CH1: Business organisations Flashcards
Definition: microeconomics
Deals with decisions made at the level of the company based on the type of organisation and their market
Definition: macroeconomics
Considers the impact of governmental decision on the economy
Definition: Economics
Concerns the allocation of scarce resources (e.g. gov budget, people, raw materials)
Definition: Organisation
A group of people organised and managed in a way that aims to follow a corporate goal or need.
note. it also has a clear structure and standardised systems/processes, and need management to control them.
Definition: sole trader
a single person business where this person performs every role
Benefits of an organisation vs. sole trader?
organisations make it easier to share; ideas, knowledge, experience, skills and resources, and hence achiever more than someone working alone
What are features or Private sector organisations?
Owned by investors
Responsible to shareholders
May be run for profit or not profit
What are features or Public sector organisations?
Owned by the state Responsible to the government Generally not run for profit Don't have shareholders May provide goods and services for the country as a whole
Definition: Non Governmental Organisation (NGO)
is a PRIVATE sector organisation which is NOT run for profit, but focuses on other goals such as ethical standards e.g. Oxfam
What further groups are private sector profit seeking organisations split into?
Incorporated and unincorporated
Definition: unincorporated organisation
When the business owners and the business hold the same legal identity.
Note. the owners are held personally liable for the business’s debts: they have UNLIMITED liability
What are the 2 types of unincorporated organisations?
1) Sole trader - wholly liable for the debts
2) Partnership -jointly liable for the debts
Definition: incorporated organisation
When the business owners and the business have separate legal identities
Note. the owners are not personally responsible for the business’s debts: they have LIMITED liability.
What are the 2 types of incorporated organisations?
Private limited company (Ltd)
Public limited company (PLC)
What are features of a PLC?
Shares can be issued to the public and traded on the stock exchange
Owners risk losing control by selling stake to the public
Large number of shareholders to report to and additional regulations to comply with
Tend to be larger companies which have issued shares to fund business ventures
What are features of Ltd companies?
Shares cannot be issued to the public
Owners retain a high degree of control of the business
Small number of shareholders to report to
Tend to be smaller companies e.g. market town retailers
What are features of Co-operatives?
Co-operatives are owned and controlled by the MEMBERS rather than shareholders.
The WELFARE of members is a key GOAL (i.e. prioritise this over profits). Members may be CUSTOMERS or STAFF. e.g. John Lewis.
It also aims to make profits for its members.
What are features of Mutual organisations?
Owned and controlled by members rather than shareholders.
members tend to be CUSTOMERS and they tend to focus on FINANCIAL products e.g. mutual building societies such as UK’s Nationwide
In terms of Economics, what are considered as scarce resources?
- Government’s budget
- The POPULATION
- An individual’s income
- Fossil fuels
Why might some people choose to put their money into a building society vs. an alternative kind of financial organisation?
- building societies are run for the benefits of their members (who tend to be customers)
- building societies will redistribute any trading surplus through the features of their products
