2.1c Partnership.
Partnerships are easy to establish. It is an agreement between two or more people who
take joint responsibility for the running of the business, the share its profits and share the risks. There are from two to twenty owners, so work roles can be allocated, and so problems experienced from sole traders may be eliminated. The business can also obtain greater finance than a sole trader through having more owners. But decision making may be slower. The business also has unlimited liability.
Also the partnership will have a deed of partnership. This is an agreement, which outlines:
- How profit and losses would be shared, if it is not equally.
- How much money and what share of the profit each partner may take out of the business.
- The working arrangements of the partnership e.g. who has responsibility for which part of the business.
- Arrangements for removing a partner or adding a partner to a business.
- Arrangements for ending the partnership and the distribution of assets once the partnership is desolved.
The advantages of a partnership are:
- Easy to raise capital from partners
- Larger-scale opportunities than for the sole trader
- Spreads responsibility and decisions
- Members of families can be introduced to the business
- Affairs can still be kept private
- Reduces the responsibility of a one-person business
The disadvantages are:
- Unlimited liability
- There can be disagreements between partners
- Can be limitations on the number of partners
- Partnerships have to be re-formed if a partner dies
Companies have a minimum of two people required to form it. It has a separate legal identity from its owners; also the company can sue or be sued by other people or companies. There is more finance available than in sole traders and partnerships because they have investors. They also have limited liability for the members and separate legal identity for the company.
2.1d Private Limited Company, Ltd.
There are two types of company, Private Limited Companies (Ltd) and Public Limited Companies (PLC). The owners of Private companies are called shareholders because they each own a share of the business. There must be at least two shareholders, but there is no limit to the amount of shareholders that there can be. Companies can expand by selling shares to people. The shares of private companies can not be quoted on the stock exchange though, and they are not allowed to advertise the sales of their shares publicly.
Public companies have a minimum share capital of £50,000 to establish themselves. To become a company both public and private must be incorporated. They then send articles and memorandum of Association to Registrar of Companies. A certificate of Incorporation is then received. A private company can then start trading. A public company must raise authorised minimum capital and then obtains trading certificate.
This is what Cadburys is.
Some advantages of this are:
- The company get money from the shares
- The firm grows bigger
- They have limited liability
Some disadvantages are:
- The company can not sell their shares on the market
- Their accounts are not private
- There are limitations on capital
2.1e Public Limited Companies, PLC.
Public Limited companies (plc) are able to raise capital through the Stock Exchange, which quotes their share prices. There are only two people needed to form a public company, but there can be many more. There is limited liability for shareholders, which means that, if the business goes bankrupt, the share holders will not be liable to lose their personal possessions to pay the money that is owed. They would only lose the value of their investment. Decisions can take a long time to be made, which can cause a problem, and employees can be distanced from one another.
Some of the advantages are:
- Limited liability for shareholders
- Its easy to raise capital
- It operates on a large scale
- Its easy to raise finance from banks
- They employ specialists
Some of the disadvantages are:
- The formation can be expensive
- Decisions can be slow
- There can be problems of the company being too large
- Employees and shareholders can become distanced from one another
- Affairs are public
2.1f Co-operative.
The co-operative movement began in 1844 by the Rochdale Pioneers. The aim was to benefit the customers by buying goods in bulk and ploughing back the profits. Customers own the business and receive dividends in relation to their purchase. They run the co-operative and make the decisions. It is favoured by the clothing industry, by small modern engineering firms and in road haulage, and these co-operatives are more successful.
There are three types of co-operatives; a worker co-operative, a producer co-operative and a consumer co-operative.
A worker co-operative is when a business becomes bankrupt, the employees buy out the business with their redundancy fees and so become co-operatives.
The advantages of worker so-operatives are:
- They have less chance of industrial relations problems than an owner/ worker system
- Produces better motivation in the workers as they are working for themselves
The disadvantages are:
- There is little chance of successful expansion as it is hard to raise capital
- Workers will find it hard to be promoted or have wage increases
- Workers may not have the necessary management expertise.
A producer co-operative is where the producers join together in order to share resources and marketing. Another way in which such groups co-operate may be in the purchase of large and expensive items of plant or machinery.
A consumer co-operative is where customers collectively own the business. The principles of this type of co-operative are:
- Each member has only one vote, regardless of the number of shares that they own
- Anyone may buy a share and become a member, regardless of race, creed or religion
- Goods and services are sold at reasonable prices.
2.1g Franchises.
Franchises are a recent development in the UK. An example of this is Thornton’s toffee company, who sells their produce to private individuals. The person taking out the franchise puts up the capital but is usual provided with equipment, training and merchandise and a well-known name to trade under.
The advantages of a franchise are:
- They can expand without the burden of debt
- Low risk is involved in franchising
- They are able to use a brand that is successful
- The provision of an exclusive area
- The provision of help, advice and training
The disadvantages are:
- Little amount of control of the franchise
2.2a Business Objectives.
Business objectives are the stated or attempted aims of firms and organisations.
All businesses have a mission statement. Cadbury’s is:
“We are passionate about working together to create brands that people love. Brands that bring the world moments of delight and a splash of colour on a grey day.”
This lets the customers know if they are getting value for money. Also that the business has reliability, quality and speed of services.
This lets the shareholders know that Cadburys are going to create a good quality chocolate, which mean that Cadburys should be able to sell a large amount and make a profit. It also shows that they are trying to reach their objectives.
It tells the employees that Cadburys want to work together, to achieve a high quality chocolate.
