Understanding Business,Organizational Structures, Resúmenes de Inglés

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Business theory

Business structures and

organizations

What business means

Business is the term for an organisation or entity involved in commercial, industrial , or professional activities. A business’s main objective is to arrange the economic production of goods or services.

Businesses can be for-profit or non-profit ****organisations**** fulfilling a charitable or social mission or state-owned. Businesses vary in size and scope, from sole proprietorships to large international corporations. The types of businesses range from limited liability companies to sole proprietorships, corporations, and partnerships.

The business also encompasses the efforts and activities of individuals who produce

and sell goods and services for profit. While some enterprises are ****unimportant****

in a single industry, others are large operations across numerous industries worldwide.

** Apple ** and ** Walmar t**

are two well-known examples of successful businesses.

FREE MARKET – This system is based on the market forces of SUPPLY AND DEMAND. Private companies decide what to produce based on consumer needs and what they are prepared to pay.

This kind of economic system is also called the capitalist and Laissez-faire system.

Classical economists such as Adam Smith , with his notion of the Invisible Hand, extensively advocated the laissez-faire system in favour of minimal government intervention.

Unlike the planned economy model, where the government controls economic activity, the private sector organises economic activity under the free market system. Resources are privately owned, and supply and demand factors determine production, distribution, and prices.

However, it must be said that a completely free market economy with no government interventions does not exist.

Even in nations such as the USA, which follow the free market model, there is still some government involvement, for example, in regulating specific industries.

****Advantages:****

• Everyone has an equal chance to improve their standard of living.
• Free market system encourages innovation and efficiency.- Promotes better use of resources to beat competitors.
• It encourages entrepreneurship because people can easily set up their businesses.

****Disadvantages:****

• Creates rigid class systems and widens the gap between the rich and poor due to limited government control
• Money tends to remain concentrated in a few hands.
• Large private companies can easily monopolize the market.

ADVANTAGES AND DISADVANTAGES OF LIVING IN A FREE MARKET SYSTEM

ADVANTAGES AND DISADVANTAGES OF LIVING IN A PLANNED ECONOMIC SYSTEM

The Advantages of a planned economy include:

• controlled prices
• reduced wealth inequality,
• low unemployment due to the government’s

aim to employ everyone.

However, this type of economic system has

****Disadvantages** too:**

• Citizens have limited freedom and choice,
• shortages and surpluses are common,
• there is little incentive for innovation

A MIXED ECONOMY combines the characteristics of the free market with planned economy models.

There is no exact formula, as countries can adopt more or fewer elements of

the two systems.

This means they can be closer to the ideal of private ownership and capitalism or more towards public ownership and socialism.

The private and public sectors have a role in making economic decisions.

Production mainly occurs within the private sector, which operates freely according to the supply and demand price mechanism.

However, the state or government monitor market forces and may intervene with fiscal or monetary policies.

The public sector is generally responsible for providing essential services

such as

∙ transport ∙ Education ∙ healthcare ∙ defence

while private companies compete to offer other goods and services.

Business theory

Business structures and organizations

Business Organisations

THE PRIVATE SECTOR

Business activities

Sole traders (^) Partnerships Limited companies(Private and Public) Franchises (^) Cooperatives Multinationals

Business activities can be organised in different ways.

Businesses , regardless of their size, have growth potential, and their goal is always to make a profit.

They can come in different sizes and structures, from one-person companies to small and medium-sized enterprises (SMEs) and multinational corporations with branches worldwide. Big companies can even be quoted on the Stock Exchange.

Depending on their size and organisation, business activities can be:

Types of organizational structures.

Hierarchical structure. In this type of structure, the chain of command looks like a pyramid with a large base of employees directly supervised by the smaller level above them, who are, in turn, governed by the level above them, continuing to the top-ranking officer such as the company president or CEO. The company’s shareholders elect the directors, who, in turn, select a Managing Director or CEO to run the company. Each department or division is headed up by a director with assistance from directors, managers, and other staff working below them.

Functional structure: This type of structure is based on an organization divided into small groups arranged based on workers’ specific skills and knowledge.

Divisional structure : In this structure, workers are split into segments corresponding to particular products, services, or markets. This kind of structure is suitable for giant companies such as multinationals.

Sole traders

A sole trader is a self-employed individual who owns and controls their business.

It is the most common and straightforward type of business to set up.

Sole traders have complete control over their business and do not have to share the profits with anyone. They can hire other workers but are responsible for all aspects of their business.

However, they also have unlimited liability , meaning they are personally responsible for all the company’s debts. If the business fails, they will bear all the risks and may lose all their assets.

Examples of sole traders include electricians, carpenters, freelance consultants, hairdressers, bakers, and shop owners.

Business Organisations

Sole traders

Advantages Disadvantages

• Setting up a sole trader activity is easy
• Sole traders are usually small businesses, so less money is needed to start
• A sole trader can make decisions freely and quickly because fewer people are involved
• A sole trader can meet the needs of local people because the owner interacts with customers
• A sole trader doesn’t have to share profits
• The owner knows their employees well
  • Having unlimited liability puts personal possessions at risk.
  • Limited capital makes it hard to raise finance and may limit access to discounts.
  • Working long hours and having few holidays can impact health and the running of the business.
  • A single owner may mean a narrow range of skills.
  • Without colleagues to consult, mistakes are possible.
  • Prices may be higher than those of larger organizations.

Partnerships (società a nome collettivo)

A General Partnership (GP) or unlimited

or ordinary partnership is owned by 2-

partners who combine their money,

skills and work to run the company and

share profits, responsibilities and

losses.

Partners have 'unlimited liability ', which

means their assets are at risk: they may

lose all their possessions if the company

does poorly and goes bankrupt.

1. Partnerships LP (società a nome collettivo)

A Limited Partnership (LP) is a type of partnership with both general and limited partners.

This structure allows for investment in the business without exposing the limited partners to the same level of risk as the general partners.

General partners have unlimited liability and are responsible for business management. In contrast, limited partners have limited liability , which is restricted to their investment amount.