FIA FAB / ACCA F1

Accountant in Business

Chapter 1
Business Organisations
& their stakeholders

What is an organisation?
An organisation is a social
arrangement which pursues
collective goals, which
controls its own performance
and which has a boundary
separating it from its
environment
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Common characteristics
Perform certain standards
Have a formal & documented
systems & procedures
Specilised in one area
Pursue a variety of objectives &
goals
Require inputs, then process
into outputs

Why do orgns exist?

To overcome individual
limitations
To enable specialisation
To save time
To share knowledge
To create synergy
Thus, organisation will be more
productive.

Might be different in:

1.

Ownership sole trader, partnership,

company private/public

2.
3.
4.
5.
6.
7.
8.

Control
Activity
Profit or non-profit (pg 6)
Legal status
Size
Source of finance
Technology

Private - Sole traders &

Partnerships
Advantages

Ease of formation
Subject to few regulations
No corporate income taxes

Disadvantages

Difficult to raise capital

Unlimited liability
Limited life
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Private - Limited companies

Advantages

Unlimited life
Easy transfer of ownership
Limited liability
Ease of raising capital

Disadvantages

Double taxation
Cost of set-up and report filing
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Public companies
Organisations

owned and run by

the govt, such as:

Armed forces
School & university
Govt departments

Types of organisation
1.
2.
3.
4.
5.
6.
7.
8.

Agriculture
Manufacturing
Mining
Energy
Retailing
Transportation
Intellectual production
Service industries

Profit vs Non-profit
Profit

Primary goal to maximise profit

Secondary goals to support primary goal

Non-Profit
Primary goal to maximise public
interests or beneficiaries
Secondary goals to minimise cost in
order to support primary goal
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Non-government orgns (NGO)

An independent voluntary
association of people acting
together for some common
purpose.
Not aimed to make profit
Not part of any govt agency
Aimed to promote social, political and
environmental change
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Others
Co-operative

societies businesses
owned by tier worker or customers, who
share the profits
Mutual associations similar to above
but owned by members only

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Stakeholders
Individuals or groups who have
an interest in what the
organisation does. They are:
Internal stakeholders (primary)
Connected stakeholders (primary)
External stakeholders (secondary)
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Stakeholders

14

Stakeholders

15

Stakeholder conflict
One of the most common one is between manager and
shareholders.
Managers are naturally inclined to act in their own best
interests.
Hence, the most important objective required for manager is
to maximise the shareholders wealth.

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Stakeholder mapping
Mendelow suggested to map
stakeholders power and interest in
order to provide what is needed by
each group by identifying who are the:
Key players may participate in decision
making (D)
Be kept satisfied (C)
Be kept informed (B)
Minimal effort required (A)
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Stakeholder mapping

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Stakeholder satisfaction
Example:
Employees staff turnover; pay & benefits
Government pollution measures; filing of annual return;
accident rate; energy efficiency
Distributors share of joint promotions; inventory shortage

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