
subscribed.
3. Limited interest on capital invested.
4. Pro it sharing: All pro its are given back to the cooperative's members. These
refunds, also called "patronage dividends," are paid to each member annually
according to the proportion of business each does with the cooperative for
that year.

Types of Cooperatives

Worker Co-operatives
Businesses owned by people who work in them. Control is democratic: one person, one vote.

Housing co-operatives
Housing controlled by the people who live there. People living in the premises jointly own and
control the co-op, this in turn controls and manages the premises. Members are at one and the
same time landlord, manager and tenant.

Marketing Co-operatives
Members can be individuals or businesses getting together for mutual benefit to do contract
delivery, joint marketing, bulk buying or to share premises. E.g. farmers and fishermen’s
cooperatives.

Credit unions
Financial co-operatives which bring people together to save, borrow at low cost rates, and
manage their finances.

Franchise
A franchise is a right granted to an individual or group to market a company's goods or services
within a certain territory or location. The Franchising Service Sector in CARICOM is dominated
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by petrol stations, fast food/quick service restaurants, lodging/accommodation, and Business
Services. Names such as Shell; Texaco; KFC; Hilton; Marriot; TGIF; Ace Hardware; Coca-Cola
and Pepsi are virtually household names in most of the Member States.
An individual who purchases and runs a franchise is called a "franchisee." The franchisee
purchases a franchise from the "franchisor." The franchisee must follow certain rules and
guidelines already established by the franchisor, and in most cases the franchisee must pay an
ongoing franchise royalty fee, as well as an up-front, one-time franchise fee to the franchisor

Advantages
• Your business is based on a proven idea. You can check how successful other franchises
are before committing yourself.
• Your franchised business will benefit from established business systems and procedures
that have been tested and proven in the marketplace
• You can use a recognized brand name and trademarks. You benefit from any
advertising or promotion by the owner of the franchise - the 'franchisor'.
• The franchisor gives you support - usually including training, help setting up the
business, a manual telling you how to run the business and ongoing advice.
• You usually have exclusive rights in your territory. The franchisor won't sell any other
franchises in the same territory.
• Financing the business may be easier. Banks are sometimes more likely to lend money to
buy a franchise with a good reputation.
• You can benefit from communicating and sharing ideas with, and receiving support from,
other franchisees in the network.
• Relationships with suppliers have already been established.

Disadvantages
• Costs may be higher than you expect. As well as the initial costs of buying the franchise,
you pay continuing management service fees and you may have to agree to buy products
from the franchisor.
• The franchise agreement usually includes restrictions on how you can run the business.
You might not be able to make changes to suit your local market.
• The franchisor might go out of business.
• Other franchisees could give the brand a bad reputation, so the recruitment process
needs to be thorough
• You may find it difficult to sell your franchise - you can only sell it to someone
approved by the franchisor.
 • All profits (a percentage of sales) are usually shared with the franchisor.
• Benefits Could Prove Illusory - If you choose the wrong franchisor, the typical
"benefits" associated with buying a franchise may prove to be an illusion. That is
there are good franchisors and franchise systems and there are bad franchisors and
franchise systems. If you choose the wrong franchisor and fail to thoroughly evaluate
the franchise agreement, training, on-going support and brand recogni on may be
non-existent;
• Poten al for Reduced Margins - As a franchisee you will be required to pay on-going
royal es. These royal es, typically, are based on your gross sales and not your
pro ts. So, royal es will impact your pro t margin. So, make sure that the franchise
opportunity and the value of the franchise system outweighs your addi onal cost.

Joint Ventures (Special type of partnership)

A joint venture is a contractualagreement joining together two or more par es for the purpose
of execu ng a par cular business undertaking. All par es agree to share in the pro ts and
losses of the enterprise. The joint venture comes to an end when the ac vity has been
completed.

Mul na onal corpora ons are business en es that operate in more than one country. The
typical mul na onal corpora on, normally func ons with a headquarters that is based in one
country, while other facili es are based in loca ons in other countries.
One common model is for the mul na onal corpora on is the posi oning of the execu ve
headquarters in one na on, while produc on facili es are located in one or more other
countries. This model o en allows the company to take advantage of bene ts of incorpora ng
in a given locality, while also being able to produce goods and services in areas where the cost
of produc on is lower.
Another model for a mul na onal organiza on is to base the parent company in one na on and
operate subsidiaries in other countries around the world. With this model, just about all the
func ons of the parent are based in the country of origin. The subsidiaries more or less func on
independently, outside of a few basic es to the parent.
Example of mul na onal corpora ons in the Caribbean are found in the bauxite and oil
industries;
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 Public sector business
The public refers to that part of the economic and administra ve life of a country which certain
goods and services are delivered by the government or state for the bene t for of its ci zenry.
The public sector includes all central and local government ac vi es which are funded by the
state. The public sector does not embrace the pro t mo ve, but concentrates more on the
provision of services for the bene t of the country as a whole. Government funding is mainly
through taxes.
Responsibili es of the public sector include;
• Educa on
• Health
• Public u li es e.g. water, electricity
• Postal services
• Road construc on and maintenance
• Transporta on
• Recrea onal facili es
• Protec on and defence of the people

State-owned corpora ons

These are legal en es that may be fully or par ally nanced by the government. They may
receive all or some revenue for the services they provide to the public.

Na onalised Industries
Na onalisa on is the process of taking a private industry or private assets into public
ownership by a na onal government or state. The opposite of na onalisa on is usually
priva za on or de-na onalisa on.
A private business may be taken over because it may be taught to be important to have them
under the direct government control. Examples of na onal industries in the Caribbean include;
• Postal services
• Railways and bus services
• Air services
• Electricity and water supply
• Ports, harbours and airports.
The aims of na onalisa on are:
1. To transfer the pro ts from private shareholders to the community at large.
2. To revitalise a declining industry with fresh investment.
3. To protect a vital but loss making industry from closure.
4. To start up new industries when private enterprise is unable or unwilling to do so.
Students Homework
To list the advantages and disadvantages of na onalisa on.
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Local Government and Municipal Authori es
Local government is the area of government that focuses on issues at the community level. It
refers to the governance of towns, ci es or regions at the local level.
A municipality is part of the local government system and is typically govern by an elected
mayor and city council. A municipality undertake ac vi es that are important for the
development of the community, including;
• Road maintenance
• Fire service
• Public health
• Garbage collec on
• Poor relief
• Approval of building plans
Advantages of Municipal Authori es
1. Members of the community have a say in the decision-making process.
2. Members of the community can contribute to policy decisions.
3. Government policies are not just imposed on the community.
4. Local needs are addressed at the local level.
Disadvantages
1. Resources are limited therefore much of what needs to be done to improve s community
cannot be carried out.
2. Central government is the main provider of funds to municipal authori es, they may
decide on projects that are not community priori es.
3. Many projects are aborted when government changes.
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