Week2-Nature and Purposes of Business Organizations PDF

Week2-Nature and Purposes of Business Organizations (Ownership)-AP5304 The Types of Business Businesses have different types according to: a.Expanse of operation b.Ownership c.Business purpose d.Legal form e.Business Sector f.Nature of operation  The Types of Business A. Accor...

Week2-Nature and Purposes of Business Organizations (Ownership)-AP5304 The Types of Business Businesses have different types according to: a.Expanse of operation b.Ownership c.Business purpose d.Legal form e.Business Sector f.Nature of operation  The Types of Business A. According to the expanse of operation (where does the business operate) According Types Features to: 1. Local Business that is setup in a Expanse local area. of 2. National Business sets up throughout Operation the country. Business sells its products 3. International and service in more than one country. Business is setup across the 4. Global globe.  The Types of Business B. According to the ownership (based on the individuals or entity which owns the business) According to: Types Features Business that is owned by the 1. Public business government for the people. Ownership Business that is owned by private 2. Private business individuals and shareholders.  The Types of Business C. According to the business purpose (What the business is trying to achieve) According to: Types Features Business is set up for the 1. Profit motive purpose of making profit. Business purpose Set up for helping the people not 2. Non-profit/ for making profit but for Voluntary charitable purpose. The owners are called trustees.  The Types of Business D. According to the legal form According to: Types Features Business is owned and controlled by single 1. Sole Trading Legal form individual. 2. Partnership Business is owned and controlled by more than one person called partners. Business started by issuing shares. The 3. Company owners of the shares are called (corporation) shareholders. The shareholders elect the board of directors to represent their interest and make major decisions. Is a license given by one company to 4. Franchise another to sell its goods or services under the same name of the licensor. Types of Business ownership; advantages and disadvantages Sole trader( Unlimited liability) Advantages: Simple organization Freedom to make decisions Obtain all profits Minimum legal restrictions Disadvantages: Possible lack of experience and ability Difficult in getting capital Unlimited liability of owner (If the business cannot pay its debts, creditors can seize the owner's personal assets, such as their car, house, or savings, to recover the outstanding amount.) Types of Business ownership; advantages and disadvantages Partnership ( Unlimited liability) Advantages: Ease of organisation Combined talent, judgment and skills Larger capital available Disadvantages: Unlimited liability – Partners are responsible for each one’s debt and owners’ personal assets will be at risk. Danger of disagreement and conflict Types of Business ownership; advantages and disadvantages Corporation (limited liability) Advantages: Limited liability to stockholders (shareholders) Ease of transferring ownership Corporations can raise large amounts of capital by issuing stocks. Disadvantages: Complicated Government regulations Large tax payment Slow decision making Types of Business ownership; advantages and disadvantages Franchise Advantages: Reduced risk of failure because franchises are based on proven business. Brand recognition: Franchise businesses benefit from established brand names and customer loyalty, making it easier to attract customers. Support and training: Franchisors typically provide comprehensive training and ongoing support in areas like marketing, operations, and management. Types of Business ownership; advantages and disadvantages Disadvantages: High initial investment: Franchise fees, royalties, and other costs can be substantial, requiring a significant financial commitment. Limited control: Franchisees must operate within strict guidelines set by the franchisor, limiting their creative freedom and decision-making autonomy.  The Types of Business E. According to the business sector According to: Types Features 1. Primary Extracts raw materials from nature: Business business Ex: Oil Wells in Awali sector 2. Secondary Transforms raw materials into business finished goods Ex: ALBA Provides goods and service to 3. Tertiary consumers Ex: Jawad Fuel station business 4. Quaternary Established for intellectual business activities like education, software development and research.  The Types of Business F. According to the nature of Operation According to: Types Features Sells products they bought from 1. Trading (retailing) other business to its customers Nature of like grocery or electronic stores operation Converts basic inputs, such as materials, labor and overhead, 2. Manufacturing into finished products which are sold to customers. Provides services, instead of product, to its customers like 3. Services banks, hotel, hospital, professional consultation. Suggested reading on topics covered Principles of Management, Hill & McShane, McGraw Hill Publishing. (Part 1, Chapter 2) Whorthington, Ian and Chris Britton (2014). The Business Environment, 5th Edition. Essex, United Kingdom: Prentice Hall. (ISBN-10: 0273756729 ISBN-13: 9780273756729) Edexcel BTEC Level 3. The Business Environment. Pearson Education Limited. Essex. 2010. Dew, P. (2008). Bahrain's Business Environment. London: GMB Publishing. Sloman, J. (2011). Economics and the Business Environment, 2nd Edition. Harlow: Financial Times Prentice Hall.