Types of Companies and Organizational Structures in Business Management

This report discusses different types of companies and organizational structures in business management, including micro, small, medium, and large businesses, sole traders, partnerships, cooperatives, and limited liability partnerships. It explains how organizational structure affects business productivity and how external factors like PESTLE analysis impact business performance.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
Submitted by:
Name:
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Contents
1

Introduction 2
Section 1: Different types of companies and how they work 2 - 3
Section 2: Different companies from sole traders to cooperatives
and Limited Liability Partnerships 4 - 6
Section 3: Different businesses structures and internal factors
affecting business 6 - 8
Conclusion 9
Reference List 10
2

Introduction
A business refers to an organisation entity engaging in commercial and
economic activities. Business firm can be profitable as well as can be non-profitable
also which work for some social cause. Business range is very huge from sole
proprietorship to multinational corporation. Business also refers to an individual’s
effort to produce goods and services. Business have several types such as sole
proprietorship, partnership, corporations, limited liability corporation etc. Business is
not only limited to its several range but it also consists different types such as micro
business, small business, medium size business, large size business etc. This report
consists of different types of different types of companies and how they work and
what kind of organisational structure followed by different business.
Section 1: Different types of companies and how they work
Micro business:
Micro business refers to those enterprises which started with small capital
investment taken from bank or any other organisation and usually operates with
fewer than 10 employees (Micro Business vs. Small Business: What’s the
Difference?, 2022).
Mostly micro businesses have their span in local area markets. These businesses
work with a purpose of improving quality life of people in developing countries. It is
not only improving quality life of local communities but also contributing in local area
company. Fourex, Cobbler are some examples of micro businesses in UK.
Small business:
Small business are private owned sole proprietorship, partnership or
corporation that has few employees and annual revenue is small as compared to
international corporations (Dumas, et. al., 2018) Small businesses are able to
provide good quality product but they are facing different difficulties along the path
such as low human resources, low capital investment etc. The values perceived by
small enterprises employees can become regular behaviour of personnel’s and leads
to long-term existence of firm in competitive market. Small business is less focus on
technology they have more focus on labour intensive technology. Here are some
examples of small businesses in UK Broadsword event house, Cafe pod Coffee co
etc.
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Medium size business:
Medium size business company defined as having not more than 250
employees and a turnover of £ 12.9 million (Finding a Standard Definition for Small
Businesses, 2021). Medium size business may be family owned, but on the basis of
their size they have separate entity from its management. The financial requirement
of medium size business are drives by short term cash flow (Effendy, et. al., 2022).
The types of finance available to medium size businesses are bank loan, bank
overdraft, leasing etc. Track global group, plan.com, Crawford healthcare etc. are
some of medium size business in UK.
Large size business:
A large size business refers to who have at least 5000 employees, has an
annual turnover of more than 1.5 billion euros and total balance sheet total balance
of more than 2 billion euros (Large enterprise 2020). The Large size business have
separate legal entity from its owner and covers large range of customers. Exxon
Mobil, Wal-Mart, general motors are some large size businesses. It also includes
some international brands such as Apple, Google, Amazon etc.
Section 2: Different companies from sole traders to
cooperatives and Limited Liability Partnerships
Sole trader business:
Sole trader business is also known as sole proprietorship. It is a type of
business which is owned by one individual. In this business type business does not
have separate entity from its owner. The individual owner enjoy all profit generated
from its business and has unlimited responsibility for all debts and losses.
Registration of sole trade business is not much complicated. The business owner
requires to register to its local authorities who will determine that name submitted for
business is not duplicated by other business firm. Sole trade business has no
separate entity from its business and owner has unlimited liability.
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Partnership:
A partnership refers to a form of business in which two or more than two
people came together for earning and sharing of profits and losses through same
objective. Common partnership business examples include law firms, physician
groups etc. Partnership is a contractual relationship between partners. In UK there
are three types of partnership -
 Ordinary partnership
 Limited partnership and,
 Limited liability business
Limited liability business:
Limited liability business is form of business with advantage of limited liability
towards company with flexibility in partnership. LLP has its separate legal entity from
its owners. Moreover, no partner is liable for unauthorized actions by other partner.
