Partnership as a Type of Business Organization

This report evaluates the case study of Little Desert Shop, a partnership-based business organization in Birmingham, UK, and how the owners are dealing with business challenges and dilemmas to maintain high profit margins and gain competitive advantage.

BA30591E– Introduction to
Business
SUMMATIVE
ASSESSMENT

TABLE OF CONTENTS
Introduction......................................................................................................................................3
Main body........................................................................................................................................3
1. Partnership as a type of business organisation........................................................................3
2. Competitive analysis using Porter’s Five force framework....................................................4
3. Macro environmental factors...................................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

Introduction
A business is referred to an entity, organisation or enterprise that undertake in industrial,
commercial and professional functions in order to gain profits and achieve the organisational
objectives through strategic management (Pozdniakov and et.al., 2018). The business decisions
and strategies are impacted by macro environmental factors and competition around them. This
report will evaluate the case study of Little Desert Shop formed by the business type partnership
in Birmingham, UK and how the owners are dealing with business challenges and dilemmas to
keep their profit margins high, gain competitive advantage and potential customers.
Main body
1. Partnership as a type of business organisation
Business organisations can take many forms as per the capital, business needs, goals and
can be such as sole proprietorship, partnerships, corporations and limited liabilities company.
Sole proprietorship is the most common form of business ownership which is entirely owned by
one person who rums it for their benefit. All the capital is invested by the owner and the profits
and all unlimited liabilities and debts are subjected to the owner. Corporation are distinct entities
which are assumed a legal person in itself and taxed as personal income. The liability is limited
to the debts of the owner and personal assets are not used for recovery of debts. The limited
liability company on the other hand is quite similar to limited partnership where there are
advantages of income of the partnership and the liability in limited. Partnership means the
business organisation which is established by the capital of two more people and can take forms
of general and limited (Cappellino, 2020).
The business organisation that is established by Mary Ones and Sue Jacksons, i.e. the
Little Desert Shop is based on a partnership form of organisation. In UK partnership is a very
common form of organisation which enables people to formally partner-up with other individual
to start a limited company or general partnership. For setting up the partnership, a name has to be
chosen, a nominated partner is selected and registration with HM revenue and customs. Both the
owners have relevant experiences in the hospitality sector and have utilised their redundancy
money to fund their start-up capital for this business venture in the hospitality sector (Prawiro,
2020). In partnership-based organisations, the owners invest certain percentage of capital, so
both Mary and Sue have invested £30,000 each and have leased a shop for a 3-year period in the
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Bullring Shopping Centre in Birmingham, UK. In order to pay the suppliers and inventory
management, they have also invested some amount of working capital which eventually led to
break even with high amount of sales revenue.
Advantages of partnership
Its main advantages are sharing the resources, profits, risks and liabilities. It is simple and
effective and highly flexible. In partnership-based organisations, all the profits are divided as per
the amount of share of capital invested by the partners, therefore the profits generated in this
business will be equally divided among Mary and Sue unless stated otherwise in their agreement
and contracts.
Disadvantages of partnership
The demerits are every partner being totally responsible for the debts, difficulty in selling
and dependency and rapport with partner. The partnership-based organisations are not considered
a separate entity unlike corporations and all the liability, that is accumulated debts such as £
20,000 loan from the bank undertaken by Mary and Sue has to be paid against partnership share
in the capital. This means that both the partners are subjected to pay the debts and liabilities up to
their contribution in the business and no personal assets can be seized for the recovery (Kahal,
2017). Both the owners in such cases invest their money, labour and property where they are
100% liable for all the debts that are incurred in the course of the business.
2. Competitive analysis using Porter’s Five force framework
Porters five forces is a model developed by Michael Porter to conduct competitive
analysis by determining various factors that could impact the business environment and in order
to understand industry attractiveness, gain competitive advantage and estimate likely
profitability.
a) Analysis of Little dessert Shop business
i. Threat of new entrants: When it comes to hospitality industry, the position of Little
Desert Shop can be heavily impacted upon as various new restaurants enter this sector
easily and therefore it is essential that the shop establishes its foothold in the market. This
level of threat can be marked high. (Öneren, Arar and Yurdakul, 2017).
ii. Bargaining power of suppliers: This threat refers to the supplier power in terms of their
ability of increase prices and their uniqueness. In the business, raw materials like
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groceries, food items and intermediaries are required on a daily basis. This level of treat
can be considered as moderate due to availability of various alternative vendors in the
food industry.
iii. Bargaining power of buyers: Consumers tend to have a higher bargaining power due to
availability of numerous other food venues and restaurants in the shopping centre in
Birmingham. This level of threat is high. The only way to attract customers by keeping
prices moderate is achieving uniqueness in terms of baked items and desserts.
iv. Threat of substitution: This level of threat is low as there are no substitute of food items
in the nearby areas of the shop and it is tough to replace food items in the shopping centre
as the only way to this is if people carry their own food items along with them or avoid
outside food for health purposes (Lewis, 2017).
v. Industrial rivalry: As per the number and strength of the rival food & beverage shops
their quality, practices and strategies have to be evaluated. The location of the shop is in
the busy Bullying Centre, which is a huge and popular area with many shops in the
immediate vicinity and multiple food venues.
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Bargaining
power of
suppliers
Bargaining
power of
buyers
Threat of
substitution
Threat of
new
entrants
Industrial
Rivalry
Porter’s
Five Forces

