Forms of Business Contd

CONGLOMERATES
A conglomerate is yet another form of business. A conglomerate is a group of companies coming
together which are involved in the production of unrelated goods and services. Conglomerates
come into existence as a result of mergers and takeovers.
Benefits of mergers and takeovers
1. Allows for the diversification of interests and at the same time spreading risks
2. Achieving leadership in a market
3. Economies of scale benefits of large scale production are reaped
Advantages of conglomerates
Diversification of business creates further profits
Additional assets create security for the company
Disadvantage of conglomerates
Subsidiaries are sometimes hard to monitor especially when production is too diverse

MULTINATIONAL CORPORATIONS (MNCS)

These companies are located in various countries all over the world.
The multinational is an enterprise that has subsidiaries or branches in more than one country. The
headquarters (parent company) will be located in the home country where the decision making is
controlled with such decisions be implemented by foreign subsidiaries.
The main objective of a multinational is to extend operations into other profitable areas by
gaining a large share of the world market. The subsidiary branches are either firms that have
been set up by the parent company; acquired via takeover or the parent company may have a
controlling interest (own majority of the shares)

Advantages of multinationals

they help to develop idle resources in other countries

they create an increase in employment and economic growth
introduction of new technology
improved training in latest skills

Disadvantages of multinationals
the presence reduces national ownership of some important industries
they repatriate their profits
they help to deplete the countries natural resources in the case of mining

FRANCHISE
Franchising is a marketing system based on a legal arrangement that permits one party the
franchisee to conduct business as an individual owner while abiding by the terms and
conditions by the second party the franchisor. The franchise is a contract granting the right to
do business and specifying the terms and conditions under which the business will be conducted.

The franchisor is the company that owns the franchises name and distinctive elements (such as
signs, symbols and patents) and that provides operating systems such as accounting, advertising,
marketing and other services. While the franchisee is given the right to produce and market the
franchisors goods and services, that production and marketing must be done according to the
licensing agreement.
Advantages of Franchise
such businesses do not have to invest heavily in advertising as the market is already
present
entrepreneurs escape the pressure of having to come up with a business idea
established name recognition
assistance is given with the accessing of initial or start-up capital
Disadvantages of Franchise
owners creativity is stifled as they cannot be flexible coming up with ideas because they
have to comply with the terms and conditions of the contract
they have to pay out a percent of profits on an annual basis even though a large initial
sum had to be paid
major disagreements may occur between the small business owner and the franchisor

Public enterprises
STATE CORPORATIONS
These businesses are owned and operated by the government and is formed by an Act of
Parliament. The capital therefore comes from the government and mainly through taxation.
These businesses are controlled by the government who appoints a minister of State along with a
board of directors to oversee the daily running of the business. Examples include public utility
companies, light and power, telephone and postal services, transport Authority, NSWMA and
NWA
These are firms that were once owned and operated privately, but have now been taken over by
the government through a process called nationalization. This happens when a private provider
of the service is unable to offer the quality service that is needed or is being offered at a high cost
to consumers.
To ensure that the country as a whole is not deprived of such a service, the government will step
in and rescue such an industry.
In nationalized industries, all the shares are owned by the state. A CEO is appointed by
government to deal with the affairs of the organization. The government at the initial stage may
fund the industry; it is however required to generate its own income in the future. E.g. J.U.T.C.

STATUTORY BODIES
These are public companies which operate with their own board of directors that are appointed
partially by central government. They operate similarly to state owned and nationalized
corporations. E.g.
C.O.J
R.G.D
Advantages

N. H. T
J.I.S

B.O.J
O.U.R

N.H.T

Society benefits from lower prices than would otherwise be charged by private
companies
Stagnant industries may be revived when operated or taken over by government
They provide employment for many

Disadvantages

Since the aim of state corporations is not that of profit making, they tend to run into grave
financial difficulties
Political interference may become a problem
Many state businesses are monopolies, therefore consumers have little choice in the
market

GOVERNMENT DEPARTMENTS
These departments have specialized functions such as health, finance, education, transportation,
security and justice etc. A minister is in charge of each department; this person being a politician
is generally a member of parliament and is appointed by the Prime minister.
Government departments are non-profit making organizations and so the costs of running these
departments are borne by the people of the country through their tax payments.
Advantages
1. The huge task of running the country is divided into manageable units
2. Consultants are attached to each department to give expert advice
3. Major decisions made must sometimes meet the approval of parliament
Disadvantages
1. Change of government cause much discontinuity in staffing and policies
2. Lack of funding leaves some departments not reaching their full potential
LOCAL AND MUNICIPAL AUTHORITIES
The various cities, towns and districts are further governed by councilors and mayors who
administer municipal businesses. These bodies are elected by those who live in the areas, be it a
town, city or district.
Some of the areas of responsibilities of municipal and local undertakings include;
Drainage and cleaning of gullies
Garbage disposal
Street cleaning
Upkeep of parks and markets
Maintenance of beaches
Advantages
1. Citizens get a chance to participate in the decisions affecting the their towns by making
suggestions and voting for councilors of their choice
2. The autonomy possessed by local government enhances democracy
Disadvantages
1. There is lack of continuity in some projects when the administration of local government
changes
2. Political biasness and charges of political pressure often interfere with serious projects