1.1 business ownership

7/29/2019 1.1 Business Ownership

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RANGES OF DIFFERENT BUSINESSES

AND THEIR OWNERSHIP

HOASEN UNIVERSITY-MANCHESTER COLLEGE

HOANG LUU, MBA

Learning outcomes

• Ranges of different businesses

• Business purposes

• Business ownership• Key stakeholders

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Types of Business Organisation

BTEC Business

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Ranges of different businesses

Sector of business activities – primary

– secondary

– tertiary

Goals/purposes

– public

– private

– not-for-profit/voluntary

Where they operate

– local

– national

– international

– global

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Base on “Where they operate”

• Local: in a town

• National: many provinces

• International: sell products overseas• Global: produce and sell across the globe

Student Activities:Take out a blank sheet of paper and write

down 3 of each types

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International business activities

• International companiesare importers and exporters, they have no

investment outside of their home country.

• Multinational companieshave investment in other countries, but do

not have coordinated product offerings in each country. More

focused on adapting their products and service to each individual

local market.• Global companieshave invested and are present in many countries.

They market their products through the use of the same coordinated

image/brand in all markets. Generally one corporate office that is

responsible for global strategy. Emphasis on volume, cost

management and efficiency.

• Transnational companiesare much more complex organizations.

They have invested in foreign operations, have a central corporate

facility but give decision-making, R&D and marketing powers to

each individual foreign market.

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Base on “Sectors”

The economy can be divided into two sectors:

The Private Sector The Public Sector

The Private Sector

• Private individuals and firms that are owned

by private individuals

• Firms in the private sector include:

– Sole Traders

– Private Limited Companies (Ltd)

– Partnerships

– Public Limited Companies (PLC)

Private Sector Firms

One of the key differences is between:

• Sole traders and partnerships whose liability is

unlimited

• Private Limited and Public Limited Companies,who have „limited liability‟

The Public Sector

• Made up of central government, local government,

and businesses that are owned by government

• In the last twenty years the number of

government-owned firms in the UK has shrunk massively

• Now, very few examples remain: for instance, the

Royal Mail

(How about Vietnam?)

Activities: Football teams Page 05

Privatization

The process of transferring ownership of a business, enterprise, agency, public service or

public property from the public sector (a

government) to the private sector, either to a

business that operates for a profit or to a non-

profit organization.

The term can also mean government

outsourcing of services or functions to private firms, e.g. revenue collection, law enforcement,

and prison management.

Ref: http://en.wikipedia.org/wiki/Privatization

Other Business Types

• Co-operatives are owned by their staff, who

are „members‟ of the firm

• Profits are shared amongst the members

• Losses too must be shared

Franchises

• Many businesses today are franchises

• A business idea is licensed to a franchisee

• The owners of the brand receive a license

fee• The franchisee gains the right to use the

business brand

Not-For-Profit/volunteer Businesses

• Many charity-based business organisations are runas „not-for- profit‟ operations

• They typically receive donations or funds fromgroups or government

• Any financial surplus is ploughed back into the business

• The organisation does not aim to generate profits

Case Study: Voluntary Service Overseas

Business Activity

• Primary Sector –

– extraction of raw materials from the earth – mining, quarrying, fishing, agriculture, forestry

• Secondary Sector – – Processing of raw materials into finished or

semi-finished products – manufacturing

• Tertiary Sector –

– Service industries – leisure, transport, finance,distribution, retailing, wholesaling,communication

New Thinking:

• Tertiary Sector – /ˈtər -shē-ˌer -ē/

– transport, energy, water (utilities)

• Quaternary Sector – /kwɔ´tə:nəri/

– finance, trading

• Quinary Sector – [ˈkwaɪnərɪ]

– health, education, research, leisure andrecreation

(After Daniel Bell: 1976 „The Coming of Post Industrial Society‟)

Business Activity

• Multiple Business Activity – e.g. BP involved in:

• Oil exploration and drilling (Primary)

• Refining oil – production of gas, petroleum, bitumen, lubricants, etc. (Manufacturing)

