Types of Business Organizations

The business organization is a group of people or an individual who work together with the aim of pursuing commercial interests. This is mainly in businesses that have the main aim of getting products through the sale of services and products. There are different kinds of business organizations with the main emphasis being the manner in which they are structured. They include Partnerships, Sole proprietorships, limited liability companies, and corporations.

Sole proprietorships are owned by individuals. They handle all tasks embedded in a business such as acquiring and managing assets as well as bearing the losses or enjoying the profits alone. Any debts and liabilities that the business faces are held by the sole proprietors. Partnerships are also under business organizations. Here, two people or more share ownership of the existing single business. There is no clear distinction between the owners and the business according to law. In partnerships, legal agreements are used because they set guidelines on how profits are shared, decisions are made, solving of disputes how to admit more partners, how to buy out partners and the procedure in which the partnership will be dissolved, (Charan, 2012). In addition, the use of time and capital invested by each partner should be clearly laid out. Lastly, corporations are business organizations that are mainly chartered by a country or state. The owners and the business are two different entities that have been separated by law. As such, corporations can be independently sued, taxed, and can also be part of contractual agreements. The people owning the entity are the shareholders who elect directors to manage the business. In case of changes in its ownership, corporations continue to exist hence being seen as an entity with its own life.

1. Partnership as a business type

Partnerships are formed by two or more similar-minded business individuals. Frank Jones and Paddy Jackson have set up a business because they have similar interests and work in the hospitality industry. Their education and professional backgrounds are good grounds for them to enter into a business partnership. Frank and Patty have to understand that a legal agreement has to exist between them so that there is a clear stipulation of how profits, losses, and liabilities will be shared. In a situation where liabilities occur, both the individuals and the business are held responsible. Also, the partnership pays the partnership income tax. The partnership is essential because more funds can be raised easily. Employees are easily attracted to the business especially when an opportunity to become a future partner is presented. Since the two have complementary skills, the business benefits a lot especially from their expertise by Frank being a chef and Paddy having the experience of being a hospitality manager. Having noted that their previous employments were redundant, the desire to become successful made them contribute £30,000 equally so that they could lease a shop and get working capital.

Legal Agreement in Partnerships

Different forms of partnerships have to be considered too. Frank and Paddy can decide to form a general partnership, joint venture, limited partnership or a partnership that has limited liability. General partnerships entail the division of responsibilities between partners especially in management and sharing of liabilities. Internal agreements also guide on the sharing of profits and losses. Partners are also required to have equal shares although this is subject to written agreements that may also state different terms, (Mhlanga, 2018).  A limited partnership is the second option which gives limited liability to some partners and inputs when it comes to management decisions. The last is joint ventures where partnerships are formed only for a single project or for a short period. In case the partners continue with their activities, this becomes an ongoing partnership hence the need for proper agreements which will guide the dissolution process. It is therefore essential for Frank and Paddy to form a general partnership because this allows them to have an equal division of responsibilities, sharing of losses or profits and also any liability that they may face.

1. Porters 5 Forces

Porters 5 forces comprise of the threat from new entrants, threats from substitutes, customers’ bargaining power, suppliers’ bargaining power as well as competitive rivalry. To start with, new entrants pose a lot of threats to existing businesses. This may be as a result of profitability in the type of business thus a rise in competitors. In relation to the Fra-Pas Frozen Yoghurt Shop, the ice-cream parlor style business is a venture that is easily pursued by many startups. This is influenced by many millennials adapting a lifestyle that is mainly influenced by social life, as such, the customer platform is huge, mainly emanating from youths and children. New entrants may also lead to a reduction in profitability because of the shared customers. To avoid this, the partners should diversify hence the recent decision to diversify their product range, (Combe, 2014). The threat from substitutes also exists. For instance, many customers may prefer cold juices and sodas as opposed to yogurts and ice creams. However, the current trends towards a healthy eating lifestyle will reduce the threat of substitutes thus the increased sale of yogurts by the partners. Customers are essential for a business. In many cases, they determine the final price of a commodity because of its quality and presence of competitors. In this case, the partners are able to reduce the bargaining power because there are no competitors and the quality of their products is high. The other aspect is the supplier’s bargaining power. They handle the supply of raw materials hence having the ability to set any price. Currently, the partners have an advantage since they have the opportunity of reducing costs by buying the raw materials at subsidized prices. Getting fresh and organic ingredients will depend on the supplier’s price thus affecting the final product’s price too, (Ebert, 2013). The last aspect is a competitive rivalry. The intensity in which competitors compete is a measure of how competitive the industry is. For a product to be placed in a market, one has to study the competitors and their strategies. This aspect directly applies to the current partners who are trying to diversify their product lines.

