上海财大ACCAF1讲义The business organisation,its stakeholders and the external environment

PartAThebusinessorganisation,itsstakeholdersandtheexternalenvironmentChapter1Businessorganizationsandtheirstakeholders1Typesoforganisation1.1WhatallorganisationshaveincommonAnorganisationis:asocialarrangementwhichpursuescollectivegoals,whichcontrolsitsownperformanceandwhichhasaboundaryseparatingitfromitsenvironment.1.2Whydoorganisationsexist?Organisationscanachieveresultswhichindividualscannotachievebythemselves.(a)Oraganisationsovercomepeople’sindividuallimitations,whetherphysicalorintellectural.(b)Organisationsenablepeopletospecialiseinwhattheydobest.(c)Organisationssavetime.(d)Organisationsaccumulateandshareknowledge.(e)Organisationsenablesynerge.Inbrief,organisationsenablepeopletobemoreproductive.1.3HoworganisationsdifferOwnership(PublicvsPrivate)Ownedbythegovernment(publicsectororganisations)Ownedbyprivateownersorshareholders(privatesectororganisations)ControlControlledbytheownersthemselvesControlledbypeopleworkingontheirbehalfIndirectlycontrolledbygovernment-sponsoredregulatorsActivityProfitornon-profitorientationLegalstatusLimitedcompaniesPartnershipsSizeSourcesoffinanceBorrowingfrombanksGovernmentfundingIssuingsharesTechnologyVaryingdegreesoftechnologyuse1.4WhattheorganisationdoesOrganisationsdomanydifferenttypesofwork2Typesofbusinessorganisation2.1

Profitvsnon-profitorientationProfitorientationMaximiseprofit(toowners)NonprofitorientationProvisionofgoods/services(topublic/beneficiaries)2.2

PrivatevspublicsectorPrivatesectorOrganisationsnotownedorrunbycentralorlocalgovernment,orgovernmentagencies.PublicsectorOrganisationownedorrunbycentralorlocalgovernmentagencies.2.3

PrivatesectorbusinessesAbusinessorganisationexiststomakeaprofit.Costsshouldbelessthantherevenues.Profitsarenotincidentaltoitsactivitiesbutthedrivingfactor.2.3.1LegalstatusSomeonesettingupabusinesscanchoosetogointobusinessalone,takeononeormorepartnerswhoalsosharetheprofitsofthebusiness,orsetupalimitedcompany.2.3.2LimitedcompaniesAlimitedcompanyhasaseparatelegalpersonalityfromitsowners(shareholders).Theshareholders’riskisgenerallyrestrictedtotheamountthattheyhaveinvestedinthecompanywhenbuyingtheshares.LimitedliabilityTheownershipandcontrolofalimitedcompanyarelegallyseparate.Shareholdersaretheownersbuthavelimitedrights,asshareholders,overthedaytodayrunningofthecompany.Directorsareappointedbyshareholderstorunthecompany.Boardofdirectorscontrolsmanagementandstaff,andisaccountabletotheshareholdersExecutivedirectorsparticipateinthedailyoperationoftheorganisation.Non-executivedirectorsareinvitedtojoininanadvisorycapacity,usuallytobringtheirparticularskillsorexperiencetothediscussionsoftheboardtoexercisesomeoverallguidance.Operationalmanagementusuallyconsistsofcareermanagerswhoarerecruitedtooperatethebusiness,andareaccountabletotheboard.2.3.3TypesoflimitedcompanyPrivatelimitedcompanies(egXLimited)Publiclimitedcompanies(egXplc)Theydifferasfollows:(a)Numberofshareholders(b)Transferabilityofshares(c)Directorsasshareholders(d)SourceofcapitalAprivatecompany’ssharecapitalwillnormallybeprovidedfromthreesources:thefounderorpromoter;businessassociatesofthefounderoremployer;venturecapitalistsApubliccompany’ssharecapitalcanberaisedfromthepublicdirectly,orthroughinstitutionalinvestors,usingrecognisedmarkets,2.3.4AdvantagesanddisadvantagesoflimitedcompaniesAdvantagesMoremoneyReducesriskforinvestorsSeparatelegalpersonalityOwnershipislegallyseparatefromcontrolNorestrictionsonsizeFlexibilityDisadvantagesLegalcompliancecostsShareholdershavelittlepracticalpower2.4

