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Business Organisations - Coggle Diagram
Business Organisations
Sole trader
Advantages
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2.He is his own boss.
Has complete control over his business
No need to consult with or ask others before making decisions.
3.He has the freedom to choose his own holidays, hours of work, prices to be charged and whom to employ
- Has close contact with his own customers.
- has an incentive to work hard as he is able to keep all of the profits, after he pays tax.
- He enjoys complete secrecy in business matters.
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Disadvantages
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3.Unless you have a strong capital flow, you can't have a lot of money to invest in R&D like a partnership or some financing company.
- Business is likely to remain small.
- No continuity of the business after the death of the owner.
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Partnerships
Advantages
- Can shared the responsibility of running the business.
- Both partners will get benefit form the profits son they will be motivated to work hard.
- More capital could now be invested into the business.
Disadvantages
- Partners can disagree on business decisions and consulting all partners takes time.
- The business did not have a separate legal identify.
- If one of the partners is very inefficient or actually dishonest, then the other partners could suffer by losing money in the business.
- The partner did not have limited liability
- Most countries limit the number of partners to 20 and this means that business growth would be limited by the amount of capital that 20 people could invest.
Definition: Is a form of business in which two or more people agree to jointly own a business. Chinese：合伙企业
Public limited companies
Advantages
- It is an incorporated business and has a separate legal identity to the owners or shareholders.
- There is now the opportunity to raise very large capital sums to invest in the business.
- This form of business organisation still offers limited liability to shareholders.
- There is no restriction on the buying, selling or transfer of shares.
5.A business trading as a public limited company usually has high
status and should find it easier to attract suppliers prepared to sell goods on credit and banks willing to lend to it than other types of businesses.
Disadvantages
- The legal formalities of forming such a company are quite complicated and time-consuming.
2.There are many more regulations and controls over public limited companies in order to try to protect the interests of the
shareholders.
- Selling shares to the public is expensive.
- There is a very real danger that although the original owners of the business might become rich by selling shares in their business, they may lose control over it when it ‘goes public’.
Definition: are businesses owned by shareholders but they can sell shares to the public and their shares are tradeable on the Stock Exchange.Chinese:公众有限公司
Joint ventures
Advantages
- Local knowledge when joint venture company is already based in the country
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Disadvantages
- Disagreements over important decisions might occur
- The two joint venture partners might have different ways of running a business – different cultures
1.If the new project is successful, then the profits have to be shared with the joint venture partner
Definition: A joint venture is when two or more businesses agree to start a new project together, sharing the capital, the risks and the profits.Chinese:合资公司
Franchising
To the franchisor
Advantages
- Expansion of the franchised business is much faster than if the franchisor had to finance all new outlets
- The management of the outlets is the responsibility of the franchisee
- All products sold must be obtained from the franchisor
- The franchisee buys a licence from the franchisor to use the brand name
Disadvantages
- Poor management of one franchised outlet could lead to a bad reputation for the whole business
- The franchisee keeps profits from the outlet
To the franchisee
Advantages
- All supplies are obtained from a central source – the franchisor
- There are fewer decisions to make than with an independent business – prices, store layout and range of products will have been decided by the franchisor
- Training for staff and management is provided by the franchisor
- Banks are often willing to lend to franchisees due to relatively low risk
- The franchisor pays for advertising
- The chances of business failure are much reduced
Disadvantages
- May be unable to make decisions that would suit the local area, for example, new products that are not part of the range offered by the franchisor
- Licence fee must be paid to the franchisor and possibly a percentage of the annual turnover
- Less independence than with operating a non-franchised business
Definition: The franchisor is a business with a product or service idea that it does not want to sell to consumers directly. Instead, it appoints franchisees to use the idea or product and to sell it to consumers. Chinese:特许经营