TYPES OF BUSINESS

ORGANISATIONS
UNIT 1, CHAPTER 2
 Significant government bail-out or rescue packages accompanied the dramatic events of the credit crisis of 2008
and the deteriorating global economic situation. On 3 April2009 the Heads of State of the leading 20 economies in
the world announced a trillion US dollar stimulus package. A number of large private banks in the United States
and the UK and companies such as General Motors received government assistance and have effectively become
public sector companies. The term renationalization began to appear in the business pages.
 This would have been unthinkable during the 1 980s and 1 990s when the private sector was being
heralded as innovative, efficient and flexible. The public sector, on the other hand, was viewed as
bureaucratic, complacent and wasteful. In the new century, a new third way between the two sectors
has been created, known as the public-private partnership, which attempts to combine the best
characteristics of both sectors to help with the construction and finance of mostly social infrastructure
projects involving irrigation, transport and other civil engineering needs. (ONGC, Coal India)
PRIVATE SECTOR ORGANISATION

 Owned & controlled by private individuals and businesses and not the government.
 Main aim is to earn profit (SR-COST)
PUBLIC SECTOR ORGANISATION

 Owned & controlled by government.

 Called state owned enterprises if fully owned by the govt.
 Ensures access of basic food, security and health services to all.
 Avoid wasteful competition as the govt. can achieve economies of scale.
 Generate employment
 Deal with economic crisis.
SOLE TRADER

 A sole trader (or sole proprietor) is an individual who runs and owns a personal business.
 Sole traders may work alone or they might employ other people to help
 Often small family-run businesses
 Start-up capital is usually obtained from personal savings and borrowing.
 unincorporated. This means the owner is the same legal entity as the business.
SOLE TRADER AO3

ADVANTAGES DISADVANTAGES

• Easy to set up, few legal formalities • Unlimited liability

• No profit sharing • Finance limitations

• Personal touch • Risk

• Own boss • Lack of division of labour and specialization

• Privacy • Lack of economies of scale

• Lack of continuity
SOLE TRADER

 May not want to expand:

 Fulfil their desire to make a decent living and not have to manage large business.
 Operate in their own niche and see no reason to expand.
 Do not have the means nor the desire to undertake risks associated with a large business.
PARTNERSHIP A03 10 marks

 A partnership is a profit-seeking business owned by two or more persons.

 No. of partners is limited to 20.
 Financed through personal savings or loans
 Silent partner: They invest money in the partnership but do not actively take part in the running of
the partnership.
 Unincorporated form of business.
Partnership Deed

 Legal Contract. Contains details of:

 The amount of finance contributed by each partner
 The roles, obligations and responsibilities of each partner
 How profits or losses will be shared among the partners
 Conditions for introducing new partners
 Clauses for the withdrawal of a partner
 Procedures for ending the partnership.
PARTNERSHIP

ADVANTAGES DISADVANTAGES

• Better finances • Unlimited liability (atleast one partner)

• Specialisation & division of labour • Lack of continuity

• Privacy • Slow decision making process

• Efficient & productive • Conflicts

COMPANY AO3

 Owned by shareholders
 joint-stock companies because the shares of the business are jointly held by numerous entities.
 incorporated: it has its own legal rights and duties.
 limited liability: shareholders can lose the value of their investment in the company
 board of directors (BOD) is elected by shareholders to run the company on their behalf
 private limited company is a company that cannot raise share capital from the general public. Shares
are sold to private family members and friends.
 Public limited company can advertise and sell its shares to the general public via a stock exchange.
Documents

 Articles of Association:
 Internal regulations and procedures of the company, e.g. the rights, roles and power of the BOD and shareholders.
 Administrative issues such as procedures of the Annual General Meeting (AGM)
 The processes for the appointment of directors and how profits will be distributed.

 Memorandum of Association:
 Its name, its main purpose, the registered address and the amount of share capital invested.

 Certificate of Incorporation: This licence recognises the business as a separate legal entity from its owners and allows the
business to start trading as a limited liability company.

 Flotation: When a business first sells all or part of its business to external investors (shareholders), a process known as an
initial public offering (IPO).
AGM

 Shareholders vote on (promises or declarations) and the re-election (or sometimes election) of the board of
directors.
 Shareholders ask questions of the chief executive officer, directors and chairperson about various aspects of
the company.
 Shareholders approve the previous year’s financial accounts after the directors present the annual report
containing information about the company’s performance.
COMPANY

ADVANTAGES DISADVANTAGES
• Finance, interest free, pay dividend only if earn • Communication with employees, customers.
profits.
• Limited liability • More expensive to set up and run.
• Continuity • Compliance with stock exchanges is expensive and
tough
• Economies of scale • Lack of privacy, hiring of auditors which costs
money
• Productivity higher due to hiring of specialist staff.
• Tax benefits, more tax deductibles.
COMPANIES WORLDWIDE NAMES
COMPANY

 Case Study 1.2.4 – FA 2

FOR PROFIT SOCIAL ENTERPRISE

 Social enterprises are revenue-generating businesses with social

objectives at the core of their operations.
 Three Types
 Cooperatives
 Micro Finance Providers
 PPP
COOPERATIVES

 Owned and run by their members.

 All employees (member of the cooperative) have a vote.
 Cooperatives share any profits earned between their members.
 Like a partnership but can have more then 20 members.
 Main aim is not to earn profits.
 Typically sell goods at a price close to cost price.
 Some profit earning is essential for needs like purchase of machinery, unexpected expenses, reinvestment
into business.
COOPERATIVES - Types

 Financial Cooperative: Provide money at lower cost, non lending services, loan to those who may not get a
loan otherwise.
 Housing Cooperative: Provide house for members. The members own a house each through the
cooperative. The surplus is invested into upkeep of the houses. Entry of members controlled.
 Worker Cooperative: Owned and operated by workers themselves and provides employments to its
members.
 Consumer Cooperative: Owned by consumers who buy for their products for their personal use. Members
get access to goods and services at lower prices than those charged by traditional commercial businesses.
 Producer Cooperative: Producers collaborate at certain stages of production. Common in agriculture where
they may do bulk buying or purchase machinery that is expensive to buy individually.
COOPERATIVES-Adv & Dis Adv

Advantages Dis Advantages

• Employees are motivated to work harder and • Pay less salaries and bonus. Not motivate the
increase productivity as they have a vested interest. employees enough.

• Democratic as employees have decision making • Less finance

power. Improves motivation.

• Provide welfare gains that benefits the whole • Decision making slow as all members have a voting
society. power.

• Public supports them as they believe in their cause. • Flat organizational structure and hence limited
opportunities for promotion.
MICROFINANCE PROVIDERS

 Prevalent in low income economies.

 Provides small amounts of finance to those who do not have access to it.
 Repayment terms are set up.
 Interest charged is small percentage.
MICROFINANCE – Adv & Dis Adv

Advantages Dis Advantages

• Made poor people financially sound and • Unethical as it is for profit enterprise and benefits
independent. from the poor.

• Job Creation and reduce unemployment • Amount of finance provided is very small due to
high risk of default.

• Better for society as a whole as children will • Some eligibility criteria has to be met by the
continue to study, better access to health care borrower to qualify for a loan.
facilities.

• Debt trap, start ups have grown but the incomes in

them have not. No multiplier effect.
KIVA
PUBLIC PRIVATE PARTNERSHIP

 Watch https://www.youtube.com/watch?v=KWfqaZrLqhI
 A quick introduction to Public-Private Partnership
PPP- Discussion
 Change
CUEGIS Culture
CONCEPT
Ethics

Globalisation

Innovation

Strategy