Types of Organisations and their Characteristics

This report evaluates different types of business structures in the United Kingdom and identifies their different characteristics in relation to their size, scope, legal structure, and key stakeholders. The example of Tesco, CycleStreets and Transparent Hands is taken in this report in order to evaluate different types of organisations and identify the interrelationship between their functions.

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Business and Business Environment

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Executive Summary
The aim of this report is to evaluate different types of business structures in the
United Kingdom and identify their different characteristics in relation to their size,
scope, legal structure, and key stakeholders. The example of Tesco, CycleStreets
and Transparent Hands is taken in this report in order to evaluate different types of
organisations and identify the interrelationship between their functions. This report
also evaluates the organisational structure of these corporations and analyse the
advantage and disadvantages of different organisation structures and their impact on
organisational structures. The example of Tesco is analysed in this report to identify
macro environmental factors by using PESTLE analysis to determine how these
factors affect the operations of the company. SWOT analysis is used in order to
evaluate internal and external factors, and those factors are linked with macro
environmental factors to determine how they affect the decision making of the
company.

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Table of Contents
1. Introduction............................................................................................................3
2. Types of organisations...........................................................................................4
Structure of the organisations...................................................................................5
Legal Structures........................................................................................................5
Analysis.....................................................................................................................6
3. Interrelationship between different functions of organisations..............................6
Different Organisational Structures...........................................................................7
4. PESTLE Analysis.................................................................................................10
5. SWOT Analysis....................................................................................................12
6. Conclusion...........................................................................................................15
7. References...........................................................................................................16
List of Figures
Figure 1: Hierarchical Organisational Structure...........................................................8
Figure 2: Matrix Organisational Structure.....................................................................9
Figure 3: Network Organisational Structure...............................................................10
Figure 4: PESTLE Analysis........................................................................................11
Figure 5: SWOT Analysis...........................................................................................13

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1. Introduction
The objective of this report is to evaluate different types of organisations and
evaluate the growth of their international business expansion. In this case, the three
companies which are selected include Tesco, Morrisons and Sainsbury. This report
will analyse the interrelationship between different functions and evaluate different
organisational functions and understand their impact on organisational structure.
This report will also focus on analyse the positive and negative influence of macro
environment factors on the operations of Tesco by using PESTLE model. This report
will also use SWOT analysis which will focus on analysing various strengths and
weaknesses of Tesco and evaluate their impact on the decision making of the
organisation.

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2. Types of organisations
Organisations are referred as groups or structures which are set up in order to
achieve specific objectives. There are a number of organisations with different
characteristics that operate in the modern business world, and each of them has a
separate set of purpose which distinguishes them from each other.
For-Profit Organisations
These are also referred as private organisations that are owned other private bodies
such as individuals and corporations. The purpose of the setup of these corporations
is to generate profit for its members, and they generally operate in the private sector
(Boateng, Akamavi and Ndora, 2016). However, these corporations are bound by the
provisions imposed by the State and they also have to make sure they identify and
comply with the provisions given in the legislative and financial framework that is
given by the government. These corporations reinvest the revenue with they
generate into their business; they also given the remaining profits to their
shareholders or investors. There are multiple sectors in which these corporations
operate, such as food, retailing, fashion and technology. Stakeholders of these
companies include shareholders, employees, customers, directors, government,
environment, suppliers, society and others. Tesco PLC is a good example of a for-
profit organisation that operates in the retailing sector. The company lays emphasis
on generating revenue for its shareholders by generating a competitive advantage
over its competitors (Tesco, 2019).
Not-for-profit Organisations
The purpose of the setup of these organisations is other than generating profits, and
they are differentiated from for-profit organisations that primarily focus on generating
private profits. These corporations work for public benefits, and they fall into the
categories of social enterprise and charities. (Lecy, Schmithz and Swedlund, 2012)
The income generated by these corporations is used in order to further the case they
advocate and they did not share those profits with their members. These
corporations are exempt from paying taxes, and they generate capital for their
operations through sponsorships, donations and others. These organisations
operate in sectors such as education, scientific or religion. Stakeholders of these
companies include employees, business partners, government, environment, society
and others. CycleStreets is a not-for-profit organisation that operates in the UK, and
it provides a free-to-use national cycle journey planner facility to the public. The
company generates funding through donations from the Co-op Community Fund,
Cambridge City Council and others (CycleStreets, 2019).
Non-Government Organisations (NGOs)
These corporations are operated independently from the state or government
despite the fact that they may receive state funding because the government cannot
govern its operations. As per the World Bank, the NGOs are categorised into two
types, which include advocacy NGOs and operational NGOs. In each of these
groups, there are further different types of NGOs that operate such as QUANGOs
(quasi-autonomous NGOs), INGOs (international NGOs), ENGOs (environmental
NGOs) and BINGOs (business-friendly international NGOs) (Drucker, 212). Just like

