Types of Companies and Organizational Structures: Business in Practice

This report from Desklib discusses different types of companies, including micro, small, medium, and large businesses, as well as sole traders, cooperatives, and limited liability partnerships. It also explores functional and divisional organizational structures and how external factors like political, economic, social, technological, legal, and environmental factors affect business performance.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
Submitted by:
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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
Introduction
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The business environment including all the various organizational sectors and
segments that are accordingly categorized on the basis of different characteristic features that
various companies sections exhibit (Cappellino, 2020). Some might be public, private or
community owned in nature and others might belong to small, medium or large scale
functions. Based on this topic, the following report will specifically illustrate in the first
section the distinct types of businesses as per their sizes and will define and describe what
elements these entail. The second section of the report will examine certain ownership based
businesses such as sole proprietorship, partnership, limited and public liability. In the final
section it will lay out different organizational impacts of it.
Section 1: Different types of companies and how they work
Micro business:
As per the name itself suggests, a micro business refers to businesses which are run on
the smallest scale imaginable. It is with accordance to the specific activities or tasks that the
company caters to such as when it is a small production scale. In this micro business
environment a very small amount of working labour exacting less than 10 individuals are
hired for the completion of the required tasks. If the factors of production are in such a small
range then it's needless to say that the capital that is invested is also minimal and such a
business is easily launched as it requires only a few inputs. The financial resources are
usually scored from local banks or other firms in micro businesses. The degree of operational
risks to occur is also low along with easy decision-making prowess and limited business
acumen.
Small business:
In sharp contrast to the medium and large scale business organizations and invariably
bigger in statute and structure than its micro version, the small business type is also regarded
as small scale enterprises or corporations (Julien, 2018). This is so because the number of
employees it comprises is comparatively lower than the medium or large companies. Here the
personnel strength is approximately around 40 to 50. The profit ratio earned by the small
business firms are at a lower level than its other counterparts due to a confined range of
production and a relatively less popular company image. The main reason for this can be
attributed to the fact that the revenue earnings that are generated here depend on the size of
the business scale which is higher at medium and large organizational workplaces. Also the
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manufacturing and production range combined with its audit and sales department function at
a low level as both the inputs and outputs are moderate in scope.
Medium size business:
As is defined by the Companies Act 2006, a business structural type can be
considered as medium-sized if it incorporates its employee strength at around 250 in number.
Medium-sized businesses are mostly either family oriented or moderately managed
organizational firms where the ownership is distinctly set apart from the management. With a
definitive track record of its working nature the medium scale corporations are involved at a
limited rate of investment that seems to operate on a smaller scale than the large sized
companies. Here the machinery equipments are mainly labour-intensive in nature and thereby
the cost ratio expenditure on the installation of technological inputs is low which leads to a
significantly low overhead costs. Medium sized organizations work on less number of
employees as the scale of its operational management activities is quite minimum and most of
its business pursuits are carried out through local producers, suppliers and consumers (Ali
and Saeed).
Large size business:
Unlike all of its micro, small and medium corporate counterparts, the large sized
businesses generally carry out their business activities on an international basis and have
numerous global connections and expansion routes. These business organizations run in big
market circles and have organized corporate workflow structures and cultures. They also
have an intense range of interconnectedness of inter-departmental relationships with a
cohesive direct and indirect ownership which is part solely owned with board members and
part collaborative in nature. These firms appeal and cater to a wide number of employees and
customer segments. They dominate certain specific markets along with some niche holdings
where differing business and marketing decisions are applied. These are highly capital
intensive and consist of an enhanced competitive workplace environment which leads to
augmented sales and increased revenue earnings. Here the risk assessment is duly dealt with
and the ability to garner helpful partnerships is also abundant.
