Types of Companies and Organizational Structures: A Study on Easy Jet

This report discusses the different types of companies based on their size and formation, and the impact of organizational structures on business productivity. It also analyzes the external factors affecting business performance using PESTLE analysis on Easy Jet.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
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Contents
Introduction 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 businesses structures and internal factors affecting
business 7
Conclusion 9
Reference List 10
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Introduction
Business is an activity of manufacturing or buying and selling of goods and services
with a primary aim of earning profits. It is an entity involved in industrial, professional or
commercial activity. There are also some organisations which do not work with the motive of
gaining revenues but with a target of serving society. Such organisations are called as non-
profit- organisations (Ponte, 2019). This report is based on Easy jet, a low cost multinational
airline, headquartered in London. It is operating over 1000 routes in more than 30 countries.
This report differentiates the different types of industries on the basis their size and on the
ground of their formation. There is also a description on the various structures of an
organisation and its impact on the productivity It has also analysed the affect of external
environment on the business performance.
Section 1: Different types of companies and how they work
Micro business:
Micro business are small sized enterprises which normally carry their tasks with the
savings held by them or by taking small loans from the the financial institutions. These firms
perform at very small scale with a limited number of employees employed by them. They
help in boosting the economy and improving the quality of the people in the country.
Characteristics of Micro business:
 Owner- Normally, micro business are owned and controlled by a single owner.
 Balance sheet value and the turnover- The total of the balance sheet and the annual
turnover of such firms should be less than € 2 million.
 Number of employees: Micro level businesses cannot hire more than 9 employees in
the organisation in which the owner is also included.
For example, Boss Brewing Company.
Small business:
Small businesses are normally the retailers, the professionals and the manufacturers
producing at lower level. They are usually the sole proprietors or the partners operating an
organisation with limited capital with a restricted number i.e. up to 50 employees (Kwilinski
and et. al., 2019).
Characteristics of business:
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 Balance sheet value and the turnover- The annual turnover and the total of the
balance sheet of these firms is restricted to € 10 million.
 Reach- These firms operate in a small area normally to the extension of the city.
 Technology- Small businesses works with the support of labourers for operating
equipments and small machines. They do not use heavy machinery or any automatic
technology.
For example, Davison Canners.
Medium size business:
Medium sized businesses are normally the well-established organisations where the
owner of the company and its management team are separated from each other. They operate
at a medium scale and incur adequate profits which are higher in comparison to micro and
small scale firms. These organisations mostly focus on the production of goods and services
and are dependent on plant and machinery for carrying their operations (Nabila and Hasnul,
2020).
Characteristics of business:
 Balance sheet value and the turnover- The total of the balance sheet of medium
scale business should be less than € 43 million and the annual turnover of such firms
is less than € 50 million.
 Number of employees- The staff count of this type of organisation is more than 50
but less than 250 members.
 Area of Operation- These firms mostly produce goods for selling in the state or the
entire country.
For example, Giacom.
Large size business:
Large business can be defined as an enterprise which operates at a very large scale
and there is no restriction on the number of employees, annual turnover or the total
investment done by them is extremely high as compared to the other forms of business. These
organisations operate at a global level and are widely recognized and popular as well.
Characteristics of business:
 Number of Employees- The minimum employee limit for forming a large scale firm
can be stated up to 250 members. There is no prescribed limit for the inclusion of
maximum number of employees within the large scale firms.
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 Reach- These businesses can operate their organisation nationally as well as
internationally.
 Capital investment- These companies start their business by investing their own
money or by taking loans but after getting listed in stock exchanges they arrange their
capital from the general public in the form of shares.
For example, Easy Jet.
Section 2: Different companies from sole traders to cooperatives
and Limited Liability Partnerships
Sole trader business:
A sole proprietor is a form of business in which one person owns and manage the
whole enterprise. The person has the sole power to take any decision related to the firm.
However, an individual may hire someone for help but power to control the management
decisions remains in the hands of the owner only.