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the not-for-profit organisations, NGOs also generate their funding from
memberships, donations and similar sources. Stakeholders of these companies
include local communities, environment, society and others. Transparent Hands is a
non-government foundation that offers health insurance plans to underprivileged
communities by crowdsourcing the funds. The company offers its services in
locations such as Pakistan to make sure that people living below the poverty line
have access to adequate health facilities (Transparenthands, 2019).
Structure of the organisations
The structure of the organisations categorised them into micro, small, medium and
large enterprises. They are distinguished based on a number of employees, owner,
shareholders, market share, market capitalisation and others. Small and medium
enterprises (SMEs) are defined as companies that have less than 250 employees,
and they contribute to 99 per cent of total businesses operating in the UK in 2018
(Parliament, 2018). Micro-businesses have less than 10 employees. In small
enterprises, the number of employees did not exceed 50. The enterprises that hire
more than 250 employees are considered as large enterprises. Tesco is considered
as a large enterprise since it has hired around 324,117 employees in the UK
(Statista, 2018). Both CycleStreets and Transparent Hands are SMEs because they
have hired less than 250 but more than 50 employees. Each of these enterprises
has a separate legal structure which guides their actions.
Legal Structures
Sole traders
The sole trader is one of the most common business structures since it is easy to
form and the parties did not have to comply with strict legal compliances. A single
person is in-charge of the control of the business and he/she is also the owner. The
business did not have a separate legal entity, and its income is considered as the
income of its owner. The legal compliances are considerably low, and the owner has
unlimited liability towards the liabilities of the business (Ionos, 2018).
Partnerships
A partnership is referred to a relationship that is formed between two or more
individuals that decide to come together to run a business in common with an
objective to generate profits. The identity of the business is not separate in the eyes
of the law based on which partners are jointly and severally liable for its liabilities
(Ionos, 2018).
Limited Companies
Limited companies have a separate entity from their owners, which given them the
right to hold property and form contracts with others. The directors are responsible
for managing their operations, and they are governed by their constitution. They are
further categorised into two types, which include Private Limited Companies and
Public Limited Companies (DLA, 2019). In private limited companies, the shares are
held by a few individuals whose liability is limited to shares, and they have a limited
number of shareholders. In public limited companies (PLCs), shares are traded
freely on the stock exchange, and they can be acquired by anyone. They are subject
to minimum capital requirements of £50,000 in the UK (DLA, 2019). Tesco is a PLC

