business organisation 3.ppt

8/10/2019 business organisation 3.ppt

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The owners and operators of a businesshave as one of their main objectives thereceipt or generation of a financial return

in exchangefor work and acceptance ofrisk.

Notable exceptions include cooperativeenterprises and state-owned enterprises.

Businesses can also be formed not-for-profitor be state-owned.


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Basic forms of ownership

Although forms of business ownership vary

by jurisdiction, there are several common

forms:

Sole proprietorship

Partnership

CorporationCooperative


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Sole proprietorship

A sole proprietorshipalso known as a sole trader, orsimply proprietorshipis a type of business entitywhich is owned and run by one individualand wherethere is no legal distinction between the owner and thebusiness.

All profits and all losses accrue to the owner (subject totaxation).

All assets of the business are owned by the proprietorand all debts of the business are their debts and theymust pay them from their personal resources.


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This means that the owner has unlimitedliability. It is a "sole" proprietorship in thesense that the owner has no partners

(partnership).A sole proprietor may do business with a

trade name other than his or her legalname.

This also allows the proprietor to open abusiness account with banking institutions.


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Partnership

A partnershipis a type of business entity inwhich partners(owners) share with each other

the profits or losses of the business.

Partnerships are often favoured over corporationsfor 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).


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However, depending on the partnership

structure and the jurisdiction in which it

operates, owners of a partnership may be

exposed to greater personal liability thanthey would as a shareholder of a

corporation.


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Corporation

A corporationis a legal entity separate from theshareholders and employees.

In British tradition it is the term designating abody corporate, where it can be either a

corporation sole (an office held by an individualnatural person, which is a legal entity separatefrom that person) or a corporation aggregate

(involving more persons).In American and, increasingly, internationalusage, the term denotes a body corporateformed to conduct business.


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Corporations exist as a product of corporate law,and their rules balance the interests of themanagement who operate the corporation;creditors who loan it goods, services or money;

shareholders, typically in the secondary market,who hold shares related to the originalinvestment of capital; the employees who

contribute their labour; and the clients theyserve.

People work together in corporations to producevalue and generate income.


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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.


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The six largest businesses of the world

in 2005 by revenue in millions of dollars


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Cooperative

A cooperativeoften referred to as a co-oporcoop) is defined by the In ternat ional Co-

operative Alliances Statement on the Co-

operative Identi tyas an autonomousassociation of persons united voluntarily to

meet their common economic, social, and

cultural needs and aspirations through a jointly-

owned and democratically-controlled enterprise.


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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 whouse its services or who work at it.

Cooperative enterprises are the focus of study in

the field of cooperative economics.


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Also

Economic democracy

Franchising

Joint ventureHolding companies


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Holding company

A holding companyis 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.


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Economic democracy

Econom ic democracyis a socioeconomicphilosophy that suggests transfer of decision-

making authority from a small minority of

corporate shareholders to the larger majority ofpublic 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.


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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 workersfrom access to economicopportunity and

diminish consumer purchasing power.


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Franchising

Franchisingis the practice of using another

person's business model.

The franchisorgrants the independent operator

the right to distribute its products, techniques,

and trademarks for a percentage of gross

monthly sales and a royalty fee.


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Franchising has been around for many centuriesbut did not come to prominence until the 1930sin the United States, when the establishment of

electricity, vehicles, and, in the 1950s, theInterstate Highway system helped propelmodern franchising, most notably franchise-based food service establishments.

According to the International FranchiseAssociation approximately 4% of all businessesin the United States are franchises.


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Joint venture

Ajoint 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 bothcontributing 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.


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This is in contrast to a strateg ic al l iance, whichinvolves no equity stake by the participants, andis a much less rigid arrangement.

The phrase generally refers to thepurposeof theentity and not to a typeof entity.

Therefore, a joint venture may be a corporation,

limited liability company, partnershiporother legal structure, depending on a number ofconsiderations such as tax and civil liabilities.


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Reasons for forming a joint

venture


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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


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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


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Strategic goals

Synergies

Transfer of technology/skills

Diversification


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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 issuesEvolving market conditions mean that joint venture is

no longer appropriate or relevant


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organisation - how businesses

organise themselves

All businesses are organised into groups of people.

This is so the employees can be organisedand

controlledto make sure the necessary work is one

efficiently.These groups have managersresponsible for them.

There are different ways of organising the business into

groups, and each way has its advantages anddisadvantages.


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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.


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Organisation by Function


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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 todo what.

3. Clarity is improved i.e. it is clear who does what.

4.Communication is weakened by a lack ofcommunication across and between functions. HRM

may be doing things Marketing need to know about.


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5. Inertia may set in where departments become over-focussed on their own agendas and lose sight of the

overall business objectives. In extreme case theteam-spirit may degenerate into tribalism wheredepartments are at war with each other and aremore concerned with winning this war thanattending to the overall business objectives.

6. This system can become overly bureaucratic whereflexibility is lost because things have to be done bythe book.

7. This system may not be suitable for largebusinesses with many different markets and/orproducts.


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Organisation by Product


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organisation:1. This structure gives focus on individual products, which may

be especially appropriate if different products have differentproblems and concerns. The issue of focus is importantbecause 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 teamswhich can help motivation and productivity. It is also flexible

in that poorly performing groups can be closed down withouttoo much disruption to the rest of the organisation.


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3. Co-operation between teams will improve where it isin 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 Financedepartment and so on.

5. Rivalry can get out of hand and become destructive.

6. Individual teams can get out of overall managementcontrol, especially if headed by a very ambitiousperson.


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Organisation by Area/Region


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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.


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Organisation by

Customer/Customer Type


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organisation:

1. This method of organisation promotes focus oncustomers and their different individual needs. This isa major advantage and helps a business to becomemarket oriented as opposed to the previous product

oriented structure.

2. Departments can be organised by market segmentwhich adds to the focus on customer need.

3. It is sometimes difficult to define exactly which groupa particular customer belongs to.


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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.


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Organisation by Process


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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 andneeds.

2. Otherwise, this is very similar to organisationby function.


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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.


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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 Iam 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 toraise productivity.


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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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business organisation 3.ppt