Types of Businesses, Organizational Structures and PESTLE Analysis of Tesco

This report covers different types of companies and their legal entities, various organizational structures, and a PESTLE analysis of Tesco. It also emphasizes the importance of identifying external environmental factors that could impact business strategies.

Business in Practice

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Define and explain the characteristics of micro, small, medium and large size businesses with
examples......................................................................................................................................1
Definition, characteristics and example of sole trader business, partnership, limited liability
business, public limited liability business and Cooperative........................................................2
Identify different organisational structures.................................................................................4
PESTLE analysis of Tesco..........................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business can be defined as an entity which has is having the provision of providing good
and services to consumers. There are different types of business which can be formed according
to the type of investment which the owner of a company have made. It depends upon the choice
of an individual that which form they have to chose according to the form of business they want
to make. But every kind of business has some or the other kind of risk which they have to face
according to the type of business they selects (Schaltegger and Wagner, 2017). Internal and
external are the two factors which can be difficult for the companies if proper measures are not
taken. Tesco is a multinational company which is famous for groceries and general merchandise
which was founded in the year 1919 and is having its headquarter in London, UK. This report
will cover different types of companies and their legal entities which will also cover internal and
external factors which can impact a business.
MAIN BODY
Define and explain the characteristics of micro, small, medium and large size businesses with
examples
Micro business- Micro business are considered to be very small in size which is having less
investment made on their business and employing less than 10 people. It can be said that micro
business usually earns less revenue comparing with other kinds of business and the market area
in which they have to cover the business is also very small. The objectives of such kind of
business are not huge because the investment made by them is also not huge. For example- Boss
Brewing Company
Small business- These kind of business are small in scale which is having a turnover of around
$6.5 million which is more than what is earned by the micro business. The kind of business
which is owned by a owner of a small business is a sole proprietorship and the area of operation
in which they conduct their business is also small (Boone, Kurtz and Berston, 2019). The small
business is considered to be a flexible because of which they are able to make sudden changes.
For example- Broadsword Event House
Medium size business-Medium size business are considered to be those which is having a
turnover of around $25.9 million in which the number of employees are more then 250. Medium
business are those type of business in which the objectives which are made are larger then the
1

small business and also the size of investment which is made by the business is also large. For
example-Verdant Leisure
Large size business-Large scale business are those which are more number of employees and
having the most complex type of management hierarchy as compared to that of medium scale
business. This type of business have different kind of specialisation in the skills and the methods
of production which they makes. Also, they are good in making innovation which can be in
relation to the use of technology which the company makes. For example- Tesco Plc.
Definition, characteristics and example of sole trader business, partnership, limited liability
business, public limited liability business and Cooperative
Sole Trader business
Definition:
This type of enterprises are owned by single person who is responsible for making
decision and is liable for any actions (O'brien, 2019). It is an unincorporated company with only
single owner who is accountable to pay personal income tax on the earned profits.
Characteristics:
 In sole trader business, person owning that company has full control over decisions and is
accountable for every loss as well as profit earned by it.
 The sole trader organisations are considered as same and the person operating business is
solely responsible for all the transactions.
 Sole traders are fully accountable for every debts the business has and is liable for to pay
that debt through personal or professional assets.
Example:
TH Electrical is a type of sole trader organisation which is established in UK and offers a
broad range of commercial, domestic and industrial services. The provide various type of
services to its clients such as PAT testing, Alarms installation, energy efficient lighting and many
more.
Partnership business
Definition:
This kind of enterprise is owned by two or more than two individuals who are responsible
for every profit and loss earned by business (Freudenreich Lüdeke-Freund and Schaltegger,
2

