Introduction to Business: Partnership Types and Porter's Five Forces Analysis
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This document provides an introduction to business, focusing on partnership types and the analysis of competition using Porter's five forces tool. It also discusses the impact of macro environment on business using PESTLE analysis. The document includes a case study of a joint venture called Little Dessert Shop in Birmingham, UK.
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TABLE OF CONTENTS INTRODUCTION...........................................................................................................................3 MAIN BODY..................................................................................................................................3 CONCLUSION................................................................................................................................3 REFERENCES................................................................................................................................3
INTRODUCTION Business refers as day to activities in organisation that consist of exchange of money and product & services. Little desert shop is a joint venture of Mary and Sue in Birmingham and it emphasizes on providing fresh organic food product to customers. Report highlight about partnership types and which one is used by two partners in case study. It also explains forces that make changes in business by using Porter’s five forces tool. Macro environment impact describe in report by the help of PESTLE. Assessment 1 1. Partnership Partnership started when two or more people come together to start a business. In this they pay either equally, partially etc. and according to that their roles, responsibility and authority define in it (Brown, 2018). Mary and Sue left their job and started their own venture Little Dessert Shop in Birmingham in United Kingdom. Feature of partnership 1 Agreement between Partners Association between 2 or more people for working together and agree with contract that was agreed by both of them. In this terms and condition are mentioned and also according to finance position of a person is defined in the organisation. There are two types of agreement namely, oral or written. Former one create confusion because mouth word cannot be evidence for future references. 2 Two or More person Partnership only started when minimum numbers of people are two or more than that. They work for single aim and objectives. 3 Sharing of profit Profit is share according to percentage of finance they provided for the business. It can be equal if both agree with it for example one has given idea and experience with some amount, will other only have finance and hence both have equal contribution directly or indirectly to business. Little desert shop started by equal funding of two peopleand hence profit as well as rights are equally divided between them. Types of partnership 1 General partnership 3
In this type of partnership people have equal rights on profit as well as resource. They contribute equal finance for it and also role as well as responsibility divided same between this people. Management activities, controlling and monitoring of business can be done by both parties because of same contribution for the business. Losses and other problems also distributed equally between members. 2 Limited Partnerships In this power and position are not same as one of the member remain limited in terms will other operate and run business with full access (Górnicka, 2018). Former one contribution by fund is less and later one has high and hence gets higher authority in company. 3 Limited Liability Partnerships In this people that are working together have limited liability and all are equally responsible for failure as well as success. Fiduciary duties are divided between every member in the partnership. Mary and Sue are in general partnership and each contributes £30,000 for the business. Roles and responsibility also divided equally between them. Losses, Legal problems etc. are also same for both. Advantage In this funds are given by two or more people and hence big venture can be setup. Losses are divided and on the other hand roles and responsibility too. Partners can make quick changes with common agreement and hence a business failure chance reduces as both of them have certain amount of experience related to it. Formation of venture is easy and can run smoothly. Disadvantage Because of different experience and ideology decision-making can be suffered and business too. Many of time people disagree with bearing losses and legal problems because of idea of one which overrule other. Partners can left organisation and hence lead to closure of it. 2 Porter’s 5 Forces It helps to understand competition intensity in business. There are number of power that can affect growth of firm for example if firm have limited supplier then manipulation and price breaking will be difficult. Threat of new entrants 4
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Little desert shop is new venture with investment of £30,000 from each partner. In this case power of new entrant remains medium because of COVID and financial instability in the country (Eissner and Gannon, 2018). Company provides fresh and organic product that are new concept and hence over ruin business need money and ideas. Company also decided to launch range of goods & services so that it can attract large population of UK and hence able to maintain its position after the pandemic. Customers of the company are loyal because of firm idea of mouth publicity. Bargaining Power of Supplier Mary and Sue started new business hence less number of supplier available for them which make power of supplier high. Most of the organic raw material for manufacturing product comes from local farmlands and because of health consciousness high in demand which give fewer chances to firm to manipulate them. Company determined