the fnal purchaser.

Without business activity we would all still be entirely dependent on the

goods that we could make or grow ourselves – as people in some communities still are.
Republic of the Philippines Business activity uses the scarce resources of our planet to produce goods and services that
DR. EMILIO B. ESPINOSA SR. MEMORIAL allow us to enjoy a much higher standard of living than would be possible if we remained
STATE COLLEGE OF AGRICULTURE AND TECHNOLOGY entirely self-sufcient.
www.debesmscat.edu.ph | Cabitan, Mandaon, Masbate
The role of businesses Businesses identify the needs of consumers or other frms. They then
purchase resources, which are the inputs of the business, or factors of production, in order to
produce output. The ‘outputs’ of a business are the goods and services that satisfy consumers’
IT 322- BUSINESS MANAGEMENT needs, usually with the aim of making a proft. Business activity exists to produce goods or
MODULE services, which can be classifed in several ways: consumer goods, consumer services and
capital goods.
WEEK 2-5 What are business ‘inputs’? These are the human, physical and fnancial resources needed by
business to produce goods or services. They are also known as factors of production. Firms
TOPICS will use diferent combinations of inputs, depending on the product being produced and the size
I. BUSINESS ORGANIZATION AND ENVIRONMENT:
of the business. There are four main inputs:
A. The nature of business activity
- What is business? • Land – this general term not only includes land itself but all of the renewable and non-
- What are business inputs? renewable resources of nature such as coal, crude oil and timber.
- Business functions • Labour – manual and skilled labour make up the workforce of the business. Some firms are
- Sectors of industry labour-intensive, that is they have a high proportion of labour inputs to other factors of
B. Types of organization production, e.g. house-cleaning services. • Capital – this consists of the fnance needed to set
- Public and private sector organization up a business and pay for its continuing operations as well as all of the man-made resources
- Profit based organization used in production. These include capital goods such as computers, machines, factories, ofces
- Sole trader, partnership, private and public limited company and vehicles. Some frms are capital-intensive, that is they have a high proportion of capital to
C. Organizational planning tools other factors of production, e.g. power stations.
- Business plans • Enterprise – this is the driving force of business, provided by risk-taking individuals, which
- SWOT analysis combines the other factors of production into a unit that is capable of producing goods and
D. Growth and evolution services. It provides a managing, decision-making and coordinating role. Without this essential
- Economies of scale
input, even very high-quality land, labour and capital inputs will fail to provide the goods and
- Business growth
- Joint ventures, strategic services that customers need. Businesses have many other needs before they can successfully
alliances, franchising produce the goods and services demanded by customers. Figure 1.1.1 shows the wide range of
these needs.
A. Introduction – What is a business?
A business is any organisation that uses resources to meet the needs of customers by
providing a product or service that they demand. There are several stages in the production of
fnished goods. Business activity at all stages involves adding value to resources such as raw
materials and semi-fnished goods and making them more desirable to – and thus valued by –
 right product decisions are made. Once a product is available for sale, the marketing
function will have to make important decisions concerning its pricing, how and where
to promote it and how to sell it and distribute it for sale.
 Operations management Once known simply as the ‘production function’, operations
management has responsibility for ensuring adequate resources are available for
production, maintaining production and quality levels and achieving high levels of
productive efciency. This function is important in service industries as well as
traditional manufacturing. In service industries, operations management will have the
objective of ensuring that the processes for the delivery of the service are well tested,
consistent and understood by all employees.
 Interrelationship of functions It should not be assumed that all business decisions taken
within these departments are separate and unconnected to the other parts of the
business. Nothing could be further from reality! Efective strategic decision-making
develops from the functions working closely together. Good communication,
cooperation and close interrelationships between functions are essential before major
decisions are taken.

