Business organizations: definition, importance and types

18 of October, 2022

First of all, we must bear in mind that before a company can be set in motion, managers must be clear about the way in which the company will be organized. Accordingly, there are several types of business organizations. Below, we will get to know them in more detail.

What is a business organization?

Business organization consists of giving a correct order to all the resources of a company. In addition to this, a course of action will be defined to achieve the goals established in the company. It should be noted that no management and administrative work can be carried out if an organizational plan is not determined beforehand.

Such a plan should seek to lay the foundations for the proper functioning of the company and for the rest of the elements that are associated with it. An example of this could be quality management, risk control or human resources, among others.

The ability of companies to show their business idea and be clear about their goals is exposed in all types of business organizations. Even the structure selected will depend on the fulfilment of their essential idea. In other words, we can say that the types of business organizations are the different ways in which a company can present itself. In this same sense, depending on the goals pursued, the sector in which they operate, their size or their legal form, such companies should be classified into different types.

Classification of business organizations

Depending on the size of the company and other determining factors, there are multiple formulas or classifications of company organization. The following are the most important ones:

According to their economic factor

• Primary sector. An organization dedicated to the extraction of raw materials.
• Secondary sector. The task of these companies is to transform the raw materials extracted by companies in the primary sector.
• Tertiary sector. These companies offer services in all kinds of fields, from food to technological development.

According to their size

• Micro enterprises. These organizations do not exceed 10 employees.
• Small business. They have a minimum of 11 employees and a maximum of 49 employees.
• Medium-sized enterprises. These companies have from 50 to 250 employees.
• Large enterprise. These companies have 251 employees or more.

Depending on the origin of their capital

• Public enterprise. This type of organization depends on public investment provided by local, regional or national entities.
• Private enterprise. Their capital is provided by private individuals.
• Mixed enterprise. Their capital comes from the contribution of the State, although such capital can also be contributed by private individuals.

What is the importance of business organization types?

• Streamlining processes. All those involved know their true role, so they optimize and accelerate all the company’s production processes.
• Correct working methods. In other words, they provide the methods for the correct performance of tasks or activities.
• Clear positions. That is to say, all the individuals who are part of the company know what their positions, responsibilities and roles are.
• Resource optimization. Resources are optimized exponentially, as mentioned above.
• Cost reduction. Implementing several ideal and agile working methods reduces costs.

In short, the types of business organizations are the different ways in which a company can be presented. We must keep in mind that this will depend on many factors and characteristics that such a company presents. For that, you can be better guided through this article and define a suitable type of business organization.