1 1.2 Types of organizations-8 hrsUnit 1: Business organization and environment

2 1.2 Types of organizations- 8 hrsDistinguish between private and public sectors Compare and contrast the main features of for-profit/Profit based (commercial) organizations: Sole Trader Partnerships Companies or Corporations 3. Compare and contrast the main features of for-profit social enterprises: Cooperatives Microfinance providers Public-private partnerships (PPP) 4. Compare and contrast the main features of non-profit social enterprises (NPO) Non-governmental organizations Charities

3 KWALAQ What do you already Know?What do you want do learn or find out? How will you go about finding this information What did you learn from the experience? What further clarification would you like? What questions have arisen?

4 1. Distinguish between the aims of businesses in private and public sectors AO2 Distinguish: Make clear the differences between two or more concepts or items. Key Concept Link: Is the culture of a business organization partly dependent on its legal form of ownership? Culture: The way we do things in our business The beliefs, values and norms within a business that define communication, working relationships and motivation between internal stakeholders. Distinguish between Public Sector & Private Sector What are the objectives of public sector organizations? Define the terms: a. Privatization. b. Public corporation c. Public Limited Corporation How might the services provided by a public sector company differ from those provided by a private sector firm? What are the Advantages & Disadvantages of Public Sector Enterprises?

5 1. Distinguish between private and public sectors 1hrPrivate Sector: Owned and controlled by private individuals and businesses The aim of most is to make profit (sales revenue- costs= $) Public Sector: Owned and controlled by the government. (state-owned enterprises if wholly owned by the government) Have objectives other than profits: Ensures everyone has access to essential goods & services: education, healthcare, public parks & libraries, emergency services, national defense, public transport. Avoids wasteful competition –economies of scale i.e. postal services, energy, telecommunications. Protect citizens and businesses (police, courts) Create employment: teachers, doctors, nurses. Stabilize Economy (several banks were nationalized during the global credit crisis- Citigroup) Preventing private monopolies Maintaining environmental standards

6 Public Corporation: a business enterprise owned and controlled by the state (nationalised industry or public sector enterprise). Public limited company (PLC): a limited company, with the legal right to sell shares to the general public, its share price is quoted on the national stock exchange. (it is in the private sector (owned by private individuals & businesses) but its shares are sold to the general public). Public - Private Partnership: Involvement of the private sector in the form of management expertise, and/or financial investment, in public sector projects aimed at benefiting the public. (usually social infrastructure projects)

7 Privatisation: the sale of public sector organisations to the private sector.Nationalization: is the process of taking a private industry or private assets into public ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being transferred to be the state. The opposite of nationalization is usually privatization or de-nationalization, but may also be municipalization. Industries that are usually subject to nationalization include transport, communications, energy, banking and natural resources. (US: Citigroup & General Motors) Renationalization: Bringing assets and/or industries back into national- government ownership after they had previously been privatized. The motives for renationalization can be widely varied, but are always based in either economics or politics. Renationalization often occurs in sectors that are required for the country to operate smoothly, or where monopolies must occur. Examples of sectors that are commonly renationalized are utilities and transportation. If no compensation is given to the previous owners, this process is called expropriation, and it is commonly seen in times of war.

8 1. Distinguish between private and public sectors 1hrCase Studies: BBC- British Broadcasting Corporation- UK (Wikipedia) vs. Caracol Televisión (television network) SAIC Motor Corporation Limited– Chinese automobile manufacturer versus Daimler AG - BMW United States Postal Service or Australia Post: versus Deutsche Post DHL group (courier company) China Mobile-worlds largest phone operator versus Claro Colombia Satena vs. Avianca (airlines) How might the products or services provided by a public sector company differ from those provided by a private sector firm? How might their objectives differ? How might their cultures differ?

