The Copperbelt University

School of Mathematics and Natural

Sciences

BS 361: Entrepreneurship Skills

Types of organisations
K. Mulenga
April 2020
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 Definition of an organisation
• An organisation is a social arrangement
for the controlled performance of
collective goals.
• An organisation can be defined as a
group of people who have come together
to achieve specific goals or objectives.

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 Examples of organisations
• A multinational company making and
selling cars-Toyota/ Nissan
• An accountancy firm - Grant Thornton
• A charity-Oxfam, Red Cross
• A local authority-Lusaka City Council
• A trade union- MUZ/ZNUT
• An army- The Zambia army
• A political party-The PF/UPND/NDC
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 Classifying Organisation
Ownership Private and Public sector
Control Shareholders, managers and
trustees
Activity Manufacturers, retailers,
distributors
Legal structure Partnership or limited company
Accountability Shareholders, government
Commercial or non-commercial Companies, non-profits orgns
objectives charity
Sources of finance Borrowing, the state,
investments
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 Business organisations
• A business organisation exists to profit.
Profits are not incidental to its activities
but the driving factor.
• Types of business organisations include
sole tradership, partnerships and limited
companies (public and private).

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 Sole Tradership
• A sole tradership is a business owned
and run by one individual perhaps
employing one or two assistants and
controlling their work.
• The individual’s business and personal
affairs are for legal and tax purposes
identical.

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 Merits of Sole Tradership
• No set up procedures
• All profits
• Closeness to customers and employees
• Independence and self- accountability
• Personal supervision over operations

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 Demerits of Sole Tradership
• Lack of economies of scale
• Dependence on individual skills
• Expansion has to be financed from
profits
• Individual lacks all- round business skills
• Loss of personal wealth through
unlimited liability
• Death of sole trader means sale to pay
tax or succession problems
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 Partnerships
• Partnerships are arrangements between
individuals to carry on business in
common with a view to make profit.
• Partnerships however involve obligations
to others, and so a partnership will be
governed by a partnership agreement.

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 Advantages of partnerships
• Expansion of capital resources
• Wider range of skill
• Spread of financial and operating
responsibilities
• Privacy (no need to file accounts)

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 Disadvantages of partnerships
• Unlimited liability
• Disputes may paralyse business
• Need to consult partners
• Lack of separate legal identity
• Joint liability for partners’ acts
• Capital tied up in business

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 Limited Companies
• The limited company has a separate legal
personality and the liability of its
shareholders for debts of the company
only extends to the capital they
contributed.
• The shareholders (owners) cannot be
sued for the debts of the company. This
is called limited liability.
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 Limited Companies Cont.
• Moreover, the ownership and control of a
limited company are legally separate even
though they may be vested in the same
individuals:
• Shareholders are the owners, but they have
limited rights, as Shareholders, over the day-
to-day running of the company. They provide
capital and receive a return.
• Directors are appointed by shareholders to
run the company. In practice they have a
greater deal of autonomy
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 Merits of limited companies
• Continuity of operation
• More human resources
• More professional appearance
• Can raise capital easily and therefore
grow
• Separation of business from owners
• Owners have limited liability and
therefore can take risks
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 Demerits of limited companies
• Larger overhead costs
• Greater formalities
• May become less responsive to
customers
• May become less responsive to changes
in the environment
• May become less flexible in structure
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 Types of Limited Companies
• Private Limited Companies- Antelope
Milling, Game Stores and Power Tools.
• Public limited companies (PLCs)-
Zambeef PLC, Zambia Sugar PLC, CEC,
Bata PLC.

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 Private Limited Companies
• Most private companies are owned by a
small number of shareholders.
• A private company’s share capital will
normally be provided by:
–The founder
–Business associates of the founder or
employer
–Venture capitalists
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 Public Limited Companies
• Public companies are owned by a wider
proportion of the investing public.
• A public company’s share capital, in
addition, can be raised from the public
directly, or through institutional investors
(NAPSA, ZSIC).

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 Control of Limited Companies
• The board of directors controls
management and staff, and is
accountable to the shareholders, but it
has responsibilities towards groups,
owners and employees alike.

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 Shareholders
• Shareholders may consist of large
institutional investors, such as insurance
companies, building societies and
pension funds.
• They might be private individuals.
• Employees can also become
shareholders.

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 Directors
• Directors are often shareholders.
• Executive directors participate in the
daily operations of the organisation.
• Non-executive directors do not take part
in the day-to-day running of the
organisation.

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 Management
• Operational management usually
consists of career managers who are
recruited to operate the business and are
accountable to the board.

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 Non- commercial organisations
• Non- commercial organisations do not
exist to make profits.

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 Examples of non- commercial
organisations
• Trade unions e.g. Mine Workers Union of
Zambia (MUZ)
• Professional associations- Engineering
Institute of Zambia (EIZ), Zambia Institute of
Marketing (ZIM), Zambia Institute of
Chartered Accountants (ZICA).
• Employers’ associations- Zambia Federation
of Employers (ZFE)
• Charities e.g. Red Cross, Oxfam
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 Advantages of Non-commercial
Organisations
• Dedicated staff
• Trusted by users
• Answer social needs
• No profit/social objectives conflict

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 Disadvantages of Non-commercial
Organisations
• Lack of clear objectives
• Difficult to measure efficiency and
effectiveness
• Lack of financial and marketing expertise
• Conflict between services wish to provide
and funds available
• Have to obtain funds in competition with
similar bodies

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 Public Sector Organisations
• A public sector organisation is an organisation
controlled directly and/ or indirectly and/or
funded by central and/or local government.

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 Examples of Public Sector
Organisations
• The Army
• Local authorities or councils
• The Police Service
• Government ministries and departments
• Public schools, hospitals and universities

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 Advantages Public Sector
Organisations
• Economies of scale
• Provision of non-profit facilities
• Allocate resources fairly
• May be more efficient
• Ready finance by taxes or government
backed borrowing

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 Disadvantages of Public Sector
Organisations
• Ignoring waste as taxpayers bear loss
• Political considerations affecting
decision-making
• Cautious management because of fear of
public accountability
• Conflict between economy of operation
and adequacy of service
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