1.2.

Types of organizati ons

 Public sectors- Organization owned and controlled by the state or the government…PAGASAI
 Private sectors- Organization owned and controlled by the …PHP AIRLINES (these specific
airlines that carry the names of their country have privilege from the country bcoz they were
once owned by the country/government…. later, went to privatization bcoz they were sold.)
 Private:
Sole trade
Social enterprise
Partnership
Cooperatives
Microfinance institution
Limited company:
Private limited company (LTD)
Public limited company (PLC)

 Public sector objectives

-provide an essential service
-provide it cheaply or free of charge, therefore it is available to everybody
-they are generally beneficial to society. It is good to have healthy and well-educated people in
the country…. (schools/education)
-maintaining employment

 Private sector objectives

-to survive in a competitive market
-to maximize their profits
-to make returns for their shareholders/owners(dividends)
-to provide products and services for the betterment of society and generate profit

 Public goods
-products that are enjoyed by the general public but are unlikely to be provided without
government intervention
-example: defence, public roads, lighthouses, street lighting

 Public-private enterprise (PPP)

-takes place when the governments create partnerships with the private sector in the provision
of certain services
-Japanese refers to this as “DAISAN sector” (third sector)
……since it refers to hybrid organization of both private and public sector…ex: Hong Kong
Disneyland

 Sole trader (proprietor)…unincorporated business

 -most common form of business organization. One person provides the finances and in return,
has full control of the business and can keep all the profits……. ex: uber/grab, road sellers
-unlimited liability…coz of debts (difficulty in paying)

Advantages
-easy to set up…no legal formalities
-owner has complete control…. not answerable to anybody else
-owner keeps all profits
-able to choose time and patterns of workings
-able to establish close personal relationship with the staff (if any are employed) and customers
-the business can be based on interest and skills of the owner…rather than working as employee
for a larger business

Disadvantages
-unlimited liability…all the owner’s assets are potentially at risk
-often faces intense competition from bigger firms, for example, food retailing
-owner is unable to specialise in areas of the business that are most interesting… it is
responsible for all aspects of management
-difficult to raise additionally capital
-long hours often to make business pay
-lack of continuity…as business does not have separate legal status, when the owner dies, the
business ends too

 Partnership
-agreement between two or more people (max of.20) to carry on a business together, usually
with a view of making a profit
-THE DEED of PARTNERSHIP establishes the rights and privileges of the partners.

Advantages
-partners may specialise in different areas of business management
-shared decision making
-additional capital injected by each partner
-business losses shared between the partners
-greater privacy and fewer legal formalities that corporate organisations(companies)

Disadvantages
-unlimited liability for all partners(exceptional)
-profits are shared
-there is, as with sole traders, no continuity and the partnership will have to be reformed in the
event of the death of one partner
-all partners are bound by the decision of any one of them
-not possible to raise capital from selling shares
-a sole trader, taking on patterns will lose independence of decision making
 Limited partnership
-GENERAL PARTNER
*manages the business
*unlimited liability
-LIMITED PARTNER
*does not manage
*limited liability

Companies/ corporate
LIMITED COMPANIES
*Characteristics
-limited liability
-legal personality (have rights…. can sue or be sued because the government recognizes the
company as an entity)
- continuity
-capital is divided into shares
-companies are run by directors
Distinguish between the ownership and control of a Limited Company

How it is formed
1… Memorandum of association (not a business plan) (prepared by corporate lawyers) + article
of association (the rights of shareholders, -the procedure for appointing directors and scope of
their powers, -the length of time directors ….)
2… Registrar of companies
3… Certificate of incorporation
4… Trading begins

PRIVATE LIMITED COMPANIES

*Characteristics
-Tend to be relatively small companies.
-Their business name ends in Limited or Ltd
-Shares can only be transferred privately and all shareholders must agree to transfer
-Private Limited Companies are often family businesses owned by members of the family or
close friends
-The directors of these companies tend to be shareholders and are involved in the running of
the business
-Many manufacturing firms are Private Limited Companies rather than Sole Traders or
Partnerships
-example: Virgin Ltd

*Advantages
-Shareholders have limited liability
-More capital can be raised as there are no limits on the number of shareholders
-Control of companies cannot be lost to outsiders
-The business will continue even if one of the owners dies

