Business organizations in the private sector differ from one another in terms of ownership structure and control, the purpose of existence, how they raise finance, how they are managed and who manages them, their size and how the profits are distributed or losses covered.
Businesses in the private sector are divided into three main types depending on profit orientation:
1. For-profit commercial organizations
a. Unincorporated businesses: Sole trader, Partnership
b. Incorporated businesses: Private limited company, Public limited company, Holding company
2. For-profit social organizations
a. Cooperative
b. Microfinance provider
3. Non-profit social organizations
a. Non-governmental organization (NGO)
b. Charity
3. Non-profit social organizations:
Non-profit social organizations are set up to increase social benefits for the good of all the society instead of making a profit. Although, they are run in a commercial-like manner, profit is not being the main goal.
Non-profit social organizations include public libraries, state schools, museums, government hospitals, social services, etc. Well-known non-profit social enterprises include Amnesty International, Habitat for Humanity, Oxfam, Red Cross, and World-Wide Fund for Nature (WWF).
There are two main types of non-profit social organizations: Non-governmental organizations (NGOs) and Charities.
Non-governmental organization (NGO)
A non-governmental organization (NGO) is a non-profit social enterprise that operates in the private sector and is not associated anyhow with the country government. It is organized on a local, national or international level to tackle issues that support the public good. It is established by highly-committed people, strictly task-focused and made up of members sharing a common interest. NGOs do not aim primarily to make a profit.
The objectives of NGOs are specifically focused on social, environmental or humanitarian objectives – are set up and run for the benefit of others in the society. They usually support disadvantaged groups in developing countries, lobby for the particular cause or bring public concerns to governments and encourage participation of society’s stakeholders at the community level. Well-known NGOs include the International AIDS Alliance in Ukraine (reduce HIV incidence and death rates from AIDS), Amnesty International, Avocats Sans Frontieres (supporting justice), Friends of the Earth (environmental protection), Greenpeace (environmental protection), Ford Foundation or UNICEF (children’s welfare).
There are two main types of NGOs which include Operational NGOs and Advocacy NGOs.
1. Operational NGOs are established for achieving given purpose, for example to provide poverty relief or complete community projects.
2. Advocacy NGOs are established to promote a cause by raising awareness through actions such as lobbying, public relations and demonstrations.
Charity
Charities are social organizations that do not make any profit, but instead accept donations from which they finance their humanitarian or social causes. Its key function is to raise funds from individuals and other organizations.
A charity provides voluntary support for good causes that are beneficial to society such as the protection of children, animal welfare, caring for the natural environment, advancement of education, health, culture and science, etc.
Charities usually do not sell any products to customers, but use marketing strategies to grab the attention of generous donors by using celebrity endorsements, holding special charity events or promoting activities in the mass media.
Many charities are very large organizations, such as Oxfam (fighting poverty), World Wildlife Fund or Red Cross. They are also run in a similar way to a limited company’s by appointing managers. Charity’s employees may be either paid for their services or work on a voluntary basis.