to provide fresh product and hence purchasing in bulk for lower prices can effect on its business. BREXIT again affected on business as organic ingredient prices that import from Europe increases because of custom duties and other taxes. Cafe is setup in such places where number of firm already established and hence customer has multiple options. Bargaining Power of buyers British customer welcomes new taste and trend hence power of buyer’s remain high. However, organic food product concept can highly profitable for organisation as large number of healthconsciousnesspeopleincreaseinthecountry.Qualityofgoodsagainimpacton purchasing power as people try to intake fresh material. Organisation has connection with local farmland which helps in providing variety of healthy product. In UK people have one stop shopping habit and little desert decided to introduce rang of product which can support it. British Food companies follow competitive price strategy which again switch loyal customer of the firm. Threat of Substitute Organisation started business with the concept of organic product and after COVID number of shifted towards it’s because of health awareness (Zhang and Cobanoglu, 2019). There are number of shops related to it in Birmingham but firm providing different kind of taste and hence substitution chances are medium. However, number of shop increasing relating to organic product and hence new product taste can take over. Organisation decided to increase in range of product which can highly be profitable for the firm. 5
Rivalry among existing competitors There are number of restaurant are available in area of little desert which also provides organic product and established from long time. Rivalries among this firm are high which increases chances of cutting price war. Organisation again has low supply chain management while other have effective which are helping in increasing market share in changing business. 3 Macro Environments Organisation faces various types of challenges from macro environment drivers and it become important to analyse it properly with the help of PESTLE so that future strategy relating to business can be set. Political United Kingdom’s exit from Europe Union creates a number of challenges for Food industry and COVID again becomes barrier in growth of it. Raw material prices hike because of it. Import and other custom duties are high which hampered growth of firm. Tourist comes from different part of Europe also decline because of COVID and BREXIT and hence decrease firm’s business. Little desert cannot manipulate supplier because European chances decrease and hence product has to provide in high cost (Tandon and et.al., 2020). Government Lockdown highly affected on firm’s financial stability as 3month remain closed and after that people are avoiding eating out which become barrier in growth of business. However, there are multiple benefit for British restaurant as government is providing half price for customer’s purchasing and by following competitive price strategy firm will be able to expand business and increase profit share. Mary and Sue also wants funds firm for introducing variety in product and recently parliament various types of schemes for promoting entrepreneurs. Technological Britain Technology continuously changes which can help firm in increasing output for the same input.After COVID people avoided eating out and introducing effective supply chain management can help in gaining this customers. Organisation can update existing systems which can also increasing quality, efficiency and productivity of work. Training and development can be introduced for advancing technology which increase innovation & creativity skills. However, cost of it increase financial expenditure of the Little desert which can be use for market development. Social 6
Organisation has high opportunity in organic food business as people shifted their taste towards health food after pandemic (Perera, Johnson and Hewege, 2018). Company also focusing in introducing new product by taking loans and hence range in it can support one stop shopping habit of UK’s consumers. Taste and Trend of customer in country quickly changes and firm has to invest high to maintain loyalty of workforce. Increasing health consciousness will become game changer for the firm, if properly utilised this factor to run the business and hence it able to gain competitive advantage in changing business. CONCLUSION It can be understand from the report that food industry business changes and number of strategy and planning require for running it. Mary and Sure come into general partnership and share equal right on restaurant management and profit. They purchase organic raw material from local farmlands as discussed in Porter’s five forces but because of limited number of supplier power is high. COVID Pandemic has highly impacted taste and trend of customer and shifted towards organic product and hence company can take it as opportunity to expand business. 7
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REFERENCES Books and Journals Brown, D., 2018. Business models for residential retrofit in the UK: a critical assessment of five key archetypes. Energy Efficiency.11.(6).pp.1497-1517. GĂłrnicka, L., 2018. Brexit referendum and business investmentin the UK. International Monetary Fund. Eissner, S. and Gannon, J., 2018. Experiences of mentoring in the UK hospitality sector. Journal of Human Resources in Hospitality & Tourism.17.(3).pp.296-313. Zhang, T. and Cobanoglu, C., 2019. The global conference on business, hospitality and tourism research 2018. Anatolia.30.(1).pp.149-151. Tandon, A and et.al., 2020. Behavioral reasoning perspectives on organic food purchase. Appetite.154.p.104786. Perera, C.R., Johnson, L.W. and Hewege, C.R., 2018. A review of organic food consumption from a sustainability perspective and future research directions. International Journal of Management and Sustainability.7.(4).pp.204-214. Online [ONLINE] Available through :<> 8