P1 Explain different types and purposes of organisations; public, private and voluntary sectors and legal structures.
An organisation is a unit or group of people with a aim of meeting a goal or a functional need, every organisation needs a management structure in order to for fill tasks and objectives.
Different types of Organisations
organisations can be broken down into these five overall categories:
Private sector organisations.
Non-governmental organisations (which are not run by the government)
Public sector organisations.
Non-profit organisations (NPOs)
Public Sectors Organisations
The public sector is comprised of organisations that are owned and operated by the government.
Examples of organisations in the public sector:
Education (schools, libraries)
Gas and oil
CPS (crown prosecution services
NHS (national health services)
Public sector organisations are very similar to voluntary sector in so far as they do not intend on generating a profit they focus on the general wellbeing and needs of the citizens.
Funding must be generated in several different manors including taxes and funding through various levels of government without this funding it would not be possible for these organisations to provide the services rendered.
Basic Characteristics /Features of Public Sector organisations.
The public sector is often referred to as the government because it is responsible for all public services as shown above.
Goals and objectives of Public Sector Organisations.
Public sector entities aim to provide services in compliance with laws and regulations, there main objective is to maximise social welfare through non-profit motivation although fiscal management is still important. The primary objective of the public sector is the maximisation of social welfare. This can only be achieved through these essential principles.
Economy- symbolises value for money and assures service on a budget and within possible source constraints
Efficiency- The organisations ability to get a suitable amount of return on the money and resources invested into the services provided.
Effectiveness- The degree in which the organisation effectively delivers the desired result it intended on achieving.
Legal form of public organisations
These sectors are set up by special acts of parliament and are also governed by them.
Private sector organisations
The private sector incorporates all for profit businesses private sector organisations are not controlled by the government the organisations is responsible for allocating most of its resources within an economy.
Objectives and goals of private sectors organisations.
There are two main objectives in a private sector organisation.
Wealth maximisation means maximisation of shareholders wealth. The shareholders wealth is maximised when the net worth of the company is increased. When the share price in the market increases as does the wealth of the shareholder, equally if it decreased it will have the adverse effect. In order to appropriately maximise wealth the company's management team have to continually peruse the highest possible return on any investment into the business while trying to diminish any possible loss.
A necessary process any for profit organisation must go through to determine the best output and price levels in order for them to maximise returns. There are two commonly used profit maximisation methods companies use, Marginal cost-marginal revenue method and total cost-total revenue method. Profit maximisation is the main objective of any business.
Types of private sectors organisations
A business exclusively owned by one individual but may have more than one employee, it is the most generic form of ownership in the United Kingdom. Sole traders are able to keep full profit after tax. There is no legal distinction between the owner and the business entity.
Features of Sole trader
Sole trader also known as sole proprietor it is one of the oldest form of business structures with many advantages. A sole trader is responsible for every aspect of the business. This form of business structure is popular due to low start-up costs, also they don't have to consult with anyone regarding business decisions so they can react to changes in the market quickly and efficiently. By law they are not required to separate business and personal income. It may be hard for a sole trader to finance a business through business loans as the companies will be fear the owner's sudden death or becoming disabled which possess the problem that sole trader lacks continuity. Sole proprietor is effective for small to medium sized companies anything larger than that can be a problem to manage.
Advantages of Sole Trader
There are many advantages of being a sole trader that I believe can be put into four categories:
You are 100% in control of your own business your essentially “your own boss” which means you don't have to consult with shareholders or other directors regarding the business because you can make decisions alone you can quickly adapt to your circumstances this can be a big advantage in the competitive market.
Your information is kept private unlike limited companies where it is compulsory to be made public after you have registered your business. The business accounts are also private giving your competitors less information about your business and potential to try and steal or copy secrets.
in some instances people can be put off by limited companies because they can be seen as less personal and to corporate where as sole traders tend to build a rapport with the local community which gives a feeling of trust and reassurance to the customers.
Sole traders retain all the businesses profits after tax so they don't have to be shared between shareholders and you don't have to keep the profits within the business. Many sole traders choose not to employ anyone which keeps maximises profit and lowers and expenses for them.
Disadvantages of Sole Trader
As a sole trader you have unlimited liability as opposed to limited liability which means you are liable for all debts and there is no distinction between personal and business assets.
