Business organisations
A business (also called a company, enterprise
or firm) is a legally recognized organization
designe...
The owners and operators of a business
have as one of their main objectives the
receipt or generation of a financial retur...
Basic forms of ownership
Although forms of business ownership vary
by jurisdiction, there are several common
forms:
Sole p...
Sole proprietorship
A sole proprietorship also known as a sole trader, or
simply proprietorship is a type of business enti...
This means that the owner has unlimited
liability. It is a "sole" proprietorship in the
sense that the owner has no partne...
Partnership
A partnership is a type of business entity in
which partners (owners) share with each other
the profits or los...
However, depending on the partnership
structure and the jurisdiction in which it
operates, owners of a partnership may be
...
Corporation
A corporation is a legal entity separate from the
shareholders and employees.
In British tradition it is the t...
Corporations exist as a product of corporate law,
and their rules balance the interests of the
management who operate the ...
In modern times, corporations have become
an increasingly dominant part of economic
life.
People rely on corporations for ...
The six largest businesses of the world
in 2005 by revenue in millions of dollars
Cooperative
A cooperative often referred to as a co-op or
coop) is defined by the International Cooperative Alliance’s Sta...
It is a business organization owned and operated
by a group of individuals for their mutual benefit.
A cooperative may als...
Also…
Economic democracy
Franchising
Joint venture
Holding companies
Holding company
A holding company is a company or firm that
owns other companies' outstanding stock.
It usually refers to ...
Economic democracy
Economic democracy is a socioeconomic
philosophy that suggests transfer of decisionmaking authority fro...
Proponents generally agree that modern economic
conditions tend to hinder or prevent society from
earning enough income to...
Franchising
Franchising is the practice of using another
person's business model.
The franchisor grants the independent op...
Various tangibles and intangibles such as
national or international advertising,
training, and other support services are
...
Franchising has been around for many centuries
but did not come to prominence until the 1930s
in the United States, when t...
Joint venture
A joint venture (often abbreviated JV) is an entity
formed between two or more parties to undertake
economic...
This is in contrast to a strategic alliance, which
involves no equity stake by the participants,
and is a much less rigid ...
Reasons for forming a joint
venture
Internal reasons
Build on company's strengths
Spreading costs and risks
Improving access to financial resources
Economies ...
Competitive goals
Influencing structural evolution of the
industry
Pre-empting competition
Defensive response to blurring ...
Strategic goals
Synergies
Transfer of technology/skills
Diversification
Reasons for dissolving a joint
venture
Aims of original venture met
Aims of original venture not met
Either or both partie...
organisation - how businesses
organise themselves
All businesses are organised into groups of people.
This is so the emplo...
There are additional benefits of organising people
into groups, such as making it clearer how
communications should be org...
Organisation by Function
Comments on this method of
organisation:
1. Specialisation by function is more efficient. Employees

get experienced in an...
5.

Inertia may set in where departments become overfocussed on their own agendas and lose sight of the
overall business o...
Organisation by Product
Comments on this method of
organisation:
1.

This structure gives focus on individual products, which may
be especially ap...
3.

Co-operation between teams will improve where it is
in the interests of both teams to do so.

4.

There is a danger of...
Organisation by Area/Region
Comments on this method of
organisation:
1.

Better response to and focus on local customer needs.

2.

Better communicati...
Organisation by
Customer/Customer Type
Comments on this method of
organisation:
1. This method of organisation promotes focus on

customers and their different i...
4. Some customer groups may be small and so

individual departments may be inefficient.
5. There will be duplication of re...
Organisation by Process
Comments on this method of
organisation:
1. This structure gives focus on production

processes which may be appropriate w...
Conclusions on organisational
structures
All these structures have strengths and
weaknesses which a business has to think
...
The question of focus is also very important, because
the structure affects the way employees think about
themselves and t...
But it is also an important limiting factor.
People become very defensive and territorial
about the interests of ‘their’ t...
Business organisation
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  • Business organisation

