Business Mangment 1.2 conspect:
Private sector: owned and controlled by private indviduals. Goal – earn profit (sales revenue – costs).
Public sector: owned and controlled by government. Goal – provide essential goods and services (usually
those that are unefficient).
Reasons for public sector business: ensure that everyone has accesess to basic services (health care,
libraries), to avoid wasteful competition (postal offices), protect citizens (police), create employment
opportunities (school, police, healthcare instituitions) and to stabilize the economy (national banks).
Types of organizations:
Sole traders: one indvidual who runs and owns the business. Business is unincorporated that means
every responsibility is on the owner.
Advantages: Few legal formalities, more profit, your own boss, privacy, quicker decision-making.
Disadvantages: unlimited liability, limited sources of finance (no investors), high risks, a lot of stress and
workload.
Partnership: for-profit private sector business owned by 2 or more persons.
Advantages: financial strength, specialisation of labour (more experience), financcial privacy, cost-
effectiveness (more efficient).
Disadvantages: unlimited liability, a lcak of harmony and continuity, longer times for desicion-making.
Privately held companies: limited liability companies that cannot raise capital from the general public
via a Stock Exchange.
Advantages: limited liability, productivity, tax benefits.
Disadvantages: comunication problems, bureaucracy, loss of control.
Publicly held companies: companies that advertise and sell their shares to the general public.
Floatation – when a publicly held company first sells all or part of its business to external investors.
IPO – initial public offering.
For-profit social enterpsrises:
1) Private sector companies: reinvest or donate their profits;
2) Public secotr companies: formed by government. Goal is to provide service and raise
government revenues;
3) Cooperatives: for-profit social enterprises owned and run by their members. Types: consumer ,
worker and producer.
Advantages (of cooperatives): incentives to work, decision-making power, social benefits, public support.
Disadvantages: limited sources of finance, slower decision-making, limited promotional opportunities.
Private sector: owned and controlled by private indviduals. Goal – earn profit (sales revenue – costs).
Public sector: owned and controlled by government. Goal – provide essential goods and services (usually
those that are unefficient).
Reasons for public sector business: ensure that everyone has accesess to basic services (health care,
libraries), to avoid wasteful competition (postal offices), protect citizens (police), create employment
opportunities (school, police, healthcare instituitions) and to stabilize the economy (national banks).
Types of organizations:
Sole traders: one indvidual who runs and owns the business. Business is unincorporated that means
every responsibility is on the owner.
Advantages: Few legal formalities, more profit, your own boss, privacy, quicker decision-making.
Disadvantages: unlimited liability, limited sources of finance (no investors), high risks, a lot of stress and
workload.
Partnership: for-profit private sector business owned by 2 or more persons.
Advantages: financial strength, specialisation of labour (more experience), financcial privacy, cost-
effectiveness (more efficient).
Disadvantages: unlimited liability, a lcak of harmony and continuity, longer times for desicion-making.
Privately held companies: limited liability companies that cannot raise capital from the general public
via a Stock Exchange.
Advantages: limited liability, productivity, tax benefits.
Disadvantages: comunication problems, bureaucracy, loss of control.
Publicly held companies: companies that advertise and sell their shares to the general public.
Floatation – when a publicly held company first sells all or part of its business to external investors.
IPO – initial public offering.
For-profit social enterpsrises:
1) Private sector companies: reinvest or donate their profits;
2) Public secotr companies: formed by government. Goal is to provide service and raise
government revenues;
3) Cooperatives: for-profit social enterprises owned and run by their members. Types: consumer ,
worker and producer.
Advantages (of cooperatives): incentives to work, decision-making power, social benefits, public support.
Disadvantages: limited sources of finance, slower decision-making, limited promotional opportunities.
