Question

Explain your understanding of how business goals are influenced by the form of organization and ownership.

Answer 1

Business goals are the target that the business tries to achieve over the period of time. Now these goals will vary depending on the type of organisation it is. Firstly there are mainly three types of organisation forms, Sole proprietor, and partnership and a corporation or company.

Sole proprietorship is where there is one owner and he makes all the decisions of the business and they don’t have to depend on anyone’s decision for that business. They take all the responsibility and risk of that business along with all the earnings of the business. The business is totally dependent on that person and any absence of them will affect the business a lot.

Partnership is where the business is owned by two or more people and so the funds are accumulated by them. Here the risk and income is shared among them depending on their profit sharing ratio. They bring together their experience and knowledge together. But the decisions are to be taken together and to be agreed by all of them.

Now, a corporation or company is also where minimum two members start a business but here the business is separate legal entity and the decisions are made in the name of the company and not the owner. Here there are usually a lot of owners, as shareholder. And all the major decisions are too made by consulting among all of them and agreed by them. Here the income and risk is shared among a lot of people so they are reduced. The company is liable for any default and not the shareholders, which is benefit for the shareholders.

Now, while making the business goal, it depends on the type of organisation as, if the goal requires,

• Scale of resources required: the goal is decided on the basis of resources available. As if it is a sole proprietorship, the resources such as money and man power is very limited so high scale production goals or high scale marketing goals cannot be set there. But if it is a corporate, there is not as much of scarcity of resources because the funds are available in greater scale due to high number of shareholders, and so national level sales goals can be set there.
• Risk taking: every business decisions have a certain amount of risk involved, but if there is a high rate of risk in a certain project or target, it is advisable to take it in a corporate or partnership as compared to a sole proprietorship, as the sole owner will not be able to take such huge liability on their own and the risk is shared by a lot of shareholders in the company and thus individual risk is reduced. They are not personally liable for any loss and the company will be liable for it.
• Quick thinking and flexibility: if it is company, such goals are set where the task is allotted to different departments and major decisions are to be taken not often as it is not practical to call for meeting with the shareholder frequently for all the decisions and it may delay the end result. But at the same time in sole ownership, decisions are not to be gone through different levels of hierarchy and so quick decisions can be made, so the goals are vaguer and quick decisions are made by the owner whenever required.
• Keeping control : in company , the shareholders doesn’t have control in the management whereas in sole ownership the owner has full control on the management. So if the owner aims at keeping the control on the day to day working of the organisation , they would prefer either sole ownership or partnership as compared to corporation.