Introduction of Joint Stock Company

When you think of all the largest companies in the world, these are not proprietorships or
partnerships. These companies are all joint stock companies. When dealing with business on
a fairly large scale, a joint stock company is the most suitable form of business organisation.
Joint Stock Company
The simplest way to describe a joint stock company is that it is a business organisation that
is owned jointly by all its shareholders. All the shareholders own a certain amount of stock
in the company, which is represented by their shares.

Professor Haney defines it as “a voluntary association of persons for profit, having the
capital divided into some transferable shares, and the ownership of such shares is the
condition of membership of the company.” Studying the features of a joint stock company
will clarify its structure.

Features of a Joint Stock Company

1] Artificial Legal Person
A company is a legal entity that has been created by the statues of law. Like a natural
person, it can do certain things, like own property in its name, enter into a contract, borrow
and lend money, sue or be sued, etc. It has also been granted certain rights by the law which
it enjoys through its board of directors.

However, not all laws/rights/duties apply to a company. It exists only in the law and not in
any physical form. So we call it an artificial legal person.

2] Separate Legal Entity

Unlike a proprietorship or partnership, the legal identity of a company and its members are
separate. As soon as the joint stock company is incorporated it has its own distinct legal
identity. So a member of the company is not liable for the company. And similarly, the
company will not depend on any of its members for any business activities.

3] Incorporation
For a company to be recognized as a separate legal entity and for it to come into existence,
it has to be incorporated. Not registering a joint stock company is not an option. Without
incorporation, a company simply does not exist.

4] Perpetual Succession
The joint stock company is born out of the law, so the only way for the company to end is by
the functioning of law. So the life of a company is in no way related to the life of its
members. Members or shareholders of a company keep changing, but this does not affect
the company’s life.

5] Limited Liability
This is one of the major points of difference between a company and a sole proprietorship
and partnership. The liability of the shareholders of a company is limited. The personal
assets of a member cannot be liquidated to repay the debts of a company.

A shareholders liability is limited to the amount of unpaid share capital. If his shares are fully
paid then he has no liability. The amount of debt has no bearing on this. Only the companies
assets can be sold off to repay its own debt. The members cannot be made to pay up.

6] Common Seal
A company is an artificial person. So its day-to-day functions are conducted by the board of
directors. So when a company enters any contract or signs an agreement, the approval is
indicated via a common seal. A common seal is engraved seal with the company’s name on
it.

So no document is legally binding on the company until and unless it has a common seal
along with the signatures of the directors.

7] Transferability of Shares
In a joint stock company, the ownership is divided into transferable units known as shares.
In case of a public company the shares can be transferred freely, there are almost no
restrictions. And in a public company, there are some restrictions, but the transfer cannot
be prohibited.
Advantages of a Joint Stock Company
One of the biggest drawing factors of a joint stock company is the limited liability of its
members. their liability is only limited up to the unpaid amount on their shares. Since their
personal wealth is safe, they are encouraged to invest in joint stock companies
The shares of a company are transferable. Also, in the case of a listed public company they
can also be sold in the market and be converted to cash. This ease of ownership is an added
benefit.
Perpetual succession is another advantage of a joint stock company. The
death/retirement/insanity/etc does affect the life of a company. The only liquidation under
the Companies Act will shut down a company.
A company hires a board of directors to run all the activities. Very proficient, talented
people are elected to the board and this results in effective and efficient management. Also,
a company usually has large resources and this allows them to hire the best talent and
professionals.

Disadvantages of a Joint Stock Company

One disadvantage of a joint stock company is the complex and lengthy procedure for its
formation. This can take up to several weeks and is a costly affair as well.
According to the Companies Act, 2013 all public companies have to provide their financial
records and other related documents to the registrar. These documents are then public
documents, which any member of the public can access. This leads to a complete lack of
secrecy for the company.
And even during its day to day functioning a company has to follow a numerous number of
laws, regulations, notifications, etc. It not only takes up time but also reduces the freedom
of a company
A company has many stakeholders like the shareholders, the promoters, the board of
directors, the employees. the debenture holders etc. All these stakeholders look out for
their benefit and it often leads to a conflict of interest.

Joint-Stock Company
The joint-stock company was the forerunner of the modern corporation. In a JOINT-STOCK
VENTURE, stock was sold to high net-worth investors who provided CAPITAL and had limited
RISK. These companies had proven profitable in the past with trading ventures. The risk was
small, and the returns were fairly quick.

Organizational structure of joint stock company

HISTRY
Granted a charter by King James I in 1606, the Virginia Company was a joint-stock company
created to establish settlements in the New World. This is a seal of the Virginia Company,
which established the first English settlement in Jamestown, Virginia, in 1607.
But investing in a colony was an altogether different venture.

The risk was larger as the colony might fail. The STARTUP COSTS were enormous and the
returns might take years. Investors in such endeavors needed more than a small sense of
adventure.

