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BUSINESS AND MANAGEMENT. MODULE 1 BUSINESS ORGANIZATIONS & ENVIRONMENT. THE ECONOMY. Private Sector. Public Sector. Private & Public Sector Organizations. The Private Sector comprises businesses owned and controlled by individuals or groups of individuals.

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Business and management

BUSINESS AND MANAGEMENT

MODULE 1

BUSINESS ORGANIZATIONS & ENVIRONMENT


Private public sector organizations

THE ECONOMY

PrivateSector

Public Sector

Private & Public Sector Organizations

  • The Private Sector comprises businesses owned and controlled by individuals or groups of individuals.

    • In every country, most business activity is in the private sector.

    • These businesses differ in size

    • The main objective is to make a profit

      • Money earned from the sale of goods minus any costs involved in selling those goods or services

  • The Public Sector comprises organizations accountable to and controlled by central or local government.

  • These usually include:

    • Health and education services

    • Defense

    • Law and order

    • Some strategic industries.


The private sector legal structure

Private Sector

Businesses

Cooperatives

Sole

Trader

Limited

Companies

Partnership

Public

LTD

Private

LTD

The Private Sector Legal Structure


Public corporations
Public Corporations

  • Organizations that are wholly owned by the government are called Public or (Crown) Corporations

  • Examples include:

    • BBC – British Broadcasting

    • KCRC – Hong Kong’s national railway

    • Nanjing Auto – China’s main automaker

    • LCBO – Ontario’s Liquor Control Board


Reasons for public corporations
Reasons for Public Corporations

  • To ensure everyone has access to basic services (health, transportation etc)

  • To avoid wasteful competition (national defense or postal delivery)

  • To protect citizens and businesses through institutions such as the Police and court systems

  • To reduce unemployment as governments tend to be large employers (teachers, doctors and nurses)


Privatization
Privatization

  • Private sector ownership provides many more benefits than the public sector

    • Mainly in the area of money-making

    • As a result, many governments sell off their businesses to private interests

  • Governments will then set up regulatory bodies to monitor the conduct and performance of these businesses, since they usually have a large share of the market

    • Ontario sell off of Ontario Hydro


Benefits of privatization
Benefits of Privatization

  • Efficiency gains

    • As more competition now enters the marketplace

  • Lower production costs

    • Again based on a competitive environment

  • Increased choice

    • For customers based on a competitive environment

  • Incentives to innovate

    • Coming up with new ideas to stay competitive

  • Less financial burden

    • As the government stops funding public companies

  • Source of government revenue

    • One time sales only, but the amount can be enormous


Formative case study etr 407
Formative Case Study – ETR 407

  • In 1999, the Ontario government sold Highway 407 for $ 3.1 billion to to a consortium of Spanish and Quebec based companies, including SNC-Lavalin, making it the largest privatization in Canadian history.

  • In addition, much needed extensions were built at no additional cost to taxpayers, creating more than 6,000 new construction jobs in the province.

  • Originally the 407 was to pay for itself and become a free public highway in approximately 30 years.

  • The conditions of the sale allow the new owners to set whatever toll rates it wants for the next 99 years.

  • Today, the highway is valued at over $10 billion, and the government had been heavily criticized for the poor terms of lease, including underestimating the value of the road.

  • Many "905ers" in the rapidly growing Greater Toronto Area who had been expecting to be served by a much-needed non-tolled, or at least reasonable priced Highway 407 consider its lease and skyrocketing toll rates a sellout, thereby significantly eroding the Conservatives' formerly strong support base in that region.

  • Critics have complained that the rising toll rates have made Highway 407 more of a "luxury" rather than a bypass on existing congested roads as it was initially intended


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