Business in Practice Report: Analysis of Company Types and Structures

This report, prepared for the BMP3002 Business in Practice module, provides a detailed analysis of different company types and their operational characteristics. It begins by defining and differentiating between micro, small, medium, and large businesses, offering real-world examples to ill...Read More

BMP3002 BUSINESS IN
PRACTICE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................2
MAIN BODY..................................................................................................................................2
SECTION 1.....................................................................................................................................2
Different types of companies and their working.........................................................................2
SECTION 2.....................................................................................................................................3
Different companies’ formation..................................................................................................3
SECTION 3.....................................................................................................................................5
3.1 Different business structures..................................................................................................5
3.2 Impact of external factors......................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
1

INTRODUCTION
Businesses, while operating have to consider a variety of aspects that can influence the
overall decision making and formation of these businesses (Gryshova and et.al., 2019). This
report will discuss what are the different legal entities that a company can adopt and how better
results can be obtained. This report will also illustrate the impact of external factors on the
business operation and the overall conclusions that can be drawn regarding the selection of
business type. Lastly, an appropriate conclusion will be provided summarising all the key points.
MAIN BODY
SECTION 1
Different types of companies and their working
There a variety of companies and different levels at which they operate. This depends on a
number of factors such as the allowed or registered number of employees that are working,
different characteristics based on which they operate and other similar conditions in which they
operate.
Micro Business: The micro business can be defined as the one where there are very small
number of employees ranging from minimum 1 to maximum 9 employees. Further The
Companies Act of UK also categorises the micro business as the one which has turnover less
than £2 million. Mainly, the micro businesses are operated by individual owners and their
companies operate at a small level. For example, Boss Brewing Company, operating in South
Wales, is owned by 2 individuals and they mainly operate with the aim of creating differences in
the way women leaders are perceived (Tumbas, Berente and vom Brocke, 2017). This is an ideal
example of the characteristics portrayed by small business who have higher number of total
employees employed but their overall revenue or profit generation is comparatively lower than
the other size businesses.
Small Business: Small businesses have been defined in the UK’s Companies Act, 2006 as the
one which does not employ more than 50 employees in the company and further the turnover
should also be limited to £6.5 million i.e. it should not be more than this. Further the balance
sheet total should also not exceed than £3.26 million in an annual year. The characteristics of
small business are more or less similar where the main aspect of their operation is that they are
not more than 50, their scale of operation is limited and lastly the revenue generated is very
2

limited. The best example that can be given of small business of UK is Pure Planet which aims
towards supplying of green electricity and gases to the domestic households in UK.
Medium Size Business: According to UK law, the medium- sized businesses in UK can be
particularly define as the one where number of employees working in the organisation are less
than 250. Additionally, the annual turnover of the company should also be less than £12.9
million annually (Arnott, Lizama and Song, 2017). There are various characteristics associated
with medium sized companies that mainly refer to their ability to take more risks and be more
profit driven than is expected. Captify, a company specialising in search engine optimisation and
taking important media decisions is the best example of medium sized business and the manner
in which they are complying with the targets clearly indicates the relevant characteristics.
Large Size Business: These can be defined as the ones where the number of employees working
are at least 5000 and the annual turnover can be greater than £1.5 billion. The characteristics of
the large business mainly refers to the fact that these can be operating in one or more countries
and contribute majorly in the revenue generation and economic growth. There are several
examples that can be quoted here with Unilever being one of the most prominent large
businesses of UK. It operates in multiple countries and has turnover of approximately £50
billion.
SECTION 2
Different companies’ formation
There are a variety of company formation styles that can be used by individuals who are
interested in such venturing and advancement. These can be discussed in detail in following
manner:
 Sole Trader Business: The sole trader is an individual entity or person who is the owner
of their business and also the operator of that particular business. Further, a sole trader or
sole proprietorship does not have any separate legal identity i.e. the assets and liabilities
of the sole proprietorship are recognised as the ones of its owner and owner is held
completely liable and responsible for all such transactions (Nikiforova and et.al., 2017).
The best example that can be selected here of sole proprietor is Ma Baker which
specialises in baking exotic and fresh breads. This business is solely owned by Alessia
and hence all the liabilities and profits are borne by the owner alone.
3

 Partnership: Broadly, partnership can be defined as the one where there are two or more
individuals who come together to share profits and losses in a fixed ratio that is pre-
determined. There can either be limited liability partnership or an unlimited one and this
is dependent on the fact that the liabilities of the partners is dependent on their
partnership ratios. For example, Pret A Manger is an excellent restaurant whose owners
are two partners having a fixed profit sharing ratio which acts as their liability sharing
ratio as well.
 Limited Liability Business: Limited liability business is one that treats the managers and
owners as a separate identity as compared to the business owners. The legal status of the
categorisation of the business as a separate legal entity. Here the unique characteristics is
that the profit sharing ratio of partners is not similar to that of their liability bearing
responsibility as their liability is pre- determined for a specific ratio (Sousa, and Rocha,
2019). If the business faces any losses or problems then the owners or partners are not
liable beyond that specified or pre- determined ratio. The best example of limited liability
business that can be quoted is of Deloitte which was one of the big four companies who
harbingered the entire concept of limited liability and was able to achieve it
simultaneously.
 Public Limited Liability Business: The public limited liability business is the one where
the ownership of a company can easily be segregated into stocks that are traded and
owned by the public. The ownership of the company can easily be gained by everyone as
the stocks of these public companies are traded on the stock exchange. For instance, the
example of this type of company can be identified in the form of Rolls Royce Holdings
Plc. where the company and its shares can be easily brought by any interested individual.
This is the most widely used form of companies and can be flexibly entered into as the
legal process is comparatively much lower and can be easily completed.
 Cooperative: Cooperatives can be defined as the one where there is a mutual assistance
implemented and exercised with a common objective that all the members tend to
achieve (Moşteanu, Faccia and Cavaliere, 2020). The profits or benefits then exercised
will be distributed or shared amongst the members. The characteristics of cooperatives
are commonly categorised as the ones where the strengthening of the community is the
area of key focus. Brighton Energy Co- Operative is one of the key examples that can be
4

