We plan to beat the competition on value for money. The current product most similar to ours, the JVC Mobile Mini-Note MP-XP7230, has a Pentium 3 processor that runs at 933 MHz, and costs at least £1,200- up to £1,700 in some places. Our mini-laptop should be more powerful, and will be much cheaper. This will require very accurate and efficient production methods, which enable the product to be cheap enough to make a large profit while being reasonably priced. We will also need to find an inexpensive method of transport, possibly a new shipping technique.
I have decided that the business that our group (Osama, Craig and I) has made should run as a partnership. Partnerships must have between 2 and 20 owners (inclusive). They also need to notify the Inland Revenue. The partners need to sign a deed of partnership, which gives information on how the business is supposed to operate, which states how the profits and losses will be shared, and how much capital each partner has invested. If this deed is not signed, each partner’s legal standing will be equal.
There are several advantages of the partnership type of ownership; the first one being that we can have a small number of partners/owners, in our case, 3. With 3 people (or more than 1 person) owning the person, more capital can be invested, so we can get manufacturers to produce high quality goods, instead of laptops that break easily or crash at the slightest tap. Each partner also has an evident specialist skill, for example, Osama may be good at keeping accounts and Craig may be good at persuading prospective suppliers/manufacturers, and I may be good at making things run on schedule, and actually selling the products. We could all be good website designers. We can share the work of the business between us, and if someone is ill, the routine and work will not suffer too badly. Partnerships are quite easy to set up as well, there are no complicated and pricy legal processes required to set up this type of business organisation. We can also keep our financial information private, so our competition (other companies producing special/budget laptops) will not have an advantage over us. If we need to, this business can admit a sleeping partner. They do not do any work; they just invest money, and expect some of the profits in return for this. This will be very useful, as we will have to pay for lots of things (office space, component production, workers, transport, facilities etc.). With the money from a sleeping partner, paying for all these things will not be as difficult as with just the 3 of us.
There is also a downside to the partnership type of business- the partners claim full responsibility for debts the company incurs (therefore the business is one legal entity with its owners). This means that if our venture failed, we would get into a lot of debt, and then we would have to give back everything bought under the company name, and then we would have our property repossessed, in order to pay off the debts. This is the greatest weakness in limited liability companies. The profits need to be shared between partners (probably equally). If the profits are not shared equally, this may lead to serious arguments or rifts within the management. Otherwise this is not too much of a problem. The last main problem is that it is more difficult for partnerships to find capital than it is for the other business types. This is because partnerships have unlimited liability (see above) so banks will be reluctant to give them a loan- as they may not be able to pay it back (with interest), if the business fails.
Reasons why I chose partnership type over the other ownership types:
Sole owner
- There are 3 owners, therefore this would not be possible
- Shortage of skills and capital
Private limited Company
- Financial information is not private, so competitors could access the information and steal unique ideas
- We need to sell shares to use as capital, but they cannot be sold to the general public- it can be difficult to find buyers.
- Shareholders will expect a cut of the profits as dividends, but this can drain the company’s assets
- Incorporation is a long and expensive process
- More complex organisational structure, whilst we are a small business
Public Limited Company
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Their shares can be sold to the public ☺(adv.)
- To become a PLC, a company must have issued at least £50,000 worth of shares
- Dividends- can drain company’s assets
- Possible takeover bids- Other companies can buy large quantities of shares in our business, and ask other shareholders to sell their shares. When this other company gains enough shares, the ownership will change.
