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The report aims to investigate and understand the types of businesses and their characteristics to understand how they operate and how they are structured. Also, it looks at the advantages and disadvantages of the various organisational structures and where they are applicable. The report also looks at understanding the factors, both external and internal, that affect the various types of businesses using various examples.
Section 1: Different types of companies and how they work
A micro business refers to a business whose scale of operation is very small. It is a company that is very small (up to nine employees) with low turnover(less than two million pounds). Microbusinesses cover a very small market area, and they carry out their businesses in very few locations. Also, the majority of these businesses are owned by sole proprietors or are partnership kind of businesses. An example of a micro business in the UK is Manton’s cards, which is a local retail business that sells gifts and cards under the directorship of Chris Beards.
A small business refers to as a sole proprietorship, corporation, or partnership that is privately owned employs a few employees and earns an annual revenue that is lower than a business that is regular sized or a corporation. A small business operates on a relatively wider scale when compared with a micro business. This comparison is based on the business’s activity, the number of staff, and the amount of revenue generated (Blackburn et al.,2013). A company with many employees can be considered a small business, whereas it is a micro business with less than ten employees (Rhodes,2015).
Medium size business:
A medium-size business refers to a company with an average employee number of 250 in a given year and which does not exceed either a medium-income of 36 million pounds or a total of 18 million pounds in its balance sheet in a particular financial year. A mid-size business operates on a larger scale concerning the number of employees, the area of operation, and the revenue generated compared to a small-scale business. An example of a mid-sized business in the UK is Verdant leisure, a Company that runs a holiday park and whose operations are in North England and Scotland (Hillary,2017).
Large size business:
A large business can be defined as a company that generates an annual turnover of more than 25.9 million pounds, employs more than two hundred and fifty employees, and its balance sheet total exceeds 12.9 million pounds. Large businesses serve a wide variety of services and products to many consumers and cover a wide market. An example of such a business in the UK is the Ceuta group, founded by Matt Bullas and service business for a consumer brand (Matejun,2017).
Section 2: Different companies from sole traders to cooperatives and Limited Liability Partnerships
Sole trader business:
A sole trader business refers to a business that is run by a self-employed individual. The sole owner keeps all the profits that the business makes after paying taxes. Also, in case of any loss, the owner is the only responsible party. This type of business requires a few legal formalities, and it is relatively easy and simple to form. Also, dissolving the Company is quite easy as the power to make decisions is vested in a single owner (Skripak et al., 2016). .An example of such a business in the UK is TH electrical, a business run by Tom Hall, which deals with offering electrical installation services in Huddersfield and Holmfirth.
A partnership business is defined as a relationship between persons who carry on a common business intending to profit. The partners are severally and jointly liable for all the business debts, and they have unlimited liability. The business is formed through an agreement between people who are considered eligible to agree and sign a contract. There must be an agreement between the partners on how profits and losses are shared among them. Also, a firm that is formed through partnership does not have its personality. In case a partner dies, goes bankrupt, or becomes a lunatic, the partnership business is terminated (Skripak et al., 2016). An example of partnership business in the UK is the Social Chain, a partnership business run by Dom McGregor and Steve Bartlett, one of the largest Marketing agency influencers in the UK.
Limited liability business:
A limited liability business refers to a business whose legal structure prevents the corporate loss from exceeding the amount of investment either in a limited liability company or a partnership. In case of a business failure, the private assets that are personally owned by the owners and investors cannot be used to cover the business losses or liabilities. The members and partners in this type of business are only liable to the extent of the profits they have not drawn and their contribution to the business. However, this may not apply in circumstances if third parties suffer losses due to the members’ negligence or the partners (Ireland,2010). Also, if the members are involved in any form of fraudulent or wrongful trading, the concept of limited liability may not be applicable. An example of such a business is the financial consultancy company Deloitte and Touche (Bloomberg, 2020).
Public limited liability business:
A public limited liability business refers to a Company with a limited liability whose method of raising capital is by offering the company shares to the public. This type of business legal existence is separate from the members who create it. The business is also required by law to be formed by at least seven members, but the number can go as high as possible. The capital collected by this type of business is through the selling of the shares of the Company to the general public by giving those who buy the membership to the Company. An Example of such a business in the UK is Rolls-Royce.
A cooperative refers to a business that is owned by members. They may be customers, residents, suppliers, or employees. The central aspect of the existence of a cooperative is shared ownership. The membership to a cooperative is voluntary and open. Also, their structure is democratic, as every member is entitled to one vote. The financial results of the business are fairly and equitably distributed based on the volume of the operations. Examples of these types of businesses in the UK include the Daily bread cooperative and the Cooperative press.
