Upload
kathleen-hardy
View
215
Download
1
Tags:
Embed Size (px)
Citation preview
Success criteria:
To introduce pupils to the different business organisation types in the UK and World-wide (international).
Learning Intentions:
You should be able to:
• identify who owns, controls and finances different types of businesses
•describe and give examples of different types
•justify reasons for these business organisations existence.
Types of ownership Sole trader Partnership Private limited company Public limited company Franchise Co-operative Charity
Sole trader One man/woman business. Sole trader owns business. Owner
and business are the same. Owner provides own capital (savings
and borrowings). Profits go to the owner (but also
responsible for losses). Owner controls business, all decisions
are theirs.
Sole traderPositives Easy to set up Can make decisions
quickly Personal attention to
business Profits are not shared Can cater for local
needs Business affairs kept
private
Negatives Limited capital Unlimited
liability Commitment
(long hours, every day)
New ideas may be limited
Partnership A business owned by several people 2–20.
Deed of partnership – contract dealing with share of profits, roles and duties, capital contributed, dispute procedures.
Owned jointly but not always equally. Partnership is an extension of sole trader. Capital provided by partners. Profit goes to partners, not always equally. All partners entitled to participate in
management (unless silent partners).
Partnership
Positives More capital than
sole traders Excessive hours
can be cut down More ideas may be
generated Specialisation can
occur
Negatives Actions of one
partner binds all More discussion
and consultation Limitation on
number of partners
Unlimited liability Partnership ends
if a partner dies
Private limited company (Ltd) Organisation owned by a group of
individuals (2+ shareholders). Memorandum/Articles of Association. Owned by shareholders (often family)
whose main function is to elect board of directors.
Money raised by share issue or borrowing.
Ordinary shares and preference shares. Profit shared between shareholders or
retained by company.
Private limited companyPositives More capital than
partnerships Limited liability Owner can retain
control Company does not
die if owners die
Negatives Must be registered
with Registrar of Companies
Harder to motivate and control workers
High set-up costs (legal and administrative)
Diseconomies of scale
Public limited company (plc)
Organisation owned by a group of individuals; has plc after name.
Certificate of Incorporation approved by Registrar of Companies.
Shareholders – 2+; shares sold on stock exchange; prospectus prepared to attract shareholders. Capital raised by share issue or borrowing. Profits shared between shareholders or
retained by company. Board of directors = divorce of ownership
and management.
Public limited companyPositives More capital than
private limited companies
Employ specialists Limited liability Company does not
die if owners die Shares can be
issued through stock exchange
Negatives Formation expensive
(legal and administrative costs)
Must publish accounts May become too large
to manage effectively Decisions more
difficult to arrive at Diseconomies of scale
Franchise
A business/individual buys a license to operate a well-known firm.
Owned by franchiser. Franchisee pays franchiser to get
license as well as a royalty. Franchisees runs business on
franchiser’s guidelines.
Click for clip
FranchisePositives Franchiser
provides a lot of support: training to start business, equipment, materials, advice, brand name
Take over a successful, winning formula
Negatives Franchisee
doesn’t have complete freedom
May not agree with decisions made by franchiser
Royalties paid to franchiser
Co-operative Organisation set up to benefit workers
or consumers. Retail – owned by workers and
shoppers. Producer – owned by workers. Retail – every pound spent receives
dividend or voucher. Producer – money comes from workers,
who share profits and share a salary. Board of directors (who may also be
workers).
Co-operative
Positives Less conflict
between workers and managers
Workers should be more motivated
Negatives Difficult to grow
and find additional capital
New workers may not be able to raise capital needed to join co-operative
MultinationalWhat is a multinational?
A company with HQ in one country but with bases, manufacturing or assembly plants in others.
A multinational operates in more than one country. It will normally have a headquarters based in one country known as the ‘home country’.
19
Multinationals
Why become a multinational?
Companies may become multinationals to:
increase market share secure cheaper premises and labour avoid tax or trade barriers take advantage of government grants.
Economies of Scale Legislation (relaxed) Taxation or Grant incentives Increased sales/less chance of takeover Lower wage rates Higher skilled workforce Can operate competitively (locally) Save on costs of transportation Avoiding Trade Barriers
21
Multinationals: Benefits
Legislation may be too restrictive Cultural difficulties Lack of technical expertise Poor infrastructure Political Instability Exploitation (e.g. low wages) Forcing local businesses out
22
Multinationals: Costs
Governments sold these companies because:◦ Huge amounts of income for the Treasury◦ Some public corporations were poorly managed
and not profitable◦ Wanted to increase share ownership and make
public interested in the success of companies/the economy
23
Privatisation
However: Public corporations were often sold off too
cheaply Privatisation has not always led to greater
competition
Examples are refuse collection and school meals
Firms are invited to submit bids (competitive tendering) to provide these services
Cost effective? Private Sector organisations have an incentive to keep costs low
24
Contracting Out
Non-profit making organisations such as charities and voluntary organisations are set up to support specific causes
26
Third Sector
Charities • Oxfam, Cancer Research• Owned and controlled by a board of trustees• They will fundraise to raise finance (TV appeals,
collections, selling products)
Voluntary Organisations
• Youth Clubs, Sports Clubs• Provide a service without the profit making
motive• Raise funds through donations, memberships,
fundraising events
◦ www.socialenterprisescotland.org.uk◦ http://Se100.net/index
27
Third SectorSocial Enterprises
• Trade in all markets selling goods/services• They have a social/environmental aim rather
than profit making• Run like a business• All of the profits must be invested in to
meeting their social aim.• Less regulated by Govt than charities
Example • Wooden Spoon Catering – provide job and education opportunities for women in vulnerable positions
Charity An organisation formed to raise money
for underprivileged people. Trustees. Charities raise money through shops,
donations and lottery money. Surplus after costs goes to the ‘needy’. Board of managers.
