Topic 2: The Concept of the Firm

Topic 2: The concept of the Firm..............................................................1
Influencing factors......................................................................................1
Private and public sector organizations......................................................2
Types of firms..............................................................................................3
Sole trader..................................................................................................3
Partnerships................................................................................................4
Limited Liability Partnerships......................................................................5
Private Limited Companies.........................................................................6
Public Limited Companies...........................................................................6
Co-operatives..............................................................................................7
Charities and Social Enterprises..................................................................9
Social Enterprises........................................................................................9
Community Interest Companies.................................................................9
Joint Ventures...........................................................................................10
Multinational Corporations.......................................................................11
Profit Maximization...................................................................................11
Maximizing Sales.......................................................................................12
Maximizing Revenue.................................................................................12
Survival......................................................................................................12
Profit Satisficing........................................................................................12
Social and Ethical Responsibility...............................................................13
Topic 3: Inside the firm...........................................................................14
Management.............................................................................................14
The classical approach..............................................................................15
The human relations.................................................................................15
The systems approach..............................................................................16
The contingency approach........................................................................17
Organizational structures - Definition.......................................................17
Organizational structures - Size................................................................17
Organizational structures - Why...............................................................17
Organizational structures - Formal relationships......................................18
Line relationships......................................................................................18
Staff relationships.....................................................................................18
Functional relationships............................................................................18
Lateral or peer relationships.....................................................................18
Organizational structures - Type...............................................................19
Influencing factors....................................................................................19
Decisions made about the basis for the structure....................................19
Hierarchical structure...............................................................................19
Functional structures................................................................................20
Product based structures..........................................................................20
Area based structures...............................................................................21
Matrix structures......................................................................................21
Divisional structure...................................................................................22

Project team.............................................................................................22
Changing approaches to organizational structure....................................23
Virtual organiztion....................................................................................23
Structural change......................................................................................23
Aspect of functional management............................................................23
Human resource management (HRM)......................................................23
Marketing function...................................................................................24
Topic 4: Macro environment - Political
Politics.......................................................................................................26
What has politics got to do with business?...............................................26
The interdependence of business and government..................................27
Government..............................................................................................27
Regulation.................................................................................................28
Taxation..................................................................................................28
Public services.........................................................................................28
Government as customer........................................................................28
Managing the economy..........................................................................29
The international dimension...................................................................29
Political debate.......................................................................................29
Left and right...........................................................................................29
Conservatism, Liberalism, Socialism........................................................29
Political risk.............................................................................................30
Topic 5: Macro Environment - Economic
Economic indicator..................................................................................32
Gross Domestic Product (GDP)................................................................32
Gross National Product (GNP).................................................................33
Balance of Payments (BOP).....................................................................33
Employment rate....................................................................................33
Inflation...................................................................................................33
Consumer Prices Index............................................................................34
Interest rate............................................................................................34
Exchange rate..........................................................................................34
National debt..........................................................................................34
Debt ratio................................................................................................34
Business cycles........................................................................................34
The role of government..........................................................................35
Economic targets.....................................................................................35
Policy tools..............................................................................................35
Fiscal policy.............................................................................................35
Monetary policy......................................................................................36
Economic environemtn forces and business behaviour..........................37
Interest rate changes..............................................................................37
Exchange rate changes............................................................................37
Topic 6: Macro environment - Demographic, Social and cultural