• Distribution of petrol from refineries to petrol stations and sales of petrol toconsumer (Tertiary)

• Research and Development (Quarternary)

Student activities:

Classify the 10 businesses, Page 06

Business Activity

• Private Sector: Business activity owned financedand controlled by private individuals

– Sole Traders

– Partnerships

– Private Limited Companies

– Public Limited Companies (PLCs)

– Co-operatives

– Franchises

– Charities

Objectives of Private Sector Business

Objectives

Profit

Survival

Share Price

Market PowerSales and Sales

Revenue

Efficiency

Quality andInnovation

Image and

Reputation

Environment

Satisficing

Social Issues

Business Activity

• Public Sector: Business Activity owned, financed

and controlled by the state through government or

local authorities

– Government – key departments set policy and monitor implementation

– Local Authorities – County Councils,

District Councils, Parish Councils

– Health Trusts – Public Corporations – BBC

Objectives of Public Sector Activity

• Access –

– available to all regardless of location or income

• Quality – – high quality services that do not cut corners

• Affordability –

– services offered at prices that are cheaper than private sector or free at the point of use

• Equity – – available to anyone whatever their background, status, income,

class, race, religion, etc.

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Range of Business Offered by the Public Sector

Roads Allotments Paths and Parks

Schools

Street

Lighting

WasteDisposal

TradingStandards

CemeteriesEnvironmental

Health

Museumsand Arts

EconomicDevelopment andTourism

Planning

Licensing

Care of theElderly

SocialServices

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Range of different businesses Where they operate

local national international global

in a town many provinces sell products overseas

produce and sell on the

Goals/purposes

public private not-for-profit/voluntary Notes

setup or taken over by

gov owned by private citizens setup not to make profit Privatized

Less likely to take risk

large business owned by

shareholders

setup, organized,staffed and run by

volunteers VSO

Owners Government individuals or shareholders supervised by trustees

Objectiv

es wider social service aims Profit

provide services to

wider community

Sector of business activitiesprimary secondary tertiary

extracting raw products

from nature

transforming raw products to

finished or semi-finished

provide services to

individuals and services

manufacturing=making things

retailing=selling things

in small qty

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Business ownership

Part 1

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UK business ownership

This means:

• They are owned by private individuals

• These individuals risk their own money

• The owners‟ reward is the profit they make.

Most businesses in the UK are privately owned.

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Private ownership options

• Sole trader – 1 owner

• Partnership – 2 people or more

• Private limited companies – often a family-run businesswith the protection of limited liability

• Public limited companies – large organisations whoseshares are traded on the Stock Exchange

• Franchises – small business trading with agreement of large firm

• Cooperatives – collectively owned by workers/customers

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Key difference

• Sole traders and partnerships have unlimited

liability. Owners are responsible for all

debts and may have to sell personal

possessions.

• Companies have limited liability. Owners

can only lose their investment even if the

company has huge debts.

Sole traders

• Easy to set up and give a

personal service

• Owner independent – can

make quick decisions

• Minimum of paperwork

• Knows customers – helps to

avoid bad debts

• Unlimited liability

• Long hours, no cover for

holidays/sickness

• Capital may come from

savings

• Needs business skills

• Business ends on death

Benefits Drawbacks

Partnerships

• Easier to raise capital

• Problems/ideas can bediscussed

• Greater range of skills/expertise

• Cover for holidays/sickness

• Unlimited liability

• Profits are shared

• May be disagreements

• Decisions/actions legally binding on all partners

• Death of a partner meansshare needs repaying

Benefits Drawbacks

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Key points about companies

• Each company has its own identity in law.

• The company employs staff, not the owner(s).

• The company owns assets, not the owner(s).

• The company operates until it is formally wound up or goes into liquidation.

• The company pays corporation tax on its profits.