Expedition Investors, Leaders, and Laborers

Who led these English COLONIAL EXPEDITIONS? Often, these leaders were second sons from
noble families. Under English law, only the first-born male could inherit property. As such,
Sir Francis Drake, Sir Walter Raleigh, and Sir Humphrey Gilbert were all second sons with a
thirst to find their own riches.

Merchants who dissented from the Church of England were also willing investors in New
World colonies. There were plenty of Puritans who had the necessary capital, and with the
Catholic-leaning Stuart monarchs assuming the throne the Puritans' motive to move became
stronger.
With an excess landless population to serve as workers, and motivated, adventurous, or
devout investors, the joint-stock company became the vehicle by which England finally
settled the Western Hemisphere.

This starkly contrasted with Spanish and French settlements. New Spain and New France
were developed by their kings. The English colonies were developed by their people. Many
historians argue that the primary reason the relatively small and late English colonization
effort ultimately outlasted its predecessors was because individuals had a true stake in its
success.

SWOT ANALYSIS
SWOT analysis is a vital strategic planning tool that can be used by Public Joint-Stock
Company Mobile TeleSystems managers to do a situational analysis of the firm . It is a handy
technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats
(T) Public Joint-Stock Company Mobile TeleSystems is facing in its current business
environment.

The Public Joint-Stock Company Mobile TeleSystems is one of the leading organizatations in
its industry. Public Joint-Stock Company Mobile TeleSystems maintains its prominent
position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis
an immensenly interactive process and requires effective coordination among various
departments within the company such as – marketing, finance, operations, management
information systems and strategic planning.
The SWOT Analysis framework enables an organization to identify the internal strategic
factors such as -strengths and weaknesses, & external strategic factors such as -
opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the

managers of the Public Joint-Stock Company Mobile TeleSystems to develop four types of
strategies:

SO (strengths-opportunities) Strategies
WO (weaknesses-opportunities) Strategies
ST (strengths-threats) Strategies
WT (weaknesses-threats) Strategies
Public Joint-Stock Company Mobile TeleSystems swot analysis / matrix

SWOT Matrix Strategies Objective

The primary purpose of SWOT matrix is to identify the strategies that a firm can use to
exploit external opportunities, counter threats, and build on & protect Public Joint-Stock
Company Mobile TeleSystems strengths, and eradicate its weaknesses.
Step by Step Guide to Public Joint-Stock Company Mobile TeleSystems SWOT Analysis
Strengths of Public Joint-Stock Company Mobile TeleSystems – Internal Strategic Factors

As one of the leading firms in its industry, Public Joint-Stock Company Mobile TeleSystems
has numerous strengths that enable it to thrive in the market place. These strengths not
only help it to protect the market share in existing markets but also help in penetrating new
markets. Based on Fern Fort University extensive research – some of the strengths of Public
Joint-Stock Company Mobile TeleSystems are –

Superb Performance in New Markets – Public Joint-Stock Company Mobile TeleSystems has
built expertise at entering new markets and making success of them. The expansion has
helped the organization to build new revenue stream and diversify the economic cycle risk
in the markets it operates in.
Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the
company to overcome any supply chain bottlenecks.
Good Returns on Capital Expenditure – Public Joint-Stock Company Mobile TeleSystems is
relatively successful at execution of new projects and generated good returns on capital
expenditure by building new revenue streams.
Highly skilled workforce through successful training and learning programs. Public Joint-
Stock Company Mobile TeleSystems is investing huge resources in training and development
of its employees resulting in a workforce that is not only highly skilled but also motivated to
achieve more.

Highly successful at Go To Market strategies for its products.

Successful track record of integrating complimentary firms through mergers & acquisition. It
has successfully integrated number of technology companies in the past few years to
streamline its operations and to build a reliable supply chain.
Strong Free Cash Flow – Public Joint-Stock Company Mobile TeleSystems has strong free
cash flows that provide resources in the hand of the company to expand into new projects.
Strong distribution network – Over the years Public Joint-Stock Company Mobile
TeleSystems has built a reliable distribution network that can reach majority of its potential
market.

Weakness of Public Joint-Stock Company Mobile TeleSystems –

Internal Strategic Factors

Weakness are the areas where Public Joint-Stock Company Mobile TeleSystems can improve
upon. Strategy is about making choices and weakness are the areas where a company can
improve using SWOT analysis and build on its competitive advantage and strategic
positioning.