For example, the decision by BMW to develop and launch its frst electric-powered
sports car – the i8 – required interaction between:
• marketing – will consumers be prepared to buy this car and at what price?
Business functions • fnance – do we have the capital needed to develop and produce it? • HR management
Most businesses have four main functional departments. These will be stafed by people with – do we need to recruit additional engineers before this project can be turned into a
specifc qualifcations and experience in the work of the functional areas. market-ready car?
• operations management – can we produce this product at a cost which allows the
 Human resource management Human resource (HR) management identifes the marketing department to set a proftable price level? Will quality of the vehicle be up to
workforce needs of the business, recruits, selects and trains appropriate employees and normal BMW standards?
provides motivational systems to help retain workers and encourage them to work
productively. It also draws up contracts of employment and covers the redundancy or
redeployment of employees if these become necessary. The aim of this business
function is to manage human resources to help the business achieve its overall
objectives.
 Finance and accounts .This function has responsibility for monitoring the fow of
fnance into and out of the business, keeping and analysing accounts and providing
fnancial information to both senior management and other departments. Without Economic sectors
adequate fnance, no efective decisions can be made within the other functional areas, All production can be classifed into four broad types of business activity, or economic sectors.
so fnance is a key division of any business. These categories are the three stages involved in turning natural resources, such as oil and
 Marketing This department is responsible for market research and for analysing the timber, into the fnished goods and services demanded by consumers plus the ‘knowledge-
results of such research so that consumer wants can be correctly identifed. This based’ support services that businesses require. The four sectors are primary, secondary,
information will then be discussed with other departments of the business so that the tertiary and quaternary. National economic data often makes no distinction between tertiary
 and quaternary sectors. The balance of the primary, secondary and tertiary sectors in the essential goods and services for individual citizens and organisations in the private sector, and they
economy varies substantially from country to country. It depends on the level of often have objectives other than proft – for example:
industrialisation in each country. The balance between the sectors is often referred to as a • ensuring supplies of essential goods and services – perhaps free of charge to the user, e.g. health and
country’s ‘economic structure’. education services in some countries
• preventing private monopolies – single frms that dominate an industry – from controlling supply
Changes in economic structure – sectoral change It is very important to recognise two features • maintaining employment
of this classifcation of business activity: 1. The importance of each sector in a country’s • maintaining environmental standards.
economic structure changes over time. Industrialisation describes the growing importance of
the secondary sector manufacturing industries in developing countries. The relative In recent years, there has been a trend towards selling some public sector organisations to the private
importance of each sector is measured in terms either of employment levels or output levels as sector – privatisation – and this means that they put proft-making as one of their main objectives.
a proportion of the whole economy. In many countries of Africa and Asia, the relative Private sector organisations are owned and operated by individuals or groups of people. These
importance of secondary sector activity is increasing. This brings many benefts as well as organisations are usually operated for a proft but not all are. For example, charities are non-proft-
problems. making organisations in the private sector; they are not owned and controlled by the government or
state.

Public sector enterprises The term ‘public’ is used by business organisations in two diferent ways, and
B. Types of organization this often causes confusion. We have already identifed public limited companies as being owned by
shareholders in the private sector of the economy. Thus, public limited companies are in the private
Introduction sector. However, in every country there will be some enterprises that are owned by the state – usually
The frst chapter looked at the classifcation of business into diferent economic sectors. This chapter central or local government. These organisations are therefore in the public sector and they are
further classifes business activity into: referred to as public corporations. Public sector organisations do not often have proft as a major
• the private sector and public sector objective. In many countries the publicly owned TV channels have as their main priority the quality of
• proft-based and non-proft-based organisations. Proft-based or for-proft businesses in the private public service programmes. State-owned airlines have safety as a priority. Selling of public corporations
sector can take diferent legal forms and the advantages and disadvantages of these are very to the private sector, known as privatisation, often results in changing objectives from socially
important. The growing importance of non-proft-based and non-governmental organisations is also orientated ones to proft-driven goals.
analysed in this chapter.
Advantages
Private sector and public sector organisations Industry may be classifed by sector: either public or • Managed with social objectives rather than solely with profit objectives
private, and by type of legal organisation. These two types of classifcation are interlinked as some • Loss-making services might still be kept operating if the social benefit is great enough
types of legal structure are only found in the private sector. The relative importance of the private • Finance raised mainly from the government so not subject to limitations from banks or
sector compared to the public sector is not the same in all mixed economies. Those economies that are shareholders.
closest to free-market systems have very small public sectors. Those countries with central planning Disadvantages
command economies will have very few businesses in the private sector. • Tendency towards inefficiency due to lack of strict profit targets
• Subsidies from government can encourage inefficiencie
Distinctions between the sectors In most mixed economies, certain important goods and services are • Government may interfere in business decisions for political reasons, e.g. by opening a
provided by staterun organisations – they are in the public sector. It is argued that they are too new branch in a certain area to gain popularity
signifcant to be left to private sector businesses. They include health and education services, defence
and law and order (police force).
In some countries, important ‘strategic’ industries are also state-owned and -controlled, such as
energy, telecommunications and public transport. These public sector organisations therefore provide
 personal possessions and property can be taken to pay of the debts of the business should it
fail. This can discourage some potential entrepreneurs from starting their own businesses.

