Types of Businesses and Organizational Structures

This report provides an overview of different types of businesses, including micro, small, medium, and large businesses. It also explains various organizational structures, such as functional and divisional structures. Additionally, the report discusses the impact of external factors on business performance, using the PESTLE analysis. Examples and insights are provided throughout the report.

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Table of Contents
INTRODUCTION...........................................................................................................................3
SECTION ONE...............................................................................................................................3
Forms of Business and their Working....................................................................................3
SECTION TWO...............................................................................................................................5
Explain Different Types of Companies..................................................................................5
SECTION THREE...........................................................................................................................7
Different Organizational Structures and Impact of External Factors.....................................7
CONCLUSION..............................................................................................................................10
REFERNCES.................................................................................................................................11

INTRODUCTION
The report aims to provide a clear picture of the various types of businesses that exist in the
business environment. The study looks at how the business are classified on basis of their nature
and liability along with the examples. The report also highlights the importance of organizational
structure and the two main structure are defined briefly. Furthermore, the PESTLE analysis is
conducted in this report to assess the external factors that influence business activities.
SECTION ONE
Forms of Business and their Working
Micro Business
A micro business is considered as subcategory of small business that fulfils the following
conditions to be classified as a ‘micro- entity’:-
 The employees must be less than ten in number
 The annual turnover must be less than £632,000
 The balance sheet is required to be less than £316,000
The micro business plays a vital role in ensuring the country’ economic viability. It contributes
in the economy by balancing social stability across different regions of the United Kingdom.
Further it contributes to the economy by concentrating more on rural and underserved urban
regions (Chown and et. al., 2018). This form of business is typically started with the same capital
value which is owned, operated and regulated by the same owner. It is even recognized as family
companies or creative start- ups initiated by young people with passion and growth potential. In
the UK, however, there are 5.7 million micro enterprises, with 95.72 percent of them being
privately owned. Micro companies employ approximately 9.1 million people. As a result, this
form of business is beneficial to the UK economy.
Small Business
Small businesses are considered as privately owned businesses with less workers and
lower annual sales than larger businesses. A small entity is described in the Companies Act of
2006 of the United Kingdom, as follows:
 Employees must be 50 or less
 Annual turnover must not exceed £6.5million
 Balance sheet must not exceed £3.26 million

Even small business contributes its best towards the economy of the nation. The business
aims to contribute by creating jobs and even by providing additional funding on both a local and
national level. Small business operates independently with small income and size. There are
privately owned companies, such as a sole proprietorship, partnership, or company. This form of
company exists in every industry, and some examples include privately owned restaurants or
cafes, bakery shops, architectural firms, and so on. Furthermore, since they are not bound by
bureaucratic inertia, small businesses may adapt to evolving demands more quickly. As a result,
they are beneficial to the local economy.
Medium Business
Medium- sized business is defined under the Companies Act 2006 of the United
Kingdom, as follows:-
 Number of employees must not exceed 250
 Annual turnover to be not more than £25.9 million
 Total of Balance sheet must not exceed £12.9 million
This type of business begins with gradual and steady growth of profitable small companies and
the corporation begins to receive a large portion of capital from sales and profits generated. The
medium- sized business bridges the gaps between small business and large business. They are
regarded as economy’s backbone by fostering growth through various employment opportunities
and provides consumers with new market (Pettigrew, 2020). They account for 45 percent of total
jobs and 33 percent of GDP, according to the source. Verdant Leisure, which employs
approximately 250 people, Crawford Healthcare, Hunter MacDonald, and others are some
popular examples.
Large Business
As opposed to other forms of businesses, large organizations prefer to provide a wider
range of goods or services to their consumers. Large businesses are defined as those with more
than 250 employees and account for 40% of total jobs and more than half of total turnover in the
UK. These businesses typically have a large distribution network and a strong presence in other
parts of the country. Further large business supports and even encourages small as well as
medium sized businesses. This form of business have a dynamic management hierarchy and a
well suitable organization structure along with effective business communication channel. As a
result of their contributions, high rates of economic opportunities, environmental protection, and

