Types of Companies

This report discusses the different types of companies and their characteristics, including micro, small, medium, and large companies. It also explores the impact of organizational structure and external factors on business.

3002 – Types of Companies
1

Table of Contents
Introduction......................................................................................................................................3
Section 1...........................................................................................................................................3
Different types of companies and their characteristics...........................................................3
Section 2...........................................................................................................................................5
Different types of organisations on the basis of incorporation...............................................5
Section 3...........................................................................................................................................6
Different organisational structures.........................................................................................6
Impact of organisational structure over productivity.............................................................7
External factors affecting business.........................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10
2

Introduction
Organisational structure is the base of operations and working culture in an organisation.
(Hatch, 2018) This report has been prepared keeping the Starbucks Corporation (herein after
referred to as only Starbucks) as the base context and the different types and sizes of businesses,
it has to compete with. Starbucks is an American multinational company headquartered in
Seattle, Washington. It comprises of coffee houses and roastery reserves and serves hot and cold
drinks, espresso, latte, etc. and snacks like chips and crackers. Various types of businesses
according to size and type have been discussed in this report. Further, various organisational
structures have been illustrated and in addition, impact of the organisational structure and
external environment of business over the Starbucks is also touched upon.
Section 1
Different types of companies and their characteristics
Companies Act of UK provides a clarity over the distinction among the micro, small,
medium and large companies, which are below mentioned:
Micro, small and medium sized companies
All entrepreneurs starts small and gradually moves towards higher scale. In UK, small
and medium size companies are together called SME (small and medium enterprises).
 Micro companies – All those companies which do not have more than 10 employees and
also, their turnover does not exceed £2 million have been defined as micro businesses.
For example, Coffee Omega.
 Small companies – All those companies which have more than 10 employees but less
than 50 and also, whose turnover does not exceed £10 million are defined as small
companies. For example, Boss Brewing Company.
 Medium size companies – All those companies which have more than 50 employees but
less than 250 and whose turnover does not does not exceed £250 million mark are
defined as medium size companies. For example, CafePod Coffee Company.
Characteristics of SME:
 Fewer employees – Scale of operations of SME is smaller and does not require large
number of employees to run it (Massaro and et. al., 2016). Therefore, SME operates with
fewer employees who handle dynamic portfolios.
3

 Limited market – With small scale of operations, they operate in a limited area of market
be it in terms of geography or demography. They are also likely to have lesser number of
distribution outlets.
 Lesser source of finance – They have restricted sources of revenue and are therefore,
likely to receive lesser amount of revenue (Heidt, Gerlach and Buxmann, 2019). In order
to expand their operations, they have to seek other sources of finance as well both from
internal and external sources. Internal sources are restricted and they have restricted
external sources as well, some because they have been legally restricted and some
because they have limited payback capabilities.
Large companies
As per Companies Act, all those corporations which crosses the mark of medium
companies i.e. all those companies which have employed more than 250 employees and rakes
turnover of more than £250 million are known as large companies. All multinational companies
are large companies like Starbucks Corporation.
Characteristics of large companies
 Defined organisational structure – In order to operate in an organised manner, large
companies have a defined structure which forms the base of their underlying corporate
culture. They have larger number of employees which are divided into teams and
departments according to their specialisation and work profile (Baumgartner and Rauter,
2017).
 Wider market access – Large companies have more resources at their disposal and are
therefore, able to cater larger market which even transcends boundaries of countries in
the case of multinational corporations. This provides them wider range of customers and
larger revenue.
 More sources of finances – They have large scale of operation and therefore, possess
access to wider sources of finance in comparison to other forms of organisations. They
can avail funds from banks and other financial institution as per their market credibility.
They are also allowed to raise funds through capital market sources like share capital,
debentures, bonds, etc.
4