Private limited companies

• Limited liability

• Minimum of 1 director and1 shareholder

• Easy to set up/affairs still private

• Easier to raisecapital/borrow from bank

• Share transfers needagreement of all

• Cannot sell shares to the public

• More regulations to comply

with• Accounting procedures may be more costly

• Death of shareholder has noeffect on company

Benefits Drawbacks

Public limited companies

• Limited liability

• Increased capital as publiccan buy shares

• Minimum of 2 directors and2 shareholders

• Shares increase in value if company successful

• Operating large scale can

lower costs per unit

• Many regulations to complywith

• Accounts (and problems)are public knowledge

• Shareholders may sellshares if dividends poor

• Original owner may loseoverall control

Benefits Drawbacks

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Review of main types of private

ownership• Sole traders – suitable for one person running small

business with low risk/little investment required

• Partnership – suitable for professional groups,husband/wife businesses, small business needing

different skills• Private limited company – suitable for family

business, essential if risk considerable, eg throughexpensive stock

• Public limited company – suitable for largenational/international operations

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Meeting the Needs

of StakeholdersBTEC Business

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What are Stakeholders?

• Stakeholders are groups of people who have

an interest in a business organisation

• They can be seen as being either external to

the organisation, or internal

• But some may be both!

Types of Stakeholder

• Owners (I)

• Shareholders (I)

• Managers (I)

• Staffs or employees (I)

• Customers (E)

• Suppliers (E)

• Community (E)

• Government (E)

• I = Internal

• E = External

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Internal and External

StakeholdersInternal stakeholders are those who are members

of the business organisation

• Owners and shareholders

• Managers

• Staff and employees

External stakeholders are not part of the firm

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But…..!

• Some groups can be both internal and

external stakeholders

• Such as staff or shareholders who are also

local residents

• Can you think of any others?

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Characteristics of Stakeholders

1. Owners and Shareholders

• The number of owners and the roles they carry out

differ according to the size of the firm• In small businesses there may be only one owner

(sole trader) or perhaps a small number of partners(partnership)

• In large firms there are often thousands of shareholders, who each own a small part of the

business

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*Managers:

• organise

• make decisions

• plan

• control

• are accountable to the owner(s)

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2. Employees or Staffs:

• A business needs staffs or employees to carry out

its activities

• Employees agree to work a certain number of

hours in return for a wage or salary

• Pay levels vary with skills, qualifications, age,location, types of work and industry

and other factors

Activities: Tell the basic difference between wage and salary

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3. Trade unions:• Represent the interests of groups of

employees.

• secure higher wages, better workingconditions

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4. Employer associations

• Represent the interests of employers in

specific industries

• Employer‟s equivalent of the trade unions.

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5. Customers:

• Customers buy the goods or services produced by firms

• They may be individuals or other businesses

• Firms must understand and meet the needsof their customers, otherwise they will fail

to make a profit or, indeed, survive

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6. Suppliers:

• Firms get the resources they need to produce

goods and services from suppliers

• Businesses should have effective relationships

with their suppliers in order to get quality

resources at reasonable prices• This is a two-way process, as suppliers depend on

the firms they supply

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7. Community:

• Firms and the communities they exist in are also in a two-way relationship

• The local community may often provide many of thefirm‟s staff and customers

• The business often supplies goods and services vital to thelocal area

• But at times the community can feel aggrieved by someaspects of what a firm does

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8. Government:

• Economic policies affect firms‟ costs (through

taxation and interest rates)

• Legislation regulates what business can do

in areas such as the environment

and occupational safety and health• Successful firms are good for governments

as they create wealth and employment

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stakeholders Preference

1 Customers

High quality, value-for-money products

Brands 5 Trade Unions

secure higher wages,better working

conditions

2 Employees

Securities of

employment

Rate of reward 6

Employer

associations

Represent the interests

of employers in specific

industries

3 Suppliers

Steady orders and

prompt payment

Feel valued by buyers 7

Local and

national

communities

Represent important

interest groups

4 Owners

Being pricipal risktakers; share of profit

increasing; value of

business rising 8 Governments

Want business to be

successful, create jobs

and pay taxes.

Thank you See you next week

1.1 business ownership

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