Professional Documents
Culture Documents
Lecture 1 - Types of Business Organization
Lecture 1 - Types of Business Organization
Types of business
organization
Contents
Macro
environment
<TITLE>
Economic (PESTLE) Non-economic
Internal
environment
The company
External
environment
Micro environment
Competitors
(Competitive environment) Public
Customers
Marketing
Suppliers intermediaries
4
INTERNAL
ENVIRONMENT
II. Types of organizations
TYPES OF BUSINESS
ORGANIZATION
1. Non- profit and profit
2. Listed on the stock exchange market: public or
private (mở-đóng)
3. State-owned enterprise or public-owned enterprise
1_ Non-profit
organization
• Non-profit organisation are legal or social entities created for the
purpose of producing goods and services whose status does not
permit them to be a source of income, profit or other financial gain for
the units that establish, control or finance them
• They may be created for charitable, philanthropic or welfare reasons
to provide goods or services to other persons in need
• Due to their unique purposes, they are frequently exempted from
various kinds of taxes
1_Non-profit organization
1_Non Government
Organizations
Otherwise, PRIVATE-OWNED
• Unlimited liability
• Difficult to raise finance
• May be difficult to specialize
or enjoy economies of scale
• Problem with continuity if
sole trader retires or dies
Partnership
• In essence, a partnership comes into being when
two or more people establish a business which they
own, finance and run jointly for personal gain,
irrespective of the degree of formality involved in the
relationship
• A partnership can range from a husband and wife
running a local shop as joint owners to a firm of
accountants or lawyers
• While it is not necessary to have a formal written
agreement, most partnerships tend to have a Deed
Partnership
A Deed of Partnership may contains:
• Amount of capital each partner should provide
• How profits or losses should be divided
• How many votes each partner has (usually based on
proportion of capital provided)
• Rules on how take on new partners
• How the partnership is brought to an end, or how a
partner leaves
Partnership – Advantages
• Spreads the risk across more people.
• Partner may bring money and resources to the
business.
• Partner may bring other skills and ideas to the
business, complementing the work already done by
the original partner.
• Increased credibility with potential customers and
suppliers
Partnership – Disadvantages
• Have to share profits
• Less control of business for individual
• Disputes over workload
• Problems if partners disagree over of direction of
business
Limited company
• In law, a company is a corporate association having
a legal identity in its own right.
• All property and other assets owned by the company
belong to the company and not to its owners.
• By the same token, the personal assets of its
members (the shareholders) do not normally belong
to the business.
Limited company - Example
Limited liability
Limited liability means that investors can only lose
money they have invested 🡪 Encourages people to
finance company
Those who have a claim against company:
• Limited liability means that they can only recover
money from existing assets of business
• They cannot claim personal assets of shareholders
to recover amounts owed by company
Limited company
Controls of a company
• Separate ownership and management of a company
• Shareholders may have money but not time or
management skills to run company
• Day to day running of business is entrusted to
directors
• Have a duty to act in best interests of shareholders
• Have to account for their decisions and performance
Public limited company
Under British law, a Public limited company must have the following
condition
• A minimum of two shareholders
• At least two directors
• Minimum (at present) of £50000 of authorized and allotted share
capital;
• The right to offer its shares (and debentures) for sale to the general
public;
• A certificate from the Registrar of Companies verifying that the share
capital requirements have been met; and
• A memorandum which states it to be a public company
Public limited company
Benefits of being a public limited company
• Availability of finance, especially if business wants
to expand
• It is also easier to raise money through other sources
of finance e.g. from banks
• Improve prestige and reputation
• Increase market value
Public limited company
Drawbacks of being a public limited company
• Costly and complicated to set up as a plc
• Certain financial information must be made available
for everyone, competitors and customers included
• Shareholders in public companies expect a steady
stream of income from dividends
• Losing control - Increased threat of takeover
Public limited company
Risk of shareholders:
• Company reduces its dividend or pays no dividend
• Value of share falls below price shareholder paid
• Company fails and investor loses money invested
Public limited company
To become a PLC, a company must do an IPO
Public limited company
Multi-national company
Multi-national corporations: An enterprise operating in several countries but
managed from one (home) country.
Generally, any company or group that derives (nhận được, lấy được từ) a
quarter of its revenue from operations outside of its home country is
considered a multinational corporation.
Multi-national corporations
There are four categories of multinational corporations:
An example of a TNC is Nestlé who employ senior executives from many countries and
try to make decisions from a global perspective rather than from one centralized
headquarters.
Public sector business
organizations
Public sector organisations Being set up in the
interest of the community and funded wholly or partly by
the government from public funds and answerable to a
government department or the Treasury come in a
variety of forms.
State-owned enterprise
A state-owned enterprise (SOE) can be:
Fully owned
Or partially owned by government (equitization- cổ phần hóa)