Advantages
• Easy to set up – no legal formalities
• Owner has complete control – not answerable to anyone else
• Owner keeps all profits • Able to choose times and patterns of working
• Able to establish close personal relationships with staff (if any are employed) and
customers
• The business can be based on the interests or skills of the owner – rather than working as
an employee for a larger firm.
Disadvantages
• Unlimited liability – all of owner’s assets are potentially at risk
• Often faces intense competition from bigger firms, e.g. food retailing
• Owner is unable to specialise in areas of the business that are most interesting – is
responsible for all aspects of management
• Difficult to raise additional capital
• Long hours often necessary to make business pay
• Lack of continuity – as the business does not have separate legal status, when the owner
dies the business ends too

Partnership
A partnership agreement does not create a separate legal unit; a partnership is just a grouping
of individuals. Partnerships are formed in order to overcome some of the drawbacks of being a
sole trader. When planning to go into partnership it is important to choose business partners
carefully – the errors and poor decisions of any one partner are considered to be the
responsibility of them all. This also applies to business debts incurred by one partner; in most
countries there is unlimited liability for all partners should the business venture fail. It is usual,
although not a legal requirement, to draw up a formal ‘Deed of Partnership’ between all
partners. This would provide agreement on issues such as voting rights, the distribution of
profts, the management role of each partner and who has authority to sign contracts.
Partnerships are the most common form of business organisation in some professions, such as
law and accountancy. Small building frms are often partnerships too. Many other owners of
Sole trader
businesses prefer the company form of organisation and this is considered next.
This is the most common form of business organisation. Although there is a single owner in
this business organisation, there may be employees but the frm is likely to remain very small.
Although they are great in number, sole traders account for only a small proportion of total
business turnover. All sole traders have unlimited liability. This means that the owner’s
 Advantages In a company, the death of an owner or director does not lead to its break-up or dissolution.
• Partners may specialise in different areas of business management All that happens is that ownership continues through the inheritance of the shares, and there is
• Shared decision-making no break in ownership at all.
• Additional capital injected by each partner
• Business losses shared between partners Private limited companies
• Greater privacy and fewer legal formalities than corporate organisations (companies) The protection that comes from forming a company is therefore substantial. Small frms can
Disadvantages gain this protection when the owner(s) create(s) a private limited company. The word
• Unlimited liability for all partners (with some exceptions) ‘Limited’ or ‘Ltd’ (‘Pte’ in some countries) indicates that the business is a private company.
• Profits are shared Usually, the shares will be owned by the original sole trader (who may hold a majority of the
• As with sole traders, no continuity and the partnership will have to be reformed in the shares to keep control of the company), relatives, friends and employees. New issues of shares
event of the death of one of the partners cannot be sold on the open market and existing shareholders may only sell their shares with
• All partners bound by the decisions of any one of them the agreement of the other shareholders.
• Not possible to raise capital from selling shares
Advantages
• A sole trader, taking on partners, will lose independence of decision-making
• Shareholders have limited liability
Limited company • Separate legal personality
There are three important diferences between companies – private limited and public limited • Continuity in the event of the death of a shareholder
companies – and sole traders and partnerships: limited liability, legal personality and • Original owner is still often able to retain control
continuity. Limited liability The ownership of companies is divided into small units called • Able to raise capital from sale of shares to family, friends and employees
shares. People can buy these and become ‘shareholders’ – they are part-owners of the • Greater status than an unincorporated business
business. It is possible to buy just one share, but usually these are owned in blocks, and it is Disadvantages
possible for one person or organisation to have complete control by owning more than 50% of Legal formalities involved in establishing the business
the shares. Individuals with large blocks of shares often become directors of the business. All • Capital cannot be raised by sale of shares to the general public
shareholders beneft from the advantage of limited liability. Nobody can make any further • Quite difficult for shareholders to sell shares
claim against shareholders should the company fail. • End-of-year accounts must be sent to Companies House (in UK) – available for public
• People are prepared to provide fnance to enable companies to expand. inspection there (less secrecy over financial affairs than sole trader or partnership)
• The greater risk of the company failing to pay its debts is now transferred from investors to
creditors (those suppliers/lenders who have not been paid). Creditors, as a result, are very
interested in both ensuring that the word ‘limited’ appears in the company name and
scrutinising the company’s accounts for signs of potential future weakness.

