Large organizations

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Large organizations play special role in the modern market economy. They are enterprises grouped in specific relationships and business organizations, ie corporations, companies, holding companies, conglomerates, trusts, community of interests, cartels, syndicates and chambers of commerce.

Corporation

Corporation - a legal entity formed by the merger of several entities to achieve a common goal. Characteristics are: the existence of common management, the corporation may include natural or legal persons or entities without legal personality, clustering activity by complementarity or similarity of function, an association of undertakings on the basis of wealth or personal factors. The standard corporation forms include: composite operators (multi-plant companies, joint ventures, joint enterprises), a group of entities with established management center.

Group of corporations - the name of one company is applied to clusters of business units:

  • economically separated (operating in the divisional structure) and also in legal terms (created as separate companies);
  • integrated system of technical relations of production, trade and capital (usually vertical in nature of the relationship);
  • managed by the leading company conducting their own business on the basis of nature of the group.

Company is a business relationship based on a separate capital ownership. It may be a group of companies legally and organizationally separated, with its own financial reporting. The standard forms of companies include: the company integrated economically, holding companies, state-owned companies. Following types of companies can be distinguished: vertical, horizontal and mixed. Creating of company is a tool to assist in managing various markets, increasing economic efficiency and reducing costs. Characteristics of the companies belonging to a common (one) owner, the existence of common management, ownership by the company legal personality, clustering by technological or industry specialization, a significant concentration of capital and production.

Holding

Holding is a special kind of relationship in which one company takes over from the other so-called control package of shares thus gaining economic dominance over the company acquired or taken over. It is a form of clustering, in which the role of the parent company holding shares fully in the capital of other companies, enabling it to exert a decisive influence on the direction of the activities of these companies. Setting up a hierarchical structure of holding companies is usually two-tier (parent-subsidiary),

Subsidiaries, with the full legal personality, are clearly subordinated to parent company (in terms of finance, personnel, and so in fact the general policy). Although their legal position does not change, after all, they maintain all the attributes of appropriate legal entity, however the role of control of the parent company is indisputable. This advantage, however, can not be considered only in terms of the negative traits of subordination, but also from the point of view of the benefits of integration.

The advantages of the holding company include:

  • allocation of capital of one entity to another, in exchange for a fair share of the profits,
  • effective influence on the activities of the subsidiaries through participation in their boards, or indirectly through the supervisory board, concentration of capital,
  • relatively free movement of capital (beyond the control of the bank)
  • ability to flexibly manage the production potential of the holding company.

Weak points of holding companies include:

  • The lack of protection of workers' interests in subsidiaries
  • Loss of competitiveness of subsidiaries
  • Particularism of managers appointed by the holding company,
  • Monopolistic position of holding.

Consortium and trust

Consortium - a temporary association of producers, traders, financial institutions and others, in order to carry out the joint account of the operations of finance, production and commercial construction, which require a capital contribution in excess of the capacity of individual participants. This may also be a contractual agreement with the parent company or independent market partners for joint investment activities, development, etc. There may be construction consortia, trade, supply, etc. The most common form similar to the partnership, while the large consortia may take the form of a joint stock company.

Business Community - a kind of economic arrangements characterized by the following features: a durable economic interaction between companies, significance impact on the development of market relations. They can take the following types of agreements: the exchange of mutual benefits, joint ventures, distribution of spheres of business, coordination of the economic and productive activities performed. Business community is a form of connecting companies in the same industry or industries to interact with each other. Business communities and trusts have a significant impact on the development of market relations. Following forms of organization of Business communities: occasional co-ordination agreement, co-operation agreements

Trust - a form of combining independent companies in the new company as a company whose members lose their legal and economic autonomy. It is generally a horizontal grouping (linking producers of similar products), with a high degree of centralization of management. Trusts are entities acting according to the formula of monopoly. The trusts connect producers in the same industry on the basis of incorporation or merger. Joint venture is a contractual agreement of the central operator and its subsidiaries with foreign partners, based on a common capital (co-investment). The joint venture project is jointly undertaken by the agents based on contract with risk sharing.

See also:

References

  • Adams, R. B., & Mehran, H. (2003). Board structure, banking firm performance and the bank holding company organizational form. In Federal Reserve Bank of Chicago Proceedings (No. 866).
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  • Markides, C. C., & Williamson, P. J. (1996). Corporate diversification and organizational structure: A resource-based view. Academy of Management journal, 39(2), 340-367.
  • Miles, R. E., Snow, C. C., Meyer, A. D., & Coleman, H. J. (1978). Organizational strategy, structure, and process. Academy of management review, 3(3), 546-562.
  • Pugh, D. S., & Hickson, D. J. (1976). Organizational structure in its context. London: Saxon House.
  • Scott, W. R. (1995). Institutions and organizations (pp. p-33). Thousand Oaks, CA: Sage.