Introduction to Business: Company Types and External Influence Report

This report provides an overview of different types of companies, ranging from micro businesses to large corporations, and their respective legal structures, including sole proprietorships, partnerships, limited liability companies (LLCs), public limited companies (PLCs), and cooperatives. The report further examines organizational structures, such as functional and divisional structures, and their impact on business productivity. It also employs a PESTLE analysis to evaluate how various external factors – political, economic, social, technological, legal, and environmental – influence the performance of businesses, using Tesco Plc as a case study. The analysis considers factors such as Brexit, economic stability, the COVID-19 pandemic, social trends, technological advancements, and legal regulations, illustrating their combined effects on business operations and strategy.

Introduction to
Business
(Types of Companies)

Table of Contents
INTRODUCTION ..........................................................................................................................3
SECTION 1: Different types of companies and how they work.....................................................3
SECTION 2: Different companies from sole traders to cooperatives and limited liability
partnership........................................................................................................................................4
SECTION 3: Different business structure and external factors affecting business.........................5
3.1 Identification of different organizational structures and explaining how does
organisational structure affect business productivity..................................................................5
3.2 How different external factors affect the performance of a business....................................7
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Business environment and business is affected and influenced by several factors and
these influences the variations and variances taking place within the organisation. The business
environment has number of types of businesses which are differentiated firm their culture, size,
scope and most importantly from their structure (Smerek and Vetráková, 2020). The presented
report is based evaluation and understanding of different types of companies and their working
on the basis of their sizes. Moving along different types of organisations are evaluated in terms
of their legal structure and working. Furthermore, a business structure of Tesco Plc is evaluated
with all the external factors which are affecting the business. Tesco Plc is a larger public
company deals in retail industry and known as the second largest in the world in accordance to
its revenue. Tesco Plc was founded in 1919 by Jack Cohen as a small corner shop and with time
and growth company is now a leading retail house of the world.
SECTION 1: Different types of companies and how they work.
MICRO BUSINESS:
Micro Business is a type of business organisation which only employs fewer employees
that is less than 10. A micro business is a subset of small business with reduced number of
employees and little turnover. A micro business is started as according to other businesses where
it selects a formal legal structure like, LLC, partnership and corporations. Once the business is
initiated the business owners will be now setting up finances, management, marketing and other
operations. And moving forward once for beginning the business processes now owners will
secure respective needed licences and permits.
SMALL BUSINESS:
A small business is a privately owned business organisation with different legal structures
like Partnership, corporations and sole proprietorship. A small business has fewer employees but
is larger than a micro business with just 10 employees or even less. A small business
organisation has lower revenues than a normal sized business. According to UK, a small business
is defined as the one with turnover more than £6.5million and maximum employee number of
50.
MEDIUM BUSINESS:

A medium sized business is defined as those businesses with less then 250 employees and
a turnover of £12.9million. A medium sized business or an organisation work with the aims of
promoting entrepreneurship and increasing investments within the industry along with increasing
the economic status of the country and increasing money flow.
LARGE BUSINESS:
A large business organisation has at least 5000 employees and the annual turnover of
more than £15million and the balance sheet of more than 2 billion. A large organisation most
commonly work with two legal structures that are partnership and limited liability company with
the aim of regular growth and development within the sector. Along with it the company holds a
long term perspective with the aim of growing within the industry and developing their
operations in different parts of the world and even in the present market place (Vochozka and
Machová, 2018).
SECTION 2: Different companies from sole traders to cooperatives and
limited liability partnership.
SOLE TRADER:
A sole trader is also known as sole proprietor and the firm is known as sole
proprietorship, which is a business operated and established by an entrepreneur single handedly.
A sole proprietorship is a type of business organisation which is the most simplest form of
conducting business operations with no legal constraints. A sole proprietorship is operated by a
sole trader a single individuals who enters the market with the motive of earning their livelihood
and sustaining within the market. It is not a legal entity.
PARTNERSHIP:
A partnership is a formal arrangement and a type of business which involves 2 or parties
in managing, executing and operating operations. A partnership is an agreement between two or
more parties who has common objective and establishes a firm to attain those common goals.
There are several types of partnership firm where all partners share all liabilities and profits with
their agreed ratios and proportions.
LIMITED LIABLITY BUSINESS:
A limited liability company (LLC) is a business structure which was established in
United States whereby the owners are partially liable for the debts and liabilities of the
organisation. These are the hybrid organisations which combines the characteristics and features

