Post 7 -by Gautam Shah
An organization is an amalgam or aggregation of human and material resources as a distinct and integrated entity or an operative system. Organizations are setup to achieve certain objectives more effectively and economically, than individuals acting by themselves. Organizations are formalized entities for ongoing efforts, and are adaptive to many different purposes, whereas enterprises are for one time effort, or set of individualized activities.
Organizations are formed for:
1 Producing and Executing physical things like goods and commodities, structures like: manufacturing units, contracting, workshops etc.
2 Managing and Servicing various types of systems, projects and setups like: security, insurance, internet, surgical, healthcare, etc.
3 Designing and Distinguishing the means, procedures and objectives. Like architecture, interior design, legal, marriage counselling, project consultancy.
Organizations serve different purposes. Business organizations are commercial activities for earning a profit. Governmental organizations are for administration, and formed through legal process and with specific policies. Non Governmental Organizations (NGOs), are government aided or privately funded, but formed with specific intentions and must abide by certain rules.
Proprietorship types of Business Organizations : A single person business (with or without employees) is called a proprietorship. The proprietor gains directly in proportion to the efforts put in. It is a natural and ideal proposition for business activity. It has flexibility of operations, including firm formation and dissolution, but has few drawbacks. One gets no relief in crisis (sickness, accident), or any time for vacation. Clients get a highly satisfying personalized service. Proprietary firms are not capable of carrying out complex jobs, handling time-intensive (fast) jobs, or multi location sites. One may need legal registrations, for income tax, service tax, and other production and sales-based taxes.
Partnership types of Business Organizations : Partnership organizations come into being, with two or more partners. Partnerships can be of maximum 20 persons, But if more than 11 participants, may also opt for a setup, legally called a cooperative. Prime blues of single person practices become less severe in a practice with partners. Partnerships can be casually launched through an understanding among all participants. For legal reasons (income tax and sales tax registration, opening a bank account, etc.) a formal partnership deed (Memorandum of Understanding -MoU) must be executed, and registered with appropriate authorities. Partners, each must have individualistic, and yet compatible competence. Professionals with identical competence in a partnership face the problems of ‘cross or overlapping interests’.
Nature of Partnerships : Partnerships are not always equal or simple. Partnerships have many areas like, resource (assets, goodwill, prestige) input, capital investment, liabilities, goodwill, gain (profit) share, physical labour and expertise input, etc. that have differing values. A formal partnership deed is necessary to clearly state all the factors. Formally constituted partnerships can be altered or dissolved only through another deed (MoU), which may or may not recognize the earlier deed, but replace it. Partners bear full and unlimited liability, and all have to share the consequences of any action by a partner.
Partners always face a problem, how to share the liabilities. Partners with monetary resource are often interested in only a safe income for their investment, but without other responsibilities. A joint stock company is a business form where these problems are solved.
Joint Stock Company Type of Business Organizations : A joint stock company (public or private limited company) endows very limited liability on its initiators or shareholders. Such organizations have an elaborate and costly process of formation, and are closely regulated by the government. In both types of joint stock companies, control of management remains with the largest shareholder/s. Companies act defines a joint company as an artificial or virtual person. The virtual person manifests as a common seal, to be used by a designated officer of the company. There are Two forms of Joint stock companies.
Private Limited Company : A Private Limited companies can be formed, by at least two individuals with minimum paid-up capital of Rupees 100000. As per the Companies Act, 1956 the total membership of these companies cannot exceed 50. The shares allotted to its members are not freely transferable between them. These companies are not allowed to raise money from the public through open invitation.
Public Limited Company : A Public limited company requires a minimum of seven initiating members, but without any restriction on maximum number of members. It must have minimum paid-up capital of Rs 500000. The shares allotted to the members are freely transferable. These companies can raise funds from general public through open invitations by selling its shares or accepting fixed deposits.
Co-operatives Types of Business Organizations : A cooperative is formed under a state law for cooperative societies. It is an amalgamation of 10 or more participants, who contribute the capital, and have equal voting rights. Profit of the cooperative society can be distributed to members in a limited amount, and the rest is ploughed back in asset creation. Cooperative model is for participating entrepreneurship to come together and help themselves. A cooperative set-up is too impersonal for a field like design, but may work for a self help production setup. It may be registered by filing application with the bye-laws for its operations. The advantages for Design production Cooperative are that there are certain Tax exemptions for manufacturing, sales and benign processes for supplying to Government departments.
Multi nationals’ Types of Business Organizations : A multinational corporation is a worldwide enterprise, where design, production and servicing occur through business entities, owned and operating in different national territories and economic regimes. It is in the form of conglomerate operating as a transnational company or often as or as a stateless entity. There always are territorial moral and legal constraints.
Consortium : A consortium is an association of two or more individuals, companies, organizations or governments (or any combination of these entities) with the objective of participating in a common activity or pooling their resources for achieving a common goal. An example of a consortium approach is World Bank participating with Banks and National Governments to finance and initiate a local government (municipal) project.
Consortium is a Latin word, meaning ‘partnership’, ‘association’ or ‘society’ and derives from consors ‘partner’, itself from con- ‘together’ and sors ‘fate’, meaning owner of means or comrade.
Other Business forms : Coopetition is a word combined from cooperation and competition. When companies that are nominally competitors, collaborate to handle an extra ordinary project. This could be to share the risk, advantageously use the capacity and gain expertise, profit and prestige.
Conglomerates : A conglomerate is formed of number of diverse business organizations dealing in products or services, often across many countries owned or managed by one corporate group. Conglomerates are formed to diversify from geographical, seasonal or product range. Conglomerate are formed with ready-running organizations rather than planning ‘green-field’ units.
Joint Venture : A joint venture, is formed to take advantage of local conditions. It occurs between diverse partners such as investors and managerial agencies, production and marketing companies, technical know-how providers and producers. Compared to a conglomerate, the business entity is created by shared ownership, management, returns and risks.
Syndicate : Group of individuals or business organizations and Governments often form syndicates or act in cohorts to protect or further their commercial interests. These often transcend the legal definitions or customs prevalent in many regions and so borders on illegal activities.
1 ORGANIZATIONS part of the lecture series DESIGN IMPLEMENTATION PROCESSES