INTRODUCTION TO BUSINESS ORGANISATION
BUSINESS UNDERTAKING
A business undertaking is an organisation which is engaged in some business or commercial activity. It may be owned and controlled by a single individual or by a group of individual or by a group of individuals. It may be based upon an informal agreement or it may be a formal association of persons. Every business undertaking is a separate and distinct unit of business. It has its own identity and separate ownership. It can be distinguished from other undertakings or on the basis of its ownership, management and control.
CHARACTERSTICS OF BUSINESS ORGANISATION
Features of business organisations are:-
1. Separate identity : Any type of business undertakings has an identity of its own. It has distinct name and it exists as a separate entity with its own assets and liabilities and thus separate accounts.
2. Independent ownership : A business undertaking is owned by private individuals or the government who are which make initial contribution of capital. Thus, every business firm or company has an independent ownership.
3. Independent management : Every business or undertaking has its own independent management depending on the form of organisation, legal status as also nature and size of business or scale of operation.
4. Risk taking : Any type of business undertaken involves risk. Profit is the reward for risk taking and uncertainty bearing. Some risks are no doubt covered through insurance. Others are borne by the owners. Such risks are known as uninsurable risks or uncertainties.
DIFFERENT TYPES OF BUSINESS ORGANISATIONS
Business organisations may be classified in broad three categories :-
1. PRIVATE SECTOR UNDERTAKINGS : These are financed, owned, operated and controlled by private persons. Their main characteristics are the following :-
(a) Private ownership and control : A private sector undertaking is solely owned and completely controlled by either one individual or a group of individuals jointly.
(b) profit motive : The main motive of this organisation is to earn profit.
(c) No state participation : There is no question of participation by the central or state governments int he ownership and control of any private sector undertaking.
(d) Private finance : The seed capital of a private sector undertaking is provided by its owners, i.e. , by a single person in the case of a sole proprietorship or by the partner in the case of partnership, and by making public issue of shares and debentures in the case of a joint stock company.
(e) Independent management : A private sector undertaking is managed by its owners directly or indirectly, i.e., directly by the owners in the case of sole proprietorship and partnership and indirectly by the board of directors who appoint professional managers who are salaried persons. The board members are appointed by the shareholders who, in turn, appoint or heir the managerial staff.
2. PUBLIC SECTOR UNDERTAKINGS : These undertakings are owned either by the central or by state government. The common characteristics are:-
(a) State ownership : Public undertakings are fully owned by the governments or by any public authority.
(b) Government control : The ultimate control of a public sector undertaking is exercised by the government.
(c) Service motive : The basic objective of a public sector undertaking is to serve the society and promote public welfare with minimum profit.
(d) State financing : The government provides initial capital and funds through appropriations from its budget. The government may also extend loan its own enterprises from the exchequer as and when needed.
(e) Public accountability : Public sector undertakings are accountable to the public for their yearly performance and operational results.
3. JOINT SECTOR UNDERTAKINGS : Joint sector consist of business undertakings wherein the ownership control and management is shared jointly by the central or the state governments and by the private entrepreneurs and occasionally the general public.
The main characteristics of joint sector enterprise are:-
(a) Mixed ownership : The government, private entrepreneurs and the investing public jointly own such enterprise.
(b) Joint management : The management and control of such an enterprise lies with the nominees or representatives of the government, private investor(s) and the public.
(c) Sharing of capital : The capital is shared by the government, private business persons and the general public in certain proportions as noted above. The basic idea is to pull the huge financial resources and technical know-how of the state private individuals.
4. PUBLIC-PRIVATE PARTNERSHIP : Public-private partnerships are government services or business ventures that are funded and managed through a partnership of government and one or more private-sector companies. There are two main types of public-private partnerships (ppp) :
(a) GOVERNMENT FUNDED : In these ventures, the government provides all or part of the funding, but the management of the organisation will be by a private business that will use private-sector methods and techniques to control it as efficiently as possible.
(b) PRIVATE-SECTOR FUNDED : In these ventures, which often involve large sums of capital investment, the government is relived of the financial burden of finding taxpayers money to pay for the project. Once the assets have been paid for, they are then managed and controlled by a government department.
FORMS OF PRIVATE SECTOR ORGANIZATIONS
A business can take a number of 'legal' forms such as the following :
1. Sole proprietorship : This type of business is owned and controlled by a single person. Its owner may be the only employee, perhaps operating a small convenience store, barber-shop, or speciality shop. Or, the owner may hire several employees to staff a larger business such as a restaurant, an auto service station, or a home construction enterprise. The sole proprietorship is the most common type of business.
2. joint Hindu family firm : The Hindu undivided Family (HUF) is a form of business organisation in which the family is endowed with some property through inheritance and the 'Karta', the head of the family, manages its day-to-day affairs.
3. Partnership : A partnership business owned and controlled by two or more persons who any parties to a particular agreement. Each of them has a financial interest in the firm.
4. Joint stock company : A joint stock company is a business owned by a group of share holders and its capital is divided up into a number of shares.
5. Cooperative society : A cooperative society is a business, owned and controlled by a group of persons called members such as workers' cooperative, farmers' cooperative or even housing cooperative.
CHOICE OF THE FORM OF BUSINESS ORGANIZATION
1. Nature and sphere of activities
2. Need for seed capital
3. Scale of operations
4. Ease of stating a business
5. Area of activity
6. Extent of liability
7. Continuity of business
8. Professionalism in management
9. Types of control of business
10. Secrecy of business