Cadbury’s objectives are:
Making a profit- nearly every business wants to make a profit (apart from charities). Especially a private business such as Cadbury’s. This could be one of their mane objectives.
Survival- the goal of survival could possibly be one of the major objectives of many businesses. For sole traders and partnerships, which have unlimited liability, reaching and bettering break-even (the point where costs equal revenues and the business moves from loss to profit) and thus surviving in the market, could be their only objective.
To increase their market share- the greater the market share, the more power the firm will have to set prices or control production. The market leader will have control, and have the power to set the prices. Maximum market share would also be part of this. This can involve entering many different markets, or producing as many different products for the same market as possible.
To maximise turnover- this is the number of sales, times the prices at which the goods are sold. A higher turnover would lead to more efficient use of the resources.
To maximise efficiency- this means the most efficient use of resources. The efficient use of these resources will keep the unit cost at the lowest level.
Customer satisfaction- this is where customers may be asked questionnaires to get their opinion on service performance and customer satisfaction. Once a business has done this they are able to reach the customers needs easily. Cadbury’s like to provide their customers with a satisfactory taste when they purchase their chocolate, so they ask the customers questionnaires and they are able to make changes to the recipe.
Developing a skilled workforce- Owners like to have a reliable hard working workforce. They are able to do this by treating the employees well and giving them good pay. This will then encourage the employees to work harder.
2.2b Culture.
A culture is made from various beliefs, ideals, norms and values. All organisations have a culture. Culture is expressed in the way that people act. It can also be seen in the organisation’s rules, procedures, structures and systems.
There are four cultures by Charles Handy, which are:
- Power Culture
This is mainly found in small entrepreneurial organisations. It relies on a central source of power, such as an autocratic leader who takes risk and they value enterprise. It has few rules and procedures. Their objectives are:
- Survival
- Profit maximisation
- Customer satisfaction
- Increase their market share
- Role Culture.
They are operated traditionally by bureaucratic style leadership, they rely heavily on rules and procedures. It is found in organisations structured by function. Their objectives are:
- Provide community service
- Skilled staff
- High quality service
This is most probably what Cadbury’s is. This is because Cadburys aim to provide a good quality chocolate for their customers, and want a skilled, happy workforce. They also want to make a profit, and give back to the community.
- Task Culture.
This is where a group or team is established for a project. They are created to problem solve. They are flexible and creative. Their objectives are:
- Solve problems to help a business improve quality
- Make profit
- High quality products
- Market share
- Survive
- Increase sales
- Person Culture.
This fulfils the need of an individual. They have freedom to shape the job. It is typical of small professional organisations with minimal structure. Their objectives are:
- Make a profit
- Increase sales
- Increase market share
- Survive
Cadburys are very successful at achieving their objectives. They have a high turnover and they are very efficient. Cadburys have the largest share of the chocolate market, as they have a very high quality chocolate. They are able to make a profit because people like the taste of Cadburys chocolate that they are prepared to pay slightly more for it. As they are so popular it means that they are able to survive in the market easily.
2.3 Functional Areas.
There are six functional areas that exist in my chosen business. These are:
- Production
- Finance
- Human resources
- Marketing
- Administration
- Research and development
2.3a Production
This is the process by which a product or service is created to meet the needs of consumers. It takes raw materials and converts them into the final product. Production are usually responsible for stock control, consumer satisfaction, quality control and resources, such as people, machinery and production space i.e. the plant.
2.3b Finance
Finance has many functions, these are:
- It records the financial activities of the business
- It monitors the expenditure of the business, insuring that looses do not occur
- It oversees customer accounts and chases slow payers
- It helps other departments to interpret their financial data. For example budget holders
- It devices financial data for an external body such as share holders, investors, government – customs and excise, VAT – inland revenue
Finance now involves non-specialists as technology has made financial data more accessible. This makes it easy to handle the businesses money, and so helps nearly every function as all departments can work efficiently knowing how much money they have to work with.
2.3c Human Resources.
Human resources are the term used to mean not just workers, but the abilities of those workers. It also examines the organisation objectives, strategies and finds the key people.
Human Resources roles are to select and recruit employees, and then they have to train these staff up. Once these employees have started work they have to pay them. It also deals with disciplinary and bereavement procedures. It oversees industrial relations and deals with appraisal performance management. Its main responsibility is to find a productive workforce. This helps to keep the employees satisfied and hard working.
2.3d Marketing.
Marketing communicates internally and externally to the business. Marketing provides customer service and it sets targets on satisfaction. It also undertakes market research, which is an ongoing activity.
The external agencies that affect marketing are trading standards and laws that relate to advertising and promotion. Marketing also involves retail distribution. It is responsible for promotion, and in addition is linked to production, finance, human resources and research and development. This helps the business to promote their products.
2.3e Administration.
Administration is a service function that is concerned with the flow of information that supports the operation of the organisation. It includes the running of the reception, mail handling, telephones, typing or word processing, the filing of documents, reprographics and secretarial work. This helps to keep the business running smoothly and efficiently.
2.3d Research and Development.
This is trying out new ideas and developing new technology to come up with better products. Potential products are designed and ideas for new products are hatched.
Research and Development design and test new ideas to try and come up with a better product. They also improve existing products. They research new areas of interest, and analyse and test competing products. They work along side the production department to develop prototypes and then construct the equipment to manufacture new products. It also helps to ensure that the new products comply with the legal requirements and the safety standards. This helps to keep the standard of the businesses product high and to keep their customers interested.