Business Organizations and Conflict Resolution

Types of Organisations

• A business is an enterprise providing services needed by the community, who are able and willing to pay.
• "Business organization" describes how a business is structured, referring to commercial or industrial enterprises and their personnel.
• The purpose of a business organization is to achieve goals that are too large or complex for individuals to accomplish alone. Cooperation allows for the creation of more and better goods and services.

Choice of Organisation Type

• The scale of business operations (small, medium, large), and market area (local, national, international), are crucial factors.
• The degree of control desired by owners and their willingness to bear risks and liabilities also influence decisions.
• Comparative tax liability and technical difficulties, as well as market competition, are important considerations.

Types of Private Organisations

• Sole Proprietorship: A form of legal organization where the owner has complete control and is personally liable for enterprise debts.
• Unlimited liability applies to the proprietor.
• The individual managing and contributing capital to the business is the sole proprietor.
• Characteristics of Sole Proprietorship:
  • One person owns the business.
  • Unlimited liability.
  • Earns all profits.
  • No distinct legal entity.
  • Simpler structure.
  • Self-employment business.
• Advantages/Disadvantages of Sole Proprietorship:
  • Advantages: Low start-up costs, freedom from regulations, direct control by owner, all profits go to owner, easy to exit.
  • Disadvantages: Unlimited liability (owner responsible for all debts), business threatened by death/illness, difficult to raise finance, growth limited by personal energy.

Partnership

• A partnership is a legal organization where two or more business owners share management, profits, and risks.
• Characteristics of Partnership:
  • Agreement among partners.
  • Legal business activity
  • Sharing of profits
  • Contractual business relations
  • Common management
  • Multiple businesses (can be more than one)
• Advantages/Disadvantages of Partnership:
  • Advantages: Ease of formation, collective talent, sharing risk, easier access to finance.
  • Disadvantages: Unlimited personal liability for partners, divided authority, potential conflict.

Companies

• A company is an association where people contribute money to a common stock and share in profits and losses.
• Types of Companies:
  • Private Limited Companies
  • Public Limited Companies

Private Limited Companies

• Closely held by a few people (minimum 2, maximum 50 shareholders).
• Stocks are not traded on exchanges, and private equity cannot be raised.
• Fewer regulations compared to public companies.
• Advantages: Easy formation, easy functioning (no filing with registrar), can act as a director.
• Disadvantages: Lack of democracy, exempt from statutory meetings, can only have two directors.

Public Limited Companies

• Stocks are held by a large number of shareholders (no maximum).
• Can be listed on stock exchanges.
• Must follow stringent laws regarding board composition and annual general meetings.
• Advantages: Economies of scale, limited liability, huge capital, transferable shares, efficient administration, democratic governance, permanent existence.
• Disadvantages: Dishonest directors may exploit shareholders, high complexities, delay in decision-making, favoritism, difficult labor relations, concentration of economic power, misuse of internal information.

Voluntary Organisations

• Also known as non-profit or non-paid organizations; not directly controlled by the state.
• Run by members, not an external force.
• Work for humanity, societal welfare, and development, particularly for disadvantaged groups.
• Features: Objective of serving social and economic needs, no-profit basis, need professional skills, no political office bearers, voluntary and constitutional functioning.
• Types of Activities: Charity, welfare, relief, rehabilitation, development of human beings, services.

Government Organisations

• Companies with at least 51% of paid-up share capital held by the government.
• Features: Registered under the Companies Act, separate legal entity, whole or majority capital from government, majority of government directors, own staff, freedom from procedural controls, accountable to Parliament/State Legislature.
• Advantages/Disadvantages: High legal control, risk spread out, mobilization of scarce savings, accelerated economic growth through industrialization, employment. (Lack of initiative, lack of business experience, slow decision-making, bureaucracy, absence of profit-motive, interference)

Stakeholder Orientation

• The degree of stakeholder demand understanding and response by a firm.
• Three activities involved: generating data about stakeholder groups, distributing information amongst employees, and responsiveness to this intelligence.

Implementing a Stakeholder Perspective

• Assessing corporate culture.
• Identifying stakeholder groups.
• Identifying stakeholder issues.
• Assessing organizational commitment to social responsibility.
• Identifying resources and determining urgency.
• Gaining stakeholder feedback.

Stakeholder Interests

• All stakeholders have distinct interests, such as customers (price, quality), employees (wages, security), owners (profit, dividends), local community (jobs, issues), government, pressure groups, suppliers (prices), and financiers (returns).

Stakeholder Conflict

• Businesses have various internal and external stakeholders with diverse interests, which can conflict.
• Examples include owners seeking high profits versus staff seeking high wages.
• Addressing these conflicts effectively leads to success.

Dealing With Conflicts

• Three major issues to consider are the type of business, its aims and objectives, and the power of stakeholder groups.

Conflict Resolution

• Accommodating: Satisfying the other party's concerns.
• Competing: Prioritizing individual needs.
• Collaborating: Satisfying all parties' concerns.
• Compromising: Finding a solution acceptable to all.
• Avoiding: Ignoring or side-stepping the conflict.

This quiz explores key concepts related to business organizations, including sole proprietorships and private limited companies, as well as strategies for conflict resolution in a business setting. Test your knowledge of stakeholder conflicts and the characteristics of various business structures.