Business Organisations PDF

Business Organisations 1. Sole Trader 2. Partnership 3. Private Limited Company (CLS or DAC) 4. Public Limited Company 5. Cooperative 6. Franchise 7. Alliance 8. Multinational Company 9. Indigenous Firms 10. Semi-State Body Sole Trader Description A business organisation that someone own...

Business Organisations 1. Sole Trader 2. Partnership 3. Private Limited Company (CLS or DAC) 4. Public Limited Company 5. Cooperative 6. Franchise 7. Alliance 8. Multinational Company 9. Indigenous Firms 10. Semi-State Body Sole Trader Description A business organisation that someone owns and runs by themselves. Formation To register as a sole trader, the business owner completes Form TR1, signs it and sends it to the local Revenue District Office. The business can be set up in the trader's name, or if using a different name they need to register the name with the Companies Registration Office (CRO). Owners 1 Liability Unlimited liability, if the business fails, the owner bears all the financial risks, their personal assets can be used to bail out the business. Finance Equity capital = owner’s capital (they are limited to their personal savings) Debt capital = loans (they can access loans from a financial institution using their business plan). Financial Results Not published, kept confidential to the business owner. Sole Trader 8 Control The sole trade has sole control over the business and decision making. Legal Entity The business is not a separate legal entity. Profits All profits are kept by the owner. Continuity of Existence Sole traders do not have continuity of existence and upon passing of the owner, the business will pass too unless taken over. Taxation Personal income tax of 20%/40% payable on earned profits. Advantages 1. Easy and quick to set up. It can start operating straight away if the sole trader is using their own name for the business (no registering with CRO). 2. They make all the decisions. They can't be outvoted over a decision by someone else. 3. They keep all the profits. They do not have to share them with partners. 4. They maintain a high level of privacy when running the business. They don't have to publish the company's accounts with details of their profits. Disadvantages 1. They take on all the risk of failure, both financial (due to unlimited liability) and personal. 2. They have unlimited liability for the debts of the business. They can lose more than their initial investment including their personal assets, should the business go bankrupt. 3. They are restricted with access to capital and might not be able to expand as quickly as they like, as they may have difficulty securing investment from financial institutions. 4. They might carry all the workload, decisions and stress of the business success. They might become overworked. 5. They pay higher rates of tax (20%/40% personal income tax) than private limited companies with 12.5% corporation tax. Sole Trader Partnership Description A partnership is a business owned by between two and 20 people. Professional practices usually form partnerships eg solicitors, accountants and architects. Formation To register a partnership, partners sign Form LP1 and submit it to the Companies Registration Office (CRO). A deed of partnership is signed (the contract between the partners that lists their rights and obligations in the partnership how profits are distributed between them). Owners 2-20 Liability Unlimited liability, if the business fails, the partners bear all the financial risks, their personal assets can be used to bail out the business. Finance Equity capital = partners’ capital (they are limited to their personal savings) Debt capital = loans (they can access loans from a financial institution using their business plan). Financial Results Not published, kept confidential to the partners. Control The partners have shared control over the business and decision making. Partnership 9 Legal Entity The business is not a separate legal entity. Profits All profits are shared by the partners. Continuity of Existence Partnerships do not have continuity of existence and upon passing of all the partners, the business will pass too unless taken over. If even one partner dies, the partnership is dissolved, and a new partnership must be formed to continue on. Taxation Personal income tax of 20%/40% payable on earned profits. Advantages 1. Risks and decisions are shared. This might reduce stress for the owners and should lead to better decisions that are more effective. 2. Different partners bring different experience and skills, which means the business has access to a wide range of expertise. 3. It can raise more finance than a sole trader, as it can have between two and 20 partners who can invest their personal savings as equity capital. 4. There are few regulations for a partnership, and it can keep accounts confidential. Disadvantages 1. Partners have unlimited liability. They are responsible for the debts of the business should it go bankrupt. 2. Decision-making might be slow, and disagreements and arguments might occur over the direction of the business. 