The two businesses that I have chosen for my investigation are Shell Ltd and Prestige Limousines, I will be comparing the differences between a partnership and a franchise company. I am also going to discuss what liabilities the companies
Unit 2 Business Studies
P1
In my assignment I am going to research two contracting businesses and what different types of ownership there are within the companies. The two businesses that I have chosen for my investigation are Shell Ltd and Prestige Limousines, I will be comparing the differences between a partnership and a franchise company. I am also going to discuss what liabilities the companies have and how that particular type of ownership is suited to the business.
The Shell Ltd company branch (garage) that I am investigating is a franchise company, this is based in the city centre near five ways roundabout on bath row road and which is a worldwide company. It is a retail business, which provides the service of fuel and shop products. It provides customers with three different types of fuel which are, diesel, unleaded and optimax. These are different types of fuels service provided by Shell. Also Shell provides products and other motor vehicles services such as quality engine oils, screen-wash which is used to clean the front windscreen glass on the vehicle and etc. Shell has up to approximately 1,000 branches through-out the UK and 40,000 branches worldwide.
A franchise company is owned by shareholders and run by directors. A franchise company is different from a sole trader and partnership in that it has legal identity separate from its owners. The shareholders are not liable for the company debts, they regulated by the Acts 1985 and 1987. Businesses such as Shell are run by a franchisee who has been given permission to operate the business by a franchisor, the organisation which owns and controls the product and services being sold. The franchisee gets the benefit of the franchisor's expertise in marketing and operations. The franchisor at Shell will often supply fuel and stock for sale, provide shop displays and give help and advice to the franchisee, which operates in a particular branch of Shell. The franchisee has the responsibilities of running the business on a day to day basis and keeps the stock sales profit and commission on fuel from the directors of the franchise company. In addition, the franchisee also needs to pay the franchisor certain amount of profit for the use of the trade name.
Some franchises carry more risk then others, meaning that some franchises are less likely to be successful. Businesses such as Shell have a successful and famous name for their standards and therefore companies such as Shell carry fewer risks. The benefits for franchisees are:
* Selling a well known product and service
* Advice, guidance and expertise from the franchisor
* Fewer decisions to make in operating the business
* Most profit is retained by the business owner
* With a reputation franchisor there is no competition within in a specified area
The liabilities at Shell:
* Business success is dependent on the skill of the franchisee and the strength and dependability of the franchisor. If either are lacking the business may fail
* Longer hours and fewer holidays
* The franchisee is dependent on the popularity of the franchisor's products and services and the amount of advertisement undertaken by the franchisor
* Only the franchisor's products and services can be sold
* Some of the profit has to be paid to the franchisor
Being a franchise company suits Shell because it is a well known and successful petrol station and because it takes one person to run minimum six petrol stations sites that is what is required from Shell and this will eventually get fewer people to run a couple of sites and will allow Shell to increase its branches. Each particular site is being run successfully then it will allow Shell reputation and value of the company increase.
The other chosen business is Prestige Limousines. The type of business ownership is a partnership. This is based in Sparkhill, Birmingham and is run by the family as a family business. This business has two partners. This business involves hiring out limousines and other luxury cars. Once a customer has booked out a limousine or any cars for a particular occasion and has agreed on a fixed package then on the date it is booked for it is driven by the limousines driver and is located where it is supposed to be.
The benefits of having a partnership is if there is one owner he has too much pressure to run the business. Since it has two partners there is less pressure on one person and this way two people can share all their ideas. If one is off sick, the other could cover it. If the business becomes bust the partners have unlimited liability for any debts, and are therefore personally liable.
The liability Prestige Limousines may face is changes with a partnership ownership which will affect rights and liabilities and the amount of capital may change and so might the share of profit. Changes in a partnership may happen when a partner retires or dies, or if a new partner joins. Also another way that a partnership business could be affected by when a partner decides to retire. For Prestige Limousines this could have a big affect because it is only a two people partnership, and if one was to retire it will lead to many problems such as it would either become a sole trader ownership or it will take time for the remaining partner to find another partner for the business. Also the same problems may occur if one partner dies. One other affect on business could be one of the partners become bankrupt.
