Business and Business Environment

Business and Business Environment Explain the different types, size and scope of organisations

What is a Business

A business may be defined as any organisation that makes goods or provides services.

A business is an organization or enterprising entity engaged in commercial, industrial or professional activities.

A company transacts business activities through the production of a good, offering of a service or retailing of already manufactured products.

  • There are many types of business in the UK. These range from small firms owned and run by just one self-employed person, through to large companies which employ thousands of staff all over the world.

Businesses exist to provide goods or services:Business and Business Environment

  • Goods are physical products such as burgers or cars.
  • Services are non-physical items such as hairdressing.

Types of Organisations

Two Basic Categories of Business:

  • For Profit Businesses

The fundamental characteristic of most businesses is to make profit. Whatever the size of the company, the primary objective of the owners or shareholders is to make as much profit as possible. Examples of “for profit” businesses range from multinational companies such as Coca Cola, BP and Xerox to small, local firms such as your local restaurant, hairdresser or dentist.

  • Not for Profit Business

Usually businesses that are set up as “not for profit” are charities or organisations seeking to provide a service to the community or to improve circumstances for the “social good”. The goal of the business is to spend all of the proceeds on its selected mission and therefore, not to make a profit.

These organisations may generate a profit, but in the UK,

  • not-for-profit organisation does not distribute profits to the owners or shareholders but passes them on to selected recipients or members of the organisation.

Examples of not-for-profit organisations are clubs, societies and charities. These may have widely differing objectives and undertake many different activities. The list include:

  • Charities – which can be formed for many reasons, but always for the benefit of a defined group of people.
  • Clubs – which provide a variety of activities catering for the specific interests of their members, such as sports facilities (for example, rugby, football or tennis), dinner clubs for members to meet new people, young farmers clubs for those working in agriculture, etc.

THE NATURE AND PURPOSE OF BUSINESS

  • What a business does depends on the purpose for which it was established and we shall start our examination of this by considering a fundamental difference in the types of businesses which exist.

General Purpose of For Profit

Businesses

  • Profit maximisation – Making profit is normally essential for a business to survive in the long term
  • Survival – This is the prime objective of a business since, unless a business can generate sufficient sales to cover its running costs, its start up capital will soon be exhausted and it will fail. Once a firm has reached this stage, which often takes a year or longer, it may then change its prime objective to one of the other common business objectives.
  • Market share – Gaining a share of the market for a particular product is essential for a business to survive. If is not possible to achieve a viable level of sales, the firm will fail.
  • Growth – increasing market share – Often firms are forced to grow to survive in their market sector. If they fail to grow their competitors, may take a more aggressive approach and force them out of business.
  • Corporate social responsibility – Although in many cases it willnot be the primary objective, corporate social responsibility is growing in importance. CSR covers a wide range of goals relating to the environment and support for social communities associated with the business

– for example, demonstrating careful use of scarce resources, avoiding use of child labour and funding projects to help disadvantaged members of the local community.

Purposes of Not for Profit Businesses

The primary purpose of not-for-profit businesses will be to fulfil a social need of some kind. Thus, the objective of a healthcare organisation might be to meet the healthcare needs of its community whereas a community play group’s might be to make basic social and learning skills accessible to all pre-school children.

Business and Business Environment

evenue Maximisation remains a key objective of these types of business in order that they have the resources to achieve that purpose. They will aim to generate a high level of income while keeping costs to a minimum in order to maximise the use of that income for the primary purpose.

  • Associated with this, many not-for-profit-businesses have high level of service as an objective – aiming to provide the highest possible level of service or the best service achievable for a given cost. The UK National Health Service aims to do this.
  • Not-for-profit businesses may also seek to generate the maximum income in order to extend the services and benefits they provide

Class Activity

  • Make a list of five “for profit” and five “not-for-profit” businesses that you have regular dealings with.
  • Find out the purpose of their businesses and what their main objectives are.

Types of Business Organisations

Who Is Involved In Business Activity?

Different businesses attempt to do different things, different types of people are responsible for starting them in the first place. In all, 3 main types of businesses (organisations) need to be considered. These are:

  • Public Sector Organisations
  • Private Sector Organisations
  • Voluntary Sector Organisations (e.g. Charities)

Public Sector

Public Sector – is owned and run by the state (Government) for the people. People pay taxes to the Government and this money is used to finance most of the public sector

AIMS:-

  • To provide essential public services
  • To use resources well for the benefit of the community

The 2 most important parts of the State are:- Central Government and Local Government

National Health Service, Social Security, Prisons, Police, Roads, Universities

  • PUBLIC CORPORATIONS These are companies that are owned by central government.
  • A government minister appoints a chairperson and board of directors to run the company on the governments behalf.
  • Public corporations include the BBC and Royal Mail
  • Public corporations receive grants from the government and also raise finance from the public.
  • The BBC charges the public for a TV licence.

Private Sector Organisations

Private Sector Businesses are owned and run by private individuals.

Examples of Private Sector businesses are: Sole Proprietorship, Partnerships, Companies (Private and Public) ,Franchises

AIMS:

  • Profit
  • Increased market share
  • Growth
  • Maximise Sales

Voluntary Organisations

OWNERSHIP: Voluntary groups are not owned by any individual people. However, someone will be responsible for ensuring that it sets targets and budgets and does what it is set up to do.

Aim: In most instances they try to help particular types of people, e.g. guide dogs for the blind, Oxfam etc.

In order to survive they normally must at least break-even (i.e. spend no more than they take in through fundraising , grants and donations)

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