Organizational Behaviour, Types of Ownership, and Mixed Economy Issues - Assignment Example

Organizational Behaviour Task Explain what is meant by the term ‘mixed economy’. A ‘mixed economy’ is referring to the economic system wherein both the private-owned companies and the state-owned companies are present. The economic activities1 of a ‘mixed economy’ normally functions through a combination of capitalism and socialism or both. (Bullock & Trombley, 1999: p. 535) It means that the production of goods within the country is manufactured by both the private and public sector under the control of the government. Task 2: Two friends who work at the same factory are soon to be made redundant. One of them already runs a small business as well as working full time at the factory. Knowing they are likely to receive a quite large redundancy package from their employers, they are discussing how they will use this. They are seriously considering getting together to run the business already owned by one of them. Task 2.a: From the list below, state (1) which forms of business this was originally and (2) what form of business will they be entering into in the future: Originally, the form of business is a ‘Sole Trade’ since there is only one person who owns and runs the business. As soon as the small-time business owner and his friend agree to get together to run the business, both are likely to form a ‘partnership’ business. Normally, a partnership business is owned by two or more individuals who have decided to set up a business. (Weber, 2007) In the process, the partners will share the risks and liabilities as well as the profits earned from the business. The two friends could also end up starting a ‘Private Limited Company’ in order to protect themselves from the possibility of business’ debts such that the owners’ liability in case the company goes bankrupt will only be limited to the amount each shareholder has invested in the company. (HIE, 2008b) A ‘franchise’ business is not applicable in the case of the two friends who are working at the same factory since franchising is an agreement formed between two legally independent parties wherein the franchisor will give the interested franchisee the right to sell the franchisor’s product and service or the use of the company’s name in exchange of the franchise fee. (Beshel, 2000) In the case of the two friends, both are seriously considering getting together to run the business. ‘Public Limited Company’ is also not applicable since this type of business form requires the company to have a public share capital. (M&N Group Limited, 2008a) It means that for a company to be registered as a public limited company, the company has to be a public company which is not true in the case of the owner of a small business who is working in a factory. Given the situation that the two friends are aiming to raise extra money to run the business through the selling of the business shares in the stock market, they should register the business as a public company first at the Companies House. The application for a public limited company will require them to have two shareholders, two directors and a competitive company secretary. (HIE, 2008) ‘Co-operative’ is also not applicable in the case of the two friends. A co-operative enterprise is owned and operated equally by individuals who have invested in the co-op for the benefits of using its services. (International Co-operative Alliance, 2007) Normally, a co-operative is owned by the key stakeholders coming from each businesses within the same industry. Task 2.b: Compare the advantages and disadvantages of the two different kinds of ownership. Advantages Disadvantages Partnership Easy to start a business partnership than private limited company. Possible tax avoidance. Low business start-up costs. Additional capital funds from each new partner Limited business regulations. Bigger management base than sole trade. Absence of business continuity in case of a serious monetary or internal conflict between owners. Divided authority among the business owners. Business’ debts become personal debts. Difficult to find good business partners. Difficult to raise additional funds to run the business in case of tight economic condition. Private Limited Company Business owners will enjoy a limited business liability in times of financial crisis. Business owners will have the option to pay employees with company’s dividends for their pension in exchange of monetary fund. The ownership and business control are closely interconnected such that the business’ Board of Directors are also the business’ shareholders. Takes longer time and effort to register and form a Private Limited Company than partnership. Additional cost and work load when filing the annual statement at the Companies House. The business will have to pay for the corporate tax. Business processes will have to go through some level of bureaucracy within the business structure. Requires more book record keeping. Task 3: Matching Type Question. Types of Ownership Typical Features 1. Sole Trade There is only one owner in this business but there may be several people working in the company as paid employees. All the profits and for the company are yours but if the company goes bankrupt you can lose everything you own, including your home, car, and other property. 2. Partnership All the profits and for the company are yours but if the company goes bankrupt you can lose everything you own, including your home, car, and other property. 3. Franchise Someone trades under a well-known name, using their products, logs, colour-schemes, marketing materials, (i.e. McDonalds) 4. Public Limited Company This company has shares which are floated on the open stock market and are available for members of the general public to buy. There can be between 2 and 20 people who own this type of business. Plc. 5. Private Limited Company Only the directors are allowed to have shares and these shares are not for sale on the open stock market. Ltd. Liabilities for this kind of company are limited and in this case you only lose the investment you put into the company. 6. Charitable Organization This type of organisation does not operate for profit. This company must register its status to gain tax relief and/or benefits. 7. Public Sector Company This company is set up by government ministers to monitor and control organizations which were once owned by the government and were known as Nationalised Industries. This kind of organization is run on behalf of the public and provides services and facilities for the running of either local regions or the country as a whole. 8. Multinational This organisation has branches all over the world and has a main head quarters in one country while having regional headquarters in other countries. 