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operating in the UK since it fulfils the criteria. Transparent Hands and CycleStreets
are private limited companies.
Analysis
Tesco, CycleStreets and Transparent Hands have separate legal structures which
affect their legal compliances and other obligations when they manage their
operations in the UK. Tesco emphasised on expanding its operations by increasing
its profitability, whereas the objective of CycleStreets is to create a better society by
offering its services for free to the public. Transparent Hands is also focused on
creating a better world by providing free health insurance facilities to underprivileged
communities.
3. Interrelationship between different functions of
organisations
An organisational function is related to a range of practices and procedures that are
conducted by an organisation to manage specific areas of its business. The common
functions of organisations include human resources, customer service, marketing,
finance, information technology and others.
 Marketing
It is integral business functions which assist the company in building a strong
relationship with its customers and interact with them to make sure that they learn
about its products and services. Through marketing, companies can create a unique
brand reputation, and it can create a loyal customer base through consumer
interactions and engagements (Porcu, Del Barrio-Garcia and Kitchen, 2017). The
advantage of effective marketing is that companies can increase brand awareness
and its sales by creating a positive brand reputation through marketing (Porcu, Del
Barrio-Garcia and Kitchen, 2017). Tesco relies on marketing to increase its brand
reputation and give its customers information regarding its new products and
services. On the other hand, CycleStreets and Transparent Hands rely on marketing
to increase awareness regarding their cause and actions, which is crucial for them to
increase their funding and donations. This function is linked with the financial
function of an organisation because the marketing strategies of the organisation are
limited by the budget set by the finance department, which highlighted their
interrelationship.
 Finance
This function focuses on conducting accounting of the operations of the organisation
and controlling its expenditures to maintain its solvency and maximise its profitability
(Caniato et al., 2016). There are various legal obligations impose on this function to
make sure that the company is able to manage its investment process and set
adequate budgets for each department that increase cost-efficiency of operations
and overall effectiveness of the organisation which is its advantage. The
disadvantage of this function is that resources are limited, which makes it difficult to
fulfil the demand of other departments (Cadden, Marshall and Cao, 2013). This
function is linked with marketing, human resource, warehousing and operations
functions because budgets are set for these functions by the finance department.
The finance department of Tesco focuses on generating a cost advantage by

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efficiently managing operations and reducing expenditures; whereas, the finance
department of CycleStreets and Transparent Hands focus on providing the best
value to the stakeholders of the organisations.
 Human resource
This is an important department which focuses on fulfilling the human capital
requirements of an organisation which also affects other internal works such as
finance, warehousing and marketing (Marchington, 2015). This function ensures
effective utilisation of resources by selecting qualified employees in the recruitment
employees and appointing them in the right position. The advantage of this function
is that it ensures that the operations, warehousing and other departments have an
adequate number of human capital to manage their operations. Tesco hires talented
and friendly employees to offer better services to its customers. CycleStreets and
Transparent Hands hire employees as volunteers who work for the benefit of society.
 Operations
This function focuses on ensuring that the processes of the organisation are
managed in a smooth and efficient manner with meet the expectation of customers
and the top-level management (Radnor and O’Mahoney, 2013). This department is
linked with finance, human resource and warehousing since inefficiency of these
functions affect the smooth operations of processes in the company that leads to
poor results (Radnor and O’Mahoney, 2013). Tesco’s management focuses on
effectively managing its operations to make sure that its customers receive expected
services which are crucial to maintain the profitability of the company. On the other
hand, CycleStreets and Transparent Hands focus on ensuring that their audience
are receiving the best services which they can achieve by maximising the utility of
their resources through effective business operations.
 Warehousing
This function focuses on ensuring that the organisation has an adequate number of
materials and workers available in the warehouse to continue operating other
functions of the company (Aldewereld, Dignum and Hiel, 2012). This function is
linked with finance and human resource operations of the company. This is a major
function in Tesco, which enables the company to make sure that adequate stock is
available for its stores and products are not getting bad while they are kept in the
warehouse. This function is not a part of the organisational structure of CycleStreets
and Transparent Hands.
Different Organisational Structures
Organisational structure is referred to a system that outlines how certain activities
will take place in the organisation in order to achieve its goals; these activities
comprise of rules, roles and responsibilities which are defined in the organisational
structure. Most common types of organisational structures are hierarchical, matrix,
divisional and network.
Hierarchical structure
This is one of the most popular organisational structures which are selected by
organisations in which employees operate in clear supervision. The functions are

