What is company?

We explain what a company is and the different types of companies. Sectors of activity, structure, social and economic purposes.

1. What is company?

The concept of company refers to an organization or institution , which is dedicated to the production or provision of goods or services that are demanded by consumers ; obtaining from this activity an economic revenue , that is, a profit. For the correct performance of the production these are based on previously defined schedules, strategies determined by the work team .

The success of a company will require clear and well established objectives , in addition to a pre-established mission . On the other hand, they should define the policies and regulations according to which they will be managed. However, beyond the regulations that decide internally and informally, they must be governed above all according to the laws that determine the regulation of their activity and operation in the jurisdiction in which they operate.

Perhaps from a more technical perspective it can be defined as a socioeconomic unit . According to this form, it will use all the resources at its disposal to transform raw material into a good or service that can be introduced into the supply and demand market to obtain a profit .

It is important to clarify that the socioeconomic term is used since the group of individuals that are part of it is identified as a social part of this unit , and the capital component that is sought to be achieved as economic.

2. Activities of a company

In this way, three areas are distinguished in which they carry out their activity, and so they are usually classified.

• Primary sector . Its area of ​​action is the primary sector if it uses as raw material any element obtained directly from nature . An example in this case would be cereal producing companies, or any other crop product.
• Secondary sector . If instead it covers the secondary sector, its task will be based on the conversion of raw material obtained through third parties, into a final and total product capable of being sold in the market.
• Tertiary sector . But there is still a third sector in charge of both the commercialization of products manufactured entirely by other companies (suppliers), and the supply of services for the satisfaction of desires and needs.

3. Company structure

The structure of a company can be constituted in different ways existing both hierarchical relationships (president, vice president, directors, managers, etc.), as linear. In the latter, there will be no more important charges than others, so all employees will enjoy the same benefits and will be urged to cover the same obligations.

Currently, so-called SMEs are very common  . The acronym corresponds to Small and Medium Enterprises, which indicates that these are those that, although they share most of the characteristics with the rest of the companies, have a production capacity and limited budget.

But in addition, one of the most important limitations is the occupational one, that is, its ability to hire staff; and it is of the utmost importance since for the growth of a company human capital will always be a fundamental factor .

4. Companies according to origin of capital

• Public enterprises. Public companies are those that belong to the public sector of each State , central or local administration. These may sell their shares on the stock market to private individuals, but they will continue to be considered public as long as 51% of their shares remain in the possession of the public sector. The main objective of this type of business is to generate the general interest of the particular group of which it is a part. The State  makes the decision to start with the company and must establish its objectives and then control its activity.
• Private businesses. Private companies, on the other hand, are those that are run by private individuals. In addition, the shares of these companies can be sold on the stock exchange. Its main objective is to maximize its profits and sales, as well as its market shares.
• Joint ventures Because the division between private and public companies is not so simple, in most cases there is a third qualification in which a company is described, where both the public and private sectors have a stake in it. In addition, the private sector can make the decision to nationalize a private company; as it happens in the opposite way, when the private sector decides to privatize a public company.

5. Companies according to their size

There are several ways to classify companies according to their different characteristics. For example, according to its size:

• Large companies  It will be determined that a company is large when it has great technological capabilities, human potential and when its capital is large. Being a large company, its obligations, its planning and organization needs will be greater than in the others.
• Medium businesses  They will require technological capabilities, but to a lesser extent than large companies. Human potential and a significant amount of capital will also be necessary .
• Small companies. They will be those that, to carry out their economic activities do not need a large amount of capital, nor human potential, nor a great capacity in terms of their technology .

6. Social and economic purposes

Companies have external and internal purposes that concern the social as well as the economic.

As for the economic purposes, they must serve the men who work inside and those who work outside the company, and we can find the following:

• External economic purpose. It is the production of goods and services in order to meet all the needs that arise from society .
• Internal economic purpose. It will seek to obtain added value to then be able to remunerate the people who are part of the company. The forms of remuneration can be in the form of profits, dividends, salaries , salaries, as well as benefits. This is intended to provide the opportunity to make investments and jobs for workers.

The social aspects in a company are just as important as the economic ones because it is made up of people and is aimed at other people. It is usually referred to as social responsibility , which includes, even, ecological issues.

The internal and external social purposes of a company are:

• The external social purpose.  It consists of the contribution of the development of each society, it must be tried that in the economic performance the social and personal values ​​that are considered fundamental are also taken care of. To be able to do this satisfactorily, it must be promoted in employees and partners that this is fulfilled and carried out.
• The internal social purpose.  It is the one that contributes to the full development of the people who are part of the company. It must be ensured that fundamental human values are not vulnerable and that, in turn, they can be promoted through employees and partners.