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Similar to Economics c business refers to an organization or enterprising entity engaged in commercial, industrial
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Economics c business refers to an organization or enterprising entity engaged in commercial, industrial
- 1. Chapter 8 Types ofBusiness Organizations Mr. Abdullah Hassan
- 2. . Sole Proprietorships 01 Forms ofPartnerships 02 Corporations, Mergers, and Multinationals 03 Franchises, Co-ops, and Nonprofits 04 Types of Business Organizations
- 3. Most of theproducers in a market economy are business organizations, commercial or industrial enterprises and the people who work in them. The purpose of most business organizations is to earn a profit. KEY CONCEPTS A producer is a maker of goods or provider of services. A business organization is an enterprise that produces goods or provides services. Most of the goods and services available in a market economy come from business organizations. A sole proprietorship is a business organization owned and controlled by one person.
- 4. The Characteristics ofSole Proprietorships Preparin g to Open Initial Difficultie s Raisin g Funds Success
- 5. Sole Proprietorships: Advantagesand Disadvantages Add Skills – 70% Add Skills – 80% Add Skills – 60% Add Skills – 90% KEY CONCEPTS The sole proprietorship has certain advantages and disadvantages that set it apart from other kinds of business structures. For example, sole proprietorships are not governed by as many regulations as other types of businesses. Also, sole proprietorships have limited life, a situation in which a business ceases to exist if the owner dies, retires, or leaves the business for some other reason. Finally, sole proprietors have unlimited liability, a situation in which a business owner is responsible for all the losses, debts, and other claims against the business.
- 6. ADVANTAGES - Sole Proprietorships Easy to Open or Close Owner Keeps Profits Freedom and Control Few Regulations
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- 8. Section 2 -Forms of Partnerships Partnership is a business co-owned by two or more people, or “partners,” who agree on how responsibilities, profits, and losses will be divided. General Partnerships Limited Partnerships Limited Liability Partnerships Partnerships are found in all kinds of businesses, from construction companies to real estate groups. However, they are especially widespread in the areas of professional and financial services—law firms, accounting firms, doctors’ offices, and investment companies. There are several different types of partnerships—general partnerships, limited partnerships, and limited liability partnerships—but they are all run in the same general way.
- 9. Advantages and Disadvantages Unlimited Liability Potentialfor Conflict Limited Life Easy to Open and Close Few Regulations Joint Decision Making and specialization Access to Resources
- 10. Corporations, Mergers, andMultinationals KEY CONCEPTS Corporations are the third main kind of business organization. A corporation is a business owned by individuals, called shareholders or stockholders. The shareholders own the rights to the company’s profits, but they face limited liability for the company’s debts and losses. These individuals acquire ownership rights through the purchase of stock, or shares of ownership in the corporation.
- 11. For example Suppose alarge company sells a million shares in the form of stock. If you bought 10,000 shares, you would own 1 percent of the company. If the company runs into trouble, you would not be responsible for any of its debt. Your only risk is that the value of your stock might decline. If the company does well and earns a profit, you might receive a payment called a dividend, part of the profit that the company pays out to stockholders. A corporation that issues stock that can be freely bought and sold is called a public company. One that retains control over who can buy or sell the stock is called a private company. Corporations make up about 20 percent of the number of businesses in the United States, but they produce most of the country’s goods and services and employ the majority of American workers
- 12. Infographic Style Key Concepts Abond is a contract issued by a corporation that promises to repay borrowed money, plus interest, on a fixed schedule. Limited liability means that a business owner’s liability for debts and losses of the business is limited. Unlimited life means that a corporation continues to exist even after an owner dies, leaves the business, or transfers his or her ownership
- 13. Corporations: Advantages andDisadvantages 1 2 3 4 5 6 Limited Liability and Unlimited Life Professional Managers Access to Resources Start-Up Cost and Effort Heavy Regulation Double Taxation and Loss of Control
- 14. Business Consolidation KEY CONCEPTS Mergers Anexample of a horizontal merger is the one between Reebok and Adidas in 2005. At the time, they were the second- and third-biggest makers of sports shoes. The subtitle of an article about the merger summed up the potential benefits of all mergers: “Adidas-Reebok merger could trim costs for companies and maybe even some dollars for consumers.” The two companies planned to cut production and distribution costs by combining their operations. This, they hoped, would improve their ability to compete against the largest sport-shoe maker, Nike. More efficient production usually leads to lower prices, which would draw consumers away from Nike. A vertical merger is the combining of companies involved in different steps of producing or marketing a product. A horizontal merger is the combining of two or more companies that produce the same product or similar products. A conglomerate is a business composed of several companies, each one producing unrelated goods or services. A multinational corporation is a large corporation with branches in several countries.
