The various forms of legal ownership structures
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Published: Mon, 5 Dec 2016
The legal structure a business chooses is vital to the way business operates. Decisions need to be made about how the tax is going to be paid, who will share out the profits and losses and what legal liabilities exist. A limited company exists as a legal entity in itself, separately from its owners or managers. Therefore, liability for debts is limited to the amount of issued share capital, whether the shares have been sold or not. The shareholders personal assets cannot be claimed for the payment of business debts to creditors. The creation of a limited company requires the lodging of various documents with the Registrar of Companies, which must include a Memorandum of Association and Articles of Association. If all documentation is satisfactory, a certificate of incorporation is issued, bringing the company into existence as a legal entity.
Tesco is a public limited company (plc). A lot of big companies go public. This is because unlike a private limited, a plc is able to advertise the sale of shares and sell them to members of the general public though the stock exchange.
Advantages of public limited company are:
· Shares can be advertised
· Shares can be sold through the stock exchange
· Large plc’s may find it easier to borrow from banks
· Shareholders have limited liability
· Cheaper borrowing and bulk purchasing
Disadvantages of a public limited company are:
• There is a loss of overall ownership
• There is a loss of control of the business
• Decisions take longer and there may be disagreement
• The personal touch may be lost
• Significant expenses are incurred when setting up a company
• There are more statutory regulations to conform to
• Profits are shared amongst a far greater number of people
• Public disclosure of the financial affairs is necessary
• Published accounts have to be prepared
Organizational structure refers to the way in which people and jobs are arranged within the organization in order to assist the organization in meeting its goals and performing its tasks. Typical organizational structures include hierarchal structures, strategic business units and simple structures; however, the type of organizational structure chosen will vary not only depending on the industry and the company, but the host country in which the company was founded. Organizational structure is one of the critical determinants of success in a global organisation, however it can also be one of the most difficult areas of the business development strategy to navigate.
Tesco has chosen to pursue a strategic business unit (SBU) across all of its business areas in order to maximize the degree of competitiveness within the individual market areas. The strategic foundation; size and scope of the operation; strategic thrust; the kinds of products or services sold and delivered; service quality and image; product/service brand identification and image; breadth of the product/service line; functions performed by the company; distribution outlets; customer market served; geographic market served; ownership; and financial targets.
The strategic business unit organizational structure provides Tesco with flexibility to expand its operations in many different directions – it can expand its electronics line in the Non-Food SBU without disturbing the policies, practices or resources devoted to the International or Core UK SBUs, which allows it a large degree of flexibility and customisation capability within the organization. It also allows the company to be successful internationally, as it can choose its market entry strategy to account for the needs of the new market, rather than simply mimicking the existing competitors or using the home country marketing, branding and business operation techniques. Tesco has been exceptionally successful at international business development, as is the market leader in five of its twelve international market areas (Tesco 2008).
Corporate culture is one of the main determinants of success or failure in a business development practice, because it largely determines how flexible, accepting of change and innovative a company tends to be. Fairfield-Sonn (2001: 36) provided a four-layer model of corporate culture that included cultural artefacts, cultural history, core ideology and core values that helps to quantify and describe the corporate culture of an organization. Thus, Tesco’s corporate culture can be determined from its corporate responsibility statements, which describe its core values and core ideologies as well as some aspects of cultural artefacts.
Tesco’s stated core priorities include:
Ensuring community, corporate responsibility and sustainability are at the heart of our business.
Being a good neighbour and being responsible, fair and honest.
Considering our social, economic and environmental impact as we make our decisions. (Tesco, 2008)
The objectives of the strategy are:
To be a successful international retailer
To grow the core UK business
To be as strong in non-food as in food.
To develop retailing services – such as Tesco Personal Finance, Telecoms and Tesco.com
To put community at the heart of what we do.
2] Explain and analyse the various ways in which information and communication technology (ICT) affect aspects of the business done by large organisations. Illustrate your answer by referring to data from your case study organisation to show how ICT is essential for controlling and supporting business process. (20 marks)
The advent of technology has made it easier for people to communicate with each other, whether they operate in the political, economic, social or general business arena at a local, national or global level. The technology that has made communication easier takes the form of mobile phones, fax machines, video conferencing, the internet and the world wide web.
Mobile phones have grown in popularity since the mid-1980s. Initially, mobile phones were (therefore visible) and expensive. Hence in the 1980s they were very much the necessary executive accessory. The first mobile phones were also heavy and cumbersome to carry around. The technology improved throughout the 19080s and 1990s and the size and styling of mobile phones improved to give small and slim model that slip easily into a jacket pocket or handbag. In line with improved technology and styling, the price of mobile phones fell and connection is possible for under $50.
Video conferencing is becoming increasingly popular among businesses. Large companies such as British Petroleum (BP) have been using video conferencing since 1983 and have in house studios in global locations.
Organisation and the application of technology…. In addition to the communications technology discussed above, organisations make use of other types of technology on a daily basis
At Tesco, technology is right at the heart of our business – helping to improve the shopping experiences for all our customers.
As you would expect from a world-class business, we need systems which are at the forefront of the industry – and if the technology doesn’t exist, we’re not afraid to innovate and be the first globally to develop and use it.
Our leading edge supply chain systems create effective stock control and product availability for all our customers.
Every customer experiences the checkout process, meaning our systems and processes at the tills need to be simple, smart and at the same time sophisticated.
Then there are new ideas like the ‘Self Scan Checkout’ (which, incidentally, our customers love).
Or what about the things you don’t see – like technology which neatly predicts when we need to open more tills, before the queues have even started to form.
Technology is integral to all our business operations – from our numerous internal systems, electronic links with our suppliers and over 5,000 office based users to support – IT is truly a business partner.
To us we’re not here to provide just hardware or software, our contribution is to provide services and innovative IT solutions which improve the lives of our people and customers.
3] Discuss and evaluate some of the ways, in which a large organisation is affected by changes in the economic environment. Refer to the organisation you have chosen and illiustrate you answer with specific examples from that organisation. (20 marks)
The economic environment consists of various factors in which affects many business such as Tesco. Factors such as employment, income, inflation, interest rates, productivity that influence the buying behavior of consumers and institutions, these would have a very big effect on Tesco positively and negatively.
The main factor that that affects the economic side is economic growth. Economic growth is important if businesses are to grow and prosper. It relates to growth in the output of the economy as a whole. Growth is measured as the change in the gross domestic product (GDP) of a country over one year. For comparisons over time this figure must be adjusted to allow for inflation and the resulting value is called ‘real growth’. Over time real economic growth leads to major improvements in living standards, expanding existing markets and opening new ones. The real economic growth of one country relative to another is an important indicator of business opportunity.
Economic growth depends on productivity and investment: using existing resources more efficiently and investing in new resources. Success in this process generates increased incomes which then fuel demand and encourage further economic growth. This cycle can, however, work in the reverse direction, as falling demand may lead to under-used resources and investment cutbacks. In comes may fall further in a spiral effect. When a business enterprise is setting objectives and strategy for the future, economic growth is a vital factor to consider. Firms with products that are necessities are much less affected by the upturns and downturns of economic growth. Supermarkets (Tesco) make a good example, although even they expand and contract their’value’ and upmarket brands according to economic conditions. But firms selling luxuries are much more sharply affected by changes in economic growth. Home furnishings, restaurants, holidays and cars are all types of product where economic growth is a critical factor when setting business plans.
Throughout the economic turndown Tesco has continued to make good progress.
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