U1- Types Of Organisation Flashcards
What are the two types of limited company?
They are both private sector organisations and they are:
Public limited company
Private limited company
Describe a private limited company (Ltd) and give an example
They can only sell shares to invited individuals with the agreement of the existing shareholders
It requires a minimum of one shareholder to register
A private limited company has more control over the business
Arnold Clark is an Ltd
What are the benefits of being a private limited company? (Ltd)
Limited liability
Allows for economies of scale
Control is not lost to outsiders
Experience and skill gained from shareholders
Less risk of liquidation
Easier to attract finance (it is seem as a formal structure)
What are the drawbacks of being a private limited company? (Ltd)
Profit shared among more people (shareholders)
Dividends are paid to shareholders at the end of the financial year only if a profit is made
Shares can’t be sold on the stock market
Must abide by the companies act
Most produce annual accounts which can be viewed by competitors and investors
Describe a public limited company (Plc) and give an example
They have the added benefit of being able to raise more capital by selling shares on the stock market
Normally they are large businesses
They publish an annual report
They can loose control of the business
Their benefits are similar to Ltd
Tesco is a Plc
What is franchising?
Franchises are business arrangements where one firm pays for the right to run under the trading name of another
The franchisee buys the right to trade as the franchising business but has to run the business in a way agreed with the franchisor.
What are the advantages of franchising for the franchisor?
Expand quickly and cheaply
Receive a share of profits and sales
Protection from competition
Can become a recognised brand
Have control over the franchisee
Franchisee may help innovation
What are the advantages of franchising for the franchisee?
Start with an established name which increases the chance of success
Attract new customers quickly which reduces the chance of failure
Given training from the franchisor
Innovation from other franchisees
Help and support from franchisor
What are the disadvantages of franchising to a franchisee?
Have to run the business as directed by the franchisor
Part of the profit and sales are paid to the franchisor
What is a multinational?
Multinational companies are businesses that trade internationally with operations in more than one country
Their products will be available in many different countries
Give 6 features of multinational companies
Operations in several countries
Has distinct home base country
Global brand
Can dominate markets across many countries
Budgets can be larger than some countries
Can greatly influence local economies
What are the benefits of being a multinational?
Much larger market
Economies of scale will be available
Profits will be greater so shareholders happier
Reputation will be enhanced
Can take advantage of local tax rates which will reduce business costs
Can take advantage of lower wage rates
What are the drawbacks of being a multinational?
Cultural variations have to be overcome for products/ marketing
Transportation can become expensive
Difficult to control- harder to manage in many countries
Language barriers will exist
Political stability is a problem in some countries
Legislation in some countries may make trading difficult
Describe third sector organisations
The main aim of these organisations is not to make a profit
They do not have to pay some forms of tax
They raise money from donations, government grants, shop sales and fees for services
They have some commercial activities to help raise funds
Charities must do one of 4 criteria to achieve charitable status. List these criteria
Relieve poverty
Advance education
Advance religion
Carry out activities beneficial to The community