b) Achievement of competitive advantage by Mary and Sue
In order to deal with threat of new entrants, increasing the advertisements and promotions
through digital marketing, improving economies of scale and establish brand equity. For
threat of suppliers, Little Desert Shop has to establish trustworthy suppliers and also keep
alternatives in place to maintain business in low working capital. For bargaining power of
customers, they can increase their prices during weekdays and decrease it during weekends to
gain penetration. They can even diverse their food segments in terms of organic and fresher
produce by keeping a low profit margin in first few months and recovering profits after
gaining a foothold. For overall industrial rivalry and to deal with the competition and attract
customers, the Little Desert Shop can focus upon personalisation, uniqueness, brand value,
promotional offers and other advantages in terms of ambience, quality of food items etc.
3. Macro environmental factors
There are various macro environmental factors lay foundation for strategic analysis and is
applied in order to understand threats and opportunities that can impact Little Desert Shop. There
are various factors that affect food industry and understanding them can help in gaining
competitive advantage, devising marketing tactics and strategies, improvement in operations and
dealing with complex and unpredictable challenges. The three factors that can be analysed are:
Political and legal factors: Governments around the world have various regulatory frameworks
for various aspects in the food and hospitality industry. Government decisions like Brexit has
affected the import of raw material by new taxation policies and supply chain issues for Little
Desert Shop. Apart from that legal factors and wide regulations in terms of cleanliness of
commercial kitchens, standards of warehousing and transportation affect the operations. If any
regulations are breached it can also result in penalties, therefore these standards have to be
adhered to and access to more local suppliers is necessary (Bloom and et.al., 2019).
Economic factors: Economic factors like inflation level, income level of consumers, economic
stability, labour costs and interest rates affect the operations of Little Desert Shop. Covid-19 has
brought lot of uncertainties and lockdown which has slowed down the business. But there are
opportunities as soon as the lockdown is lifted to serve food items in lower prices and high safety
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standards to attract the customers with disposable income and also the labour cost will decrease
due to higher demand for jobs (Gursoy and Chi, 2020).
Socio-cultural factors: The cultural factors like beliefs and values, social factors like tastes,
lifestyle, trends and preferences and attitudes in general directly affect the food choices of the
people. For example, currently there is a high demand for healthier alternatives, Safely cooked
food, organic foods, vegan items and diabetic friendly options which if included in the premium
food segment could help Little Desert Shop to maintain high profit margin and gain wider
market (Perera, 2017).
Conclusion
It can be concluded from the above report that Little Desert Shop. Is based on a
partnership form of business organisation where the partners have equal contribution. It was
observed that partnership business forms tend to have advantages like shared risks, losses,
limited liability and collective resources for star-up capital. The competitive analysis of Little
Desert Shop. Resulted in higher threats in factors like new entrants, buyer power and overall
industrial rivalry which could be countered by new promotional activities like digital marketing,
economies of scale, premium product segments and brand equity. The macro environmental
factors assessed were politics and legalities which have to be strictly adhered to, economic
factors like disposable income post lockdown and socio-cultural factors like healthy options in
food product segment of Little Desert Shop.
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References
Books and Journals
Bloom, N., and et.al., 2019. The impact of Brexit on UK firms (No. w26218). National Bureau
of Economic Research.
Cappellino, A., 2020. How to Choose the Right Business Organization Form.
Gursoy, D. and Chi, C.G., 2020. Effects of COVID-19 pandemic on hospitality industry: Review
of the current situations and a research agenda.
Kahal, A., 2017. Limited Liability Partnership: An Emerging Business form for
Entrepreneurs. International Journal of Engineering and Management Research
(IJEMR), 7(3), pp.654-657.
Lewis, R., 2017. Porter's Five Forces of competitive advantage.
Öneren, M., Arar, T. and Yurdakul, G., 2017. Developing competitive strategies based on SWOT
analysis in Porter’s five forces model by DANP. Journal Of Business Research-
Turk, 9(2), pp.511-528.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Pozdniakov, S., and et.al., 2018. Definition of the role of business modelling in the building of a
management information system.
Prawiro, B.Y., 2020, September. Study of partnership form to improve idle land based on risk
management. In IOP Conference Series: Materials Science and Engineering (Vol. 930,
No. 1, p. 012019). IOP Publishing.
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