Types of organization

Organization may be classified on several bases such as size- small, medium, large and giant, ownership- public, private, and joint, legal form- sole trading, partnership, joint stock Company, cooperative society, and multinational company. Organizations can be classified as follows can on the basis of their objective:

1) Business organizations: they are formed for earning profits. They are mainly concerned with producing goods and services of value to the society. Companies, partnership firms, and sole trading firms are organized along these lines with a profit motive to survive against competition, future expansion and development. Their prime beneficiaries are their owners.

2) Government organizations: such organizations are formed for the satisfaction of the people and their welfare. They are engaged in public services. They can be government departments, ministries and public corporations. Their prime beneficiaries are general publics.

3) Service organizations: service organizations are voluntary organizations, which are formed for promoting social welfare activities in the country. They are non-profit social organizations such as schools, hospitals, social welfare agencies, etc. the prime beneficiaries are the clients who come in the direct contact with the organization.

4) Political organizations: political organizations render services to upliftment of the society. They seek to elect a member of their group to public office of the country such as parliament, district committee, etc. political parties and associations comes under this category.

5) Religious organizations: they serve for the attainment of spiritual needs of members and try to convert non-believers to their faith. Churches, Vishwa Hindu Parishad, etc. come under this category.

6) Associative organizations: they satisfy the needs of people to friendships and to have contact with others who have common interests. Clubs, team etc. come under this category.

7) International organizations: they are association of many countries. It can be international or regional associations such as UNDP, WORLD BANK, ASEAN, SAARC, etc. the prime beneficiaries are member countries.

Security issue process

Before issuing security the board of director of the firm decides how much fund to be raised. It also decides whether to raise funds from private placement or public sale. In private placement, fund can be raised promptly with lower cost. If the issue is big, the public sale can also be made at lower cost.

If the issue has to be sold publicly the firm should select investment bank. An individual investment bank alone may take the responsible of issue and sale and distribute of the security. If the issue is big, many investment banks make syndicate and take the responsibility of issue jointly.

The investment bank receives the new security at low price as far as possible and earns profit by selling to other investors. The investment bank may directly purchase security with the issuing firm, or may only guarantee the fixed price of the security. But in both situations, the investment bank bears the risks of profit or loss that occur in security market.

After selecting the investment bank, the bank and the firm jointly make final decision regarding the basis, maturity, type, interest rate of the security and the commission of the investment bank etc. the commission charged by the investment bank may be a great financial cost particularly in small issue. Most of the firms have the rights to negotiate the commission charged by the investment bank. It is know as negotiated issue. But the public utilities select the investment bank by competitive bids. The investment bank which provides cheapest service is selected in it. The bid reduces the profit of an investment bank.

The delay in selling the security is regarded as the great enemy of the investment bank. It is because, he has to get addition fund to keep the security not sold and has also additional risk of fall in price. In case of adverse change in the price there is decline in the prestige of the investment banking business is risky and highly competitive due to various uncertainties.

The security can be sold through underwriting or on best efforts basis. In underwriting the investment bank sells the security to the ultimate investor by buying with the firm. Since the issuer already receives money in it, he needs not worry at all. The bank bears all risk as an underwriter or a guaranteer.

In best effort basis, the investment bank does not make guarantee of sale. He just makes maximum effort to sale the security. In case of no sale, he returns to the firm itself. The bank receives commission on the basis of amount sale.

After registration on the concerned agency by the investment bank it makes the prospectus available to the potential investors. The prospectus contains firm’s history, management, financial position, feature of security, promoters, share to be allotted the promoters and outsiders.

In final, the security is sold to the general public. The formal public sale is called ‘opening the book’. The sales start after opening the books. In case of high demand, the book is immediately closed and an application given more than requirement is announced. It is called the issue ‘flayed out of the windows.’ If the issue is not sold, time is increased and the book is kept open.

Business environment and its importance

An organization is a part of society and the business environment has a direct relationship with the policy of the organization. The environment may imposes several constrains on the organization as it has a tremendous impacts and influence. The organization on the other hand, has very little control over its environment. Therefore, the success of an organization depends to a very large extent on its adaptability to the environment.

Business organizations are neither self-sufficient nor self-contained. They exchanges resources with outside environment and depend on it for their survival. They draw inputs such as raw materials, capital, labor, energy and information from the external environment. They transform inputs into products and services and supply as outputs to the external environment.

Davis Keith defines the business environment as - “aggregate of all conditions, events, and influences that surround and affect it.”

There are two sets of environment: internal and external environment, which influences the business policy of an organization. The internal environment is known as controllable factors because the organization has control over these factors. They consist of employees, shareholders and board of directors, and culture. Organization can modify or alter such factors to suit the environment.

The external environment is known as uncontrollable factors because such factors are largely beyond the control of the legal and technological environment. They are uncertain and complex.

The importances of business environment are as follows:

1) The study of the business environment helps an organization to develop its broad strategies and long term policies.

2) It enables an organization to analyze its competitor’s strategies and thereby formulate effective counter strategies.

3) The environment is constantly changing. Knowledge about the changing environment will keep the organization dynamic in its approach.

4) Such a study enables the organization to foresee the impact of the socio-economic changes at the national and international level on its stability.

5) As a result of the study, executives are able to adjust to the prevailing conditions and thus, influence the environment in order to make it suitable to business.