3. If one partner dies, the partnership is dissolved, and a new partnership must be formed. 4. Profits have to be shared between partners based on their share of the business as per the deed of partnership. But this could be unfair, as it might not reflect the effort/workload of each partner. 5. They pay higher rates of tax (20%/40% personal income tax) than private limited companies with 12.5% corporation tax. Partnership Private Limited Company Description Under the Companies Act 2014, a private limited company must now become either a private company limited by shares (Ltd or CLS) or a designated activity company (DAC). Private limited companies account for approximately 88 per cent of companies in Ireland. LTD/CLS 1. Each Ltd/CLS has the title of Ltd after its business name. 2. It requires only one director. 3. It has a single document constitution. 4. There is no limit to what activities the business can engage in. 5. A Ltd/CLS can have up to 149 shareholders. 6. The shareholders can decide not to hold an AGM by passing a written resolution. 7. No authorised share capital is needed, so there is no limit on the number of shares the business can issue. Private Limited Company 10 DAC 1. The title DAC applies to each company. 2. It requires a minimum of two directors. 3. It uses an Articles of Association and Memorandum of Association as its constitution. 4. It is established for a very specific purpose and is restricted to operating only in that activity. 5. Unless it has only one shareholder, it has a legal obligation to hold an AGM each year. 6. A DAC must have an authorised share capital. 7. All financial companies must register as DACS (for example, Ulster Bank DAC). Formation A limited (Ltd) company must create a constitution. This contains the name of the company, a statement that it is a company limited by shares and that the liability of its members is limited. This document and other registration forms are sent to the Companies Registration Office (CRO). Once the registrar is satisfied, they issue a certificate of incorporation, which allows the business to begin trading as a Ltd/CLS. Shareholders 1-149 Liability Limited liability, the owners are not personally liable and can lose only their original investment amount if the business goes bankrupt and not their personal assets. Finance Equity capital = share capital (selling issues shares up to a maximum of 149 shareholders), reserves/retained earnings (profits not paid out as dividends to shareholders that are ploughed back into the business). Debt capital = loans (they can access loans from a financial institution using their business plan). Financial Results Abbreviated financial statements must be sent to the registrar of companies. Control A private limited company is controlled by the shareholders based on the rule 'one share, one vote'. The original shareholders can maintain control of the company if they hold 51% of the ordinary share capital. Legal Entity The business is a separate legal entity. Profits Profits are paid out as dividends to shareholders based on their ownership percentage or else are ploughed back into the business in the form of retained earnings/reserves. Continuity of Existence A private limited company has continuity of existence, it lives on beyond its shareholders until it is would up. Taxation Corporation tax of 12.5% payable on company profits. Private Limited Company 11 Advantages 1. One of the main advantages of the private limited company structure is the ability to raise capital by selling shares to a maximum of 149 shareholders. Start-up costs such as research and development, technology, marketing and staffing requirements are very high so this is useful. 2.The shareholders of a private limited company have limited liability. This means that they are not personally liable and can lose only their original investment if the business fails. 3. A private limited company is controlled by the shareholders based on the rule 'one share, one vote'. The original shareholders can maintain control of the company if they continue to hold 51 per cent or more of the ordinary share capital. In a private limited company, the members keep control because shares are not sold on the stock exchange. 4. The start-up business is incorporated and is a separate legal identity from the owners in the eyes of the law. This means that it can sue or be sued in its own name and enter into business contracts. 5. The company is legally independent of its owners and therefore it can stay in existence even after the death of a shareholder. Disadvantages 1. In comparison with a sole trader or a partnership, there are more costs and regulations involved in establishing and closing down a limited company. There may be more professional costs to set up the company and help prepare annual accounts and tax returns as well as additional costs related to Revenue requirements. 2. There are more compliance procedures that a limited company is required to deal with, for example, annual returns. This adds to costs, as accountants and auditors may be needed to compile these. 