Types of Companies: Business in Practice

This study material discusses the different types of companies and their structures, including micro, small, medium, and large businesses, as well as sole traders, partnerships, limited liability, and cooperatives. It also covers organizational structures and external factors affecting business, such as political, economic, social, technological, legal, and environmental factors.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
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Contents
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Introduction 2
Section 1: Different types of companies and how they work
P
Section 2: Different companies from sole traders to cooperatives
and Limited Liability Partnerships p
Section 3: Different businesses structures and internal factors
affecting business p
Conclusion p
Reference List p
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Introduction
A business can be explained as a regular trade, occupation or profession of an
person, it is a type of commercial activity that is done for a specific reason which
monetary gains. The first concern for any business activity is to find out the factors
necessary for its survival and most of them are dependent on one factor which is
money(Handy, 2020). There are countless types of business that operate in the
market place based on their size, objectives, number of partners and the products
and services they deal in. Businesses are essential for any economy because they
give survival commodities to not just themselves but the humans involved in them.
Section 1: Different types of companies and how they work
Micro business:
Micro business means a business that has a small amount of capital and a small
number of employees which is a trademark of a developing country, it helps the
jobless people to find employment(Sohari, Budiningsih and Sari, 2019). Micro
businesses increase the purchasing power, offer convenience and reduce production
cost which is very much encouraged and supported by the government of most
countries. Microbusinesses generally employee a less than 10 people which is why
they are the most common types of businesses around the world, their working is
similar to most business types but they usually find a lot of difficulty in getting loans
and credit for expansion and startup.
Many microbusiness can be found in retail sector, health care, social assistance and
construction, these businesses help in bringing areas that are backward into the
national development plans.
Small business:
Small scale businesses are those which generally have a small production capacity
and are mostly family owned and only deal in limited amount of products and
services. These are generally labour-intensive and have less use of machinery so
they lack technology wise with limited resources(Julien, 2018). The benefits of small
scale business include its ability to produce at a shorter time period which is a huge
plus point and there is more flexibility in decision making as compared to the larger
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industries. These industries are able to create more personal relationship with the
clients and customers and promote entrepreneurship and the use of renewable
resources because they give full control to the owner and work from the ground level
with appropriate manoeuvring.
Example of small scale business types include tourist guide services, tax
consultation services, textile industries, food processing industries and many more.
Medium size business:
Medium scale businesses and their employees are directly instructed and managed
by their owners and generally they can be up to 6 in number. These businesses
have less than 250 employees and an annual turnover under €50 million. These
businesses have a large number of operations on daily basis and a greater number
of business contacts and clients(Kurochkina and et.al., 2019). This type of business
falls in a weird position as it is too big to get discounts and too small to have the
prestige of a large scale enterprise. Generally these business evolve from small
scale businesses and due to their success they are able to afford the expansion into
becoming a medium sized business or industry. The examples of their contribution
can be found in exports, manufacturing outputs and employment sector of the
country.
Large size business:
A large business organisation encompasses the units of those whose investments in
their machinery and plant breaks the limit specified by the government. has more
than 250 employees and a turnover of more than €50 million. These industries are
able to produce products cheaply because they deal and operate in bulk with more
efficiency than small scale business enterprises(Stocker and Várkonyi, 2022). These
industries have more purchasing power, so are more dominant in the market place in
comparison to small scale and medium scaled business industries which is why they
are more automated and advanced technology wise as all this requires money on
large scale. The labour in large scale industry is highly skilled and trained with the
raw materials coming from various suppliers within the globe or a country. These
industries are located where there is abundance of raw materials and cheap labour
can be found to produce capital and consumer goods within the country that would
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make it self reliant. Examples of large scale businesses include textile industries,
telecommunication industries, information technology industries, silk industries,
petroleum and natural gas industries and more.
Section 2: Different companies from sole traders to
cooperatives and Limited Liability Partnerships
Sole trader business:
It is a form of business organisation which solely is owned by a single individual. This
form of organisation is generally small in size due to its ownership.
