Types of Companies and Internationalization: A Business Overview

Posted on Oct 28, 2024 in Economy

Types of Company Classification Criteria

1. By the Nature of Economic Activities

Businesses develop in different sectors:

  • Primary Sector: Focuses on natural resources (e.g., agriculture).
  • Secondary Sector: Transforms goods into other goods (e.g., industry and construction).
  • Tertiary Sector: Encompasses businesses that provide services.

2. By Size or Dimension

  • Microenterprises: Less than 10 employees.
  • Small Enterprises: Less than 50 employees.
  • Medium Enterprises: 50-250 employees.
  • Large Enterprises: More than 250 employees.

3. By Scope of Operation

  • Local
  • Regional
  • National
  • Multinational

4. By Capital Ownership

  • Private
  • Public
  • Mixed

5. By Legal Form

  • Entrepreneur (Autonomous): A single individual operating a business.
  • Corporate Companies or Societies: Several individuals pool resources (money, goods, or labor).
    • SA (Sociedad Anónima): Capital is divided into shares, and liability is limited to the investment.
    • SL (Sociedad de Responsabilidad Limitada): Liability is limited to the contributions, which are called participations. Transfer of participations is restricted.
    • Partnership: Partners contribute capital and are jointly liable for debts.
    • Limited Partnership: Two types of partners: general partners with unlimited liability and limited partners with liability limited to their contribution.
    • Social Interest Societies: Companies focused on social objectives, such as growth and internationalization.

Internationalization of Business

Business growth often involves expansion beyond national borders. This internationalization trend is driven by factors such as:

  • Limited size of national markets.
  • Globalization.

Mergers and Acquisitions

Companies may merge or acquire other companies to achieve growth and economies of scale. This can lead to the formation of giant companies with significant production capacity.

Multinational Enterprises (MNEs)

MNEs operate in multiple countries, distributing their activities based on advantages offered by different locations. They may manufacture in countries with lower costs and sell in developed countries with higher consumer demand.

Advantages and Disadvantages for Host Countries

MNEs can bring both benefits and drawbacks to host countries. Advantages include:

  • Economic development.
  • Job creation.
  • Access to advanced technologies.

However, disadvantages may also arise:

  • Technological dependence.
  • Exploitation of resources.
  • Environmental concerns.

Social Responsibility of MNEs

Growing awareness of social and environmental issues has led to increased demands for responsible behavior from MNEs. This includes:

  • Environmental Protection: Using effective techniques to reduce emissions and pollution.
  • Social Commitment: Contributing to the social and cultural development of the communities where they operate.
  • Employee Relations: Fostering a climate of cooperation, motivation, and participation.
  • Consumer Trust: Providing clear and reliable information about products, ensuring quality, and offering reasonable prices.