20 pages/≈5500 words
The Different Types And Scope Of Business Organizations Structures (Essay Sample)
discuss the following;
BUSINESS AND BUSINESS ENVIRONMENT
The different types and scope of business organizations
Scope of organizational structures
Macro factor influencing organizations activities
Name Tutor Course Date BUSINESS AND BUSINESS ENVIRONMENT The different types and scope of business organizations The major types of organization include: * Sole trades * Partnerships * Limited companies * Franchise * Licensing companies * Joint ventures The sole trader This is the most common type of business ownership and has a wide range of activities for instance; plumbing, electrical work, catering, construction. (Fleischmann et al., 98). No ambiguous paper work requirements to start a sole trade business. Decisions can be made quickly and close contact can be kept with ones ‘customers and employees. All profits are enjoyed by the owner who has the responsibility and mandate to build up his business enterprise. It has some disadvantages .As a sole trader one has to make all decisions by himself, working long hours to achieve the business needs which can be even risky if one gets ill (Fleischmann et al. 97). You also have to provide all the finances by yourself. As sole trader you need to act a jack-of all –trade. This may be unrealistic in that one cannot have all the business skills required just because they are electricians for example. The partnership An ordinary partnership is formed by two to twenty partners. However, the partnership Act 2002 which is an act of parliament has made it legal for some forms of partnerships for example, big law firms to have more partners who have a limited liability (Jennings, 205). People forming partnerships can share workload and contribute their skills from respective fields of specializations. It’s also easy to share the capital requirement needed. For example two or more lectures are able to pool knowledge on different subjects and can be able to work on shifts. If one falls ill the business can still go on. Partnerships are usually set up by writing out a deed of partnerships which is witnessed by the solicitor and sets out the important details such as how the profits and loses will be shared. Companies A company is formed by shareholders with directors appointed to give directions to the business. The chief executive is the most senior official within the company with the responsibilities for making major decisions. Appointment of Some specialized managers is done to run and control the business on behalf of the board (Fleischmann et al. 96). Companies are bodies with legal capacity and a right of existence on their own separate from their owners.so they can sue and be sued on their own name. Funding of the organization is done through purchase of shares. The shareholders status is of limited liability which means they are protected from losing a certain amount in case the organization makes loses (Jennings, 201). All companies have to register with the office of the register of companies and attain an official address. Limited liability is a form of business protection for company shareholders including some limited partners. Franchising Franchising is the ‘hiring out ‘or licensing of the use of ‘good ideas ‘to other companies. A franchise gives permission to sell a product and trade under a certain name in a particular area. In case I have good idea, I can sell you a license to trade and carry a business using my idea in your area (Carroll et al., 302). The person taking out franchise puts down a sum of money as capital and is issued wit equipment by the franchising company. The firm selling the franchise is called the franchisor and the person paying out for the franchise is called the franchisee. Joint venture A joint venture is considered to be more binding than franchise. It's a mutual agreement between two companies to provide resources to assist each other for agreed period and payment. A joint venture is where two companies come together to attain goal that they could not attain separately. It may be within a short period of time or take several years. Licensing organizations These are more like government agencies granting individual s license to allow them trade to business or other individuals their intellectual property. A license acts as a contract through one party can grant another the right to use its copyright, trademarks, patent and logos(Carroll et al., 306).The individual or organization getting the patent pays some fees known as royalties to the owner. The agreement therefore does not stand as permanent transfer of ownership for the intellectual property. Difference between for profit and nonprofit organization The most significant difference between for profit and nonprofit organization is their reason for existence. Profit organizations are mainly set up to generate income to their owners and their employees whereas nonprofit are commonly established to provide humanitarian service or environmental needs. According to Carroll et al., (302), all funds collected by nonprofit organizations are channeled towards meeting people and environment unmet needs like water, shelter food and education if not so they may be also directed towards issues like forestation and securing endangered species. Profit organization provide products on demand to the market places and money earned on the sales is distributed to the stakeholder in terms of their shares in the business Difference in Features Carroll et al., (310) stipulates that cash and receivables come as sales revenue to profit making organisations. The organization depend on collected capital arrangements coming in form of their earned income and some credit arrangement from their lenders and suppliers to fund their operations. For profit organizations however, get their funds from the government mostly (Carroll et al., 315) .Other funds can come in form of grants and donations from well-wishers and other interested organizations. The methods of acquiring income by both entities determine how they get to use the proceeds in their functions .nonprofit organizations ensure that they spent their income in ways that derive maximum utility to their recipients. In the case of profit driven organizations they have to ensure their debts and other expenses are cleared and then the profit is spent as per a laid down structure. Tax and liability factors Profit-making organizations have a tax structure which depends on the nature of organization. Sole proprietors and partnerships incomes are treated as personal income and owners are liable for all their business debts. Nonprofit making organizations are can be accepted from tax by registering as such. Organizations contributing to nonprofit organization are offered some tax incentives as well for Workforce composition Workforce composition is difference between the two organizations. For profit employees take a form of salaried and part time paid employees, with some occasional trainee’s. Nonprofit organizations however employ a certain small workforce and large percentage of volunteers. The process for hiring and firing is also different, employee motivation direction and communication protocols may also vary between the two organizations for both paid and volunteer employees. Difference in organizational structure of small, medium and large organization Organization structure makes a foundation over which most businesses operate and grow. Organization structure is different in small and large organizations where by small organization is represented by few layers of managers and less employees in their chart. Large organization is represented by organization structure of many layers with a load of employees ranging from senior officials to ground supervisors. Decision making process According to Storey (416), long term decision making is centralized in the smaller organizations as compared to large organizations. Within the first years large organization can cope with decision making but with increase in capacity to handle it becomes more complicated and not a single or few people can do it. The allows decision making to move away from the main offices or the headquarters to the various branches thus creating different layers of management Individual responsibility In large organizations each individual has his work clear cut while in smaller organizations one has to handle a wider area of responsibility than his counterpart in large organization. Locations Large organization have numerous number of offices , retail outlets and service centers whereas small organizations are less spread out .This is because large organization need to serve a large population whereas small organizations have a specific target population that they concentrate upon(Storey, 425). Their main aim is to ensure complete satisfaction to their clients and gain control of their targeted clients. Communication Organization structure has some formal communication structure or flow of information. Communication in the level of interpersonal level becomes less as the organization grows .these calls for use of electronic means of communication in terms of phone mails and faxes in large organizations due to distance. Different business purposes Purpose involves an organizational statement of long term plans which is known as the mission of the organization. It explains the reasons why a company is in existence. Goals define the actions necessary for the organization to get to its objectives. Originations also have objectives which are short term goals Implementation Laying down organization goals is the priority process, where the senior management should be in the forefront. Depending with organizations size divisional leaders may also be involved. Other employees also should be involved to include their input so that it could be a collective effort and everybody is brought on board. Considerations Organizations can gauge their performance by financial growth of their enterprise. The financial indicator that can be used include; liquidity, asset utilization, profitability. Taking an example of growing company by get...
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