Legal personality Public limited companies

A company is legally recognised as having an identity separate from that of its owners. This Public limited companies can be recognised by the use of ‘plc’ or ‘Inc.’ (Incorporated) after
means, for example, that if the products sold by a company are found to be dangerous or the company name. It is the most common form of legal organisation for large businesses, for
faulty, the company itself can be prosecuted but not the owners, as would be the case with the very good reason that they have access to very substantial funds for expansion. Converting
either a sole trader or a partnership. A company can be sued and can sue others through the a private limited company to public limited company (plc) status is referred to as a stock
courts. market fotation. A plc has all the advantages of private company status plus the right to
Continuity advertise its shares for sale and have them quoted on the stock exchange. Public limited
companies have the potential to raise large sums from public issues of shares. Existing because of the nature of the business activity as with the development of new technology
shareholders may quickly sell their shares if they wish to. This fexibility of share buying and products, conversion to public limited company status is common. However, much depends on
selling encourages the public to purchase the shares in the frst instance and thus invest in the the desire for control of the original owners/shareholders. There is often the desire of the
business. original owners to get back overall control from ‘short-term-minded’ investors by converting a
The other main diference between private and public companies concerns the ‘divorce plc back into a private limited company.
between ownership and control’. The original owners of a business are usually still able to
retain a majority of shares and continue to exercise management control when it converts to For-profit social enterprises
private company status. This is most unlikely with public limited companies, due to the
volume of shares issued and the number of people and institutions as investors. These 1. Social enterprises
shareholders own the company, but they appoint, at the annual general meeting, a board of Social enterprises are not charities, but they do have objectives that are often diferent from
directors who control the management and decision-making of the business. This clear those of an entrepreneur who is only proft-motivated. Making a proft may be one of the
distinction between ownership and control can lead to conficts over the objectives to be set objectives of a social enterprise, but it is usually much less important than the organisation’s
and direction to be taken by the business. The shareholders might prefer short-term maximum- social objectives.
proft strategies, but the directors may aim for long-term growth of the business, perhaps in In other words, a social enterprise is a proper business that makes its money in socially
order to increase their own power and status. responsible ways and uses most of any surplus made to beneft society. Social entrepreneurs
are not running a charity, though – they can and often do keep some of any proft made for
Advantages themselves. Social enterprises compete with other businesses in the same market or industry.
• Limited liability
• Separate legal identity They use business principles to achieve social objectives. Most social enterprises have these
• Continuity common features: • They directly produce goods or provide services.
• Ease of buying and selling of shares for shareholders – this encourages investment in plcs • They have social aims and use ethical ways of achieving them. • They need to make a surplus
• Access to substantial capital sources due to the ability to issue a prospectus to the public or proft to survive as they cannot rely on donations as charities do.
and to offer shares for sale
Disadvanges
• Legal formalities in formation
• Cost of business consultants and financial advisers when creating a plc
• Share prices subject to fluctuation – sometimes for reasons beyond business’s control, e.g.
state of the economy Objectives of social enterprises
• Legal requirements concerning disclosure of information to shareholders and the public, Social enterprises often have three main aims:
e.g. annual publication of detailed report and accounts • Economic – to make a proft or surplus to reinvest back into the business and provide some
return to the owners.
• Risk of takeover due to the availability of the shares on the stock exchange
• Social – to provide jobs or support for local, often disadvantaged, communities.
• Directors influenced by short-term objectives of major investors
• Environmental – to protect the environment and to manage the business in an
Legal forms of business organization
environmentally sustainable way. These aims are often referred to as the triple bottom line.
Businesses often change their legal form as they expand and as the objectives of the
This means that proft is not the sole objective of these enterprises.
owners change. Many newly formed businesses are sole traders and then accept partners if the
aim of the original owner is to expand and share management responsibilities. Conversion to
2. Cooperatives
company status is often caused by owners wishing to protect their personal wealth and
encourage new shareholder investors. When further expansion is very expensive, perhaps
 Cooperatives are not about making big profts for shareholders, but creating value for
customers and secure employment for workers – this is what gives cooperatives a unique • the executive summary − an overview of the new business and its strategies
character, and infuences their values and principles. • description of the business opportunity − details of the entrepreneur; what is going to be
Cooperatives tend to fall into one of these three groups: sold, why and to whom
• Retail cooperative – also called consumers’ cooperatives. This is a cooperative business • marketing and sales strategy − details of why the entrepreneur thinks customers will buy
owned by customers for their mutual benefts. It is a private sector enterprise that is oriented what the business plans to sell and how the business aims to sell to them
towards service rather than fnancial proft. It often takes the form of retail outlets operated and • management team and personnel − the skills and experience of the entrepreneur and the staf
owned by their consumers. The consumers or customers are the people who have provided the he/she intends to recruit
capital required to launch or purchase the enterprise and profts are shared either by discounts • operations − premises to be used, production facilities, IT systems
on products or by a payout to customer owners each year. • fnancial forecasts − the future projections of sales, proft and cash fow, for at least one year
• Agricultural cooperative – this exists when farmers pool resources for mutual beneft, for ahead.
example, in the buying of fertiliser or the marketing of key food products.
• Worker cooperative – often engaged in manufacturing. Workers collectively own the
business and make the important decisions.

