Introduction to business

achieve these aims?
Business ethics
Legal forms of business

in, output out.
Firm: An economic organisation that co-ordinates the process

of production and distribution.
But products require a complex production process – two major factor organising these: market (prices signals), firm (hierarchy of managerial authority).
Within the firm transaction costs are lowered.

marketplace
Reasons for transaction costs:
Uncertainty of contracts
Complexity of contracts
Monitoring contracts
Enforcing

contracts
Therefore, for most goods, firm represents a superior way to organise production!

clearly interested in profits maximisation.
However maximisation is a process of

undertaking decisions on how much to produce, at what price etc.
In many cases it is not up to owners to undertake these decisions – rather to managers.
Ownership ≠ control. In most cases modern company is legally separated from its owners.

where people (principals), as a result of lack of knowledge

(information), cannot ensure that their best interests are served by their agents.
Asymmetric information: A situation in which one party has superior position with respect to the information (knows more than another).
Possible ways of solving: monitoring or incentives

of takeover
All this leads to increased stress on business ethics!
Business

ethics: A company attitude and conduct toward its employees, customers, community and stock-holders.

law
product safety
Fair employment practices
Fair marketing and selling practices
Lack of use

of confidential info for personal profits
Community involvement
Lack of corruption
How to obey: code of ethical behaviour, various trainings

lack of trust, individual tragedies.
Are companies unethical or just some

of their employees? In most cases individuals are blamed, however in Arthur Andersen case otherwise.

is in business on his/her own behalf. Usually small business,

but may employ other people.
(+) inexpensive, easy formation; less regulated, usually easier tax regime, business affairs are private.
(-) unlimited personal liability; difficulties in funding on larger scale, life of business limited to the life of individual who created it

Advantages similar to prioprietorship plus more capital available (each partner

bring some money), but each partner liable for business debt (from 2001 in UK limited liability partnerships allowed).
Case: Arthur Andersen – each partner suffered from those who worked with Enron, WorldCom.

from its owners and managers, having unlimited life, easy transferability

of ownership and limited liability.
(-) taxation – in most cases double: first on corporate level (corporate tax – Poland: CIT) next on personal level when paid out as dividend.
(+) Limited liability reduces investors’ risk – lower risk=higher value; growth opportunities due to easier access to capital; better liquidity due to facilitation of ownership transfer.

two types: consumer co-opertives (in many countries Co-ops, Poland Społem(?);

producer (or service) co-operatives.
Public corporations – state owned enterprises in various forms. Legal identity separate from government. UK: BBC, Bank of England. Poland: numerous state-owned enterprises, NBP(?).