1.

Types of organization: ADVANTAGES DISADVANTAGES

-Profit

-Non-profit

-Non-governmental (NGO)

• Soletrader: -no legal requirements; you set up the business and can
start with the trading.

-Any income or profit is yours; you pay tax over this.

- Few legal constraints and you have unlimited liability; which means

any debt you leave the company with is your debt.

• Partnership: - like a sole trader but then with ownership shared in

between partners.

-Unlimited liability.

• Private limited company: - Limited liability, if there is a debt it stays

with the company

the owner is not liable for the debt. This depends on the value

of shares that were issued.

- There are legal constraints: must be registered in the

Companies House and other various legal documents.

- There need only be one director who needs to file annual

annual accounts to the Companies House.

-Shares are only sold privately.

• Public limited company: -Limited liability.

-The shares are sold to the public through the stock exchange.

-Legal constraints to produce annual reports and accounts that

go the Companies House.

-They need at least 2 directors.

-Have a fully qualified company secretary.

• Charity: - a company that is established for charitable goals only.

-Their aim is not to make profit.

• Cooperatives: -is a company that is run by the customers that use their
services.

-the profit is reinvested into the cooperative or given back to the memebers.

-it is for the benefit of the ever changing demand of the members.

• Franchise: - it is a license agreement between two parties that gives the

right to

market a product or service under a certain trademark.

-the franchisee must pay fees to the franchisor.

-company makes use of reputation of franchisor.

Private sector: it is made up of memebers of the general public, and companies owned
by

the general public.

Public sector: these are the companies, various councils, owned by the government
e.g post office.

1.2 Growth and Evolution:

Global conglomerates: A global conglomerate is when a company that has many

different types of businesses that have different markets all around the world. These
different companies are unrelated to each other, it could have been that a core
company bought companies step by step increasing the power of the company.

Global conglomerate had to start off as conglomerates and then to grow.

Conglomerates were particularly beneficial during the 1960s because of low interest
rates and it was possible to buy companies by creating a debt. The conglomerate
benefited from this because if the profit of the bought company would be higher than
the loan costs. This meant that the equity of the company was increasing and the
stocks went up. This meant more money was gained from the stocks which could be
used again to buy another company. This lead to rapid growth however as soon as the
interest rates went up again the profit to cost ratio of the bought companies was
minimal or it could have cost money.

Due to this increase in interest rates by the late 1970s there were not a lot of
conglomerates remaining.

One can say that a Global conglomerate is not easy to get because it is difficult to
invest into companies in which you do not share thoughts/ideas. A successful example
of a global conglomerate is General Electric (GE) they were successful because they
were not a high geared company but benefited from the increase in interest rate.
Another example is Siemens A.G which is the largest Global Conglomerate in the
world with about 472,000 workers.

Advantage Disadvantage
-When the interest was low it is possible to -If the interest rates would become so high
rapidly grow into large company. that the costs for bought company are
higher than its profits it not profitable.
-The growth does not require a lot of
external financing because the company -You take up many debts to increase the
takes a loan to buy the company. size of the company which adds more risks.

-There are many markets a conglomerate -The conglomerate is often high geared.
is present on which means that it is
possible to grow on each market and if a
market is not flourishing there are still
other markets to focus on.

-Improves the market-based allocation of

capital.

Networks:

In the context of this portion of the syllabus "networks" refers to arrangements

between independent organizations to work together.

1. They can have an organizational superstructure (and thus become members of the
XXX network), which could mean members benefit from the marketing of the
superstructure and/or its possibilities for referrals-- something like Best Western
hotels/motels or Garni hotels/guest houses. Or they may be independently owned
entities that offer services of another organization--"affiliate" radio or TV stations. In
both of the above types of examples, these are not "franchises," though certainly they
share some common characteristics with them. They are, rather,
associations/networks.
2. They can be arrangements literally to function together. While in some cases that
means that they are very close to or are a strategic alliance (The Star Alliance in the
airline industry, for example, where five major airlines formed an alliance so that all
five enjoyed the benefit of providing service to basically all major airports in the
world without having, individually, to have flights, etc. to each), in other cases the
functioning relationship gets closer to the connotation of the word network--small
shipping companies, which often deliver "globally" but actually deliver in a limited
geographic region and another company in the network delivers any shipments
beyond the original shipping company's geographic territory. That network can have
either legal basis or exist merely as a matter or practice.

