1.2 Types of Organizations

Private & Public Sectors

Private Sector Businesses

  • goal is profit-maximization
  • owned and controlled by private individuals and businesses
  • Examples:
    • Law firms
    • Estate agents
    • Newspapers or magazines
    • Financial Services

Public Sector Businesses

  • provides essential goods and services that is inefficiently being provided by the private sector
  • owned and controlled by the government
  • Examples:
    • Healthcare
    • Public Education
    • Museums
    • Armed forces

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Profit-Based Organizations

Sole Trader

  • business is owned and controlled by one person
  • the simplest form of businesses
  • owned by a single owner who takes all profits and liabilities
AdvantagesDisadvantages
financial strength, more start-up capitalunlimited liability
shared responsibilityslower decision making
less pressuredisagreements & conflicts

Companies/Corporations

  • businesses owned by shareholders, those who have invested money to provide capital for a company
  • there is a legal difference between the owners’ and the business’ identity
  • Limited Liability - shareholders only lose the value of their investment, not their personal belongings
  • more bureaucracy
  • two types: Private & Public

Private Limited Company:

  • shareholders are usually family, friends, and business partners
  • shares are not traded on a public stock exchange
  • unless elected to the Board of Directors; the shareholders aren’t involved in running the business
AdvantagesDisadvantages
limited liabilitymore legal restrictions
higher capital, expansion capacitycorporate taxes
no limit on the number of shareholdersprofit has to be shared among many people

Public Limited Company:

  • shared are traded on a public stock exchange
  • required to publish financial accounts and reports to the public
AdvantagesDisadvantages
limited liabilityvulnerable to takeovers
more capital, expansion capacityvalue of shares can go down
shares can be bought and sold easilyrules and restrictions
value of shares can increaseexpensive to set up

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For-Profit Social Enterprises

Social Enterprises: Revenue generating businesses with social objectives at the core of their objectives

  • Main Goals:
    • to achieve social objectives
    • earn revenue in excess of costs

Cooperatives

  • jointly owned and run by members who share profits and benefits
Consumer CooperativesWorker CooperativesProduces Cooperatives
owned by the customers who buy the goods and/or services for personal useset up, owned, and organized by their employee membersjoin and support each other to process or market their product
AdvantagesDisadvantages
incentives to worklimited sources of finance
social benefitsslower decision-making
public supportlimited promotional opportunities

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Microfinance Providers

  • small loan providers to poor businesses who have no access to conventional banking services
AdvantagesDisadvantages
job creationlimited finance
social well-beinglimited eligibility

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Public-Private Partnerships [PPP]

  • government jointly works with the private sector companies
AdvantagesDisadvantages
more productive while also proving merit goodsgovernment must support financially when costs increase for the business
conflict between public & private sector intents & goods

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Non-Profit Social Enterprises

  • organizations operating for public welfare, not profit
  • exempt from many taxes

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Non-Governmental Organizations [NGOs]

  • exists in the private sector
  • participates in humanitarian, educational projects, etc
    • WWF, UNESCO, Red Cross

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Charities

  • non-profit organization that is exempted from taxes
  • charitable objectives
    • reducing poverty
    • environmental degradation
AdvantagesDisadvantages
social benefitsbureaucracy
tax exemptionscharity frauds exist
public recognitionlimited sources of finance
limited liabilitydisincentive effects

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