Topic 1 Enterprise as a subject of economy

Topic 1. Enterprise as a subject of economy 1. 1. Purpose of enterprise’s functioning 1. 2. Classification of enterprises 1. 3. Production structure of enterprise 1. 4. Branch structure of production

1 According to the Ukrainian law the “Commercial Codex”, an enterprise is a basic organizational link of national economy of Ukraine. Enterprise is an independent subject which has rights of legal entity and carries out production, research and commercial activities with the purpose to receive the income ( the profit).

Market principles of enterprise activity Rationality Economy Efficiency Competition

The enterprise as the production organization has the followings descriptions: 1. Resources necessary for activity: • • • material and technical technological human organizational information finance

2. Dependence from external environment 3. Horizontal division of labor 4. Infrastructure

An enterprise environment External environment Users, consumers, suppliers, contractors, business partners Social environment State relations Internal environment Management Employees (labour collective) Proprietors

1) personality of top manager and his ability to lead an enterprise in the market conditions; 2) the acceleration of scientific technical progress (STP), with the innovation policy of enterprise; 3) perfection of production and labour organizations, management of enterprise;

4) legal form of organization structure 5) creation of positive socially psychological climate in a collective; 6) the specification of productions and industries; 7) quality and competitiveness of products, with the management of costs and price policy; 8) the depreciation and investment policy.

1) related to the changes of internal and world market. Mainly it is shown in the changes of demand supply, and in price-waves; 2) related to the changes of political situation both in a country and in global scale; 3) related to the inflation processes; 4) related to the State activity.

Structure of functions and subsystems of production enterprise Enterprise Functions Production Sale Supplying the production with raw materials and with financial resources Providing safe terms of labour Providing the places of work Subsystems Production Financial Administrative Information Transport

1. To get the maximum profit from ready goods selling 2. To satisfy the customers’ needs

1) complex study of the market; 2) innovative activity; 3) production activity; 4) commercial activity; 5) logistical support; 6) economic activity; 7) warranty service; 8) social activity

An enterprise activity is regulated by numerous of legal acts, the main are: 1. Commercial Codex 2. Articles of enterprise 3. Collective agreement

Enterprise forming sources : • Money payments and material of founders; • profit from the basic and other types of activity; • profits from shares and other investmen activity;

• bank credits and other creditors; • capital holdings and grants from budgets; • income from privatization of property; • free or charitable payments of enterprises, organizations and citizens, or other sources.

An enterprise is considered to be created in the day of his state registrations in local power bodies, where an enterprise is appropriated a registration number in the state register of legal entities.

Signs of enterprise as a legal entity First of all, an enterprise must have its own or rented property. Second - ability to pay on debts.

Third - the own name in economic relationships Fourth - right (possibility) to sue or answer on lawsuits in Commercial or general court, in accordance with a legislation and by agreements.

The fifth point, an enterprise must have independent balance, correctly register charges on a production and selling of products according to established system of accounting. The sixth - any legal entity must have the name, with pointing of its legal form in it.

2. Enterprises classification № Classification Types of signs 1 Purpose and character of activity enterprise 1. Commercial 2. Noncommercial Examples A purpose is to receive an income. Charity, educational, scientific, medical

2 Forms of property 1. Private Belongs to the separate citizens with a right for hiring a labour. 2. Collective Proprietors are a labour collective. 3. Communal A proprietor is local community. Based on the state property. 4. State

3 National belonging of capital 1. National A capital belongs to the enterprise of this country. 2. Foreign All the capital or his basic part is a property of foreign businessmen. 3. Mixed A capital belongs to the businessmen of two or more countries.

