Presentation 1 Categories and Purposes of Organization

Chapter 1
Categories and purposes of
Organisation
 Learning Objectives

1. Review the Business Environment

2. Examine the purposes of different organizations

3. Compare and contrast the legal structure of various types of organization.

4. Describe different forms of businesses and how they are categorized

5. Identify the attributes associated with a successful business

Business Categorization
• Business organisations can be classified in a variety of ways, including:
• size (e.g. small, medium, large);
• type of industry (e.g. primary, secondary, tertiary);
• sector (e.g. private sector, public sector); and
• legal status (e.g. sole trader, partnership, and so on).
 Business Environment
• Business organizations differ in many ways, but they also have a
common feature which is the transformation of inputs into output.

• This process takes place against a background of external influences

which affect the firm and its activities. This external environment is
complex, volatile and interactive.
Business Environment

Macro environment

Micro environment

Internal Environment

Business
Environment
Business Environment
Business Environment
Business Environment
• Business activity is essentially concerned with transforming inputs
into outputs for consumption purposes.
• All businesses operate within an external environment which shapes
their operations and decisions.
• This environment comprises influences which are both operational
and general.
• The Internal/ operational environment of business is concerned with
such factors as customers, suppliers, creditors and competitors.
• The general environment focuses on what are known as the PESTLE
factors.
Business Environment
In analyzing a firm’s external environment attention needs to be paid
to the interaction between the different environmental variables,
environmental complexity, volatility and change and to the spatial
influences.

While all firms are affected by the environment in which they exist and
operate, at times they help to shape that environment by their
activities and behavior.
In-Class Activity
1. In what senses could a college or university be described as a
business organization? How would you characterize its ‘inputs’ and
‘outputs’?

2. Give examples of the ways in which business organizations can

affect the external environment in which they operate.
Categories of Organizations
 INTRODUCTION

• Business organisations can be classified in a variety of ways,

including:
• size (e.g. small, medium, large);
• type of industry (e.g. primary, secondary, tertiary);
• sector (e.g. private sector, public sector); and
• legal status (e.g. sole trader, partnership, and so on).

• An organizational structure consists of activities such as task

allocation, coordination and supervision, which are directed
towards the achievement of organizational aims. There are six
organizational structure types and three type have still been
developing.
Business Categories based on
Legal Structure

private
company

non-profit public
organizations company

Legal
structure

government
Cooperatives
organizations

voluntary
organizations
Business Categories
Smal
• Based on Size
l

Based
on
Size
Mediu
m Large
Business Categories
There are many different ways to measure the size of firms. Common
measures used are:
• turnover,
• the value of output,
• the capital employed or
• the level of employment.
Business Categories
Example of businesses categorized by their employment size:

• Small businesses are businesses with 1 to 99 employees;

• Medium-sized businesses are businesses with 100 to 499 employees;
• Large businesses are businesses with 500 employees or more.
Business Categories
• Based on Sector

Primar
y

Based
on
Sector
Secondar
y
Tertiary
Business Categories
• Canada has a mix of all three industries. These specifically include:
• manufacturing (secondary industry),
• services (tertiary industry, and
• natural resources being obtained (primary industry).
 Types of Business
Organization

Sole
Proprietorship

Types of
Business
Organization

Corporations Partnership
 Sole Proprietorship
With this type of business organization,

you are the sole owner, and fully responsible for all debts
and obligations related to your business.

All profits are yours to keep.

Because you are personally liable, a creditor can make a

claim against your personal assets as well as your
business assets in order to satisfy any debts.
 Sole Proprietorship
Advantages:

Easy and inexpensive to register

Regulatory burden is generally light

You have direct control of decision making

Minimal working capital required for start-up

Some tax advantages if your business is not doing well (for example,
deducting your losses from your personal income, and a lower tax
bracket when profits are low)

All profits go to you directly

 Sole Proprietorship

• Disadvantages:

Unlimited liability (if you have business debts, claims can be made

against your personal assets to pay them off)

Income is taxable at your personal rate and, if your business is

profitable, this could put you in a higher tax bracket

Lack of continuity for your business if you are unavailable

Can be difficult to raise capital on your own

 Partnership
• A partnership is a non-incorporated business that is created between
two or more people. In a partnership,

your financial resources are combined with those of your business partner(s),
and put into the business.

