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CHAPTER 2
PLANNING AND ORGANIZING A BUSINESS
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A business can be defined as an organization thatprovides goods and services to others who want
or need them. It includes every form of trade,
commerce, craftsmanship, occupation,
profession or other activities that is carried out
for the purpose of maximizing profit.
There are four (4) forms of business:
SOLE PROPRIETORSHIP
PARTNERSHIP
PRIVATE LIMITED COMPANY.
PUBLIC LIMITED COMPANY.
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It is owned by one person the simplest business structure
may have any number of employees
requires a small amount of capital to start
with
only Malaysian citizens or permanent
residents can register as an owner
Examples: tailor shops, beauty saloons,restaurants, launderettes and mini market
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a legal business entity with two or morepartners but not exceeding 20 persons
partners carry out the business, share the
capital, profits and losses
Partnerships comprise two or more businesspartners pooling their resources in a business
with a view to profit.
only Malaysian citizens or permanent residents
can register partnerships Personal names or trade names can be used as
business names
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Active partners:The partners who actively participate in the day-to-day operations of the businessare known asactive partners. They contribute capital and are
also entitled to share the profits of the business.They also share the losses that the businessfaces.
Dormant partners:Those partners who do not participate in the
day-to-day activities of the partnership firm areknown as dormant or sleeping partners. Theyonly contribute capital and share the profits orbear the losses, if any.
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Nominal partners:These partners only allow the firm to use theirname as a partner. They do not have anyreal interest in the business of the firm. They do
not invest any capital, or share profits and alsodo not take part in the business of the firm.
Minor as a partner:In special cases a minor can be admitted aspartner with certain conditions. A minor can only
share the profit of the business. In case of losshis liability is limited to the extent of his capitalcontribution for the business.
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cannot sell shares to the publicdistinguished by the appellation
"Sendirian Berhad", shortened to "Sdn
Bhd" or "S/Bprivate limited company is limited to
50 members, minimum 2 members
A minimum paid-up capital of only RM2is needed to start a private limited
company
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AMTIS SOLUTION SDN BHD
(SDN.BHD.)
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source their capital by selling shares to the
public
distinguished by the appellation "Berhad",
shortened to "Bhd". public limited companies have no member
limit
need a paid-up capital of not less than
RM40mil or RM60mil
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(BHD)
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ADVANTAGES DISADVANTAGES
Easy to set up with fewformalities.
Business liabilities are unlimited,
which may involve personalassets of all partners of thecompany.
Business risks can be reducedand distributed amongpartners. In cases of loses,
each partners will share theburden.
Risks of personal clashes amongpartners.
A lot of ideas, talents, and
skills can be pooled together
for better management.
If any of the partners passes
away or is declared bankrupt,
the business is automatically
dissolved, unless there is anagreement otherwise.
The responsibilities ofmanaging and handling thebusiness can be divided equallyamong partners.
If no Letter or Agreement is
being made, unethical or
misconduct behavior may
happen.
PARTNERSHIP
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ADVANTAGES DISADVANTAGES
Limited liability More complicatedto set up - legalformalities
Can raise capitalby selling shares The profits mustbe shared
The board of
director canchoose who canbuy and who
cannot buy share
Private Limited Company (sdn. Bhd.)
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ADVANTAGES DISADVANTAGES
Limited liability More complicatedto set up - legalformalities
Increase the skillin the business.(Specialisation)
Loss of individualcontrol
Greater threat oftakeover
PUBLIC Limited Company (Bhd.)
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Running a franchise
TOPIC 2.1.4
Establishing a new business
Buying an existing business
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Have A Capital Understand How To Manage Financial Business.
Knowledge About Business Environment
Product / Service / Areas Of Business / Facilities / Marketing
Legal Compliance Business Laws / Business Procedure
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High commitment
High risk
Delayed profitability
Limited financing
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What type of business should you buy?
Finding a business to buy
Research the Businesss history and finances
Closing the deal
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ADVANTAGES DISADVANTAGES
Established Customers Invest a large amount up front,
and will also have to budget for
professional fees for solicitors,
surveyors, accountants etc.
A business plan and marketing
method should already be in
place.
You also need to consider why
the current owner is selling up
and how this might impact the
business
Existing employees should have
experience you can draw on
You may need to honors or
renegotiate any outstanding
contracts the previous
owner leaves in place
A market for the product or
service will have already been
demonstrated.
