Types of Companies and Organizational Structures - Desklib

This report discusses different types of companies, including micro, small, medium, and large businesses, as well as organizational structures like functional and divisional structures. It also covers external factors affecting business productivity through a PESTLE analysis. The report focuses on McDonald's as a case study. Course code and college/university are not mentioned.

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
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 9
Introduction
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Business environment means to all factors which impact the working of the business
it can either be internal or external factors. It helps organization in evaluating those
factors in order to make proper strategies for better decision making which improves
over all growth and profitability. It also assists in overcoming threats and
weaknesses which firm can posses from its external and internal environment. The
following reports is based on McDonald which is a American fast food company
expanded globally. It was founded in 1940 as a small restaurant in California, United
States Of America. The aim of the report will be on how different types of company
works, various companies from sole traders to cooperatives and limited liability
partnership. Moreover different business structure and external factor affecting
business productivity and pestle analysis of external environment affecting the
respected company.
Section 1: Different types of companies and how they work
Micro business:
It refers to small enterprise that employ less then 10 people and require less capital
investment to start a business and it usually operates within its local area. Usually
micro enterprise serves as a hallmark of supporting economy as well as the country.
It gives people the option to get employment in a desirable industry. It also helps in
in enhancing buying power, reducing manufacturing cost etc. Apart from this,
government also motivates people to start their own micro enterprise in rural or low
income places that not only helps organist but also assist in development and
economy. Moreover, usually micro enterprise focuses to boost sustainable evolution.
These businesses should be equally treated as any large business in strategies ,
decision making and professionalism which can help them to convert into more
bigger entities in future (Rapkin, 2019).
Characteristics of Micro business:
 Employees working in these type of businesses are very low, It basically
consists of 1-9 people only.
 It require very less amount to start a business.
 Its target market is usually selected, specific and smaller area which
generates low revenues.
Small business:
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Businesses which operates on a small scale level that includes very low funds for
investment as well as it requires very low number of workers with few machines.
Small scale businesses are type of industries which provides services and products
on a very small scale. These businesses plays an crucial role in economical
evolution of a country. These industries requires capital less then 1.
Characteristics of small scale business:
 Small scales businesses require low numbers of employees with capital less
then 1 .
 Entrepreneurs are the sole authority of the businesses who decides about the
organizational matter.
 It works in a small niche area which operates in a one selected market (Li,
Yang, and Huang, 2019).
Medium size business:
These businesses operates in larger basis then small size but not that large to
compete with large scale industries. It usually requires more employs then small
scale industries about 50 to 250 workers and usually involves more capital then
small sized businesses. They operates in a bigger market share in order to sell their
products and services and their turnover is usually below £50 million.
Characteristics of medium size business:
 It has a larger market share to sell their products and services.
 Decision making authorities are delegated according to the different
departments.
 It can attract large investment for smooth functioning and expansions.
Large size business:
In this type of business category, businesses with bigger size in terms of operations,
production, and economies. They recruit lots of employees to generate more sales
revenue by targeting not only domestic but global markets. It usually involves more
then 250 employees and having a turnover of more then £50 million.
Characteristics of large size business:
 They hire skilled and professional work force to support their organizational
functions than of small businesses.
 They invest huge capital investment in order to expand and take competitive
edge over its competitors with having large resources.
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 Large scale businesses usually targets bigger market share and having some
of their production or subsidiaries facilities in many several countries (Jarwal,
2020).
Section 2: Different companies from sole traders to
cooperatives and Limited Liability Partnerships
Sole trader business:
Sole trader-ship is a kind off a business which has a single owner who bears all the
risk on the business failure and also has the total responsibilities of the business.
In a sole trader ship, owners have all the authority and decision making powers and
the owner is fully entitled to the all the profits which business generates.
Characteristics of the sole trader:
 In a sole proprietorship business, liability of the firm can be unlimited and
proprietor suffer every loss of the business even owner's private property is
liable for the obligations occurred.
 As decision makers of the business is their owners who is in position to
maintain all the business affairs and secrecy to himself.
 Business and owner are the same entity in this form as loss of the business
will be owner's loss and profit will owner's profits.
Partnership:
In this form of businesses it contains two or more partners who share similar thoughts of
running a business. All the profits, losses, responsibilities are mutually shared by all the
partners of the enterprise. Partnership business requires a legal agreement which contains
everything related to business and responsibilities which is mutually decided by every partner
of the firm prevent further conflicts.
Below are some characteristics of the partnership business:
 Every partner have a risk of unlimited liability for all the debts of the firm.
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 No partner have a right to share its partnership with other person or include another
partner in the company without the consent of the other partners (Chamberlain, and
Anseeuw, 2019).
 Legal Partnership deed is required to avoid later conflicts.
Limited liability business:
These are the firms which combines features of corporations and partnerships. It
also refers to hybrid combination of partnership and company which involves two or
more partners to establish it. It is usually settled by the skilled professionals who
involves partners of this business form in according to their share percentage.
Following are the characteristics of the Limited Liability business:
 It is the combination of both company and partnerships.
 Liabilities are limited as according to the investment contribution of the
partners.
 Taxes are paid by the partner not by the firm.
Public limited liability business:
It is a type of company which can legally offer its shares to sell to the general public
and its their choice if they want to offer their share to the public or now but they have
the option if they wants to. In order to start a public limited liability business there are
some particular obligations that a PLC needs to meet.
Below are some characteristic of it:
 Company has a separate legal entity from identity of its shareholder or
partners.
 Shareholder can easily transfer their shares to the public whenever they want.