It may be difficult to raise funds which in turn can affect expansion in the future.
All decisions are made personally by the sole trader so there is no one to fall back on decision making. The success or failure of the business rests on one person's shoulders.
4. reverse economies of scale
Unfortunately, sole traders cannot take full advantage of economies of scale the same way limited companies can who can buy in bulk. This means they could possibly have to charge higher prices to cover costs.
Legal form of Sole Trader
By law the business and the business owner are the same person. The sole trader has unlimited liability which means they are responsible for all debts incurred by the business.
Partnerships – general and LLPs
Their names are similar but they are very different in execution a limited liability partnership requires at least one person to take on all the risk and manage the business while the rest of the partners have no liability where as general partnerships share all liability and profits.
Features of Partnerships – General and LLP
key features of LLPs:
• It is a legal personality
• First members must sign an incorporation document
• Tax advantages (they are taxed as a partnership)
• All partners can manage the business
Key features of a general partnerships:
• There are no business structure requirements or governance
• Company itself is not taxed on earnings
• Avoid double taxation
• Unlimited liability
• Responsible for the businesses solvency and liabilities
• Each partner can act on behalf of the business without other partners consent
Advantages of Partnerships – General and LLPs
Advantages of LLP:
• Spate legal business entity- it can buy, rent and enter contracts.
• Limited liability- protects the members personal assets from the business assets.
• Can organise their internal structure as a traditional partnership.
• Share all profits between partners.
• Unlimited owners.
• Flexibility- each partner can choose how much they what to invest in the company.
Advantages of a general partnership:
• No income tax- each partner personally files profit or losses on their own personal income tax.
• Easy to establish- Can be established through oral agreement.
• Legal liability- all individuals are responsible for business obligations and debts.
• Management issues- money invested by an individual is then owed by all partners.
Disadvantages of Partnerships – general and LLPs
Disadvantages of a LLP:
• Lack of privacy (normally financial records must be disclosed)
• All income is personal income and is taxed.
• Profit cannot be retained like a limited company limited by shares all profit is shared and unable to be carried to the next fiscal year.
• Must have two members- if one member decides to leave the business may become redundant.
Disadvantages of general partnerships:
• All partners are personally liable for all business debts and liabilities
• Without a partnership agreement all members can act as manager and control the business
Legal form of Partnerships – general and LLPs
Legal form of general partnerships:
All partners are legally liable for every aspect of the business there is no legal separation between the business and the business owner. General partnerships must be set in accordance with the partnership act of 1890 and due to proprietorship two people must be subject to a maximum of 10 persons for banking business and for non-banking 20 business to form a partnership
Legal form of LLPs:
Unlike general partnerships LLPs are limited liability partnership which was originally introduced quite recently in 2001 by the LLP act 2000. It is ideal for professionals such as solicitors and dental practises that commonly operate as traditional partnerships
Companya general partnership a company
A company is an entity that engages in business, it has its own legal identify separate from that of its members unlike a general partnership it cannot be established orally it must be formed as an act of parliament (charter) or registering under the company acts. Member liability is commonly limited by the charter (but not always).
Features or characteristics of a Company
A company has many features that makes it a unique organisation. It's a separate legal entity under incorporation law. If for example one or more of the member were to die the company would not dissolve, shares are easily transferable and the person the that shares are transferred to would fully acquire all rights of the transferrer. In some instances the shareholders do not tend run the business the board of directors do the shareholders are simply that shareholder. There must be at least one shareholder one director and at least one share for the company to exist. The name is registered by the registrar of companies who will also ask for an address for communication purposed
Advantages of a Company
Meaning the shareholders that have invested are limited to the company's debts equal to the amount they have invested and no more which provides security for possible investors
Limited companies are only taxed on their profits which can be around 20-22% unlike sole trader who's tax can be 33-40% .
Being a separate entity to owner can add security to employees because the business can outlive its owners and no other business forms are not subject to.
Shares can be easily transferred and once transferred the transferee is fully acquires all rights.
Disadvantages of Company
Complex accounts: companies must produce yearly accounts with the double entry system which can be time consuming and costly due to the larger scale of a company
Cost: companies can be expensive to start up and run.
Power struggles: there can often be a clash of interest amongst shareholders and directors of the company in so far as business vision which can lead to hostilities within the business. As more people are added into the business there is a chance that takeover can occur.
