Explain the different types, size and scope of organisations

Explain the different types, size and scope of organisations

Different types, size and scope of organisations:

Differences between for profit and not for profit and non-government organisations (NGOs)

Micro, small, medium-sized enterprises (SMEs). Different business purposes, objectives and supply of goods and services

The range of legal structures associated with different forms of business: sole traders, partnerships and private limited companies

Differences between for profit and not for profit and non-government organisations (NGOs)

Organisations can be described as groups or structures set up with the purpose of achieving certain goals or objectives. The modern business world features different types of organisations, each set up to serve a unique purpose and to meet the various needs of the societies within which they operate. The most common way of distinguishing between organisations is to look at their goals and purpose. Some organisations operate for generating profit, whilst others may operate to promote a social cause or to further the wellbeing of society. Based on this, it is possible to differentiate between for profit organisations, not for organisations and non-governmental organisations (NGOs).

For Profit Organisations

Any business, corporation or organisation that has been set up with the primary purpose of generating profits can be described as a for profit organisation. These organisations usually operate in the private sector, which means that they are owned by individuals or group entities and not by the state or government and are referred to as businesses. However, this does not mean that these organisations are not regulated by the state. They are subject to the legal and financial framework set out by relevant state authorities. The revenue generated by these organisations is usually reinvested into the business to ensure its sustenance and the remaining profits are distributed amongst the business investors and/or shareholders, depending upon the legal structure of the organisation. Their operations can be based in multiple sectors including fashion, technology, food and retail.

Not for Profit Organisations

Not for profit organisations are those organisations which are set up for a purpose other than that of financial gain. These organisations can be differentiated from for profit organisations on the basis that their primary motive is not to generate private profits for business owners but rather to work for public benefit. The organisations that fall under the not for profit category can include charities and social enterprises. Although some of these organisations might undertake business activities, the sums generated from these activities are used to further the cause they advocate, and their profits are never distributed amongst their members. Not for profit organisations are usually always tax exempt and generate their funding through donations, sponsorships and other similar investments. They usually operate in the religious, scientific or educational sectors.

Non-Government Organisations

Non-government organisations, most commonly referred to as NGOs, are non-profit organisations that operate independently from the state or government. Although they may still receive state funding, NGOs operate without representation from the government. The World Bank has identified two different groups of NGOs: operational NGOs and advocacy NGOs. Operational NGOs usually work towards the designing and implementation of development-based projects; whereas advocacy NGOs work towards promoting a specific cause. Different types of NGOs may exist within each group. The most common types of NGOs include: INGOs (international NGOs), BINGOs (business friendly international NGOs), ENGOs (environmental NGOs) and QUANGOs (quasi-autonomous NGOs). Like most non-profit organisations, NGOs are also reliant on external funding that comes through donations, membership dues and grants etc.

Micro, small, medium-sized enterprises (SMEs). Different business purposes, objectives and supply of goods and services
Business Enterprises

As outlined earlier, not all organisations operate to make a profit. However, businesses (or enterprises) that are set up with the primary motive of profit generation do not necessarily need to be large multinational corporations with a huge workforce. They can be micro, small, medium or large. The distinguishing factors between these types of businesses are the number of employees, the number of owners and/or shareholders, their market share (i.e. their proportion of the total market sales in the relevant sector) and their legal status.

There is an additional category of businesses referred to as small to medium-sized enterprises (SMEs). Over 95% of the business in the European Union are classified as SMEs. According to the European Commission, ‘the category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.’

The main determining factors for SMEs are staff headcount and turnover. For micro-sized enterprises, the staff headcount is less than 10 employees with a turnover of less than EUR 2 million. For small enterprises, the staff headcount is less than 50 employees with a turnover of less than EUR 10 million and for medium-sized enterprises, the staff count is less than 250 employees and a turnover of less than EUR 50 million. Based on eligibility, SMEs can apply for funding and support that might not be otherwise available to larger businesses. These figures are specific to the European Union and other countries may have higher or lower thresholds for distinguishing between enterprises.

Each enterprise must decide on their legal structure as this will have wide ranging implications on how the business operates, how it raises finances and how it distributes profits. There are many different types of legal structures that a business can adopt, but the ones most common to SMEs are sole proprietorship, partnerships and private limited companies.