Types of Companies: Analysis of Different Organizational Structures and External Factors Affecting Business

This report provides an analysis of different types of companies, their organizational structures, and external factors affecting business productivity. It includes a PESTLE analysis and covers micro, small, medium, and large businesses, as well as sole traders, partnerships, limited liability businesses, and cooperatives.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
Submitted by:
Name:
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Contents
INTRODUCTION..........................................................................................................2
MAIN BODY..................................................................................................................3
Section 1: Different types of companies and how they work....................................3
Section 2: Different companies from sole traders to cooperatives and Limited
Liability Partnerships.................................................................................................5
Section 3: Different business structures and external factors affecting business....7
CONCLUSION..............................................................................................................9
Reference List...............................................................................................................9
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INTRODUCTION
The aim of this report is to analyze companies and their operations. A legal
entity created by a group of people to carry out a business will be termed as a
company; it can also be understood as a corporation or a partnership either
incorporated or not under the company act 2013 will be considered as a company.
There are several kinds of companies which uses different kinds of methodologies to
execute their operations depending on the nature and size of the organization
(Samusenko, Plaskova and Prodanova, 2020). According to the Companies Act
2013, a company have a separate legal entity and is considered a s an artificial
person possessing perceptual succession, common seal and the right to be sued
and to be sued. In this report a brief analysis will be executed on the various kinds of
companies and their way of conducting its operations, the structures of the
organization will be taken in account followed by the affects the macro factors and
the external environment causes to the various organizations.
MAIN BODY
Section 1: Different types of companies and how they work
Micro business:
Micro businesses also known as micro enterprise, are the small business that
provides employment to lesser individuals. The major geographical area under which
the company operates, is their local communities where they aim to sell their
produced goods and services. The capital for which is financed by banks for their
operational activities (Alanzi, 2018). For micro enterprises, micro credit is provided
who do not possess any employment or collateral along with who do not have any
credit history, this micro credit facilitates in meeting their capital requirements in the
most reasonable manner. The functions of micro businesses can vary on the nature
of the business; the various kind of micro businesses are as follows:
 Farmers
 Street Vendors
 Independent small shop owners
Small business:
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Small businesses are identified as a private corporation or partnership and is
comprised of lesser employees, small businesses are capable for applying for the
government initiatives. Regardless the small organizations can imply the
technologies and quality assessment systems as large enterprises do if the
organization is making profits and do not face any financial turbulence. For effective
management of human resource and adequate allotment of its finances, the
organization owners treat their and company's wealth separately regardless of any
financial situation, quality assessment of the products and services are done
frequently(Helmold2019). On regular basis incentives are provided to employees as
it is necessary to keep them motivated, along with it builds their faith in the company.
Medium size business:
Under the companies act 2006, medium size businesses are defined as the
companies who have less or up to 250 employees. Medium size businesses are
family owned businesses who have a well-structured operational setup and trusted
financing sources, the organization used its debt or new equity to fund and support
the business operations. Medium sized companies acquire its funds from multiple
sources at the same time, well the sources can be authorized or
unauthorized(Horch2018). The functioning of a medium size industry is not that
different from any large scaled business, the only difference that could exist is
between the technologies and infrastructure that is being used depending on the
profits that are being generated.
Large size business:
Businesses which have the capacity to employ more than 500 individuals or
equal to it, businesses like these are considered as above average as they have
much larger operational opportunities and the structure becomes complex. The
structure is followed by large amount of resources including financial resources, they
are capable of investing huge amount in technologies and soft wares to make their
operations more effective which will eventually increase the profit margin to a certain
level (Anyaegbunam, Ndukaihe, Nwankwoand, Ugwu,2021). The organization hires
more skilled employees in comparison to small scale business which helps to
achieve the predetermined targets of the organization, investment in correct
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technology and software makes the operational process smooth which helps the
organization in long run.
Section 2: Different companies from sole traders to cooperatives and Limited
Liability Partnerships
Sole trader business:
Sole trader’s business also known as sole proprietorship is not incorporated in
neither of the company’s act. In a sole proprietor who pay the tax through his income
for the profits made in the business, as creating a separate trade mark is not
necessary the procedure carries out the business under his own name. Its one of the
most convenient form of doing a business (Shahid, and Muchiri, 2018). Initially small
businesses start off as a sole procedure, with time and increased investments it
become capable of hiring more employees for the systematic execution. As
compared to other businesses sole procedures are provided functional autonomy
under which the government do not interfere much in the functioning of the
organization.
Partnership:
Partnership refers to the formal agreement that takes place between two or
more than two individuals or group of individuals for carrying out a business and
taking a part in the profits and loss generated. Under certain conditions partners do
share limited liability, partnerships enjoy few tax benefits which organization do not.
Partnerships created with limited liability is a common practice that working
professionals including doctors, lawyers, accountants follow, which provide a sense
of security to the partners in regards to their profits. Which works in this way if in any
situation one of the partners is caught liable for being involved in any malpractices,
the asset belonging to his partner will not be at risk.
Limited liability business:
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It is a kind of business model under which the members of the business also
known as the owners are protected from repaying any company's liabilities from their
personal assets, the rules and regulations implying to LLC can differ among different
state authorities. Any individual or company can become a part of LLC, the limited
liability companies are not required to pay tax directly on the profits made by the
organization, as the profits goes within the members of the company and they pay
tax accordingly depending on the amount they have received (Attar,Abdul-Kareem,
2020). The state under which the company is working is required to sign the article of
organization, as it is required to establish limited liability companies. The document
lists the all the obligations that will exist between the company members/owners.
