Chapter 1 Business organisations and their stakeholders Qiang

Chapter 1 Business organisations and their stakeholders Qiang Jiang School of Business Sichuan University, China jiang. qiang@outlook. com

Topic list • Purpose of business organisation • Types of business organisation • Stakeholder goals and objectives

1 Purpose of business organisation • A social arrangement which purses collective goals, which controls its own performance and which has a boundary separating it from its environment • Preoccupied with performance, meeting or improving their standards • contain formal, documented systems and procedures • People specialise in one activity • Variety of objectives and goals • Obtain inputs, process them into outputs

1 Purpose of business organisation • Why do organisations exist – Overcome people’s individual limitations – Enable people to specialise in some actives – Save time – Accumulate and share knowledge – Synergy: by bring together two individuals their combined output will exceed their output if they continued working separately

1 Purpose of business organisation How organisations differ – Ownership – Control – Activity – Profit or non-profit orientation – Legal status – Size – Sources of finance – Technology

2 Types of business organisation Profit vs non-profit orientation goal Profit orientated Non-Profit orientated Primary goal Maximise profit Provision of goods/services secondary goal Output of goods/services Minimise cost of primary goal

2 Types of business organisation • Private vs public sector – Private sector: organisations not owned or run by central or local government, or government agencies. – Public sector: organisation owned or run by central or local government or government agencies.

2 Types of business organisation • Legal status – Sole traderships – Partnerships – Limited company

2 Types of business organisation • A limited company has a separate legal personality from its owners. the shareholders cannot normally be sued for the debts of the business unless they have given some personal guarantee. their risk is generally restricted to the amount that they have invested in the company when buying the shares.

2 Types of business organisation • Characteristics of limited company – Shareholders are the owners – Directors are appointed by shareholders to run the company Ø executive directors Ø Non-executive directors – Operational management career managers

Types of limited company X limited(private) X PLC(pulic) Number of shareholders Small number Wider proportion of the investing public Transferability of share Transferable with the consent of the shareholder Trade on stock exchang Diretors as shareholders Hold a portion of shares Source of capital founder/promotor Business associates Venture capitalists the public Institutional investors

2 Types of business organisation Advantages of limited companies l. More money l. Reduces risk l. Separate legal personality l. Ownership is separate from control l. No restrictions on size l. Flexibility: capital and enterprise brought together Disadvantages of limited companies l. Legal compliance costs l. Shareholder have little power, only sell share

2 Types of business organisation Characteristics public sector Ownership and management government objectives variety accountability To parliament funding Raising taxes, making charges, borrowing Demand for service limitless resource Limited

2 Types of business organisation Advantages of the public sector Disadvantages of the public sector l. Fairness lproviding Public goods l. Public interest l. Economies of scale l. Cheaper finance lefficiency l. Accountability l. Interference lcost

2 Types of business organisation • Non-governmental organisations – Independent voluntary association of people – For some common purpose

2 Types of business organisation • Co-operative societies and mutual associations – Open membership – Democratic control (one member, one vote） – Distribution of the surplus in proportion to purchase – Promotion of education

3 Stakeholder goals and objectives • Stakeholders are those individuals or groups that, potentially, have an interest in what the organisation does. – Internal stakeholders – Connected stakeholders – External stakeholders

3 Stakeholder goals and objectives • Internal stakeholders: employees and management – Organisation’s continuation and growth – Individual interests can be harnessed to the goals of the organisation

3 Stakeholder goals and objectives • Connected stakeholders – Shareholders (corporate strategy) – Bankers (cash flows) – Suppliers (purchase strategy) – Customers (product market strategy)

3 Stakeholder goals and objectives • External stakeholders – Government – Interest/pressure groups – Professional bodies

3 Stakeholder goals and objectives • Another approach – The primary stakeholder: • internal and connected stakeholders – The secondary stakeholders: • external stakeholder

3 Stakeholder goals and objectives • Stakeholder conflict – May force resignations and divestments of business – Companies may make profit at the expense of the long term benefit of the companies.

3 Stakeholder goals and objectives • Stakeholder mapping: power and interest – Menndelow suggests that stakeholders may be positioned on a matrix whose axes are power held and likelihood of showing an interest in the organisation’s activities.

3 Stakeholder goals and objectives • Strategic value of stakeholders – Correlation between employee and customer loyalty – Continuity and stability in relationship with employees, customers and suppliers • Responsibilities towards customers • Responsibilities towards suppliers

Q 1. 3 Which of the following statements is true Q 1. 8 ADB is a business which is owned by its workers. The workers share the profits and they each have a vote on how the business is run. A public sector B private sector C Not-for-profit Dco-operative