Legal form of Companies
Being identifies as an artificially person the company can survive regardless of death of any members.
Differences between private and public companies
A joint venture is a business that is created by two or more people but they both remain separate whilst keeping their distinctive characteristics which tent to be mostly incorporated.
Features of Joint ventures
Corporations, individuals, and businesses can form a joint venture they are usually entered for access to the foreign market which can bring new and innovative products and ideas joint ventures is a form of short partnership which the shareholders each share mutually undertake transactions for profit this joint venture benefits both parties equally and facilitates industry, capital and tech growth. Unlike … it is not a separate legal entity.
Advantages of Joint Ventures
1. allows companies to benefit from new geographic markets
2. greater capital e.g. staff tech etc.
3. risk sharing
4. being able to sell to the other partner
Disadvantages of Joint Ventures
1. communication and general direction of where the companies going can be an issue
2. possible reconstruction of business structure
3. integration issues
Legal form of Joint Ventures
The JV agreement is the most important document setting out the partners rights and obligations which joins together two or more parties separate from each other legally and economically for the purpose of continual activities and or executing a particular business. All parties must agree to be severally liable considering the risks of the activities.
A franchise is a commercial relationship between the trademark owner the branded name and service mark with the intention is a more relatable business it tends to be recognisable businesses we see on our day to day like burger king for example. A franchise is a well establish company with an establish turf or region in which it sells and or promotes
Features of a Franchise
A franchise is an already well-established business it is a business that has a report built up by its name. it can adapt to new markets easily and is based on mutual agreement. The key for a successful franchise is always marking something consumers want/need regardless of the economic climate.
Advantages of a Franchise
From a franchisee perspective, there are many pros to becoming a franchiser, once you have started in operating the franchise your franchiser doesn't just leave you out in the cold they give you ongoing support like training programs or direct support. as you will be working under a well-established brand it lowers your start up work tremendously due to the fact they already have a client base and a name that people will flock to they also franchisers have allocated domain and try to strategically place themselves as to not impeach on anybody's territory in regard to finance banks are more likely to favour you as a franchisee due to the scale of a franchise there is added security behind the loan actually being returned in the allotted time period set
Disadvantages of a Franchise
The disadvantages of a franchise makes it very hard to determine whether or not becoming a franchisee is a good decision or not, a lot of the disadvantages are out of your hand, like the fact any bad business decision the franchisers make can shut down your business and you have no say on how the business in run you cannot change the name or the products even if you think it's is the right decision so your hands are tied in many aspects of this venture there are many guideline the franchisee will have to be taught then abide by. once you have become a franchisee the hours can be very extensive, up to but not limited to 60 hour weeks. There is a lot of dedication involved in the running and upkeep of a franchise if you get the opportunity, some people have been turned down by a lack of capital, not being able to buy their own materials can be a turn off for a franchise and initial and continual fees will be implemented for starting the business using the franchise brand name alone.
Legal form of Franchise
Franchises must be established by franchise agreement which is a legally binding contract between the franchise and the franchisee and can only be enforced under the law of contract.
Voluntary sector organisations
Also known as the community sector or third sector is a non-profit and non-governmental organisation sector.
Goals and objectives of voluntary organisations.
voluntary organisations strive to assist volunteers, promote equality and provide skills and platforms for different voices to be heard. They strive to transform our generation through different tactics and help provide safe environments for people and organisations to come together and help one and other.
There are different types of voluntary organisations such as NGOs and NPOs
Distinguish the differences between:
Non-governmental organisation is an organisation that exists off donations and fund raising it does not rely on the government for funding it is a non-profit organisation and is independent they engage in different activities for religious or charitable purposes.
Non-profit organisations are set up by a group of individuals to pursue a common non-profit goal and or commitment they have no intention of distributing revenue within the organisation and is tax exempt although donations tend to be tax deductible to the people that make them. NPOs must serve a public benefit otherwise they cannot be classed as NPOs
Task P2 Explain the size and scope of types of organisations mentioned in task P1 above. Clearly explain the nature and scope of their activities.
Briefly explain what you understand by scope of an organisation.
The scope of an organisation can vary depending on the company. It covers various areas and departments.