3. There is no onus on companies to pay dividends thus profits are not always paid out to shareholders in the form of divides and these profits are shared amongst all shareholders 4. Company control and decision making is shared. Benefits of Changing from Sole Trader to Ltd 1. A sole trader has unlimited liability, so faces losing personal assets if the business goes bankrupt. If they become a limited company, they will have limited liability and they will not face losing their personal assets should the business go bankrupt. 2. A sole trader might be limited in how much capital they can invest. If they become a limited company, they can have up to 149 shareholders who can invest. 3. If they made the switch, the workload, decision-making and the stress of running a business can be shared amongst the new owners (1-149 shareholders). 4. A sole trader would cease to be a business upon the death of its owner. If it becomes a limited company, it would have continuity of existence. This might be important if the sole trader was a family business that they wanted to pass on. Private Limited Company Public Limited Company Description A public limited company has at least seven shareholders. There is no limit to the number of shareholders it can have. The shareholders publicly buy and sell shares in the company on a stock exchange. 12 Formation As a business grows, it might float on the stock exchange and become a public limited company. This allows their shares to be bought and sold on the stock market. These companies can be recognised by the letters 'PLC' after their name. It must first apply to the stock exchange for a quotation allowing its shares to be bought and sold on the market. It must then produce a prospectus, this is a book that details the company history and invites members of the public to buy shares. Further legal documents have to be prepared then the company can make an IPO (Initial Public Offering). Shareholders 7< Liability Limited liability, the shareholders are not personally liable and can lose only their original investment amount if the business goes bankrupt and not their personal assets. Finance Equity capital = share capital (issuing shares on the stock market), reserves/ retained earnings (profits not paid out as dividends to shareholders that are ploughed back into the business). Debt capital = loans (they can access loans from a financial institution using their business plan). Financial Results Full financial statements must be sent to the registrar of companies. Control A private limited company is controlled by the shareholders based on the rule 'one share, one vote'. The original shareholders can maintain control of the company if they hold 51% of the ordinary share capital. Legal Entity The business is a separate legal entity. Profits Profits are paid out as dividends to shareholders based on their ownership percentage or else are ploughed back into the business in the form of retained earnings/reserves. Continuity of Existence A public limited company has continuity of existence, it lives on beyond its shareholders until it is would up. Taxation Corporation tax of 12.5% payable on company profits. Advantages 1. Unlimited access to more capital (shares), as there is no limit to the number of shareholders. 2. Stock listing boosts the image of the company, which helps to attract further investment. 3. It attracts top managers and gets free publicity in articles, newspapers and magazines due to its status. 4. It usually has a very good credit rating so it can access capital to expand. 5. It can reward employees with profit-sharing schemes, which can be used to attract top managers to the company. Public Limited Company 13 Disadvantages 1. The cost of running and floating a PLC is very high. There are a lot of legal documents to be prepared so solicitors and stockbrokers need to be paid before making an IPO (Initial Public Offering). 2. It must publish lots of information about its activities and accounts (it does not have much confidentiality). 3. Shareholders and the board might disagree publicly on major decisions. This could damage performance or the reputation of the company. 4. The share price is the main indicator of performance, but is not fully in the company's control, as investors can influence it. 5. Control might be lost, as PLCs are easier to target for a takeover bid. They are vulnerable, as there is no control of who buys shares in the company on the stock exchange. The original shareholders can maintain control of the company if they hold 51% of the ordinary share capital, however, they are open to an unpreventable hostile takeover. Public Limited Company Cooperative Description A co-operative (or co-op) is a democratically controlled business that is jointly owned by its members. Members have a common bond and operate the business for their mutual benefit. It can be a worker co-op, financial co-op, producer co-op or consumer co-op. Formation A co-operative requires at least seven members and an application must be made to the Registry of Friendly Societies. Once