You and your partner(s) would then share in the profits of the business
according to any legal agreement you have drawn up.
 Partnership
In a general partnership, each partner is jointly liable for the debts of
the partnership.

In a limited partnership, a person can contribute to the business

without being involved in its operations.

A limited liability partnership is usually only available to a group of

professionals, such as lawyers, accountants or doctors.
 Partnership
• Advantages:
• Fairly easy and inexpensive to form a partnership
• Start-up costs are shared equally with you and your partner(s)
• Equal share in the management, profits and assets
• Tax advantage — if income from the partnership is low or loses
money (you and your partner(s) include your shares of the
partnership in your individual tax returns)
 Partnership
• Disadvantages:
• There is no legal difference between you and your business
• Unlimited liability (if you have business debts, personal assets can be
used to pay off the debt)
• Can be difficult to find a suitable partner
• Possible development of conflict between you and your partner(s)
• You are held financially responsible for business decisions made by
your partner(s); for example, contracts that are broken
 Corporations

Another type of business structure is  a corporation.

Incorporation can be done at the federal or provincial/territorial

level.

When you incorporate your business, it is considered to be a legal

entity that is separate from its shareholders.

As a shareholder of a corporation, you will not be personally liable

for the debts, obligations or acts of the corporation. It is always wise
to seek legal advice before incorporating.
 Corporations

Advantages:

Limited liability

Ownership is transferable

Continuous existence

Separate legal entity

Easier to raise capital than it might be with other business structures

Possible tax advantage as taxes may be lower for an incorporated

business
 Corporations

Disadvantages:

A corporation is closely regulated

More expensive to set up a corporation than other business forms

Extensive corporate records required, including documentation filed

annually with the government

Possible conflict between shareholders and directors

You may be required to prove residency or citizenship of directors

 Corporation Set-up
• Incorporate: to form a corporation.
• Charter: a document granted by the state giving a corporation the
right to do business
• Stock: shares of ownership in the corporation
• Stockholders (shareholders): owners of stock.

Reasons to own stock:

Dividends: share of corporate profits paid to stockholders
Speculation: buy in hope that price of stock will increase.
 Market Share
• Market Share - Out of total purchases of a customer of a product or
service, what percentage goes to a company defines its market share.
In other words, if consumers as a whole buy 100 soaps, and 40 of
which are from one company, that company holds 40% market
share. 
• Market shares can be value or volume. Value market share is based
on the total share of a company out of total segment sales. Volumes
refer to the actual numbers of units that a company sells out of total
units sold in the market. 
• Market share is a measure of the consumers' preference for a
product over other similar products.
 Business Entities
• The three commonest forms of business in the private sector are
sole traders, partnerships and limited companies.
• Whereas the owners of the first two types of business organisation
face unlimited personal liability, in companies the legal separation
of the firm from its owners affords the latter limited personal
liability.
• Companies are normally run by directors who are appointed to
represent the interest of the owners (the shareholders). In public
companies this separation of ownership and control is a key
distinguishing feature.
• Other forms of business organisation exist in the public sector
(e.g. the public corporation) and the ‘third sector’ (e.g. the co-
operative).
• Government-owned businesses are increasingly adopting
private sector forms of organisation to provide for greater
flexibility and freedom of action.
• The legal status of the organisation has implications for the
objectives of the enterprise, how it is financed and for its
stakeholder relationships.
In-Class Activity
• Examine the implications of ‘privatising’ a public sector business
organisation.
Purposes of Organization
Mission Statement
Vision Statement
Objective/ Goal
Values
 Vision Statements

Vision – description of something in the future

“mental perception of the kind of environment an individual, or

an organization, aspires to create within a broad time horizon
and the underlying conditions for the actualization of this
perception”

Vision Statement
A vision statement answers the question,
“ What will success look like?”
The pursuit of this image of success is what motivates people to
work together. A Vision provides strong foundation for
developing a comprehensive mission statement .
 Vision Statement

Strategic Vision addresses the

“where are we going” questions, and
explains the course and direction chartered by
management.

A strategic vision should provide a clear understanding of

what the business should look like and provide help to take
strategic decisions.
 Examples of Vision Statements

• 1. “Our vision is to create a better every-day life for many

people.”

