Business Organizations

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.


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