Topic 2 - Types of Organisations

Question 1

Private Limited Company

Answer 1

Owned: shareholders
Controlled: board of directors
Aims: maximise profits, growth, increase market share.

Advantages:
- Owners have limited liability.
- Ownership is not lost to outsiders.
- Expertise is gained from board of directors.
- Close-knit, friendly feel with a high level of customer service.

Disadvantages:
- Limited source of capital as shares cannot be sold publicly.
- Profits have to be shared by issuing dividends.
- Complicated legal process is required to set up.
- Financial statements have to be shared with companies house.

Question 2

Public Limited Company

Answer 2

Owned: shareholders
Controlled: board of directors
Aims: maximise profits, dominate market, increase market share

Advantages:
- Owners have limited liability.
- Shares can be sold publicly.
- Can dominate the market
- Easy to borrow finance due to size and reputation.

Disadvantages:
- Dividends are shares with many shareholders.
- Annual accounts have to be published.
- Costly and complicated to set up.
- Control can be lost as anyone can buy shares.

Question 3

Franchise

Answer 3

Businesses pay a sum of money to own a branch of a well-known, existing business.

Aims: growth, increase market share, maximise profits.

Question 4

Franchiser

Answer 4

Owner of original business.

Advantages:
- Low-risk form of growth as the franchisee invests the majority of the capital.
- Receives a percentage of all franchisee’s profits each year.

Disadvantages:
- One bad franchise may tarnish the whole business’s reputation.
- Only a share of profits is received.

Question 5

Franchisee

Answer 5

Owner of each individual branch.

Advantages:
- Franchise is a well-known business with an existing customer base.
- Industry knowledge and training provided by the franchiser.
- Franchiser carries out national advertisements.

Disadvantages:
- Royalties have to be paid each year.
- High initial start up fees.
- Little control over decisions.

Question 6

Multinationals

Answer 6

Businesses that have operations in more than one country.

Advantages:
- Increases market share.
- Can avoid legislation in home country.
- Wages and raw materials costs are lower in host countries.
- Grants can be issued to set up in host countries.
- Can avoid quotas and tariffs in home country.

Disadvantages:
- Language barriers can slow communication.
- Cultural differences can affect production.
- Exchange rates can affect purchasing and paying expenses in other countries.
- Time differences can hinder communication.

Question 7

Charity

Answer 7

Owned by: trust
Controlled by: board of trustees
Aims: raise money for s specific cause, have good CSR

Advantages:
- Exempt from paying some taxes
- Low wage costs as volunteers work for free
- Private companies are willing to donate as it is good PR

Disadvantages:
- Difficult to compete with the large marketing budgets of private sector businesses
- Volunteers may leave for paid work

Question 8

Social Enterprise

Answer 8

Organisations that aim to make a profit to benefit a specific group or cause. Usually has social, environmental or cultural aims.

Advantages:
- Social aims can attract customers
- Good quality employees are attracted to the business
- Likely to receive government grants
- Asset lock means that the sale of assets and profits go towards their cause if the business is shut down