definition

 A group of people, working together over a period of time to achieve common goals or
objectives.

why do they
exist ?

 People have various needs which cannot be obtained from a single source
 Overcome people’s individual limitations
 Allows people to specialize
 Save time by co-operating and combining their efforts to achieve objectives

INTRODUCTION TO ORGNISATIONS
 Knowledge or information sharing.

general categories of organizations

COMMERCIAL GOVERNMENT CHARITABLE SOCIAL

DEPARTMENTS
 They are profit  Non-profit  Non-profit  Non-profit
oriented oriented oriented oriented
 Goods and  Aim is to  To provide  Established to
services are provide service to the provide social
provided at a essential public especially interaction for
price services to the those who are members who
 Aim is to public/society underprivileged share a
reduce cost and  Normally eg the poor, common
increase income subsidized by physically interest eg
(profit the government handicapped, chess club,
maximization) through old folks etc cookery club,
taxpayers  Capital or toastmasters
money income is club, computer
obtained club etc
through public  Income is by
donations way of
membership
1–
fees
UNIT

types of organizations
(1) Sole Trader
(2) Partnership
(3) Private Limited Company
(4) Public Limited Company
(5) Public Sector

INTRODUCTION TO BUSINESS Systematic 01-01

Unit 1 - Introduction To Organisations College Johor
Bahru
 Advantages Disadvantages

 Ease of formation; procedures  Difficulties to raise funds for

are simple start/expansion of business
 Control measures are simple and  Lack of stability/permanence –
SOLE TRADER flexible should owner die or fall ill,
 Small capital needed business will be affected
Characteristics Independence in decision

 Unlimited liability
 Classified as small making
business  Limited by personal capabilities
 Does not have to share profit
Owner may not be able to handle
 Registered under one  Tax is usually low; owner pays
owners name only all business operation when the
only personal income tax
business grows
 Presence of personal element:
 personal interest in the
development of the business
 close relationship with workers
and customers

Advantages Disadvantages

 Capital increase as a result of  Profit sharing

partners contributions
 Easier to expand business
PARTNERSHIP  Interests and responsibilities are
shared among partners
Characteristics  Personal element is retained
 Classified as small  personal interest in the
business development of the business.
 More than one  close relationship with workers
registered owner and customers.
 Specialization of skills occur - each
partner can concentrate on the
work that he is suited or trained
for. There is greater efficiency
and higher productivity
 Unlimited liability. Partners are
not only responsible for their
own actions, they are responsible
for the actions of their partners
 Authority is limited
 Partnerships can be terminated
as a result of:
 death of partners
 withdrawal of partners
 insanity of partners
 war between nations of which
partners are citizens.
 Disagreements among partners
can severely affect business

Advantages Disadvantages
PRIVATE LIMITED
COMPANY  Limited liability  The procedures/formalities
 A Board of Directors is elected to involved in setting up the
Characteristics ensure that the organization business is more rigid
 Part of the functions smoothly  Ownership is only limited to
registration  A Managing Director (MD) is either family members or other
procedure involves selected to oversee the closely related groups
the submission of the company’s daily activities (ie relatives or friends)
following documents:  There is capital increase via  Shares cannot be offered for sale
(a) Memorandum of members contributions to the public
Association  There is specialization of skills  Transference of shares from one
(b) Articles of holder to another must first be
Association  Business is continuous
approved by other existing
 On registration the shareholders
company is allowed  Changes and propositions in the
to have the business are subject to 51% vote
abbreviation ‘Ltd’ from existing shareholders
after its name before it can be passed
 It is normally a  Disagreements among
family business shareholders can badly affect the
business

INTRODUCTION TO BUSINESS Systematic 01-02

Unit 1 - Introduction To Organisations College Johor
Bahru
 Advantages Disadvantages
PUBLIC LIMITED
COMPANY  Increase in capital as a result of  Formalities involved in setting
selling shares to the public up the business is more rigid as
 Limited liability they have to follow strict
Characteristics government regulations
 A company with at  Shares can be freely transferred
without the approval of other  There is constant pressure to
least 2 shareholders
can register itself as shareholders perform well in business.
a Public Limited  There is a large pool of human Otherwise the public will lose
Company. resources confidence in the organization
In the UK a £50,000 and will be reluctant to purchase
  Death or withdrawal of a
issued share capital the company’s shares. This will
shareholder will not affect the
is required as part of affect business badly causing
existence of the company
the qualification. share prices to drop
 On registration the  Proper documentation must be
company will carry maintained carefully at all times
the abbreviation according to the strict
‘Plc’ after its name. government rules. Financial
 They can issue statements have to be audited
shares for sale to the and then published for
public shareholders

PUBLIC SECTOR Advantages Disadvantages

Characteristics  Fairness. Everyone can gain  Efficiency may be ignored as

 Organizations access to the services provided losses are covered by taxation.
owned and run by eg education, healthcare,  Political interference.
the government and security Organizations’ operations may
local government,  They are expected to show a be seriously affected by political
eg. general great sense of responsibility to changes or decision making.
hospitals, army, the public because the  Complexity of management
schools and corporation is answerable to the
universities,  They can cover their costs quite
parliament simply by raising their prices.
government
departments  Economies of large scale
 They are  Better financing. Government
accountable to the backed loans are cheaper
parliament  Free from taxation
 Funding is made
available through:
 raising taxes
 fees (passport
charges,
processing fees etc)
 borrowing

INTRODUCTION TO BUSINESS Systematic 01-03

Unit 1 - Introduction To Organisations College Johor
Bahru