Enterprise Structures: Location, Holding, and More

Enterprise Location

The location of a business is usually considered when the business is first setting up. We may come across two kinds of problems: location and dimension. First, we should research the market and see if our product has any demand or interest, and analyze the level of competition. Then, we should analyze raw materials’ supply, the job market, the cost of the land where the business will be located, transportation facilities, government influence and laws, facilities for investing and acquiring money, and finally, the region's economic development.

Enterprise Structures

Holding

The parent company buys the shares of the subsidiaries or branches, so the parent is the owner. The parent makes the most important decisions because, as they have the majority of the shares, they have the majority of the votes.

Trust

The subsidiaries are the owners of the shares, so the profits are shared in each company. The management of the shares is left in the hands of a board of management. The most important decisions are decided in this board. The objective of a trust is to grow as much as possible, to gain market share, and to become a monopolist.

Cartel

Some companies that produce the same product sign an agreement and try to reduce the competition between them, agreeing to sell the product at the same price. The companies share the market, creating a zone for each company, and each company can only sell in its zone and not in the other zones.

Takeover

Company number 1 buys the patrimony of company number 2, and company number 1 maintains its legal person. As the patrimony of company number 2 is inside company number 1’s, company number 1 is now bigger.

Merger

Company number 1 and company number 2 mix their patrimonies, and the initial legal person of both companies disappears. At the end, a new legal person is created, and the new company is the owner of both patrimonies.

Cluster

A group of companies that belong to the same economic sector, often located in the same geographical area, and they collaborate between them to be more competitive.

Joint Venture

This is a contract signed by two or more companies to collaborate on a specific project. The difference between a cluster and a joint venture is that a joint venture is a temporary situation in which a small group of companies collaborates to get some objectives. The companies that participate in the joint venture can invest money, knowledge, and time.

Transnational

It is a group of companies located in different countries. They work as a group, but they don’t have a centralized managing company in one country, so the management is done in each country.

Multinational

Is a company that creates subsidiaries in different countries, but they have a parent company where the multinational started. This parent controls the working of all the group, so the management is centralized in one country.