    1. 1. Business organisations A business (also called a company, enterprise or firm) is a legally recognized organization designed to provide goods and/or services to consumers. Businesses are predominant in capitalist economies, most being privately owned and formed to earn profit that will increase the wealth of its owners and grow the business itself.
    2. 2. The owners and operators of a business have as one of their main objectives the receipt or generation of a financial return in exchange for work and acceptance of risk. Notable exceptions include cooperative enterprises and state-owned enterprises. Businesses can also be formed not-for-profit or be state-owned.
    3. 3. Basic forms of ownership Although forms of business ownership vary by jurisdiction, there are several common forms: Sole proprietorship Partnership Corporation Cooperative
    4. 4. Sole proprietorship A sole proprietorship also known as a sole trader, or simply proprietorship is a type of business entity which is owned and run by one individual and where there is no legal distinction between the owner and the business. All profits and all losses accrue to the owner (subject to taxation). All assets of the business are owned by the proprietor and all debts of the business are their debts and they must pay them from their personal resources.
    5. 5. This means that the owner has unlimited liability. It is a "sole" proprietorship in the sense that the owner has no partners (partnership). A sole proprietor may do business with a trade name other than his or her legal name. This also allows the proprietor to open a business account with banking institutions.
    6. 6. Partnership A partnership is a type of business entity in which partners (owners) share with each other the profits or losses of the business. Partnerships are often favoured over corporations for taxation purposes, as the partnership structure does not generally incur a tax on profits before it is distributed to the partners (i.e. there is no dividend tax levied).
    7. 7. However, depending on the partnership structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as a shareholder of a corporation.
    8. 8. Corporation A corporation is a legal entity separate from the shareholders and employees. In British tradition it is the term designating a body corporate, where it can be either a corporation sole (an office held by an individual natural person, which is a legal entity separate from that person) or a corporation aggregate (involving more persons). In American and, increasingly, international usage, the term denotes a body corporate formed to conduct business.
    9. 9. Corporations exist as a product of corporate law, and their rules balance the interests of the management who operate the corporation; creditors who loan it goods, services or money; shareholders, typically in the secondary market, who hold shares related to the original investment of capital; the employees who contribute their labour; and the clients they serve. People work together in corporations to produce value and generate income.
    10. 10. In modern times, corporations have become an increasingly dominant part of economic life. People rely on corporations for employment, for their goods and services, for the value of the pensions, for economic growth and cultural development.
    11. 11. The six largest businesses of the world in 2005 by revenue in millions of dollars
    12. 12. Cooperative A cooperative often referred to as a co-op or coop) is defined by the International Cooperative Alliance’s Statement on the Cooperative Identity as an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointlyowned and democratically-controlled enterprise.
    13. 13. It is a business organization owned and operated by a group of individuals for their mutual benefit. A cooperative may also be defined as a business owned and controlled equally by the people who use its services or who work at it. Cooperative enterprises are the focus of study in the field of cooperative economics.
    14. 14. Also… Economic democracy Franchising Joint venture Holding companies
    15. 15. Holding company A holding company is a company or firm that owns other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies.
    16. 16. Economic democracy Economic democracy is a socioeconomic philosophy that suggests transfer of decisionmaking authority from a small minority of corporate shareholders to the larger majority of public stakeholders. While there is no single definition or approach, all theories and real-world examples of economic democracy are based on a core set of fundamental assumptions.
    17. 17. Proponents generally agree that modern economic conditions tend to hinder or prevent society from earning enough income to purchase its output production. Centralized corporate monopoly of common resources typically forces conditions of artificial scarcity upon the greater majority, resulting in socio-economic imbalances that restrict workers from access to economic opportunity and diminish consumer purchasing power.
    18. 18. Franchising Franchising is the practice of using another person's business model. The franchisor grants the independent operator the right to distribute its products, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee.
    19. 19. Various tangibles and intangibles such as national or international advertising, training, and other support services are commonly made available by the franchisor. Agreements typically last from five to thirty years, with premature cancellations or terminations of most contracts bearing serious consequences for franchisees.
    20. 20. Franchising has been around for many centuries but did not come to prominence until the 1930s in the United States, when the establishment of electricity, vehicles, and, in the 1950s, the Interstate Highway system helped propel modern franchising, most notably franchisebased food service establishments. According to the International Franchise Association approximately 4% of all businesses in the United States are franchises.
    21. 21. Joint venture A joint venture (often abbreviated JV) is an entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. The venture can be for one specific project only, or a continuing business relationship such as the Fuji Xerox joint venture.