all rules are adhered to and the appropriate fee is paid, the registrar gives permission for the co-op to begin trading. Shareholders 7< Liability Limited liability, members of the cooperative’s liability is limited to the amount they invested in the co-op, if the co-op were to go bankrupt, they would not lose any personal assets to pay the co-op's debt. Finance Equity capital = member’s capital (limited amount of finance that can be raised from its members), reserves/retained earnings (profits not paid out as dividends to shareholders that are ploughed back into the business). Debt capital = loans (they can access loans from a financial institution using their business plan). Financial Results Full financial statements must be sent to the registrar of companies. Control Co-operatives have a democratic structure, where each member has one vote ('one member, one vote') regardless of the number of shares they hold (unlike PLCs with ‘one share, one vote’). An elected management committee runs the business and makes the important decisions. Legal Entity The cooperative is a separate legal entity. Profits Members receive a share of the profits in proportion to their turnover in the co-operative (producer co-operative) or as a percentage of the savings (credit union). Continuity of Existence A cooperative has continuity of existence, it lives on beyond its shareholders until it is would up. Cooperative 14 Franchise -a business arrangement whereby the franchisor (the existing business with the proven business model) grants permission to the franchisee (the person setting up the business) to use its name, logo and business idea in return for a fee or a percentage of profits or sales, and often an initial payment upfront -franchising allows the franchisor to expand their business without having to invest further capital or take additional risks, as these are passed on to the franchisee in the contractual arrangement -it is a cost-effective form of expansion for the franchisor, which is useful if raising finance is an issue -it can be risky for a franchisor; if standards are not maintained by the franchisee, the image of all of the franchise's stores could be affected -a business could become a franchisee to be able to use an established model, including the branding, logos and products of the franchiser -eg McDonalds outlets in Ireland are all franchised -Unit 5 Notes page 52 Taxation Corporation tax of 12.5% payable on cooperative profits. Advantages 1. Members of co-ops have limited liability and would not lose any personal assets if the co-op went bankrupt. 2. Members have a democratic say in how the business is run. Co-op members are invited to the AGM and can vote on issues such as the dividend. Decisions are made based on 'one member, one vote', rather than how much each person has saved. 3. Members usually have a common bond eg a credit union is a group of people, connected by a 'common bond' based on the area they live in, the occupation they work in or the employer they work for, who save together and lend to each other at a fair and reasonable interest rates. 4. Cooperatives aren’t usually profit driven. 5. Cooperatives often have very high credit ratings, making accessing finance easier than others. Disadvantages 1. There is a limit to the amount of finance that can be raised from each member. There is no huge incentive for members to invest more finance as regardless of share ownership levels, each member still has one vote. 2. Cooperatives often have to borrow heavily due to lack of equity raising capabilities thus negatively effecting their gearing. 3. Resentment can arise between members as each member has one vote maximum and members with large shareholdings may become frustrated having the same control as members with little shares. Cooperative 15 Franchising Benefits to Franchiser -low capital investment = franchising is a form of expansion that requires low investment from the franchiser, as the capital used to expand the business comes from franchisees paying for the licensing -fast expansion = franchising permits a more rapid expansion, by using the franchisees' capital, the franchisor is able to establish a large number of outlets in a short period of time, rapid expansion can be achieved without incurring the overheads and costs associated with opening company-owned outlets -motivation = an owner will be more attentive than a manager, this is the central point that makes franchising so attractive, the franchiser can be assured that the person operating their business will be as involved as they would, by franchising the business, the franchisor places its expansion in the hands of people who are motivated to make it work and are therefore more likely to succeed -economies of scale = there is strength in numbers, the franchise can command deals with various suppliers and control supplies to various franchisees, bulk buying leads to cost savings for all the stores, making them more competitive Franchising Benefits to Franchisee -proven success = the franchisee knows the brand and products are popular and have