P2-M1
There are several different types of business ownership, the owners have different responsibilities and involvement in a business. One aspect of this is who bears the business risk and whether the owners have limited liability. Different types of ownership are, Sole trader Partnership Company Public ownership Co-operative Franchise. Normally when a business starts such as Prestige Limousines , the business is small. This is because the person who starts it hasn't got a lot of finance. A person who starts alone in the business world is called a sole trader. If there are two or more persons involved , e.g. family or friends, then it is called a partnership. These two types of businesses are unlimited liability, because it's not the business that is liable but the owner. This means that, if the business goes bankrupt, the owner's personal assets can be taken away. For this reason being and from consideration I see that if one partner at Prestige Limousines becomes bankrupt the second partner is there to help if it was a sole trader his personal belonging (valuables) could be taken away therefore I think a partnership business in Prestige Limousines is best suited for it purpose.
Shell is also suited in its ownership, if it was to be any other type of ownership then it would not be successful, because it has more then 40,000 branches worldwide it would be very difficult for it not to be a franchise company because the company name then wouldn't be recognisable for consumers if there was to keep a different company name for each branch. Shell has one supplier which supplies them their good and services therefore they would have any problems of finding a particular supplier.
The tertiary sector, whose services are sold in ...
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Shell is also suited in its ownership, if it was to be any other type of ownership then it would not be successful, because it has more then 40,000 branches worldwide it would be very difficult for it not to be a franchise company because the company name then wouldn't be recognisable for consumers if there was to keep a different company name for each branch. Shell has one supplier which supplies them their good and services therefore they would have any problems of finding a particular supplier.
The tertiary sector, whose services are sold in consumer, capital, industrial and service markets, forms a major part of most developed economies (such as the UK Italy and France). In recent decades the tertiary sector has increased in importance for many developed economies. In the UK the tertiary sector is by far the biggest proportion of the economy. Operating in the tertiary sector poses similar problems to that of the secondary sector, they still need to "add value" to their products and they still face competition. Yet because a good deal of service sector business requires "face to face" contact with the customer, it is a little harder for overseas competition to take customers away.
Classifying businesses into three industrial sectors Primary Sectors which mainly involves extracting raw materials. This involves the extracting of natural resources, i.e. raw materials for use in the manufacturing process. Examples of primary production are mining, farming, market gardening, fishing and forestry. Secondary Sector, manufacturing products, this is the next stage of production, it involves the processing of raw materials into the manufactured product, for example, fruit into pies or juice, wood into chipboard, metal into cars, and so on. Tertiary Sector, providing services, this third classification involves a business providing a service rather than a manufactured item, examples include catering, shops, insurance, travel, and advertising. But more precisely I am going to discuss what industrial sector Shell is in and which is in the tertiary sector as it sell goods and provides services.
The tertiary sectors have different sections, sections in which have certain activities that make up a letter, letters made up from G to Q. For example Shell would come under the section H because they are retailing products and services. There are other sections such as G which are wholesale and retail, section I which is communication, transport, and storage, these are all different examples of how different sections are made up in the tertiary sector.
The tertiary sector is the biggest sector out of all sectors, while secondary sectors are slowly decreasing to the number amount of the secondary sectors businesses in the UK, looking approximately 10 years back the secondary sector was on the same level on the tertiary sector. Also the primary sector which has dropped in number amount of businesses, eventually it might come to a stage were there are very little amount of businesses as primary sectors are around in the UK because the number at presently has rapidly decreased but still at present in the primary sector there are few businesses such as mining and farming which are still popular.
Out of the whole the trend for services such as fuel in the tertiary sector is slowly increasing. This is because they will always have high demand for their service. If Shell branches are located in the city centre they more likely to get more demand for their service because as city centre is the most busiest place in Birmingham, its more likely to get more customers and therefore there is more demand for their services. Shell seems to be in line with UK trends as it is not raising or falling.