9 TOK - Cambridge ‘All countries have organisations that are part of the private sector; they come in the form of business organisations that exist to create a profit for their owners. All countries also have public sector organisations that exist to improve the welfare of all people in society. As a consequence of this, governments should look to expand the proportion of countries’ organisations that are owned by the state.’ Analyse the evidence you would use to prove or disprove this statement. In the light of this statement, discuss some of the reasons why so many countries have privatised former public sector organisations. Discuss some reasons why countries may nationalise private sector organisations, or renationalise organizations. ‘Organisations always run more efficiently when they are free of government control.’ (Comment on this statement after you read about nationalisation of Citigroup & General Motors). Discuss to what extent you agree or disagree with this statement.

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11 2. Compare and contrast the main features of for-profit/Profit based (commercial) organizations 2 hr AO3 1. What are the different types of business ownerships? 2. Define the terms & compare and contrast the main features of for profit organizations (advantages & disadvantages) Sole Trader Partnerships Companies or Corporations- Private limited company Public limited company 2. How can the risk of loss influence decision making in these types of organizations? 3. What is the difference between the term business and company? 4. In your business plan, what type of for profit organization will you constitute (explain the reasons why)

12 2. Compare and contrast the main features of for-profit/Profit based (commercial) organizations4. Evaluate the most appropriate form of legal organisation for different businesses. Give a brief description and examine the advantages and disadvantages (costs & benefits) of 2 types of commercial organization. Case Studies: Sole traders: Chanel – Coco Chanel (today Ltd) /Marks & Spencer – Michael Marks and Thomas Spencer/Tesco – Jack Cohen/Cam Tran – Flowers by Cam (London UK) Partnerships: EXP: the Chinese experience (London)/ Private Ltd Company: Ernst & Young, Ikea, Lego, Mars Limited (www.mars.com), Rolex, Pricewaterhouse Coopers, Tutor2U, Virgin Group. Public Limited Company: China mobile, Coca-Cola Company, HSBC, Michelin, Microsoft, Nike, Inc., Porsche, Samsung, Vodafone, Google, General Electric, Facebook

13 Few legal formalities: Registering is easy, inexpensive, quick) 2. Compare and contrast the main features of for-profit Commercial Organizations 2hr Sole Trader (sole proprietor) (comerciante): An individual who owns and runs a personal business. He provides the permanent finance and in return has full control and keeps all profits. Usually small businesses/profits no large enough to support growth/come to an end when the sole trader retires or dies/often a niche in the market. Advantages Disadvantages Few legal formalities: Registering is easy, inexpensive, quick) Unlimited liability- no legal distinction between the business and the sole trader. Profit taking: all Limited source of finance (personal savings) Being your own boss/complete control: quicker decisions, flexibility times & patterns of work High risks – of failure/ Workload & Stress/ Limited scope for expansion Personalized service: Usually a small business close to the customer Limited economies of scale/prices less competitive Privacy of financial records/limited accountability Lack of continuity (holidays, illness, death)

14 2. Compare and contrast the main features of for-profit Commercial Organizations 2hrPartnerships (sociedad de hecho): Profit seeking business owned by 2 or more, with shared capital investment and usually shared responsibility. For ordinary partnerships the maximum # is 20. Usually professional people with related qualifications (doctors, lawyers, accountants). Investors are called (silent partners or sleeping partners)/partners do not necessarily share profits equally Unincorporated – Unlimited liability. Partnerships are safer than sole traders but also more complex A partnership agreement does not create a separate legal unit. Some countries require a deed of partnership: Financing: Amount $ contributed by each , Responsibilities: roles, obligations and responsibilities, Voting rights Division of profits & Liabilities: how profits and losses will be shared. Procedures for changing circumstances: clauses of withdrawal, procedures for ending, conditions for new partners

15 2. Compare and contrast the main features of for-profit Commercial Organizations 2hrPartnerships: Advantages Disadvantages More Financial strength than sole traders (all partners contribute, more access to finance) Decisions are made jointly by partners Specialization/division of labour/ efficiency An individual partner doesn’t have control, has to rely on work and good will of others. Prolonged decision making/Lack of harmony Cost – effective/ Business losses are shared between partners Unlimited liability: No legal distinction: responsible for debts wholly or severally. Unless partner declares “limited partners” Profits are shared among partners Financial privacy/fewer legal formalities than corporations. Less access to loans than corporations Typically more stable than sole traders, higher likelihood of continuity Lack of continuity: disagreements and conflict.