Section 3: Different businesses structures and internal factors affecting business
3.1 Identification of different organisational structures and explaining how does organisational structure affect business productivity
One of the organisational structures used in the business is divisional hierarchical structure. This involves the use of a command chain that is vertical in organising employees and assigning them responsibilities. In this structure the organisation is grouped into divisions that are responsible for the functions of the organisation. Large organisations majorly apply this type of structure in determining the employee’s duties and responsibilities (Mihm et al.,2010). The senior management of an organisation in this type is taking decisions that are followed by the subordinate’s bellow in the structure.
Also, there is a functional structure that is the most commonly used. In this structure, individuals are grouped based on the specific functions that they perform. This involves creating common departments, which include accounting, human resources, and purchasing (Bai et al.,2017). The grouping is done by separating the different areas and separately managing them. The structure has an advantage as the separation of the functions is based on the expertise required to run a specific department. However, the structure may be challenging as it may lead to the focus of various departments on only the responsibilities that they specialise in and ignore the support that may be needed by other departments in the organisation (Palmer, A & Hartley, B., 2011).
The third structure is referred to as the matrix structure. It provides for both vertical and horizontal reporting levels in an organisation. It promotes the working together of members from various groups in the organisation. The structure is more beneficial as it is created for employees outside their departments, which encourages collaboration in the organisation. However, it is quite challenging if the directions given to employees are from different managers who expect the employees under them to have priorities on their responsibilities (Palmer, A & Hartley, B., 2011).
Moreover, an organisation may use a product structure that involves having an executive oversee everything related to a particular line of product and whereby all employees who work on that line report to that particular executive. The structure has an advantage in that it enables the arrangement of various products by categorising them. However, it may lead to creating processes that may be completely separate concerning other lines of products in the same organisation. Some businesses also use the organisation’s customer structure, whereby they base their structure on the customer type. The main aim of this type of structure is ensuring that they meet particular customer expectations by using a service approach that is customised. The structure is quite specific to every customer groups’ needs and may be quite effective in improving its service to the customers (Galbraith,2011). On the other hand, it may lead to ignoring the needs of some types of customers. Another type of organisational structure is the Geographic structure, which is mainly used by organisations that operate in various geographic regions. This helps in supporting the demands in logistics and geographical differences that may arise on the customers’ needs. This brings an advantage for organisations that operate beyond state limits and cities and serve various customers in multiple states or all-around the country (Funk,2014).
3.2 How different external factors affect the performance of a business
The political factors affect the business performance by determining the extent of the government’s influence on a particular industry or the country’s economy. This may include the imposition of taxes or duties, which may cause changes in organisations’ structures that generate revenue. Examples of political factors are fiscal policies, tax policies, and trade policies. Recently due to the “BREXIT” deal, the UK business suffered from many changes. These changes were very unfavorable for many organisations by imposing new regulations.
Economic factors determine the performance of an economy and thus directly affect businesses, which may have long-term effects on the performance. The effects may be in the form of a rising rate of inflation, which affects businesses’ pricing of products. This affects the consumers’ purchasing power, which, in turn, the economic models of demand and supply (Cadle et al.,2010). Examples of economic factors are economic growth, inflation rates, foreign exchange rates, and interest rates. The current situation caused by COVID-19 19 is a typical example of how the economy slowdown is reflecting over the business. Many physical stores closed down due to the social restrictions. Restaurants and bars were heavily impacted as a result of the taken precautionary measures.
There are social factors that involve the business market’s social environment. This involves the effect and determinations made by the population, demographics, and trends in cultural practices in the business environment. This may involve changes in various markets on demand for products, especially during particular periods due to the ongoing events such as holidays or various celebrations. Social factors are determining the marketing approach in many cases. For example, big brands such as Coca Cola use different adverts depending of the region. The iconic “Santa” advert for Christmas, is not used in countries were the main religion is Islam.
They involve the effects on the business environments caused by technology and innovations. This may have an effect that is favourable or not depending on how the markets’ operations and the industry have been affected. This also relates to development, research, business automation, and awareness of the technology that a particular market is. Nowadays many organisations embrace the use of artificial intelligence. Many websites use robots for their customer services chats. That ease the process and also reduce the need of more employees.
They affect businesses in particular industries, including farming and tourism (Shtal et al.,2018). The environmental factors relate to those determined and influenced by the environment that surrounds a particular business. This may involve climate changes, weather, offsets in the environment, and geographical locations. Legal factors also affect business performance internally through policies maintained by businesses and externally, through laws made by countries aimed at regulation of business operations. These may involve the effects on business by labour laws, consumer laws, and various safety standards that have been set.
The report has been critical in learning about various businesses, structures, and factors that affect their performance. Understanding these aspects and the business environment, in general, is essential for the business. Knowing also the external environment and how it impacts the business help the organisation to be prepared for any obstacles (Palmer, A & Hartley, B., 2011). Business owners and managers should be aware of all this factors in order to be competitive on the market and achieve the desired results.
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