BUS ORG STRUC, GOVN AND MGT

Question 1

organisation

Answer 1

a SOCAIL ARRANGEMENT which pursues collective GOALS, which CONTROLS its own performance and which has a BOUNDARY separating it from its environment

Question 2

The common characteristics of organisations are as follows

Answer 2

(1) Organisations are preoccupied with PERFORMANCE, and meeting or improving their standards.
(2) Organisations contain formal, documented SYSTEMS AND PROCEDURES which enable them to control what they do.
(3) Different people do different things, or SPECIALISE in one activity.
(4) They pursue a VARIETY OF OBJECTIVES and goals.
(5) Most organisations obtain INPUTS (eg materials), and PROCESS them into OUTPUTS (eg for others to buy).

Question 3

Why do organisations exist?

Answer 3

Organisations can achieve results which individuals cannot achieve by themselves.
(1) Organisations OVERCOME PEOPLE’S INDIVIDUAL LIMITATIONS, whether physical or intellectual.
(2) Organisations ENABLE PEOPLE TO SPECIALISE in what they do best.
(3) Organisations SAVE TIME, because people can work together or do two aspects of a different task at the same time.
(4) Organisations ACCUMULATE and share KNOWLEDGE.
(5) Organisations enable SYNERGY: by bringing TOGETHER two individuals their combined output will
exceed their output if they continued working separately.
In brief, organisations enable people to be MORE PRODUCTIVE.

Question 4

How organisations differ

Answer 4

(1) Ownership
(2) Control
(3) Activity
(4) Profit or non-profit orientation
(5) Legal status
(6) Size
(7) Sources of finance
(8) Technology

Question 5

What the organisation does

Answer 5

(1) Agriculture: Producing and processing food
(2)Manufacturing: Acquiring raw materials and, by the application of labor and technology, turning them into a product (eg a car)
(3) Extractive/raw materials: Extracting and refining raw materials (eg mining)
(4) Energy: Converting one resource (eg coal) into another (eg electricity)
(5) Retailing/distribution: Delivering goods to the end consumer
(6) Intellectual production: Producing INTELLECTUAL PROPERTY (eg software, publishing, films, music)
(7) Service industries: Including retailing, distribution, transport, banking, various business
services (eg accountancy, advertising) and public services such as
education, medicine

Question 6

Profit vs not-for-profit orientation

Answer 6

An important difference in the list above is between profit orientated (‘commercial’) and not for profit orientated (‘non-profit’) organisations.

Question 7

Private sector

Answer 7

Organisations not owned or run by central or local government, or government
agencies

Question 8

Public sector

Answer 8

Organisations owned or run by central or local government or government
agencies

Question 9

Legal status

Answer 9

Someone setting up a business can choose to go into business ALONE, take on one or more PARTNERS who also share the profits of the business, or set up a LIMITED COMPANY

Question 10

Limited company

Answer 10

a separate legal personality from its owners (shareholders).

Question 11

limited liability

Answer 11

restricted to the amount that they have invested in the company when buying the
shares

Question 12

Characteristic of Limited company

Answer 12

The ownership and control of a limited company are legally separate even though they may be vested in the same individual or individuals.

Question 13

Shareholders are the owners

Answer 13

limited rights, as shareholders, over the day to day running of the company. They provide capital and receive a return. Shareholders could be large institutional investors (such as insurance companies and pension funds), private individuals, or employees.

Question 14

Directors

Answer 14

appointed by shareholders to run the company and controls management and staff, and is accountable to the shareholders, but it has responsibilities
towards both groups – owners and employees alike

Question 15

Executive directors

Answer 15

participate in the daily operations of the organisation

Question 16

Non-executive directors

Answer 16

invited to join in an advisory capacity, usually to bring their particular skills or experience to the discussions of the board to exercise some overall
guidance.

Question 17

Operational management

Answer 17

consists of career managers who are recruited to operate the

business, and are accountable to the board

Question 18

Types of limited company

Answer 18

private limited companies and public limited companies

Question 19

Differences of 2 types of limited company

Answer 19

(1) Number of shareholders.
(2) Transferability of shares.
(3) Directors as shareholders.
(4) Source of capital
using recognised markets.

Question 20

Number of shareholder (Differences of 2 types of limited company)

Answer 20

Most private companies are owned by only a small number of shareholders. Public companies generally are owned by a wider proportion of the investing
public.

Question 21

Transferability of shares (Differences of 2 types of limited company)

Answer 21

Shares in public companies can be offered to the general public. In practice this means that they can be traded on a stock exchange. Shares in private companies, on the other hand, are rarely transferable without the consent of the shareholders.

Question 22

Directors as shareholders (Differences of 2 types of limited company)

Answer 22

The directors of a private limited company are more likely to hold a substantial portion of the company’s shares than the directors of a public company.

Question 23

Source of capital (Differences of 2 types of limited company)

Answer 23

(1) A private company’s share capital will normally be provided from three sources.
(a) The founder or promoter
(b) Business associates of the founder or employer
(b) Venture capitalists
(2) A public company’s share capital, in addition, can be raised from the public directly, or through institutional investors,

Question 24

Advantages of limited companies

Answer 24

(1) More money is available for investment.
(2) Risk is reduced for investors thanks to limited liability.
(3) They have a separate legal personality. A company can own property, make contracts etc.
(4) Ownership is legally separate from control. Investors need not get involved in operations.
(5) No restrictions on size apply. Some companies have millions of shareholders.
(6) They offer flexibility. Capital and enterprise can be brought together.

Question 25

Disadvantages of limited companies

Answer 25

(1) Legal compliance costs. Because of limited liability, the financial statements of most limited
companies have to be audited, and then published for shareholders.
(2) Shareholders have little practical power, other than to sell their shares to a new group of
managers, although they can vote to sack the directors.