Mind Your Business - 9 October 2008

Overview

Look in any standard textbook on business ownership and it all seems reasonably straightforward. You start off as a sole trader, move on to become a partnership, then a private limited company and finally the pinnacle of success is as a public limited company! In reality things are quite different.

One crucial point to remember when looking at business ownership is who is setting up the business and why? If it is an individual with a new business idea then the type of start-up model might be a choice between a sole trader, partnership or private limited company. With the latter two, the individual might be using members of the family or close associates as partners or shareholders who will contribute to the initial finance of the business.

For large businesses, however, the issues might be quite different. Many larger businesses will be setting up different types of business operations within their organization. It might be setting up a new operation abroad or an associated business to help the core business. This might involve setting up a distribution arm, for example. Rather than having it as part of the whole business, it might be set up as a separate business in its own right but dedicated to servicing the needs of the core business.

In such circumstances, the sub-business is likely to be set up as a private limited company with the only shareholder being the main business. This type of organization is fairly common. In addition, the rise of private venture capital is of growing importance in the business world. Venture capitalists are groups of private investors who look for business opportunities to invest in. If they do spot a suitable business opportunity, they tend to buy the business and keep it as a private limited company where it remains under their control.

Business ownership is therefore not quite as straightforward as textbooks might suggest. If you wander down any high street or shopping mall, there is a fantastic array of different shops all offering a variety of things to tempt us. Take so-called 'high street fashion'. You have such a choice - Topshop, Miss Selfridge, Dorothy Perkins, Burton, British Home Stores (now known as BHS) and Tammy, to name but a few.

But how much choice do you really have? You might think that all these stores are separate shops, and in some respects they are. They might be catering for a slightly different market or market segment but in fact they are all owned by the same company and behind that company is one man!

Burton, Dorothy Perkins, Evans, Miss Selfridge, Outfit, Topshop, Topman and Wallis are all part of the Arcadia Group Limited, which is owned by Philip Green. However, Sir Philip’s wife, Tina, owns a 92% share in the Arcadia Group. Philip Green also owns BHS and Tammy, which trades as a brand within BHS. In the 2007 Times Rich List, Mr Green was estimated to have a personal fortune of £4.9 billion and was 7th in the list in Britain!

Dorothy Perkins and Burton - two separate stores? Yes in some ways, but no in others. Behind both of these is one man - Philip Green. It is little wonder he is referred to as the 'king of the high street'.
Copyright: Biz/ed images.

This sort of business ownership is not unusual. Many of the brands we know on the high street are all part of the same group and whilst it may seem that there are lots of independent stores to choose from, the reality is that many of them are all inter-related in some form or another.

Other examples of this web of business ownership include the Speciality Retail Group plc - heard of them? Probably not, but they own Racing Green, Suits You, Young's Hire, Woodhouse, Chester Barrie and Suit Direct. HMV and Waterstones are part of the same group; The Shoe Studio Group Ltd owns Chelsea Cobbler, Roland Cartier shoes, Roberto Vianni, Nine West, Bertie, Pied a Terre and Principles. The DSG Group owns Dixons, Curry's, PC World and The Link, and Kingfisher own B&Q, Screwfix Direct and Woolworths.

HMV - Not just a simple chain of music stores selling CDs. The international arrangement of different forms of business ownership and its ownership of Waterstones and Ottakars is typical of many such arrangements of business ownership.
Copyright: Biz/ed images.

All in all, that does not leave much room for too many other high street stores! Of course, plenty of smaller stores do exist, but the trend in recent years has been for stores to become increasingly more consolidated. By this we mean that the ownership of the stores falls into the hands of a smaller number of businesses or owners. However, what is important in many cases is to ensure that the brand lives on.

The brand is not just the name of the business; it is what the business is associated with and recognised for. Think of Topshop and what comes to mind? High quality expensive clothing that you would be worried about wearing on a raucous night out? Probably not. Functional clothing that is of good quality but reasonably priced - the sort of clothes you buy, wear a few times and then ditch as you change your wardrobe and attempt to keep up with the fashions? That is probably more like what Topshop aims to be and very successful it has been at fulfilling that role.

In many ways the high street is rather deceptive, giving the impression of a crowded market place with high levels of competition. The reality might be different but that does not mean that we do not have a choice!