16 Main features of Commercial Organizations: Company/Corporation (US)/Joint – stock companiesCompany or Corporation (US) (Sociedad Anónima/Sociedad Limitada): A business established for a specific purpose and registered according to local or national legislation. Owned by multiple shareholders: individuals or other businesses that have invested money to provide capital for a company. Joint – stock companies: stocks are jointly held by numerous entities. Incorporated: the company is a separate entity (legal personality): has its own rights and duties. Limited liability: the maximum a shareholder can loose is the value of their investment. Share: a certificate confirming part ownership of a company and entitling the shareholder to dividends and certain shareholder rights. Usually each share equals one vote. Owners can change. Shareholder: individuals or institutions that own shares in a limited company. Share holders own but don’t run the company. A Board of Directors (BOD) is elected to run the company (responsible/accountable). Individual shareholders do not control the business unless they own a majority of chares. Company keeps profit unless shareholder decide to pay in the form of dividend.

17 Main features of Commercial Organizations: Company/Corporation (US)When a business decides to become a company it can choose to be different types of organizations: Private limited company: Cannot raise share capital from the general public, shares sold to privately (family members, friends, associates). Shares cannot be traded without prior agreement of the BOD. Usually family businesses. Usually have ltd or Limited. (Usually limited to 20 shareholders). (the word limited or Ltd. In the name). Advantages Disadvantages Separate legal personality Legal formalities involved Shareholders have limited liability Continuity in the event of death of shareholder. Original owner is often able to retain control Capital cannot be raised by selling shares to the general public. Able to raise capital by selling shares Quite difficult to sell shares Price of share may increase/ dividends. Original owner is often able to retain control Price of share may decrease/may not receive dividends/ loss of control. Greater status than an unincorporated business. Improves chances of finance. End of year accounts must be sent to the “Superintendencia de sociedades”-if applicable . Available for public inspection. (less secrecy).

18 Main features of Commercial Organizations: Company/Corporation (US)/Joint – stock companiesBefore companies can begin trading, 2 documents must be produced and submitted (varies): Memorandum of Association: Outlines fundamental details: name, main purpose, registered address, amount of share capital invested. (not in Colombia) Articles of Association (Articles of Incorporation) (Estatutos): Stipulates the internal regulations and procedures of the company. Certificate of Incorporation: (Certificado de existencia y representación legal) This license recognizes the business as a separate legal entity from its owners and allows the business to start trading as a limited liability company. Once authorities approve above documents & fee is paid. The Company & Managers are accountable: Usually have to publish audited company reports annually or quarterly (in some countries) Annual General Meeting (AGM) &Extraordinary General Meeting (EGM)

19 Main features of Commercial Organizations: Company/Corporation (US)/Joint – stock companiesWhen a business decides to become a company it can choose to be different types of organizations: Public limited company: Able to advertise and sell its shares to the general public via the stock exchange. (Usually use PLC or Inc). Initial Public Offering (IPO)/Flotation: When a business first sells all or part of its business to external investors (shareholders. Company is listed in the stock exchange. Its share price is quoted on the national stock exchange. Largest shareholders tend to be institutional and commercial investors) Potential Investors can see accounts. Business has no control over who buys their shares. Divorce between ownership and control.

