The Objectives of Business Organisations

The overriding objective of any business is to produce goods or services that satisfy consumer wants and needs. A business that fails to satisfy will not survive. However, simply satisfying consumers will not be enough. Different organisations will set themselves specific aims and objectives they hope to achieve through their activities:

· The profit motive allows a business to continue and expand. Profit is the main measure of business success. Loss-making firms are inefficient and uneconomic: output is low and costs are high. They may also have failed to identify what their consumers want, either producing the wrong product, or offering the right product at the wrong price or place.

· Expanding sales and market share, i.e. trying to sell more than rival firms. This may be especially important if the firm is promoting a new product or entering a new market, perhaps overseas. In the short run, they may have to make price cuts and spend heavily on advertising and promotion, both of which can reduce potential profit.

· Providing a public service. Organisations owned and controlled by the government have an objective to provide a service that is in public interest. Some services may be provided free at the point of use, others may be charged for, but operate at a loss. Losses made by these services are subsidized by profits made by other services provided by the organisation, and from general tax revenues.

· Charity. A number of private business organisations belong to what is called voluntary sector of the economy which consists of charities and other non-profit-making organisations. Charitable organisations rely heavily on donations of money and endowments to provide help and care for people and animals in need.

Private sector business organisations

The sole trader

The oldest and the most popular type of business is the sole trader – a business that is owned and controlled by one person. A sole trader is someone who is self-employed. To start their business, they will usually dip into their own savings or borrow from family or friends. Sole traders will also tend to rely on an overdraft facility at the bank in order to make payments, obtain credit from their suppliers, hire purchase for the purchase of equipment, and credit card companies. Sole traders may grow to employ several people or have a number of branches, but so long as there is only one owner the business will remain a sole trader.

Advantages of being a sole trader:	Disadvantages of being a sole trader:
· Easy to set up – there are no legal formalities or fees · The owner is his/her own boss and can make all the decisions · The owner keeps all the profits · Can be set up with relatively little capital · Personal contact with customers can encourage consumer loyalty	· The owner may have limited funds and may find it difficult to borrow money from banks · The owner may have to work long hours and cannot afford to be off sick · The owner has unlimited liability · The owner must be a ‘jack of all trades’ · Small businesses are often unable to benefit from bulk purchase discounts

Partnerships

A partnership is defined as an agreement between 2 to 20 people providing capital and working together in a business with the objective of making a profit. Partnerships are common in professions such as doctors, insurance brokers, and vets, although they can also be found in other occupations such as builders, garages, and in small factories.

Although it is not required in law, most partnerships operate according to terms drawn up in a Deed of Partnership. This is a document that sets out matters such as how much capital each partner has invested in the business and therefore how much they own; how profits (and losses) are shared among the partners, and procedures for accepting new partners. If no agreement is drawn up, the rights and obligations of partners are determined by law.

To become a partner in a firm, it is necessary for the prospective partner to buy his or her way into the partnership, thus providing existing partners with additional capital. Banks may be more willing to lend money to a partnership because the security offered by a group of partners is likely to be more than that of sole trader.

Advantages of a partnership:	Disadvantages of a partnership:
· Easy to set up. There are few legal formalities · More capital can be injected into the business · Partners can have a variety of useful skills, bring new ideas and help decision-making · Partners can cover for each other during periods of sickness and holidays	· Partners may disagree · Partners have unlimited liability · Partnerships may still lack capital · Profits have to be shared · A partnership will automatically end, or is dissolved, if one partner resigns, dies, or is made bankrupt

Ordinary partnerships can be turned into limited partnerships where at least one partner, known as a sleeping partner, has limited liability. Sleeping partners provide capital for the business and take a share of the profits but take no active part in the day to day running of it.

Дата добавления: 2015-12-08