Shell are in the tertiary sector. This type business provide a service to the community. Shell provides customers with products and services. Being through the primary and secondary sectors, tertiary sector mainly involves retailing such as Shell buys a regular stock from another company for their shop sale on products and also Shell gets provided with large quantities of oil delivered to them and then sell them individually in small quantities to general public. Prestige Limousines also has a similar trade where it is an establishment that provides prepared limousines and depending on the occasion usually some occasions intend to have some extras along side with the limousine, this includes variety of selection of different limousines.
The trend in the tertiary sector in the UK for the last ten years has been an increase, in the UK more people choose to work in providing direct service to customers than in factories. Tertiary sector represents more than one quarter of a million working in occupations across the public.
The tertiary sector of industry, also called the service sector or the service industry is one of three main industrial categories of developed economy, the others being manufacturing and primary goods production such as agriculture, or extraction such as mining and fishing. It includes all the providers of services to businesses and to individuals, and can be divided into four sections:
* Public services including admin, defence, health, education and personal services such as hairdressers.
* Financial and business services including banks, insurance companies, advertising, law, accountancy.
* Transport and communication including bus and train providers, radio and tele communications.
* Retailing includes shops, inns and pubs, fast food and distributive services.
There are two types of tertiary industry:
* Profit utilising, which provide a service but do not make money. Examples include education, hospitals, emergency services, etc.
* Profit making industries, which make money. Examples include restaurants, mobiles phones shops, supermarkets, etc.
P3
Prestige Limousines main activity is providing a service for customers to come and have an excellent experience in a variety of limousines to choose from and for any occasion. Shell main activity is to sell a variety of fuels and shop products to customers.
Prestige Limousines thrives on offering an excellent customer service and luxurious limousines decorated to suit any occasion such as weddings, birthdays, stag and hen nights, airport, seaport transfer, restaurant, shopping, sightseeing, corpora & executive events, parties, prom nights, graduations and tours. Prestige Limousines also specialise incorporate work and because they are based in the Midlands no destination is out of reach. Heathrow, Gatwick, Birmingham, Manchester all major and smaller airports are covered, including railway stations. Hiring luxurious limousines could include occasions such as birthdays were a customer may want to choose to arrive at his destination point and a treat for the special birthday occasion. Weddings include a fully uniformed chauffeurs, also come with a complimentary bottle as any occasion. Sightseeing could be one of the occasions where customers travel in style, avoiding the hassle of public transport or driving and enjoy them selves with a CD player and a DVD player. Another occasion could be parties were couples, friends, or relatives may decide to go out for a night out where as any other occasion it comes with a complimentary bottle and many more. This also comes fully furnished with DVD, TV and is equipped with Air Conn. All limousines drivers are fully uniformed with experienced driving skills.
The main activity of Shell is its stock sale and its fuel sales. Shell provide fuel in diesel, unleaded, and optimax which is known as better quality version compared to unleaded. Also Shell provides a car wash which works electronically through a machine, a vacuum cleaner which also works electronically and a air pressure machine which Shell provide free of charge to their customers. Shell receives more then 40 thousand customers a day. Shell main sale is in the shop, they provide products with many different selection to choose from, and the main activity is to provide their customers with best quality service that could be provided to them.
Both businesses are in a growth trend now and have been for roughly the past ten years. They both have a lot of competitors e.g. Shell has a lot of competition because there are many other petrol stations around which also supply petrol and according to Shell location there is one Texaco petrol station down the road from Shell and this gives big competition between each other.
The competition on both of my chosen businesses are coping fairly well because Shell provide special offers on their fuels and shop products and so are Prestige Limousines because their prices are very competitive with their competitors.
