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7/29/2019 1.1 Business Ownership
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HOANG LUU, MBA
RANGES OF DIFFERENT BUSINESSES
AND THEIR OWNERSHIP
HOASEN UNIVERSITY-MANCHESTER COLLEGE
2012
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Learning outcomes
• Ranges of different businesses
• Business purposes
• Business ownership• Key stakeholders
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Types of Business Organisation
BTEC Business
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Ranges of different businesses
Sector of business activities – primary
– secondary
– tertiary
Goals/purposes
– public
– private
– not-for-profit/voluntary
Where they operate
– local
– national
– international
– global
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Base on “Where they operate”
• Local: in a town
• National: many provinces
• International: sell products overseas• Global: produce and sell across the globe
Student Activities:Take out a blank sheet of paper and write
down 3 of each types
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International business activities
• International companiesare importers and exporters, they have no
investment outside of their home country.
• Multinational companieshave investment in other countries, but do
not have coordinated product offerings in each country. More
focused on adapting their products and service to each individual
local market.• Global companieshave invested and are present in many countries.
They market their products through the use of the same coordinated
image/brand in all markets. Generally one corporate office that is
responsible for global strategy. Emphasis on volume, cost
management and efficiency.
• Transnational companiesare much more complex organizations.
They have invested in foreign operations, have a central corporate
facility but give decision-making, R&D and marketing powers to
each individual foreign market.
7/29/2019 1.1 Business Ownership
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Base on “Sectors”
The economy can be divided into two sectors:
The Private Sector The Public Sector
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The Private Sector
• Private individuals and firms that are owned
by private individuals
• Firms in the private sector include:
– Sole Traders
– Private Limited Companies (Ltd)
– Partnerships
– Public Limited Companies (PLC)
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Private Sector Firms
One of the key differences is between:
• Sole traders and partnerships whose liability is
unlimited
And
• Private Limited and Public Limited Companies,who have „limited liability‟
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The Public Sector
• Made up of central government, local government,
and businesses that are owned by government
• In the last twenty years the number of
government-owned firms in the UK has shrunk massively
• Now, very few examples remain: for instance, the
Royal Mail
(How about Vietnam?)
Activities: Football teams Page 05
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Privatization
The process of transferring ownership of a business, enterprise, agency, public service or
public property from the public sector (a
government) to the private sector, either to a
business that operates for a profit or to a non-
profit organization.
The term can also mean government
outsourcing of services or functions to private firms, e.g. revenue collection, law enforcement,
and prison management.
Ref: http://en.wikipedia.org/wiki/Privatization
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Other Business Types
• Co-operatives are owned by their staff, who
are „members‟ of the firm
• Profits are shared amongst the members
• Losses too must be shared
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Franchises
• Many businesses today are franchises
• A business idea is licensed to a franchisee
• The owners of the brand receive a license
fee• The franchisee gains the right to use the
business brand
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Not-For-Profit/volunteer Businesses
• Many charity-based business organisations are runas „not-for- profit‟ operations
• They typically receive donations or funds fromgroups or government
• Any financial surplus is ploughed back into the business
• The organisation does not aim to generate profits
Case Study: Voluntary Service Overseas
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Business Activity
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Business Activity
• Primary Sector –
– extraction of raw materials from the earth – mining, quarrying, fishing, agriculture, forestry
• Secondary Sector – – Processing of raw materials into finished or
semi-finished products – manufacturing
• Tertiary Sector –
– Service industries – leisure, transport, finance,distribution, retailing, wholesaling,communication
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New Thinking:
• Tertiary Sector – /ˈtər -shē-ˌer -ē/
– transport, energy, water (utilities)
• Quaternary Sector – /kwɔ´tə:nəri/
– finance, trading
• Quinary Sector – [ˈkwaɪnərɪ]
– health, education, research, leisure andrecreation
(After Daniel Bell: 1976 „The Coming of Post Industrial Society‟)
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Business Activity
• Multiple Business Activity – e.g. BP involved in:
• Oil exploration and drilling (Primary)
• Refining oil – production of gas, petroleum, bitumen, lubricants, etc. (Manufacturing)
• Distribution of petrol from refineries to petrol stations and sales of petrol toconsumer (Tertiary)
• Research and Development (Quarternary)
Student activities:
Classify the 10 businesses, Page 06
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Business Activity
• Private Sector: Business activity owned financedand controlled by private individuals
– Sole Traders
– Partnerships
– Private Limited Companies
– Public Limited Companies (PLCs)
– Co-operatives
– Franchises
– Charities
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Objectives of Private Sector Business
Objectives
Profit
Survival
Share Price
Market PowerSales and Sales
Revenue
Efficiency
Quality andInnovation
Image and
Reputation
Environment
Satisficing
Social Issues
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Business Activity
• Public Sector: Business Activity owned, financed
and controlled by the state through government or
local authorities
– Government – key departments set policy and monitor implementation
– Local Authorities – County Councils,
District Councils, Parish Councils
– Health Trusts – Public Corporations – BBC
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Objectives of Public Sector Activity
• Access –
– available to all regardless of location or income
• Quality – – high quality services that do not cut corners
• Affordability –
– services offered at prices that are cheaper than private sector or free at the point of use
• Equity – – available to anyone whatever their background, status, income,
class, race, religion, etc.