9. Quango Non-governmental quasi-autonomous non-governmental organisation. One of its objectives is to raise public awareness of the problems facing other individuals, countries, wildlife, the environment, etc. Task 4.a: Explain what is meant by ‘centralisation’ and ‘decentralisation’. Centralisation – “the act of consolidating or combining the power to control a business under a central control unit or department.” (Farlex Dictionary, 2008a) It means that the entire company (regardless of whether the business have different branches and plant location), the business is still operated under a single monitoring unit. For example: A well-known clothing retailer may have different store locations but its purchasing activities is being controlled under one purchasing department. Decentralisation – “the spread of power away from the centre to local branches or departments.” (Farlex Dictionary, 2008b) In the case of a decentralised business practice, the purchasing of goods of a clothing retailer is not controlled by one purchasing department. It means that each of its store manager has the right to select its chosen supplier. Task 4.b: Describe two advantages and two disadvantages for centralisation. Advantages Disadvantages The business owner could control the purchasing activities. Therefore, minimizing the possibility of ‘red tape’ or other unethical business practices such as bribery or illegal business transaction. Failure to establish a good central control business unit could result to business opportunity loss in the long-run. For example: inefficient purchaser may fail to keep track on items that have run out of stock. This will cause some down-time loss in the case of a manufacturing firm. Effectively control the quality of raw materials or purchased items needed in the business’ daily operations. There is a higher risk for store managers to feel less authority in terms of controlling the business. Task 4.c: Describe two advantages and two disadvantages for decentralisation. Advantages Disadvantages Store managers could easily act upon minor or major operational problems without having the need to wait for the final decision coming from the higher business managerial level. High possibility of illegal and unethical business practices especially when it comes to the purchase of raw materials and finish goods needed in running the business. Decentralisation could increase the work motivation and innovation of managers who are goal-oriented by nature. Less control over the purchase of raw materials and other goods resulting to inefficient quality of goods sold in each retail store outlets. Task 5.a: Describe one likely or typical objective of the ff. organizations: Red Cross – The British Red Cross in UK help protects the health and well- being of the local citizens and people around the world by responding to people who are facing different kind of emergencies related to the victims of transportation accidents as well as the need to evacuate a geographic area caused by fire and floods. In the process, Red Cross render actual and training services related to first aid. (British Red Cross, 2008a) World Trade Organization (WTO) – WTO provides the global trade rules and promotes a global free trade by convincing each country to abolish import tariffs in order to smoothen out the trading activities from one country to another. (BBC News, 2008) In line with this matter, WTO implemented the General Agreement on Tariffs and Trade (GATT) in order to reduce tariff rates, facilitate the trading system globally by removing any forms of potential trading barriers. (WTO, n.d.) International Monetary Fund (IMF) – The main objective of the IMF is to monitor and maintain the progress of economic and financial developments in each country. (International Monetary Fund, 2008a) In order to prevent the possibility of a global financial crisis, IMF offers technical assistance, trainings and financial advice on how to avoid such crisis. Task 5.b: What kind of social and/or environmental issues might affect these businesses? Red Cross Diseases such as HIV and AIDS can affect the main objective of Red Cross in terms of protecting the health and well-being of each individual. (British Red Cross, 2008b) In order to avoid the transmission of HIV and AIDS virus globally, Red Cross is exerting effort on educating people on ways to protect themselves from life-threatening diseases. Aside from epidemic diseases, British Red Cross is also affected by the uncontrollable global climate changes. (British Red Cross, 2008c) Basically, the negative consequences of climate changes increase the incidence of weather related disasters around the world. World Trade Organization (WTO) There are people around the world who are opposing with the main goal of WTO due to the fact that the economic progress in some countries will be negatively affected by the changing business laws and regulations. (BBC News, 2008) Most of these individuals believe that WTO will benefit mostly the developed countries such that the promotion of global trading could negatively affect the manufacturing side of many countries that are not able to compete well with other countries in terms of productivity, economies of scale and including the limited available jobs caused by a huge number of local businesses that are forced to close down caused by tight competition in the market. International Monetary Fund (IMF) The increasing cost of food worldwide affects the IMF’s main goal in terms of maintaining the economic progress, financial developments and poverty reduction in each country. (International Monetary Fund, 2008b) In line with the higher prices of food, IMF strongly suggests the need to increase the global food supply in order to prevent a hunger among the poor families in each nation/country. Aside from increasing the global food supply, IMF encourages each country to avoid raising taxes on food import and export. (International Monetary Fund, 2008b) References: “BBC News.” 29 March 2008. Profile: World Trade Organization . 20 May 2008 . Beshel, Barbara. “IFA Educational Foundation Sponsored by Pepsico Foundation.” 2000. An Introduction to Franchising. 20 May 2008 . “British Red Cross.” 2008a. What We Do int eh UK. 20 May 2008 . “British Red Cross.” 2008b. HIV volunteering in Ethiopia. 20 May 2008 . “British Red Cross.” 7 May 2008c. World Red Cross Day: Climate change is humanitarian issue. 20 May 2008 . Bullock, Alan and Stephen Trombley. Mixed economy entry in The Norton Dictionary of Modern Thought. W. W. Norton & Company , 1999. “Farlex Dictionary.” 2008a. Centralisation. 20 May 2008 . “Farlex Dictionary.” 2008b. Decentralisation. 20 May 2008 . “HIE.” 2008. Q&A: From sole trader to a private limited company. 20 May 2008 . “HIE.” 2008b. Q&A: From sole trader to a private limited company. 20 May 2008 . “International Co-operative Alliance.” 26 May 2007. Statement on the Co-operative Identity. 20 May 2008 . “International Monetary Fund.” 2008. What the IMF Does. 20 May 2008 . “International Monetary Fund.” 10 April 2008b. Food Price Rises Threaten Efforts to Cut Poverty—Strauss-Kahn. 20 May 2008 . “M&N Group Limited.” 2008a. What is a Public Limited Company? 20 May 2008 . Weber, Stephen. “bytestart.co.uk.” 11 October 2007. Business Structures: Sole Trader, Limited Liability Company, Partnership or LLP. 21 May 2008 . “WTO.” n.d. Chapter 1 Objectives and Organisation of the WTO. 20 May 2008 . Read More