of corporations with partnership and a sole proprietorship. A limited liability company is
business structure which is only allowed under United States statues and the surroundings of
LLC's varies from place to place and state to state.
PUBLIC LIMITED LIABILITY BUSINESS:
A Public Limited Liability Company (PLC) signifies the business which offers shares to
the public and trade their shares in market for raising funds and capital like initial capital to start
the business. A Public limited company status is used in Great Britain and is equivalent to U.S.
Inc. The company with PLC at the end of its name shares the liability with the shareholders and
can not be responsible for any business losses in excess of the amount. For Example, Tesco Plc
which is headquartered in United Kingdom and operates in Retail as well as manufacturing
industry (Thorlakson, de Zegher and Lambin, 2018).
COOPERATIVE:
A cooperative company is defined as the firm or the organisation which is an autonomous
association of people came together voluntarily to meet their common economic, social, and
cultural needs with the mean of jointly owned and democratic fully controlled organisation. In
simpler words, cooperatives are those organisations which are created by people who have a
specific need and who are willing to work together as a team to accomplish those needs by
operating and organizing a company.
SECTION 3: Different business structure and external factors affecting
business.
3.1 Identification of different organizational structures and explaining how does organisational
structure affect business productivity.
Organisational structure is a system that outlines the certain value adding activities taking
places or will be taking place in an organisation (Westervelt, Schank and Huang, 2017). The
organisational structure divides the company into parts with the aim of supporting each and
every action taking place in the firm and keeping strong connection between operations. There
are different types of organisational structure like Functional, Divisional, Hybrid, Flat and others.
The most common and old structure is Functional Structure, which divides the company
into parts on the basis of number of functions. This is also known as Hierarchical structure where

a chain of commands is established which is typically begins from the Senior management,
executives and then moves to employees.
Illustration 1: Tesco Corporate Governance Structure, 2016
Tesco Plc follows hierarchical organisational structure placing the Board of Directors on
the top of common, then departments which is further divided on store level with regional
managers and managers of the store and different departments are placed and lastly employees
are situated (Cornejo-Ortega, Chavez-Dagostino and Malcolm, 2018).
The organisational structure defines the working and also the power and authority
distribution as well as placement within the organisation. Another structure is divisional structure
in which the company is divided into parts on the basis of the regional that is geographical areas
(Lichtenthaler, 2020).

3.2 How different external factors affect the performance of a business.
PESTLE analysis is a tool or a framework which is used and helpful for evaluating and
analysing the external environment of an organisation within the industry and with the focus on
understanding the factors affecting and going to affect the business of the entity in future. The
PESTLE framework is a strong potential tool which helps in making several evaluations and
supporting in effective decision making.
PESTLE DESCRIPTION
Political BREXIT deal has recently been executed and is currently the most crucial
factor politically which is affecting businesses in UK and for Tesco Plc. The
factor is affecting and influencing the competitive position of Tesco Plc
because of uncertainties being caused in the political environment and
intervention of government in businesses through different laws and
regulations. Company that is Tesco Plc is a significant part of retail sector and
has a huge brand name where it exports food and non-food products form
different locations in the world. But since BREXIT, EU have increased fresh
food import duties which have put additional pressure on profit margins of the
company and on its low cost producing position in the market (Małys and
Fonfara, 2018).
Economic The economical environment of UK is stable and potential enough for
companies like Tesco Plc. The country's economical structure plays a huge
role in offering a stable platform to business owners in for running their
operations but since BREXIT took place it is bringing negative effects over
business and reflecting huge drop in consumption that is directly leading to
downfall in financial performance of entity.

Illustration 2: Tesco Supermarket: PESTLE, SWOT, Porter’s Five Forces
and Value Chain, 2020
Along with it another reason which is affecting the economic position of the
world and United Kingdom is Covid-19 and the pandemic caused form the
virus. The world was under lock-down stopping the operations of several
industries. Retail sector is affected due as imports and exports are becoming
difficult as borders are locked and leading to unavailability of goods for
customer according to their needs and demand (Niskanen and Rohracher,
2020).
Social The social trend which is currently very affecting to Tesco Plc is Covid-19
outbreak and health consciousness amongst people which is leading to more
demand of organic feed products. Moreover, people are looking for more
sustainable and organic options which is reflected by the increasing sales of
organic and vegan food. Also, population of UK is getting aged as well as the
outbreak of the virus is keeping people in which is resulting in reducing sales
through supermarkets and foot-falling in stores of Tesco PLc as people do not
prefer to go out in such condition of the world.
Technological Technology has became a huge support for several industries in such situation
of Covid-19 and for Tesco Plc it has done wonders. Tesco Plc is a techno
friendly company according to which the brand has made several changes in
its operations with the use and involvement of technological advancement

