Business

Organisations
 The Nature of Firms

• The importance of understanding the

organisation of businesses
• The nature of firms
– complex production
• organising production through markets
• organising production through hierarchies
– benefits of organising production within
firms
• reduction in transactions costs
– problems of market arrangements
• uncertainty
• complexity of contracts
• monitoring and enforcing contracts
 The Nature of Firms

• Goals of the firm

• The traditional theory of the firm

• Alternative theories

– the divorce of ownership from control

– the development of the joint-stock company

– managerial objectives
 The Nature of Firms

• The principal / agent relationship

– the principal – agent problem
– asymmetric information
– dealing with imperfect information
• monitoring
• incentives

• The goal of staying in business

– the willingness of firms to take risks
– problems of being over cautious
 The Firm as a Legal Entity

• The sole proprietor

– unlimited liability
• The partnership
• Companies
– limited liability
– public limited companies (plc)
• public issues of shares
• shares traded on the Stock Exchange
– private limited companies
– consortia
– co-operatives: producer and consumer
– public corporations
 The Internal Organisation of the Firm

• U-form
 U-form business organisation

C h ie f e x e c u t iv e

P r o d u c t io n F in a n c e S a le s P u r c h a s in g
 The Internal Organisation of the Firm

• U-form
– advantages
– problems when firms expand beyond a
certain size
• bounded rationality
• communications costs
• distorted information
• decline in organisational efficiency

• M-form
 M-form business organisation

H e a d O f f ic e

D iv is io n 1 D iv is io n 2 D iv is io n 3

P r o d u c t io n F in a n c e S a le s P u r c h a s in g
 The Internal Organisation of the Firm

• U-form
– advantages
– problems when firms expand beyond a
certain size
• bounded rationality
• communications costs
• distorted information
• decline in organisational efficiency

• M-form
– advantages and disadvantages
 The Internal Organisation of the Firm

• The flat organisation

• Multinationals and business

organisation

– H-form

– integrated international enterprises

– transnational associations
 The Walt Disney Company (Holding Company)

W a lt D is n e y
C om pany
( H o ld in g c o m p a n y )

S tu d io M e d ia P a rk s a n d C onsum er
E n te r ta in m e n t N e tw o r k s R e s o r ts P r o d u c ts

(S E E B E L O W ) ABC TV ABC C a b le D is n e y W a lt D is n e y D is n e y A n a h e im D is n e y R e g io n a l L ic e n c e e s T h e D is n e y
N e tw o r k R a d io o p e r a tio n s W e b s ite s R e s o r ts C r u is e L in e S p o r ts In c . E n te r ta in m e n t S to r e s

1 0 a f f ilia te 5 3 r a d io E S P N c a b le T h e D is n e y O t h e r c a b le 5 M a jo r R e s o ts M ig h ty A n a h e im R e ta ile r s M a n u f a c tu r e r s P u b lis h e r s

T V s ta tio n s s ta tio n s n e tw o r k s C hannel c h a n n e ls D ucks A n g e ls

W a lt D is n e y D is n e y la n d D is n e y la n d T o k y o D is n e y D is n e y
W o r ld R e s o r t P a r is R e s o rt V a c a tio n C lu b
 The Walt Disney Company (Holding Company)

W a lt D is n e y
C om pany
( H o ld in g c o m p a n y )

S tu d io M e d ia P a rk s a n d C onsum er
E n te r ta in m e n t N e tw o r k s R e s o r ts P r o d u c ts

(S E E B E L O W ) ABC TV ABC C a b le D is n e y W a lt D is n e y D is n e y A n a h e im D is n e y R e g io n a l L ic e n c e e s T h e D is n e y
N e tw o r k R a d io o p e r a tio n s W e b s ite s R e s o r ts C r u is e L in e S p o r ts In c . E n te r ta in m e n t S to r e s

1 0 a f f ilia te 5 3 r a d io E S P N c a b le T h e D is n e y O t h e r c a b le 5 M a jo r R e s o ts M ig h ty A n a h e im R e ta ile r s M a n u f a c tu r e r s P u b lis h e r s

T V s ta tio n s s ta tio n s n e tw o r k s C hannel c h a n n e ls D ucks A n g e ls

