7.

Forms of companies

I. Introduction



I. There are three main types of business ownership in the private sector of the economy.


1. Sole proprietorship
This type of firm is run by the sole trader who is responsible for the total control and
management of the business. The owner has unlimited liability for the debts.


2. Partnership
General partnership
This is a type of business entity in which partners share with each other the profits or losses
of the business undertaking in which all have invested. At least one partner must accept
unlimited liability.

Limited partnership
In this type of business the internal member has unlimited liability. The external/silent partner
doesnt take part in the activity of the partnership. He/she has limited liability.


3. Corporation

Limited liability company-Private limited company.
The members have limited liability. The capital of the firm is divided into shares, but the
shares are not sold on the stock exchange and they cannot be offered to the general public.

Company limited by shares Public limited company
This business has to be founded with a certain amount of issued capital. When an investor
buys shares he/she becomes a part owner. Shareholders have limited liability to the extent of
the face value of their shares.

Special forms of private business enterprises and relationships

Holding/parent company
This is a company that owns enough voting stock in another firm to control management and
operations by influencing or electing its board of directors.

Co-operative
This is a business society which is jointly owned and run by its members, who work together
and share the profits.

Joint venture Joint enterprise
This is a partnership in which two or more people or organisations work together. It is usually
restricted to short-term deals.


Union
This is a legal entity with a minimum of two founding partners without the obligation of
contributing a certain minimum amount of capital. It is a non-profit organisation.

Subsidiary/affiliate
In business this is an entity controlled by another entity. The controlling entity is called its
parent. A parent and all its subsidiaries together are called a group. When ownership is not
shared and the subsidiary is wholly owned by the parent, it is called a branch.

Franchise
This is a business selling named goods on the basis of a licence given by a company to use its
established brand name and sell its goods.


Building society
Operating on a non-profit basis, it pays interest on deposits made by the general public, and
provides mortgages.

Offshore company
This is a firm based and registered in a tax haven to avoid higher taxation.


II. There are two main types of public enterprises.

1. Municipal undertakings

These are businesses or services operated by local authorities. They are financed by local
council tax and charges made for the use of the service (e.g. theatres, sports centres). They
may also be subsidised by grants provided by the government.

2. State undertakings

These are businesses operated by the government on behalf of the public. The general policy
is decided by the government in consultation with the corporation board, which is appointed
by the government.
















Vocabulary exercises

A. Match each word or phrase in the left-hand column with one similar in meaning
from the list opposite.


1. proprietorship a. ownership

2. unlimited liability b. choosing for an official position by voting

3. losses c. managed, operated

4. limited liability d. sums of money lost as a result of operating
a business
5. electing e. obligation to cover all debts with personal
assets
6. board of directors f. for sy, as a representative of sy

7. run g. group of people elected to manage a
company
8. deals h. liability for debts only to the extent the
person concerned has invested
9. entity i. business agreements

10. on behalf of sy j. something that exists independently



B. For each item in the list below, find in the text a word or phrase similar in meaning

1. established
2. capital in the form of shares (two words)
3. collectively
4. allowed by law
5. giving, along with others
6. permit
7. located
8. tax paid to the local authority (two words)
9. sums of money given by the state
10. meeting held to exchange opinions or seek advice


II. Hungarian text
Exercise 1
Cover the English words and expressions given in the footnotes and try to guess the English
equivalents of the underlined parts of the Hungarian text.

Exercise 2
After checking your guesses against the footnotes, give an oral summary of the text in
English.
risfziktl
i
hangos a vilgsajt
ii

