RANGES OF DIFFERENT BUSINESSES AND THEIR OWNERSHIP

HOASEN UNIVERSITY-MANCHESTER COLLEGE 2012

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Learning outcomes
Ranges of different businesses Business purposes Business ownership Key stakeholders

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Types of Business Organisation

BTEC Business

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Ranges of different businesses

Where they operate
local national international global

Goals/purposes
public private not-for-profit/voluntary

Sector of business activities

primary secondary tertiary
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Base on Where they

operate

Local: in a town National: many provinces International: sell products overseas Global: produce and sell across the globe

Student Activities: Take out a blank sheet of paper and write down 3 of each types
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International business activities

International companies are importers and exporters, they have no investment outside of their home country. Multinational companies have investment in other countries, but do not have coordinated product offerings in each country. More focused on adapting their products and service to each individual local market. Global companies have invested and are present in many countries. They market their products through the use of the same coordinated image/brand in all markets. Generally one corporate office that is responsible for global strategy. Emphasis on volume, cost management and efficiency. Transnational companies are much more complex organizations. They have invested in foreign operations, have a central corporate facility but give decision-making, R&D and marketing powers to each individual foreign market.
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Base on Sectors
The economy can be divided into two sectors: The Private Sector The Public Sector

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The Private Sector

Private individuals and firms that are owned by private individuals Firms in the private sector include:
Sole Traders Private Limited Companies (Ltd) Partnerships Public Limited Companies (PLC)

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Private Sector Firms

One of the key differences is between: Sole traders and partnerships whose liability is unlimited

And
Private Limited and Public Limited Companies, who have limited liability

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The Public Sector

Made up of central government, local government, and businesses that are owned by government In the last twenty years the number of government-owned firms in the UK has shrunk massively Now, very few examples remain: for instance, the Royal Mail (How about Vietnam?)
Activities: Football teams Page 05
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Privatization
The process of transferring ownership of a business, enterprise, agency, public service or public property from the public sector (a government) to the private sector, either to a business that operates for a profit or to a nonprofit organization. The term can also mean government outsourcing of services or functions to private firms, e.g. revenue collection, law enforcement, and prison management.
Ref: http://en.wikipedia.org/wiki/Privatization HOANG LUU, MBA

Other Business Types

Co-operatives are owned by their staff, who are members of the firm Profits are shared amongst the members Losses too must be shared

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Franchises
Many businesses today are franchises A business idea is licensed to a franchisee The owners of the brand receive a license fee The franchisee gains the right to use the business brand

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Not-For-Profit/volunteer Businesses
Many charity-based business organisations are run as not-for-profit operations They typically receive donations or funds from groups or government Any financial surplus is ploughed back into the business The organisation does not aim to generate profits

Case Study: Voluntary Service Overseas

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Business Activity

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Business Activity
Primary Sector
extraction of raw materials from the earth mining, quarrying, fishing, agriculture, forestry

Secondary Sector
Processing of raw materials into finished or semi-finished products manufacturing

Tertiary Sector
Service industries leisure, transport, finance, distribution, retailing, wholesaling, communication
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New Thinking:
Tertiary Sector /tr-sh-er-/ transport, energy, water (utilities) Quaternary Sector /kwt:nri/ finance, trading Quinary Sector [kwanr] health, education, research, leisure and recreation
(After Daniel Bell: 1976 The Coming of Post Industrial Society)

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Business Activity
Multiple Business Activity
e.g. BP involved in: Oil exploration and drilling (Primary) Refining oil production of gas, petroleum, bitumen, lubricants, etc. (Manufacturing) Distribution of petrol from refineries to petrol stations and sales of petrol to consumer (Tertiary) Research and Development (Quarternary)
Student activities: Classify the 10 businesses, Page 06
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Business Activity
Private Sector: Business activity owned financed and controlled by private individuals
Sole Traders Partnerships Private Limited Companies Public Limited Companies (PLCs) Co-operatives Franchises Charities

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Objectives of Private Sector Business

Satisficing Environment Image and Reputation Quality and Innovation Efficiency Sales and Sales Revenue Profit Survival Share Price Objectives Social Issues

Market Power

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Business Activity
Public Sector: Business Activity owned, financed and controlled by the state through government or local authorities
Government key departments set policy and monitor implementation Local Authorities County Councils, District Councils, Parish Councils Health Trusts Public Corporations BBC

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Objectives of Public Sector Activity

Access
available to all regardless of location or income

Quality
high quality services that do not cut corners

Affordability
services offered at prices that are cheaper than private sector or free at the point of use

Equity
available to anyone whatever their background, status, income, class, race, religion, etc.

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Range of Business Offered by the Public Sector

Roads Allotments Paths and Parks Museums and Arts Planning Street Lighting

Environmental Health

Cemeteries

Licensing

Care of the Elderly

Social Services Economic Development and Tourism

Trading Standards

Waste Disposa l

Schools

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Range of different businesses

local in a town Where they operate national international many provinces sell products overseas Goals/purposes private owned by private citizens not-for-profit/voluntary setup not to make profit setup, organized, staffed and run by volunteers supervised by trustees global produce and sell on the globe

public setup or taken over by gov

Notes Privatized

Less likely to take risk Owners Government

large business owned by shareholders

individuals or shareholders

VSO

Objectiv es wider social service aims primary extracting raw products from nature

provide services to Profit wider community Sector of business activities secondary tertiary transforming raw products to provide services to finished or semi-finished individuals and services retailing=selling things manufacturing=making things in small qty

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Business ownership
Part 1

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UK business ownership
Most businesses in the UK are privately owned.