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categorised into different parties such as HR, technical, finance and others (Edwards
and Gill, 2012). Each of these structures is interrelated with each other, and the
manager of a particular store or area is responsible for handling different factors
such as finance, human resource, warehousing, and others. Simplicity is its biggest
advantage through which different departments can be managed without any issues.
However, its disadvantages are decentralised power and slow decision making,
which slow down the growth of companies (Cosh, Fu and Hughes, 2012). Tesco has
implemented this structure in order to manage its operations globally. The regional
manager in Tesco is responsible for handling specific stores in a geographical area.
Each of the department is responsible for handling different areas such as finance,
human resource, administration, operations and warehousing.
Figure 1: Hierarchical Organisational Structure
(Source: Meng, 2018)
Matrix Structure
In this structure, the reporting relationships between parties are set up as a grip or
matrix rather than defining them in the traditional hierarchy. This structure is useful
for the organisation in which people with similar skills work together to achieve
common goals, which are its advantage (Saunila, Makimattila and Salminen, 2014).
The disadvantage is ambiguity regarding the distribution of power, which causes
confusion. This structure is adopted by CycleStreets in which a team of engineers
work together to make this service possible and provide it for free to the public.

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Figure 2: Matrix Organisational Structure
(Source: Creately, 2018)
Divisional Structure
This is a popular structure in which different functions of the organisation are
categorised into divisions. The advantage of this structure is control and focus over
specific divisions and in each of this division, adequate resources and functions is
needed to manage the operations of the support line which is conducted by the
company through its division managers (Cosh, Fu and Hughes, 2012). Its advantage
is effective control on different organisational functions such as finance,
warehousing, human resource and marketing; however, the disadvantage is high
costs.
Network Structure
This structure assists in the visualisation of both internal and external relationships
between the managers and employees in the organisation which operates in a less
hierarchical and decentralised structure. The objective of this structure is to promote
flexibility in the operations, which provides organisational efficiency and
effectiveness, which is its advantage (Saunila, Makimattila and Salminen, 2014).
However, the disadvantage is lack of control over employees’ work. Transparent
Hands has adopted this structure since it works with the help of a network of its
volunteers within which the decision making is decentralised. Organisational
functions such as finance, human resource, marketing and operations are conducted
through the network of people that handles different operations in the organisation.

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Figure 3: Network Organisational Structure
(Source: Creately, 2018)
4. PESTLE Analysis
PESTLE is referred to a strategic framework that is used by organisations in order to
identify key external influences that affect their business operations (Zalengera et al.,
2014). Tesco is chosen as the organisation to implement PESTLE analysis in order
to understand the external influences that affect the operations of the company.

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Figure 4: PESTLE Analysis
(Source: B2U, 2016)
 Political factor
Brexit is a major political event that is likely to affect the operations of Tesco since it
is a multinational company and the trading relationship between the UK and other
nations is likely to affect in an adverse manner after Brexit (Butler, 2018). In order to
manage its operations in Europe, the company will be subject to import duties and
fees, which will result in affecting the profitability of the enterprise.
 Economic factors
The changes in the labour costs affect the supermarkets of the UK, which resulted in
increasing operating costs of the enterprise. For example, the minimum wage rate in
the UK increased by 4.4 per cent in 2018, which resulted in increasing the operating
costs of Tesco (ONS, 2018). The changes in the foreign currency exchange rate
after Brexit will reduce the foreign income of Tesco, and it will affect the profitability
of the enterprise.
 Social factors
The customers in the UK prefer to do shopping in bulk which is beneficial for Tesco
since it offers heavy discounts to its customers in order to increase its sales (Ruston,
2018). As the demand for online shopping is increasing, Tesco has implemented
policies to offer its products through online medium to its customers. The company
has also started offering organic food to its customers as the demand for health food
increases in the UK (Ruston, 2018). It increases the market share of the company,
and it resulted in increasing the customer loyalty of Tesco, which is beneficial for the
growth of the enterprise.
 Technological factors

