UNIT 2
BUSINESS MANAGEMENT
Week 3 & 4
Notes By : Farihan Elyana Bt Zahari
LESSON LEARNING OUTCOME:
1.
Explain the management function.
2.
Propose the formation of new business
Notes By : Farihan Elyana Bt Zahari
Management: Definitions

“Management is the process of designing and
maintaining an environment in which individuals,
working together in groups, efficiently accomplish
selected aim(s) viz. to create a surplus(s).” …. Weihrich &
Koontz

“Management is not an absolute; rather it is socially and
culturally determined. Across all cultures and in all
societies, people coming together to perform certain
collective acts encounter common problems having to do
with establishing direction, coordination and motivation.
Culture affects how these problems are perceived and
resolved.” …The Art of Japanese Management by R. Pascale & A.
Athos .
vikramthadeshvar@hotmail.com
SYSTEMS APPROACH TO MANAGEMENT
Management as a system transforms inputs:
 by the process of
Planning
+ Organizing
+ Leading
+ Controlling

Planning involves selecting objectives or
goals and the course of actions to achieve
them:



Provides the bridge to take us from where we are
to where we want to go;
Is a rational approach to achieving pre-selected
objectives - based on innovation, knowledge and
purpose;
Decision making in choosing the best from
alternative courses of action and is integral to
planning;
Notes By : Farihan Elyana Bt Zahari
Plans as foundation of Management
What kind of
resources
needed?
What kind of people
& org. structure
to have?
Plans
How to lead them
to reach planned
goals?
How to control in
case of deviation
from plan ?
vikramthadeshvar@hotmail.com
The primacy
of Planning
Types of Plans
•
Mission / Purpose
–
The basic function or ‘reason for existence’ of an
enterprise/ organization
Case in point: Mission of Politeknik Tuanku
Syed Sirajuddin
“Mewujudkan ekosistem pembelajaran yang
transformatif, kondusif dan inovatif.”
Type of Plans (Cont’d)
•
Objectives/ Goals
–
The end towards which activity of an organization is aimed,
e.g.
•
•
•
For a Business enterprise – profit, surplus creation;
For a Management Institute: The number of employable/useful
trainees;
Strategies
–
–
Determination of the long term objectives and adoption of
a course of action
Gives a frame work for linked action-plans, communicated
systematically to guide thinking and actions.
Types of Plans (cont’d)
•
Policies
–
“Plans” that are general directional statements (or
understandings) that guide/help in decision making:
•
•
–
–
Repeat decisions taken ‘reflexively’;
Delegation of tasks without loss of control.
Some discretion is permissible depending on circumstances
thus encouraging initiative within limits and situational
adjustments;
Issues with “Policy”
•
•
Seldom documented in writing
Subject to interpretations
Types of Plans (cont’d)
•
Procedures
Plans that are chronological sequences of required actions:
task-oriented in nature;
– Cuts across department boundaries (sub-systems) in an
organization: e.g. customer complaint handling procedure;
– Procedures and policies are inter related: e.g. authorization
for paid leave
–
•
•
•
Policy governs quota, responsible authority etc.
Procedure governs application, grant and record-keeping.
Rules
–
Specific actions or non-actions allowing no discretion
•
Caution: rules (and procedures too) limit initiative!
Types of Plans (cont’d)
•
Programs
–
Action plans (mainly non-routine or for changed activities)
including, task assignments, steps to be taken, resources to be
deployed etc. to achieve a (new/renewed) goal;
•
•
–
Primary program may require supporting programs, spreading across the
enterprise;
Perfect coordination between supporting & primary programs essential
to avoid delays, unnecessary costs and expected roll-out.
Programs are a complex of (sub)goals, policies, rules and other
elements necessary for the course of action e.g. obtaining ISO
certification.
Types of Plans (cont’d)
•
Budgets
–
–
A statement of expected results expressed in “Numerical
terms” e.g. financial operating budget = “profit plan”;
Budgets enforce precision in thinking:
•
•
–
Making a budget is ‘planning’ by itself;
Encourages innovation – a “different” way to work
Budgets serve for ‘Control’:
•
•
•
Enforces discipline in execution of plans;
Instills cost consciousness;
Makes people (constantly) plan!
