Types of Organization

What is the difference between the public and private sector? Public sector – organizations that operate under the ownership and control of the government Public corporations are wholly owned by the government, such as the US Postal Service Private sector – Businesses that are owned and controlled by private individuals and organizations

Public sector – organizations that operate under the ownership and control of the government

Public corporations are wholly owned by the government, such as the US Postal Service

Private sector – Businesses that are owned and controlled by private individuals and organizations

Why do some organizations belong in the public sector? To ensure everyone has access to basic services, such as health care or education To avoid wasteful competition and enjoy the benefits of economies of scale , such as with energy or national defense To protect citizens, such as the police or courts system To reduce unemployment

To ensure everyone has access to basic services, such as health care or education

To avoid wasteful competition and enjoy the benefits of economies of scale , such as with energy or national defense

To protect citizens, such as the police or courts system

To reduce unemployment

What is a sole-trader? Sole traders: self-employed business people who run their own businesses (private sector) Advantages Few legal formalities Profits don’t have to split Being your own boss Disadvantages Unlimited liability (meaning the owner can be sued for all possessions) Limited sources of finance Lack of continuity

Sole traders: self-employed business people who run their own businesses (private sector)

Advantages

Few legal formalities

Profits don’t have to split

Being your own boss

Disadvantages

Unlimited liability (meaning the owner can be sued for all possessions)

Limited sources of finance

Lack of continuity

What is a partnership? Partnership: business owned by two or more people (public sector) Advantages Financial strength Division of labor or specialization Disadvantages Unlimited liability (though split among partners) Decision-making takes longer Still may be difficult to raise capital

Partnership: business owned by two or more people (public sector)

Advantages

Financial strength

Division of labor or specialization

Disadvantages

Unlimited liability (though split among partners)

Decision-making takes longer

Still may be difficult to raise capital

What is a company or corporation? Company/Corporation: businesses that are owned by shareholders NOTE: Do not use the term business and company interchangeably (See example tip on p.32) Advantages Lower risk to investors Economies of scale due to larger size Continuity Disadvantages Financial information must be shared with all shareholders More bureaucracy Communication problems

Company/Corporation: businesses that are owned by shareholders

NOTE: Do not use the term business and company interchangeably (See example tip on p.32)

Advantages

Lower risk to investors

Economies of scale due to larger size

Continuity

Disadvantages

Financial information must be shared with all shareholders

More bureaucracy

Communication problems

How can companies be classified? Private limited companies: Shares are sold to a private family or friends Do not have report financial standing of the company Public limited companies: Sells shares of the company to the public Financial information about the company must be made public

Private limited companies: Shares are sold to a private family or friends

Do not have report financial standing of the company

Public limited companies: Sells shares of the company to the public

Financial information about the company must be made public

Why do people become shares? To receive dividends (portions of the profits of the company) For capital growth (prices of the shares increase) For voting power

To receive dividends (portions of the profits of the company)

For capital growth (prices of the shares increase)

For voting power

What is a non-profit organization? Non-profit organization or not-for-profit organization: establishment run in a business-like manner, but profit is not the major objective Business surplus (or profit) is put back into the business

Non-profit organization or not-for-profit organization: establishment run in a business-like manner, but profit is not the major objective

Business surplus (or profit) is put back into the business

What is a non-governmental organization? Non-governmental organization: a type of not-for-profit organization that are run for the benefit of others in society (also called Private Voluntary Organizations) Two types of NGOs Operational NGOs: established for a given objective Example: Unicef (United Nations Children’s Fund) Advocacy NGOs: take an aggressive approach to defend a cause Example: Greenpeace

Non-governmental organization: a type of not-for-profit organization that are run for the benefit of others in society (also called Private Voluntary Organizations)

Two types of NGOs

Operational NGOs: established for a given objective

Example: Unicef (United Nations Children’s Fund)

Advocacy NGOs: take an aggressive approach to defend a cause

Example: Greenpeace

What is a charity? Charity: non-profit organization that collects donations in support of a cause Advantages Provide support for the welfare of society Exempt from paying income tax Disadvantages Lack of profit motive may cause staff to be unmotivated Survives solely on donations, which may cause financial problems and decrease quality of talent pool

Charity: non-profit organization that collects donations in support of a cause

Advantages

Provide support for the welfare of society

Exempt from paying income tax

Disadvantages

Lack of profit motive may cause staff to be unmotivated

Survives solely on donations, which may cause financial problems and decrease quality of talent pool

What is a pressure group? Pressure group: Non-profit organization established by their members to address a special interest of the group Covered more in Unit 1.4

Pressure group: Non-profit organization established by their members to address a special interest of the group

Covered more in Unit 1.4

HL: Relationship between public and private sector organizations What is the role of the government? To provide services to the general public that are in its best interest What options does the government have to provide these services? Supply the services themselves Allow private firms to supply them Form a public-private sector partnership (such as Disneyland in Japan)

What is the role of the government?

To provide services to the general public that are in its best interest

What options does the government have to provide these services?

Supply the services themselves

Allow private firms to supply them

Form a public-private sector partnership (such as Disneyland in Japan)

What is the difference between public and private goods? Private goods : Goods that are excludable; people who cannot afford them can go without them (such as mobile phones, cars, etc.) Private goods : Products that are enjoyed by the general public but would probably not be provided without government intervention

Private goods : Goods that are excludable; people who cannot afford them can go without them (such as mobile phones, cars, etc.)

Private goods : Products that are enjoyed by the general public but would probably not be provided without government intervention