A Procter & Gamble bekebelezi
iii
a Gillette-et, s e pldtlan mret tranzakcival
iv
a
fogyasztsi cikk-gyrtsi
v
szegmensben ltrejn a vilg msodik legnagyobb vllalata
vi
.
De az utbbi idben bejelentett
vii
megafzik kzl felttlenl emltst rdemel
viii
az
Oracle-Peoplesoft felvsrls
ix
, a Mittal Steel ltrejtte, a HPCompaq egyesls, a
legjabb hr
x
pedig az, hogy az SBC telefontrsasg az AT&T-re tett ajnlatot
xi
.
Mi a magyarzata
xii
a szinte minden ipargban
xiii
dl egyeslsi lznak? A vllalatok
ltalban a tanknyvekben is lert elnyket emltik
xiv
: a kzs fejlesztsi s rtkestsi
csatornk
xv
jobb kihasznlsra
xvi
, a mretgazdasgossgbl fakad
megtakartsokra
xvii
, a beszlltkkal
xviii
trtn a kzs trgyalsbl
xix
szrmaz er-
sebb alkupozcira
xx
. Ezen rvektl
xxi
a Procter-Gillette nsszal feleslegess vl
xxii
6
ezer alkalmazott bizonyra nem hatdik meg
xxiii
. A valsgban sokszor az vezrli a
felvsrlt
xxiv
, hogy egy gazdasgi lassuls
xxv
idejn csak ily mdon
xxvi
tudja nvelni
forgalmt
xxvii
, vagy egyszeren meg akarja szerezni a konkurens piact
xxviii
.
Az optimista kalkulcik mindazonltal nem mindig vlnak be
xxix
. A tzsde
xxx
jobbra
mr a bejelents
xxxi
pillanatban pontosan jelez
xxxii
: a vev cg rszvnyeinek rfolyama
ltalban esik
xxxiii
, a megvsrolt pedig emelkedik
xxxiv
, a vtelrtl fggen. A fzik
nagy rsznl a fellelkeslt vlegnyek
xxxv
tl sokat adnak a menyasszonyrt
xxxvi
, a h-
zassgban azonban a tervezett elnyket nem tudjk valra vltani
xxxvii
. Elfordul, hogy
maga a koncepci is hibs
xxxviii
, mint pldul az AOl-Time Warner parti esetben.
Sokszor viszont csak a figyelmetlensg
xxxix
, a szervezeti kultrk, vezeti stlusok
sszefrhetetlensge
xl
okolhat a kudarcrt
xli
. Radsul
xlii
- mint azt a Business Week
felmrse kimutatta
xliii
- az gyfelek
xliv
a fzik felnl gy rzkelik, hogy valamilyen
szempontbl rosszabb kiszolglst
xlv
kapnak, mint korbban.
Amerikban kevsb gondolnak r, az Eurpai Uniban azonban az is szempont
xlvi
az
egyeslsek megtlsnl
xlvii
, hogy mennyire veszlyes a szabad versenyre
xlviii
, ha egy
ipargban mr csak kt-hrom risi jtkos
xlix
marad.


III. English text
Hungry tiger, dancing elephant
Rethinking the multinational

The Economist, 4 April 2007

1. Last June IBM held its annual investors' day in the grounds of the Bangalore Palace, a
fake Windsor Castle in India's equivalent of Silicon Valley. Ten thousand employees
gathered to hear speeches by the president of India and IBM's own boss, Sam Palmisano.
2. The domestic Indian market has become one of the fastest-growing in the world for IBM,
with revenues rising by 40-50% a year. The firm now has more employees in India than in
any other country except America.
3. Emerging economies increasingly count as a threat to established global firms, as well as
an opportunity. Indian services firms such as Infosys and Wipro are starting to give IBMand
its old rivals, Accenture, EDS and Hewlett-Packarda run for their money. As globalisation
accelerates, this is forging a new vision of what it is to be a successful multinational company.
4. In a speech last year Mr Palmisano set IBM's Indian move in the context of the modern
multinational company. This, he said, had passed through three phases. First was the 19th-
century international model, whereby firms were based in their home country, but sold
goods through overseas sales offices. Then came the classic multinational firm, in which the
parent company created smaller versions of itself in countries around the world. This was how
Mr Palmisano found IBM when he joined it in 1973.
5. The third model, argues Mr Palmisano, the IBM he is now building, is the globally
integrated enterprise. Rather than have a parent with lots of Mini-Mes around the world,
such a firm shapes its strategy, management and operations as a single global entity. It puts
people and jobs anywhere in the world based on the right cost, the right skills and the right
business environment. And it integrates those operations horizontally and globally. In this
approach, work flows to the places where it will be done best, that is, most efficiently and
to the highest quality. The forces behind this are irresistible, he says. The genie's out of the
bottle and there's no stopping it.
1690 n