2020). In this type of organisations all partners are equally accountable for all the management,
debts, decision-making and all the other activities occurring in company.
Characteristics:
 This business is an agreement between two or more persons yo operate company's
activities. The agreement could be between people could be in writing or by oral
communication.
 The main aim of this business is to earn maximum profits that is shared by both
individuals owning organisation. Both partners equally shares earned profit and are also
accountable for loss.
 No partner could transfer their share to other person without having consent of another
partner. Both partners could also sell the business to any person or big firm without
concerning each other (Bogers and Jensen, 2017).
Example:
NotontheHighStreet.com is an organisation in UK which was founded by two
entrepreneurs Sophie Cornish and Holly Tucker. The company offers unique and handcrafted
gifts products for its potential customers.
Limited liability business
Definition:
This is a type of enterprise which are hybrid institutions that join together the
characteristics features of corporation with sole proprietors or partnership businesses (Murcia,
Rocha and Birkinshaw, 2018).
Characteristics:
 This business protect the owners of the company from being personally responsible for
paying debts or liabilities.
 The company is not accountable for paying any taxes from the directly earned profit.
 The rules and regulations of LLC varies from state to state.
Example:
Oxfam is a type of limited liability company established in UK which works to end the
poverty worldwide.
Public limited liability business
Definition:
3

These type of enterprises offers their shares to public which are just considered as
shareholders and are not responsible for any actions taken by companies.
Characteristics:
 Any individual could buy the shares of the company and can also transfer those to
anyone.
 These enterprises have separate legal existence which is different from its members who
owns them.
 Those individuals who buy the shares of the company are known as members.
Example:
HSBC Holdings plc is a public limited company established in UK which is a investment
bank and financial facilities holding organisation.
Cooperative businesses
Definition:
These type of enterprises are owned by those individuals who are mutually interested in
achieving same goal (Wood and Logsdon, 2017).
Characteristics:
 The person is solely interested in the objectives of company could join these businesses.
 These enterprises have open membership which means that any one irrespective of their
caste, gender or religion could join them.
 The business is operated by elected members.
Example:
Baywind Energy Co-operative is a company in UK which is a type of Cooperative
business.
Identify different organisational structures
Organisational structure is a method to determine how specific activities of an
organisation are directed to accomplish its objectives (Chen, Eshleman and Soileau, 2017). There
are various types of organisational structure which are discussed below in detail:
Hierarchical organisational structure
This organisational structure is like pyramid which is commonly used by many
companies. This structure form a chain of command from upper level which includes managers
4

or shareholders to lower level that is consist of employees. Tesco implements this type of
organisational structure in its management system.
Advantages
 This structure helps in defining level of authorities and accountability.
 This makes employees clear about their roles and responsibilities which reduce the
possibility of confusion.
 It helps organisation in enhancing their profitability as every member of the organisation
is working with all their efforts (Rüsen, Kleve and von Schlippe, 2021).
Disadvantage
 Employees of the same department could become competitive which might create
conflicts resulting in decrement in growth of company.
 Employees might feel ignored as it does not give them authority to express their opinions. The possibility of autocratic leadership style could increase within organisation as upper
management is taking all the decisions.
Horizontal or flat organisational structure
This type of structure is defined as flat because there are very few level of management
which involves superiors and employees (Mallor and Barnes, 2020). This type of organisational
structure is generally implemented by small firms or start-ups.
Advantages
 This organisational structure provide more opportunities to employees to put forward
their persuasions.
 This structure helps organisation in improving their co-ordination and enhance the
possibility of more interpersonal relationships.
 It also assist in maintaining open communication as every member could be able to take
part in decision-making procedure.
Disadvantage
 This structure might create confusion among employees as their roles and
responsibilities are not clear.
 As every individual in the company have different personality and opinions which might
increase the chances of conflicts among them.
5

