Business Ownership & Distribution Channels in the UK: A Comprehensive Guide
Types of Business Ownership in the UK
Private Ownership
1. Sole Proprietor
This business is owned and operated by one person.
Advantages:
- Small capital required to start
- Complete control of the business
- Personal contact with customers
- Owner retains all profits
Disadvantages:
- Unlimited liability (owner is personally responsible for all debts)
- Lack of continuity (business may struggle if the owner is ill or dies)
- Owner must provide all capital
2. Partnership
A partnership consists of 2-20 people (with some exceptions) who share ownership and responsibility.
Advantages:
- More experience and knowledge available for decision-making
Disadvantages:
- Unlimited liability for each partner
Note: Limited partnerships exist where some partners (limited partners) are only liable for their investment.
3. Limited Companies
Owners (shareholders) have limited liability, meaning they are only liable for the amount they invested.
Advantages:
- Limited liability for shareholders
4. Private Limited Company (Ltd)
Shares are only sold to known individuals and cannot be traded publicly.
5. Public Limited Company (PLC)
Shares can be bought and sold by the public on the Stock Exchange.
Special Forms of Business
1. Franchising
A company (franchisor) allows another business (franchisee) to use its products, techniques, and trademark.
2. Cooperatives
Businesses owned and operated by their members, who act as both owners and customers.
3. Holding Companies
A company that controls other companies through ownership of shares.
4. Building Societies
Non-profit organizations that act as intermediaries between savers and borrowers for mortgages.
Channels of Distribution
How goods reach the customer from the manufacturer.
Direct Selling
Manufacturers sell directly to consumers.
Manufacturer to Retailer
Manufacturers sell in bulk to large retailers, bypassing wholesalers.
Manufacturer to Wholesaler
Manufacturers sell in bulk to wholesalers, who then sell to retailers.
Factors Influencing Distribution Choices
Perishability of the Product
Perishable goods require rapid distribution.
Value and Size of Goods
Bulky or expensive goods may be sold directly to retailers.
Size of the Order
Large orders may be supplied directly to retailers.
Type of Customer
Industrial customers may expect direct service from the manufacturer.