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Tesco focuses on relying on technology to improve its supply chain operations;
however, the company is lagging behind in terms of consumer services by failing to
utilise technological advancement to offer better services to its customers. The
company has started offering online shopping facility to its customers which
increased in increasing its sales. The company has also introduced RFID technology
that is focused towards increasing customer services by making sure that the
machine automatically counts the stock and remove it after the sale which saves
time (Rigby, 2016).
 Environmental factors
The enterprise has implemented policies which are targeted towards reducing its
carbon footprint and fulfilling its environmental responsibilities. The company has
implemented policies in order to minimise its carbon footprint by 50 per cent by 2020.
The company has also committed to increase the use of renewable energy in its
operations. The company has made a pledge to run its 100 per cent operations
through renewable energy sources by 2030 (Tesco, 2018). Tesco has also
implemented policies which are targeted towards protecting farmlands, marine and
forests to make sure that these natural resources are protected which result in
sustaining the growth of the enterprise (Tesco, 2018).
 Legal factors
The company has to comply with a strict legislative framework to make sure that it
effectively conducts its business operations. Recently, the company faced a major
lawsuit from its employees in which they made an equal pay claim against the
company which could reach up to £4 billion (Munbodh, 2018). This lawsuit is failed
by 1,000 Tesco workers who claimed that the company had violated equal pay
policies in the UK that leads to this lawsuit. This affected the public image of the
company that also affects its customer loyalty and result in reducing the profitability
of the company.
5. SWOT Analysis
SWOT analysis is referred to a framework that is used by companies in order to
evaluate their competitive position and develop strategic planning (State, 2018). It is
an acronym for strengths, weaknesses, opportunities and threats. Tesco can use this
framework to evaluate the internal and external factors that affect the operations of
the enterprise.

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Figure 5: SWOT Analysis
(Source: State, 2018)
 Strengths
One of the key strengths of Tesco is that it is the biggest grocery retailing in the UK
which provides a competitive advantage to the company. It has won a number of
awards for providing effective customer service, retail excellence and overall
shopping experience (Rigby, 2016). This strength can assist the company in
ensuring that it addresses the key challenge of Brexit since it will continue to
generate high revenue in the UK. The company has also recently become the most
popular retailer in Ireland which will enable the enterprise to make sure that it
sustains its profitability. It is also the largest private employer in Europe, and it
provides more than 743,000 job opportunities (Statista, 2018). The company also
uses RFID enabled barcode system which enables it to ensure that it uses
technological advancements to improve its services.
 Weaknesses
The company has failed in the American and Japanese market due to which it had to
shut down its operations in these nations. The company was involved in a number of
legal issues involving fraud and lack of equal pay to employees, which adversely
affects its market image. The profits of the company were down by 9 per cent in
2018, and it is likely to decrease after Brexit (Eley, 2018). The company has failed to
implement policies to improve its customer services, which affect customer loyalty.
 Opportunities
The company should expand its operations in foreign markets which are not affected
by Brexit to sustain its growth. It can reduce its operating costs in the future by using
renewable energy sources which will also increase the sales of the company since
73 per cent of millennial customers prefer to pay higher prices for product and

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services which are sustainable (Curtin, 2018). The company can use social media to
improve the efficiency of its services to make sure that it improves its customer
services by helping them directly through social media sites. The use of technology
will enable the company to improve the efficiency and effectiveness of its customer
services which is crucial to sustain the growth of the enterprise. The company can
also enter into joint ventures to reduce its operating costs and expand its operations
in emerging markets to make sure that it tackles the issues of reduced profitability
and increase its overall profits.
 Threats
The negative brand image of the company is a major threat to the company. The
company was recently involved in a backlash regarding its Christmas advertisement
in 2017 that was considered as disrespectful by its customers (Belam, 2017). The £4
billion lawsuits filed by employees also harmed the brand reputation of the company,
and it will also reduce the profitability of the company (Munbodh, 2018). The
economic crisis that follows Brexit is likely to affect the domestic operations of Tesco
due to strictness in government regulations and growth in labour costs. The
competition from local as well as international corporations also creates major
threats for the operations of Tesco, which is likely to reduce its profitability and
create challenges for the enterprise which affects its decision making since it has to
take these factors into consideration.

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6. Conclusion
Based on the above observations, it can be concluded that there are different types
of organisations which are categorised based on their characteristics that shape their
legal structure and business functions. The example of Tesco, Transparent Hands
and CycleStreets is analysed in this report along with their business structures, legal
structure, purpose, organisational structure and others. The PESTLE and SWOT
analysis are used in this report to identify different macro and micro factors that
affect their operations of Tesco. Each of these elements is interlinked with each
other to determine factors that affect decision making in the organisation and its
sustainability in the market.

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