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Range of Business Offered by the Public Sector
Roads Allotments Paths and Parks
Schools
Street
Lighting
WasteDisposal
TradingStandards
CemeteriesEnvironmental
Health
Museumsand Arts
EconomicDevelopment andTourism
Planning
Licensing
Care of theElderly
SocialServices
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Range of different businesses Where they operate
local national international global
in a town many provinces sell products overseas
produce and sell on the
globe
Goals/purposes
public private not-for-profit/voluntary Notes
setup or taken over by
gov owned by private citizens setup not to make profit Privatized
Less likely to take risk
large business owned by
shareholders
setup, organized,staffed and run by
volunteers VSO
Owners Government individuals or shareholders supervised by trustees
Objectiv
es wider social service aims Profit
provide services to
wider community
Sector of business activitiesprimary secondary tertiary
extracting raw products
from nature
transforming raw products to
finished or semi-finished
provide services to
individuals and services
manufacturing=making things
retailing=selling things
in small qty
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Business ownership
Part 1
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UK business ownership
This means:
• They are owned by private individuals
• These individuals risk their own money
• The owners‟ reward is the profit they make.
Most businesses in the UK are privately owned.
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Private ownership options
• Sole trader – 1 owner
• Partnership – 2 people or more
• Private limited companies – often a family-run businesswith the protection of limited liability
• Public limited companies – large organisations whoseshares are traded on the Stock Exchange
• Franchises – small business trading with agreement of large firm
• Cooperatives – collectively owned by workers/customers
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Key difference
• Sole traders and partnerships have unlimited
liability. Owners are responsible for all
debts and may have to sell personal
possessions.
• Companies have limited liability. Owners
can only lose their investment even if the
company has huge debts.
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Sole traders
• Easy to set up and give a
personal service
• Owner independent – can
make quick decisions
• Minimum of paperwork
• Knows customers – helps to
avoid bad debts
• Unlimited liability
• Long hours, no cover for
holidays/sickness
• Capital may come from
savings
• Needs business skills
• Business ends on death
Benefits Drawbacks
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Partnerships
• Easier to raise capital
• Problems/ideas can bediscussed
• Greater range of skills/expertise
• Cover for holidays/sickness
• Unlimited liability
• Profits are shared
• May be disagreements
• Decisions/actions legally binding on all partners
• Death of a partner meansshare needs repaying
Benefits Drawbacks
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Key points about companies
• Each company has its own identity in law.
• The company employs staff, not the owner(s).
• The company owns assets, not the owner(s).
• The company operates until it is formally wound up or goes into liquidation.
• The company pays corporation tax on its profits.
