Exploring Business Structures and External Factors: A Case Study

This report provides an overview of various business structures, ranging from micro-businesses and small businesses to medium-sized and large corporations, with a focus on how these different types of companies operate and compete. It examines specific organizational forms such as sole traders, partnerships, limited liability partnerships, and public limited companies, detailing their characteristics, advantages, and disadvantages. Furthermore, the report analyzes the impact of external factors on businesses using the PESTLE framework, covering political, economic, social, technological, legal, and environmental considerations, with specific examples related to Sainsbury's and the broader UK market. The analysis highlights the importance of understanding both internal structures and external influences for effective business strategy and sustainability.

Business in practice

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Section 1 - You are to show an understanding of the different types of companies and how
they work.....................................................................................................................................1
Section 2 - Different companies from sole traders to cooperatives and Limited Liability
Partnerships..................................................................................................................................3
Section 3 - Consider different business structures and how external factors affect businesses. 4
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business is a commercial activity which include providing products or services to consumers to
generate profit. Profits in a business are not always in the form of money it can be benefits in any
form. A business is an entity which is involved in professional, charitable or industrial trade
activities. There are different types and sizes of businesses and every organisation doing business
have a organisational structure that outlines how business perform various activities to achieve
organisational goals (Miller, K. and et.al., 2021). In this report we will discuss about different
types of businesses Sainsbury's have to compete with. Sainsbury's is one of the largest
supermarket chain in the United Kingdom and it was founded in 1869 by John James and Mary
Ann Sainsbury.
MAIN BODY
Section 1 - You are to show an understanding of the different types of companies and how they
work.
There are mainly four types of companies operating in the market and these companies work
differently from each other.
 Micro Businesses – These are small businesses with only few employees. These
businesses also operates like as other businesses and a sole person can start these types of
businesses with low capital investments. Such businesses often face difficulties to expand
the business further. These businesses also face difficulties in raising capital for
businesses because traditional investors and lenders usually avoid to invest in these
businesses. These businesses perform simple operations and activities in their day to day
work. The benefits these businesses have is their flexibility and management. In micro
businesses generally a single person remain in the power to take decisions and that's why
these businesses take decisions fast which helps them to adapt quick changes required for
businesses (Hutahayan, 2021). These businesses also face some difficulties in the market.
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Like such businesses do not have access of sufficient resources. It is difficult for micro
businesses to find employees because they can not pay as much as other businesses.
 Small Businesses – These businesses can be defined as partnership, sole proprietorship
or corporations which have fewer peoples and income below a certain value. Every big
business starts as a small business. Entrepreneurs executes their idea by setting a small
business and then look to expand it with time. These businesses are important for
development of entrepreneurship in every country. Usually owners of these businesses
are their manager and the management team of such businesses consist family members
and close friend. These businesses have concentration of authority and there is a close
relationship between management and employee in small businesses. These types of
businesses do not have full time functional specialists. Owners or managers perform
various functional tasks in small businesses. Area of operation of such businesses is
generally domestic and they contribute in countries economy significantly. A small
business do not need heavy capital investment and it earn higher return on owners equity
as compare to large businesses. Investors can get higher investment by investing in
smaller businesses.
 Medium Size Businesses – These businesses are larger than small businesses and smaller
then large businesses. These businesses may be family owned and ownership of such
businesses are different from their management. These businesses plays an important role
in nations economy and provide employment for so many employees (Masouras, Maris
and Kavoura, 2020). Such businesses can exist in almost any industry. Medium size
businesses can be a threat for Sainsbury's because they possess the ability to give tough
competition to any company in their domestic market. These businesses use various
financial institutions to raise funds and they operate and establish in a mature market
assuming growth.
 Large Businesses – These businesses can be categorised as above average businesses.
These businesses have large and operations and they enjoy economies of scale.
Sainsbury's is also a large businesses that hires a lot of labour and generate big revenue.
Such businesses serve maximum customers and operate nationally or internationally.
These companies possess adequate resources and they also face a fierce competition in
the market. These companies work in very complex business environment and they have
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to manage legal and social factors to conduct business smoothly. These businesses rely
more on technology in their operations and these organisations have different
departments who perform specific functions. These companies are either registered as
private or public limited companies.
Section 2 - Different companies from sole traders to cooperatives and Limited Liability
Partnerships.
Their are different types of companies mentioned below -
Sole Traders – This type of businesses are owned and managed by a single person and that
person is responsible for any loss business makes. A sole trader business doesn't have a separate
legal entity from their owner. A sole trader possess full control of their business and it also bring
many challenges for owner of the business. Business expenses and incomes go with the
individual tax return and owners raise capital personally for starting such businesses. Many
entrepreneurs start their businesses as sole traders initially and them grow eventually. Drawback
for these companies is that they don't have government protection. Tradespeople, freelance
workers and independent contractors are some examples of sole traders.
Partnership – A partnership in business is a formal agreement between two or more people to
work together towards a common goal. In such companies two or more then two people manage
and operate the company. These partners are personally liable for losses business make and share
the profits in a defined portion. Like sole trader partnership also do not have a separate legal
entity and partners generally have unlimited liability in partnerships. Partnerships are easier and
less costly to form then corporations. In partnerships there is always a risk of conflicts because
there are more then one person who have the decision making power (Fernández-Monroy,
Martín-Santana and Galván-Sánchez, 2018). There are various types of partnerships in the
business like general partnership, limited partnership and partnership at will. Partnership
companies are easy to form and they can take benefits of different partner's skills and knowledge.
