Handout 1: Economic sectors PowerPoint presentation Unit 320 (B&A 59): Principles of business Handout 1: Economic sectors

Public – organisations funded by public money. Economic sectors Public – organisations funded by public money. Private – motivation is to increase profit, attract new customers and build on existing relationships. Voluntary/not-for-profit (the Community and Voluntary Sector) – charities or organisations operating under a charitable status where money is not raised for a cause, but rather invested back into the operation. The factors that determine organisations’ objectives and targets are its type, size and positioning within their sector. Economically, organisations fall into either public, private or voluntary sectors. Public sector – these are organisations funded by public money (ie taxes), eg NHS organisations such as doctors’ surgeries and hospitals; schools, councils, government departments. They are usually organisations which provide preventative or supportive services to a wide-ranging client base, where money is not the goal. Private/commercial sector – eg retail, where the motivation is to increase profit, attract new customers and build on existing relationships. They are owned by shareholders, which may number from one to thousands. Public limited companies, whose shares may be bought by the public, are identified by the letters plc after the name; private limited companies, where there are a fixed number of shareholders, carry the abbreviation Ltd after the name. Voluntary/not-for profit organisation (the Community and Voluntary Sector) – eg charities such as Oxfam, or organisations operating under a charitable status where money is not raised for a cause, but rather invested back into the operation, eg City and Guilds

Funded by public money (ie taxes) Public sector Funded by public money (ie taxes) Provide preventative or supportive services to a wide-ranging client base Profit is not the goal Answer to Parliament or central government Either report to government departments, headed up by ministers of the political party in power, or non-ministerial government departments that answer to Parliament. These are organisations funded by public money (ie taxes), eg NHS organisations such as doctors’ surgeries and hospitals; schools, councils, government departments and agencies. They are usually organisations which provide preventative or supportive services to a wide-ranging client base, where profit is not the goal. The main objectives of any organisation in the public sector is to provide efficient and effective public services, whilst carrying out government policy and complying with legislation. Usually, an organisation´s aim is stated in its mission statement: whilst private sector organisations usually focus on the customer, public sector organisations usually concentrate on the service they offer. Broadly, public sector organisations fall into those reporting to government departments, which are headed up by ministers of the political party in power, and non-ministerial government departments that answer to Parliament rather than a cabinet minister, eg Ofsted, HMRC, Charity Commission. Public sector organisations include: Government departments, eg Department of Health Government executive agencies that operate as separate entities within the department eg The Met Office and HM Land Registry are both executive agencies within the Department of Business, Innovation and Skills (BIS) Non-ministerial departments eg the Foods Standards Agency Non-Departmental Public Bodies (NDPB) – quangos – eg The Health and Safety Executive Local authorities (councils), eg London Borough of Ealing.

Types of private organisation: sole trader partnership Private sector Motivation is to increase profit, attract new customers and build on existing relationships. Types of private organisation: sole trader partnership private limited company public limited company. These organisations’ motivation is to increase profit, attract new customers and build on existing relationships, eg retail. They vary enormously in size, from the sole trader to the multi-national. Sole trader – one person owning the organisation and taking personal liability for debts and profits. Examples are window cleaners, painters and decorators, local builders. Partnerships – two or more people run the organisation, taking joint personal liability for debts and profits. Limited companies – these consist of a minimum of two shareholders and must be formally registered. Whilst, they are subject to comply with more legislation, their advantage to the owners is that their personal liability for debts is limited to their shareholding. There are two types of limited company: Private limited company - are owned by a fixed number of shareholders, who provide the finance for the operation in exchange for their corresponding share in the profits. These companies carry the abbreviation Ltd after the name. Public limited companies - shares may be bought by the public on the Stock Exchange. These companies, because of their public nature, are subject to more stringent financial reporting and auditing requirements and are identified by the letters plc after the name.

Voluntary/not-for-profit (the Community and Voluntary Sector) Organisations who aim to raise aid for their stated cause. Voluntary organisations such as the Voluntary Services Organisation. Organisations operating under a charitable status where money is not raised for a cause, but rather invested back into the operation, eg City & Guilds. Sometimes referred to as the Third Sector, this comprises charity organisations such as Oxfam, whose principal aim is to raise aid for their stated cause or voluntary organisations such as the Voluntary Services Organisation which works in partnership with many public sector organisations, including the NHS. Voluntary organisations may enter into contracts with public bodies to provide services or they may work with them more informally, referring clients to public services, taking referrals from public bodies or sharing information with them. Other types of organisations in this sector operate under a charitable status where money is not raised for a cause, but rather invested back into the operation, eg City and Guilds.

Summary of differences between sectors There are major differences between these three groups or sectors, mainly in the areas of their purposes, the way they are run, how they are financed and what they do with their profits or surpluses of cash. The very different purposes of the sectors and the ways they are financed determine how the organisations are structured and run.

Organisational objectives Public sector Focus on provision of efficient and effective services to the public Private sector Focus on getting customers to buy their products/services Voluntary sector Focus on helping a cause or those that cannot help themselves Usually, an organisation´s aim is stated in its mission statement. An organisation’s objectives are determined by the type of organisation and its sector. For example, the main objectives of any organisation in the public sector is to provide efficient and effective public services, whilst carrying out government policy and complying with legislation. As they are funded with public taxes, they must provide the best value for money services. Private sector organisations usually focus on growth and profit. 7

Mission statements Effective Care, Well Delivered. – NHS To bring inspiration and innovation to every athlete in the world. – NIKE We defend the natural world and promote peace by investigating, exposing and confronting environmental abuse, and championing environmentally responsible solutions. – Greenpeace An organisation’s mission statement can reveal the differences in purpose between the sectors: Effective Care, Well Delivered NHS – public sector organisation. To bring inspiration and innovation to every athlete in the world NIKE – private sector We defend the natural world and promote peace by investigating, exposing and confronting environmental abuse, and championing environmentally responsible solutions GREENPEACE – voluntary sector 8