Mutual rights and duties of partnership decided through partnership deed.
Partnership deed is a written document which specifies rules, regulations and duties
of individual partner and it also includes monetary share of every partner. Limited
liability business is an artificial legal person and has a common seal.
Public limited liability business:
As per UK company law a company refers to PLC when it has minimum share
capital of £50,000 and offer different types of share such as equity share, preference
share etc. (Public limited company (PLC) 2006). PLCs has advantage that it can
raise capital through offering companies share to public. A listing on public stock
exchange attracts traders and investors which lead to high capital investment. Public
limited company has its own perpetual succession.
Cooperative:
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A cooperative is an organisation that is owned and controlled by its member
for fulfilling mutual needs. These cooperatives are open and voluntary associations
and follow democratic structure. Services offered by cooperative provide benefit to its
owners. In cooperative business when members join they have to submit sum
amount of investment to run a cooperative business. There is no restriction of
members in this business type and every member have limited liability and equal
voting rights. This kind of structure encourages employees to contribute equal effort
and shared responsibility.
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
 Business structure
A business structure refers to legal structure of an organisation which impact
day to day operations a business.
 Functional structure
A functional structure of an organisation refers to a type of structure in which
organisation divided into different department on the basis of specialisation. These
departments are overviewed by functional managers. In each department employees
are liable to report their functional managers. Functional department includes sales
department, human resource department, marketing department and many more. In
large companies these departments divided on the basis of geographical areas and
in small business firms these departments occupy different offices in same building
functional structure provides stable work environment therefore, personnel’s have
clear view of their job scope(Roe and Dalton, 2019). Large companies often focus on
functional structure because this structure provides efficiency in specific department
and it automatically leads to organisational efficiency. Here are some key
characteristics of functional structure: -
1. There is top to down hierarchy- The companies who follow functional structure
they follow top to down hierarchy to convey information and down to up
hierarchy in reporting relationship.
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2. Employees specialise in certain task- Employees in functional structure are
hired in the basis of their expertise and they rarely do work in any other
department.
How functional structure effect business productivity
Functional structure effect business productivity positively it increases
productivity of employees. In functional organisational structure employees have
unique skills which motivate employees to work efficiently which can lead to high
productivity of overall company. The high confidence level of employees force them
to do task effectively and efficiently with supervision of superiors and under this
structure personnels shows higher productivity and they promoted to higher
positions.
 Divisional structure
The divisional structure refers to when organisation employees divided into
small units on the basis of product and services they produce not on the basis of
their job description(Harper, 2018).This structure units activities on specific product
line and every different product line has separate sales, marketing, human resource
department etc. The divisional structure allows semi-autonomus units that operate
independently to achieve organisational goals and objectives of organisation. In
divisional structure divisions have their own management team to lead and individual
accountable for their own actions which creates more accountability of actions. Here
are some characteristics of divisional structure: -
1. Selling of wide range of customer products
2. Dealing in both businesses to customer and customer to business services.
How divisional structure effect business productivity
Every organisational structure have different positive implications on business
productivity. In divisional structure every divisions head look for all aspects for which
they are responsible as a result of this employees skills of solving critical situation
make him suitable candidate for job higher positions. Moreover divisional structure
promotes expansion of business if a business enterprise tries to produce a new
product line then it can do adding a new division for that product line which does not
effect organisation existing structure and leads to high chances of growth for
business.
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How organisational structure effects business productivity
As per the result of above factors it shows that organisational structure plays a
crucial role in effecting employees performance and business productivity (Kang and
Busser, 2018). A poor organisational structure leads to employee’s poor
performance and a flexible organisational structure impose a positive impact on
employee’s performance and employees’ productivity.
How different external factors affect the performance of a business
– PESTLE Analysis
Pestle analysis is a business tool which used for analysing and assessing
business environment in which firm operates. PESTLE is an acronym used for
Political, economic, social, technological, legal and environmental.