Limited Liability Partnership – This type of companies protect their owners from being
personally liable for repayment of company's debts and liabilities. In such partnerships partners
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personal assets are not liable for the repayment of company's losses. Such partnerships have
separate legal entity. Partners in such partnerships remain protected by the mistakes made by
other partners. Limited liability partnerships are common in professional businesses like law
firms, accounting firms and medical practices. Conflicts in partnership can still rise because
partners can take individuals decision which can harm the business.
Public Limited Liability Business – The companies that offer share and stocks to general public
is known as public limited companies. These companies are registered under stock market and
buyers of their shares and stocks are not liable for any loss company may make. For such
companies it is mandatory to use the PLC abbreviation after the name of the company. These
companies have to maintain a transparency and for that they publish their financial data and
disclosures for the general public regularly (Baumer-Cardoso, Campos and Ashton, 2021).
Sainsbury's is also a public limited company and it is listed on the London stock exchange.
According to the UK company law a PLC must have minimum share capital of £50,000. The
biggest advantages these companies have is that they can raise capital easily by issuing public
shares but these companies also have to face some problems like increased scrutiny and
regulations.
Section 3 - Consider different business structures and how external factors affect businesses.
Organisational structure defines how an organisation direct their functions to achieve
organisational goals. Organisational behaviour determine how the information flow in the
organisation. In a centralised structure the decisions come from top level managers while in a
decentralised structure the power of decision making is distributed among various levels.
Organisational structure help organisations to become efficient and focused towards their
organisational goals. There are different types of organisational structure which are mentioned
below -
Functional Structure – A functional organisational structure starts with the highest level and
goes down from there. Employees in such organisation are organised according to their specific
skills and separate departments are managed independently Various companies this structure
because it allow employees to focus on their roles and also encourages specialisation. Different
departments in organisation feel self-determined because of this structure.
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Hierarchical Structure – This is the most common organisational structure and it is also
followed by Sainsbury's. In this structure commands flow from top to down in a hierarchical
manner. This structure define responsibilities and authority of every employee in the
organisation. Decision making in such organisations is formal and this also flows from top to
bottom. This makes a tall organisational structure and it keep increasing as organisation grow.
Divisional Structure - In divisional organisational structure company divide employees
according to products or markets. Companies have marketing sales and communication
departments while in a divisional organisational structure the company will have teams focusing
on specific regions or products (Islami and et.al., 2021). In this structure various departments are
created and each department has a manager responsible for the work done by the department.
PESTLE Analysis is a framework companies use to identify external factors effecting business.
This is a common tool various companies use to analyse business environment in which they
operate. By applying PESTLE analysis companies analyse political, economical, social,
technological and legal factors that influence their business.
 Political Factors – Political factors include taxation, trade policies and other fiscal
policies. These factors are driven by government actions. Sainsbury's has a very large
business and that's why small change in government policies can have a impact on their
business. Political stability of a country is also needed for the company for smooth
conduct of business
 Economical Factors – These factors include interest rates, exchange rates and
commodity prices etc. The high wage movement in UK has influenced Sainsbury's
business. The rise of supermarket chains across UK has also effected the company as
they have to deal with more competitors now.
 Social Factors – A good part of company's revenue come from fast food items.
Consumers in UK are shifting towards health conscious diets and that can effect the
company's business significantly (Dutt, 2021). People are also becoming more
conscious about sustainability and Sainsbury's has integrated sustainability in their
business model which help them to create a good image in customers mind.
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 Technological Factors – The company should keep an eye on latest technologies and
innovations and should try to adopt technologies which can positively influence their
business (Lee and et.al., 2020). The company can use modern AI based analytical
systems to create effective digital marketing campaigns.
 Legal Factors – Different countries have different legal environments and hence the
company is operating in different companies they have to understand and work
according to each country's legislation. Retailers in UK have been fined by authorities
for failing to follow the waste management and food safety rules.
 Environment Factor – Operations of the company have a impact on environment. The
use of plastic in packaging is responsible for environment problems and pollution.
Operations in company like freezing food product uses lot of energy and emit green
house gases which also harm environment. The company must work to make their
operations sustainable.
CONCLUSION
In this report it is concluded that there are different types and sizes of businesses and each
business work differently according to their size and structure. In this report we discussed
various types of businesses which can be a competition for Sainsbury's. Further in the report we
applied PESTLE analyse and understand various external factors that effect the company. With
the analysis it is concluded that political and legal factors are the factors which the company
should consider to grow their business in different countries.
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REFERENCES
Books and Journals:
Baumer-Cardoso, M.I., Campos, L. and Ashton, W., 2021, February. Circular Economy and
Companies: Understanding the Characteristics and the Challenge of Measurement.
In International Joint conference on Industrial Engineering and Operations
Management (pp. 597-608). Springer, Cham.
Dutt, N., 2021. Factors Affecting Consumers Buying Behaviour towards Online Shopping.
Review of International Geographical Education Online, 11(7).
Fernández-Monroy, M., Martín-Santana, J.D. and Galván-Sánchez, I., 2018. Building successful
franchise partnerships: the importance of communication and trust. Management
decision.
Hutahayan, B., 2021. Empowerment of small businesses based on agribusiness, micro and
cooperatives in Malang to face the ASEAN market. International Journal of Business
Process Integration and Management, 10(3-4), pp.195-200.
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.
Lee and et.al., 2020. Exploring influential factors affecting guest satisfaction: Big data and
business analytics in consumer-generated reviews. Journal of Hospitality and Tourism
Technology.
Masouras, A., Maris, G. and Kavoura, A. eds., 2020. Entrepreneurial Development and
Innovation in Family Businesses and SMEs. IGI Global.
Miller, K. and et.al., 2021. Business models big and small: Review of conceptualisations and
constructs and future directions for SME business model research. Journal of Business
Research, 131, pp.619-626.
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