Steps in Planning
Being aware of
challenges
Market, Customer’s
wants, Competition,
Own strengths
& weakness
Setting Goals/
Objectives
Planning premises
What to accomplish
& when
Budgeting
(Numberizing Plans)
e.g., Sales budget
Operational Expense budget,
Capital expenditure budget
Identifying
alternatives
Internal & external
Environment/conditions
Formulating
Supporting
plans
Comparing &
choosing an
alternative
e.g., plan to buy
Decision
Equipment, recruit & train
making
Employees, develop product etc
Nature of Organizing
Organizing may be broadly defined as:
•
1.
2.
3.
4.
The identification and classification of required activities;
The grouping of those activities towards attaining their
set objectives;
The assignment of those groupings to a responsible
manager, duly empowered;
The provision for coordination among, within and across
the groups in the organization.
Organization structures are designed to:
•
–
–
–
–
Clarify tasks & responsibilities,
Remove obstacles,
Furnish decision making & communication network
Support attainment of enterprise objectives
Leading
• involves the social and informal sources of
influence that you use to inspire action taken
by others. If managers are effective leaders,
their subordinates will be enthusiastic about
exerting effort to attain organizational
objectives.
Notes By : Farihan Elyana Bt Zahari
Controlling
•
involves ensuring that performance does not deviate from standards.
•
Controlling consists of three steps, which include
i.
ii.
iii.
establishing performance standards,
comparing actual performance against standards,
taking corrective action when necessary.
•
The measurement of performance can be done in several ways,
depending on the performance standards, including financial statements,
sales reports, production results, customer satisfaction, and formal
performance appraisals.
•
Effective controlling requires the existence of plans, since planning
provides the necessary performance standards or objectives.
•
Controlling also requires a clear understanding of where responsibility for
deviations from standards lies. Two traditional control techniques are
budget and performance audits. An audit involves an examination and
verification of records and supporting documents.
Notes By : Farihan Elyana Bt Zahari
Types of
Business Ownership
Private Sector
•
Sole Trader
•
Partnerships
•
Private Limited Company
(Ltd)
•
Public Limited Company
(plc)
•
Franchise
Public Sector
• Public Corporations
• Municipal
Undertakings
• Trusts
Sole Trader
Key Features
A Sole Trader has:
•
1 owner
•
0 to any number of employees
A Sole Trader is in the Private Sector
Sole Trader
Disadvantages
Advantages
•
Unlimited liability
•
No one to share decision
making
•
Lack of specialisation
•
No continuity of existence
•
Time off/holidays
•
Limited finance
Sole Proprietorship/Sole Trader
•
Formed under the Business Act 1956
–
–
–
This type of business is owned by an individual or sole person.
Has a simple business structure
Some sole trader can operate as big business, e.g. Family run business.
•
–
E.g. Kamdar Departmental Store was sole trader for long time until it turn into private
limited company ( Sdn. Bhd.)
Example of Sole trader – tailor, Beauty Saloon, restaurants, launderettes
(dobi), mini market etc.
Advantage Sole Proprietorship
•
Easy to manage the business.
•
All decision made by the owner- manager.
•
Low start up capital, no heavy investment.
•
Flexibility in operation.
•
The Sole trader can act quickly with a degree of flexibility.
•
Own boss
•
Total control
•
Greater opportunity for flexible working
•
Keep all profits
•
Easy to set up – few legal requirements
•
Easy to form and dissolve (bubarkan) with minimum formalities.
•
Nobody shares the rewards of the business, all profit will go to the owner.
•
Subject to less government rules and regulation.
•
The owner – manager has to pay income tax based on total profit earned to LHDN ( Inland Revenue Board, M’sia)
Disadvantages
Sole Proprietorship
–
Limited source of capital
•
–
The liability is unlimited
•
–
Lack of capital to expand the business further.
The owner- manager will be liable to settle all debts outstanding.
