MODULE 2

• Enterprise: Definition - An organized business entity with activities aimed at growth and/or profit

  
• Ownership is the legal right to possess, control, and dispose of something
• Three ways to acquire business ownership: initiating a business, purchasing an existing company, franchising
• Types of ownership:

  • Public Ownership
  • Private Ownership
  • Mixed Business Units
• Public Ownership is owned by the state or a public body, providing essential services to the public
• Private Ownership is owned by private individuals or organizations, like Sari-Sari Stores, Bakeries, Beauty Salons, and Auto Repair Shops
• Mixed Business Units combine public and private ownership, like government-owned enterprises operated by private contractors
• Forms of Public Enterprise:

  • Public Corporation
  • Non-Incorporated Public Enterprise
• Forms of Private Enterprise:

  • Sole Proprietorship
  • Partnership
  • Corporation
• Sole Proprietorship is owned by one person, like Sari-Sari Stores, Bakeries, and Auto Repair Shops
• Partnership involves two or more co-owners sharing profits and losses, like Beauty Salons and Cafe/Restaurants
• General Partnership and Limited Partnership are classifications based on liability
• Partnership characteristics:

  • Pass-through taxation
  • Partners' equity accounts
  • Mutual agency
• Types of Partnerships based on involvement:

  • Silent Partner
  • Secret Partner
  • Dormant Partner
  • Nominal Partner
• Advantages of Partnership:

  • Mutual contribution
  • Sharing of riskCombines special skills, expertise and

  experience of the partners
• Partnership:

  • Co-Ownership of Contributed Assets: when one partner contributes an asset to the business, all partners jointly own it to some extent
• Corporation:

  • Structured with stock/shareholders, a board of directors, and officers to manage the operation
  • Treated as a separate entity from the owners
  • Types: Private, Public, Closed, Open, Municipal, Domestic, Foreign, Alien, Nonprofit, Single-Individual
• Corporate Combinations:

  • Aim to increase profits through mutual dependence in resource exploitation
  • Types: Merger, Holding Company, Cooperatives
• Vertical combinations join together plants performing successive functions in the chain of processes from raw material to finished products
• Based on divergent functions, vertical combinations can be:

  • Corporation through joint product group
  • Combination through byproduct group
  • Combination through like process
• Convergent function deals with businesses where different products manufactured are combined to form a single new product
• Conglomerate diversification is a combination of two or more corporations engaged in entirely different businesses together into one corporate structure
• Horizontal integration brings together a number of plants engaged in the same or similar activities in one industrial field
• Horizontal integration can be done through acquisitions, mergers, and conglomerates
• Lateral or conglomerate diversification is formed by mergers to bring together all kinds of unrelated functions and products
• Ownership plays an important role in the management of businesses
• Factors affecting the choice of ownership:

  • Business nature and size
  • Capital required
  • Operating time of the business
  • Product type to be produced
  • Production method and volume
  • Markets to be supplied
  • Competitiveness
  • Laws and government policies
• Types of Corporation

  PRIVATE CORPORATIONS

  PUBLIC CORPORATIONS

  CLOSED CORPORATIONS

  OPEN CORPORATIONS

  MUNICIPAL CORPORATIONS

  DOMESTIC CORPORATIONS

  FOREIGN CORPORATIONS

  ALIEN CORPORATIONS

  NONPROFIT CORPORATIONS

  SINGLE-INDIVIDUAL CORPORATIONS
• Examples of mergers are based on two functions

  Divergent functions

  Convergent functions
• Mergers BASED ON DIVERGENT FUNCTIONS

  Combination through joint product group

  Combination through byproduct group

  Combination through like process
• Mergers BASED ON CONVERGENT FUNCTIONS

  Complimentary products

  Auxiliary products

  Meet in common market
• Holding company

  Type of business organization that allows a firm (called parent) and its directors to control or influence other firms (called subsidiaries).

  Does not produce goods or services itself, rather its only purpose is owning shares of other companies.
• Cooperatives

  An organization collectively owned and operated by a group of people in order to compete with large-scale competitors.
• CONSUMER COOPERATIVES:

  Operates in retail trade and services.
• Two types of cooperatives

  Consumer Cooperatives

  Producer Cooperatives
• PRODUCER COOPERATIVES:

  Operates in sale and purchase of agricultural products and/or producer’s supplies.