Understanding Companies: Types, Structures, and the Digital Age
What is a Company?
A company, like Apple or Médicos Sin Fronteras, is fundamentally an organization—a structured group of people using resources to achieve shared goals. Companies, however, are distinct from other organizations because their primary objective is profit generation and distribution to owners.
Key Characteristics of Companies
- Specific organization
- Combines resources to produce goods and services
- Provides added value
- Operates as a technical, economic, socio-political, and decision-making unit
While all companies are organizations, not all organizations are companies. The defining characteristic of a company is its profit motive.
The Hybrid Spectrum of Organizations
- Traditional Non-Profit: Focused on social good, relies on donations. Example: Red Cross
- Non-Profit with Income-Generating Activities: Generates income but reinvests profits into its social mission. Example: Museums
- Social Enterprise: Balances social impact and profit, reinvesting profits into its mission. Example: TOMS Shoes
- Socially Responsible Business: For-profit business incorporating social and environmental practices. Example: Patagonia
- Corporation Practicing CSR: Implements Corporate Social Responsibility (CSR) initiatives, but profit remains the main focus. Example: Starbucks
- Traditional For-Profit: Focused solely on profit maximization. Example: Apple
Companies are vital to our socioeconomic system, driving development and growth. Their survival depends heavily on navigating a complex environment.
Navigating the Complex Business Environment
The business environment is increasingly volatile, uncertain, complex, and ambiguous (VUCA). Factors like social trends, unstable markets, and new technologies require managers to possess specialized knowledge for company survival and success.
The Entrepreneur and the Manager
Owner: Holds legal rights and control over a business or asset.
Manager: Oversees daily operations.
Entrepreneur: Starts a business, assuming financial risks for profit or innovation.
Property/Ownership: Belongs to the legal owner(s).
Management: Executed by individuals with authority to set goals, make decisions, and coordinate work.
Business Person: Both owner and manager.
Entrepreneur (in English): Often used interchangeably with business person, but ideally implies innovation.
Companies as Systems
A company is a system—a set of interdependent elements (subsystems) interacting within a defined structure to achieve a common objective.
Classifying Companies
Economic Criteria
- Size: Micro, small, medium-sized (SMEs), and large.
- Activity: Primary (raw materials), Secondary (manufacturing), Tertiary (services).
- Scope: Local, regional, national, international.
Legal Criteria
- Property of the capital:
- Public companies
- Private companies
- Legal Form:
- Individual Businesses (sole proprietorship): owned by one person, usually the individual who has day-to-day responsibility for running the business
- Partnerships: two or more people share ownership of a single business
- Corporations: legal entities independent from their founder(s)
- Cooperative Society: cooperatives
Digital Companies
A digital company is the one that uses technology as a tool to achieve very tangible business objectives such as increasing sales and improving profit margins. Being digital is becoming more and more a common practice in many companies around the world.
This by applying these technologies in the different areas of administration, management, operations, marketing, sales, purchases, communications, customer service and others.
Digital companies VS Traditional Companies
- Digital companies could NOT exist without internet.
- Focused on the customer through their data
- Their products evolve very fast
- Traditional companies COULD exist without internet
- Less flexible
- Tends to require more capital