the promotion of foreign relations are achieved. Unilever (£113.85 billion), HSBC Holdings
(£81.20 billion), AstraZeneca (£104.73 billion) and others are some examples.
SECTION TWO
Explain Different Types of Companies
Sole Proprietorship
It is the most basic type of company that is owned and controlled by a single individual.
In this case, the sole trader is personally liable for the company's debts and obligations. The
definition of a single entity does not apply to this form of company since the owner and the
company are essentially one and the same. In a sole proprietorship, the owner's liability is
unlimited, which means the owner may have to surrender personal assets to pay off business
debts. Freelancer work, caterers, small farmers, reparation service and others are examples of
sole proprietorship. The following are some of the characteristics that make this sort of business
popular:-
 The formation of the company is easy
 The procedures are simple along with less legalities
 Cost expenditure is less
 Confidentiality as the owner is not required to publish the records and accounts publicly.
Partnership
Two or more partners are required to form a partnership company in which each partner
contributes to the capital value and shares benefit or loss in a reasonable manner. The partners
are individually and jointly responsible for the arrears and obligations in this form of business,
and their liability is unlimited (Malhotra, 2020). It is likely to form a partnership agreement
either verbally or in writing. The benefit and loss sharing is usually spelled out in the partnership
agreement. One of its other distinguishing features is the transfer of interest subject to the mutual
consent of all partners required for such a transfer to an outside party. Partners jointly participate
in the decision making process. Warner Bros., Twitter, WhatsApp, and other companies are only
a few examples. The following are some of the most common characteristics:-
 As sole proprietorship, the formation of partnership is also easy
 There is a support of financial resources
 Flexibility in working without any interventions of government

 Risk is distributed among partners
Limited Liability Business
This type of business combines the characteristics of a partnership and a corporation.
There are two or more partners in this type, one of whom is a general partner and the other a
limited partner. Furthermore, the liability of this form of company is limited. It considered as the
popular form of business with individuals running smaller companies (Regalia, 2020) (. These
businesses are bound by the strict corporate laws, but they are flexible when it comes to taxation
and the various advantages of appropriate tax plans. When compared to Sole traders and
Partnership companies, they are not cost effective. Westinghouse, Barclays Bank, Oxfam,
Burberry, and other are some examples. The following are some of its characteristics:-
 Enjoys concept of unlimited term of existence
 Supported by large financial resources
 The Flow- through taxation is main feature
Public Limited Liability Business
This form lead the division of ownership into shares which are open to public for trading
purpose on a stock exchange. The owner can raise capital by issuing bonds, and it can also
ensure long-term viability by distributing risk among its shareholders. This type of business has
better growth and expansion opportunities in the marketplace. In the marketplace, this form of
company has more opportunities for growth and development as compared to other forms of
businesses. The owner must demonstrate a high degree of transparency in both the decision-
making process and business outcomes. The firm generally obtains funds from financial
institutions, most common banks, which are more likely to support financial need. Some popular
examples are Rolls- Royce Holdings Plc., GlaxoSmithKline, British Petroleum Company
Limited, and so forth.
Cooperative
A Cooperative is considered as a legal entity. The cooperative's key goal is to deliver
support to its members and other stakeholders in order to achieve its customer satisfaction goals.
For these types of companies, achieving profit is a second priority. Furthermore, the return on
equity capital is small, and as a result, the return on investment in the form of dividend is also
limited. Heart of England Co-operative Society, Cooperative Home Care Associates, Do it Best,

and many others are examples of this type of organisation. The following are some of its
characteristics:-
 Encourages values, norms and local culture
 Provides protection to the customers
 Democratic management and leadership style
 Limited interest on the capital
SECTION THREE
Different Organizational Structures and Impact of External Factors
The organisation structure way which outlines the organizational activities and further
determines the roles and responsibilities, delegation of power and channel of communication
amid different levels of hierarchy in the organization. Furthermore, without structure, employee
morale suffers, which can lead to poor decision-making. It may also have a negative effect on the
company Akman, 2020). As a result, businesses must develop an appropriate organisational
structure in order to accomplish their objectives effectively and efficiently. As discussed below,
the two most common types of organisational structure are functional and divisional.
Functional Organisational Structure
Figure 1: Functional Organizational Structure, 2019