sold well, so there is less risk for than creating their own products, logo and brand name -market research is complete = the franchisor often builds up data on the competition, demographics and potential sales in a certain region to show how feasible it is to open a store, which the franchisee can access -economies of scale = franchisees benefit from a centralised purchasing system, where the head office can purchase raw materials, furniture and fittings at a lower cost per unit than if the franchisee sourced them as a new business, they also gain from collective advertising, as the budget is much bigger -ongoing support and mentoring = the franchisor wants the franchisee to succeed, so they offer advice, the franchisee can benefit from their experience and skills as well as the initial training -existing customer base = some customers in the franchisee's area are already loyal to the franchise, so they have a customer base from the start 16 Franchising Disadvantages to Franchiser -less control = control is lost over the day-to-day management of the franchise businesses, the franchiser has to trust franchisees to operate their own stores, whereas if they opened up new stores themselves they would have more control of decisions -reputational risk = the reputation of the whole business could be affected by the actions of one franchisee with poor-quality standards or staff, a good franchisor vets potential franchisees thoroughly before granting permission to them -training = a training programme for franchisees is required, this can be expensive and time-consuming for the franchisor, but it is crucial to up skill new franchisees on the processes and ethos of the company -supervision = franchisees have to be monitored regularly to ensure they are operating at a satisfactory level and maintaining the quality standards of the brand Franchising Disadvantages to Franchisee -little independence = control over complete decision making and entrepreneurial independence is lost in the running of franchise businesses for the franchisee, they have to submit to the franchisor’s decisions and choices -reputational risk = the reputation of the whole business could be affected by the actions of one franchisee with poor-quality standards or staff -reduced creativity = entrepreneurs want to innovate and come up with their own ideas, franchising limits the franchisee's freedom to launch new products or adapt to changing conditions as they see fit -geographic restrictions on sales = if franchisors want to increase the number of franchises, the franchisor might limit where the franchisee can sell their products eg some pizza stores do not accept orders if they fall within another store's selling area -reduced income = the franchisee must pay the franchisor a percentage of profits -high start up costs = franchising is a form of expansion that requires high capital investment from the franchisee, an initial start up fee as well as ongoing royalty payments leads to high initial and ongoing costs Business Alliance -also known as a strategic alliance 17 -it is an agreement between two or more businesses to pool resources and expertise to work together over a specified period of time or to complete a specified project (eg product launch) while remaining separate legal entities -eg in 2021, Uber and Spotify announced an alliance to allow Uber users to connect to Spotify and stream their favourite music while on a ride -Unit 5 Notes page 56 Strategic Alliance Benefits -cost effective = in an alliance, both companies' resources are shared, and associated costs incurred are divided between partners eg Barnes & Noble has an alliance with Starbucks to sell its coffee in some bookstores so that the companies can share the cost of renting the premises -reduces risks of expansion = instead of one company bearing all the risk of an expansion, two or more can agree to try to expand together so that each partner in the alliance will share the risk eg when TacoBell and T-Mobile announced an alliance, they undertook to share the financial risk of failure, while both aimed to grow their own brands and customer base -access to other networks/markets = a strategic alliance allows both companies to access each other's consumer and network base and to reach new consumers and markets that they might not have had before -easier to terminate = an alliance is easier to terminate if it does not work out well, there is less to untangle legally as far as assets are concerned, as both companies have remained separate entities by entering the voluntary agreement eg Swatch and Tiffany decided to end their proposed 20 year strategic alliance early after neither party was happy with what the other brought to the alliance -shared resources = rather than having to develop a new idea independently, the businesses can share market research, machinery and skills with each other, which is a huge benefit eg Volkswagen has Microsoft working to develop its in-car technology, rather than hiring staff to develop its own systems Strategic Alliance Disadvantages 18 -clash of cultures = different