CharityPositives If charity has
status of charitable trust it doesn’t pay tax
Looks after less privileged and the environment
Negatives Less money may
be donated due to introduction of the National Lottery
Relies on voluntary workers, who are usually not paid for work
Answer a question
Explain three reasons why an organisation would become a private limited company.(3 marks) 2009
You have 3 marks to achieve, the command word is explain – remember this means a good expansion for each mark.
You have 6 minutes.
Peer marking
You are going to swap answers.
Has your partner answered well? Does the answer make sense? Is it worth a mark?
Solution Owners of a private limited company (Ltd)
have limited liability to others, which reduces the risk of personal loss.
A private limited company is a larger organisation and this allows the business to attract finance more easily.
Control of a private limited company is still not lost to complete outsiders, so owners can still make decisions and decide on the direction of the business.
Experience and skills can be gained from shareholders, and can be used to improve the performance of the business.
Introduction – Reasons why an organisation would become a private limited company (LTD) are as follows: Owners of a private limited company (Ltd)
have limited liability to others, which reduces the risk of personal loss.
A private limited company is a larger organisation and this allows the business to attract finance more easily.
Control of a private limited company is still not lost to complete outsiders, so owners can still make decisions and decide on the direction of the business.
Experience and skills can be gained from shareholders, and can be used to improve the performance of the business.
Expansion point
Public sector organisations Businesses set up by an Act of
Parliament. Government provides capital through
the Treasury. Government appoints chairman and
board. May be natural monopolies. May be unattractive to private sector
due to enormous capital investment.
Public CorporationsBBC and Royal Mail (prior to selling on stock market), Bank of England
Local Authority ServicesEducation, Housing, Police, Social Services
Central Government DepartmentsTreasury, Defence, Health, Employment, Social Services, Environment, Transport
Public SectorOrganisations
Public corporationsReasons for being set-up: to avoid wasteful duplication and
confusion to set up and run important non-
profitable services to prevent exploitation of consumers to protect jobs and key industries.
Privatisation Is ‘the selling off of public corporations
to the private sector’.
British Gas, British Telecom and British Steel are examples of nationalised industries that were sold off under the Conservative government of Margaret Thatcher (Prime Minister 1979–1990).
Why privatise?
Makes industries more competitive and efficient.
Privatisation raises huge monies for government.
The public are more willing to invest on the Stock Exchange than before.
Success Criteria:
Introduction to the different types of
BUSINESS OBJECTIVES
Learning Intentions:
By the end of these lessons you should be able to:
• identify
•describe and give examples
•To allocate to specific types of organisations of Business Objectives
Business objectives• Survival• Maximising profits• Growth• Increasing market share/leader• Good reputation/social responsibility• Maximising sales• Satisficing• Providing a service/quality service• Managerial objectives• Customer satisfaction
+Objectives
Objective Description Justification
Survival To continue trading Need to survive or the business would not exist
Maximise Profit To have a higher income than costs
Allows the business to improve/expand
Customer Satisfaction
Make customers happy
Customer loyalty, new customers
Market Leader Biggest business in a market
More customers than competitors
43
+Objectives
Objective Description Justification
Social Responsibility
Behaving in an ethical and responsible way (marketing & operations unit)
Improves the organisations reputation
Satisficing Ensuring that your business operates to a satisfactory position
Not always possible to reach perfection (limited resources etc.)
Managerial Objectives
Their own internal objectives e.g. bonuses
Motivational for the manager to do well
Growth Making the organisation increase in size
Increases sales/profits/reputation/economies of scale
44
Objectives by business sector
Type of business Aims/objectives
Private sector Survival, profit maximisation, growth, increase returns to shareholders, increase market share, maximising sales, managerial objectives, image and social responsibility
Voluntary sector Help others, maximise cash collections, offer a service to the community
Public sector Help people, improve quality of service, cut costs/efficiency, raise revenue, provide a service,
Objectives in exams
Explain internal factors that could be taken into account prior to an organisation setting strategic objectives. (4 marks)
A difficult question – what do you think it means?
Meaning
What areas of the business would be looked at by management before they make an important decision about the direction of the business?
Hint – size of the business.
Can you expand and get 4 marks?
Marking…
Size of the organisation would be considered - smaller firms’ strategic objectives will be of a smaller nature than those of multinational companies.
Company policy on, for example social and ethical responsibility, are the company products & activities following this policy?
Consider shareholders’ points of view. Consider whether a private or public
sector organisation. Consider internal financial situation. Consider technological factors.