Section 2
Different types of organisations on the basis of incorporation
Incorporation of an organisation not only defines its legal structure but also forms the
base of its administrative structure, operation structure, tax structure, financial structure and
others. Different types of organisations on the basis of incorporation are mentioned below:
 Sole proprietor – This is the business organisation of a sole trader. Under it, both trader
and business are treated as single entity and therefore, has unlimited liability. In other
words, sole trader is personally responsible for all operations and transactions of the
business and accordingly, all profits and losses, which makes them personally responsible
to compensate all the liabilities incurred in the business (Blair and Hitchens, 2018). They
are only required to get themselves registered under HMRC as they are not governed
under definite law. They have restrictions regarding use of names and cannot use LLP or
Plc behind their name. For example, Ace Cafe, London.
 Partnership – Partnership is the form of business organisation in which two or more
persons or organisations come together to operate a business with commercial objectives.
In UK, entities can enter into conventional partnership with unlimited liabilities or
limited liabilities partnership with limited liabilities. They are governed by respective
legislations and need to get themselves registered with HMRC as well. Operational
conditions are decided in the partnership deed wherein functions, profit-sharing ratio, etc.
among the partners are defined. For example, partnership between Craving Coffee and
Pact Coffee.
 Limited liability partnership – These are partnerships with corporate like liability
structure. In other words, these are partnerships wherein partners and business are treated
as separate entities and their liabilities are capped according to the paid-up capital they
have been subscribed to, like directors of the company (Kraakman, 2017). Hence, they
are needed to be incorporated with Companies House and need to file their annual
accounts with the House. They are required to be registered with HMRC as well and have
tax structure like conventional partnership. For example, Yells Cafe LLP
 Public limited company – It is a form of corporate organisation. Therefore, it has to
compulsorily get itself registered with Companies House and HMRC both. They have to
file all financial statements with both the institutions. Public limited companies also have
5

to affix Plc behind their name and they have wider sources of finances available to them
as they can also raise money through the capital market sources like raising share capital
on London Stock Exchange. Company is owned by equity members and is run by board
of directors who are responsible to make all the operational changes. Profit of the
company is first used to pay out taxes and then further decision is made, either to retain
profit or distribute as dividend. For example, Dunkin' aka Dunkin Donuts.
 Cooperative – It is a community operated business structure. In it, business entity is
owned and operated by a group of people or community like of employees, local
residents, etc. who come together to initiate a business (Alvesson, 2018). Cooperative
organisations possess a flexible model. Decision-making is taken by majority voting as
all the members have equal rights in the cooperative structure in the operational and
financial matters like profit sharing, retaining, investing or distribution among the
members. They need to get themselves registered with HMRC. For example, Black Cat
Cafe, cooperatively run cafe in Hackney, London.
Section 3
Different organisational structures
Organisational structure of an organisation forms the basis for its hierarchical
development i.e. it forms the basis for command chain and communication chain in the company
(Brunsson and Olsen, 2018). Below mentioned are few organisational structures found in the
business organisations:
 Functional structure – Organisations following this structure group their people on the
basis of functional specialisations which makes the basis of departments in the
organisation like sales and marketing department, accounts and finance department, etc.
It allows for the specialised and efficient decision-making but can also lead to frictions in
the company due to reduced co-operations between the department. Companies like Zara
and McDonald's have functional organisational structure.
 Divisional structure – Organisations following this structure usually have multiple
products in their portfolios and divide these products in separate divisions to facilitate
smooth operational decision-making. Different divisions usually work as independent
companies working under the umbrella of group head company. It allows flexibility in
6

operations to divisional companies but this can also result in reduced effect of group head
over the division. Hospitality companies like Hilton Group and IHG Group follow this
structure wherein their individual units of hotels are divisions working under the umbrella
of group company.
 Matrix structure – Organisations following this structure are those companies which have
characteristics of both functional and divisional structures. This makes dual reporting a
norm in these companies (Jaques, 2017). Staff of these companies have to first report to
their functional heads and then same report is forwarded to the divisional management.
Double reporting reduces chances of mismanagement and frauds but it increases delay in
decision-making. Starbucks follows matrix structure.
 Flat structure – Above structures are known as traditional organisational structure while
flat structure is the one which takes on a different approach to management. Companies
following this structure encourages decentralisation and aims to eliminate bureaucracy by
reducing tiers of hierarchy. This makes way for innovation and creativity but can also
result in unnecessary struggle for power. Companies like Google follow this structure.
Impact of organisational structure over productivity
Organisational structure has a great impact on entire company as well on productivity. As
a healthy and coordinated environment is required to work efficiently.
 Structural Flaws- Whenever Starbucks faces flaws over its structure it has a negative
impact on it as it cannot effectively communicate with the executive team which could
lead in inefficiency and need to be repaired to work fruitfully.
 Managerial influence - It play a great role in organization because the efficiency of
managerial staff has a great impact over employees. Wrongly managed or a wrong
decision has a bad effect over productivity as the things will go on wrong direction
(Luhmann, 2018). And opposite to that smart decision taking will help in increase the
productivity and the overall performance of the company.
 Growth – It is another factor as company progress with a inadequate internal structure ,
improper communication which leads to the inefficiency of organization. And an
adequate structure designed in a proper way can lead to the productivity in more effective
manner.
7