This type of structure is most common and oldest as it bifurcates the major functions of
the organization into distinct groups. The model aims to separate the main functions into various
differentiated job functions in order to achieve desired goals effectively and efficiently. Some of
the advantages of the functional organisational structure are as follows:-
 Grouping employees in accordance with specialization led to increased customer
satisfaction
 The roles and responsibilities are defined clearly without any confusion
 Lead to efficient working
 Expedient in handling problems and decision making process
 Healthy employment relations (Social Work, 2020)
Whereas, the disadvantages are as follows:-
 Isolated employees affects the progress of the business
 The lack of channel of communication lead to misunderstanding and conflicts
 Lack of coordination
 Less flexibility and creative skills due to inefficient working
Divisional Organisational Structure
Figure 2: Divisional Organizational Structure, 2021

The divisional structure classifies each organizational functions into divisions. This
organizational structure is most suitable for company who aims to grow and achieve success for
long term. This form of structure divides the organization into distinct divisions based on
resources, products, services or geographical areas. Each division operates within this framework
by managing its own resources and tasks. The structure provides a clear line of ownership along
with strategic oriented view of operation and benefits so as to achieve organizational objectives.
Furthermore, one of the structure's disadvantages is that duplication of functions within each
division leads to dysfunctional relationships, rivalry, and politics among divisions (Weir, C.,
2020).
Impact of External Factors on Business Performance
Many factors in the external environment have an impact on the organization's success.
To determine certain external factors in the environment, the PESTLE analysis is used. It is a
useful method for determining the worth of a company by taking into account the changing
environment and the activities that it oversees. Further, Sainsbury Company is used to recognise
market trends and make meaningful adjustments while considering these factors as discussed
below.
Figure 3: PESTLE Analysis, 2021

 Political: The intervention of government causes great impact on the working of the
company. Recently, the long anticipated Brexit effect decreased sales of the company.
Further the COVID- 19 pandemic hit hard along with adverse impact on the business.
 Economic: The economic factors plays vital role in influencing business such as the
pandemic has led to inflation causing a decrease in purchasing power of the customers.
Further rise in fuel cost, fluctuation in the currency are some other factors.
 Social: The Company aims to maintain social factors such as higher quality product amid
pandemic, adhering social distancing norms.
 Technological: The business must be updated with the pace of technology. The
Sainsbury started online shopping by paying through just one click. Such helps to gain
sustainability in the market (Khan and et. al., 2020).
 Legal: Company is required adhere with the rules and regulations formed by the
government. For example, Sainsbury Company follows pandemic regulations amid
pandemic situation.
 Environmental: Nowadays, most of the companies encourages environment practices as
to achieve competitive advantage in the market. Such as Sainsbury through new ways
aims to reduce carbon footprint by using biodegradable packaging in order to reuse
wastage.
CONCLUSION
The report ends by briefly describing the various forms of businesses, as well as their key
characteristics accompanied by examples. A number of factors that contribute to growth and
organisational structures have been also discussed. It demonstrates that in order to achieve
desired objectives effectively and efficiently, it is critical to gain effective knowledge about the
organisation in the marketplace and to choose an appropriate organisational structure while
keeping in view the changing environment.

REFERNCES
Books and Journals
Akman, M., 2020. Defense Management and PESTLE Analysis. Ante Portas - Studia nad
bezpieczeństwem, pp.93-102.
Chown and et. al., 2018. The ‘High Achievers’ project: an assessment of the support for students
with autism attending UK universities. Journal of Further and Higher Education. 42(6).
pp.837-854.
Khan and et. al., 2020. Macroeconomic management. Washington, D.C.: IMF Institute,
International Monetary Fund.
Malhotra, Y., 2020. Knowledge Management and New Organization Forms. Information
Resources Management Journal. 13(1). pp.5-14.
Pettigrew, A., 2020. Innovative forms of organizing. London: Sage Publications.
Regalia, I., 2020. Regulating new forms of employment. Abingdon [England]: Routledge.
Social Work, 2020. Organizational Structure for Casework Supervision.
Weir, C., 2020. Organizational structure and corporate performance. Management Decision.
33(1). pp.24-32.