organisational cultures in two firms can lead to conflict between competing management teams, who are used to their own work practices and management styles and systems, this might cause a lack of co-operation within the new merged entity, leading to poor management decision-making -shared profits = earnings are shared between the companies -less control = control is shared between the companies who remain separate legal entities, thus compromises and negotiations may need to be made -reputational risk = the reputation of the whole business could be affected by the actions of one company in the strategic alliance Multinational Company -also known as a transnational company -a multinational company (MNC) is a business with a head office in one country and branches or factories in two or more countries -the head office or headquarters (HQ) controls the company, usually form the company’s home country, while the branches carry out different tasks for the business in other countries across the world -eg in Ireland in 2019 more than 230,000 people were working for MNCs, such as Apple, Google, Facebook, HP, Pfizer and LinkedIn -Unit 7 Notes page 28 Why Multinational Companies Choose Ireland -corporation tax = MNCs pay 12.5% corporation tax on their profits in Ireland, this low rate of corporation tax is a key government strategy in attracting FDI eg Germany has an effective corporation tax of between 30-33% (Unit 6 Notes page 39) -spin off companies = as many global companies, such as Intel, and Google, have a major presence here and have been here for years, service providers and spin-off industries have developed in Ireland so other MNCs can benefit if they locate to Ireland -IDA Ireland = IDA Ireland is responsible for attracting and developing foreign direct investment in Ireland, the IDA works with businesses setting up in this country, it carries out research into the best industrial estates for them, advises them, offers mentors and gives grants to MNCs when they are locating to Ireland (Unit 6 Notes page 40) 19 -educated workforce = MNCs employ highly skilled graduates, up to PhD level, and Ireland has a high third-level education take up as attending college is free, many of these graduates are engaged in research and development, this is an important area in multinational business that attracts companies such as Google, which has its European headquarters in Dublin -EMU membership = the introduction of the single currency brought additional incentives for foreign investors to locate to Ireland, along with relative price stability, the Euro has made life easier for MNCs and business executives trading or visiting the Eurozone area -EU membership = creation of the single European market eliminated trade barriers within the EU, allowing for the free movement of goods, services, labour and capital between Member States, MNCs located in Ireland have access to a huge EU market of more than 500 million people eg pharmaceutical companies use Ireland as a stepping stone to the EU market (Unit 7 Notes page 23) -language = English is the international business language, also the growing number of people living in Ireland who speak different languages is a key factor in encouraging MNCs to locate here Benefits of Multinational Companies in Ireland -employment = more than 230,000 people are employed by MNCs in Ireland, this enables highly educated citizens to stay here rather than having to emigrate to find work and preventing the brain drain of Irish citizens -government revenue = in 2022, ten MNCs made up 57% of Ireland’s €22.6 billion corporation tax intake for the year -Ireland’s reputation = large number of MNCs in Ireland promotes Ireland’s image globally as a great country for doing business -balance of payments = MNCs produce goods in Ireland and export them abroad, increasing this country's total exports and improving the balance of payments (Unit 7 Notes page -spin-off effects = MNCs locating in cities and towns increases the demand for local services like taxis, restaurants and hotels, boosting sales for local indigenous firms 20 -new skills = many of the top MNCs in the world are located in Ireland with the latest technology and systems, Irish employees develop and learn as Irish managers and employees develop their skills using these, this can help would-be entrepreneurs to learn Disadvantages of Multinational Companies in Ireland -repatriation of profits = even though a lot of money is made in Ireland, MNCs send their profits back to their headquarters in their home country, these profits are not spent domestically and has no benefit for Ireland -indigenous firms competition = indigenous firms that do not benefit from economies of scale might close down if MNCs can sell at lower prices, leading to job losses -no Irish loyalty = MNCs have less loyalty to Ireland so could relocate to other countries should the costs of production rise or tax rates change causing loss of employment -effects of closure = the sudden closure or withdrawal of MNCs in Ireland would have huge consequences for direct employment and spin-off