A case study of the media conglomerate EMI
EMI are one of the worlds biggest, if not the biggest record label known to man. The company is a multinational plc, which basically means that the company owns and controls other companies all over the world. EMI is the parent company, and the companies it controls are called subsidiary companies. The subsidiary companies that Emi owns are organisations like Virgin Records, and HMV. Multinational companies are usually set up to increase productivity and to cut costs, by helping them to do things like making raw materials cheaper, and easier to get hold of.
Also by using countrys with poor economies to provide cheaper workforces, this factor of being based in poorer countries also help them to avoid high tax costs. EMI also holds the status of being a PLC aswell as a multinational in the private sector. Because EMI is a PLC it means that the company has what is called ‘limited liability’. This means that if the company were to have a law suit put against them then the owners of the company “shareholders” are not liable to lose anything accept for there shares in the company.
Unlike a company with unlimited liability, which the owners could stand to lose more than just their companies, they also stand to lose what they posses like their homes and cars etc. But other factors of being a PLC are that the company can easily find ways to raise capital for expansion, especially as large well known firms are low risk ventures for banks, and also shares are able to be sold openly on the stock markets around the world. Unlike private limited companies who can only sell a limited number of shares and cannot sell them openly on the markets.
There are also disadvantages to being a PLC, for example all PLC’s need at least i?? 50,000 to start up the status of a public limited company. Also every year an annual report and account must be published and a copy given to all shareholders, and also be made available for public viewing. An AGM must also be held every year so that the owners of Emi (the shareholder) can have a chance to try and influence the way in which the company works. But normally Also a high risk to the company is that shares sold on the stock market could be sold on to rival companies who would only need 50% + of the shares to take control.
Another major process the company has to do is collect the right documentation and this has to be done even before the company can start trading. The business needs “a Memorandum of Association and Articles of Association to be sent to the company registrar” then the company registrar must issue a “Certificate of Incorporation” then the company issues a “prospectus” after this the company must issue its “shares” after which the registrar draws up a “Certificate of Trading” after this the company can begin trading openly.
At the end of the financial year shareholders are paid a dividend of what the company has profited over the 12 months. Then the rest of the profit is put back into the business. (E2) Although Emi are one of the most flexible companies in the way they operate the still have constraints on them just like any other company would have but then again they also have their benefits. The benefits that Emi hold just as any multinational Plc would are that the company has the advantage of limited liability which basically means if the company were to become bankrupt or if they were to be sued, only the company its self would stand to be lost.
As the owners (shareholders) themselves would not stand to anything that they own except what they owned in shares in the company. Unlike companies who have unlimited liability, like sole traders for example who could stand to lose every thing that they owned if they got into trouble. Other advantages of being a Plc include the ability to raise capital, and this is for many reasons from the factor that banks find larger companies less of a high risk factor due to their high reputations unlike small businesses who are found to be a risk and do not generally have enough collateral to cover what they wish to borrow.
Plc’s can also use their shareholders to raise capital and introduce new shares for existing shareholders to buy or they can put their shares up on the stock markets. Emi also has one other main advantage over many companies which include the factor it is a multinational. This means that the company has been organized to increase productivity and profitability, by carefully picking its locations from where its offices are positioned like New York, Paris, London, and Madrid.
Where the artists that the company wants are most likely to be found, to which countries Emi can use for cheap resources and labour, even for cheaper taxation. Other factors that make Emi being a multinational more able to operate are the facts that they can dodge laws like environmental laws which do not apply in some countries, and also means that they can avoid tariffs when they are importing and exporting their merchandise.
But even though the company has these advantages that keep them at the top of their game they also face a few disadvantages which could easily lead to end of the company, by this I mean that even though the company can use the stockmarkets to their advantage they could also lead to what is know as a hostile takeover if a rival company were to gain over 50% of the companies shares. Another factor about selling you’re shares on the stockmarkets is that it is costly to have shares quoted on the stock exchange. This is because it would have the controlling vote in what the company does.
Another disadvantage that Emi would have faced when starting out are the large costs and amounts of paper work needed to set up the Plc. Also the company needs to let the shareholders and public know how the company is progressing each year with a annual report, the only problem with this is that rivals can also gain access to this report, and would be able to target areas that the company is under performing in to try to remove trade from the company. Also the report takes along time to put together and calculate.