 Creativity- innovative and new ideas lead to the organisation in a right and successful
way. Inefficient or wrong implementation increases the negative effect and might
mitigate the way of improving its productivity.
External factors affecting business
A PESTLE analysis is a tool which monitor company's external factors that have an
impact on company's performance. PESTLE is a framework which plays key role to understand
dynamics of the market and continuously improve the performance of the company (Seidl,
2016).
 Political factors - The main political factor of this company is sourcing of their raw
material “Fair Trade” practices should be followed while importing and exporting the raw
material. It should be stick to the rules and regulations of the country and from where it is
sourcing its raw material.
 Economic Factors - Economic factors play a vital role as it tell how effectively and
profitably the organisation is doing business. Factors like interest rates,inflation and so
on. But ongoing global recession has an huge impact on Starbucks revenue. researches of
the last months, it indicates that people has not reduced the consumption of coffee instead
they have moved towards the low priced coffee they are offering.
 Sociocultural factors - Social factors are the factors which includes the choices,
preferences and attitude of the customer ,different age groups, growth of
population,fitness consciousness. Company should focus on the ongoing trend because
tastes and preferences changes as the trend booms (Waldman and Jensen, 2016).
 Technological factors - Technology plays key role in organization as the use of
innovative and advanced technology leads to changes in the service pattern at the cafe.
Use of the agriculture study by growing the coffee plant help the company in a more
better way.
 Legal factors - Legal factors means the company should follow all the laws and
regulations prescribed by the government in terms of employment, consumer protection,
patent and safety laws.
 Environmental factors - Environmental factors means the factors which are related to the
use of eco-friendly products, usage of those products which does not pollute the
environment.
8

Conclusion
In the above report, it can be seen there are various type of organisations on the basis of
incorporation and structure. Organisational structure has an impact over the hierarchical
structural, corporate culture and operational approaches of an organisation. Further, it was
elucidated that a firms operates in a dynamic environment and there are various factors that
affect its operations which range from political to legal and social to economic environmental
factors.
9

References
Books and Journal
Alvesson, M., 2018. Organization theory and technocratic consciousness: Rationality, ideology
and quality of work (Vol. 8). Walter de Gruyter GmbH & Co KG.
Baumgartner, R.J. and Rauter, R., 2017. Strategic perspectives of corporate sustainability
management to develop a sustainable organization. Journal of Cleaner Production, 140,
pp.81-92.
Blair, D.M. and Hitchens, D.M., 2018. Campus companies: UK and Ireland. Routledge.
Brunsson, N. and Olsen, J.P., 2018. The Reforming organization: making sense of administrative
change. Routledge.
Hatch, M.J., 2018. Organization theory: Modern, symbolic, and postmodern perspectives.
Oxford university press.
Heidt, M., Gerlach, J.P. and Buxmann, P., 2019. Investigating the security divide between SME
and large companies: How SME characteristics influence organizational IT security
investments. Information Systems Frontiers, 21(6), pp.1285-1305.
Jaques, E., 2017. Requisite organization: A total system for effective managerial organization
and managerial leadership for the 21st century. Routledge.
Kraakman, R., 2017. The anatomy of corporate law: A comparative and functional approach.
Oxford University Press.
Luhmann, N., 2018. Organization and decision. Cambridge University Press.
Massaro, M. and et. al., 2016. Knowledge management in small and medium enterprises: a
structured literature review. Journal of knowledge management.
Seidl, D., 2016. Organisational identity and self-transformation: An autopoietic perspective.
Routledge.
Waldman, D.E. and Jensen, E.J., 2016. Industrial organization: theory and practice. Routledge.
10