1.2 Types Of Organization Day 2


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1.2 Types Of Organization Day 2

  1. 1. Types of Organization
  2. 2. What is the difference between the public and private sector? <ul><li>Public sector – organizations that operate under the ownership and control of the government </li></ul><ul><ul><li>Public corporations are wholly owned by the government, such as the US Postal Service </li></ul></ul><ul><li>Private sector – Businesses that are owned and controlled by private individuals and organizations </li></ul>
  3. 3. Why do some organizations belong in the public sector? <ul><li>To ensure everyone has access to basic services, such as health care or education </li></ul><ul><li>To avoid wasteful competition and enjoy the benefits of economies of scale , such as with energy or national defense </li></ul><ul><li>To protect citizens, such as the police or courts system </li></ul><ul><li>To reduce unemployment </li></ul>
  4. 4. What is a sole-trader? <ul><li>Sole traders: self-employed business people who run their own businesses (private sector) </li></ul><ul><ul><li>Advantages </li></ul></ul><ul><ul><ul><li>Few legal formalities </li></ul></ul></ul><ul><ul><ul><li>Profits don’t have to split </li></ul></ul></ul><ul><ul><ul><li>Being your own boss </li></ul></ul></ul><ul><ul><li>Disadvantages </li></ul></ul><ul><ul><ul><li>Unlimited liability (meaning the owner can be sued for all possessions) </li></ul></ul></ul><ul><ul><ul><li>Limited sources of finance </li></ul></ul></ul><ul><ul><ul><li>Lack of continuity </li></ul></ul></ul>
  5. 5. What is a partnership? <ul><li>Partnership: business owned by two or more people (public sector) </li></ul><ul><li>Advantages </li></ul><ul><ul><li>Financial strength </li></ul></ul><ul><ul><li>Division of labor or specialization </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Unlimited liability (though split among partners) </li></ul></ul><ul><ul><li>Decision-making takes longer </li></ul></ul><ul><ul><li>Still may be difficult to raise capital </li></ul></ul>
  6. 6. What is a company or corporation? <ul><li>Company/Corporation: businesses that are owned by shareholders </li></ul><ul><ul><li>NOTE: Do not use the term business and company interchangeably (See example tip on p.32) </li></ul></ul><ul><li>Advantages </li></ul><ul><ul><li>Lower risk to investors </li></ul></ul><ul><ul><li>Economies of scale due to larger size </li></ul></ul><ul><ul><li>Continuity </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Financial information must be shared with all shareholders </li></ul></ul><ul><ul><li>More bureaucracy </li></ul></ul><ul><ul><li>Communication problems </li></ul></ul>
  7. 7. How can companies be classified? <ul><li>Private limited companies: Shares are sold to a private family or friends </li></ul><ul><ul><li>Do not have report financial standing of the company </li></ul></ul><ul><li>Public limited companies: Sells shares of the company to the public </li></ul><ul><ul><li>Financial information about the company must be made public </li></ul></ul>
  8. 8. Why do people become shares? <ul><li>To receive dividends (portions of the profits of the company) </li></ul><ul><li>For capital growth (prices of the shares increase) </li></ul><ul><li>For voting power </li></ul>
  9. 9. What is a non-profit organization? <ul><li>Non-profit organization or not-for-profit organization: establishment run in a business-like manner, but profit is not the major objective </li></ul><ul><ul><li>Business surplus (or profit) is put back into the business </li></ul></ul>
  10. 10. What is a non-governmental organization? <ul><li>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) </li></ul><ul><ul><li>Two types of NGOs </li></ul></ul><ul><ul><ul><li>Operational NGOs: established for a given objective </li></ul></ul></ul><ul><ul><ul><ul><li>Example: Unicef (United Nations Children’s Fund) </li></ul></ul></ul></ul><ul><ul><ul><li>Advocacy NGOs: take an aggressive approach to defend a cause </li></ul></ul></ul><ul><ul><ul><ul><li>Example: Greenpeace </li></ul></ul></ul></ul>
  11. 11. What is a charity? <ul><li>Charity: non-profit organization that collects donations in support of a cause </li></ul><ul><li>Advantages </li></ul><ul><ul><li>Provide support for the welfare of society </li></ul></ul><ul><ul><li>Exempt from paying income tax </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Lack of profit motive may cause staff to be unmotivated </li></ul></ul><ul><ul><li>Survives solely on donations, which may cause financial problems and decrease quality of talent pool </li></ul></ul>
  12. 12. What is a pressure group? <ul><li>Pressure group: Non-profit organization established by their members to address a special interest of the group </li></ul><ul><ul><li>Covered more in Unit 1.4 </li></ul></ul>
  13. 13. HL: Relationship between public and private sector organizations <ul><li>What is the role of the government? </li></ul><ul><ul><li>To provide services to the general public that are in its best interest </li></ul></ul><ul><li>What options does the government have to provide these services? </li></ul><ul><ul><li>Supply the services themselves </li></ul></ul><ul><ul><li>Allow private firms to supply them </li></ul></ul><ul><ul><li>Form a public-private sector partnership (such as Disneyland in Japan) </li></ul></ul>
  14. 14. What is the difference between public and private goods? <ul><li>Private goods : Goods that are excludable; people who cannot afford them can go without them (such as mobile phones, cars, etc.) </li></ul><ul><li>Private goods : Products that are enjoyed by the general public but would probably not be provided without government intervention </li></ul>