Classwork Series and Exercises {Economics – SS1}: Business Organisation

Economics, SS1, Week 5

Topic: Business Organisation

Contents:

1. Definition of Business Organisation
2. Types of Business organization
3. Characteristics or features of Business organisation
4. Definition of Business Organisation
5. Differences between Private and Public Enterprises

Business Organisation

Business Organization can be defined as an enterprise set up by an individual or group of individuals, government or its agencies for the purpose of making profit and providing goods and services for the satisfaction of human wants. Every business organization , be it small or big, irrespective of the ownership and structure have one thing in common, which is the provision of goods and  services to meet the needs of the people.

Types of Business Organisation

There are two major types of business organisation, they are  Private enterprise and public enterprise

A. Private Enterprise: Private enterprises are the enterprises owned by individuals, they enterprises managed, controlled and directed by private individual persons. It is usually classified as a private sector enterprises. Examples of private enterprises include sole proprietorship, partnership, private and public limited liability company and co-operative societies.

The major aim of private enterprises is to make profit.

Characteristics/ features of private enterprises

• Ownership belongs to private individuals: The enterprise is owned by individuals, e.g sole proprietorship or partnership are the ones that own the business enterprise.
• Accountability is to the owner: The transactions of the business enterprises are usually accounted for and submitted to the owners of the enterprise
• Owners managed the business themselves: The daily operations of the business enterprise is controlled and managed by the owners of the enterprise
• The capital is provided by private individuals: Private individuals that owned the enterprises are the people to raise capital for the establishment of the enterprise.
• The owners bear the risk of the business: In the event of business failure or liquidation, the owners bear the risk associated with the business.

B. Public Enterprises: Public Enterprises are types of business owned, controlled and managed by the Government. They are enterprise owned by either the local, state or federal government. The major objective is to provide social services to the people or general public. Examples of Public Enterprises are: The Nigerian Port Authority (N.P.A), Nigerian Television Authority (NTA), Nigerian Railway Corporation (N. R. C) etc.

Characteristics or features of Public Enterprises

• Objective is to provide social services for the people: The aim of the public enterprises is to make services available for the general public. To provide social amenities to the public at reduced prices.
• Management is accountable to the government: The management of public enterprises is directly accountable to the government that set up the enterprise.
• It is managed by board of directors: The public enterprises is managed by board of directors who are appointed by the government.
• It is a legal entity: Public enterprise is a corporate body or a legal entity i.e it can sue and be sued in its own right.
• The Government and tax payers borne the risks: The risk associated with public enterprises are usually borne by the government and tax payers who provided the capital for setting up the business.

Differences between Private and Public Enterprises

Private Enterprises	Public Enterprises
1. Their major is to maximize profits	Their major objectives is to provide social services to the people.
2. Private enterprises are owned by individuals	Public enterprises are owned by government
3. The capital for running the business is provided private individuals	Capital is provided by government (e.g local, state or federal)
4. Owners bear losses suffered by the enterprises	Tax payers bear losses suffered by public enterprises
5. They are more efficient in the management of enterprises	They are less efficient in the management of the enterprises
6. They require small amount of capital to set up	They require huge amount of money to set up
7. They do not enjoy any monopoly	They enjoy some small form of monopoly