ThepublicsectorThepublicsectorcomprisesallorganisationsownedandrunbythegovernmentandlocalgovernment.2.4.1Keycharacteristicsofthepublicsector(a)Accountability,ultimately,toParliament.(b)FundingRaisingtaxesMakingchargesBorrowing(c)Demandforservices:limitless(d)Limitedresources2.4.2Advantages(a)Fairness(b)Fillingthegapsleftbytheprivatesector(c)Publicinterest(d)Economiesofscale(e)Cheaperfinance(f)Efficiency2.4.3Disadvantages(a)AccountabilityInefficiencymaybeignored(b)InterferencePoliticiansmaynotbefamiliarwiththeoperationofabusinessandyetpoliticalpressuresandindecisionmayinfluenceadverselythedecisionmakingprocess.(c)CostThepublicwilldemandasperfectaserviceaspossiblebutwillnotwishtobearthecostinvolved.2.5

Non-governmentalorganisationsAnon-governmentalorganisation(NGO)isanindependentvoluntaryassociationofpeopleactingtogetherforsomecommonpurpose(otherthanachievinggovernmentofficeormakingmoney).Aimedatpromotingsocial,politicalorenvironmentalchange.SomeorganisationalfeaturesofNGOsStaffingbyvolunteersaswellasfulltimeemployeesFinancefromgrantsorcontractsSkillsinadvertisingandmediarelationsSomekindofnational‘headquarters’Planningandbudgetingexpertise2.6

Co-operativesocietiesandmutualassociationsCo-operativesarebusinessesownedbytheirworkersorcustomers,whosharetheprofits.OpenmembershipDemocraticcontrol(onemember,onevote)DistributionofthesurplusinproportiontopurchasesPromotionofeducationMutualassociationsaresimilartoco-operativesocietiesinthattheyare‘owned’bytheirmembersratherthanbyoutsideinvestors.QuestionsAlimitedcompanyhasaseparatelegalidentityfromitsowners.Trueorfalse.ATrueBFalseAnswer:AWhichofthefollowingprovidesanexampleofa‘boundary’separatinganorganisationfromitsenvironment?AAdivisionalstructureBSystemsandproceduresCFactorygatesDRecruitmentpolicyAnswer:CPrimaryandsecondarygoalsareequallyimportantinanorganisation.Isthisstatementtrueorfalse?ATrueBFalseAnswer:BWhichofthefollowingbestdescribesthepublicsector?ACompanieswhereprofitsarethedrivingfactorBCompanieswhichareownedbyawideproportionoftheinvestingpublicCAllthoseorganisationsownedandrunbythegovernmentandlocalgovernmentDBusinessesownedbytheirworkersorcustomers,whosharetheprofitsAnswer:C3StakeholdergoalsandobjectivesStakeholdersarethoseindividualsorgroupsthat,potentially,haveaninterestinwhattheorganisationdoes.Objectivesmustconsiderstakeholders.JohnsonandScholesidentifiedthreetypesofstakeholder:ICE3.1Internalstakeholders:employeesandmanagementEmployeesManagers3.2ConnectedstakeholdersShareholders(corporatestrategy)Bankers(cashflows)Suppliers(purchasestrategy)Customers(productmarketstrategy)3.3ExternalstakeholdersGovernmentInterest/pressuregroupsProfessionalbodies3.4AnotherapproachPrimarystakeholders:haveacontractualrelationshipwiththeorganisation.Includesinternalandconnectedstakeholders.Secondarystakeholders.Equatestoexternalstakeholders.3.5StakeholderconflictBetweenmanagersandshareholders3.6Stakeholdermapping:powerandinterestMendelow’sMatrixThematrixoutlineshowtoapproacheachstakeholderStakeholdermappingisusedtoassessthesignificanceofstakeholdergroups.SegmentD:strategymustbeacceptable–keyplayersSegmentC:keepsatisfiedSegmentB:keepinformedSegmentA:minimaleffortStakeholdersmaymovefromquadranttoquadrant.3.7ThestrategicvalueofstakeholdersThefirmcanmakestrategicgainsfrommanagingstakeholderrelationships.3.8MeasuringstakeholdersatisfactionQualitativeQuantitativeQuestionsWhichofthefollowingisnotaconnectedstakeholder?ACustomerBEmployeeCLandlord(Lessor)DSh