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Section 2: Different companies from sole traders to
cooperatives and Limited Liability Partnerships
Sole trader business:
The sole trader form of companies conduct their business on a solitary proprietorship
basis. This means that the owner of the particular company is a single individual that has
amassed the total power, control and authority over the business firm (Rye, 2020). As the
name itself suggests, a singular person is responsible for all the decisions that are taken which
means that entire liability lies with that sole owner only. Also, in this sole ownership scenario
the stakes of risks are either high or low depending on how much debt the proprietor is in or
how much damage has been done. The number of shareholders are also low to zero in this
company type.
Partnership:
Partnership is the kind of company category where it is descriptive in the name there
are more than one or two partners that are collectively running the business organization. In
its formal definition the partnership company structure is shouldered by more than one
individual where all the profit and losses are shared by the respective partners. The business
has to be conducted equally and justifiably where prior to making any decision all the
partners are consulted until a unanimous decision is arrived at. As to the legal requirements,
these are to be addressed according to the personal opinions meaning that it is not mandatory
to adhere to all legalities.
Limited liability business:
Limited liability business is defined as the corporate structure wherein the owners are
not personally liable for the acts done by the company (Halliday and Okara, 2022). This is
hybrid entities that amalgamate the characteristics of companies and those of sole
proprietorship and partnership. It simply defines that liability of the owners are limited up to
the amount invested in the company are not accountable for the losses and debts that of a
company. The limited liability company has separate legal existence in the market and are
flexible and simpler in the taxation and the operation and management of the businesses.
Purpose to make a limited liability business is to protect the owners that helps them to survive
in the market at the time of losses that occurs in the company.
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Public limited liability business:
According to the Companies Act of 2013, the public limited liability company is one
of the most favoured business options that people choose as the business environment that it
provides is conducive in nature as the prospect of entering further market shares is high.
Public limited company consists of a wide scope of legislative freedom as the individuals
who adopt such a company structure have to deal with self-owned property which is later on
shared by other stakeholders and the stakes of debt recurrences are comparatively low. Both
the directing members and shareholders are not liable to the company creditors (Amirian,
2020).
Cooperative:
The cooperative business is the business that is owned, managed and operated for the
benefits of the members of the cooperatives (McKillop and et.al., 2020). Cooperatives are
democratic organization. The purpose to make a cooperative business is to realize the
economic, social and the cultures needs of either the member of the organization or the
surrounding community. Cooperatives have a strong committent towards strengthening the
community where the business exist or serve their products. Five types of cooperative society
are retail, worker, producer, service and the housing cooperatives. Advantages of the
cooperative society are that all the members in the cooperative society have equal voting
rights and the structures. The cooperative society are arranged in such a manner that all the
members of the organization gets an equal shared responsibility to operate and manage
cooperative society. There is no such limit on the number of members that can form
cooperative society. Cooperative society focuses on delivering mission rather than
maximizing profits to the investors.
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
There are mainly two type of business structure functional and divisional that impacts
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business productivity in different ways.
Functional structure-
The functional structure of the organization divide all the operations of the company into
different departments and different area of expertise such as department of finance,
department of production, department of marketing etc. this is divided in such a way that all
the employees working in that particular department are specialized in that function and the
role given to them to serve particular department (Kumar, and et.al., 2019). It impacts
organization in positive way as different department leads business to the greater
productivity. The productivity is the result of the efficiency that is generated in the
organization by completing task on time. Every functional department is headed by
functional manager that is responsible to maximize the expertise of department to achieve the
business objectives on time. Communication in such organization flows straight to top
management and there is very fewer interactions between department. The importance of
functional structure are as follows-
 Hierarchy in such structure is clear and transparent which helps to make
communication system better in the organization.
 Roles and responsibility of every department is clear which helps in easy
accountability for the work.
 Employees specialize in different departments help company to increase productivity
that In turn maximize profits of the company.
