Types of organisations AND Growth Flashcards
What type of liability does a private limited company have?
Limited
Who are the owners of a private limited company
Shareholders
Who are private limited companies controlled by?
Board of director
What are the advantages of a private limited company?
Owners have limited liability
Ownership is not lost to outsiders
Business retains a close and tight-knit friendly
feel and level of customer service found in
smaller companies.
Expertise and business acumen gained from an
experienced board of directors
What are the disadvantages of a private limited company?
Profits have to be split with many shareholders by issuing dividends
Complicated legal process required to set up the company
Limited source of capital as shares are not sold publicly
Financial statements have to be shared with ‘Companies House’ meaning their profits are not kept private
What type of liability does a public limited company have?
Limited
Who controls a public limited company?
Board of directors
However public limited companies can sell their shares publicly, through the stock market.
What are the advantages of a public limited company?
shareholders have limited liability
Large amounts of finance can be raised through
Easy to borrow finance due to a PLC’s size and
reputation is less risk for banks
PLCs can easily dominate markets
What are the disadvantages of a public limited company?
Dividends shared with many shareholders
the public sale of shares Can lose control of the business as anyone can buy shares on the stock market
Annual accounts have to be published
Setting up a PLC is costly and complicated
What is a franchise?
is a business model that allows businesses to pay a sum of money to own a branch of a well-known, existing business
What are the aims of a franchise?
The franchiser’s main aim is to grow and increase market share. They also aim to maximise profits and as they may be a PLC, increase their market value too.
What are the advantages of a franchiser?
Low risk growth as the franchisee invests the
majority of the capital
Receives a percentage of all franchisee’s profits
each year
What are the disadvantages of a franchiser?
Reputation of the whole franchise can be tarnished by one poor franchisee
Only a share of profits received rather than all profits if they owned each branch.
What are the advantages for a franchisee?
The franchise is a well-known business with
existing customer base.
Industry knowledge and training provided by
the franchiser
Franchisee benefits from national advertisements carried out by the franchiser
What are the disadvantages for a franchisee?
Very little autonomy over decisions as the franchiser decides on products, store layout, uniforms etc…
Royalties have to be paid each year
High initial fees
What is a multinational
is a business that has operations in more than one country
What are the advantages of a multinational?
Wage and raw material costs are lower in other
countries
Can avoid legislation in home country
Grants can be issued by governments to locate in their country
Avoid quotas (retraction on amount of
imports/exports) and tariffs (taxes on
imports/exports) issued by their own
governments
What are the disadvantages of a multinational?
Language barriers can slow down communication
Cultural differences can affect production, e.g. ‘Siestas’ in Spain.
Exchange rates can affect purchasing and paying expenses in different countries
Time differences can hinder communication between head office and branches around the world
What are the advantages of a charity?
Charities are exempt from paying some taxes
such as VAT or Corporation Tax
Low wage costs due to volunteers working for
free
Private companies are more willing to donate
to or sponsor charities than ever before as it is
good ‘PR
What are the disadvantages of Charitys?
Can be difficult to compete with private sector’s large marketing budgets
Charities rely heavily on volunteers who may leave for paid work
What are advantages of setting up a social enterprise?
· Social aims can endear them to customers who share their beliefs.
· High quality staff are attracted to the organisation.
· More likely to receive government grants due to their positive impact on society.
· Should they be closed down the sale of any assets and any profits they have will be used to benefit their cause (‘Asset Lock’)
What are objectives of businesses?
Maximising profits
Survival
Satisficing
provide a high quality service
increase market share
managerial objectives
maximise sales
Corporate social responsibility
Customer satisfaction
What are ethical and environmental responsibilities?
· Use renewable energy, such as solar and wind energy
· Use sustainable raw materials, e.g. sustainable fish stocks
· Fair trade
· Offering fair pay and working conditions for staff
· Avoid testing on animals
· Avoid the use of child labour
What are advantages of good CSR?
· Business gains a good reputation for their caring nature
· Customers that agree with the aim are likely to use the business
· Society and the environment are kept in good order which will benefit the business in the long run