Chapter 1 The Business Organization - Part I

1.1 What is an organization

1. Organizations are social arrangements for the controlled performance of collective goals
2. Key Aspects:
a) Collective goals ( common goals)
b) Social Arrangements ( structures that enable people working together towards common goals)
c) Controlled Performance ( systems and procedures ensuring goals are achieved)

1.2 Why do we need organizations?

1. Organizations can achieve results that cannot be produced by individuals on their own, because organizations enable people to:
a) share skill and knowledge
b) specialize
c) pool resources.

2. Organizations are more efficient than individuals, for an organization has the ability of being able to employ the techniques of specialization and division of labour. In particular, organizations:
a) save time
b) pool knowledge
c) are power centers.

1.3 Classifying Organizations by Profit Orientation

I) Profit -seeking organizations
II) Not-for-profit organizations

I. Profit-seeking organizations
Objective: Maximizing wealth of owners, usually expanded into three primary objectives:
a) To continue in existence ( survival)
b) To maintain growth and development
c) To make a profit

Other relating objectives suggested by Peter Drucker :
a) market standing
b) innovation
c) productivity
d) physical and finance resources
e) profitability
f) manager performance and development
g) worker performance and attitude
h) public responsibility.

II. Not-for-profit organizations (NFPs or NPO’s)

1. NPOs unlikely to have financial objectives as primary
2. Instead they are seeking to satisfy particular needs of their members or sector of society. Examples: government departments, schools, charities, clubs
3. One specific category of NFP is a mutual organization that is formed for the purpose of raising funds by subscriptions of members, out of which common services can be provided to serves the interest of their members. Examples:
a) Building societies
b) Trade unions
c) Working-men’s clubs

1.4 Classifying Organization by Ownership/Control

I. Public Sector Organizations
II. Private Sector Organizations
III. Co-operatives

I. Public Sector Organizations
Part of economy concerned with providing basic government services and thus controlled by government organizations. Examples: police, military, primary education, public roads

II. Private Sector Organizations
Private sector, comprising non-government organizations, is a part of a nation’s economy that is not controlled by government. Examples: businesses, charities, clubs ( of which include profit-seeking and not-for-profit organizations)

III Co-operatives

Association of person united voluntary to meet their common economic, social and cultural needs and aspiration through a jointly owned and democratically controlled enterprise.

Characteristics:
1. User-owner
2. User-control
3. User-benefit

· Owned and controlled by their members who buy their goods or use their services
· Meet the needs of member-owners
· Not owned by investors
· Not to accumulate capital for investors

Example: Gujarat Co-Operative Milk Marketing Federation-GCMMF , India.