P4
Choosing the right location for a business will be the first and main step it takes towards opening business. Of course for any type of business a location will be convenient for their customers, employees and suppliers. Some businesses rely on passing trade, they would like to be in an area where enough people are likely to want their products and whether or not the business location is attractive. As well as any business thinking about the best location for customers they will also need to look at if the location is easy for their employees and suppliers. Good public transport links make it easier for employees who don't live within a walking distance. Businesses also should look at their competitors trying to avoid them as much as possible.
For Prestige Limousines, location has never had an affect on its business because Prestige Limousines are not particularly based in one location for customers to approach because it depends on the amount of advertisement done for it is well established through out its areas or cities. Prestige Limousines depends on the advertisement such as online booking, on shops windows display, etc. They will receive calls or emails from their customers and then if customers would like to make further arrangements, the Prestige Limousines has its based location in a particular area and then customers go to the located place which is in Sparkbrook on Golden Hillock Road. Prestige Limousines is the only local company around its area that have limousines. Its location is based on a very busy road and is more likely to grab customers attention. Prestige Limousines is based in a location where there are other businesses such as window factory is based next door to and a few others businesses which are also located at that particular forecourt. Why it was located there because it would attract a lot of on going traffic and it would be an easy location for customers to come to. Also it has good parking facilities so customers do not need to worry about finding a car parking place and its located place itself is in a large surface area were it allows them to view the limousines.
The reason why Shell is located in Edgbaston on Bath Row Road is because it is in the main city centre of Birmingham and also it's around the corner to Five Ways shopping centre which a lot of people tend to go to for shopping because it's a popular place to visit or shop. In the city centre there is a lot of different type of shops such as food shop, mobile phones shops, clothing, jewellery, etc and that's it maybe the most popular place around Birmingham because of the variety of different options available.
Therefore, it is a good location for Shell located area, it would definitely sell and make profit because that area is like a shopping centre, people to come every day from different places. Also Shell is well known for its fuels and standards it holds and it has many branches all over not just UK, all over the world. As it is a very busy area Shell are more likely to a lot of customers coming. Bath Row Road is links to Broad Street so they get many customers coming and asking for the location to Broad Street and will also tend to fuel up or get something to eat.
P5-M2
A stakeholder is a person, persons or organisation that has an interest in the actions and reactions of a particular business. In this case, interest means that the actions of the business will have an effect, direct or indirect, on others. The following diagrams display external stakeholders and internal stakeholders that any business may have. External stakeholders are not directly involved in the business. Internal stakeholders are directly involved in the business.
Example of external stakeholders:
Examples of internal stakeholders:
Any person or group of people having an interest in a business is called a stakeholder. There are two main types of stakeholders:
* Internal for example employees, managers, and shareholders
* External the local community and the government
The interest of stakeholders within Shell organisation:
The Customers
The customer's first priority is value for money and choice. Customers are particularly keen for the business to succeed, because this will mean a continual flow of new advanced products at lowers prices. Customers will also want to know if the quality and price of the product that they are buying will be consistent wherever the purchase is made. If customers do not like the way in which a business operates they will form pressure groups.
Shareholders
Shareholders are the owners of the business. A Shareholder's primary priority is to reach his or her financial goals; this can be done through the company giving out dividends or through a form of capital gain, this is where the price of the share has increased above its purchase price.
Banks (Lenders)
A bank's main concern when it has lent money out to a big business is that the business does well. This is because the success of the business will affect the success of the bank. After a bank has lent out their money they will want to receive a return on their investment such as interest payments. They will also want to see their money back in the future. If this does not happen the business will fail because the banks will take them over and sell some of their major assets.
Community
This is not only directed at the local community but also environmental groups campaign for the protection of the environment e.g. if Shell started to sell clothing, they would get people from green peace and other pressure groups telling them to get rid of it, and they would have to. The community can range from local to global.
The community are also interested in the organisations employment policy because if a large business moves near it is a source of work for them. But with a business coming there are also environmental policies i.e. the local community might not be happy with the way in which the business effect the quality of there life.