W a lt D is n e y D is n e y la n d D is n e y la n d T o k y o D is n e y D is n e y
W o r ld R e s o r t P a r is R e s o rt V a c a tio n C lu b
 The Walt Disney Company (Holding Company)

W a lt D is n e y
C om pany
( H o ld in g c o m p a n y )

S tu d io M e d ia P a rk s a n d C onsum er
E n te r ta in m e n t N e tw o r k s R e s o r ts P r o d u c ts

(S E E B E L O W ) ABC TV ABC C a b le D is n e y W a lt D is n e y D is n e y A n a h e im D is n e y R e g io n a l L ic e n c e e s T h e D is n e y
N e tw o r k R a d io o p e r a tio n s W e b s ite s R e s o r ts C r u is e L in e S p o r ts In c . E n te r ta in m e n t S to r e s

1 0 a f f ilia te 5 3 r a d io E S P N c a b le T h e D is n e y O t h e r c a b le 5 M a jo r R e s o ts M ig h ty A n a h e im R e ta ile r s M a n u f a c tu r e r s P u b lis h e r s

T V s ta tio n s s ta tio n s n e tw o r k s C hannel c h a n n e ls D ucks A n g e ls

W a lt D is n e y D is n e y la n d D is n e y la n d T o k y o D is n e y D is n e y
W o r ld R e s o r t P a r is R e s o rt V a c a tio n C lu b

T h e a tr ic a l F ilm s B u e n a V is ta H o m e A n im a te d T e le v is io n B u e n a V is ta B u e n a V is ta
B a n n e rs E n te r ta in m e n t P r o d u c tio n a n d T h e a tr ic a l G r o u p M u s ic G r o u p
D is tr ib u tio n

W a lt D is n e y T o u c h s to n e H o lly w o o d M ir a m a x D im e n s io n W a lt D is n e y B u e n a V is ta W a lt D is n e y W a lt D is n e y H o lly w o o d M a m m o th
P ic tu r e s P ic tu r e s P ic tu r e s F ilm s F ilm s T e le v is io n T e le v is io n R e c o rd s M u s ic P u b lis h in g R e c o rd s R e c o rd s
 The Walt Disney Company (Holding Company)

W a lt D is n e y
C om pany
( H o ld in g c o m p a n y )

S tu d io M e d ia P a rk s a n d C onsum er
E n te r ta in m e n t N e tw o r k s R e s o r ts P r o d u c ts

(S E E B E L O W ) ABC TV ABC C a b le D is n e y W a lt D is n e y D is n e y A n a h e im D is n e y R e g io n a l L ic e n c e e s T h e D is n e y
N e tw o r k R a d io o p e r a tio n s W e b s ite s R e s o r ts C r u is e L in e S p o r ts In c . E n te r ta in m e n t S to r e s

1 0 a f f ilia te 5 3 r a d io E S P N c a b le T h e D is n e y O t h e r c a b le 5 M a jo r R e s o ts M ig h ty A n a h e im R e ta ile r s M a n u f a c tu r e r s P u b lis h e r s

T V s ta tio n s s ta tio n s n e tw o r k s C hannel c h a n n e ls D ucks A n g e ls

W a lt D is n e y D is n e y la n d D is n e y la n d T o k y o D is n e y D is n e y
W o r ld R e s o r t P a r is R e s o rt V a c a tio n C lu b

T h e a tr ic a l F ilm s B u e n a V is ta H o m e A n im a te d T e le v is io n B u e n a V is ta B u e n a V is ta
B a n n e rs E n te r ta in m e n t P r o d u c tio n a n d T h e a tr ic a l G r o u p M u s ic G r o u p
D is tr ib u tio n

W a lt D is n e y T o u c h s to n e H o lly w o o d M ir a m a x D im e n s io n W a lt D is n e y B u e n a V is ta W a lt D is n e y W a lt D is n e y H o lly w o o d M a m m o th
P ic tu r e s P ic tu r e s P ic tu r e s F ilm s F ilm s T e le v is io n T e le v is io n R e c o rd s M u s ic P u b lis h in g R e c o rd s R e c o rd s