Understanding Business Organizations

Business Organisations: Defined and Formed

• Business organizations are formed to meet a variety of needs.
• Buchanan and Huczynski define organizations as social arrangements for the controlled performance of collective goals.
• The key aspects include collective goals, social arrangements, and controlled performance.
• Collective goals mean that organizations are defined by what they aim to achieve, like a school educating pupils or a company making profits.
• Social arrangements mean that organizations are structured to enable people to work together, with larger organizations often having more formal structures.
• Controlled performance means that organizations have systems to ensure goals are met, like setting sales targets for a company.
• A major similarity among most organizations is that they transform inputs into outputs.
• A football team exemplifies an organization, because it has players who come together to play with the objective to outscore their opponent, internal systems to work together, members with specific skills, and team spirit.

The Need for Organizations

• Organizations enable individuals to share skills and knowledge to perform tasks beyond individual capabilities.
• They allow workers to specialize, building greater expertise.
• Pooled resources create synergy, enabling organizations to achieve more than individuals working alone.

Types of Organizations: Commercial vs. Not-for-Profit

• Organizations are classified based on their goals.
• Commercial or profit-seeking organizations aim to maximize the wealth of their owners.
• Common commercial business forms include sole traders, partnerships, and limited liability companies.
• Sole traders: business owned and run by one person where the owner is not legally separate from the business.
• Partnerships: businesses owned and run by two or more individuals, traditionally without separate legal identity, but may have structures like Limited Liability Partnerships (LLPs).
• Limited liability companies: companies with a separate legal identity from their owners (shareholders), who have liability limited to their investment.
• Private limited companies (Ltd) are smaller businesses, often with few shareholders and cannot offer shares publicly.
• Public limited companies (plc) are larger, can offer shares publicly, and can have millions of shareholders.
• Not-for-profit organizations (NFPs or NPOs) aim to satisfy specific needs of members or society, not profitability.
• Examples of NFPs include government departments/agencies, schools, hospitals, and charities.

Public vs. Private Sector Organizations

• The public sector provides basic government services controlled by government organizations.
• Public sector organizations include police, military, public transport, primary education and healthcare.
• The private sector consists of organizations run by private individuals or groups, rather than the government.
• It normally includes businesses, charities and clubs, which can be both profit-seeking and not-for-profit organizations.

Non-Governmental Organizations (NGOs) and Co-operatives

• NGOs do not have profit as their primary goal and are not directly linked to the national government; often promoting political, social, or environmental change.
• Examples of NGOs include Red Cross, Doctors Without Borders, Greenpeace, and Amnesty International.
• Co-operatives are owned and controlled by their members (customers) democratically, with each member having one vote on key decisions unlike companies where votes align to share numbers.
• They are organized to meet the needs of member-owners, who share any profits.
• The Co-operative Group in the UK is a large example, with over 5.5 million members in banking, travel, and groceries.

Sectors of Organizational Operation

• Organizations differ based on their operational market.
• Agriculture involves production, processing, and packaging of foodstuffs.
• Mining involves extraction and processing of minerals.
• Finance includes banks and companies profiting through investments and lending.
• Retailers sell goods produced by manufacturers to consumers.
• Service involves producing intangible goods and services.
• Transportation involves moving goods between locations.

Summary of Organizational Differences

• Ownership: Private sector organizations are owned by individuals or shareholders, public sector is controlled by the government, and co-operatives are owned by their members.
• Objectives: Vary widely, from social services (charities, public sector) to maximizing owner wealth (profit-seeking).
• Activities: Designed to support the organization's specific objectives.
• Sources of funding: Public sector raises money from the government, private sector (companies, co-operatives) from owners, and charities via donations.
• Size: Varies from large multinational companies to small businesses.
• Liability: Sole traders/partnerships' owners are liable for business losses whilst company owners have limited liability.