Foundation Apprenticeship in Business Skills Understanding Business Types
Foundation Apprenticeship in Business Skills Understanding Business – Types of Organisations – Private Sector organisations
Today we will… • Compare the different SECTORS OF THE ECONOMY • Describe the features of different types of business organisations
Sectors of Business There are four Industry Sectors Primary Secondary Tertiary Quaternary There are three Business (Economy) Sectors Private Public Third
Types of Businesses Private Sector Sole Trader Partnership Private Limited Company Public Sector Third Sector Public Sector Organisation Charity Voluntary Organisation Local Council (Government) Social Enterprises Multinational Company Franchise Public Corporation Co-operatives
Private Sector The Private Sector aims to Maximise Profits To turn innovative ideas into successful businesses (fill gaps in the market) To expand the business (grow)
Private Sector Organisations Sole Traders Partnerships Private Limited Companies (Ltd) Public Limited Companies (Plc) Franchises Multi-National Companies
Private Sector Organisations Owned by private individuals Controlled by a Board of Directors Financed by bank loans, government grants
Case Study Bill had been working for a large building and construction company for 20 years. One morning he woke up and decided to start his own construction business working for himself. Which type of organisation is Bill setting up? “Bill’s Builds”
Sole Trader • owned and controlled by one person. • such as tradesmen, newsagents or hairdressers. • the sole trader has unlimited liability meaning that creditors can claim the sole trader’s personal possessions
Sole Trader This is a business which is owned and managed by one person ADVANTAGES DISADVANTAGES Relatively easy and cheap to set up It is harder to get loans from banks The owner makes all the decisions Long working hours with few holidays The owner keeps all the profits Problems if owner falls ill even for a short time Unlimited liability Sole responsibility
Sole Trader You can review this video which provides an overview of what it is like to be a sole trader https: //www. bbc. co. uk/teach/class-clipsvideo/business-ks 4 -gcse-music-mud-andmaking-money-sole-trader-businessmodel/zdq 76 v 4
Three months later. . . Bill’s Builds is booming! Bill has been very busy with work, the phone rings constantly with new customers and emails are pouring in! Bill’s wife, Jean, is an accountant. Bill thinks Jean should partner with him in the business to cover the office work. They rename the business. Which type of business is this? “Building Up”
Partnership • A business owned by between 2 and 20 owners. • Main aims are to maximise profits and perhaps grow the business. • Examples could include Lawyers, Accountants and Estate Agents. • A partnership agreement will be drawn up. This sets out the details about responsibilities of each partner, salaries that are paid and sharing-rights for decision making power and the sharing of profits (and losses).
Partnership This is a business which is owned and managed by 2 – 20 people. ADVANTAGES Workload can be shared Partners can specialise in different areas More money can be invested in the business DISADVANTAGES Unlimited liability – liable for business losses Arguments may occur Profits must be shared between partners Partners may leave, upsetting the running of the business
Two Months Later. . . Building Up is still doing well, so they decide to expand Jean suggests they bring in two new partners Benefits of new partners Expertise Ideas Capital Investment
Shortly After. . . Her husband was a joiner by trade and her son had just finished his apprenticeship as a Painter and Decorator …how convenient. They decided to set up a Private Limited Company (Ltd)
Private Limited Companies (Ltd) • Limited companies get their name from having limited liability. • This means owners’ personal possessions are not at risk. Should the business be in debt to creditors the owners only lose their investment. • The owners of a limited company are called shareholders as they have one or more shares in the business. In a private limited company (Ltd) shares are not available to the general public and are sold privately to investors the business know, such as employees.
Private Limited Companies (Ltd) • Private limited companies aim to maximise profits, to grow and perhaps increase market share. • They are controlled by a board of directors who are managed by a managing director. • All limited companies have to produce documents called the Memorandum of Association and Articles of Association that outline the rules of the company, such as shareholders’ rights and responsibilities of the directors.
Private Limited Company (Ltd) ADVANTAGES Control of company not lost to outsiders More finance can be raised from shareholders and lenders BOD brings significant experience to aid decision making Limited liability DISADVANTAGES Profits shared amongst more people Shares cannot be sold to the general public Must abide by the Companies Act
Franchise A business agreement that allows the use of an established business (brand) name and to sell their products or services
Franchise not A franchise is a type of business, but a way the business can be run For example, a Sole Trader can have a Burger King Franchise
Franchiser Franchisee
Case Study Subway Spending between £ 100, 000 and £ 150, 000 would allow you to open a fully-fitted Subway sandwich shop Subway would give you the right to operate in a particular location, and to use their brand signage By paying a fee you benefit from national advertising, brand awareness and support
Franchise A short video introducing the concept of a franchise model and how it is used at Reading Festvial https: //www. bbc. co. uk/teach/class-clipsvideo/business-ks 4 -gcse-music-mud-andmaking-money-franchise-model/z 76 tscw
Franchise For the Franchisee ADVANTAGES DISADVANTAGES Reduced marketing costs Products, prices and layout of store may be dictated Reduced risk as the brand is already established A royalty payment must be paid (often a % of revenue) Franchiser may provide training and standardised administration Initial cost is expensive
Franchise For the Franchiser ADVANTAGES DISADVANTAGES Fast method of expanding without heavy investment Only receives a share of the profits Provides a steady cash flow from royalty payments Poor franchisee can damage company reputation Shared risk between Franchiser and Franchisee A weak franchisee may not return much profit
Multinational Corporations A Multinational has branches (called subsidiaries) in more than one country. The distinguishing feature of an MNC is that it sets up production facilities in more than one country. Increase market share Cheaper labour and production Take advantage of Government Grants Avoid or reduce tax Save costs of transport Avoid trade barriers
Multinationals Advantages Wage and raw material costs are lower in other countries Can avoid legislation in home country Disadvantages Language barriers can slow down communication Cultural differences can affect production, e. g. ‘Siestas’ in Spain. Grants can be issued by governments to Exchange rates can affect purchasing and locate in their country paying expenses in different countries Avoid quotas (retraction on amount of imports/exports) and tariffs (taxes on imports/exports) issued by their own governments Time differences can hinder communication between head office and branches around the world
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