Not-for-profit Organisations (AQA GCSE Business)

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Charities

Charities exist to provide support to those in need, promote a particular cause, and advance the well-being of society
They have a specific purpose that is defined by law and must follow strict regulations governing their activities
They primarily rely on donations from individuals, corporations and governments and often actively fundraise and engage in campaigns to attract donations

Diagram: Examples of Global Charities

Examples of non profit charities include the Bill and Melinda Gates Foundation, The Wellcome Trust, and Spain's La Caixa Foundation

Charities need to have a specific purpose, related to areas such as health, education or improving living conditions

Evaluation of Charities

Advantages	Disadvantages
Charities can gain support for particular needs from a very wide audience, including the general public and businesses Specialists working for them provide expert support to increase the efficiency of their aid Charities are often powerful lobbyists who can persuade governments to support their aims	The country or group receiving the charitable support can become overly dependent on it Salary levels of senior managers of charities is often closely examined and spending decisions sometimes attract negative press coverage Funding for charities can be irregular, which makes budgeting difficult

A social enterprise is a business that has the primary purpose of creating social or environmental impacts, in addition to generating profits
Cooperatives are a common form of social enterprise
- They are owned and controlled by workers or customers (often called members) who share profits, contribute to key decisions and have the right to elect directors

Objectives of Social Enterprises

Social	Environmental
Provide jobs and support for disadvantaged groups in society, such as the disabled or homeless	Protect the natural world, animals and their habitats, and reduce the impacts of pollution or overdevelopment
Ethical	Financial
Operate the business in a responsible way by treating stakeholders, including employees and suppliers, fairly	Make a profit to invest back into the social enterprise to expand the social work that it performs

Butterfly Books is a social enterprise that publishes children’s educational books in the UK
- Its aim is to 'work to educate, inspire and entertain children, aiming to change future generations by reducing gender bias in job roles'
- A recent book entitled 'My Mummy is an Engineer' challenges gender stereotypes

Evaluation of Social Enterprises

Advantages	Disadvantages
Social enterprises often have a good reputation, which can attract highly-qualified employees and encourage customer loyalty For-profit rivals may be encouraged to improve their business practices to better compete with social enterprises Deserving causes receive much-needed financial support	Social enterprises may face media scrutiny so must ensure they behave responsibly at all times Profits (surpluses) available for reinvestment are limited as they are shared with members or good causes Decision-making is often slow as many stakeholders need to be consulted

The Public Sector

Public sector firms are owned and controlled by the government and are usually funded through taxation
Their main goal is usually to provide services such as education, healthcare or emergency services that may not be provided by businesses

Diagram: Examples of Public Sector Services

The public sector includes emergency services, transportation, health and education organisations

Hospitals, schools and emergency services are often partly or fully provided by the public sector

Public sector organisations operate on a local, regional or national government level
- E.g. Transport for London provides local transport in the London region, whilst the National Health Service (NHS) operates across the whole of the UK
Governments retain ownership of organisations in the public sector for several reasons:
- They are strategically important to the country, such as defence, public broadcasting or justice systems
- They provide essential services such as water, electricity supply or emergency services
- They are merit goods that may not be provided in sufficient quantities by private businesses, such as education or health services
- Some public sector organisations were once owned by private individuals and have been nationalised to ensure their survival
  - E.g. In 2008, the UK government nationalised Northern Rock, a bank which was on the verge of collapse as a result of the global financial crisis
Public sector organisations are funded by central and local governments, but some may charge a fee for selected services
- E.g. The NHS is free at the point of use for British citizens, but they must pay for medical prescriptions, some procedures and parking on hospital premises

Evaluation of Public Sector Organisations

Advantages	Disadvantages
Government ownership is essential for some crucial or sensitive industries Examples include water, power and communications	Due to a lack of competition, public corporations may become inefficient or have no incentive to improve, affecting consumer choice
Important public services, such as TV and radio broadcasting, are often in the public sector Non-profitable but important programming can be made available to the public	Corporations may become complacent or have an unfair advantage over private sector rivals as they can access government subsidies to help them if they are struggling
The government can choose to nationalise industries that may be in financial trouble Jobs can be secured and consumers will still have access to the important goods or services the business provides	Funding can be cut as a result of political decisions and changes of governments can cause significant disruption to corporation missions and operations

Exam Tip

A common misconception is that not-for-profit businesses do not generate profit. In many cases, though, they do. This profit, sometimes called a surplus, is usually reinvested into the business or distributed to good causes. If public sector organisations generate a profit, it is either reinvested in the service they provide or given back to the government to fund other public services.

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