Introduction to business organizations
You have already gained a good understanding about the preparation of business
plans. The next step is selecting a suitable type of business organization in order to
implement the plan. This chapter aims to give you the required guidance with this
regard. At present different businesses help people to satisfy their needs and wants.
Accordingly, businesses are related with all daily activities of people. The influence
of businesses can be seen not only when we fulfill our daily requirements like foods
and cloths, but also when satisfying our all other day today needs and wants.
Example :-
Products like books, pens and pencils
Different organizations that provide the services like banking and
insurance
After doing the above activity, you can understand that it is necessary to get the
assistance of different parties in order to fulfill your needs and wants and you are
clear that business organizations are behind all these activities. To start and run
businesses, individuals should organize as groups. Thus, units comprise of group
of people working together for the purpose of achieving a common goal are called
organizations. Accordingly, different business organizations have been established
at present in order to satisfy the needs and wants of people.
Entities that engage in production and distribution of goods and services with the
aim of earning profits, achieving social well being or fulfilling any other objective
while using limited resources to satisfy human needs and wants are called business
organizations.
Some of the common characteristics that can be seen in every business organization
are given below.
# Having an objective.
# Using limited resources.
# Having an organizational structure.
# Engaging in an economic activity.
# Having a group of people who work together (owners, employees etc.)
Classification of business organizations
Today different business organizations have been established to supply goods and
services for the purpose of satisfying needs and wants of people.
These different types of business organizations can be classified based on different
criteria. Here, we consider only the following criteria which are often used.
1. Ownership
2. Objective
Classification of business organizations based on ownership
The ownership of the business is explained based on the way the financial resources
are provided to start the business. Parties that deploy resources in the business are
called owners. Owners enjoy the profits or losses earned by a business.
Based on ownership, business organizations are classified as follows.
1. Private sector businesses
2. Public sector businesses
When financial resources are deployed in a business by an individual or group of
individuals, the ownership of the business is with the private sector. Then they are
called private sector businesses.
Similarly when the financial resources are provided by the government, the
ownership is with the government and they are called public sector organizations.
Classification of businesses based on the ownership is given below.
Classification of business organizations based on their objectives
Entrepreneurs conduct businesses with the aim of achieving different objectives.
Businesses can be classified as follows based on their objectives.
1. Profit oriented businesses
2. Not-for profit organizations
If a business is carried out by an entrepreneur with the objective of gaining profit,
such businesses are called profit oriented business organizations.
Examples :-
Private hospitals , Private Banks , Super markets , Garment firms
Similarly, the objective of some businesses is not to earn profits but to provide
benefits to the society. Such organizations are called not-for profit organizations.
Examples :-
Red Cross , Lions club , Sports clubs
Profit oriented businesses and not-for profit organizations are operating under both
the private and the public sectors.