Characteristics:-
 Liability in sole proprietorship or sole trader is unlimited till the personal assets
of its owner. Its owner is liable for the firms credit as a whole(Formosa, 2018).
 In sole proprietor form of business organisation, the profit earned by the
operations in organisation is solely enjoyed by the owner as they are the only
runners of organisation and are responsible for the earned profit.
Examples:- A local grocery store, a small medical shop, roadside vendors etc.
Partnership:
It is a form of business organisation which has two or more than two individuals or
groups takes initiative to enter into an official agreement to run a business
organisation.
Characteristics:-
 Liability in partnership form of business organisation is unlimited and the
partners are liable to the firm credit up to sale of their personal assets to pay
their firms credit.
 Decision making in partnership is is comparatively effective than that of sole
proprietor as there are more than one owners in the firm which ensure better
efficiency in decisions.
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Examples:- Social chain, Mumsnet, Yoomo, Bremont, etc.
Limited liability business:
It is a hybrid form of business organisation which has properties or advantages of
two forms of organisations i.e. partnership and company.
Characteristics:-
 Liability in this form of business organisation is limited and its owners are not
liable for their firms credit up to their personal assets which is a property of
company(Rajanahalli, 2020).
 LLB has flexibility in their operations as there are limited number of owners of
the firm which enhances quick flexible and effective decision making which is
a property of partnership firm.
Examples:- Virgin Atlantic, John Lewis partnership, B&M retail etc.
Public limited liability business:
It is a form of business organisation which has a huge number of owners i.e. the
share holders of the firm.
Characteristics:-
 BOD (Board of directors) are the governing body in public limited company
which are trained professionals which ensure effective and efficient decision
making.
 Public limited liability company lacks in flexibility in decision making due to its
huge size and large number of owners. BOD needs to think thoroughly in
order to get more results.
Examples:- Barclays plc, Cineworld group plc, J Sainsbury plc etc.
Cooperative:
Cooperative is a form of business organisation which is setted up with the collective
or group efforts of two or more than two individuals with the motive of public services
and welfare.
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Characteristics:-
 The sole motive of cooperative business is to promote public welfare and is
not formed with the motive of earning profits(Loyola Idiakez, Udaondo Alberdi
and Uriarte Zabala, 2019).
 It is demographic in nature and the leader or manager of the firm is decided
by collective voting of all of its members where each vote has equal value
irrespective of caste, gender, religion etc.
Examples:- Central England cooperative, Lincolnshire cooperative, Channel Islands
cooperative etc.
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 framework with the help of which work
flows through a company. It emphasises on work coordination between groups and
their individual performances to help manage tasks. An organisational structure is
mostly formalised and rigid, however less traditional structures tend to be flexible
with the plus to being able to respond very quickly to changing market
situations(RECTOR, 2021). These structures were first introduced during the 1800s
at the time of industrial revolution and since then have come a long way with various
changes and types with their placement in most organisations and firms.
 Hierarchical organisational structure: The pyramid-shaped organisational
structure is one of the most common structures on the basis of its
implementation in organisations. In this framework the commands go from top
to bottom with each employee found with a supervisor. It helps to define level
of authority which gives responsibility to employees and manager and that
ultimately improves the productivity of an organisation.
 Functional organisational structure: This organisational structure is very
similar to hierarchical organisational structure which is why the top level has
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the highest amount of responsibility being descending as the level goes down.
In this structure employees are assigned specific works and roles based on
their capabilities and skills with each department managed separately. It
allows employees to focus on their roles which removes distractions and
increases productivity.
 Horizontal or Flat organisational structure: This type of organisational
structure is mostly found in newly formed organisations or small sized
businesses where there are fewer levels of management. As in new
businesses there is not much requirement of large number of management
which encourages more employee contribution in decision making and less
supervision overall. This type of organisational structure gives employees
more responsibility which generates a sense of belonging and fosters open
communication which decreases the time in fixing errors ultimately increasing
production.