Failing which all assets will be ceased by court order to be sold, and cash
generated will used to pay all outstanding creditors. The future development
of the business is limited.
•
Lot depends on the managerial capability of the owner and physical health.
The life span of the business depends upon the age of the owner and how
efficiently he manages the business.
– He is of ill health or passes away the business continuation is disrupted.
– If he choose an heir (successor) to the business, then the business has to be
reregistered.
–
Partnership
A Partnership can have:
• 2 - 20 owners
• 0 to any number of employees
• A Sleeping Partner - someone who invests money but takes no part in the day
to day running
• A Deed of Partnership - lays out rules for running and dissolution of the
Partnership eg sharing of profits
A Partnership is in the Private Sector
•
Partnership is a legal business entity with two or more partners.
•
In this type of business, a person forms a partnership (kongsian)
•
A partnership business has to be registered under the Business Registration Act
1956
Partnership – Advantages
•
Easy to set up and operate – less formalities.
•
Easier to secure financial assistance from financial institutions.
•
Equity can be increased from existing partners.
•
Business risks can be less because risk is borne by all existing partners.
•
The responsibility of managing and overseeing the business can be handled by all
partners.
•
Ideas, talents and skills can be pooled together from partners for better management.
•
Income tax is not imposed on the partnership business but instead on the individual
partners.
•
Shared decision making
•
Increased capital invested
•
Increased specialisation
•
Easy to set up – few legal requirements
Partnership – Advantages & Disadvantages
•
Business liabilities are unlimited.
–
Personal assets can be seized by court order since no distinction between personal & business assets.
•
The life span (jangka hayat) of the partnership business depends on the life spans of the business.
•
If partner declared bankrupt, dies or become insane business has to be dissolved.
•
If a Letter of Agreement as per Partnership Act 1961 is not made members may resort to mismanage or be unethical in
conducting their business in the partnership.
•
Difference of opinion and conflict may lead to breakup of the partnership.
•
Unlimited liability
•
Profits have to be shared between partners
•
No continuity of existence
•
Partners may have disagreements
•
Limited finance
Contract Agreement
•
It is necessary for the business to have some kind of Contract or
Partnership Agreement to minimize any problems that may arise.
•
The Business Registration Act 1956 does not state that the
formation of a partnership business must have a written agreement.
Contract Agreement
•
Should an agreement arises what should be the contents?
–
The Contents are as follows:
• Name of the business
• The duration of the partnership
• Agreement as the partnership status once the partner/s passes away or withdraws from the
partnership.
• The name of the individuals involved in managing the partnership.
• The accounts of the business.
• The structure of ownership i.e. the contribution made by individual partners.
• The rights and obligation of the business partners
• What are the properties that are considered as business assets to distinguish from personal
assets.
Partnership Act 1961
•
According to Sect 26 & 27 of the above act:
–
–
–
–
–
Profit & Loss are to be shared equally.
No interest is payable on a partner’s capital
Partners are required to participate actively in the business.
No partner is entitled for salary for work contribution done for the
partnership.
Partner’s should be paid based on their contribution.
Partnership Act 1961
–
–
–
–
–
Daily routine matters can be decided by the majority of the partners, but
major changes require the support of all partners.
Partner may choose not to be partner any longer if all partners have agreed.
If all partners agree a new partner can be brought to replace the old partner.
All business accounts books need to ket in the business premises.
Partners have the right to check the books of the company as when needed.
