To: Mr. Sttorck
From: kasun perera
Date: 11th September 2003-09-17
Ref unit2: how businesses develop
How businesses develop
The aim of this report is to produce a portfolio based on an investigation of two contrasting businesses. I have chosen two different companies for my report. It will include
a description of type of ownership and the different liabilities of owners. A description off different industrial sectors and currant UK trends in their growth or decline. Description of business activities and current UK trends in their growth or decline. The reason for the location of each business. A Description of the influence of each stakeholder on each business.
Of my chosen businesses.
Type of owner ship
The large company I have chosen is Tesco the reason I chose Tesco is it’s a very successfully growing large company. Tesco is public limited company (PLC) (Means that any one can be shareholder) Public limited companies are the largest type of privately owned enterprise in the UK. A PLC has power to rise large amount of capital, through selling it’s shares to the public.
A Public Limited Company can sell its shares on the Stock Market, the owners of a Limited Company are not involved in the running of the business, unless they have been elected to the Board of Directors
This means it can develop the business more easily then private limited company, sole trader. It can also benefit from being a large-size organization. It will be able to buy in bulk, and specialise.
Tesco sells Groceries, cloths, CDs, videos, DVDs, books, Computer Games, Electricals, school equipment, Wines and other alcohol drinks.
Tesco is currently the leading supermarket in uk. Tesco as a pretty good Competition from other supermarkets such as Sainsbury, Safeway. But Tesco is cheaper then most of the other supermarkets and they offers lot more products. Recoding to Tosco’ on average Sainsbury's are 4% more expensive than Tesco and Safeway are 10% more expensive than Tesco.
There are more then 700-plus stores and many distribution centres are located in
United Kingdom. They have several office sites in the UK and Ireland, where there key support functions are based. The majority of office staff is based in Hertfordshire. Tesco has been operating on an international basis for long time, anticipating the need to become a major retail name in key regions, they moved into central Europe, where they have a strong presence in Hungary, Poland, Slovakia and the Czech Republic and the dynamic Asian market.
Been a PLC Tesco has advantages such as have limited liability, enjoy maximum continuity, can raise large sums of capital, large size enable them to enjoy economies of scale' such as being able to buy supplies in bulk and they find it easy to borrow money then smaller businesses because they are less Rick then smaller firms. But there is all ways face disadvantages such as employees and shareholders became too detached from one another because of the large size. Ease of transfer of share ownership can lead to 'take-over' bids for company. (Other advantages and disadvantages are shown below.)
Advantages of been a PLC
Raise large amount of capital from share issue,
Benefit from economies of scale, e.g. bulk buying, cheaper borrowing,
Produce goods at lower unit cost.
Disadvantages of been a PLC
Become too large resulting in poor labour relations,
Conflict of interest between shareholders and the Board of Directors,
Possibility of takeover or merger because shares can be bought by anyone,
Being a PLC suits Tesco because they can sell their shares to increase it’s income which make it easier to expand and grow. Tesco has limited liability, which means if they run out if money they go bankrupt and the owners don’t loose any of their properties. Tesco have to sell all the goods and products. Tesco is suited to a plc because they can run cheaply buying things in bulk and save money then selling the products to their customers cheaper which increase the value of their share which means Tesco’s competitors loose customers and Tesco gain customers.
The small company I chose is kebab house. The reason I chose kebab house because it’s a well-known shop and I enjoy shopping in it. Kebab house is a sole trader.
Sole trader a sole trader describes any business that is owned and controlled by one person, although they may employ workers.
Sole trader is the simplest and the most common type of enterprise in UK. Been a small company kebab house has lots of advantages
for example sole trader feels a personal involvement in the business, the owner dose not have to consult anyone else when making decisions. The owner dose not has to share profits with anyone else. But there are always disadvantages been a small company for an example, limitation on capital for expansion and cannot employ specialist workers such as accountants and information technology experts. Other disadvantage been is that sole trader dose not have any on e to share the responsibility of running the business with. A good chief, for an example may not be very good at handling money in the shop. The most important one is unlimited liability, where the sole trader can be force to sell personal assets to cover any business debts.
Other advantages have been a sole trader is that:
Generally, only a small amount of capital needs to be invested, which reduces the initial start-up cost.
The wage bill will usually be low, because they’re a few or no employees. It is easier to keep overall control, because the owner has a hands-on approach to running the business and can make decisions without consulting anyone else.
Other disadvantages have been a sole trader is that:
Sole trader often works long hours and find it difficult to take holidays, or time off if they are ill.
Developing the business is also limited by the amount of capital personally available.
I think been a sole trader suit kebab house perfectly because then they don’t have to compete with the big chain-stores, it is also suited to sole trader because the owner don’t have to consult other people about his decisions he can just put them in to action. For an example if the owner knows there goner be lot of customers coming in at 2 a clock then he can shut the shop and reopen at 2a clock with out going through a chain of command.