 The profitability of company could also be impacted as employees are not provided with
right guidance.
PESTLE analysis of Tesco
This a marketing tool which is used by various companies to evaluate external
environmental forces which could influence their business in the existing market (Schaltegger
and Wagner, 2017). The PESTLE analysis in context Tesco has been mentioned below in detail:
Political factors: These components are concerned with the laws executed by
government of various countries which could impact the strategies of company. In context to the
selected organisation, it is the largest retailer in the UK which have to make ensure that the
products or services offered are of best quality. The company also operates its business in
various other countries where it has to follow their laws in order to remain in their market for
long time. The different tax policies of several countries could also impact its profitability.
Economic factors: These elements are related to the financial situations of countries
which could influence their growth and productivity. In case of the selected organisation, as it
operates in several countries where their factors such as revenue, distribution, sales and profit
impact its economic growth. For instance, in the situations of global pandemic COVID-19 the
company reported its pre-tax profit which was around £825m on 27 February 2020 which were
almost 19.7% lower than the year 2019. The sales of the company increases almost around 7.7%
to £39.4bn because of online demands. Despite the growth in sales the company faces fell of
profit by 20% (COVID-19: Tesco counts cost of pandemic as profits slide 20% despite
'exceptional' sales, 2021).
Social factors: These elements are related to the changing preferences or trend of people
and in society. In case of the selected company, the demands of customers changes with time
which are influenced by many factors such as social or cultural. In today's time people prefer to
buy online rather than sticking to same traditional shopping. The company needs to implement
strategies which could help it in growing with market trends.
Technological factors: These components of the model are concerned with advanced
and innovative technologies which impact marketing strategies or way of operating business of
companies. In relation to Tesco, majority of its customer have shifted to online shopping which
increases the pressure on company to operate its business on online platform. The company also
6

focus on promoting its products or services through online social platforms such as Facebook,
Twitter, Instagram and others.
Legal factors: These elements are related to the legal entities which could make
companies face some consequences if laws are not followed (Boone, Kurtz and Berston, 2019).
In case of the selected organisation, it has to follow all global marketing laws in order to
maintain business operations smoothly.
Environmental factors: These elements are related to environment which could impact
the working of company. In case of Tesco, the company has launched strategies known as phase
two to Remove, Recycle, Reuse and Reduce plan. By this scheme organisation aims to reduce its
carbon footprints impact on environment.
CONCLUSION
From the above discussion it has been estimated that there are different type of business
which are categorized according to their sizes. It has also been observed that various types of
business enterprises depends upon who are owning them. The various types of companies
executes different organisational structure which define their way of organising management. It
could also be said from the above report that it is very important for companies to identify their
external environmental factors which could impact their marketing and business strategies.
7

REFERENCES
Books and Journals
Bogers, M. and Jensen, J.D., 2017. Open for business? An integrative framework and empirical
assessment for business model innovation in the gastronomic sector. British Food
Journal.
Boone, L.E., Kurtz, D.L. and Berston, S., 2019. Contemporary business. John Wiley & Sons.
Chen, Y., Eshleman, J.D. and Soileau, J.S., 2017. Business strategy and auditor reporting.
Auditing: A Journal of Practice & Theory, 36(2), pp.63-86.
Freudenreich, B., Lüdeke-Freund, F. and Schaltegger, S., 2020. A stakeholder theory perspective
on business models: Value creation for sustainability. Journal of Business Ethics,
166(1), pp.3-18.
Mallor, J. and Barnes, A.J., 2020. Business law the ethical, global, and e-commerce
environment.
Murcia, M.J., Rocha, H.O. and Birkinshaw, J., 2018. Business schools at the crossroads? A trip
back from Sparta to Athens. Journal of Business Ethics, 150(2), pp.579-591.
O'brien, J., 2019. Category management in purchasing: a strategic approach to maximize
business profitability. Kogan Page Publishers.
Rüsen, T.A., Kleve, H. and von Schlippe, A., 2021. The Dynastic Business Family as Family,
Organisation and Network. In Managing Business Family Dynasties (pp. 7-18).
Springer, Cham.
Schaltegger, S. and Wagner, M. eds., 2017. Managing the business case for sustainability: The
integration of social, environmental and economic performance. Routledge.
Wood, D.J. and Logsdon, J.M., 2017. Theorising business citizenship. In Perspectives on
corporate citizenship (pp. 83-103). Routledge.
[Online]
COVID-19: Tesco counts cost of pandemic as profits slide 20% despite 'exceptional' sales. 2021.
Online Available Through: <https://news.sky.com/story/tesco-counts-cost-of-pandemic-
as-profits-slide-20-despite-exceptional-sales-12275048>./
8