THE CONCEPT OF FIRM & INDUSTRY


CONTENTS
1.0 Definition of firms and industry 
2.0Types and basic features of business enterprises 
3.0General and specific problems of business enterprises


1.0 Definition of firms and industry 

1.1 Definitions of firms:
A firm may be defined as an independently administered business unit which has the ability and capability of carrying out production, construction or distribution activities. Firms may be small or large. Therefore firms are of different sizes, ranging from the one-man business with limited capital to the joint stock company with huge amounts of capital. 

1.2 Definition of Industry:
An industry may be defined as a group of firms producing broadly similar commodities or offering complementary services. Examples are the shoe industry, vehicle manufacturing industry where various companies in a country are involved in the manufacturing of motor vehicles of various kinds, and each of those companies is regarded as a firm. Also, we have transport industry, cement industry, entertainment industry etc.  

2.0 Types and Basic Features of Business Enterprises:
The types of business enterprises include sole-proprietorship, partnership, Joint Stock Companies (private and public), cooperatives, Public Corporations and Joint ventures. 

2.1 SOLE PROPRIETORSHIP  
The Sole proprietorship is an unincorporated business organization owned by one person, who provides the capital, runs the business and undertakes the risks and profits of the business alone. It is popularly referred to as one-man business, and also the oldest and the most common type of business organization. 
Examples of Sole proprietorship are tailors, barbers, hairdressers etc. 

2.2 Characteristics of sole proprietorship:
(i)Ownership: - it is owned and run by one person, though he may have employees. 
(ii)Source of capital: - He provides the capital required for starting and running the business. 
(iii)Life span: - the life span of the business depends on the owner. The business can fold up anytime. 
(iv)Liability: - The sole proprietor has unlimited liability. This means that if the business liquidates, the owner of the business may have to lose his private assets to offset the debt of the business.

2.3 Advantages or Merits of Sole Proprietorship:
(i)Decision-making: Quick decisions are easily taken by the sole proprietor alone without the consent of other workers in the organization. 
(ii)Capital required: the sole proprietorship requires very small capital to set up. 
(iii)Establishment: it is very easy to establish because of the small capital requirement. 
(iii)Profits:  all the profits derived from the business belong to the owner of the business because the capital outlay came from him. 

2.4Disadvantages or Demerits of Sole Proprietorship 
(i)Problem of continuity: the death of the owner may cause the business to die with him, especially when there is no successor to take over from him. 
(ii)Unlimited liability: he bears the entire risk of the business alone. If the business fails, he bears the entire loss and his personal belongings have to be sold to pay his creditors. 
(ii)Lack of specialization: the proprietor is personally involved in every section of the business. He works very hard. He does not usually take leave. He therefore tends to over work himself to the detriment of health. 

2.5 THE PARTNERSHIP 
Definition – a partnership is a type of business organization formed by an association of two to twenty persons having similar interests, and by agreement (usually legal) decides and plan to run a business together with the sole aim of making profit. Examples of partnership in Nigeria are Diya Fatimilehin & Co (Estate Firm), Oni & Sons Nigeria Ltd etc.

2.6 Features of Partnership  
Ownership: the number of partners ranges from two to twenty for most business, but two to ten for banking business. 
Life span: the life span of partnership depends on the agreement signed by the partners involved. 
Management: the business has no board of directors. The active partners control and manage the business. 
Objectives: the main objective of partnership is to make profit. 
Legal entity: it is not a legal entity as the partners do not have a separate identity from the business

2.7 TYPES OF PARTNERS 
(A)Limited Partner: A limited partner has limited liability.He does not receive dividends but receives a fixed rate of interest on his capital
(B)General/Active Partner:  He has full power of participation. He takes active part in the administration but has unlimited liability.
(C)Nominal or quasi-partner: he contributes only his name. he does not take active part in the running of business.
(D)Sleeping or dormant partner: he contributes capital but takes no part in the conduct and management of the business. 

2.9 Advantages or Merits of Partnership
(A)Joint decision making: when two or more partners put heads together and take joint decisions or the
enterprise better results are derived. 

(B)There is privacy: there is privacy in conducting business affairs since it is not required to make its accounts available for public inspection. 

(C)Greater Continuity: the death of a partner may not lead to a total dissolution of the business since the other partners can still go ahead. 

(D)Loan facilities:A partnership can easily obtain loan from creditors since they are jointly liable. 

(E)Personal Contact: there is still an element of personal contact with both employees and customers. This is because of the relatively small size of the business when compared with the limited liability companies.

2. Disadvantages or Demerits of Partnership:
(i) Disagreement between partners can end the
business.
(ii)Unlimited liability 
(iii)Difficulty in management.
(iv)Limited growth 
(v) Business is not a legal entity 

3.0 General and Specific Problems of Business Enterprises:
(A)Shortage of Raw Materials:
Businessorganizations in West Africa find it difficult to acquire the necessary raw materials. 
(B)Low level of Technology:
High level of technology is yet to be developed which can facilitate functioning of business enterprises. 
(C)Political Instability:
A political atmosphere with incessant coups and counter-coups which is common in West Africa will stifle any meaningful business activities. 
(D)Problem of smuggling:
Government and its agents are still unable to stop smuggling, and it is seriously affecting business enterprises in West Africa. 
(E)Problem of infrastructural facilities:
The infrastructural facilities needed by these business enterprises for their effective functioning are either inadequate or nowhere to be found. 

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