Characteristics of Sole trader business:
 Unlimited Liability- Liability in this type of business is unlimited which means at the
time of shortage of funds, the personal assets of an owner can be used to pay off the
business debts (Eijdenberg, 2019).
 Minimum Government regulations- There are minimum legal formalities at the
time of commencement for a sole trading firm.
For example, Freelance writer.
Partnership:
Partnership is a type of business in which two or more than two people sign a
partnership deal and start a business with some common goal. The agreement between them
governs the capital invested and the profit sharing ratios among the partners along with
various other terms and conditions related to partnership.
Characteristics of Partnership:
 Voluntary Registration- It is not mandatory for a firm to register partnership but it is
suggested to get it registered because it helps the partners at the time of conflicts.
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 Continuity- The partnership among the members comes to an end in case of death or
bankruptcy. It is not a continuous process, so demise of a partner will not mean that
the heir of a dead person can be taken as a partner.
For example, Red Bull and GoPro.
Limited liability business:
Limited liability business is a type of organization where the owners of the firm are
not personally liable for paying any sort of liabilities at the time of crises. It has a separate
legal entity apart from its members.
Characteristics of limited liability business:
 Perpetual Succession- These types of firms can continue their business even after the
retirement, death or insolvency of any member. There is no requirement to register the
organisation again (Julien, 2018).
 Artificial Legal Person- These firms exits as an artificial person in the eyes of law. It
enjoys all the rights and bears punishments just like an individual.
For example, Anheuser-Busch.
Public limited liability business:
A public limited company is an organisation which is managed by the board of
directors and owned by multiple number of shareholders. These companies are eligible to
offer their shares to the public and arrange capital from them.
Characteristics of Public limited liability business:
 Name- It is mandatory for this type of business to use word “LTD” at the end of the
name of the company.
 Prospectus- These organisations needs to issue prospectus to invite the general public
for subscribing its shares.
For example, Tesco.
Cooperative:
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Co-operatives are the type of businesses in which a group of people own and manage
the operations of the firm and use its products for self consumption. These persons form an
association to fulfil their social, cultural and economic needs.
Characteristics of Cooperative:
 Voluntary Association- In this type of firm any person can join or leave the business
by its own will. But a person cannot transfer its personal share to any other individual.
 Capital- Capital is invested by the members themselves in the form of shares. These
organisations are normally formed by the poorer people, so they can increase their
capital by taking loans from the cooperative banks (Pakarinen and Virtanen, 2017).
For example, Co-operative Housing Societies.
Section 3: Different business structures and external factors
affecting business
3.1 Identification of different organizational structures and explaining how
does organisational structure affect business productivity
Organisational structure can be defined as a method in which the various activities of
the firm are divided and coordinated so that it can help in achieving organisational goal. It
divides the duties according to their nature and creates coordination among them by assigning
these duties effectively. The two types of structure are discussed below:
 Functional structure- This is the most common type of structure which can be found
in almost all businesses. It focuses on creating departments on the basis of the type of
work or similarities in the job. For example, all the tasks related to the management of
employees are attached to the Human resource department. This type of structure
helps an organisation in avoiding duplication of tasks as all the departments are aware
about their separated duties. The functions assigned to one section do not coincide
with the duties delegated to the other unit. It also brings specialisation among the
employees as they tend to perform the same job repetitively. But it can harm the
productivity of the company if the various departments of the firm do not coordinate
with each other. For example- Starbucks.
 Divisional structure- This type of structure is adopted by the big organisations who
deal in either multiple products or multiple areas or both. Each division has its
separate control over its resources and have its own team different from other
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divisions. For example, a company is dealing in transportation, electronics and
clothings. Then it will have different divisions for its all the products with variant
managing and operating team. This type of structure helps in avoiding confusion in
the organisation as in the absence of this structure, tasks of different divisions will
coincide with each other and it will decrease the productivity of the business. But this
structure can also create inter organisational competition among different divisions
which is not good for the development of the firm. For example, Coca-Cola.
