Chap 1 Flashcards
What is a public organisation?
What is the goal of a public organisation
provide services deemed important to society
-must demonstrate efficienct
What is a private-public partnership
share risk and reward
private help public become more efficient
What are non profit private companies
Mutuals - funds from membership - provide common goods to members “according to need”
e.g. building societies, trade unions
cooperatives - membership owned business - “according to use”
Charities: service to society
members club: facilitate environment for members
QUANGO: on behalf of gov
What are the 3 E’s
Public sector must have good value for money
Economy (cheap acq resources)
Efficiency (decrease waste resources)
Effectiveness ( @orgs objectives
What is a sole tradership and partnership?
Where one individual owns and runs the entire company.
two or more parties to manage and operate a business and share its profits.
partnership agreement = legally sets out a partnership
both have ultimate liability - personal assets could be seized to pay debts of business
What is a limited company?
Exposure limited to value of shares they have
Private (LTD)
Public (PLC)
what is the difference between PLC and LTD
PLC can offer shares to sale to public
LTD cannot offer shares to sale to public
Quoted = shares listed and traded on a recognised stock exchanged
What is a stake holder and 6 egs
those who can be impacted by the org/or just interested
Local residents
Employees
Gov
Management/directors
Supplers
Customers
How are stakeholders categorised
Primary
Internal - Employees, Management/D
Connected - shareholders, customers, suppliers, financiers
Secondary
External - local community, gov, pressure grousp
OR mendelows stakeholder map LH Power vs Interest
What does a shareholder get for investment
-recieve a return - minimum = required rate of return = cost of capital
have a say on how company is run
What are the three ways to measure shareholder investment returns
ROCE - how effciently capital is used wrt a return - historical
EPS - short term performance - used by stock market - historical
PE ratio - markets perception of future growth - higher = more potential/less risky
What is agency theory?
Agency theory is a principle that is used to explain and resolve issues in the relationship between business principals and their agents. Most commonly, that relationship is the one between shareholders, as principals, and company executives, as agents.
Shareholders want wealth maximisation
directors want salary, status and job security
Alternative views on management within organisations
Baumol
Williamson
Cyert and march
What is Baumol
Sales maximisation
-managers concentrate on expanding sales
-increased prestige, bonuses and job security
