What are state companies and examples

Company & operation

Companies or businesses are organized business units. Their job is to produce or provide goods or services that serve to meet the needs of the population. In contrast to Households companies pursue an economic interest.

In this post you will learn how a company is structured, what tasks and functions it has and what types of company there are. At the end you can test your knowledge with the help of our exercise questions.

Building the company

Every company has different departments, each of which has an important function for the company.

The company divisions are:

Example of building a company
In the Knusper-Schmidt company, which produces potato chips, ...
  • the management of all important decisions such as choice of location, contractual partner and expansion of the company.
  • investing and financing through raising funds, managing income and planning expenses.
  • human resources to recruit, manage and support employees.
  • accounting for data from production (how much is produced), sales (how much is sold), etc. From this data, the company management derives strategies for optimizing processes.
  • materials management to the purchase, storage and provision of ingredients and packaging materials.
  • the production to the manufacture and packaging of the potato chips.
  • the sale of the advertising, the design, the stores that sell the chips, and the customer service.

Corporate environment

The company's environment influences the decisions and processes in the company. The environment consists of interested parties (groups of people who make certain demands on the company) and the environment (conditions that define the possibilities and limits of the company).

The following groups of people and circumstances belong to the environment of a company:

  • Internal interested parties (employees, managers, owners, shareholders)
  • External interested parties (customers, competitors, creditors, contractual partners, the public)
  • Economic environment (economic, economic and personal developments)
  • Technological environment (technical and scientific progress)
  • Physical-ecological environment (raw materials, environmental protection, transport infrastructure)
  • Social environment (legislation, culture, politics, demography)

Conflicts of Interest

It often happens that interests of different or even the same interest groups are in conflict. For example, customers demand high quality and low prices. Here, compromises have to be made or for the identity of the company to be clearly defined in which direction price and quality should develop.

Differentiation from companies

Companies can be divided according to the following criteria:

  • according to public / private
  • according to the legal form
  • according to the size
  • according to the industry

Private and public companies

Private companies are companies in which the state has no stake. Private companies depend on making a profit, otherwise they cannot cover the costs of salaries, rents, production, etc. and would have to file for bankruptcy.

Example for private companies
The potato chip producer Knusper-Schmidt is a private company. It must sell enough chips to, among other things, to cover the following costs:

Public companies, on the other hand, are either under public law, i.e. purely state-owned companies, or private companies that are largely or wholly state-owned. To be considered as such, a public company must take precedence "Public purposes" follow. This term is not precisely defined, but it excludes companies that are exclusively for-profit.

Public companies include: active in the following areas:

  • Broadcasting (e.g. ARD, ZDF, Deutschlandradio)
  • Transport (e.g. Deutsche Bahn, air traffic control, federal autobahn GmbH)
  • Communication (e.g. Deutsche Post, Telekom)
  • Credit institutions (e.g. savings banks, Landesbanken)
  • Insurance (e.g. German pension insurance)

Differentiation according to legal form

The choice of the company's legal form is one of the constitutive management decisions. Tax, economic and financial aspects play a role in this decision.

Essentially, a distinction is made in Germany between the following legal forms:

Differentiation according to size

Companies can be divided into small, medium and large companies. The size of a company can be determined based on various factors.

According to the Commercial Code, the differentiation criteria include:

According to Section 267 of the German Commercial Code (HGB), companies are classified as small, medium-sized and large corporations to which the following figures apply:

Differentiation according to the economic sector

In 2017 there were almost 3.5 million commercial companies in Germany. In the following graphic you can see how many companies there are in the various industries.

Company goals

The overriding goal of any private company is to make a profit. A company cannot survive in the long term without a positive balance sheet.

Subordinate to this, there can be different goals from company to company:

  • increase of productivity
  • Improve quality
  • Image improvement
  • Expansion of the target group
  • Improvement of working conditions
  • Lowering expenses
  • Development of international markets
  • Increasing the number of employees or locations

The goals of public companies are very different from those of private companies.

  • Demand coverage
    It should be ensured that the population is adequately supplied with z. B. water, electricity or gas is supplied.
  • Loss minimization
    Public companies such as museums or theaters, which usually do not make a profit and rely on public money, usually try to minimize their losses.
  • Cost recovery
    Here the price (e.g. the gas or water price) should cover the costs for the provision. No profit is made.
  • Reasonable profit
    A certain profit is to be achieved, with which losses in other areas are compensated. Here, too, the profit only serves to cover costs.

Practice questions