 Shareholders liability is limited in according to the shares owned by them.
Cooperative:
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It is one of the form of business organization which voluntary. As it is a voluntary
association people are free to join and free to leave whenever they want where
membership is also voluntary (Cho, and Lee, 2021).
Characteristics of it are:
 There are no owners in such type of organization, it is controlled and
managed by their members.
 It is basically a non profit organization.
 It does not get affected if the members are leaving or new members are
joining.
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
Functional Structure- It is a business structure which makes groups of employees
in the organization based on to their profession and skills required for the particular
job role. Many involves chain of command or level of hierarchy which have various
sections under the supervision of the managers or leaders. Majorly businesses
operates in this structure as it combine employees who have similar skills, talents
and knowledge that assist companies to accomplish their goals.
Divisional Structure- It is a way of designing a company so that it ca split up into
many semi independent sections called divisions. These employees in the particular
divisions controls the daily operations and are always responsible to answer to the
main authority who are the decision and strategies makers of the organizations and
allocates its execution to the various divisions. Large multi national companies
follows this structure.
Here, McDonald corporation uses divisional structure where company is separated
into elements which are presented responsibilities based on the operational needs.
Every division manages particular functional areas or according to the organizational
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strategies (Makushchenko, 2019). McDonald uses the global hierarchy and divides
its divisions on performance based.
3.2 How different external factors affect the performance of a
business – PESTLE Analysis
PESTLE Analysis- Pestle analysis is a framework which is useful in analysing the
essential external factors of the company. It helps organization in better decision
making and improve efficiency by researching on various factors which might assist
organization in overcoming external difficulties and it also assist professionals in
getting better insight of external factors which may impact in the operations of the
organization. Following the PESTLE of McDonald.
 Political Factor- It refers to actions and policies of the government on the
remote environment of a organization's business and the economy of it. This
factor can determine the pace and way of development of any business. In
McDonald's case, it can be threat to the company if it does not follow the
strict policies on diet, safety and health which is made by UK government in
order to the prevent any public health issues.
 Economic Factor- This factor refers to impact of economic trends and
conditions on the macro environment of any organisation. Fluctuation in
global economy, inflation, foreign interest etc. In context to Mcdonald's, they
requires to get their raw materials internationally as because of change in
interest and currency rates prices of raw material keeps fluctuation in order to
overcome this situation company needs to make startegies on how to get raw
materials at lower price.
 Social Factor- It is defined as social status which impacts the attitude and
behavior of consumers. In case of McDonald's, UK's dynamic trend or
healthy lifestyle is a threat to the company as it is fast food chain which is not
good for health of their consumer. They need to make a strategy in order to
overcome it
 Technological Factor- This factor states that adaption of latest technology,
status and automation. It is beneficial for companies as it is time and cost
saving factor. In terms of McDonald's, based on this factor company is
increasing their sales through mobile and online channels which enables
companies to increase their revenue growth through it that helps brand in
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growing its fast food chain in entire country (Baker, Kumar, and Pandey,
2021)
 Legal Factor- It refers to law and legislation related to consumer safety,
employees welfare, climate change etc. In context to McDonald's, this factor
can provide an opportunity to improve the firm by modifying and executing a
complete animal welfare policies which can assist them in brand awareness
and can attract more consumers who are in support of animal welfare.
 Environment Factor- This factor in today's worldwide scenario has become
very crucial component of the macro environment and it also refers to the
ecological factor. In case of McDonald's, company is majorly working on
adopting sustainability in all its functions (Lo, and et. al. 2021). They have a
target to use 100% of its packaging material made from recycle and
renewable sources.
Conclusion
From the above report it is concluded that there are many different kinds of
companies in according to their size, turnover, employees etc , and these
businesses either small or large established on different manner it can be sole trader
ship , partnership, cooperatives, limited liability firms etc. which works on different
organizational structure. Above company is using divisional structure and after
analyzing their external environment, it stated that company's legal, technological
and environment factor can be their opportunity to grow the company for long term.
Reference List
Lo, A.Y., and et. al. 2021. In government we trust? Micro-business adaptation to
climate change in four post-colonial and transitional economies of
China. Global Environmental Change, 69, p.102305.
Baker, H.K., Kumar, S. and Pandey, N., 2021. Thirty years of Small Business
Economics: A bibliometric overview. Small Business Economics, 56(1),
pp.487-517.
Makushchenko, T., 2019. PROBLEMS OF DEVELOPMENT OF SMALL AND
MEDIUM SIZE BUSINESS IN RUSSIA. In RUSSIAN ECONOMY: GOALS,
CHALLENGES AND ACHIEVMENTS (pp. 212-214).
Cho, S.H. and Lee, J., 2021. Estimating the uncertainty–R&D investment relationship
and its interactions with firm size. Small Business Economics, 57(3),
pp.1243-1267.
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Chamberlain, W. and Anseeuw, W., 2019. Inclusive businesses in agriculture:
Defining the concept and its complex and evolving partnership structures in
the field. Land Use Policy, 83, pp.308-322.
Jarwal, D., 2020. Limited liability partnerships: A business model to achieve
entrepreneurial efficiency. JIMS8M: The Journal of Indian Management &
Strategy, 25(3), pp.13-20.
Li, X., Yang, X. and Huang, T., 2019. Persistence of delayed cooperative models:
Impulsive control method. Applied Mathematics and Computation, 342,
pp.130-146.
Rapkin, D.P., 2019. Leadership and cooperative institutions in the Asia-Pacific.
In Pacific Cooperation (pp. 98-129). Routledge.
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