Divisional Structure-
Divisional structure of the organization means that the structure is divided into various
departments on the basis of product, region or the territory (Islami, and et.al., 2021). Every
unit is managed by divisional manager whose role is enhanced performance in that particular
unit by supervising it. For example company organized on the basis of divisional structure
can have operation groups in US, Europe, Australia. Divisional structure is implemented by
those organizations that sells wide variety of the products in the market. It is also followed in
the organization that sales both business-to-consumer and business-to-business services. The
divisional structure is always focused on maximizing profits be serving different clients
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locally and internationally. The advantage of divisional structure are as follows-
 Divisional structure created more accountability that means individuals in the
organization are responsible for the acts done by them.
 Divisional structure helps organization in gaining competitive advantage in the
market, business scope gets wider with divisional structure.
 It also helps organization in enhancing the culture of the company by allowing all the
unique perspectives of the different employees working at different levels in the
organization.
3.2 How different external factors affect the performance of a
business – PESTLE Analysis
The PESTLE Analysis working in the outside environment has major impact upon the
performance of the business in the organization (Matovic, 2020).
POLITICAL- Political factors are all those factors that are related with the government of the
particular country. The political factors involve fiscal policy, tax policy, trade barriers and
traffics etc. These factors have both positive as well negative impact on the performance of
the company.
ECONOMICAL- The economic factors like the rise in inflation rate of an economy would
affect company in negative way. These are all factors that determines the performance of the
economy that directly or indirectly impact company.
SOCIAL- The social factors are all those factors that are related with the social environment
of the country like cultural trends, demographic analytics, population growth etc.
TECHNOLOGICAL- Technological factors are those factors that are related with the
innovation in technologies and affects operations of the company favourably or unfavourably
like automation, research and development, technological awareness counts under it.
LEGAL- Legal factors are all those laws that affect the continuity of the business in the
country. The consumer laws, labour laws, safety standards and laws counts under it.
ENVIRONMENTAL- The environmental factors are those factors that are determined bu the
surrounding environment. Business analysis of environmental factors includes climate,
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weather, location, global change in environment etc.
Conclusion
From the above report It can be said the there are various types of businesses running
in the market like the micro business, small business, medium size business and the large
business. The report also addresses the sole trader, cooperatives and the limited liability
partnership. Furthermore, the report has discussed the functional and divisional structure and
how that structure affects the productivity of the business. Lastly the report analysis the
PESTLE structure that affects the business performance.
Reference List
Books and Journals
Ali, E.J.M. and Saeed, M., A STUDY OF FIRM GROWTH IN THE SMALL AND
MEDIUM-SIZE BUSINESS: A CRITICAL REVIEW.
Amirian, I., 2020. Limited Liability: Brief Historical Review and Analysis of Rationales.
Available at SSRN 3834225.
Cappellino, A., 2020. How to Choose the Right Business Organization Form.
Halliday, C.E. and Okara, G.C., 2022. Challenge and Prospects of the Limited Liability
Partnership and the Limited Partnership as Vehicles for Business in Nigeria. Journal
of Commercial and Property Law .9(2). pp.70-81.
Islami, E., and et.al., 2021. The Role of Departmentalization, Divisional Structure and
Strategic Business Units (SBUs) in Enterprises in Kosovo. Calitatea .22(183). pp.18-
22.
Julien, P.A., 2018. The state of the art in small business and entrepreneurship. Routledge.
Kumar, V., and et.al., 2019. Advanced Functional Structure‐Based Sensing and Imaging
Strategies for Cancer Detection: Possibilities, Opportunities, Challenges, and
Prospects. Advanced Functional Materials .29(16). p.1807859.
Matovic, I.M., 2020. PESTEL analysis of external environment as a success factor of startup
business. ConScienS, p.96.
McKillop, D., and et.al., 2020. Cooperative financial institutions: A review of the literature.
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International Review of Financial Analysis .71. p.101520.
Rye, J., 2020. What is the difference between a sole trader and a limited company?. In Setting
Up and Running a Therapy Business (pp. 132-134). Routledge.
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