Strategy theory

Strategy illustration

The structure of business

In the UK and most other countries business is structured in such a way that most activity takes place within the private sector with decisions being made by the market. Private sector businesses are owned by individual owners and shareholders, who seek to make a profit or achieve other objectives.

Companies are owned by shareholders who appoint directors to look after their interests. The Board of Directors appoints specialist managers to run the company.

Some businesses (although fewer these days) have a top down hierarchical structure. These are organisations with a number of layers within them, and a downward flow of communication. In an organisation structured in this way decisions and instructions flow from the top, and people lower down the organisation are reluctant to make decisions for themselves.

In contrast, many modern organisations are organised in a more democratic way. Layers of the hierarchy have been stripped out, and often employs are organised into work teams. A team member may also be part of other teams at the same time. In these new forms of democratic organisations there is a multi-channel flow of communication.

The private sector: Consists of sole trader, partnership, private companies, public companies, and franchises. These are owned by individual business owners and shareholders who seek personal objectives such as making a profit.

The public sector: Consists of organisations that are owned by the government on behalf of taxpayers and other citizens. A good example is the BBC.