2. “Make people happy”

• 3. “Bring inspiration and innovation to every athlete* in the

world. (*If you have a body, you are an athlete.)”
.
 Mission Statements

Organizations relate their existence to satisfying a particular need of

the society. They do it in terms of their mission.

“Mission is a statement which defines the role that an organization

plays in a society.”

It refers to the particular need of that society for instance,

its information needs.
purpose or reason for the organization's existence.

“Mission is an enduring statement of purpose that distinguishes

one firm from other similar firm.”
 Examples of Mission Statements

1. 1.

Mission Statement
“to save people money so they can live better.” 
Vision Statement
“Be THE destination for customers to save money, no matter how they want to
shop.”

2.
Mission Statement
“To create a better everyday life for the many people.”
Vision Statement
“Our vision is to create a better every-day life for many people.”
 BUSINESS OBJECTIVES
• Objectives represent a managerial commitment to achieve
specified results in a specified period, of time.

• They clearly spell out the quantity and quality of performance to

be achieved, the time period, the process and the person who is
responsible for the achievement of the objective.

• Objectives are end results of planned activity

• Objectives state what is to be accomplished by when and should

be quantified if possible.
 BUSINESS OBJECTIVES
• The objectives for your plan need to be SMART (Specific, Measurable,
Attainable, Relevant and Timely).
When defining these objectives consider the following:
• the ‘Return on investment’.
• increased customer spend,
• greater brand awareness,
• an increase in visits and online registrations, etc.

• If the success of this objective can be quantified and measured

• the customer journey - Awareness, Acquisition and Conversion. Your

plan needs to look at the whole customer journey.
 BUSINESS OBJECTIVES

Objectives need to fulfil the SMART Criteria

Examples of Objectives
Minnesota Mining & Manufacturing
(3M) Financial objectives
1. To achieve 10% growth in earnings per share.
2. To achieve 20% - 25% return on equity.
3. To achieve 27% return on capital employed.
 Goals

Goal is defined as an “intermediate result to be achieved by a certain

time as part of the grand plan . A plan can, therefor have many goals.”

• Two types of Goals

1) Financial goals
These goals focus on achieving a certain level of financial performance,
measured in terms of return in investment or growth of revenues

2) Strategic goals
The goals focus on achieving strategic or competitive advantages within
the industry, like technology leadership, creativity and innovation and
superior customer service
 Statements of Purpose
Tim Hortons
MISSION STATEMENT
• Our guiding mission is to deliver superior quality products and
services for our guests and communities through leadership,
innovation and partnerships.

OUR VISION
• Our vision is to be the quality leader in everything we do.
• in our communications
 Statements of Purpose
Tim Hortons
Our Objectives
• Establish a leadership position in sustainability that reflects our commitment to doing the
right thing
• Understand stakeholder perspectives on any given issue and consider views in decision-
making
• Minimize the potentially negative impacts of our operations
• Create positive change that benefits individuals, communities, the planet and our business

Our Guiding Principles

• Do things that Make a True Difference
• Acknowledge, and respect the social, environmental and economic impact of our activities
• Honour, respect and support individuals and stakeholders
• Participate with, and build the success of, our communities
• Be honest and transparent
 Purpose of an Organization
Example 2
San Antonio Multi-Service Market
Mission: Maximize Utilization of the Direct Care System in the San Antonio Multi-Service Market Area
Vision: A World-Class, Multi-Service, Unified Health System Serving San Antonio and Referred
Beneficiary Market
Goals:
• Optimize efficiency between direct and private sector care markets
• Eliminate duplicate services
• Increase synergy and cooperation among San Antonio MTFs
• Ensure patient satisfaction with access and quality service
• Strengthen Readiness by allocating appropriate mix of resources
• Collaborate support functions across the market
Objectives:
• Establish the Consult and Appointing Management Office
• Increase RWPs / RVUs in the direct care system per the business plan
• Consolidate logistical and contracting functions
• Realign staff resources to meet patient demand
• Establish enrolment sites to meet changing patient demographics
• Enrol eligible beneficiaries up to capacity
In-Class Activity
Work in groups or pair
1. Come up with a business idea
2. Describe the purpose of your business
1. Mission Statement
2. Vision statement
3. Objectives

3. How would you categorize your business?

4. What would be the broad environmental factors affecting your
business?
Questions?