3.2 How different external factors affect the performance of a business –
PESTLE Analysis
External factors refers to those forces which are present outside the organisation but
affects the decision making process and performance of the company. These factors are not in
the control of the management (Rüegg-Stürm and Grand, 2019). The managers had to analyse
the impact of any change in this environment, so that corrective actions could be taken in
time. PESTLE Analysis has been conducted on Easy Jet to analyse the affect of external
factors on the performance of the business.
 Political Factor- This factor analyse the impact of various government decisions on
the firm. Easy Jet is an airlines company, so it is prone to the threat of terrorists
hijacks. Government of UK Shas enforced some rules regarding the security of the
passengers. For this, the company had to invest a heavy amount on the technical
appliances to detect such activities.
 Economical Factor- These factors include the determinants of economy like taxation
structure, pricing policy etc. Regular fluctuations in the price of fuel and currency
exchange rates influence the business of Easy Jet a lot. The cost of operating the flight
has been continuously increasing for the company because prices of fuels are
increasing. This resulted in the increase in the fare charges for the passengers which is
not good for the growth of the firm.
 Social Factor- This factor comprises of the cultural trends and choices of the
customers on the basis of their tastes, income, necessity and the population. With
time, the lifestyle of people has changed a lot and they prefer to travel through air
planes for business and holidays. This has increased the number of passengers for
Easy Jet.
 Technological Factor- It links with the innovation in the technology which can affect
the activities of the corporation. Increasing use of internet facility has helped Easy Jet
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to conduct their operations more efficiently and the customers can also generate the
information about the various routes operated by the company by sitting at their
homes only.
 Legal Factor- It relates to the laws or rules and regulations of the country which
affect the operations of the business. Easy jet has to pay take off and landing charges
as regulated by CAA, otherwise the firm has to face difficulties in finding suitable
airport for itself (Dhingra and et. al., 2020).
 Environmental Factor- These factors includes all the above factors along with the
pollution level, climate change etc. According to the rules of government, Easy Jet
has to make it sure that there is minimum carbon emissions from its air planes.
Otherwise they will have to bear the consequences.
Conclusion
It can be concluded from the above report that there are various types of businesses
according to there size and formation. Each type of business has its own characteristics which
is suitable for different types of firms as per their scale of operations. All these businesses
irrespective of their sizes can impact the operations of the other organisations. Along with
size , it is also very important to analyse the various types of organisational structures as it
affects the performance of the company. Selecting wrong type of structure can create losses
and chaos in the organisation. A firm should also keep an eye on its external environment as
it can impact the business negatively as well as positively.
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Reference List
Dhingra, N. and et. al., 2020. Instantiating Descriptions of Organizational Structures.
In Distributed Artificial Intelligence (pp. 141-156). CRC Press.
Eijdenberg, E.L., 2019. Exploring sustainability orientation of MSME-owners in
Tanzania. Journal of Enterprising Culture. 27(01). pp.35-59.
Julien, P.A. ed., 2018. The state of the art in small business and entrepreneurship. Routledge.
Kwilinski, A. and et. al., 2019. Environmental taxes as a condition of business responsibility
in the conditions of sustainable development. Journal of Legal, Ethical and
Regulatory Issues. 22. pp.1-6.
Nabila, P. and Hasnul, S., 2020, September. Optimization of Instagram promotion and
distribution using e-commerce platform for MSME Atkey. In Contemporary
Research on Business and Management: Proceedings of the International Seminar
of Contemporary Research on Business and Management (ISCRBM 2019), 27-29
November, 2019, Jakarta, Indonesia (p. 203). CRC Press.
Pakarinen, M. and Virtanen, P.J., 2017. Matrix organizations and cross-functional teams in
the public sector: a systematic review. International Journal of Public Sector
Management.
Ponte, S., 2019. Business, power and sustainability in a world of global value chains. Zed
Books Ltd..
Rüegg-Stürm, J. and Grand, S., 2019. Managing in a Complex World: The St. Gallen
Management-Model. utb GmbH.
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