Public limited liability business:
A company that offers it shares to public by issuing a prospectus is referred
as a public limited liability company. Under PLC the owners or the members of the
company are not liable to pay for the company’s loss more then, they have invested
in the company’s shares. Companies that are listed under the London Stck
Exchange are all considered as PLC's. Public limited companies are responsible to
pay to release timely reports for its existing stakeholders and for their future external
investments on the other hand privately owned companies are not supposed to do
so. The biggest advantage of forming a public limited company is the ability to issue
its shares on public stock exchange which attracts the ideal investors and support
the businesses, on the other hand the public companies are required to hold a
transparent accounting between its stakeholders and host a general annual meeting
to keep them updated with the changes, which private companies are not supposed
to do.
Cooperative:
A co-operation is created by individuals to target an unfocused need and
more specifically for the benefits of the members of the company. People of different
working professions have different needs to be meet such as dancers need a dance
studio to practice, freelancers need a co working place for the office environment.
People with problem solving capabilities formulates plans to target the issue and
provide a solution, for which a group of well qualified individuals are required which
lead in the formation of cooperatives (Diefenbach, and Gleich,2018). It’s not
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necessary for cooperative to incorporated under the company’s act, but are required
to draft a document including their resources and responsibilities.
Section 3: Different business structures and external factors affecting
business
3.1 Identification of different organizational structures and explaining how does
organizational structure affect business productivity
There are 5 kinds of organizational structures including:
1. Horizontal/ Flat: This structure is suitable for the companies who do not
have a large employee base to handle and whose hierarchy is not that
complex, delegation under this structure is done efficiently which provides
adequate responsibilities to the employees. Affects: Can build up a lot of
confusion among the employees as they will not be knowing whom thwy are
supposed to report.
2. Divisional: different department in an organization will be having different
organizational structures to maintain their resources effectively. This
organizational structure is used by companies will large number of employees
as it provides flexibility, it motivates to take practice effective decision making
under smaller time duration. Affects: This can lead to internal competition
because of lack of communication, which will not be beneficial for the
company in the long run.
3. Matrix: It helps in managing cross- functional teams, basically teams of
different backgrounds working towards the same goal. The structure helps in
providing a dynamic perspective of the organization, it helps the project
managers in filtering the right skills among the employees required for the
effective execution of the project. Affects: this structure is not static in nature
which means that it can change under favorable or unfavorable conditions,
which results in dispute among the mangers as well as the team mates.
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4. Team based: This organization structure does not work on the basis of the
traditional management, and allots its resources and focus on problem solving
and delegation of power. The structure increases efficiency as it fits well with
the modern project management methodologies such as agile and waterfall.
Affects: In some way it disturbs the necessary hierarchical structure of the
organization which creates complexities in the promotions of the employees.
5. Network: This structure primarily focuses on communication between the
several internal departments of the organization, as these very less
companies execute their operations under the same roof, as compared to
other structures it does not focuses on the hierarchy but on the
communication. Affects: the process of dealing with multiple departments
can become way too complex to work with, which will create dilemma for the
employees.
3.2 How different external factors affect the performance of a business – PESTLE
Analysis
Pestle analysis is a framework which is used to evaluate external business
factors in which companies operates. It is comprised of 6 external factors; political,
economic, social, technological, legal and environmental. These factors affect the
functioning in several ways.
 Political: Each and every company gives its utmost priority to the factors
included in this factors; tax and trade regulations, environmental policies, etc.
are needed to be taken into consideration.
 Economical: This factors refers to the market or the economy trends of the
nation the company is working in, this helps them to develop reliable
strategies and provide the right investment opportunity for the business.
 Social: A company cannot survive if the product does not match with the
beliefs and traditions of the place they are executing their operations. The
product should be audience specific, as then it will be able to deal with the
consequences.
 Technological: Companies need to adapt with the the updated technological
trends to keep the company's pace with the competition market.
 Legal: Legal norms related to employment, patents, migration a production
should be analyzed.
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 Environmental: Sustainability is a major concern on the planet which needs to
take care of which all the resources available.
CONCLUSION
In aim of the essay was to provide a brief overview about the operational
setups of different kinds of organizations, the kind of structures they have adapted
and their impact on the productivity and efficiency of the company, followed by the
external factors that affects the performance of the company i with the help of
PESTLE Analysis.
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Reference List
Samusenko, A.S., Plaskova, N.S. and Prodanova, N.A., 2020. The analysis of the
external environment to determine the practical focus of applied research
and development in the framework of innovation. In Complex Systems:
Innovation and Sustainability in the Digital Age (pp. 245-255). Springer,
Cham.
Alanzi, S., 2018. PESTLE Analysis. Project Management.
Helmold, M., 2019. Tools in PM. In Progress in Performance Management (pp. 111-
122). Springer, Cham
Horch, H.D., 2018. The intermediary organisational structure of voluntary
associations. Voluntary Sector Review, 9(1), pp.55-72.
Anyaegbunam, E.N., Ndukaihe, I.L., Nwankwo, O.A. and Ugwu, F.O., 2021. The
interplay between interpersonal relationships and organisational learning
behaviour: influences of psychological safety. Journal of Psychology in
Africa, 31(6), pp.549-554.
Shahid, S. and Muchiri, M.K., 2018. Positivity at the workplace: Conceptualising the
relationships between authentic leadership, psychological capital,
organisational virtuousness, thriving and job performance. International
Journal of Organizational Analysis.
Attar, M. and Abdul-Kareem, A., 2020. The Role of Agile Leadership in
Organisational Agility. In Agile Business Leadership Methods for Industry
4.0. Emerald Publishing Limited.
Diefenbach, U., Wald, A. and Gleich, R., 2018. Between cost and benefit:
Investigating effects of cost management control systems on cost efficiency
and organisational performance. Journal of Management Control, 29(1),
pp.63-89.
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