Types of Organizations

Private and Public Sectors

Businesses can be classified into 2 main sectors:

Private sector: businesses controlled by an individual/group of people 

Public sector: state-controlled businesses

Economies can be classified into 3 based on their business activity:

Mixed Economy: comprises of both private and public sector businesses

Free market economy: largely composed of private sector businesses

Command economy: economic resources largely owned and controlled by the government.

Reasons to keep certain businesses (like strategic industries) under government control:

Strategic industry: industry that's considered very important to a country's economy or safety (energy, public transport)

Monopoly: occurs when a company is the only seller in a particular market, hence faces no competitions, therefore able to control pricing.

Privatization: transfer of public sector businesses to the private.

Public corporations: companies owned & controlled by the PUBLIC sector. Also known as, nationalized sector, public sector enterprise. (not to be confused with public LIMITED companies)

AdvantagesDisadvantages
managed with social objectives rather than profit objectives, even if its proving to be a lossgovernment subsidies and lack of profit objectives can cause inefficiency
finance provided by the government hence not subjected to limitations from banks/shareholdersinterference of the government in business decisions solely to gain popularity 

For-profit Organizations

Profit based private sector organizations:

Unincorporated business: businesses which doesn't hold a separate identity from its owners; owners are fully liable should the business fail Eg: sole traders, partnerships

Unlimited liability: when one is legally responsible for a business to an extent that one's personal possessions can be used to pay off debts should the business fail.

Continuity: when the death of the owner doesn't lead to the dissolution of a company

AdvantagesDisadvantages
keeps all the profitsrisks of unlimited liability

owner retains complete control; not answerable to anyone

faces competitions from large companies as businesses operated by sole traders are usually small
flexible working scheduledifficulties raising capital for expansion
able to establish close relationships with customers, employeesno continuity in case of death of the owner since the business doesn't have a separate legal status
a business can be based on personal interest/hobby of the sole trader rather than working for a companycannot specialize since the owner is responsible for all aspects of management
no legal formalitieslong hours necessary in order to be profitable

Deed of partnership: a formal agreement between the partners who are about to start a venture together about issues such as voting rights, management roles, distribution of profits etc.

AdvantagesDisadvantages
capital invested and decision-making is sharedunlimited liability
partners can specialize in a certain aspect of managementno continuity in case of death of a partner, unless the partnership is reformed
losses are shared between partnersloss of independence in decision-making (in case of a sole trader)
more privacy and less legal formalities (compared to limited companies)shared profits
 impossible to raise capital from selling shares

Limited liability: one is legally responsible for the business only to the extent of the amount they've invested, not their total wealth. 

Share: unit of a company's ownership entitling the shareholder to dividends and to certain shareholder rights.

Shareholder: individuals that own shares in a limited company

Private limited companies: 'Ltd' or 'Pte', small-medium sized businesses

AdvantagesDisadvantages
limited liabilitytoo many legal formalities
separate legal personalitynot able to sell shares to the general public to raise capital
continuity  
original owner is able to retain control 
able to sell shares to family, friends, relativesdifficult for existing shareholders to sell their shares
greater status than unincorporated businessesless secrecy over financial affairs (compared to unincorporated businesses)

Public limited companies: 'plc' or 'Inc', large businesses

Stock market flotation: conversion of a company from a private to public limited one where shares can be bought/sold on the free market.

Divorce between ownership and control: when owners of the business don't exercise management control over the business. 

AdvantagesDisadvantages
limited liabilitylegal formalities
separate legal personalityconflicts over objectives, due to divorce between ownership and control (shareholders will focus on maximizing profits (short-term goals) whereas directors aim for long term growth.
continuityrisk of takeover due to huge volume of shares sold
able to raise capital with the sale of shares to the publicless secrecy over information (required to disclose to shareholders/public)
ease of buying/selling shares encourages investment into the businessshare price subjected to fluctuations that's beyond the business's control

 

For-profit Social Enterprises

Social enterprise: business that prioritizes social over profit objectives and uses ethical ways of achieving them; invests most of its revenue into benefitting the society rather than maximizing returns to owners.

Cooperative: a group of people united voluntarily to meet their common needs and aspirations through a jointly-owned and democratically controlled enterprise; prioritizes social over financial objectives.

Microfinance Institution: provision of very small loans by specialist finance businesses, not by a traditional bank.

Public–private partnership

Public-private partnership: involvement of the private sector in the form of financial or management expertise in public sector projects aimed at the benefitting the public.

CostsBenefits
Workers wouldn't have the security of being employed by the public sector since private sector businesses usually try to increase profits by cutting staff wages and benefits. It's argued that many roads, prisons and hospitals couldn't have been built unless the private sector had been involved.

high rents and leasing charges involved in PFI schemes these must be paid for by taxpayers.

Costs to the public sector would be lower if the projects were operated by private sector businesses as they aim to make profits; hence, they operate services as efficiently as possible. 

Private sector businesses may lack the experience
needed to operate public sector projects. E.g.
social housing schemes – failure of the scheme could
leave vulnerable groups in society at risk.
Using private sector business finance could mean, public services  being improved, without an increase in taxes (since at least, in the short run, costs aren't covered by the government).

 

Non-profit Social Enterprises

Non-profit organization: governed by a voluntary board who have other aim other than profits.

Non-governmental organization (NGO): a non-profit group that functions independently of any government, which serves a social/political goal. E.g. supporting disadvantaged groups in developing countries.

Charity: organization set up to raise money to help people in need or to support causes that require funding.

 

 

 

 

 

 

 

 

https://dictionary.cambridge.org/dictionary/english/strategic-industry

https://ncbaclusa.coop/resources/what-is-a-co-op/

https://www.investopedia.com/ask/answers/13/what-is-non-government-organization.asp#:~:text=A%20non%2Dgovernmental%20organization%20(NGO,humanitarian%20causes%20or%20the%20environment.

 

 

 

 

Editors

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