*Disadvantages
-Profits must be shared out amongst a much larger number of members
-There is a legal procedure to set up the business. This takes time and costs money.
-Firms are not allowed to sell shares to the public. This restricts the amount of capital that can
be raised.
-Financial information…

PUBLIC LIMITED COMPANIES

1)Memorandum of association + Article of association + Statutory declaration
2)Registrar of companies
3)Certificate of incorporation
4)Publish of prospectus
5)Flotation

*Exiting the stock market

-sometimes business lose flavour with the stock market
-the business may be bought outright by a private individual
-the people running the business might no longer be willing to tolerate interference from the
external shareholders

*advantages
-huge amounts of money can be raised from the sale of shares to the public
-production costs may be lower as firms gain economies scale
-because of their size, PLC can often dominate the market
-it becomes easier to raise finance as financial institutions are more willing to lend to PLCs

*disadvantage
-setting up costs can be expensive
-since anyone can buy shares, it is possible for an outside interest to take control of the
company
-all company accounts can be inspected by members of the public
-because of their size, they cannot deal with customers at a personal level.
-the way they operate is controlled by various company acts which aims to protect shareholders
-there is divorce of ownership and control which might lead to the interest of owners being
ignored to some extend
-PLCs inflexible due to their size
Marks scheme
-An unincorporated business is when there is no legal difference between the owners and the
business. Everything is carried out in the name of the owners

*Disadvantage of partnership
-Disagreements. Consulting and convincing someone will be difficult.
-Decision making. Giving up control or lose the ability to make decisions of his own.
-Trust. Will be bound with any decisions made by a partner regarding the business.

*Benefits to incorporate
-Limited liability. Having a separate legal entity allows the owners to separate their personal
assets from the business entity.
-Capital. Enables the firm to raise more capitals from sale of shares to family, friends and
venture capitalist.
-Expansion. Having the ability to raise more funds, the firm expands its operations enabling it to
compete with bigger firms.
-Status. Bigger firms have greater status, which allows them to get preferred interest rates from
financial institution. Employees take pride in working for a firm that has stability.
-Continuity. The business operation is not halted by the death of any shareholder.

*Business implications of a limited liability.

-Definition: The potential to loss of a shareholder has if the company fails, this is limited to the
amount invested by a shareholder.
-Risk. This encourages potential investors to take part in investing capitals in an organization.
-Responsibility. Limited liability to certain extend removes accountability towards decisions
made by directors/CEO/decision makers of the firms as they take substantial risk at the expense
of the other shareholders or customers.
*Protection. During loss, the personal assets of the shareholders are protected.

Social enterprise—for profit

- Forms a business that has a social purpose.
- Social purpose ……… the organization aims to improve human, social and environmental
well-being.
- Business aims to earn a profit; however, the social aim takes priority.
- Takes the form of sole traders, partnerships, company.

Cooperatives (incorporated)
-this is a common form of business organization in some countries, especially in agriculture
and retailing.
Features
- All members can contribute to the running of the business, sharing the workload,
responsibilities and decision making.
 - All members have one vote at important meetings.
- Profits are shared equally among the members.
- Types:
1. Financial cooperatives - they will be lending you at a lower rate. They will also trust that you will
as them back as you are one of them.
2. Housing “
3. Workers “
4. Producer “
5. Consumer “

Financial cooperatives

- A financial institution the ethical and social aims of which take precedence over profits.

Exp- credit union – lending money at lower rates than banks and their financial institutions.

- Members can borrow money to finance projects which otherwise will not be allowed by
financial institution.

Housing cooperatives
- Run to provide housing for its members.
- Owning apartment building and having each member entitled to one housing unit in the
building. The members through the cooperative, own the building and surpluses.

Workers cooperatives
*Business owned and operated by the workers themselves.
-Does not pay significant wages or salary.
-Providing employment to member.
-Proving certain benefits to members. (discounts)

Producer cooperatives
*Producers collaborated in certain stages of production – especially in areas where
expensive equipment needs to be utilized and maximized.
-Pool resources together to obtain capital and cost efficiencies.

Consumer cooperatives
*Provides service to its ‘members’. Entitles members to purchase products and services
often at lower prices than for profit stores.
-exp: groceries

Cooperatives
Advantages
- Buying in bulk
- Working to together to solve problems and make decisions.
- Good motivation of all member to work hard as they will benefit from shared profits.
Disadvantages
- Poor management skills unless professionals are employed.
- Capital shortages because no sale of shares to non-member general public is allowed.
 - -Slow decision making if all members are to be consulted.