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Private limited companies
• Limited liability
• Minimum of 1 director and1 shareholder
• Easy to set up/affairs still private
• Easier to raisecapital/borrow from bank
• Share transfers needagreement of all
• Cannot sell shares to the public
• More regulations to comply
with• Accounting procedures may be more costly
• Death of shareholder has noeffect on company
Benefits Drawbacks
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Public limited companies
• Limited liability
• Increased capital as publiccan buy shares
• Minimum of 2 directors and2 shareholders
• Shares increase in value if company successful
• Operating large scale can
lower costs per unit
• Many regulations to complywith
• Accounts (and problems)are public knowledge
• Shareholders may sellshares if dividends poor
• Original owner may loseoverall control
Benefits Drawbacks
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Review of main types of private
ownership• Sole traders – suitable for one person running small
business with low risk/little investment required
• Partnership – suitable for professional groups,husband/wife businesses, small business needing
different skills• Private limited company – suitable for family
business, essential if risk considerable, eg throughexpensive stock
• Public limited company – suitable for largenational/international operations
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Meeting the Needs
of StakeholdersBTEC Business
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What are Stakeholders?
• Stakeholders are groups of people who have
an interest in a business organisation
• They can be seen as being either external to
the organisation, or internal
• But some may be both!
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Types of Stakeholder
• Owners (I)
• Shareholders (I)
• Managers (I)
• Staffs or employees (I)
• Customers (E)
• Suppliers (E)
• Community (E)
• Government (E)
• I = Internal
• E = External
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Internal and External
StakeholdersInternal stakeholders are those who are members
of the business organisation
• Owners and shareholders
• Managers
• Staff and employees
External stakeholders are not part of the firm
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But…..!
• Some groups can be both internal and
external stakeholders
• Such as staff or shareholders who are also
local residents
• Can you think of any others?
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Characteristics of Stakeholders
1. Owners and Shareholders
• The number of owners and the roles they carry out
differ according to the size of the firm• In small businesses there may be only one owner
(sole trader) or perhaps a small number of partners(partnership)
• In large firms there are often thousands of shareholders, who each own a small part of the
business
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*Managers:
• organise
• make decisions
• plan
• control
• are accountable to the owner(s)
Characteristics of Stakeholders
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Characteristics of Stakeholders
2. Employees or Staffs:
• A business needs staffs or employees to carry out
its activities
• Employees agree to work a certain number of
hours in return for a wage or salary
• Pay levels vary with skills, qualifications, age,location, types of work and industry
and other factors
Activities: Tell the basic difference between wage and salary
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Characteristics of Stakeholders
3. Trade unions:• Represent the interests of groups of
employees.
• secure higher wages, better workingconditions
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4. Employer associations
• Represent the interests of employers in
specific industries
• Employer‟s equivalent of the trade unions.
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Characteristics of Stakeholders
5. Customers:
• Customers buy the goods or services produced by firms
• They may be individuals or other businesses
• Firms must understand and meet the needsof their customers, otherwise they will fail
to make a profit or, indeed, survive
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6. Suppliers:
• Firms get the resources they need to produce
goods and services from suppliers
• Businesses should have effective relationships
with their suppliers in order to get quality
resources at reasonable prices• This is a two-way process, as suppliers depend on
the firms they supply
Characteristics of Stakeholders
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7. Community:
• Firms and the communities they exist in are also in a two-way relationship
• The local community may often provide many of thefirm‟s staff and customers
• The business often supplies goods and services vital to thelocal area
• But at times the community can feel aggrieved by someaspects of what a firm does
Characteristics of Stakeholders
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8. Government:
• Economic policies affect firms‟ costs (through
taxation and interest rates)
• Legislation regulates what business can do
in areas such as the environment
and occupational safety and health• Successful firms are good for governments
as they create wealth and employment
Characteristics of Stakeholders
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Key
stakeholders Preference
Key
stakeholders Preference
1 Customers
High quality, value-for-money products
Brands 5 Trade Unions
secure higher wages,better working
conditions
2 Employees
Securities of
employment
Rate of reward 6
Employer
associations
Represent the interests
of employers in specific
industries
3 Suppliers
Steady orders and
prompt payment
Feel valued by buyers 7
Local and
national
communities
Represent important
interest groups
4 Owners
Being pricipal risktakers; share of profit
increasing; value of
business rising 8 Governments
Want business to be
successful, create jobs
and pay taxes.
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Thank you See you next week