Factors that determine the size of a organisation
There is an abundance of varied factors that determine the size or an organisation
Resources: resource availability
Small and medium sized enterprises
A micro business consists of less than10 employees and has a turnover under 2 million pounds
A small business less than 50 employees and a turnover of under10 million pounds
A medium sized business has less than 250 employees
Importance of SMEs in the UK
SMEs in the UK are of the upmost importance they are a crutal part of the economy and are a driving force behind the European economy the five a health breeding ground for competitiveness and employment. Whit there combined turn over reaching just over 1.6 trillion at the start of 2014 they also make up 99% of all private sector companies within the UK. SMEs employee over 24 million people in the. In total SMEs make up over 50% of overall value of business in the EU. Without the EU there would be a steady decline of jobs available in the UK.
Scope of different organisations
A locally owned business diatribes good and or services to the local population also franchies can be referred to as a local company when operating only in a local community
Distributes a product/service throughout a company. This would generally mean they have several bases over the country which involves a distribution system that includes warehouses and vehicles owned by the company. National companies have a large profit potential with a lot of competition. They also must include various aspects of the marking mix in order to sustain profitability.
An international company operates throughout the world with a base in each individual country it operates in with one main headquarters in a centralised place.
A multinational company is an enterprise that is in operation within several countries but is managed at a centralised home base, because it acquires over a quarter of its revenue for outside of it native country is classified as a multinational organisation as is any company or group that does this also.
Global companies operate and have invested in a large amount of countries throughout the globe they distribute and market through the use of the same coordinates of any other companies for example image and branding. There is one primary office that is responsible for globalised strategies, cost management and efficiency
Task P3 For Coca-Cola to be successful, its operations are divided into different functions. Identify these functions and clearly explain how their interrelations link to its objectives and organisational structure.
(Define and briefly explain what are organisational functions?)
Importance of organisational functions
Without organisational function the buss
Organisational structure is the way in which tasks are divided, subdivided and allocated to specific departments within the organisation it clearly outlines the roles and responsibilities for groups and individuals. The system that is used makes a clearly defined hierarchy, identifying jobs, functions and where and whom to report to. Organisational structure allows for clear rules to be set which assists the organising in achieving goals and objectives.
Types of organisational structures
(Identify and explain types of organisational structures)
Organisational structure of Coca-Cola
(Draw the organisational structure of Coca-Cola UK. Clearly explain how different functions interrelate and link to its objectives and structure. In your explanation clearly explain how inter-functional relationships assist in the achievement of goals and objectives)
As an organisation coca cola has structured itself incorporating the two biggest allies of a business which is an organisational structure system and the division of labour whist structuring themselves according to the size and nature of the business. Coco cola is one of the most recognised trademarks globally.
When it comes to division of work Coca cola divides labour between departments, groups and workers to preform specific tasks, the tall hierarchy system is extensive and divisions are divided into regions, by dividing and … departments into different regions it allows coca cola to benefit from a plethora of different … for example if divided into north, south, east, west London the different divisions are able to target specific markets in that region which will enable them to market and meet consumer demands efficiently and effectively. Every region is different what might please consumers in Scotland and whales might not suit consumers in London and Ireland Each division benefits from its own marketing manager who is responsible for communicating all new ideas to supervisor's due to higherachy of the tall hierarches system, the new idea has to be communicated to a team of 12 in north America who can give the final go ahead on any potential decisions being considered by any region.
Coca cola like many companies push the importance of team work and team structuring to employees, be it from product launching bottling, by bringing together groups of employees and marketing specialists who can then communicate to others of there market research and testing, whist food technologists can clarify weather a new product or changes to an existing product is the right move for the business also financial experts can conclude the cost of such a venture and other experts who are involved can explain the risk factors, for example regional reliability etc.
Task P4 Using PESTLE analysis identify and discuss the various macro environmental factors that impact on Coca-Cola, highlighting the positive and negative impacts.
Macro is the external factors in which a business is unable to control these factors can influence and directly effect decision making, performance and strategies taken by a business, there macro factors may include social conditions, technological changes and political forces.
Importance of macro environmental analysis to business success
The macro environmental analysis of a business is crucial to its success. macro identifies potential opportunities and threats that will impact upon an organisation positively or negatively, there is a large number of factors that can effect a business and potentially ruin it all factors need to critically analysed for strategic planning.
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