Business

• Business


  An organisation or economic system where goods and services are exchanged in order to make a profit
• Types of business organisations


  • Sole traders
  • Partnerships
  • Limited companies
  • Cooperative societies
  • Franchising
• Sole trader


  • The most basic type of business, where an individual runs and owns the business themselves
  • They are solely responsible for all aspects of their business and have unlimited liability
  • They have full control over their business and keep all the profits
  • They also face the risk of losing personal assets if the business fails
• Partnerships


  • An agreement between individuals, called partners, who team up to operate a business together
  • They share the duties of managing the business and invest money to start it
  • Unlimited or ordinary partnership: All partners are actively involved in managing the business and are responsible for any losses
  • Limited partnership: Not all partners play an active role in running the business. Only one partner is accountable for losses, while the others, known as "sleeping partners," are only liable for the money they put into the business
• Advantages of a partnership

  • Fewer legal obligations
  • Better decision-making (two or more heads are better than one)
  • Shared ownership
  • More potential investment with more partners involved
• Disadvantages of a partnership

  • The partnership doesn't have its own separate legal identity
  • At least one partner has unlimited liability
  • There may be potential conflicts among the partners regarding business strategy
  • Decision-making can be slower and more complicated
  • Profits need to be divided among partners
• Limited companies


  • A business structure with its own legal identity, separate from its initial investors
  • Shareholders, who purchase shares in the company, become its owners and receive a portion of the company's profits as dividends
  • Shareholders don't manage the company; instead, decisions are made by the board of directors
  • If the company faces bankruptcy, shareholders are only liable for the amount they invested
• Private limited company


  • A prevalent type of privately owned small business
  • They cannot be publicly traded on the stock exchange and typically sell shares privately to a maximum of 50 individuals
  • Share sales require agreement among existing shareholders
  • In the UK, the minimum share capital for a private limited company is £1
  • Over 95% of limited companies in the UK fall into the "private" category
• Public limited company

  • Listed on the stock exchange and they can freely sell shares to the public
  • They are required to have a minimum share capital of £50,000
  • Due to their size and scope, public limited companies are more intricate to establish and operate compared to other company types
• Cooperative societies


  • A privately-owned business entity operated and governed by its members, who are both owners and customers
  • The primary goal is to save costs by collectively producing, purchasing, or selling goods, with profits returned to the members
  • Members contribute capital, often in the form of dividends
  • Common types include workers', consumers', and producers' cooperatives
• Franchising


  • A method of product or service distribution involving two key players: the franchisor, who creates the brand's trademark and business system, and the franchisee, who pays royalties and often an initial fee to operate under the franchisor's name and system
  • The agreement between them is termed the "franchise"
  • Typically, the franchisor is a prominent, established company
• Types of organisational structures

  • Hierarchical structure
  • Functional structure
  • Divisional structure
  • Matrix structure
  • Flat structure
• Hierarchical structure


  • Resembles a pyramid, with many employees at the bottom directly supervised by those at a higher level, who in turn are supervised by those above them, leading up to the top-ranking officer like the President or CEO
• Functional structure


  • The organization is divided into smaller groups based on the specific skills and knowledge of workers
• Divisional structure

  • Workers are grouped into segments corresponding to specific products, services, or markets. This structure is suitable for large companies, such as multinationals
• Matrix structure


  • Reporting relationships are organized as a grid or matrix rather than a traditional hierarchy. Groups of workers are organized around specific projects, with clear functions for each employee. This is ideal for large companies with diverse product lines, long or complex projects, and a fast-changing work environment
• Flat structure

  • Refers to a structure where employees can make decisions quickly, as there are fewer levels of middle management. Small companies often adopt this structure at the start of their business
• Startups


  • New companies just getting started, often created by one or more entrepreneurs aiming to develop a fresh product or service and introduce it to the market
  • Usually, startups begin small and are funded by the founders and others who believe in their vision
  • One of the first priorities for a startup is to secure enough funding to continue developing their product
• Microenterprises


  • Small businesses that serve goods and services to a local community or market
  • Typically have a small number of employees, operate within a limited geographical area, and generate less than two million euros in turnover
  • Usually begin with a small amount of capital obtained from a bank or other financial institution, often through microcredit or microfinance
  • They often specialize in providing goods or services to improve the local quality of life
  • Microenterprises not only benefit their owners but also contribute to the local economy
• Globalization


  The trend where the world becomes more interconnected due to growing economic integration between continents, leading to increased international trade
• Multinational corporations (MNCs)


  • Companies that operate in numerous countries simultaneously and earn at least a quarter of their revenues from outside their home country
  • Typically have a central holding company, where its headquarters are located, along with several subsidiary companies spread across the globe
  • Having subsidiaries in different countries offers several advantages: access to lower production costs, enhanced efficiency, and increased employment opportunities
• Sectors of economic activity

  • Primary sector (agriculture, farming, fishing, forestry, mining)
  • Secondary sector (manufacturing and construction industries)
  • Tertiary sector (businesses providing services to the public)
  • Quaternary sector (information and communication technologies, consulting services, and research)
• Chain of production


  The movements of goods and services through the primary, secondary, and tertiary sectors
• Economic systems

  • Traditional economy
  • Free market system (capitalism)
  • Mixed economic system
  • Planned economy
• The Wealth of Nations was written in 1776