Business in Practice: Report on Types of Companies and Structures

This report examines various types and sizes of businesses, focusing on how they operate and the factors that influence them. It begins by differentiating between micro, small, medium, and large enterprises, outlining their characteristics and providing examples. The report then explores different organizational structures, including sole traders, partnerships, limited liability businesses (LLPs and Ltds), public limited companies (PLCs), and cooperatives, detailing their definitions and features. Furthermore, it delves into different organizational structures like functional, hierarchical, divisional, flat, and matrix structures, analyzing their impact on productivity. The report also includes an external analysis using the PESTLE framework to assess the political, economic, social, technological, legal, and environmental factors affecting businesses, with Tesco PLC as a case study. The report highlights how these external factors influence business operations and strategies.

Types of organisations
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Table of Contents
Introduction......................................................................................................................................3
Section 1...........................................................................................................................................3
Different types of companies..................................................................................................3
Section 2...........................................................................................................................................4
Different types of organisations.............................................................................................4
Section 3...........................................................................................................................................6
Different organisational structures.........................................................................................6
External factors affecting businesses......................................................................................8
Conclusion.......................................................................................................................................8
References......................................................................................................................................10
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Introduction
Businesses are designed to generate profit and lead organisations on the road of growth and
development. The organisational structure of a business helps it take on competition that comes
its way (Jenkins and Williamson, 2015). This report has been prepared to present the different
types and sizes of businesses that TESCO PLC will eventually have to cooperate and compete, at
some point of their operations. TESCO PLC is a British multinational groceries and general
merchandise retailer. Discussed below are difference between SME and large businesses. Also,
discussed below are various types of organisations such as sole traders, partnerships and
company. Various organisational structures and their impact over productivity are also discussed
below.
Section 1
Different types of companies
Small and medium enterprises (SME)
In UK, Companies Act define small, medium and large enterprises. They provide
employment to large number of people in UK and are a vital part of its growing economy.
 Micro business – In UK, micro businesses are those businesses which do not have
more than 9 employees and whose turnover is under £2 million. For example, Boss
Brewing Company.
 Small business – Small businesses are those businesses which do not have more than
49 employees and whose turnover is under £10 million. For example, Broadsword
Event House.
 Medium size business – Medium businesses are those businesses which do not have
more than 249 employees and whose turnover is under £250 million. For example,
John Good Shipping.
Characteristics of SME - Following are the characteristics of SME:
 Limited resources – SME has smaller scale of operations (Jacquemin and De
Jong, 2016). They have less capital and human resources and therefore have
restricted sources of availability of other resources. Also, their sources of finances
are limited.
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 Limited market – With lesser capital and less human resources with them, SME
generally had lesser means to promote their business. Therefore, they have
limited market reach of customers.
 Operations – SME generally has informal management style which allows it
more flexibility in operations. There is no clear division of tasks and no
specialisations are there.
Large size business
All those organisations which crosses the range of medium size businesses in terms of employees
and turnover are termed as large size businesses (Beynon-Davies, 2020). They have much larger
number of clients, contacts, customer reach and business opportunities than SME. For example,
Tesco Plc.
Characteristics of large organisations – Following are the characteristics:
 Better risk appetite – They have large-scale of operations and have large capital
resources to absorb uncertainties. Therefore, they can take bigger risks to grow
their businesses.
 Organised structure – They have more organised business structures for they
have more complex management process to handle. They have clear command
structures but more management tiers can also lead to delay in decision making
process.
 More finance Opportunities – They have more variety of options of availing
finances which are not available to SME such as public deposits, bonds, capital
market, etc.
Section 2
Different types of organisations
Structure of business organisation matters as it directly impacts the administration of the
organisation, degree of personal liability of owners, amount of tax business is liable to pay and
also, its ability to raise finance (Coppin, 2017). Various types of business structures found in UK
are below mentioned:
 Sole Trader business – It is a business entity where an individual is operating solely
i.e. there is no legal distinction between the owner and the business. A sole trader is
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self-employed and is completely personally responsible for all the profits or losses
business makes. Therefore, sole trader has unlimited liability and is also responsible
for paying all the taxes. One can trade as a sole trader under any name and doesn’t
need to register the name but cannot use existing trade mark or include Limited,
LLP, PLC in trade name. To set up as a sole trader in UK, one must inform HMRC
about paying taxes through self-assessment. For example, beauty parlour, barber
shop, general store run by a single owner.
