Please enable JavaScript.

Coggle requires JavaScript to display documents.

Business Structure - Coggle Diagram

- - - - problem with these goods is we can all benefit from them without paying for them- if someone paid for +installed street lighting, anyone walking down that road would benefit-> these goods that will only be provided by government are called public goods- non excludability+ non rivalry
    - - 2 best examples of merit goods are education +health care- private schools +private hospitals, but most patients are treated by the NHS +most children go to state schools- government spends great deal of money trying to ensure that we have an effective health service, schools colleges that supply a well-educated/ trained workforce. We would under-consume merit goods if it were left to the market. Some consumers could not afford the goods, and others would fail to see the full benefit of consuming these goods
        
        merit goods: said to have positive externalities- consumption of goods will have positive effects not only on the individual that consumes them, but also on society in general. By attending school, individuals become better educated +skilled. Some individuals may use knowledge/ skills to set up businesses that employ people who themselves will pay tax and contribute to society-> positive externalities to education; if individuals succeed in school-> less likely to commit crime/ require safety net of benefits system
  - - - survival- in shorter term this can be more important than making profits as the majority of new businesses fail within first two years- larger businesses may also have this objectives as a priority during recession when market is competitive
        
        gaining market share- businesses may spend to gain customers reducing profits in the short run, but increasing profits of longer term;
        
        improving ethics- likely to increase costs and reduce profits;
    - - many senior managers have bonus schemes related to increasing share prices and dividends achieving targets within these schemes then becoming main focus of business;
        
        for small businesses initial objective is to survive difficult startup time of gaining customer, establishing good local name, building reputation;
        
        some may concentrate on establishing their brand name, becoming the most recognised business in their market- costs money so reduces profits;
        
        businesses that try minimize impact of their activities on the environment / ensure their suppliers get a good deal;
- - - - any legal action is taken against business, not shareholders- only liable to lose amount of money invested in business– hence, liability is limited
        
        PLC's trade shares on stock market. In UK, there are two main stock markets: Alternative Investment Market (AIM) – for smaller companies and London Stock Exchange (LSE) – for larger businesses
        Shares are freely bought +sold-> ownership of PLCs is changing all the time. However, this change of ownership normally has very little impact on running of business;
        
        pros and cons of PLC
        
        benefit of limited liability → if the business falls into debt, then the owner is not held responsible and their personal possessions are safe
        
        can attract extra shareholders to invest because of limited liability
        
        Control cannot be lost to outsiders → shares only sold by word-of-mouth, so owners have to invite people to buy company shares
        
        1 more item...
        
        legal procedure in setting up takes time and costs money
        
        having to disclose accounts → financial information filed with Registrar can be looked at by the public/ competitors
        
        Profits have to be shared with other shareholders
        
        1 more item...
      - pros and cons of PLC's
        
        All shareholders maintain limited liability
        
        Due to larger size-> enjoy more market power
        
        huge amounts of money can be raised from sale of shares to public on Stock Exchange → used to expand business
        
        Economies of scale may be enjoyed as company grows
        
        business may gain greater presence/dominance in market
        
        1 more item...
        
        can be expensive → setting up costs can run into millions for some businesses
        
        Outside interests could take control as shares are on sale to public
        
        greater divorce of ownership +control than in PLC- company’s board may lose control
        
        accounts can be inspected by public/ competitors, who could use them to their advantage
        
        have to publish more information than private limited companies
        
        1 more item...