- 15. Conglomerates Another kind ofbusiness consolidation, the conglomerate, is formed when two or more companies in different industries come together. In theory, the advantage of this form of consolidation is that, with diversified businesses, the parent company is protected from isolated economic pressures, such as changing demand for a specific product. In practice, it can be difficult to manage companies in unrelated industries. Conglomerates were popular during the 1960s. One conglomerate of the 1960s was Gulf and Western, which included companies in such diverse fields as communications, clothing, mining, and agricultural products. As with many other conglomerates formed in the 1960s, however, Gulf and Western did not produce the desired financial gains. Gulf and Western sold all its companies but the entertainment and publishing endeavors and became known as Viacom.
- 16. Multinational Corporations When you useGoogle to do an Internet search, you are using the services of a multinational corporation, a large corporation with branches in several countries. Google’s headquarters are in Mountain View, California, but it has branch offices in many other countries. Coca-Cola, McDonald’s, Nike, and Sony are all examples of multinational, or transnational, corporations. Multinational corporations like Google are a major force in globalization, commerce conducted without regard to national boundaries. Multinational corporations have many beneficial effects. They provide new jobs, goods, and services around the world and spread technological advances. When such companies open businesses in poorer countries, the jobs and the tax revenues help raise the standard of living.
- 17. General Electric: MultinationalCorporation UP DOWN The operations of General Electric (GE), one of the world’s largest multinational corporations, span the globe . While its headquarters is located in the United States, GE has manufacturing and production centers located in countries far and near. To supply these centers, GE purchases raw materials from all over the world. Further, the corporation has sales centers on six of the seven continents. GE is both a multinational and a conglomerate, offering a wide range of services and products. The diagram below offers a view of GE’s six major businesses and the units that make up these businesses. GE owns many companies that you know. For example, GE owns 80 percent of NBC Universal, which is made up of the NBC television network, Universal Pictures, and many related businesses. GE’s Consumer and Industrial unit manufactures such common products as refrigerators, ovens, and light bulbs. But many of GE’s businesses are less well-known because they provide services and products for businesses and governments. See Page 245 and page 246 (Bill Gates: Entrepreneur and Corporate Leader)
- 18. Section 4 -Franchises, Co-ops, and Nonprofits A franchisee is a semi independent business that buys the right to run a franchise. A franchise is a business made up of semi-independent businesses that all offer the same products or services
- 19. Advantages and disadvantagesof Franchises UP DOWN Becoming a franchisee of Mango Grove Juice and Nut Bar appealed to Tim for several reasons. First, he would have a level of independence he did not have in his job at the restaurant. Second, the franchiser, Mango Grove Fruit and Nut Bar, would provide good training in running the business, since his success affected their own. They would also provide proven products—their famous mango smoothie mixes and nut bread for sandwiches—as well as other materials, such as the décor common to all the Mango Grove juice bars, at a relatively low cost. Further, the franchiser would pay for national or regional advertising that would bring in customers. Tim also thought through the disadvantages. He would have to invest most of the money he had saved, with no assurance of success in the business. He would also have to share some of the profits with the franchiser. Further, he would not have control over some aspects of the business. For example, he would have to meet the
- 20. Cooperatives and Nonprofits Acooperative is a business operated for the shared benefit of the owners, who also are its customers. A nonprofit organization is a business that aims to benefit society, not to make a profit.
- 21. A Business Organizationfor Its Members When people who need the same goods or services band together and act as a business, they can offer low prices by reducing or eliminating profit. Such organizations are called cooperatives, or co-ops. There are three basic types of cooperatives: consumer, service, and producer. Consumer Consumer, or purchasing, co-ops can be small organizations, like an organic food cooperative, or they can be giant warehouse clubs. Consumer co-ops require some kind of membership payment, either in the form of labor (keeping the books or packaging orders) or monetary fees. They keep prices low by purchasing goods in large volumes at a discount price. Service Service co-ops are business organizations, such as credit unions, that offer their members a service. Employers often form service cooperatives to reduce the cost of buying health insurance for their employees. Producer Producer cooperatives are mainly owned and operated by the producers of agricultural products. They join together to ensure cheaper, more efficient processing or better marketing of their products.
- 22. A Purpose Other ThanProfit SIT AMET, There are several different types of nonprofits. Some, like the American Red Cross, have the purpose of benefiting society. They provide their goods or services for free or for a minimal fee. Other nonprofits, like the American Bar Association, are professional organizations. Such organizations exist to promote the common interests of their members. Business associations, trade associations, labor unions, and museums are all examples of organizations pursuing goals other than profits. The structure of a nonprofit resembles that of a corporation. A nonprofit must receive a government charter, for example, and has unlimited life. Unlike a corporation, however, many nonprofit organizations are not required to pay taxes because they do not generate profits and they serve society. Nonprofits raise most of their money from donations, grants, or membership fees. Some nonprofits sell products or services, but only as a way of raising funds to support their mission.
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