 Partnership – It is a form of business organisation in which two or more persons or
entities come together to commence a business with a view to make profit (Aldous,
2018). Partners share the business’s profits and losses as per arrangement and each
partner has to pay taxes on their share. Partnership has to be registered with HMRC.
There are different types of partnerships in the UK, each defined by a different
partnership act such as – conventional partnership in which all partners have
unlimited personal liability and limited partnership in which at least one partner must
have unlimited liability and the rest, limited partners’ liability is capped to their
capital contribution. For example, Warner Bros. was initially a partnership business.
 Limited liability business – These are the business entities in which owners’ and
organisation are treated as distinct entities and the owners have their liability limited
to the capital provided by them. Two most famous limited liability businesses in UK
are limited liability partnerships (LLP) and private limited company (Ltd). LLP is a
cross between conventional partnership and a company. It must be registered t
Companies House and with HMRC. LLP partners are like directors and have limited
liability. Its accounts are filed with Companies House but it is taxed like
conventional partnership. For example, BCL Solicitors LLP. Private Limited
company is separate from its owners and people who run it, who have limited
liability (Nakamura and Suzuki, 2015). A limited company is either limited by shares
or limited by guarantee. Most common is company limited by shares. They use
Limited or ltd. After their name and are not allowed to trade their shares freely in
public. For example, Greenergy is private limited company limited by shares.
 Public limited liability business – It is also known as public limited company (PLC).
It has to be registered with Companies House and HMRC and also, has to file annual
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report and other requirements to both. It is a limited liability company whose shares
can be traded freely in public. All companies on London Stock Exchange are PLC
but it is not necessary for all PLCs to trade their shares at stock market. It is owned
by shareholders and run by its directors. It has to pay corporation tax before paying
out any dividend to its shareholders. For example, Tesco PLC.
 Cooperative – These are business entities owned and run by their members.
Cooperative business model is flexible and can be organised and run in different
ways by employees, consumers, local residents and businesses (Heese, Srinivasan
and Kelley, 2019). Members have an equal say in business operations and profit
shares. They choose what to do with profits, whether to distribute it among the
members or reinvest into the business. They are needed to be registered with HMRC.
For example, Edinburgh Bicycle cooperative.
Section 3
Different organisational structures
Organisational structure is a system which outlines the directions of activities such as rules,
roles and responsibilities in the organisation (Alam and Raut-Roy, 2019). There are four types of
organisational structures:
 Functional structure – These types of organisations departmentalise their structure
on the basis of functions such as marketing function, sales function, etc. This
structure allows high degree of specialisation and ensures accountability while at
the same time, can lead to preferring achieving departmental target over
organisational targets. For example, Airtel.
 Hierarchical structure – In this structure, employees are ranked at various levels in
an incremental order of power, authority and responsibility with directors at top.
This structure clearly defines command structure but is bureaucratic and
communication takes time to pass from different levels. For example, Tesco.
 Divisional structure – This structure is suitable for large companies that have
multiple operations based on different products range or geographical units, which
operates under umbrella group. Each company operates on its own with full
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flexibility but communication gets difficult within divisions. For example, General
Motors.
 Flat structure – This structure limits levels of management and therefore such
organisations have few tiers of seniority (SPARKS, 2018). Employees are given
responsibilities in-line with their expertise. It allows them to have more creativity
and encourage different ways of ideas. It reduces red tape and facilitates faster
communication. For example, Google.
 Matrix Structure – This structure has multi reporting relationships of employees
with two or more than two reporting authorities. It allows flexibility and more
balanced decision-making but multi reporting can also lead to confusion and
conflicts. It also makes responsibility fixation difficult. For example, Philips.
Impact of organisational structure over productivity
Organisational structure of a company defines hierarchy of authority, responsibility and
command chain. It also establishes communication channels. This has direct impact over the
productivity of the company. Following are few illustrations of impacts that organisational
structure can have over a company’s productivity:
 Impact of functional structure – Organisations with this structure has defined
departments in which employees are grouped together according to their specialisations.
With people of same specialisations working together, they can work in cooperation
which helps in increasing their efficiency and promotes job specialisation (Mosey, Noke
and Kirkham, 2017). All this enhances productivity of the company. Tesco divides their
organisational targets into departmental targets which makes it easier to achieve targets.
