16 17
How companies work
Business ownership
56.5%
of UK limited
companies have
employees; the
remaining 43.5%
are single-member
companies (SMCs)
CANADIAN
COMPANIES
Privately held
company
In a privately held company,
a limited group of private stock
owners controls the company.
These companies do not offer
shares to the general public on
stock exchanges.
Private characteristics
May issue stock and have shareholders. Shares,
however, do not trade on public exchanges
Management is not required to file disclosure
statements with the SEC
Dependant on private funding
Businesses in Canada can
be sole proprietorships,
partnerships, or
corporations. A business
can also be run as a
cooperative, a business
that is owned and
controlled by its
members. Canadian
companies must
register in the province
or territory in which
they are domiciled.
A limited liability company (LLC) is a hybrid between a corporation
and a partnership. The upside of an LLC is that it offers many
of the advantages of a corporation, but is cheaper to create
and maintain. Taxation rules vary, depending on the Articles of
Organization of the LLC. Laws also differ from state to state. A
limited liability company is an “LLC,” not an “Inc.” or “Corp.”
LIMITED LIABILITY COMPANIES IN THE US
Corporations operate as legally
and financially independent
entities. They may be publicly
traded or privately held.
Corporation
US_016-017_Limited_Companies-new.indd 17 15/12/2014 12:54
How it works
Although most of the world’s companies are set up as
private, public companies are seen as more prestigious
and profitable. For business ventures requiring large
amounts of capital, a public company offers greater
opportunity for raising funds, since shares can be sold
to public investors to generate cash. Private companies
must rely on private investors or use the capital
investment of their owners. Public companies are
subject to more stringent legal controls than private
ones, and are expected to disclose financial details.
While the owner-shareholders of a private company may buy and sell
their shares privately (usually with director approval), any investor in
the financial market can trade the shares of a public company.
Private and public
companies
Differences between private
and public companies
Private company directors have to weigh up the potential
capital increase of floating on the stock exchange against
the legal red tape aimed at protecting public shareholders.
Directors
Usually control all of the shares.
Reporting
In the US, no disclosure is required outside
the company; in the UK, it is mandatory to file
accounts at Companies House.
Shareholders and management
Shareholders are often actively involved in
management so decisions can be made quickly.
Financing
Company must rely on private investment, which
is often harder to attract because there are fewer
financial details available.
Valuation
Value of the company is more likely to fluctuate;
it is more difficult to assess because there are
fewer available financial details.
Size
Number of shareholders is limited, usually to
fewer than 2,000.
27 mil lion
the number of companies
in the US, fewer than
1% of which are public
Famous private companies
Mars Confectionery and pet food;
third-largest private US company
Rolex Swiss-based English company
making status-symbol watches
LEGO® Danish company producing
household-name toy bricks
Hearst Corporation Mass-media
multinational based in New York City
IKEA Swedish retailer registered in
Netherlands selling flat-pack furniture
PwC Largest professional services
network
Private
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18 19
HOW COMPANIES WORK
Business ownership
Directors
Not necessarily shareholders.
Reporting
Companies have a legal obligation to disclose
accounts and submit regular financial reports.
Shareholders and management
Clear boundary is drawn between the role of
shareholders and management; may lead to
a conflict of interest.
Financing
Can tap financial markets to raise capital by
selling stock or bonds.
Valuation
Value of the company is easier to assess, from the
trading price of shares and financial statements.
Size
Number of shareholders is unlimited.
Choose board members
Usually at least three directors to
allow future board decisions to
be made with only two members
present (representing a majority)
Inform staff
Must notify in writing anyone with
an interest (including employees
and proposed board members)
that company intends to go public
Vote for conversion
Board meeting held to vote in
favor of changing company’s
Articles of Incorporation (specifying
private or public company)
Register company
Documents setting out board
resolutions sent to Secretary of
State, who issues certificate
declaring the company is public
Make public announcement
Press releases issued, events for
business held, and emails sent to
inform contacts of change
$55 bil lion
the amount raised on 141
IPOs at the NYSE in 2013
GoinG public
There are legal requirements at each stage of converting
a company from private to public, such as voting in a
board of directors and deciding on a new name.
Unquoted/unlisted company Another term for
a private company
Initial public offering (IPO) Stock-market launch
Secondary stock offering Second-round sale of
shares to raise more capital
Ticker symbols Unique code assigned to publicly
traded companies and used by stock exchanges
need to know
Public
US_018-019_Private_vs_Public.indd 19 15/12/2014 12:54
18 19
HOW COMPANIES WORK
Business ownership
Directors
Not necessarily shareholders.
Reporting
Companies have a legal obligation to disclose
accounts and submit regular financial reports.
Shareholders and management
Clear boundary is drawn between the role of
shareholders and management; may lead to
a conflict of interest.
Financing
Can tap financial markets to raise capital by
selling stock or bonds.
Valuation
Value of the company is easier to assess, from the
trading price of shares and financial statements.
Size
Number of shareholders is unlimited.
Choose board members
Usually at least three directors to
allow future board decisions to
be made with only two members
present (representing a majority)
Inform staff
Must notify in writing anyone with
an interest (including employees
and proposed board members)
that company intends to go public
Vote for conversion
Board meeting held to vote in
favor of changing company’s
Articles of Incorporation (specifying
private or public company)
Register company
Documents setting out board
resolutions sent to Secretary of
State, who issues certificate
declaring the company is public
Make public announcement
Press releases issued, events for
business held, and emails sent to
inform contacts of change
$55 bil lion
the amount raised on 141
IPOs at the NYSE in 2013
GoinG public
There are legal requirements at each stage of converting
a company from private to public, such as voting in a
board of directors and deciding on a new name.