20 Main features of Commercial Organizations - PLCAdvantages Disadvantages Access to Finance: Raising Capital by selling Shares. Improved chance of raising further finance (loans) & Possibilities for Expansion Compliance Costs: Setting up can be complicated and expensive. (rules & regulations of stock exchange) Limited liability for investors. Company & Management: Accountable. Shareholders own but do not run the business. Directors influenced by short term objectives. Greater Continuity & Stability (long-term relationships) Communication problems (employees & customers) Economies of scale & Productivity Added complexities:+ expensive bureaucracy (solicitors, accountants) Ease of selling shares PLC: A company has no control over the stock market & loss of control over who buys its shares. Share prices subject to fluctuation/risk of takeover Tax benefits: Corporate tax vs. Income tax/ wider range of allowances and tax-deductible costs. Disclosure of information(PLC)/ Many details are legally recorded and matters of public record/

21 In Colombia: Types of Companies:Sociedad por Acciones Simplificada - SAS: One individual can register and have the advantages of a separate legal entity: Limits liability but implies more legal formalities: ie. registering in the Chamber of Commerce. Empresa Unipersonal: EU One individual can register and have the advantages of a separate legal entity: Limits liability but implies more legal formalities: ie. registering in the Chamber of Commerce. Sociedad colectiva - SC: With unlimited liability. Sociedad encomandita (simple o por acciones) – SCS o SCA: Some partners have limited liability and others unlimited liability. Sociedad Limitada (LTDA): limited liability(no more then 25) Sociedad anónima (SA): Limited liability: at least 5 shareholders. Empresa Asociativa de Trabajo: EAT

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23 3. Compare and contrast the main features of for-profit social enterprise 2hr AO3Define the term social enterprise. What is the difference between a social enterprise and a commercial business? TOK: Is the label “social enterprise” appropriate? Can businesses be separated from a profit motive? Can any business be separated from a social purpose? 5. Describe 3 models: Cooperatives Microfinance providers Public-private partnerships 6. What motivates the founders of social enterprise?

24 3. Compare and contrast the main features of for-profit social enterprise 2hrCase studies: Examine benefits, discuss whether government should give incentives Fifteen (UK)- a chain of restaurants – profits for giving young people a greater opportunity to have a better future. Cooperatives: Associated Press (USA)/Aurora Win Cooperative (Brazil)/Cooperative Bank (UK)/ Credit Agricole Group (France)/Mondragon Corporation (Spanish)/Ocean Spray (US) Sunkist (US, Xinjiang Quanliang (China) Investigate the role of the International Cooperative alliance (ica.coop) Micro finance provider: Bangladesh Rural Advancement Committee (BRAC) (www.brac.net), Grameen Bank (Muhammad Yunis) Bangladesh, Public –private Partnerships (PPP): London's Olympic Stadium, Sydney Harbour Bridge, New Yorks Central Park, World Health Organization (WHO), Hong Kong Disneyland, Eurotunnerl (Skanska)

25 Compare and contrast the main features of for-profit social enterprise 2hrSocial enterprises are revenue generating businesses with social objectives at the core of there operations. (aims to provide human, social or environmental well-being) Main goals of Social Enterprises: achieve social objectives & earn revenue in excess of costs (profit). Social enterprises strive to return a surplus for social gain. (social gain takes priority over growth, maximizing sales, profits) Collaboration between the business and the local community. Greater Democracy (style of governance stems form the spirit: to do good – consultation and transparency) Operates the same functions as any other business.

26 Compare and contrast the main features of for-profit social enterprise 2hrAdvantages Disadvantages Favourable Legal Status (not personally liable or accountable to shareholders). Insufficient capital for financial strength or growth Strong Communal Identity: common sense of purpose. Decision making is complex & time consuming. Benefits to the stakeholder community Some: Tax benefits Models (in addition to other business models): Cooperatives Microfinance providers Public-private partnerships (PPP)

27 Cooperatives Cooperatives: For – profit social enterprises owned and run by its members, such as employees or customers, with the common goal of creating value for its members by operating in a social responsible way (reducing costs to its members). All members have a vote and share (benefits or any profit earned). (members may participate actively in the running of the business) Consumer Cooperatives: owned by customers who buy the goods and/or services for personal use. (lower prices). Ej. Financial Cooperative (credit unions), Housing Cooperative, grocery stores Workers Cooperatives: set up, owned and organized by their employee members. (members are provided with work). Producer Cooperatives: Producers join and support each other to process or market their products. (Agriculture: buy equipment, processing facility, raw materials)

