Topic 1A: Purpose of Business Organisations

Question 1

What is an organisation?

Answer 1

A social arrangement for the pursuit of collective goals. controls its own performance and has a boundary separating it from the environment

Question 2

What do all organisations have in common? (5)

Answer 2

a) Pursue a variety of objectives and goals
b.) Different people do different thing or specialise in one speciality
c.) Keen to achieve good performance
d.) Contain formal, documented systems and procedures which enable them to control what they do
e.) Most organisations contain inputs and process them into outputs

Question 3

Why do organisations exist?

Answer 3

To achieve results that individuals cannot achieve by themselves

Question 4

How do organisations differ in terms of legal form?

Answer 4

limited company vs partnership

Question 5

How do organisations differ in terms of ownership?

Answer 5

private sector vs public sector

Question 6

How do organisations differ in terms of control?

Answer 6

owners vs managers

Question 7

How do organisations differ in terms of activity?

Answer 7

manufacturing vs services.

Question 8

How do organisations differ in terms of profit?

Answer 8

profit vs non-profit

Question 9

How do companies differ in terms of size?

Answer 9

small family business vs small and medium sized enterprise vs multinational

Question 10

What are the different sectors of organisation?

Answer 10

Agriculture
Manufacturing
Extractive / raw materials
Energy
Retailing / distribution
Intellectual production
Service industries

Question 11

What are the different types of business organisation? (8)

Answer 11

Commercial
Not for profit
Public sector
Charities
Trade unions
Local authorities
NGOs
Co-operative societies and mutual associations

Question 12

What is the difference between profit vs non profit in terms of ownership?

Answer 12

Owner vs other stakeholders

Question 13

What is the difference between profit and non-profit in terms of revenue?

Answer 13

Profit vs donations

Question 14

What is the difference between profit and non-profit in terms of goals

Answer 14

in terms of the fact that the goal of a profit organisation is maximising shareholder wealth whereas that of a not for profit is the provision of goods and services

Question 15

What is the difference between profit and non-profit in terms of measure of performance

Answer 15

Profit focus vs value for money and efficiency

Question 16

What is the difference between profit and non-profit in terms of technology?

Answer 16

An example would be Apple vs news agency or social club.

Question 17

What is a public sector organisation?

Answer 17

Organisations that are owned or run by a government (local or national) are in this

Question 18

What is a private sector organisation?

Answer 18

All other organisations

Question 19

What is a limited liability company?

Answer 19

A business that has its own separate legal identity, meaning that it is legally separate from the owners.

Question 20

What is the main advantage of a limited liability company?

Answer 20

Shareholders liability is limited to the amount they have invested into the company

Question 21

What are other advantages of a limited liability company?

Answer 21

• More money available for investment from shareholders
• Easier to raise capital from banks and other lenders
• Ownership and control are legally separated, investors need not run the company

Question 22

What are the main disadvantages of a limited liability company?

Answer 22

Greater administrative burden and cost, especially for listed entities

Lack of privacy as anyone can download the financial statement and other public data.

Question 23

What are the two types of limited liabiliy companies in the UK?

Answer 23

Private companies which are usually owned by a small number of people and their shares are usually not easily transferable (ltd_

Public companies which are usually traded on the stock exchange. The directors of this are less likely to hold a signifiant shareholding (plc)

Question 24

What is a co-operative society

Answer 24

Businesses owned by their workers or customers who share the profits.

Question 25

What are the features of co-operative?

Answer 25

• Open membership
• Democratic control (one member, one vote)
• Distribution of the surplus in proportion to purchases
• Promotion of education

Question 26

What is a mutual association?

Answer 26

Organisations that exist for the mutual benefit of their members. Examples include savings and loan organisations (building societies), where the members are the savers who deposit their savings in the organisation. As there are no external shareholder to pay dividends to, the profits of the organisation are enjoyed by the members in the form of favourable interest rates.

Question 27

What is the essence of agriculture?

Answer 27

Producing and processing food

Question 28

What is the essence of manufacturing?

Answer 28

Acquiring raw materials by the application of labour and technology and turning them into a product

Question 29

What is the essence of extractive / raw materials?

Answer 29

Exacting and refines raw materials e.g. when mining

Question 30

What is the essence of energy?

Answer 30

Converting one resource int another

Question 31

What is the essence of retailing and distribution?

Answer 31

Delivering goods to the end customer

Question 32

What is the essence of intellectual production?

Answer 32

Producing intellectual property

Question 33

What is the essence of service industries?

Answer 33

Includes retailing, distribution, transport, banking, various business services and public services such as education and medicine.