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Simona Agoston

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To differentiate between several types of companies

To identify the main organizational characteristics of companiesbelonging to different categories

To identify and comment the main forms for capital raising

To explain the concept of franchising

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Branch of industry

Goods producing businesses/ service businesses

Size (SMEs, large companies)

Cooperation form (strategic alliances, joint venture,cartel etc.)

Legal form (sole proprietorship, private limited

company, public stock ownership etc. )

Ownership (private, public)

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Goods producing businesses tangible goods from activities such as manufacturing, construction,agriculture etc.

capital intensive businesses require substantial investments inbuildings, machinery, equipment etc.

Service businesses intangible products from activities such as finance, retail trade,entertainment, health care, banking, education etc. labor intensive company- is dependent on the knowledge and skills ofthe employees

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Growth of the service sector

Some companies produce both goods and services

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which trigger the growth of service sector:

Consumers have more disposable income

Changing demographic pattern and lifestyle trends Services are needed to support complex goods and

new technology

Specialization/ need for professional advice

Barriers to entry are low

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SMEs criteria (Romania):

Average annual number of employees < 250

Net annual turnover < 50 Mio. Euro

Total assets < 43 Mio. Euro

(IMM # SRL # SA)

In most economies SMEs prevail, representing over 98%of the companies

Special financial support for SMEs (e.g. Europeanfunding, Mihail Kogalniceanu credit etc.)

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Provide the majority of jobs (>50%)

Significant contribution to the GDP (55%-95%)

Create product and service innovation

Provide specialized goods and services

Support the economy during crisis time (moredynamism, flexibility and willingness to try new thingsthan big businesses)

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1. Austria 99.6 50.86 65.5

2. Belgium 99.8 64.49 68.9

3. Denmark 99.7 58.75 68.74

4. Finland 99.75 44.33 59.15

5. France 99.79 45.76 66.86

6. Germany 99.63 60.17 59.85

7. Greece 99.95 82.87 86.68

8. Ireland 99.59 33.02 69.59

9. Italy 99.54 71.38 80.34

10. Luxembourg 99.62 74.2 72.32

11. Netherlands 99.56 56.06 62.47

12. Portugal 99.87 66.8 78.87

13. Spain 99.89 55.3 79.45

14. Sweden 99.67 51.51 61.37

15. Great Britain 99.8 38.4 55.3

Source: CNIPMMR (2007), Cartea Alba a IMM-urilor din Romania, p.22

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SMEs in Romania

Source: European Commission, 2011

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Romanias SBA (Small Business Act) profile

Romanias performance against the EU average

Below average profile for

Romania Sub par performance in 4 ofthe 8 principles for which dataare available (Access tofinance, Responsiveadministration, Skills and

innovation andInternationalization)

Source: European Commission, 2011

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Profile of the Romanian entrepreneur

-just 17.5% of Romanians consider the option of starting up a businessin the next 6 months (place 56 out of 59 evaluated countries- high riskadversity)

- 46% of the Romanians are afraid of financial failure

- Low density of SMEs (EU- 42 SMEs/ 1000 inhabitants, Romania 24SMEs/ 1000 inhabitants)

- In the last 2 years 250.000 SMEs were closed

- Negative figures regarding feminine entrepreneurship in Romania(64% men)

- SMEs established in 2011: commerce 30%, other services 25%,agriculture 16%, rate of innovative businesses very low life-stylebusiness/ high growth venture

Source: Barzoi, V., Businesscover, 30thOct. 2012

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1. To start from scratch Total control over yourbusiness Doing what you enjoy Ability to reach your fullpotential

High risk

Higher efforts to build a reputation Complete responsibility Usually longer working hours

2. To buy an existing business Established customerand supplier base Functioning business

system Location Proven product orservice Trained employees Easier financing You can concentrate onmaking improvements

Many businesses are overpriced Limited freedom Risk of incompatibility between the

new owner and existing employees Unknown (covered) problems withsuppliers, customers etc.

3. To buy a franchise You are sure that you

get a viable business Instant brandrecognition National advertisingprograms Standardized quality forgoods and services Support from thefranchisor (financialassistance, site research,training, decoration,network of suppliers,

technical assistance etc.)

High dependence on the franchisor

(He falls, you fall)Restricted control over your business(sell just some goods and services,established suppliers, rules)Goods often supplied by thefranchisor itself at the price he setsSmall flexibility and adaptabilityMonthly payment (royalty) to thefranchisorIf the franchisee fails to meet theminimum standards, the franchisormight terminate the licence

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A form of business organization in which a firm which already has a successful product orservice ( ) enters into a contractual relationship with other businesses( ) operating under the franchisor's trade name and usually with thefranchisor's guidance (http://www.investorwords.com/2078/franchise.html, 20.Oct.2011).

the right to sell trademarked goods which are purchased from thefranchisor and resold

- the right to produce and distribute the manufacturersproducts, using supplies purchased from the franchisor

- the right to open a business using franchisors name andformat for doing business

Cost of franchises = initial fee + monthly royalties

http://www.investorwords.com/2078/franchise.htmlhttp://www.investorwords.com/2078/franchise.html

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- investment specialists who provide money to finance newbusinesses with high potential and management expertise for a portion of the ownership

VCs the business becomes profitable long term investors

Very selectiveOffer large amount of money

wealthy individuals who put their own money into start-ups with the goal ofeventually selling their interest for a larger profit

Smaller amounts of money than VCsOffer their business expertise to the new business and are involved longer in the company

- offering shares of ownership or stock to the public for the firsttime

Can be an expensive procedure and requires a longer period of time

centers that provide start-ups with various services and facilities: office space,legal and accounting advice, marketing support etc.

80% of businesses nurtured in incubators succeedOpen to all businesses, or just to some sectorsTenants graduates

- the collective effort of individuals who network and pool their resources,usually via the Internet, to support efforts initiated by other people or organizations.

- funding of a company by selling small amounts of equity to many investors

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