Think about the feelings of
current staff
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Your business is based on a proven idea.
You can use a recognized brand name and trade
marks.You benefit from any advertising or promotionby the owner of the franchise - the "franchisor".
The franchisor gives you support- usually including
training, help setting up the business, a manual
telling you how to run the business and ongoing
advice.
You usually have exclusive rights in your territory. The
franchisor won't sell any other franchises in the same
region, though there will be competition from other
businesses. Financing the business may be easier. Banks are
sometimes more likely to lend money to a franchise
with a good reputation.
Risk is reduced and is shared by the franchisor.
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Costs may be higherthan you expect.
The franchise agreementusually includes
restrictions on how you run the business.
The franchisor might go out of business, orchange the way they do things.
Other franchisees could give the brand a bad
reputation.
Reduced risk means you might not generatevast profits.
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FEATURES SOLE TRADER PARTNERSHIP SDN BHD BHD FRANCHISE
Number ofowners: 1 2 - 20 Unlimitednumber ofshareholders
Unlimitednumber ofshareholders
Franchisor ownsthe name.Franchisee ownsthe premises
Liability ofowners:
Unlimited Unlimitedsleeping partner- limited liability
Limited Limited Depends on setup - may be asole trader, Ltd
Capital
provided
Owner Partners Shareholders Shareholders Franchisee
Who getsprofits?
Owner Partners maybe splitaccording toamount invested
Shareholders Shareholders FranchiseeFranchisor paidroyalties - % ofprofits
Risks: High High Low Low Low
Legal
Requirements:
None None Registration under Companies Act -
Memorandum and Articles ofAssociation. Then receive aCertificate of Incorporation
PLC also receives Certificate ofTrading
Depends on set
up of business(eg sole traderset up no legalrequirementsetc)
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Every Business need a manager to coordinates allbusiness activities.
In fact, all the manager do the same tasks in
business management such as:
Planning
Organizing
Leading
Controlling
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For example, a manager of a new local
restaurant will need to have a marketing
plan, a hiring plan and a sales plan.
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ELEMEN OF
PLANNING
BUDGET
PROGRAM MISSION
STRATEGY
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Emphasizes the achievement of goals
To facilitate the evaluation
Reduce risks and losses
Division of tasks
Identify opportunities and threats
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Organizemeans to properly arrange
In Business organizing refers to the activities of
designing an organizational structure, dividing andassigning jobsand task among departments sectionsor units besides handling the infrastructure andoperation method.
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Managers are responsiblefor organization of thecompany and this includes organizing people andresources.
Knowing how many employees are needed for
particular shifts can be critical to the success of acompany.
Without an organized workplace, employees will
see a manager as unprepared and may lose respectfor that particular managers supervisorytechniques.
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The act of getting the job done through otherpeople is referred to in managerial functions as
leading.
Leading involves :
Assigning of jobs and responsibilities.
Motivating employees
Providing and receiving feedback.
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In an ideal situation, the manager also serves as
the leader. Managers who want to lead
effectively need to discover what motivates
their employees and inspire them to reach thecompany objectives.
In other words a manager needs to develop
interpersonal and good communication skills toenable him to lead and motivate the workers.
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Delegates tasks
Facilitate communication
Motivate employees
Coordinate tasks
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Controlling is a monitoring functionto
ensure that activities carried out are onthe right track in achieving the goals set
out by the business,
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A manager compares progress against theobjectives and targets of the business,and takecorrective actions or devices an alternativestrategy whenever deviation is found.
Managers need to pay attention to costs versusperformance of the organization. For example,if the company has a goal of increasing sales by5% over the next two months, the manager may
check the progress toward the goal at the endof month one.
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An effective manager will share this
information with his or her employees. This
builds trust and a feeling of involvement for
the employees.
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Planning is not about predicting the future
Planning is not about writing a detailed road
map into the future
Planning is not about a few people writing a
vision statement & then getting buy-in from
everyone else
OverviewThe
Organisation
The
Future
The
ProcessReflections
Business
Ecosystem
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Strategic planningis an organizations process ofdefining its strategy, or direction, and making
decisions on allocating its resources to pursue this
strategy, including its capital and people.
Various business analysis techniques can be used in
strategic planning, including SWOT analysis, PEST
analysis.
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If you fail to plan, then you plan to failbe
proactive about the future
Strategic planning improves performance
Counter excessive inward and short-term thinkingSolve major issues at a macro level
Communicate to everyone what is most important
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Step 1 Identify mission, objective andcurrent strategy for organization.