Important terms

domestic market the country in which a company producing goods/services
has its base, or in which they are sold

multinational company (MNC) a company that operates internationally,
usually with subsidiaries, offices, or production facilities in
more than one country

parent company a company that owns other companies

globally integrated enterprise - a company that fashions its strategy, its
management, and its operations in pursuit of a new goal:
the integration of production and value delivery worldwide.

integrates horizontally manages production establishments located in
different countries to produce the same or similar products
(e.g. McDonalds)


Extended vocabulary

held (an investors day): organized (an event for IBM investors)
count as a threat: are considered to be a threat
to give sy a run for their money (idiom): to be as good, or nearly as good, as sy is at sg
forging (a new vision): forming or creating
irresistible: very appealing and therefore unstoppable
the genies out of the bottle (idiom): nothing can stop it from succeeding (refers to the
story of the magic genie who was released from a bottle and granted wishes to the person
who let it out)


Comprehension questions


1. What was organised at the Bangalore Palace last June?



2. What indication is there that India is a strategic market for IBM?



3. How do established global firms typically view emerging economies?



4. How well do Indian IT companies like Infosys and Wipro compete with giants like IBM
or Hewlett-Packard?


5. What general impact is the rapid rise of globalisation having on global firms?



6. According to IBMs boss, what are the first two phases that multinational companies
have passed through and what characterised each of these models?



7. Which of the multinational phases was IBM in when Mr Palmisano joined the company?



8. What is the third multinational model and what characterises it?



9. How does the integrated enterprise model work?



IV. Discussion questions

A. Discussion questions related to the article

1. What are some of the threats and opportunities that emerging economies present to global
firms?

2. How can multinational companies stay competitive in an increasingly globalised
economy?

3. How are the forces of globalisation changing the way multinational companies view
themselves?


B. Additional discussion questions

1. Which are the most popular business forms in Hungary?

2. What are the advantages and disadvantages of a franchising business?

3. What is the role of small and medium-sized enterprises in an economy? What kinds of
problems do they struggle with?

V. Role-play

13. Increasing market share

Student:
You are the director of one of the local budget airlines. Your company sales are high, but you
find out that another budget airline intends to enter the domestic market. The owner of your
airline meets with you to discuss your strategy for not losing sales to the competition.


Examiner:
You are the owner of a local budget airline, which is operating successfully. However,
another budget airline will soon enter your market and you want to get ready to face the
competition. You meet with your director to discuss a strategy.





14. Environment-friendly

Student:
You are the head of the R & D department in a company that produces 30,000 tons of waste
products from its offices and caf areas every year. Currently, there is no policy on recycling
and you think there should be one. You meet with the CEO to discuss with him the
advantages of recycling, and mention some of its possible disadvantages.


Examiner:
You are the CEO of a large company that produces many tons of waste products from its
offices and caf areas. You meet with your R & D manager to discuss the advantages of
recycling and whether there could be some disadvantages.








i
megamergers
ii
world press
iii
acquires
iv
transaction
v
consumer product manufacturing
vi
company is established
vii
announced
viii
deserves mentioning
ix
acquisition
x
the latest news is
xi
has made a bid for
xii
explanation for
xiii
branch of industry
xiv
mention the advantages
xv
shared development and sales channels
xvi
better exploitation
xvii
savings arising from economies of scale
xviii
suppliers
xix
joint negotiation
xx
bargaining position
xxi
arguments
xxii
being made redundant
xxiii
are not moved
xxiv
what motivates the acquirer
xxv
economic slowdown
xxvi
only by this means
xxvii
increase its turnover
xxviii
rivals market
xxix
come true
xxx
stock exchange
xxxi
announcement
xxxii
gives precise signals
xxxiii
share price falls
xxxiv
rises
xxxv
bridegrooms
xxxvi
for the bride
xxxvii
realise
xxxviii
faulty
xxxix
carelessness
xl
incompatibility of corporate cultures

xli
can be blamed for failure
xlii
moreover
xliii
survey has revealed
xliv
clients
xlv
worse service
xlvi
argument, point worth considering
xlvii
judging
xlviii
free competition
xlix
giant players