4 Legal 1. Individual status and form of house holding 2. Cooperative 3. Lease 4. Economic societies A proprietor is one person or family A voluntarily association of property with the purpose of joint activity A domain and using property on rights of the contract of tenancy An association of property and participating in entrepreneurial activity with the purpose of receipt of income

5 Branch and 1. Industrial functional type of 2. Agricultural activity 3. Construction 4. Transport 5. Sale 6. Scientific 7. Leasing 8. Bank 9. Insurance 10. Tourist 11. Other

6 Technological territorial unity and degree of subordination 1. Main 2. Subsidiary Main enterprises which control other firms Legally independent organizations, that has the balance, but especially submits and controlled a main firm 3. Association Legally independent 4. Branch enterprises, but having some degree of dependent from central office due to mutual agreement Does not have legal and economic independence

7 After size 1. Large The amount of workers for a year exceeds 1000 persons, volume of gross receipt from realization of products – does not exceed a 5 million euro. 2. Middle 3. Small The amount of workers for a year does not exceed 50 persons, volume of gross receipt from realization of products – does not exceed 500 thousands of euro.

By the enterprise structure • strictly specialized • universal • combined

Enterprises can be gathered in: associations are contractual associations, created with the purpose of permanent coordination of economic activity. An association does not have a right to interfere in production and commercial activity of anybody from its participants;

corporations are contractual associations, created on basis associations a production scientific and commercial interests with delegation of separate powers centralized adjusting to activity of every participant; consortia are temporal regulation association industrial and bank capital for achievement of general purpose;

business concerns - regulation union of industry enterprises, scientific organizations, transport, banks, trade and etc. on the basic of complete financial dependence of one or group of businessmen;

A production cooperative store is a voluntarily association of citizens for a general production and other economic activities, created on the basis of accumulation of property and personal labour participation.

Economic societies include: joint-stock companies with limited liability societies with additional responsibility complete societies command societies.

Production description enterprises includes determination scale of productions: . large serial individual production

3. Production structure of the enterprise The structure of an enterprise — it is composition and correlation of internal branches : workshops, departments, laboratories and other components that make unique economic object.

Production structure of enterprises are composition of branches of production system that have own technological intercommunications.

Enterprise Workshops and economies Basic setting Supplying workshops Processing workshops Auxiliary setting Assistant economies Auxiliary workshops Ware-house workshops Production structure of enterprise

Classification of production structure Depending on subsection activity of which is fixed in basis of production structure were are: Workshops production structure (basic, auxiliary) Non work-shops production structure Combinate

2 2. On the form of specialization of basic workshops: Technological structure Subject structure Mixed structure 3. Depending on the presence of basic and of the auxiliary proceedings: Enterprises with a complex structure Enterprises with the specialized structure

General structure of enterprise Departments: Economic Financial Pricing Human recourses Scientific Project-designer Technical information Departments: Technical preparation productions Standardizations Main engineer (technical director) Director PR Deputy Production Main mechanic Main power engineering specialist Head of production Main Accountant department Commercial Deputy Departments: Marketing and advertising, supply and sale, transport Auxiliary workshops Departments: Department of technica control Basic workshops

4. Branch pattern of production Branch of industry – it high-quality homogeneous aggregate of enterprises, associations and other economic units of different patterns of ownership what execute identical functions in the system of public division of labor

Basic signs which influence on forming of industry (and national economy): • a production in considerable scales • presence of generous amount of enterprises-producer of this products; • Specific technological processes and organizations of work; • homogeneity of raw material which is consumed by the enterprises;

Economic industry — aggregate of enterprises with one centre of management. Pure industry is an aggregate of enterprises what produce identical products but are in the submission of different departments. Complex industry is a row of areas what are incorporated by homogeneous signs.

Enterprises related to the industry by the economic setting of products. On this sign industry is divided into a group A and group B.

By the character of influence for the purpose labour all of industries of industry are divided into: extractive and transfer. 2. After the structure of charges: labour intensive, resource-demanding, fund content, energy and oil content 3. At times works during a year — seasonal and off-season. 1.

indexes of a particular branch structure n n n share of products by separate industries in the general volume of output of products by industry; changes of share of capital assets used in production to the total worth of capital assets of industry; changes of quantity of workers in relation to the general quantity of workers in industry.

Factors of a particular branch pattern of production: : • level of introduction of achievements Of scientific and technical progress; • a level of specialization and co-operation in production; • development of electrification mechanizations and computer-aided manufacturing; • presence of natural resources and minerals; • social-historical terms; • geopolitical position of the state; • climatic terms of the state; • development of transport; • growth of financial welfare and standard of culture of population.