28 Cooperatives Advantages DisadvantagesIncentive to work (motivation & productivity) by being owners Disincentive effects (don’t pay high salaries)& limited promotional oportunies Decision - making power: democratic Slower decision - making Social benefits: gains can be enjoyed by the wider community Limited sources of finance (members) Public Support for the cause

29 Microfinance ProvidersMicrofinance providers: A type of financial service aimed to provide small amounts of finance to those who traditionally would not have access to it ej. entrepreneurs of small businesses, rural communities, females and those on low incomes. (lenders pay low interest rate & the capital) They enable the disadvantaged members of society to gain access to essential financial services to help eradicate poverty. Access to banking and insurances may be limited, unofficial money lenders – high costs. The main aim to help those who would previously never have had access to finance to take the first steps towards economic independence.

30 Microfinance Providers:Advantages Disadvantages Accessibility: to those in poverty Immorality: providers are for profit organizations, that profit from poor and unemployed. Job Creation: effective use creates job opportunities Limited finance: high risk of default Social Wellbeing: for successful candidates Limited eligibility: not all poor people qualify

31 Public - Private PartnershipsPublic-private partnerships (PPP) (sociedades de economía mixta): Occur when the government works together with the private sector to jointly provide certain goods or services. Hybrid organizations of both the public and private sector. (schools, hopitals or specific sites) Benefits from dynamics, finance, expertise and efficiency of private sector and funding and support of public sector.

32 REVISION ACTIVITY- CambridgeRead the case study below and then answer the questions that follow. Waste – a good case for public–private partnership? Capital Waste Disposal plc was created 5 years ago when the capital city’s rubbish collection service was privatised. As a public sector enterprise, the organisation had been overstaffed and inefficient, but charges for collecting waste were low and the service was popular with local residents. The city government subsidised the waste services and this helped to keep charges down. Shortly after privatisation, the directors announced substantial job cuts to save on costs. The waste collection service was reduced to once a week, yet charges were increased. The city government also announced that the city’s rubbish collection services would be opened up to competition. The business started to make big profits. It invested in new equipment and paid dividends to its shareholders. Last year, for the first time since privatisation, profits fell. This was due to competition from a newly formed waste disposal business. Many of Capital Waste’s shareholders wanted the directors to be replaced. The biggest shareholders demanded to be on the board of directors. The chief executive discussed with the bank whether a loan could be obtained to enable him to buy out most of the shares to convert the business into a private limited company.

33 REVISION ACTIVITY II- CambridgeHe told the bank manager, ‘If I turn the business into a private company, I can run it without any interference from big shareholders and publish less data about the company.’ The government still owns and manages the old and inefficient waste recycling plant in the city. It now wants to involve Capital Waste in a public–private partnership to build a new, environmentally friendly waste recycling plant. The business would be asked to invest capital in the new facility and to use its private sector managers to help manage the new plant. A PPP would help to make sure that it was built quickly. However, some local residents are worried that private sector managers would try to cut costs, and that difficult to recycle waste would simply be dumped in the local river. 36 marks, 65 minutes

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35 4. Compare and contrast the main features of non-profit social enterprises (NPO) 2 hr AO31, Define a non- profit social enterprise. 2, Describe the characteristics of Non-governmental organizations Charities 3. What is the true nature of an NGO? 4. Look at the website for 2 NGO´s (one local and one international). Make notes about when they where established, the work they do, any recent news articles about them, information about their funding and organization. What are the main similarities and differences? Ej Red cross, Red Crescent, Mohammed bin Rashid Al Maktoum Foundation, Calouste Gulbenkian Foundation, Bill & Melinda Gates Foundation, Amnesty International, Habitat for Humanity, Oxfam, World Wide fund for Nature 5. ToK: How can we “know” if for profit organizations do not care about society as much as non – profit social enterprises? Or give as much social benefits?