Non-profit social enterprises

 Businesses operating in the private sector and do not aim to make profits at all.
 The main purpose is for the benefit of the society.
 They are run as businesses.
 SURPLUS = Total revenue – Total cost
-exp: The red cross (Christianity)/red crescent
-Types:
*NGOs – Non-Government Organizations
-Social enterprises that supports various causes that are socially desirable.
-They are not organized or run by any government.

 Charities
- Specific form of NGOs whose aim is to provide as much relief to those in need.
- Focus in Philanthropy.
- Help those who cannot help themselves.
To differentiate between NGOs and Charities- NGOs teaches how to fish while Charities provide the fish.
NGOs provide something that can be used in the long run while the charities provide stuff that is
temporary or does not last that long.

- Features
- Profits are not are generated
- Donations are important
- Unclear ownership and control
- Exempt from paying taxes

Advantages
-They help people or causes in need.
-Foster philanthropic spirit in the community.
-Foster informed discussion in the community about allocation of resources.
Disadvantages
-Lack of control but intense lobbying can lead to socially undesirable goods.
-Sometimes employees on NPO have a passion and zeal that will serve the organization or its cause.
-Funding can be irregular.

MICRO – FINANCIERS
-is a source of financial services provided to unemployed or low-income groups who would otherwise
have no other means of gaining this service.
-Aim: To give low income individuals an opportunity to become self-sufficient by providing a means of
saving and borrowing money and insurance.
1.3. Organizational objectives

Vision statement - dream for the future, ambition, clarity –can but does not have to contain something
about social issue
- Example….to be the leading company in manufacturing
- What do we want to become
- Points out to the future. It is what the business would like to see itself as.
- To audiences….. To internal stakeholders, inspires and motivates employees. To external
stakeholders, binds them to the business by giving a sense of shared beliefs
Mission - contains company’s purpose
- Example….
- Why are we doing…/what are you doing…
- Based upon where the business is now, communicates what needs to be done in order to
achieve the vision.
- Internal…provides a mean for accountability by defining key performance indicators.
External…..measures how successful the business is at achieving its own vision.
- What is a mission statement…answer why you exist as an organization, values, description
of customers.

Good mission/vision statement

- Short
- Memorable
- Inspiring
- Market focused
*who are you serving?
*what value are you providing?
*Why do people want to have a business with you
- What do you want to be remembered for?

Purpose
-used interchangeably but they do two distinctly different jobs
-inform and encourage the involvement of internal and external stakeholders
-usually appear in all company literature
-at times, used as a part of a marketing message designed to influence perception

Are they useful?(mission statements)

yes
- Quickly informs groups outside the business what the central vision and aim is
- Provides motivation to employees
- Helps guide and direct individual employee behaviour at work
No
- Too vague and general
- To make stakeholders feel good about the organization.
- Virtually really impossible to analyse or disagree with
- Often rather ‘wooly’ and general….two completely different businesses can have similar
mission statements.

AIMS & Missions Statements have in common

 - Lack specific detail

Vision statement mission statement objectives strategies

Missions statement helps in achieving…………. ^

Corporate objectives
- Is a target that must be achieved in order to realize the stated aim
- It:
*tends to be medium to long term and set in order to coordinate business activity.
*guides the actions of employee step by step
*should be quantifiable and have a timescale
Differences n aims and objectives
Aims
- What the business wants to achieve?
- Not necessarily time bounded
- Vague or abstract goal
- What a business wants to happen?
- Set by senior leaders
Objectives
- What the business has to do to achieve the aims?
- Time-bounded
- Specific and measurable target
- What a business needs to happen?
- Set by managers or their subordinates
Objectives are important in order to:
- Determine strategy
- Provide a guide to action
- Provide a sense of direction and units
- Provide a framework for decision making
- Coordinates activities
- Facilitate prioritization and resolve conflicts between departments
- Measure and control performance
- Encourages a concentration of long-term factors
- Motivate employees
- Provides a basis for decision making
- Provide shareholders with a clear idea of the business in which they have invested
Factors which determine the corporate objectives of a business:
- The size and status of the business
- The power of the stakeholders(people who have interest in the business)
- Ownership
- External and internal pressures (competition, loan by government which restricts the
boundaries of the business)
- Risks
- Corporate and business culture
- Number of years the business has been operating (the longer, the more widespread the
objectives are)
Tactics are used to get to the vision.