Not highly successful at integrating firms with different work culture. As mentioned earlier
even though Public Joint-Stock Company Mobile TeleSystems is successful at integrating
small companies it has its share of failure to merge firms that have different work culture.
Organization structure is only compatible with present business model thus limiting
expansion in adjacent product segments.
The marketing of the products left a lot to be desired. Even though the product is a success
in terms of sale but its positioning and unique selling proposition is not clearly defined which
can lead to the attacks in this segment from the competitors.
Investment in Research and Development is below the fastest growing players in the
industry. Even though Public Joint-Stock Company Mobile TeleSystems is spending above
the industry average on Research and Development, it has not been able to compete with
the leading players in the industry in terms of innovation. It has come across as a mature
firm looking forward to bring out products based on tested features in the market.
There are gaps in the product range sold by the company. This lack of choice can give a new
competitor a foothold in the market.
The company has not being able to tackle the challenges present by the new entrants in the
segment and has lost small market share in the niche categories. Public Joint-Stock
Company Mobile TeleSystems has to build internal feedback mechanism directly from sales
team on ground to counter these challenges.
Days inventory is high compare to the competitors – making the company raise more capital
to invest in the channel. This can impact the long term growth of Public Joint-Stock
Company Mobile TeleSystems

Opportunities for Public Joint-Stock Company Mobile TeleSystems –

External Strategic Factors
The new taxation policy can significantly impact the way of doing business and can open
new opportunity for established players such as Public Joint-Stock Company Mobile
TeleSystems to increase its profitability.
New customers from online channel – Over the past few years the company has invested
vast sum of money into the online platform. This investment has opened new sales channel
for Public Joint-Stock Company Mobile TeleSystems. In the next few years the company can
leverage this opportunity by knowing its customer better and serving their needs using big
data analytics.
The new technology provides an opportunity to Public Joint-Stock Company Mobile
TeleSystems to practices differentiated pricing strategy in the new market. It will enable the
firm to maintain its loyal customers with great service and lure new customers through
other value oriented propositions.
Opening up of new markets because of government agreement – the adoption of new
technology standard and government free trade agreement has provided Public Joint-Stock
Company Mobile TeleSystems an opportunity to enter a new emerging market.
The market development will lead to dilution of competitor’s advantage and enable Public
Joint-Stock Company Mobile TeleSystems to increase its competitiveness compare to the
other competitors.
Organization’s core competencies can be a success in similar other products field. A
comparative example could be - GE healthcare research helped it in developing better Oil
drilling machines.
New environmental policies – The new opportunities will create a level playing field for all
the players in the industry. It represent a great opportunity for Public Joint-Stock Company
Mobile TeleSystems to drive home its advantage in new technology and gain market share
in the new product category.
Decreasing cost of transportation because of lower shipping prices can also bring down the
cost of Public Joint-Stock Company Mobile TeleSystems’s products thus providing an
opportunity to the company - either to boost its profitability or pass on the benefits to the
customers to gain market share.

Threats Public Joint-Stock Company Mobile TeleSystems Facing -

External Strategic Factors
New technologies developed by the competitor or market disruptor could be a serious
threat to the industry in medium to long term future.
The demand of the highly profitable products is seasonal in nature and any unlikely event
during the peak season may impact the profitability of the company in short to medium
term.
Intense competition – Stable profitability has increased the number of players in the
industry over last two years which has put downward pressure on not only profitability but
also on overall sales.
Rising raw material can pose a threat to the Public Joint-Stock Company Mobile TeleSystems
profitability.
Changing consumer buying behavior from online channel could be a threat to the existing
physical infrastructure driven supply chain model.
No regular supply of innovative products – Over the years the company has developed
numerous products but those are often response to the development by other players.
Secondly the supply of new products is not regular thus leading to high and low swings in
the sales number over period of time.
Shortage of skilled workforce in certain global market represents a threat to steady growth
of profits for Public Joint-Stock Company Mobile TeleSystems in those markets.
Increasing trend toward isolationism in the American economy can lead to similar reaction
from other government thus negatively impacting the international sales.
Limitations of SWOT Analysis for Public Joint-Stock Company Mobile TeleSystems
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does
have its share of limitations.
Certain capabilities or factors of an organization can be both a strength and weakness at the
same time. This is one of the major limitations of SWOT analysis . For example changing
environmental regulations can be both a threat to company it can also be an opportunity in
a sense that it will enable the company to be on a level playing field or at advantage to
competitors if it able to develop the products faster than the competitors.
SWOT does not show how to achieve a competitive advantage, so it must not be an end in
itself.
The matrix is only a starting point for a discussion on how proposed strategies could be
implemented. It provided an evaluation window but not an implementation plan based on
strategic competitiveness of Public Joint-Stock Company Mobile TeleSystems
SWOT is a static assessment - analysis of status quo with few prospective changes. As
circumstances, capabilities, threats, and strategies change, the dynamics of a competitive
environment may not be revealed in a single matrix.
SWOT analysis may lead the firm to overemphasize a single internal or external factor in
formulating strategies. There are interrelationships among the key internal and external
factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of Public Joint-Stock Company Mobile

TeleSystems
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate
managers decided to provide weightage to each internal strength and weakness of the firm.
Organizations also assess the likelihood of events taking place in the coming future and how
strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT
analysis because with Weighted SWOT Analysis Public Joint-Stock Company Mobile
TeleSystems managers can focus on the most critical factors and discount the non-
important one. It also solves the long list problem where organizations ends up making a
long list but none of the factors deemed too critical.