36 Compare and contrast the main features of non-profit social enterprises (NPO) 2 hrSome businesses operating in the private sector do not aim to make profits at all. They are social enterprises (the main aim is a social purpose) but they do not aim to make profits whatsoever. They are run as a business, they aim to generate surpluses rather than profits. The surplus is used to advance the social purpose for which the business was set up, rather than distributed to the owners. (Surplus = total revenues – total costs). (surplus is not classed as profit because it does not get distributed to owners or taxed but is reinvested) They are allowed to make surplus but it must be retained for capital requirements of the organization (self preservation and growth) or on the social purpose. They are not organized or run by any government. Donations are important There is unclear ownership and control – (Fundaciones)

37 Main features of non-profit social enterprises (NPO) 2 hrAdvantages Disadvantages They help people or causes in need The lack of control but intense lobbying can lead to socially undesirable goods ej. National rifle association and gun owners of America. They foster a philanthropic spirit in the community/make it a better place to live/improve general business climate Employees sometimes have a passion and zeal that ill serves the organization. Ej greenpeace. They can foster informed discussions in the community about allocation of resources. Funding can be irregular They can innovate.

38 Compare and contrast the main features of non-profit social enterprises (NPO) 2 hrThey share some common features of for – profit Social enterprises: They strive to return a surplus for social gain. (social gain takes priority over growth, maximizing sales, surplus) Collaboration between the business and the local community. Greater Democracy (style of governance stems form the spirit: to do good – consultation and transparency) Operates the same functions as any other business. Practice Question: page 36- loykie lomine and others (oxford)

39 Compare and contrast the main features of non-profit social enterprises (NPO) 2 hrThey can take many possible forms, and the differences can be subtle – two broad categories exist: 1. Non-governmental organizations (NGO)/ Private Voluntary Organizations (PVO): The aim is to support a cause that is considered socially desirable. The UN defines NGO´s as “private organizations that pursue activities to relieve suffering, promote the interest of the poor, protect the environment, provide basic social services or undertake community development”. Ej Save the Whales, Greenpeace, Friends of the Earth, Aga Kahn Development Network, Unicef. Some have political aims: Amnesty International, National Rifle Association. Types: Operational NGO´s: Established for a given objective or purpose. Tend to be involved in relief-based and community projects. Advocacy NGO´s: more aggressive approach to promote or defend a cause, striving to raise awareness.

40 Compare and contrast the main features of non-profit social enterprises (NPO) 2 hrThey can take many possible forms, and the differences can be subtle – two broad categories exist: 2. Charities: Aim is to provide as much relief as possible for those in need, their focus is on philanthropy and a desire to help those who cannot help themselves. They provide voluntary support for good causes (from societie´s point of view) ej. Protection of children, animals, the environment. Its key function is to raise funds from individuals and organizations to support a cause that is beneficial to society. They can be for a single event (natural disaster, war), o focus on a single issue: Save the children, Oxfam, Half the sky, Red cross, Red Crescent, World Wildlife Fund Charities are exempt from paying taxes, other NGO´s are not (laws vary in countries)

41 Charities Advantages Disadvantages Social benefitsBureaucracy: They have to be registered before they operate Tax exemption for NPO´s (corporate taxes & concessions for other taxes) Disincentive effects for (unpaid) volunteers, and salaries tend to be less. Tax incentives for donors Charity fraud(misuse of charitable donations) Limited Liability Inefficiencies: Those who run are not personally liable for debts incurred. Public Recognition and Trust Limited sources of finance (donations)

42 ACTIVITY Cambridge Read the case study below and then answer the questions that follow. The oil giant BP Amoco will face renewed action next week from Tibetan pressure groups to withdraw from PetroChina, the state-run Chinese oil company which is building a gas pipeline through ethnic Tibetan areas. Tibetan activists will coordinate a worldwide series of protests starting next Thursday while the Free Tibet Campaign is planning to disrupt BP’s AGM in April. It has tabled a resolution calling on BP to dispose of its PetroChina stake on the grounds that it is against the company’s ethical policy on human rights and the environment. The pressure group may also call for a consumer boycott of BP petrol stations. A government minister admitted to reporters in Beijing that BP and PetroChina would face a public relations ‘disaster’ if the resolution is passed. 17 marks, 35 minutes

43 CUEGIS CONCEPTS – 1hr CONSIDER HOW THE CONCEPTS OF CHANGE CULTUREETHICES GLOBALIZATION INNOVATION STRATEGY APPLY IN THE DIFFERENT TYPES OF ORGANIZATIONS? IN THE REASONS FOR SETTING UP A BUSINESS?