Suppliers
Suppliers are stakeholders in the business because if the business fails, they will lose a customer and therefore lose sales and money. Suppliers derive their demand from the demand of the end user. They again will only succeed if their client succeeds. Suppliers will also be concerned about being paid on time; their cash flow depends on major customers.
Government
A business will almost always pay several different types of tax to the government. These taxes are national insurance, income tax, sometimes V.A.T. (value added tax) sole traders and corporation tax. If a business fails, the government will not only lose a great deal of revenue through tax but it will also have to increase its expenditure on unemployment benefit.
Competition
If a business launches a successful product it will not only reduce market share but it will force rival businesses to copy the product and emulate marketing strategies. This is why nowadays you see large companies such as Shell selling a large variety of products.
Entrepreneurs
The entrepreneur is the man who is working behind the scenes of a company. He is the man with the ideas, the person who saves the company from losing money in that particular year. He is the person who is interested in the firm's survival, and the likelihood of profits. This profit motive may clash with the objectives of some of the stakeholder groups e.g. in competition you have to have low prices, and this cuts profit margins and also employees want high wages and job security this will also tamper with the year's profits.
Unions
Actions of unions can occur regardless of success in the company. It all relies on whether the employees are satisfied with their wages and their working environment. Satisfying these groups does tend to be a lot easier when the company has money to spend on their employees.
Managers and Directors
Managers and directors run the company. They are stakeholders because they may have been awarded share options or may just own shares in the company they work for. The profit of the company mainly in terms of market share, profit and share prices will determine whether managerial staff will continue to have a job in the company, because if the company fails the person will be sacked.
Employees
All employees will wish to see the business in which they are working in to do well. This is because if the business does well they have more job security and have a higher income. The performance of the employees is a key factor to the business doing well. It is vital to have friendly staffs that have some knowledge of the company in which they are working.
I will briefly explain the influence that different stakeholders have on that business.
The Customers
The customers are by far the most important people to a company, most of a company's time goes towards keeping their customers happy. This is why the whole structure of a company is built around their customers. That is why a large business or organisation keeps their environment clean and lays out there products in easy to find areas. They go to all this trouble because without customers there would be no revenue and without revenue there would be no company. To keep the customers happy the business has to constantly change their products and also do a lot of research into different methods of selling goods. All of this can take a significant amount of time.
Shareholders
Shareholders are a form of revenue for a company. Shareholders will want a business to invest their funds so that they earn the best return. Shareholders will want to see their money tied up in productive, operating assets and will not want to see much tied up in current assets. So a shareholder influences the way in which a business has to invest their money.
Banks
Financial organisations such as banks have a big influence on a business. A business relies on the loans provided by the bank to pay for day-to-day business costs, such as rents and business rates, wages and the cost of materials. Financial organisations will want to make sure that the businesses that they lend to will be successful and run well by their managers so that they will be able to afford to repay their loans. If a business cannot repay a loan it may have to sell off its stocks, machinery and premises to do so. This could mean the business is unable continue. It is therefore vital that a business is run efficiently to guarantee financial support from banks.
Community
The community has an important external influence on business decisions. To keep the community content and avoid problems with pressure groups the business has to concentrate on certain aspects such as location and noise pollution. The business must ensure that they produce their goods and services without damaging the environment and the health and well being of the people nearby. Next recognises the demand for environmentally friendly products continues to grow and where possible they seriously consider theses issues.
* Shell does not test any of its products on animals
* All company cars are run on unleaded petrol
* No aerosols are used in Next products.
* Next has and environmentally friendly Green Cotton range.
Shell see themselves as an integral part of the community of which it trades and recognises the responsibility to help towards the well being of the society. Shell not only make large donations to charities, but they are committed to giving time to employees to help support worth while causes in the local community.