This means: They are owned by private individuals These individuals risk their own money The owners reward is the profit they make.

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Private ownership options

Sole trader 1 owner Partnership 2 people or more Private limited companies often a family-run business with the protection of limited liability Public limited companies large organisations whose shares are traded on the Stock Exchange Franchises small business trading with agreement of large firm Cooperatives collectively owned by workers/customers

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Key difference
Sole traders and partnerships have unlimited liability. Owners are responsible for all debts and may have to sell personal possessions. Companies have limited liability. Owners can only lose their investment even if the company has huge debts.

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Sole traders
Benefits Easy to set up and give a personal service Owner independent can make quick decisions Minimum of paperwork Knows customers helps to avoid bad debts Drawbacks Unlimited liability Long hours, no cover for holidays/sickness Capital may come from savings Needs business skills Business ends on death

Partnerships
Benefits Easier to raise capital Problems/ideas can be discussed Greater range of skills/expertise Cover for holidays/sickness Drawbacks Unlimited liability Profits are shared May be disagreements Decisions/actions legally binding on all partners Death of a partner means share needs repaying

Key points about companies

Each company has its own identity in law. The company employs staff, not the owner(s). The company owns assets, not the owner(s). The company operates until it is formally wound up or goes into liquidation. The company pays corporation tax on its profits.

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Private limited companies

Benefits Limited liability Minimum of 1 director and 1 shareholder Easy to set up/affairs still private Easier to raise capital/borrow from bank Share transfers need agreement of all Drawbacks Cannot sell shares to the public More regulations to comply with Accounting procedures may be more costly Death of shareholder has no effect on company

Public limited companies

Benefits Limited liability Increased capital as public can buy shares Minimum of 2 directors and 2 shareholders Shares increase in value if company successful Operating large scale can lower costs per unit Drawbacks Many regulations to comply with Accounts (and problems) are public knowledge Shareholders may sell shares if dividends poor Original owner may lose overall control

Review of main types of private ownership

Sole traders suitable for one person running small business with low risk/little investment required Partnership suitable for professional groups, husband/wife businesses, small business needing different skills Private limited company suitable for family business, essential if risk considerable, eg through expensive stock Public limited company suitable for large national/international operations

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Meeting the Needs of Stakeholders

BTEC Business

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What are Stakeholders?

Stakeholders are groups of people who have an interest in a business organisation They can be seen as being either external to the organisation, or internal But some may be both!

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Types of Stakeholder
Owners (I) Shareholders (I) Managers (I) Staffs or employees (I) Customers (E) Suppliers (E) Community (E) Government (E)

I = Internal E = External

Internal and External Stakeholders

Internal stakeholders are those who are members of the business organisation Owners and shareholders Managers Staff and employees External stakeholders are not part of the firm
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But..!
Some groups can be both internal and external stakeholders Such as staff or shareholders who are also local residents Can you think of any others?

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Characteristics of Stakeholders
1. Owners and Shareholders
The number of owners and the roles they carry out differ according to the size of the firm In small businesses there may be only one owner (sole trader) or perhaps a small number of partners (partnership) In large firms there are often thousands of shareholders, who each own a small part of the business
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Characteristics of Stakeholders
*Managers:
organise make decisions plan control are accountable to the owner(s)

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Characteristics of Stakeholders
2. Employees or Staffs:
A business needs staffs or employees to carry out its activities Employees agree to work a certain number of hours in return for a wage or salary Pay levels vary with skills, qualifications, age, location, types of work and industry and other factors
Activities: Tell the basic difference between wage and salary
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Characteristics of Stakeholders
3. Trade unions:
Represent the interests of groups of employees. secure higher wages, better working conditions

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4. Employer associations
Represent the interests of employers in specific industries Employers equivalent of the trade unions.

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Characteristics of Stakeholders
5. Customers:
Customers buy the goods or services produced by firms They may be individuals or other businesses Firms must understand and meet the needs of their customers, otherwise they will fail to make a profit or, indeed, survive
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Characteristics of Stakeholders
6. Suppliers:
Firms get the resources they need to produce goods and services from suppliers Businesses should have effective relationships with their suppliers in order to get quality resources at reasonable prices This is a two-way process, as suppliers depend on the firms they supply
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Characteristics of Stakeholders
7. Community:
Firms and the communities they exist in are also in a twoway relationship The local community may often provide many of the firms staff and customers The business often supplies goods and services vital to the local area But at times the community can feel aggrieved by some aspects of what a firm does

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Characteristics of Stakeholders
8. Government:
Economic policies affect firms costs (through taxation and interest rates) Legislation regulates what business can do in areas such as the environment and occupational safety and health Successful firms are good for governments as they create wealth and employment
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Key stakeholders

Preference High quality, value-formoney products Customers Brands 5 Securities of employment Employees Rate of reward 6 Steady orders and prompt payment Feel valued by buyers Being pricipal risk takers; share of profit increasing; value of business rising

Key stakeholders

Trade Unions Employer associations Local and national communities

Preference secure higher wages, better working conditions Represent the interests of employers in specific industries

Suppliers

Represent important interest groups

Owners

Governments

Want business to be successful, create jobs and pay taxes.

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Thank you See you next week

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