    22. 22. This is in contrast to a strategic alliance, which involves no equity stake by the participants, and is a much less rigid arrangement. The phrase generally refers to the purpose of the entity and not to a type of entity. Therefore, a joint venture may be a corporation, limited liability company, partnership or other legal structure, depending on a number of considerations such as tax and civil liabilities.
    23. 23. Reasons for forming a joint venture
    24. 24. Internal reasons Build on company's strengths Spreading costs and risks Improving access to financial resources Economies of scale and advantages of size Access to new technologies and customers Access to innovative managerial practices
    25. 25. Competitive goals Influencing structural evolution of the industry Pre-empting competition Defensive response to blurring industry boundaries Creation of stronger competitive units Speed to market Improved agility
    26. 26. Strategic goals Synergies Transfer of technology/skills Diversification
    27. 27. Reasons for dissolving a joint venture Aims of original venture met Aims of original venture not met Either or both parties develop new goals Either or both parties no longer agree with joint venture aims Time agreed for joint venture has expired Legal or financial issues Evolving market conditions mean that joint venture is no longer appropriate or relevant
    28. 28. organisation - how businesses organise themselves All businesses are organised into groups of people. This is so the employees can be organised and controlled to make sure the necessary work is one efficiently. These groups have managers responsible for them. There are different ways of organising the business into groups, and each way has its advantages and disadvantages.
    29. 29. There are additional benefits of organising people into groups, such as making it clearer how communications should be organised. The development of team-spirit also usually improves motivation and productivity.
    30. 30. Organisation by Function
    31. 31. Comments on this method of organisation: 1. Specialisation by function is more efficient. Employees get experienced in and competent at one particular job. 2. Accountability is clear i.e. whose responsibility is it to do what. 3. Clarity is improved i.e. it is clear who does what. 4. Communication is weakened by a lack of communication across and between functions. HRM may be doing things Marketing need to know about.
    32. 32. 5. Inertia may set in where departments become overfocussed on their own agendas and lose sight of the overall business objectives. In extreme case the team-spirit may degenerate into tribalism where departments are ‘at war’ with each other and are more concerned with ‘winning’ this war than attending to the overall business objectives. 6. This system can become overly bureaucratic where flexibility is lost because things have to be done ‘by the book’. 7. This system may not be suitable for large businesses with many different markets and/or products.
    33. 33. Organisation by Product
    34. 34. Comments on this method of organisation: 1. This structure gives focus on individual products, which may be especially appropriate if different products have different problems and concerns. The issue of focus is important because it determines the priorities people will have, and the way they think about those priorities. 2. Each group can be run as a separate profit centre. This way, healthy competition and rivalry can develop between ‘teams’ which can help motivation and productivity. It is also flexible in that poorly performing groups can be closed down without too much disruption to the rest of the organisation.
    35. 35. 3. Co-operation between teams will improve where it is in the interests of both teams to do so. 4. There is a danger of duplication of resource use if each team has a Marketing department, a Finance department and so on. 5. Rivalry can get out of hand and become destructive. 6. Individual teams can get out of overall management control, especially if headed by a very ambitious person.
    36. 36. Organisation by Area/Region
    37. 37. Comments on this method of organisation: 1. Better response to and focus on local customer needs. 2. Better communication within the locally-based department. 3. Rivalry between departments. 4. Duplication of resource use. 5. Conflict and lack of co-operation between departments.
    38. 38. Organisation by Customer/Customer Type
    39. 39. Comments on this method of organisation: 1. This method of organisation promotes focus on customers and their different individual needs. This is a major advantage and helps a business to become market oriented as opposed to the previous product oriented structure. 2. Departments can be organised by market segment which adds to the focus on customer need. 3. It is sometimes difficult to define exactly which group a particular customer belongs to.
    40. 40. 4. Some customer groups may be small and so individual departments may be inefficient. 5. There will be duplication of resources. 6. Individual departments may escape from proper overall management control.
    41. 41. Organisation by Process
    42. 42. Comments on this method of organisation: 1. This structure gives focus on production processes which may be appropriate where, as in the example of oil, the processes are quite different with different problems and needs. 2. Otherwise, this is very similar to organisation by function.
    43. 43. Conclusions on organisational structures All these structures have strengths and weaknesses which a business has to think about before choosing which one to use. Changing that decision, and re-structuring, is very disruptive and very expensive, so it is better to get it right the first time. Communications and control are key issues.
    44. 44. The question of focus is also very important, because the structure affects the way employees think about themselves and their own personal objectives e.g. ‘I am an accountant’ or ‘I am a soap-team member’ or ‘I am a driller’. It is natural for humans to identify with a group of people (a ‘team’) and this can be turned to the business’ advantage by acting as a motivator and helping to raise productivity.
    45. 45. But it is also an important limiting factor. People become very defensive and territorial about the interests of ‘their’ team and this can get in the way of objective problem-solving. In the extreme, a business can disintegrate into a bunch of warring tribes where ‘revenge’ on ‘that lot’ overrides the business’ objectives.
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