Suppliers
The influence that suppliers may have on a company such as Next is that they may introduce new ideas, quality and value to the range. They can also influence the type of materials that are used for products this is dependant on the availability of materials. Shell, like many other companies have begun to outsource part of its activities. If the suppliers do a good and efficient job for Shell they maybe influenced into 'outsourcing' more, this in turn will provide growth for suppliers. If a supplier is doing well it may provide discounts for its regular customers.
Government
The government have a strong influence on businesses such as Next. The government lay down regulations to ensure that undesirable activities do not take place, they do not want smaller businesses to be at the mercy of large enterprises. Without legislation consumer rights may be ignored. Dangerous products may be offered for sale, people may be cheated on price, employees may be treated unfairly and with little respect. The government therefore has a significant influence on businesses as it can make an activity illegal and therefore control a businesses actions and operations, the government also set standards e.g. trading standards, safety standards and environmental standards, which businesses should follow. Government also encourage businesses .They do this by supportive or protective measures. Competition legislations prevent large business to collude and fix prices. Health and safety legislation protect both employers and employees. The government also promotes business abroad, as at Trade Fairs, to try to help exporters.
Competition
Competition has a big influence on companies such as Next. Next always tries to stay one step ahead of its competitors through regular market research. If one of its competitors launches a successful product Next will either try and copy or design a better product. One of the responsibilities of a Next designer is to ensure that all trends are covered in line with their high street competitors. They also employ buyers to research competitor's ranges and identify product trends. Next have a Market Research Department that keeps a close watch on competitors and it also gives an invaluable insight into customers purchasing habits and attitudes.
Unions
Unions usually have an influence on a business in that they can demand certain rights for employees. It is a union's job to ensure that employees are satisfied with conditions and atmosphere in which they work. Next does not have a formally recognise any trade unions for collective bargaining arrangements, however the decision to join any trade union is clearly with the individual employee. Next do however consider employee's views and ideas, which are heard and channelled through staff councils.
Managers and Directors
The influence that the managers and directors have on a company will determine whether the company ends the year with profits which exceed the year before. The managers and directors in a company are always looking for different ideas to boost sales . the way in which managers and directors operate will determine whether a business is successful or not.
Employees
Employees have a big influence on the success of a company. If an employee is happy with his or her working conditions, he or she will work well, this in turn will benefit the company. Next prides itself on the working condition they provide their employees. Next encourages and enables people to use their initiative. They develop their employees by identifying their needs against business requirements and reward them by providing a competitive benefits package which is regularly reviewed. It is important to Next that their employees are happy.
There are various groups of stakeholders of Prestige Limousines. The internal stakeholders are the manager and the employees. The manager wants to run his business and make his profit, the employees want to help the customers by working and earning their money. Other stakeholders are the customers and the suppliers.
Internal stakeholders include ordinary employees and managers of the business. Shareholders, customers and other groups or individuals having close ties with a business are called stakeholders. These are very important to a business, so the managers do their best to ensure that they are satisfied with the action of the business.
At Shell all employees whether part time or full time are important stakeholders for businesses. Because they are closely involved with the business, they are likely to have a strong influence on how it runs. Employee's expectation is likely to include:
* A clean and safe working environment
* Job security
* Competitive pay rates and benefits such as discounts on company products
* Interesting and rewarding work
* Opportunities for promotion and a career structure
At Prestige Limousines all managers as well as the directors of a company are stakeholders. Managers will have a bigger say then junior employees in how a business is run. Manager's expectations from the business will be similar to those of employees, but will also include:
* Developing a local or national reputation as a successful manager
* Working in a business that is growing
* Having a greater role in decision making
All these stakeholders are important to the business. The manager is there to see if everything is going well and sorts out the bills, the products etc also providing good customer service. Supplier to supply the goods or services and provided to their customers.
Both businesses respond to the stakeholders needs, depends on the successfulness of the business. If the business is successful the managers will make money, the customers will come and buy or eat what the business is selling. There will be workers applying to help out and earn their money.
GNVQ Business Studies- Unit 2- What Your Business?
Adeel Akhtar
