BUSINESS AND MANAGEMENT

1. BUSINESS AND MANAGEMENT MODULE 1 BUSINESS ORGANIZATIONS & ENVIRONMENT

2. 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.

3. Private Sector Businesses Cooperatives Sole Trader Limited Companies Partnership Public LTD Private LTD The Private Sector Legal Structure

4. 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

5. 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)

6. 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

7. 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

8. 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