Step 2 Environment Analysis
Step 3 Identify opportunities and treat
Step 4Analyzed resources and
capabilities of business
organization
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Where are we now? (Assessment)
Where do we need to be? (Gap / Future End
State)
How will we close the gap (Strategic Plan)How will we monitor our progress (Balanced
Scorecard)
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Address critical performance issues
Create the right balance between what the
organization is capable of doing vs. what the
organization would like to doCover a sufficient time period to close the
performance gap
Visionaryconvey a desired future end state
Flexibleallow and accommodate changeGuide decision making at lower levels
operational, tactical, individual
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Environmental Scan
Assessment
Background
Information
Situational Analysis
SWOTStrengths,Weaknesses,
Opportunities,
Threats
SituationPast,
Present and Future
Significant Issues
Align / Fit with
Capabilities
Mission & Vision
Values / Guiding
Principles
Major Goals
Specific Objectives
Performance
Measurement
Targets / Standards of
Performance
Initiatives and
Projects
Baseline Components
Performance
Management
Review Progress
Balanced Scorecard
Take Corrective
Actions
Down to Specifics Evaluate
Where we are Where we want to be How we will do it How are we doing
Gaps
Action Plans
Feedback upstreamrevise plans
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Political Economic Social Technology
Environment
regulation &
protection
Economic growth Income
distribution
Government
research spending
Tax Policies Interest rate &
monetary rate
Demographic,
population growth
rate, age
Industry focus on
technological
effort
International
trade regulation& restrictions
Government
spending
Labor & social
mobility
New inventions &
developments
Competition
regulation
Inflation Rates Fashion , hype Changes in IT
Political stability Stage of business
cycle
Health
consciousness &
welfare
Changes in
Internet
Safety regulations Consumer
confidence
Living conditions Changes in Mobile
Technology
2 SWOT A l i
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SWOTAnalysis is a simple but
useful framework for analyzing
your organization's strengths andweaknesses, as well as the
opportunities and threats you
face.
2. SWOT Analysis
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Strengths
Weaknesses
Opportunities
Threats
2. SWOT Analysis
SWOT stands for:
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Strengths - the positive internal
attributes of the organisation
Weaknesses - the negative internalattributes of the organisation
2. SWOT Analysis
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Opportunities - externalfactors which
could improve the organisations prospects
Threats - externalfactors which could
undermine the organisations prospects
2. SWOT Analysis
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Strategic management
the art and science of formulating, implementing,
and evaluating cross-functional decisions that
enable an organization to achieve its objectives
1-59Copyright 2013 Pearson Education, Inc. publishing as Prentice
Hall
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Strategic management is used synonymously
with the term strategic planning.
Sometimes the term strategic management is
used to refer to strategy formulation,
implementation, and evaluation, with strategic
planning referring only to strategy formulation.
1-60Copyright 2013 Pearson Education, Inc. publishing as Prentice
Hall
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A strategic plan is a companys game plan.
A strategic plan results from tough managerial
choices among numerous good alternatives,
and it signals commitment to specific markets,
policies, procedures, and operations.
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Hall
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Strategyformulation
Strategyimplementation
Strategyevaluation
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Hall
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Strategy formulation
includes developing a vision and mission,
identifying an organizations external opportunities
and threats, determining internal strengths and
weaknesses, establishing long-term objectives,generating alternative strategies, and choosing
particular strategies to pursue
1-63Copyright 2013 Pearson Education, Inc. publishing as Prentice
Hall
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Deciding what new businesses to enter,
What businesses to abandon,
How to allocate resources,
Whether to expand operations or diversify,Whether to enter international markets,
Whether to merge or form a joint venture,
How to avoid a hostile takeover.
1-64Copyright 2013 Pearson Education, Inc. publishing as Prentice
Hall
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Strategy implementation
requires a firm to establish annual objectives,
devise policies, motivate employees, and allocate
resources so that formulated strategies can be
executed often called the action stage
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Hall
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Strategy evaluation
reviewing external and internal factors that are the
bases for current strategies, measuring
performance, and taking corrective actions
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Hall
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a. financial institutions
b. management and entrepreneurship
c. technology
d. location and business spacee. marketing
f. research and project identification
g. information
Copyright 2013 Pearson Education, Inc. publishing asPrentice Hall 1-67
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