Porter’s 5 Forces and Competition

For the partners to achieve competitive advantage, they should first source their raw materials and fresh produce from diligent suppliers. This helps in the creation of quality products. Secondly, they should advertise more and also have different products which will appeal their customers and potential customers. By applying for a loan, enough capital will be raised for advertisement in social media using banners and also print media. There is also the need to satisfy the different need of customers by providing all flavors and a range wider of products.

1. Macro environmental factors

Business entities are affected positively or negatively by factors such as economic, social and also political factors. In terms of political factors, businesses can be affected by interventions or regulations that are set by the government. This includes tax policies, environmental law, labor law, tariffs, and trade restrictions, (Kotler, 2012). Political stability is also a factor that has to be considered. Tax policies affect the production of raw materials hence the final price of products. Similarly, trade restrictions can be imposed on businesses that operate in certain regions. Health is a major factor for the government. In relation to this business, the government is concernment about the health hand eating habits of its citizens, (Needle, 2012). This can be a positive factor for the business since it sells products that are advocated for consumption by the government.

Business is also affected by economic factors such as high or low bank interest rates, economic growth, inflation rates, and exchange rates. Positive economic growth leads to growth in the business sector due to high consumer spending and a good business environment that leads to profits, (Rugman, 2012). This is also boosted by favorable interest rates imposed on loans and low inflation. High costs of production lead to increased commodity prices thus an impediment to the making of sales and profits.

The last aspect of social factors has been a boost to businesses such as Paddy Jackson’s Fra-Pas Frozen Yoghurt Shop. In comparison to coffee shops and fast food restaurants, many youths, children and the elderly tend to align themselves with fancy places. In this case, customers hand out and enjoy the moments thus creating a good culture, (Ryan, 2014). Health consciousness is also a good culture that is being adopted by many consumers. Consumers are also picky about health standards and quality of products. By adhering to these factors, Fra-Pas Frozen Yoghurt Shop will be able to get more profits, earn a good reputation and also meet the demands of consumers.

Conclusion

In a nutshell, Frank and Patty should form a general partnership for their business. It is important for an agreement to exist between them because it lays out procedures and responsibilities in the business. An agreement will also stipulate how losses and profits will be shared. In terms of liability, both the partners and the business are equally responsible. A good agreement and registration of the business will make it easy to get a loan and also bring more members on board. In the attempt of expanding the range of products, the market trends and competitors have to be monitored. Profitability will also be enhanced by bulk purchase of raw materials which are available at discounted prices. Lastly, more focus should be emphasis on creating new products at affordable prices, with good quality too so that the business becomes profitable and reputable.

References

Charan, R., 2017. How High?Potential Leaders Can Master The Macro Environment. Leader to Leader, 2017(85), pp.31-36.

Mhlanga, O., 2018. Impacts of the macro environment on airline performances in southern Africa: Management perspectives. Tourism and Hospitality Research, p.1467358418771442.

Combe, C. 2014 Introduction to Management. Oxford: Oxford University Press

Ebert, R. and Griffin, R. 2013 Business Essentials, Global Edition 9th ed. London: Pearson

Kotler, P. and Armstrong, G. 2012 Principles of Marketing, global edition. 14th ed. London: Pearson

Needle, D. 2012 Business in context: an introduction to business and its environment, 5th ed. Andover: South-Western Cengage Learning

Rugman, A. M and Collinson, S. 2012. International business, 6th ed. Harlow: Pearson

Ryan, D. (2014) Understanding digital marketing: marketing strategies for engaging the digital generation. 3rd ed. London: Kogan Page