The essential feature of this type of business is that the sole trader has full responsibility for the financial control of his or her business, for meeting capital requirements and running costs and full personal liability in the case of debt.
Sole trader businesses are east to set up. The sole trader has:
- Direct personal involvement
- Unlimited liability
- Independence
- Entitlement to all of the profits but responsible
For all the debts
The advantages of being a sole trader are that the sole trader has 100% control of their organisation and they are involved in the day-to-day control of what goes on. But the main advantage is that all the profits go to the sole trader.
The disadvantage of being a sole trader is if the business goes in to debt if he/she was to have a partner there would be less money to pay up as it would be divided and it is more likely the bank would give him/her a loan if there was a partnership, so he/she would end up borrowing from members of there family
Partnership- Is known as a minimum of two people to a maxim of twenty known as a partnership. Partnerships exists mainly in the professions-doctors, lawyers, accountants, and surveyors frequently run their organisations in the form of partnerships. This is an ideal legal structure as some professional bodies forbid there members to trade as company’s.
The advantages of being in a partnership is that there is less money to be paid if the business goes into debt. And they would not be involved in the day to day running of the business so they could look into putting there time into another organisation.
The disadvantages of a partnership is that you alone would not have 100% control of the business and day to day control. And the profits would have to be divided.
Private limited companies
Private limited companies are suitable for small business and medium sized operations. This type of business is particularly suitable for family firms and for small enterprises involving just a handful of people.
Public limited companies.
The letters plc at the end of its name distinguishes a public company from a public company from a private limited company. All companies with share prices on the London stock market are public limited but not all public limited companies are not on listed on the stock market. To become a public limited company, a business must have an issued share capital of least £50,000 and the company must have received at least 25 per cent of the normal values of the shares.
Companies.
A company is defined as an association of persons that contributes money (or equivalent value in goods and assets) to a common stock, employ it in some trade or business, and share the profits or losing arising out of that business.
Franchises.
A franchises is not a form of business organisation as such, but a way of managing and growing a business.
Franchising covers a variety of arrangements under which the owner of a business idea grants other individuals or groups (known as franchisees) to trade using that name or idea.
Business objectives.
The main business objective for Audi AG is to improve the sales of there cars worldwide and increase there profit (profit maximisation).
The mission statement for Audi is:
“Audi is an internationally renowned manufacturer of high-quality cars.
We aim to establish new standards to substantiate our brand claim of Vorsprung durch technik”.
The objective of a business can vary depending on what the business does.
E.g. Oxfam’s main objective is to raise money and the profit goes directly to helping poverty in third world countries. But an organisation like Audi AG will have there main objective to sell top of the range cars to all sorts of clientele and there profits goes straight back into the company.
A mission statement gives an indication of what the purpose of the business and dovetails with the objectives the organisation sets itself.
Business objectives are medium to long-term goals or targets that provide a sense of direction to the business. For example in the case of Audi AG they might have an objective to boost Car sales from 20,000 to 30,000.
Companies may have a number of objectives. In general, the objectives pursued by a business tend to vary according to its size, ownership and legal structure.
Small business are more likely to have survival as there main objective as they tend to lack the financial recourses to cope with adverse trading conditions.
Larger business will have maximising there profits as there main objectives, especially if they are a plc [public limited company] because they will have shareholders breathing down there neck wanting the highest possible return.
These objectives will reflect purpose of the business as expressed in the mission statement and they have a considerable impact on the way in which it operates.
The goals pursued by any business can be separated into primary and secondary objectives.
- Primary objectives are those that must be achieved if the business is to survive and be successful
- Secondary objectives tend to measure the efficiency of the organisation. They may affect the chances of success, but only in the long term.
The hierarchy of the objectives.
Mission Statements.
Many organisations attempt to express the purpose of their being within a few sentences. These mission statements are intended to provide a sense of common purpose to direct and stimulate the organisation. This statement represents the vision or mission of the organisation.
Mission statements normally set out to answer FAQS [frequently asked questions].
- What business is the organisation in?
- Who is to be served?
- What benefits are to be provided?
Organising
When saying organising in a business sense it means many things, E.g. management of time, saying who is in charge of what by using things like an Organisational structure. In an organisation with dozens of employees, it is important that each member of staff knows exactly what to do, and how this links up with work carried out by other members of staff. People are therefore grouped into functional areas which relate to there job, so the people doing similar jobs work in the same area. There areas are then linked to an overall structure.
The most Suitable organisation structure depends on several factors.
- The aims of the business
- The size of the organisation
- The number of employees
- Whether the organisation produces goods or offers a service
This table shows all the members of the supervisory board.
Organisational Cultures.
Culture describes the values and beliefs of the people who make up an organisation. An organisations culture will be displayed in the attitudes of its staff and the ways in which they interact with other people such as customers, suppliers an colleagues. It will also be shown by the way that decisions are taken and in the management style used throughout the organisation.
Role culture.
Many business have traditionally operated in a bureaucratic manner, relying upon agreed procedures and strict hierarchy and roles within the organisation.
Within these traditional or role cultures, employees are expected to behave conventionally. They are expected to follow the rules- individualism is discouraged.
Audi Ag are based on using this organisational culture. It benefits the larger companies such as Audi were there is a strict hierarchy as the table below shows.
Person-oriented culture.
A person-oriented culture is characterised by a focus on fulfilling the needs of the individuals within an organisation. It allows individuals freedom to shape theire jobs and operate with a degree of independence.
It is therefore appropriate when employees are highly skilled and motivated. This type of culture may exist within organisations such as firms of accountants and solicitors.
Power culture.
Power culture places considerable emphasis on personal charisma and
risk-taking. It disregards procedures and values entrepreneurship. This type of culture Is most common in small business, where a ingle person can have an overview of the entire organisation.
From this table we can see that roles are spread out so managers can concentrate on there specific job roles instead of putting a half hearted attempt in to there job because of the heavy work load.
Organisational functions.
All organisations require resources to carry out their functions. One way of judging the success of a business is to compare the resources it uses with the value of the product that results.
Resources of the business.
One way of considering the resources used by a business is to classify them into factors of production. The main factors of production are capital, labour and land.
Capital-refers to any manufactured product used by the business to make products. This category therefore includes all machinery, vehicles and office equipment used in businesses.
Labour-is the human resource used by business organisations during production. It refers to the input of physical or mental activity by employees.
Land-in the context of this classification is not only the site on which the business is located , but also all the natural resources it might use.
The functions of business.
All businesses combine factors of production as an essential part of their production activities. To combine these factors, to engage in production and to achieve their objectives organisations undertake a number of functions. The major business functions include:
- Finance
- Production
- Human resources
- Marketing
- Administration
- Research and development.
Finance.
A separate department normally carries out the finance function of the business. The finance department carries out a number of key activities.
These are summarised in the diagrams beside.
Production
Production covers all the activities that must be undertaken to make firms products.
Human resources.
In modern businesses, human resources management is now taking on the role previously carried out by personnel management. There is a very clear distinction between personnel management and human resource management.
Personnel management considers the tasks involved in managing people-recruitment, selection and so fourth – as separate elements.
Human resource management (HRM) elevates the effective use of a business’s labour