3. Networks can have even more informal relationships than this, too. Professionals
often "network," share ideas, refer business to each other though there may never be
any type of legal or organizational status of the "network."

Subsidiary:

Subsidiaries-

When a company buys has control of another company it is called a subsidiary. The
company controls the subsidiary is called the parent company and it often owns 51%
of the shares of the company. This gives them a say in the board of the company
which then again gives them a possibility to control the company. When a company
has several subsidiaries it is called a group. An important fact about subsidiaries is
that they are a different legal entity than the parent company which means it has
different taxations and regulations. This can then be used to benefit the parent
company. Two examples of companies that have subsidiaries are IBM and Xerox
corporation.

Advantage Disadvantage
-It is to spread its risks because the parent -It could in some cases be more useful to
is not liable for the subsidiary. invest into something else than a
subsidiary.
-The subsidiaries are separate legal
entities, so they are separate from the -It needs more organization to keep two or
parent company, losses do not affect the more companies on track.
parent company.

-To spread territory so that consumers

always see the same company everywhere.

-To decrease the tax needed to pay.

Joint venture/ strategic alliance

A joint venture is when individuals, groups of individuals, corporations, limited
companies or partnerships form a short term partnership, e.g. for one project, to carry
out economic activities collectively. The companies in the joint venture all supply
equity and share the risks, profits and costs.

Joint ventures are often used to enter into foreign markets. The foreign company then
forms a joint venture with a domestic company. This is beneficial for both because
often the foreign country has the knowledge and technology whereas the domestic
company already has the customers and know the market well. Example of a joint
ventures are Sony Ericsson which is a permanent joint venture. Another is one
between two of the oil and gas industry TNK-BP.

The difference between a joint venture and a strategic alliance is that the companies
taking part to not form one legal entity. They stay separate companies but work
together to reach a goal.

Advantage
-There is less risk involved because the
companies are sharing it amongst each
other.
-To opens doors to new technology and
customers.
-There is competitive advantage because
there are several companies working on
the same project; increasing market
segment.
Disadvantage
-The joint venture does not have to be an
success and then the investments were
useless because it could have been your
company did not learn anything from it.
-The sharing of knowledge could be abused
so that only one company walks away with
the benefits.

-Combined research and development.

Multinational companies:

A multinational organization is a company that supplies or makes their product in at

least two countries. A multinational company however is often very large and can
have budgets that exceed budgets of some countries. Due to this they have a lot of
power and can determine economies and therefore on political relations between
countries. They also played an important role in globalization because once these
companies were very large they went to poor countries to produce their goods for
cheap labor costs. In the world the multinational companies are the ones that nearly
everyone knows. Examples of this are Google and HSBC but there are many more.
Advantage Disadvantage
-Your products are represented all over the -Not all products can be sold everywhere in
world. the world due to different legislation.

-Once you are very large you have the - The maximum of the company can be
possibility to work on revolutionizing reached, new investments into other types
ideas. of businesses need to be made.

Holding companies:

A holding company is a company that owns another company. This means that they
need to have enough stock to be able to control the board of directors which then
means they can direct management and operations. They do this so they can operate
the company the way in which they think it is best, and has higher profits. A holding
is beneficial because it is like having another company but only with less liability and
risk. An example of this Ahold which is famous for its supermarket chains. Another is
UAL Corporation.

Advantage
-There is less risk involved in the
expansion of the company, the holding
company is not affected when one of its
companies are not successful.
-Through relative small investment it is
possible to control a company.
Disadvantage
-Sometimes things become unclear or the
leaders make use of the possibility to fraud
money.
-All the controlled companies do not form
one big company to work together.