businesses as well as government revenue due to our high reliance on MNCs -government influence = large MNCs have huge lobbying and persuasive power over governments and can influence policy and decision making power of the government hugely due to the large amount income, business and employment they create in Ireland, decisions that are made might not benefit the Irish economy and Irish citizens which is often seen as undemocratic or unethical by MNCs -MNC over-reliance = record levels of corporation tax intake (€22.6 billion in 2022) are not guaranteed to continue, MNCs have less loyalty to Ireland so could relocate to other countries should the costs of production rise or tax rates change Indigenous Firms -an indigenous firm is an Irish-owned and locally based business that has been established and is owned and managed by Irish residents -it produces goods and services in Ireland -the Irish owners have a direct personal interest in the survival and growth of the firm -the firm's principal place of business is in Ireland -eg Supermac’s, Eason and Smyths Toys 21 Importance of Indigenous Firms -loyal to Ireland = indigenous firms are more likely to remain loyal to Ireland and not relocate, even in times of recession or low investment -provide local benefits = Irish firms' profits and wages are more likely to be spent locally than be repatriated like an MNCs, the knock-on effects of Irish businesses are that they might purchase raw materials from local suppliers, employ local people and reinvest their profits in Ireland, which can be spent in the economy -enterprise culture = if Irish entrepreneurs prove to be successful, indigenous firms might stimulate other entrepreneurs to set up businesses, generating a culture of enterprise -lower reliance on FDI = if Ireland has become too dependent on multinational companies (MNCs), when more indigenous firms are encouraged to open, the economy will be less reliant on MNCs -employment = small and medium enterprises create huge employment with more than 309,000 SMEs in Ireland -balance of payments = indigenous firms are involved in the export services sector and therefore increase the value of Ireland's total exports, which improves the balance of payments, as more money is flowing into the economy from abroad (Unit 7 Notes page 31) Semi-State Body -semi-state bodies are state-owned enterprises that are technically commercially run, which benefits the Irish government -eg RTE, ESB, Dublin Airport Authority, Bord Gais, Irish Rail -privatisation of semi-state bodies is the selling of a state-owned company to private investors eg Aer Lingus was sold by the Irish government to private investors in 2006 -nationalisation is when a privately run business is taken over and run by the state eg Anglo Irish Bank was nationalised in 2009 by the Irish Government Benefits of Privatisation -government revenue = selling a state enterprise provides the government with an immediate lump sum of money, the revenue can be used to build infrastructure or repay 22 the national debt eg the Government received €335 million for selling off a stake in Aer Lingus to IAG in 2015 -efficient service/production = private firms are driven by profits and should therefore be more efficiently run, as decisions are based on improving quality and there is more scope for investment, state-owned enterprise might not have competition so it lacks the incentive to innovate and could also lack funding. -access to finance = privatised companies can take out loans and sell shares to access finance, the government needs to prioritise spending so it may not be able to invest as much in semi-state bodies as a private investor could -industrial relations = public sector workers are more likely to take part in industrial action in pursuit of pay claims or better working conditions than those in the private sector -increased competition = the elimination of a state monopoly can lead to open market competition, which should lead to greater choice and lower prices for consumers eg increased competition in the communications market since Telecom Éireann was privatised Disadvantages of Privatisation -loss of state assets = the state protects industries that are of strategic interest to the country, selling them off to private investors means that control of important resources like water or the transport network is lost. -increased unemployment = there might be a loss of jobs through a rationalisation of services so the business can become more efficient, this may lead to higher social welfare spending for the government -fewer social commitments = essential services that do not make a profit might be discontinued by the private business to reduce costs eg if the postal service was privatised, it might start charging more to deliver or stop delivery to remote places. -profit motive/increased prices = privatised companies must maximise returns to their shareholders, this could result in increased prices for consumers or a loss in the quality of the service, this is more likely to happen if a private body has a monopoly of power in a market