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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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