Business is growing, there are more and more large companies, but for a small entrepreneur it is becoming more and more difficult to survive. What corporations they are, what they are, good or bad - to unite, we will consider in this article.
Corporation: definition and essence
In modern market conditions, it is becoming increasingly clear that it is extremely difficult for small enterprises to stay afloat among business sharks, since external factors easily affect the activities of an entrepreneur, but he, in turn, cannot turn the environment back on track. Therefore, business entities are increasingly uniting and strengthening.
The meaning of the word "corporation" came to us at the end of the 19th century with the growth of manufactory production. It is clear that since then the concept of production activity and the business as a whole have changed.
What is a corporation today? This is an association of a group of elements (in our case, entrepreneurs) that achieve common goals by synergistic efforts. It is important to understand that the owner does not take an active part in the activities of such business entities, therefore, personnel are hired separately as managers.
Today, corporate governance is most developed in the capitalist countries: Japan, the USA and Canada.
What are they like?
According to the current legislation of different countries, in a particular state the permitted forms of corporation vary, therefore it is more expedient to consider their varieties in the generally accepted world economic theory. So, the most common forms are:
- Limited Liability Company (LLC). As a rule, statutory funds in an enterprise of this type are formed at the expense of the founders' own resources, therefore all risks fall on them (these include the now popular mortgage corporation).
- Closed Joint Stock Company (CJSC). Shareholders act as owners, and they distribute the profit received between themselves and employees.
- Open Joint Stock Company (OJSC). Securities of this type of enterprise are issued through open subscription, so anyone can buy them, including the government, which generates state corporations.
- Cartel. It arises if the business entities involved in one industry are combined.
- Holding. A corporation consisting of several companies, headed by a separate branch, which solves key business issues on its own behalf.
- Pool. A group of enterprises that differs by the distribution of profit (equally).
Corporate Relations
As a rule, if business entities unite, then they become dependent on each other. Although it sometimes happens that each company carries out its core business separately, only periodically transferring dividends to shareholders (an example of this is a mortgage corporation). But, nevertheless, there is an algorithm for the relationship between the owner and business entity:
- once an independent legal entity is absorbed by the head representative;
- financial management becomes corporate;
- the former enterprise is being restructured;
- a consortium is created and branches are formed.
Corporate Management System
As a rule, information about the management of the combined enterprises, as well as the bodies implementing this process, is indicated in the charter documents of the newly formed business entity.
If we are talking about a closed joint-stock company and a joint-stock company, then similar organizations are managed by hired executives, and the meeting of shareholders decides key issues (state-owned corporations in the headquarters also have representatives of the executive sector).
Cartels, syndicates, holdings, pools and other forms of associations inherent in capitalist society are structured as follows:
- board of directors (carries out strategic planning);
- Executive Director (gives orders, bears a share of responsibility);
- other personnel (as a rule, has a vertical hierarchy).
Corporate Benefits
What is a corporation? Representatives of capitalist society argue that this is the optimal form of functioning of business entities. And in some ways they are right, since there are positive aspects to this:
- The ability to continuously increase production capacity, as large concerns are much easier to survive in today's competitive market environment.
- A financial corporation is often a great bait for an investor. Nevertheless, there is a high probability that the holder of foreign capital will invest in a large company, rather than take the risk of concluding transactions with one-day firms.
- Such associations, as a rule, have a long-term long-term perspective and a strategic development plan, which to some extent guarantees reliability and financial stability.
- What does a corporation mean? Distribution of rights. Therefore, in particular, for shareholders it is much more profitable to bear partial responsibility for the activities of the company than full.
disadvantages
As this is characteristic of the absolute form of entrepreneurship, corporations have a number of their disadvantages:
- It should not be forgotten that in such subjects of activity control and management is carried out by various groups of officials, which can cause controversial situations and untimely response to certain negative aspects.
- Increased tax rate. Since the share of net profit and dividends is subject to transfer to the state treasury.
- A huge level of potential opportunities and ways for managers to abuse their position. For example, if things are not going well in the company, then the management may decide to issue additional securities, the proceeds of which will subsequently cover the losses incurred earlier.
What is a corporation in Russia
The principles and forms of doing business in Russia today are so diverse that here you can find a lot of private entrepreneurs, as well as small LLCs that are just starting their activities as holdings and powerful sharks represented by Sibneft and Gazprom.
Despite the fact that each of them has different goals and has enormous differences in the volumes of profit and sales, there are still a number of tasks that are adhered to without exception:
- maximization of the production and scientific-technical relationship between holding participants, while optimizing the distribution of responsibilities to senior officials and owners;
- strategic governing bodies with full responsibility monitor the performance of enterprises;
- at the same time, “local” officials are directly involved;
- especially large corporations try to introduce special economic centers into the company that administer the current activities of the business entity;
- intercompany trade relations are carried out on special conditions.
findings
So, we examined what a corporation is, what are its varieties, found out what functions it performs, and revealed both the advantages and disadvantages of this form of organizational activity.
We must understand that in the regime of our post-Soviet mixed economy we are too far from a capitalist society, and are we striving for this? Too many one-day firms and small entrepreneurs without special strategic plans. But, nevertheless, the vast majority of the Western business world considers this form of organizational activity to be quite successful.
Who knows, maybe in a few decades, modern entrepreneurs will have no choice but to unite in larger commercial unions in order to survive in a modern competitive market society, but for now - we strive for the best.