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45 ACTIVITY 2.3- Cambridge Read the case study below and then answer the questions that follow. Footie Ltd to stay private after ruling out float Footie Ltd, the shoemaker and retailer, is to remain a private limited company. The directors received overwhelming advice against converting it to a plc. The company has no need of further capital to fund further expansion, and is now one of the world’s largest private limited companies. In 2004, after a decade of declining fortunes, it came within five votes of opting for a takeover by Shoeworks plc. But in April this year, it announced annual profits up from $42.7 million to $50.8 million on sales of $825 million. That was its third year of record profits, reflecting its strategy of reducing its reliance on own manufacture and investing in its brands and shops. Footie Ltd is now more of a retailer and wholesaler than manufacturer, owning or franchising 650 shops and importing shoes from abroad. Five years ago, 75% of its shoes were manufactured in Footie’s European factories. Now it is just 25%, with 40% of the business based in Asia. Jim Parker, chief executive, has claimed that Footie is the largest conventional shoe brand in the world, having sold 48 million pairs last year. He said the business was expanding rapidly in nearly all markets and this growth strategy requires a lot of capital. ‘We can continue to build the business with benefits of moving to lower-cost countries and with investment in our brand and retailing operations.’ Despite ruling out a float for now, the company said it would continue to examine ‘the most appropriate legal structure to meet shareholders’ interests on the basis of its strategy for future growth and the conditions in the footwear market’. 26 marks, 45 minutes

46 REVISION CHECKLIST- Cambridge1 What is the difference between private sector and public sector organisations? 2 State three differences between a sole trader and a private limited company. 3 Who (a) owns and who (b) controls a public limited company? Explain why this distinction might lead to conflict. 4 Why might the directors of a public limited company decide to convert the business back into a private limited company by buying a majority of the shares? 5 Explain how legal personality and continuity help businesses and companies to operate effectively. 6 In what way does limited liability make it easier for companies to raise finance? 7 Using the examples of a sole trader business and a public limited company, explain how the relationship between ownership and control differs in these two types of organisations. 8 Using the examples of a partnership and a public limited company, explain how the legal structure of a business affects its ability to raise finance. 9 List two organisations in your own country that are in the public sector. 10 Analyse one impact of the distinction between ownership and control for: a shareholders of a plc b employees of a plc. 11 Explain two potential advantages to a country when its government uses Private Finance Initiatives to pay for new motorways. 12 Explain two potential disadvantages to a country when its government uses public–private partnerships to pay for and manage health clinics.

47 EXAM PRACTICE QUESTION- Cambridge Read the case study below and then answer the questions that follow. THE GOOGLE™ PHENOMENON In 1995, Larry Page and Sergey Brin met at Stanford University. The following year they formed a partnership and began collaborating on a search engine called BackRub. In 1997, they decided to rename BackRub and came up with Google (derived from ‘googol’ a mathematical term for the number represented by the numeral 1 followed by 100 zeros). With $ support from a backer, Google Inc was set up in 1998 in a garage in California. Later that year, PC Magazine recognised Google’s search engine as one of the top 100 websites. In 2000, Google became available in many languages including French, German, Italian and Chinese. By 2004, the Google search index contained 6 billion items, including 4.28 billion web pages and 880 million images. It moved to an office in California called Googleplex with over 800 employees and offices all over the world. In the same year, Google became a public limited company offering for sale 19,605,052 shares at an opening price of $85 a share. Over the next five years, Google refined and added to its search engines a range of products such as Google News, Google Earth, Google Maps and Google Video. Today, Google is a huge multinational corporation worth around $160 billion and its share price is over $500 a share. Source: Adapted from various sources

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