A1. The Purpose And Types Of Business Organisation

Define ‘business organisations’ and explain why they are formed. Describe common features of business organisations. Outline how business organisations differ. List the industrial and commercial sectors in which business organisations operate. Identify the different types of business organisation and their main characteristics.

Organisations are defined as:

"Social arrangements for the controlled performance of collective goals" (Buchanan and Huczynski)

All organisations concentrate on coordinating the 3 points:

1. Social Arrangement

2. Collective Goals

3. Control of Performance

Types of organisation by profit orientation

Commercial:

• Sole traders;

• Partnerships;

• Limited liability companies:

  • Private limited companies (Ltd);

  • Public limited companies (plc).

Not-for-profit:

• Government departments and agencies;

• Schools;

• Hospitals;

• Charities (such as the Red Cross, Oxfam and Doctors Without Borders);

• Clubs.

Types of organisation by ownership/control

Public sector:

• provides basic government services;

• controlled by government.

Private:

• run by private individuals and groups;

• partly or wholly funded from non-government sources;

• can be both profit-seeking and not-for-profit.

Non-governmental organisations (NGOs):

• does not have profit as its primary goal;

• is not directly linked to the national government (e.g. Red Cross).

Cooperatives:

• owned by people who use their services;

• each member gets a single vote on decisions.

Commercial private sector industries are additionally subdivided in two ways:

1. Retailers (рознечные торговцы) = commercial industries who sell goods to the general public.

• This includes traditional outlets such as grocery stores, specialty shops, department stores and drug stores, but also includes online outlets such as online clothing stores or online book sellers.

2. Wholesalers (оптовики)

• Some commercial private sector industries buy from manufacturers and sell to retailers. 

• Not all commercial industries involve wholesalers. 

• In some cases, the retailer can buy directly from the manufacturer. 

• Industries that commonly use wholesalers include manufactured office supplies and home goods.

Types of directors:

• Executive directors participate in the daily operations of the organisation and 

• Non-executive directors are independent and are not involved in the day to day running of the business. They are invited to join in an advisory capacity to exercise overall guidance.