Corporate objectives
- Survival
- Profit
- Growth
- Image and reputation
- Market share
- Sales revenue
- Shareholder value
Common corporate objectives
 Maximizing profits
- It means producing at the level of output where the greatest positive difference between
total revenue and total cost is achieved
Price is constant
 Growth
Usually measures in terms of sales
- Has many potential benefits for the managers and owners
- Large firms will be less likely to be taken over and will benefit from economies of sale
 Increasing market share
- Closely linked to overall growth of the business is the market share it enjoys within the main
market
- Increasing market share indicates that the market mix
 Social, ethical and environmental consideration
Increasingly consumers and other stakeholders are reacting positively that act on ‘green’ or
socially responsible ways
- Maybe due to much greater adverse publicity given to business activity that is being
perceived as being damaging to stakeholder groups and wider world
- Increasing influence of pressure groups affecting decision making of business
-----legal requirements have forced businesses to refrain from certain practices
- Examples:
#firms that promote organic and vegetarian foods
#retailers that emphasizes the proportion of their products made from recycled materials
#businesses that refuse to stock goods that have been tested on animals or foods based on
GM ingredients
 Maximizing shareholder value
- This could apply to public limited companies (PLC) and help to direct management action
towards taking decisions that would increase share prices and returns to shareholders
 Survival
- This is often a short-term objective and is often at the initial stage of the business
- It may be the case for all businesses whenever there is a crisis
 Brand recognition
 Satisficing (has to do with the personal objective of the owner…personal satisfaction
 Customer satisfaction
 Brand loyalty
 Reputation and image
Public sector objectives
- State-owned organizations tend not to have profit as a major objective
- Aims of these organizations can vary greatly from providing services
- Example: BBC
Divisional, departmental and individual objectives
- Once corporate objectives have been established – it needs to broken down into specific
targets for sperate division, departments and ultimately individuals
- Corporate objectives – relate to the whole organization – they cannot be used by each
division unless meaningful targets focusing on fictional paths are made

SMART
S – specific - focus to what the business does
M – measurable – quantitative values are more effective targets to work towards
A – achievable – otherwise pointless
R – realistic/relevant – Based on the resources of the firm and the relevance to the personal involved
T – time-bound – time limit to help in assessment
1.5. Change and ….
STEEPLE

 Change
- Internal environment
- External environment
- Globalization (the world getting more connected)
- Competition (forces to do certain things just so we could be a part of the business
community)
- Changes in customer’s need (influenced by a lot of things)
- Changes in customer’s expectations (more choices)
- Demand for increased quality
- Stakeholders expectation
- Employees expectation
- Financial environment

GLOBALIZATION
 Opportunities
- Economies of scale
- Standardized products
 Threats
- Greater international competition
- Different cultures and nationalities – preferences (towards the domestic/local)

NEW TECHNOLOGIES
 Business communication
- Decentralization, Downsizing
 Production
 Marketing
 Finance
 Research and development
 Technology
- Impact on lifestyle change

DEMOGRAPHIC CHANGES
 Changes in the size and structure of business
 Nature and needs of employees
 Needs and wants of customers
~An ageing population?

SOCIAL AND CULTURAL CHANGE

 Behaviour
 Attitudes
 Expectation
~Women as part of workforce
~24-hour shopping
~Migration
CHANGES IN LEGISLATION
 Government laws
- Safety and health
- Working hours
- Discrimination
- Consumer protection (rights/laws exp: refunds for defected product within the time period)

POLITICAL CHANGES
- Government or the people running the government

STEEPLE / PESTLE
-Social
-Technological
-Economic
-Ecological
-Political
-Legal
-Ethical

STEEPLE ANALYSIS
 An organization audits the influence of each STEEPLE factor to the business
 Analyse the which factor has the most important influence in the business
- The business can develop a strategy to take it into account.

TABLE (Common influences in STEEPLE ANALYSIS)

Social influence
Technological influence, Information and Technology Communication (ICT)
Economic influence, (Exchange rate only if exporting or importing if not local market)
Ethical influence, (some businesses might not be affected by anything ethical)
Political influence, lobbying (businesses trying to influence congress, senators in passing a certain law)
Legal influence, (not all businesses concern themselves with the changes in a particular law)
Ecological @ Environmental influence,