 Political factors- The political factors impact business productivity in several
aspects. Rise in tax rate is an example of political factors if a government
increases tax rate for some companies and decrease for other then it will
definitely impact business in both cases therefore, it is necessary to have
relevant data which help firm in tackling business situation.
 Economic factors – Economic factors are those which effect an enterprise
economically such as unemployment rate, customer income etc. If
unemployment rate is high, it means government is not fully utilising its
resources. If unemployment rate is low, it means in operating country people
are employed and well settled and this is not a good sign of new entrant
companies because then company will not get enough workforce from local
market.
 Social factor- There is no doubt that social changes take place rapidly. The
social aspect focuses on family, colleagues, neighbour etc. these given
factors can impact on individual interests, opinions, etc. change in interest and
preferences adversely impact total sale of product and revenue earned by
product. Lifestyles, purchasing habits, education level, family size and
structure these given factors may impact business productivity socially.
 Technological factor- Technological factors are those which possess through
existence, availability of technological development. Digitalisation leads to
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highly globalisation internet is an example of technological factors. There are
almost every company deals with their customers through online websites. If
there will any internet connectivity issue for one or more than one days
therefore, company will unable to connect with its employees and may face
huge loss in total sale of products.
 Legal factors- The legal factors play a crucial role in determining success of
every business across the globe. These factors include organisational law,
securities law, contract law, consumer protection law, business license law
etc. if a countries government have strict law regarding giving licenses to new
firm who wants to being globalised then to situating business plants in those
countries is difficult task then company invest more time in solving critical
issues and it impacts on business productivity.
 Environmental factors- Now a day’s people are concern and aware about
environment. Environmental factors include climate, weather changes, air
pollution etc. If an organisation dealing in seasonal products therefore, due to
seasonal changes total sale of product may hamper.
Conclusion
It can be concluded that business have several types and every types have its own
different rules and regulations. Every aspect of business provides benefits and
liability as per its nature such as micro business does not has a separate legal entity
whereas large size business has a separate entity from its owner and an artificial
person in eyes of law. Organisational structure plays a crucial role in effecting
business productivity as if organisation have flexible culture therefore, employees are
free to give ideas and suggestion but if structure is rigid so, employees feel as a
slave and only follow actions given by their superior. Moreover, pestle analysis states
that external business environment affect business productivity through several
factors such as political, legal, economical etc.
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Reference List
Dumas, M., La Rosa, M., Mendling, J. and Reijers, H.A., 2018. Introduction to
business process management. In Fundamentals of business process
management (pp. 1-33). Springer, Berlin, Heidelberg.
Effendy, A.A., Mustofa, M.A., Basuni, R.R., Nurjaya, N. and Sunarsi, D., 2022.
Determinants of Small medium Micro business empowerment: Systemic
literature review. International Journal of Artificial Intelligence Research, 6(1).
Harper, H., 2018. Management in Further Education: theory and practice. Routledge.
Helmold, M., 2019. Tools in PM. In Progress in Performance Management (pp. 111-
122). Springer, Cham.
Kang, H.J.A. and Busser, J.A., 2018. Impact of service climate and psychological
capital on employee engagement: The role of organizational
hierarchy. International Journal of Hospitality Management, 75, pp.1-9.
Roe, R. and Dalton, P., 2019. Positive Framing Our Organisation. In Giving Hope:
The Journey of the For-Purpose Organisation and Its Quest for Success (pp.
57-78). Palgrave Macmillan, Singapore.
Finding a Standard Definition for Small Businesses, 2021.[Online] Available through:
Micro Business vs. Small Business: What’s the Difference?, 2022[Online] Available
through:
https://www.nerdwallet.com/article/small-business/micro-busines
Large enterprise 2020.[Online] Available through:
https://www.insee.fr/en/metadonnees/definition/c1035
Public limited company (PLC) 2006.[Online] Available through:
https://debitoor.com/dictionary/companies-act-2006
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