Business

Organisations
 The Nature of Firms
 The importance of understanding the organisation of
businesses
 The nature of firms
– complex production e.g. 4 steps of production of bread:
agriculture, flour, mixing, baking etc.
• organising production through markets – separate
contracts
• organising production through hierarchies – the firm
– organising production within firms
• reduction in transactions costs
– problems of market arrangements
• Uncertainty in contracts due to lack of perfect knowledge
• complexity of contracts (many stages of production)
• monitoring and enforcing contracts
 The Nature of Firms

 Goals of the firm

 The traditional theory of the firm

 Alternative theories

– the divorce of ownership from control

– the development of the joint-stock company

– managerial objectives e.g. market share / as a stepping stone to new

position
 The Nature of Firms

 The principal–agent relationship

– asymmetric information
– dealing with imperfect information
• monitoring
Satisficing
• incentives

 The goal of staying in business

– problems of taking on too much risk
– problems of being overly cautious
 The Firm as a Legal Entity
 The sole proprietor to be one's own boss

– unlimited liability
 The partnership
– unlimited and limited liability partnerships
 Companies
– limited liability
– public limited companies (plc)
• public issues of shares
• shares traded on the Stock Exchange
– private limited companies
– consortia
– co-operatives: producer and consumer
– public corporations
 The Internal Organisation of the Firm

 U-form
 U-form business organisation

Chief executive

Production Finance Sales Purchasing

 The Internal Organisation of the Firm

 U-form
– Advantages – efficiency for SMEs
– problems when firms expand beyond a
certain size
• bounded rationality
• communications costs
• distorted information
• decline in organisational efficiency
 M-form business organisation

Head Office

Division 1 Division 2 Division 3

Production Finance Sales Purchasing

 The Internal Organisation of the Firm

 U-form
– advantages
– problems when firms expand beyond a certain size
• bounded rationality
• communications costs
• distorted information
• decline in organisational efficiency
 M-form
– advantages and disadvantages
 The Internal Organisation of the Firm

 The flat organisation

 Multinationals and business organisation

– H-form

– integrated international enterprises – clear

corporate philosophy, common aims and objectives

– transnational associations (global sourcing)

 The Walt Disney Company (Holding Company)
Walt Disney
Company
(Holding company)

Media Parks and Consumer Studio

Networks Resorts Products Entertainment

SEE Adventures by Disney Disney Walt Disney Disney Publishing Disney shopping Disney Interactive Studios SEE
BELOW Cruise Line Resorts & BELOW
Worldwide

Walt Disney Disneyland Disneyland Tokyo Disney Hong Kong ESPN Disney Vacation
World Resort Resort Paris Resort Disneyland Zone Club

ABC TV and Radio Walt Disney Internet Cable Animated Television

Network Group operations & Production

10 affiliate 72 radio ESPN and other The Disney Walt Disney Disney-Pixar
TV stations stations cable networks Channel Television & Animation Studios
Animation

Disney Home Disney Disney

Entertainment Theatrical Music Group
Productions

Walt Disney Touchstone Miramax Hollywood Walt Disney Hollywood Lyric Street
Pictures Pictures Films Pictures Records Records Records
 The Walt Disney Company (Holding Company)
Walt Disney
Company
(Holding company)

Media Parks and Consumer Studio

Networks Resorts Products Entertainment

SEE Adventures by Disney Disney Walt Disney Disney Publishing Disney shopping Disney Interactive Studios SEE
BELOW Cruise Line Resorts & BELOW
Worldwide

Walt Disney Disneyland Disneyland Tokyo Disney Hong Kong ESPN Disney Vacation
World Resort Resort Paris Resort Disneyland Zone Club

ABC TV and Radio Walt Disney Internet Cable Animated Television

Network Group operations & Production

10 affiliate 72 radio ESPN and other The Disney Walt Disney Disney-Pixar
TV stations stations cable networks Channel Television & Animation Studios
Animation

Disney Home Disney Disney

Entertainment Theatrical Music Group
Productions

Walt Disney Touchstone Miramax Hollywood Walt Disney Hollywood Lyric Street
Pictures Pictures Films Pictures Records Records Records
 The Walt Disney Company (Holding Company)
Walt Disney
Company
(Holding company)

Media Parks and Consumer Studio

Networks Resorts Products Entertainment

SEE Adventures by Disney Disney Walt Disney Disney Publishing Disney shopping Disney Interactive Studios SEE
BELOW Cruise Line Resorts & BELOW
Worldwide

Walt Disney Disneyland Disneyland Tokyo Disney Hong Kong ESPN Disney Vacation
World Resort Resort Paris Resort Disneyland Zone Club

ABC TV and Radio Walt Disney Internet Cable Animated Television

Network Group operations & Production

10 affiliate 72 radio ESPN and other The Disney Walt Disney Disney-Pixar
TV stations stations cable networks Channel Television & Animation Studios
Animation

Disney Home Disney Disney

Entertainment Theatrical Music Group
Productions

Walt Disney Touchstone Miramax Hollywood Walt Disney Hollywood Lyric Street
Pictures Pictures Films Pictures Records Records Records
 The Walt Disney Company (Holding Company)
Walt Disney
Company
(Holding company)

Media Parks and Consumer Studio

Networks Resorts Products Entertainment

SEE Adventures by Disney Disney Walt Disney Disney Publishing Disney shopping Disney Interactive Studios SEE
BELOW Cruise Line Resorts & BELOW
Worldwide

Walt Disney Disneyland Disneyland Tokyo Disney Hong Kong ESPN Disney Vacation
World Resort Resort Paris Resort Disneyland Zone Club

ABC TV and Radio Walt Disney Internet Cable Animated Television

Network Group operations & Production

10 affiliate 72 radio ESPN and other The Disney Walt Disney Disney-Pixar
TV stations stations cable networks Channel Television & Animation Studios
Animation

Disney Home Disney Disney

Entertainment Theatrical Music Group
Productions

Walt Disney Touchstone Miramax Hollywood Walt Disney Hollywood Lyric Street
Pictures Pictures Films Pictures Records Records Records