1. Type of Business Organisation

2. Learning Intentions: Success criteria:
To introduce pupils to the different business organisation types in the UK and World-wide (international).
Success criteria:
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.

3. Organisations Types of Organisation Private Sector Public Sector
Profit-making
Non-profit-making

4. Types of ownership Sole trader Partnership Private limited company
Public limited company
Franchise
Co-operative
Charity

5. Private Sector

6. 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.

7. Sole trader Negatives Limited capital Unlimited liability
Commitment (long hours, every day)
New ideas may be limited
Positives
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

8. 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).

9. Partnership Negatives Actions of one partner binds all
More discussion and consultation
Limitation on number of partners
Unlimited liability
Partnership ends if a partner dies
Positives
More capital than sole traders
Excessive hours can be cut down
More ideas may be generated
Specialisation can occur

10. 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.

11. Private limited company
Positives
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

12. 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.

13. Public limited company
Positives
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

14. 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

15. Franchise Positives Negatives
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

16. 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).

17. Co-operative Negatives Positives
Difficult to grow and find additional capital 
New workers may not be able to raise capital needed to join co-operative
Positives
Less conflict between workers and managers 
Workers should be more motivated

18. Multinational What is a multinational?
A company with HQ in one country but with bases, manufacturing or assembly plants in others.
Most multinationals are basically a federation of multiple national companies loosely connected across borders and managed largely by expatriates sent out from the centre.
By using expatriates they miss out on learning about the culture of the local people and perhaps even alienate the market. Many multinationals may not even sell goods in the country they are in.

19. Multinationals
A multinational operates in more than one country. It will normally have a headquarters based in one country known as the ‘home country’.

20. 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.
Increase market share – companies may find they are at saturation point in the domestic market and need a new outlet. They may start by exporting to other countries but eventually they will want to take production overseas. Coca Cola started this way, following US soldiers around the world after World War I.
Secure cheaper premises and labour – the costs of land and labour will be cheaper in developing countries. Sweatshops in the Far East are an example of cheap labour, whereas production plants opening in the old Soviet Bloc nations like Poland, Bulgaria etc are examples of cheap factories.
Avoid tax or trade barriers – different nations have different levels of corporation tax and may have different barriers to entry. The Japanese only allow a small percentage of foreign cars to be sold in Japan to protect their own industry.
Government grants – many US companies were attracted to the UK in the 1980s because the government gave them money to open up operations here.

21. Multinationals: Benefits
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

22. Multinationals: Costs
Legislation may be too restrictive
Cultural difficulties
Lack of technical expertise
Poor infrastructure
Political Instability
Exploitation (e.g. low wages)
Forcing local businesses out

23. Privatisation 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
However:
Public corporations were often sold off too cheaply
Privatisation has not always led to greater competition

24. Contracting Out 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

25. Third Sector

26. Third Sector
Non-profit making organisations such as charities and voluntary organisations are set up to support specific causes
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

27. Third Sector www.socialenterprisescotland.org.uk
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

28. 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.

29. Charity
Positives
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

30. TASK TIME

31. 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.

32. Peer marking You are going to swap answers.
Has your partner answered well?
Does the answer make sense?
Is it worth a mark?
Work with the class to assist them in understanding the way that questions are marked. They peer assess and discuss the answer with each other and then award the appropriate marks – teacher gives support.

33. 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.
How did you do?

34. Introduction – Reasons why an organisation would become a private limited company (LTD) are as follows:
Expansion point
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.
How did you do?

35. Public Sector

36. 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.

37. Public Sector Organisations
Public Corporations
BBC and Royal Mail (prior to selling on stock market), Bank of England
Local Authority Services
Education, Housing, Police, Social Services
Central Government Departments
Treasury, Defence, Health, Employment, Social Services, Environment, Transport

38. Public corporations Reasons 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.

39. 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).

40. 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.

41. Introduction to the different types of
Learning Intentions:
Introduction to the different types of
BUSINESS OBJECTIVES
Success Criteria:
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

42. 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

43. 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

44. 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

45. 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,

46. TASK TIME

47. 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?
Groups should be given time to work out exactly what the question is asking about. Explain that some questions are not straightforward. Although this seems to be a question about objectives, it is more about internal issues.

48. 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?

49. 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.