3. Microfinance institutions
The microfinance approach to providing small capital sums to entrepreneurs is now a very
important source of fnance in developing, relatively low-income countries.

Non-profit social enterprises Not all organisations in the world aim to make profts. There are
many thousands of non-profit organisations that have objectives other than proft – for
example, charities and pressure groups. Many of these are also termed non-governmental
organisations (NGOs).

Non-governmental organisations (NGOs) A non-governmental organisation (NGO) is a not-

for-proft group, independent from government, which is organised on a local, national or
international level to tackle issues that support the public good. They are task-focused and
made up of people sharing a common interest. NGOs perform a variety of services and
humanitarian functions, bring public concerns to governments and encourage participation of
society’s stakeholders at the community level. The objectives of NGOs are not proft-based but
are specifcally focused on social, environmental or humanitarian objectives. In Russia, the Importance of business plans
GLOBUS group aims to ‘stimulate an efective national response to the HIV/AIDS epidemic’. • Business plans are most important when setting up a new business, but they should be
Also in the humanitarian feld, the International AIDS Alliance in Ukraine aims to ‘reduce HIV referred to and updated when important strategic choices are being made too. The main
incidence and death rates from AIDS’. purpose of a business plan for a new business is to obtain fnance for the start-up. Potential
investors or creditors will not provide fnance unless clear details about the business proposal
have been written down.
C. Organizational Planning Tools • The planning process is very important too. If an entrepreneur went into a new business –
Business plans even if no external fnance was required – without a clear sense of purpose, direction,
The contents of a typical business plan are:
marketing strategies and what employees to recruit, the chances of success would be much might include: poorly trained workforce, limited production capacity and ageing equipment. This
reduced. information would also have been obtained from an internal audit.
• The fnancial and other forecasts contained in the plan can be used as the targets that the • O = opportunities These are the potential areas for expansion of the business and future profts.
business should aim for. These factors are identifed by an external audit of the market the frm operates in and its major
competitors. Examples include: new technologies, export markets expanding faster than domestic
Users of business plans markets, and lower rates of interest increasing consumer demand.
Business plans may be of real beneft to the stakeholders of new businesses: • T = threats These are also external factors, gained from an external audit. This audit analyses the
• The plan allows potential investors in the new business – and the bank – to make a business and economic environment, market conditions and the strength of competitors. Examples of
judgement about the viability of the idea and the chances of the owners making a success of it. threats are: new competitors entering the market, globalisation driving down prices, changes in the
Potential shareholders will not invest without seeing a plan frst. law regarding the sale of the frm’s products and changes in government economic policy.
• The fnancial forecasts in a business plan can act as budgets and control benchmarks for the
internal stakeholders such as business managers.
• Updated versions of the plan can be used to apply for additional funding, to attract additional
partners or to supply data for the experts if a stock market fotation becomes an option.
• Employees will fnd that planning helps identify specifc objectives and targets and gives
focus to their work, which aids motivation.
• Suppliers may be able to tell from the parts of the business plan that are communicated
externally whether it is worthwhile establishing a long-term trading relationship with the
business.

What Is a SWOT Analysis?