Unquoted/unlisted company Another term for
a private company
Initial public offering (IPO) Stock-market launch
Secondary stock offering Second-round sale of
shares to raise more capital
Ticker symbols Unique code assigned to publicly
traded companies and used by stock exchanges
need to know
Public
US_018-019_Private_vs_Public.indd 19 15/12/2014 12:54
Multinationals
A multinational corporation has business operations in more than one
country. It usually starts as a national company and sets up subsidiary
(branch) companies abroad for production and sales.
How it works
Multinationals have several goals:
to increase revenue by finding new
markets; to streamline operations
and production by taking advantage
of global locations with lower labor
and/or transport costs; and to adapt
to local cultural/market differences.
A company may achieve such goals
by outsourcing (using external
suppliers) or offshoring (relocating
functions). Companies may also
insource (move operations in-house)
to rightsource (find a good balance).
Case study: mapping a multinational
Sportswear company Nike has successfully spread around the globe from
its corporate base in the US. It has manufacturing functions where technical
expertise maximizes efficiency and keeps costs down; distribution hubs in
strategic locations; marketing and retail departments in countries where it
is establishing local markets; and call centers where they are cost-effective.
McDonald’s is a
multinational—the
product changes to
suit the market. For
example, it serves a
shrimp burger in Japan
and chicken rice
porridge in Malaysia.
Apple is an example of
a global company—the
product is essentially
the same except for
a language change.
A global company has facilities in different countries but operates as a
single corporate culture with common processes. A multinational has
facilities in different countries but each functions as its own entity,
adapting locally, with little communication between geographic divisions.
Multinational
Global
GLOBAL VS. MULTINATIONAL
hello
hola!
United Kingdom
London
One of many country HQs in major
European cities, the London office
serves the UK market. Nike also has
a product creation center in Italy.
Regional HQ Management
and core admin functions
Marketing UK campaigns
and merchandising
United States
Beaverton, Oregon
Senior management are located
at the company’s corporate base,
or “campus”, its center for decision-
making on global strategy, design,
and marketing, and core functions.
World HQ Management,
finance, legal, IT, and admin
Global marketing
Branding and marketing
R and D Sport research
lab and design facilities
Distribution Hi-tech hub
in location with good links
Memphis, Tennessee
Retail Online sales and
stores across North America
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20 21
how companies work
Business ownership
Transnational corporation
Similar to a multinational but
does not identify itself with
any particular parent nation
Platform corporation
Multinationals that do not
manufacture, but outsource
products they have designed
NEED TO KNOW
The Netherlands
Hilversum
Based in a central location, a European
headquarters supports operations
across Western, Central, and Eastern
Europe, and is close to the company’s
European distribution center in Belgium.
Brazil
São Paulo
Operations, marketing, and distribution for the Central and South American
market are based in Brazil, with offices and retail outlets in all major countries.
India
Bangalore
Call centers draw on a supply of
English-speakers on lower wages.
China
Shanghai
The company’s second-largest and fastest-growing market, China is also a
major manufacturing base due to local expertise and low production costs.
Japan
Tok yo
Most manufacturing is based in
the Asia-Pacific region, benefiting
from expertise and lower wages.
Regional offices in 13 countries
also support production and retail.
Retail Continually expanding
retail network for sports brand
European HQ Management,
finance, legal, IT, and admin
Retail Online sales and stores
across Europe
Design HQ for global soccer
apparel business
Chinese HQ Operations
and core support functions
Marketing Campaigns for
the Chinese market
Manufacturing Sportswear
factories and innovation hubs
Regional HQ Core
operations and marketing
Manufacturing Sites
in several countries
Customer support
Complaints and returns
Central and South American
HQ Operational center
Distribution Hub for retail
stores across the continent
US_020-021_Multinationals.indd 21 21/11/2014 14:32
20 21
how companies work
Business ownership
Transnational corporation
Similar to a multinational but
does not identify itself with
any particular parent nation
Platform corporation
Multinationals that do not
manufacture, but outsource
products they have designed
NEED TO KNOW
The Netherlands
Hilversum
Based in a central location, a European
headquarters supports operations
across Western, Central, and Eastern
Europe, and is close to the company’s
European distribution center in Belgium.
Brazil
São Paulo
Operations, marketing, and distribution for the Central and South American
market are based in Brazil, with offices and retail outlets in all major countries.
India
Bangalore
Call centers draw on a supply of
English-speakers on lower wages.
China
Shanghai
The company’s second-largest and fastest-growing market, China is also a
major manufacturing base due to local expertise and low production costs.
Japan
Tok yo
Most manufacturing is based in
the Asia-Pacific region, benefiting
from expertise and lower wages.
Regional offices in 13 countries
also support production and retail.
Retail Continually expanding
retail network for sports brand
European HQ Management,
finance, legal, IT, and admin
Retail Online sales and stores
across Europe
Design HQ for global soccer
apparel business
Chinese HQ Operations
and core support functions
Marketing Campaigns for
the Chinese market
Manufacturing Sportswear
factories and innovation hubs
Regional HQ Core
operations and marketing
Manufacturing Sites
in several countries
Customer support
Complaints and returns
Central and South American
HQ Operational center
Distribution Hub for retail
stores across the continent
US_020-021_Multinationals.indd 21 21/11/2014 14:32
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