BUSINESS ETHICS AND SOCIAL
RESPONSIBILITY
NATURE OF BUSINESS ORGANIZATION
BUSINESS ORGANIZATION: AN ART OR
A SCIENCE
Business organization – Art
ART is a system of rules
for the attainment of a given end.
 Thomas L. Massie says, “In any activity that is
classed as an art the emphasis is on applying skills
and knowledge in accomplishing an end through
deliberate effort.
 George Robert Terry, art is “bringing about of a
desired result through application of skill.”
 Chester Irving Barnard has remarked. “The function of
an art is to accomplish concrete ends, effect result,
produce situations that would not come about,
without the deliberate effort to secure them.”
Art, thus, concerned with the application of skills and
knowledge. In this sense, business organization is an
art as one has to use his skills and knowledge in
solving many complicated problems of business to
achieve the enterprise objectives.
Business organization – Science
SCIENCE literally means knowledge.
It is a systematized body of knowledge acquired by
mankind through observation and experimentation and
which is capable of verification.
 John Maynard Keynes , “science is a
systematized body of knowledge which establishes
relationship between cause and effect.”
Business organization is viewed as a science as it is an
organized body of knowledge built up by management
practitioners, thinkers and philosophers over a period of
years.
What is the
meaning of
Business – is a commercial enterprise which is operated
of making profit by supplying goods and
services to consumers.
What is an
Organization?
Organization - is an organized
body of people with a particular
purpose especially a business,
society, association, etc.
Business Organization – is the structure of a specific
entity in terms of how its formed and functions
in the society, the structure of the organization
is built on the purpose of the business.
Business Organizations come in
different types and different forms of ownership
MAJOR TYPES OF BUSINESSES
1. Service Business
2. Merchandising Business
3. Manufacturing Business
1. Service Business – a service type of business that
provides intangible products (products with no
physical form). Service firms offer professional
skills, expertise, advice and other similar
products.
2. Merchandising Business – this types of business buys
products at wholesale price and sells
the same at retail price. They are known
as “buy and sell” businesses. They make
profit by selling the products at prices
higher than their purchase costs.
3. Manufacturing Business – unlike a merchandising
business, a manufacturing business buys
products with the intention of using them
as materials in making a new products.
There is a transformation of the products
purchased.
FORMS OF BUSINESS ORGANIZATION
1. Sole Proprietorship
2. Partnership
3. Limited Partnership
4. Corporation
1. Sole Proprietorship – is a business owned by only one
person. It is easy to set up and is the least
costly among all forms of ownership.
ADVANTAGES
 Easy/Inexpensive to form
 You set your own hours
 Take in all the profit., profits go to the owner
 Direct Control of the business, you are your own boss
 Easy to dissolve
DISADVANTAGES
 Limited financing
 Limited ideas
 The sole proprietor is responsible for all losses
 The sole proprietor faces unlimited liabilities
2. Partnership – is a business owned by two or more
persons who contribute resources into the
entity. The partners divide the profits of the
business among themselves. Most partnerships
should have a “partnership agreement” because
of the potential issues between the partners.
ADVANTAGES
 The ability to raise more money, usually more access to
capital
 More potential for ideas and innovation
 The ability to share workload among all of the partners
 The ability to divide losses among all of the partners
DISADVANTAGES
 The potential for disagreements about how to run a
business
 Profits must be split among all of the partners
 Partnership face unlimited liability
 Mutual agency : all of the partners have the authority
to conduct a business on behalf of the partnership
3. Limited Partnership – this is a variation on the general
partnership form of business organization.
There are two types of partners, general and
limited. The limited partners invest money
and share profits and losses. The limited
partners only face limited liability.
4. Corporations - a business organization that has a
separate legal entity. The most complex type of
business organization. Permanent organization
and treated as individuals. Has rights and
responsibilities.
ADVANTAGES
 Limited Liability –corporation not owners are
responsible for debts
 Easy to raise money
*selling stock in company (share of ownership)
*profits paid to stockholder (dividends)
Disadvantages
 Limited say in running the company
 Elected Directors
* Elected by shareholders
* Directors choose executives to run the company