tools such as digital marketing, online shopping, radio-frequency and other.
But technology is changing and increasingly getting advanced which changes
the requirements for company and make it to become more and more techno
friendly with changing world and technology industry (Hajdas, Radomska and
Silva, 2020). The company has to work more to introduce Artificial
intelligence (AI) in operations and other factors for being competitive and
sustain in relation to the trends in the industry.
Legal The legal and political factors are similar to each other to some extent. The
laws and regulations established by the government and other political
administrations or institutions renders more specific regulations for the
business in a particular industry which are needed to be followed by
companies. Such as due to BREXIT import duties increased in EU which
impacted prices of products and services. Moreover, Value Added Tax (VAT)
increased in recent years which also resulted in increased rates for products
and affected Tesco Plc low cost strategy. Also, Covid-19 regulations are
different which focuses on social distancing norms and ideas leading to
increasing strictness and change in operations due while running supermarkets
and online business (Bilgeri, Wortmann and Fleisch, 2017).
Environmental This is the recent factor which is being added to the external environmental
analysis. Tesco Plc is a techno and environment friendly organisation which
has made significant efforts for reducing its carbon footprint and covering for
the damage it has made to the environment in past years. Tesco Plc is a
leading brand and is making arrangements for adopting practice of
“Extrapolate” in all its stores by 2030. The only factor affecting is tightening
laws and policies of government for environmental impacts and leading to
cause negative impacts on the business and practices of the organisation.
CONCLUSION
The above report and discussion conducted concludes the variations and differences in
companies or businesses that are flourishing within the market. There are several types of
businesses which are differentiated on the basis of their sizes and legal structure as well as

turnover. In UK these bifurcation is made on employee numbers like in Micro the workforce is
of less than 10, in small they reach to 50, in medium they reach to 250 and in large workforce is
more than 5000.

REFERENCES
Books and Journals
Bilgeri, D., Wortmann, F. and Fleisch, E., 2017. How digital transformation affects large
manufacturing companies’ organization.
Cornejo-Ortega, J. L., Chavez-Dagostino, R. M. and Malcolm, C. D., 2018. Whale watcher
characteristics, expectation-satisfaction, and opinions about whale watching for
private vs community-based companies in Bahía de Banderas,
Mexico. International Journal of Sustainable Development and Planning, 13(5),
pp.790-804.
Hajdas, M., Radomska, J. and Silva, S. C., 2020. The omni-channel approach: A utopia for
companies?. Journal of Retailing and Consumer Services, p.102131.
Lichtenthaler, U., 2020. Beyond artificial intelligence: Why companies need to go the extra
step. Journal of Business Strategy.
Małys, Ł. and Fonfara, K., 2018. The Types of Trust in the Development Process of the
International Business Relationships: An Exploratory Study among Polish
Companies. Entrepreneurial Business and Economics Review, 6(3), pp.175-191.
Niskanen, J. and Rohracher, H., 2020. Passive houses as affiliative objects: Investment
calculations, energy modelling, and collaboration strategies of Swedish housing
companies. Energy Research & Social Science, 70, p.101643.
Smerek, L. and Vetráková, M., 2020. Difference in human resources development in various
types of companies. Polish Journal of Management Studies, 21.
Thorlakson, T., de Zegher, J. F. and Lambin, E. F., 2018. Companies’ contribution to
sustainability through global supply chains. Proceedings of the National Academy
of Sciences, 115(9), pp.2072-2077.
Vochozka, M. and Machová, V., 2018. Determination of value drivers for transport companies in
the Czech Republic. NAŠE MORE: znanstveno-stručni časopis za more i
pomorstvo, 65(4 Special issue), pp.197-201.
Westervelt, M., Schank, J. and Huang, E., 2017. Partnerships with technology-enabled mobility
companies: Lessons learned. Transportation Research Record, 2649(1), pp.106-
112.
Online:
Tesco Supermarket: PESTLE, SWOT, Porter’s Five Forces and Value Chain, 2020. [Online]
Available Through: <https://15writers.com/sample-reports/tesco-pestel-swot-porters-
five-forces-value-chain/>.
What is an SME?, 2020. [Online] Available Through:
<https://www.thecompanywarehouse.co.uk/blog/what-is-an-sme/>.