SWOT analysis A SWOT analysis provides information that can be helpful in matching the frm’s KEY TERMS
resources and strengths to the competitive environment in which it operates. It is, therefore, useful in CONSUMER GOODS: the physical and tangible goods sold to the general public. They
strategy formulation and selection. include cars and washing machines, which are referred to as durable consumer goods.
It comprises: Nondurable consumer goods include food, drinks and sweets that can only be used once.
• S = strengths These are the internal factors about a business that can be looked upon as real CONSUMER SERVICES: nontangible products that are sold to the general public and include
advantages. These could be used as a basis for developing a competitive advantage. They might hotel accommodation, insurance services and train journeys
include experienced management, product patents, loyal workforce and good product range. These CAPITAL GOODS: physical goods that are used by industry to aid in the production of other
factors are identifed by undertaking an internal audit of the frm. This is often undertaken by specialist goods and services such as machines and commercial vehicles
management consultants who analyse the efectiveness of the business and the efectiveness of each PRIMARY SECTOR BUSINESS ACTIVITY: firms engaged in farming, fishing, oil
of its departments and major product ranges. extraction and all other industries that extract natural resources so that they can be used and
• W = weaknesses These are the internal factors about a business that can be seen as negative processed by other firms.
factors. In some cases, these can be the fip side of a strength. For example, whereas a large amount SECONDARY SECTOR BUSINESS ACTIVITY: firms that manufacture and process
of spare manufacturing capacity might be a strength in times of a rapid economic upturn, if it products from natural resources, including computers, brewing, baking, clothing and
continues to be unused it could add substantially to a frm’s average costs of production. Weaknesses construction.
TERTIARY SECTOR BUSINESS ACTIVITY: firms that provide services to consumers and PUBLIC LIMITED COMPANY (PLC): a limited company, often a large business, with the
other businesses, such as retailing, transport, insurance, banking, hotels, tourism and legal right to sell shares to the general public; its share price is quoted on the national stock
telecommunications. exchange.
QUATERNARY SECTOR BUSINESS ACTIVITY: IS focused on information technology SOCIAL ENTERPRISE: a business with mainly social objectives that reinvests most of its
(IT) businesses and information service providers such as research and development, business profits into benefiting society rather than maximising returns to owners.
consulting and information gathering. TRIPLE BOTTOM LINE: the three objectives of social enterprises: economic, social and
ENTREPRENEUR: someone who takes the financial risk of starting and managing a new environmental.
venture. COOPERATIVE: a group of people acting together to meet the common needs and aspirations
INTRAPRENEUR: someone within a large corporation who takes direct responsibility for of its members, sharing ownership and making decisions democratically.
turning an idea into a profitable finished product through using ‘entrepreneurial talents’ such MICROFINANCE: the provision of very small loans by specialist finance businesses, usually
as risk-taking and innovation. not traditional commercial banks.
BUSINESS PLAN: a written document that describes a business, its objectives and its PUBLIC–PRIVATE PARTNERSHIP (PPP): involvement of the private sector, in the form of
strategies, the market it is in and its financial forecasts. management expertise and/ or financial investment, in public sector projects aimed at
PUBLIC SECTOR: comprises organisations accountable to and controlled by central or local benefiting the public.
government (the state) PRIVATE FINANCE INITIATIVE (PFI): investment by private sector organisations in public
PRIVATE SECTOR: comprises businesses owned and controlled by individuals or groups of sector projects.
individuals. NON-PROFIT ORGANISATION: any organisation that has aims other than making and
MIXED ECONOMY: economic resources are owned and controlled by both private and distributing profit and which is usually governed by a voluntary board.
public sectors. NON-GOVERNMENTAL ORGANISATION (NGO): a legally constituted body with no
FREE-MARKET ECONOMY: economic resources are owned largely by the private sector participation or representation of any government which has a specific aim and purpose, e.g.
with very little state intervention. supporting disadvantaged groups in developing countries or advocating the protection of
COMMAND ECONOMY: economic resources are owned, planned and controlled by the human rights.
state. CHARITIES: an organisation set up to raise money to help people in need or to support causes
PRIVATISATION: the sale of public sector organisations to the private sector. that require funding
PUBLIC CORPORATION: a business enterprise owned and controlled by the state – also
known as nationalised industry or public sector enterprise.
SOLE TRADER: a business in which one person provides the permanent finance and, in
return, has full control of the business and is able to keep all of the profits.
PARTNERSHIP: a business formed by two or more people to carry on a business together,
with shared capital investment and, usually, shared responsibilities.
LIMITED LIABILITY: the only liability – or potential loss – a shareholder has if the company
fails is the amount invested in the company, not the total wealth of the shareholder.
SHARE: a certificate confirming part ownership of a company and entitling the shareholder to
dividends and certain shareholder rights.
SHAREHOLDERS: individuals or institutions that buy/own shares in a limited company.
PRIVATE LIMITED COMPANY: a small to medium-sized business that is owned by
shareholders who are often members of the same family; this company cannot sell shares to
the general public.