quoted here where the focus is to increase use of solar energy and has more than 500
members collectively.
Therefore, in this manner, there are different formation of companies that can be adopted by
any business and hence the entrepreneurs can easily venture into multiple areas or methods of
operating and conducting a business.
SECTION 3
3.1 Different business structures
There are a variety of business structures that can be adopted in the organisation for its
successful operation with feasible decisions that will foster the growth and flexibility in the
organisation collectively. There are two major organisational structure and each affects the
overall business productivity in their own manner. These can be discussed and illustrated as
follows:
Functional Structure: The functional structure is the one where the categorisation of the
employees is based on their specialised area of operation i.e. based on different organisational
functions, the employees whose job areas and responsibilities confirm to that particular area fall
within that criteria. Usually, there are six main areas of functions in any organisation such as
finance, marketing and sales, research and development, production, human resource and
purchase departments and all the employees working in an organisation are categorise on the
basis of this only (Morkunas, Paschen and Boon, 2019). This type of structure is more suitable to
implement in those organisations whose area and scale of operation is simple and small. This is
also very easy to adopt and implement because of the less complexity. The communication flow
and hierarchy becomes clear to the employees where they know exactly whom to communicate
what and when. This significantly improves the entire functioning and quickens the decision
making process.
Divisional Structure: The divisional structure can be identified as the one where the functions of
the organisations are categorised based on different product lines or markets i.e. specialized
divisions are created which has all the functions that are to be performed. The contribution of
this type of structure is in the form of the fact that it can be easily implemented on larger
organisations because of the variety of functions that they are required to perform. The managers
usually have autonomy here and despite it being expensive, it contributes immensely in the
5

growth of larger organisations. The responsibility of the organisation and its top management can
easily be integrated with the responsibilities that they are required to fulfil.
3.2 Impact of external factors
In order to evaluate the impact that external aspects have on the overall performance of the
business organisation can be evaluated in detail using the Pestle Analysis model. This can be
done in following manner:
 Political Factors: There are a variety of political aspects that affect the overall
performance of any businesses. The existing issues in UK such as Brexit and the latest
problem of global pandemic have affected the overall stance of government (Sousa and
Rocha, 2019). When the government policies are flexible and encourage the business
operations then automatically the performance of business increases.
 Economic Factors: There are many factors that can be categorised into the economic
factors such as inflation rate, purchasing power of people, GDP etc. that affect the
decision making capacity of the business regarding pricing strategies. Further, the
profitability of the business gets influenced due to the economic factors as they influence
the overall operating capacity of a business.
 Social Factors: For every business, it is important that the society and people approve of
the idea based on which business is operating. When they will support and foster the
business idea and concepts, then the productivity and performance of business will
improve significantly.
 Technological Factors: The technological updates need to be integrated in the operation
of any business as these are directly associated with the results and productivity that can
be achieved by the business (Arnott, Lizama and Song, 2017). Therefore, regularly
updating the technology implemented in the company can directly influence their
decisions.
 Legal Factors: Legal factors implicate the overall legislations and laws that are
implicated on the entire company and its operation. This further helps in deciding the
scope of the business and the areas they can venture into or the scope i.e. boundaries
within which they can operate.
 Environmental Factors: The environmental factors are the ones where the different
aspects associated with the environmental surroundings are considered. The businesses
6

are forced to engage in regular CSR activities and these influence the overall profitability
and goodwill of the companies.
CONCLUSION
Based on the analysis done in the report above, it can be clearly concluded that the overall
distribution of companies is largely based on their different legal structures and the different
characteristics that they have. It was identified that what are the external and internal factors that
are associated with it. The pestle analysis helped in easily understanding that how various factors
can be used to influence the decision making in the organisations and gain better results.
7

REFERENCES
Books and Journal
Gryshova, I., and et.al., 2019. A model for selection of a management team to ensure the
sustainability and development of the business organizations. Entrepreneurship and
Sustainability issues, 7(1), p.690.
Tumbas, S., Berente, N. and vom Brocke, J., 2017. Three types of Chief Digital Officers and the
reasons organizations adopt the role. MIS Quarterly Executive, 16(2).
Arnott, D., Lizama, F. and Song, Y., 2017. Patterns of business intelligence systems use in
organizations. Decision Support Systems, 97, pp.58-68.
Nikiforova, E.G., and et.al., 2017. Portfolio Method Of Selection The Adequate Kpi System For
All Types Of Organizations. Astra Salvensis.
Sousa, M.J. and Rocha, Á., 2019. Skills for disruptive digital business. Journal of Business
Research, 94, pp.257-263.
Moşteanu, N.R., Faccia, A. and Cavaliere, L.P.L., 2020, August. Disaster Management,
Digitalization and Financial Resources: key factors to keep the organization ongoing.
In Proceedings of the 2020 4th International Conference on Cloud and Big Data
Computing (pp. 118-122).
Morkunas, V.J., Paschen, J. and Boon, E., 2019. How blockchain technologies impact your
business model. Business Horizons, 62(3), pp.295-306.
8