3.2 How different external factors affect the performance of a
business – PESTLE Analysis
PESTLE analysis is a common framework used by firms to evaluate the macro
factors of the market environment These include Political, Economic, Social,
Technological, Legal and Environmental factors(Buye, 2021). It gives the respective
enterprise an idea about the components that might impact its working or the
industry it operates in.
 Political Factors: These factors relate to the policies and rules that came into
power due to their implementation by government. These include various
economic policies or legislation like taxation, conflicts, fiscal policies and trade
tariffs. In context to Marks & Spencer which is headquartered in London,
United Kingdom with operations around the world, it enjoys the freedom of
free trade which enables it to send it's products world wide without any
restrictions.
 Economic Factors: These factors have a direct impact on the long term
working of a company or an organisation in relation to the pricing of their
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products or the influence on the demand & supply of its services &
commodities. Marks & Spencer has strategies in alignment to the government
policies and so it provides quality products.
 Social Factors: These factors consist of culture and values of the industry's
consumers which affect the operations of an enterprise indirectly. These
include lifestyle choices, purchasing habits and peak buying choices. In the
United Kingdom the costumers have more purchasing power due to it being
one of the world's biggest economies which benefits Marks & Spencer
indirectly.
 Technological Factors: The components that affect the direct or indirect
functioning of firms in an industry. Better technology helps an organisation to
access data and manufacture goods at a faster speed with better quality.
Marks & Spencer being one of the United Kingdom's biggest retail firms have
to keep investing on the latest technology which increases the cost of
operations.
 Legal Factors: These are the factors that might affect both external and
internal environment of a company. These are the regulatory elements and
procedures of an industry which control safety and employment activities. In
Marks & Spencer the working conditions for employees is shaped according
to the government legal rules which benefits the workers.
 Environmental Factors: These consist of of all those components relating to
the physical environment and how to protect them. Sustainable development
is one of its famous component with examples of it found in tourism,
agriculture retail stores or food products. Marks & Spencer deals initiated the
movement of becoming a sustainable retailer which makes its operations
expensive due to the supply of such materials being expensive.
Conclusion
From the above report, it has been concluded that businesses are important for the
survival of an economy and the people and exist in many sizes, types. Depending
upon the capital invested these are Micro business, small business, medium sized
business and large businesses. Depending upon the objectives and types these
exist in sole trader ship, partnership, limited liability and cooperative business types.
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Organisational structure is a framework through which work flows in an organisation
and come in various types depending on the size and type of an organisation. Pestle
Analysis combines various types of external factors that affect the working of an
organisation including political, economic, social, technological, legal and
environmental factors.
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Reference List
Buye, R., 2021. Critical examination of the PESTLE analysis model. Action Research
for Development: Research Gate.
Formosa, A.M., 2018. From a sole trader to a company: a legal and financial
analysis (Master's thesis, University of Malta).
Handy, C., 2020. What is a business for?. Harvard business review, December.
Julien, P.A., 2018. The state of the art in small business and entrepreneurship.
Routledge.
Kurochkina and et.al., 2019. Management features of small and medium-sized
business enterprises. Revista Espacios, 40(34).
Loyola Idiakez, A., Udaondo Alberdi, A. and Uriarte Zabala, L., 2019. The Differential
of the Cooperative Company.
Rajanahalli, K., 2020. Limited Liability Partnership as a Better Alternative to
Incorporation. Issue 5 Int'l JL Mgmt. & Human., 3, p.514.
RECTOR, D., 2021. Organisational Structure.
Sohari, T.D., Budiningsih, I. and Sari, A., 2019. Strengthening of micro business
innovation. J. Bus. Econ. Review, 4(3), pp.131-138.
Stocker, M. and Várkonyi, L., 2022. Impact of market orientation on competitiveness:
Analysis of internationalized medium-sized and large
enterprises. Entrepreneurial Business and Economics Review, 10(1), pp.81-
95.
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