Private Limited Company (Ltd)
A Private Limited Company has the following key features:
•
Ltd after it’s name
•
Owners called shareholders
•
A separate legal existence from owners
•
Shareholders who are family and friends
•
Governed by two legal documents:
– Memorandum of Association
– Articles of Association
•
Controlled by a Board of Directors
•
Run by a Managing Director
A Private Limited Company is in the Private Sector
Private Limited Company
(Ltd)
Advantages
•
Limited liability
•
Greater availability of
finance
•
Specialisation can
occur
Disadvantages
•
More complicated to
set up - legal
formalities
•
Loss of individual
control
Public Limited Company (plc)
A Public Limited Company has the following key features:
•
plc after it’s name
•
Owners called shareholders
•
A separate legal existence from owners
•
Shareholders who are members of the general public
•
Governed by two legal documents:
– Memorandum of Association
– Articles of Association
•
Controlled by a Board of Directors
•
Run by a Managing Director
A Public Limited Company is in the Private Sector
Public Limited
Company (plc)
Disadvantages
Advantages
•
Limited liability
•
•
Greater availability of
finance
More complicated to
set up - legal formalities
•
Loss of individual
control
•
Greater threat of
takeover
•
Specialisation can occur
Franchise Key
A Franchise is:
•
Where a business (the Franchiser) allows another business (Franchisee) to trade under
their name
•
Also a method of business growth
•
Some examples of franchises:
–
–
–
–
•
McDonalds
Pizza Hut
Kwik Fit
Thorntons
Also going to have another type of business ownership eg sole trader etc
A Franchise is in the Private Sector
Franchising
Disadvantages
Advantages
For Franchisee
•
Established name
•
Support of Franchiser
For Franchiser
•
Quick way to grow
•
Royalties from
Franchisee
For Franchisee
•
Lack of total control
For Franchiser
•
Risk of reputation from
unsuitable franchisee
Comparison Business Ownership
FEATURES
SOLE TRADER
PARTNERSHIP
LTD
PLC
FRANCHISE
Number of
owners:
1
2 - 20
Unlimited
number of
shareholders
Unlimited
number of
shareholders
Franchisor owns
the name.
Franchisee owns
the premises
Liability of
owners:
Unlimited
Unlimited
sleeping partner
- limited liability
Limited
Limited
Depends on set
up - may be a
sole trader, Ltd
Capital
provided
Owner
Partners
Shareholders
Shareholders
Franchisee
Who gets
profits?
Owner
Partners – may
be split
according to
amount invested
Shareholders
Shareholders
Franchisee
Franchisor paid
royalties - % of
profits
Risks:
High
High
Low
Low
Low
Legal
Requirements:
None
None
Registration under Companies Act Memorandum and Articles of
Association. Then receive a
Certificate of Incorporation
PLC also receives Certificate of
Trading
Depends on set
up of business
(eg sole trader
set up – no legal
requirements
etc)
Public Sector
•
Business and organisations controlled by the government
•
Main aim of organisations in the Public Sector is to provide a service
for members of the general public
•
Examples include:
BBC – British Broadcasting Corporation
– NHS - National Health Service
– DENI – Department of Education for Northern Ireland
– Defence – Army, Royal Navy, Royal Air force, PSNI
– Local Councils
–
DISCUSSION
•
explain the nature of the business to be run by your product.
Notes By : Farihan Elyana Bt Zahari
How to Do Online Business in Malaysia
1.
Register with MMC, if your business activity relates to
telecommunication sector.
2.
Register with CCM as a business enterprise
3.
Get a domain name, a hosting account and a properly designed
website. If you want to try out before spending additional money on
these items, you can still sell through Facebook, eBay, lelong.com.my,
mudah.my, your blogs and other social media sites.
4.
Register and declare income with the Inland Revenue Board of
Malaysia
Notes By : Farihan Elyana Bt Zahari
Buying a Business in Malaysia
•
Many people will find that buying an existing business is a safer option than
starting a new business from scratch.
•
The benefits of buying a business are self evident.
•
The business you buy will have a trading history, will have customers, and will
have (probably) staff who know how the business runs.
•
By looking through the books you will be able to determine turnover and profit
percentages, and perhaps find some ways to save money, or make more money.
•
Always engage the services of an accountant who understands how to buy a
business, and who can help you drill down into the figures to make sure the
price you are paying for the business is fair.
•
When you buy a business it is important to understand why the business is for
sale. Is it due to retirement or ill health? Does the owner need to sell to fund
other projects? Has the business reached the highest level of turnover and
profit likely ever to be achievable? Or is the business struggling?
Notes By : Farihan Elyana Bt Zahari
franchise
Notes By : Farihan Elyana Bt Zahari