1.2 TYPES OF BUSINESS ENTITIES / IB BUSINESS MANAGEMENT / public & private sector, social enterprise

1.2 Types of Business Entities

Introduction

  • Overview of business entities: Public vs. Private Sector

  • Mention of various organizations: BBC, NASA, Netflix, etc.

  • Encouragement to engage with content through comments and subscriptions.

1. Private and Public Sector Companies

A. Sectors of Ownership vs. Sectors of Industry

  • Sectors of Ownership: Divides economy into Private and Public sectors based on ownership.

  • Sectors of Industry: Refers to Primary, Secondary, Tertiary, and Quaternary sectors based on nature of activity.

B. Definitions

  • Public Sector:

    • Owned and funded by the government.

    • Aims to provide public services (transportation, infrastructure, education, healthcare).

    • Revenue generated does not lead to profit distribution but a 'surplus', benefitting the country.

  • Private Sector:

    • Owned by individuals or groups who aim to earn profits.

    • Operates with the goal of profit generation, creating competition and innovation.

    • Profits are distributed among owners, contrasting with public sector surpluses.

C. Characteristics and Examples

  • Public Sector Pros:

    • Socially oriented, funded by taxes, aims to provide for citizens.

  • Public Sector Cons:

    • Often inefficient due to lack of competition and motivation.

  • Public Sector Examples:

    • BBC (British Broadcasting Corporation), USPS (United States Postal Service), NHS (National Health Service), NASA.

  • Private Sector Pros:

    • Efficient, innovative, focused on quality to meet consumer demand.

  • Private Sector Cons:

    • Less socially oriented, primarily profit-driven.

  • Private Sector Examples:

    • Coca-Cola, Burger King, Netflix, Apple, Google.

D. Public Sector Size by Country

  • Cuba: 77% of workforce in public sector.

  • United States: 13.3% public sector workforce.

  • Japan: Only 7.7% public sector workforce.

2. Companies, Sole Traders, and Partnerships

A. Evaluation of Business Types

1. Liability

  • Unlimited Liability:

    • Sole traders are personally responsible for all business debts.

    • Example: If a sole trader fails to pay back a bank loan, personal assets can be seized.

  • Limited Liability:

    • Ownership limited to initial investment.

    • Example: Shareholders in a company like Amazon risk only their investment amount if the company fails.

2. Legal Identity

  • Importance of legal recognition for businesses, akin to having a passport for personal identification.

3. Social Enterprises

A. Definition and Characteristics

  • Businesses that balance profit-making with social aims.

  • Seek to create a positive impact while ensuring sustainability.

B. Pros and Cons of Social Enterprises

  • Pros:

    • High customer loyalty due to social impact focus.

    • Practices often promote ecological and social sustainability.

  • Cons:

    • Higher compliance costs for ethical business practices.

    • Difficulty in predicting income due to reliance on donations and sponsorships.

    • Challenges with gaining community endorsement for initiatives.

C. Unique Marketing and Financial Challenges

  • Difficulty reaching target audience compared to traditional businesses.

  • Income forecasting is complicated by reliance on goodwill and donations.

Conclusion

  • Four assessment objectives: distinguish sectors, evaluate organization types, assess social enterprises, understand risks of ownership.

  • Encouragement for further learning and interaction.

  • Invite audience for feedback and questions.

  • Express appreciation for viewing and support.