This way they are able to ensure that not just high productivity is ensured but inter-
departmental co-ordination and co-operation is also maintained.
 Impact of divisional structure – Those organisations which have more than one
independent range of products generally adopts it. Most of the time, inside the division,
functional structure is followed but with better adaptability. Therefore, higher
productivity in relation to customers and target market are achieved. But, many a times,
they are less productive than complete functional structure because of loss is some
economies of scale.
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 Impact of structural flaws – Whenever a company is not able to properly execute its
structure, command chains are disrupted, communication channels are broken and such
lapses have a serious negative impact over the company’s productivity. For example,
functional structure discourages creativity over specialisation which reduces employee
morale in the long run and that leads to reduced productivity (Nicolescu and Lloyd-
Reason, 2016). Tesco ensures that it leaves no flaws in its organisational structure that
can decrease its organisational efficiency and productivity.
External factors affecting businesses
To analyse impact of external business environmental factors over the operations of the
organisation, PESTLE analysis is conducted (Kreutzer, 2019). PESTLE analysis for TESCO
PLC is as following:
 Political factors – Political environment of UK is generally stable. Although Brexit
policy has created uncertainty, the environment is conducive for business and also,
government is facilitating businesses to stabilise economy after recent economic
slump as well as to help the business organisations recover from downturn caused by
Covid-19 lockdown.
 Economic factors – High labour cost in UK and Ireland are negative influence for
Tesco profits and so are uncertain situations like created by Covid-19, which are
doubted to cost company a lot.
 Social factors – Tesco tries to alter its products range according to social demands
such as including branded halal meat for Muslim customers and Kosher products for
Jewish customers in UK.
 Technological factors – Technology has helped company increase its customer
reach and services. For example, self-service checkout points at Tesco physical
stores helps customers with reducing their time of service and company with
reducing their staff costs.
 Legal factors – Tesco needs to comply with all mandatory legal compliances such as
related to employee rights, fair competition, customers’ rights, etc., otherwise it
could be sued and get fined.
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 Environmental factors – Plastic waste generated by Tesco has received
environmentalists’ concerns. Therefore, company shall take efforts to reduce its
plastic waste and encourage reuse and recycle.
Conclusion
From the above report, it can be concluded that a company operates in a business
environment. Operating in that environment, it encounters various companies of operational
sizes and operational structures which are incorporated in different forms of businesses.
Different forms and structures have a profound impact over productivity of the organisation.
Business operations are also affected by components that are present in its external environment.
It is important for companies to know other organisations around them, so that that they can
figure out their competitors as well as associates to make appropriate strategies to deal with
them.
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References
Books and Journal
Alam, S. and Raut-Roy, U., 2019. Evaluating the Effectiveness of Reward Strategy at Tesco:
Evidence from Selected Stores in UK. Indian Journal of Industrial Relations, 55(1).
Aldous, M., 2018. Business ownership and organisation. In An economist’s guide to economic
history (pp. 167-174). Palgrave Macmillan, Cham.
Beynon-Davies, P., 2020. Business information systems. Red Globe Press.
Coppin, A., 2017. Organisation Structure and Design. In The Human Capital Imperative (pp. 45-
49). Palgrave Macmillan, Cham.
Heese, J., Srinivasan, S. and Kelley, J., 2019. Accounting Fraud at Tesco Stores (A).
Jacquemin, A. and De Jong, H.W., 2016. European industrial organisation. Macmillan
International Higher Education.
Jenkins, W. and Williamson, D., 2015. Strategic management and business analysis. Routledge.
Kreutzer, R.T., 2019. Toolbox for Marketing and Management: Creative Concepts, Forecasting
Methods, and Analytical Instruments. Springer.
Mosey, S., Noke, H. and Kirkham, P., 2017. Building an entrepreneurial organisation. Taylor &
Francis.
Nakamura, M. and Suzuki, K., 2015. A Study on the Changing Structure of Retail Logistics.
In Toward Sustainable Operations of Supply Chain and Logistics Systems (pp. 67-79).
Springer, Cham.
Nicolescu, O. and Lloyd-Reason, L. eds., 2016. Challenges, performances and tendencies in
organisation management. World Scientific.
SPARKS, L., 2018. Tesco’s chain management supply 07. Logistics and Retail Management:
Emerging Issues and New Challenges in the Retail Supply Chain, p.183.
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