UNIT 2 BUSINESS MANAGEMENT Notes By Farihan Elyana Bt Zahari LESSON LEARNING OUTCOME Explain the management function Propose the formation of new business Notes By Farihan Elyana Bt Zahari ID: 328978
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Slide1
Week 3 & 4
UNIT 2BUSINESS MANAGEMENT
Notes By : Farihan Elyana Bt ZahariSlide2
LESSON LEARNING OUTCOME:
Explain the management function.Propose the formation of new business
Notes By : Farihan Elyana Bt ZahariSlide3
vikramthadeshvar@hotmail.com
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 .Slide4
by the
process
of
Planning
+ Organizing
+
Leading
+ Controlling
SYSTEMS APPROACH TO MANAGEMENT
Management as a system transforms inputs: Slide5
Notes By : Farihan Elyana Bt Zahari
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;Slide6
vikramthadeshvar@hotmail.com
Plans as foundation of Management
Plans
What kind of resources needed?
What kind of people
& org. structure
to have?
How to lead them
to reach planned
goals?
How to control in
case of deviation
from plan ?
The primacy of PlanningSlide7
Types of Plans
Mission / PurposeThe 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
.”Slide8
Type of Plans (Cont’d)
Objectives/ GoalsThe
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. Slide9
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 interpretationsSlide10
Types of Plans (cont’d)
ProceduresPlans 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.
RulesSpecific actions or non-actions allowing
no discretionCaution: rules (and procedures too) limit initiative!Slide11
Types of Plans (cont’d)
ProgramsAction 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.Slide12
Types of Plans (cont’d)
BudgetsA 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!Slide13
Steps in Planning
Being aware of
challenges
Market, Customer’s
wants, Competition,
Own strengths
& weakness
Setting Goals/
Objectives
What to accomplish
& when
Planning premises
Internal & external
Environment/conditions
Identifying
alternatives
Comparing &
choosing an
alternative
Decision
making
Budgeting
(Numberizing Plans)
e.g., Sales budget
Operational Expense budget,
Capital expenditure budget
Formulating
Supporting
plans
e.g., plan to buy
Equipment, recruit & train
Employees, develop product etcSlide14
Nature of Organizing
Organizing may be broadly defined as: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 Slide15
Notes By : Farihan Elyana Bt Zahari
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
.Slide16
Notes By : Farihan Elyana Bt Zahari
involves ensuring that performance does not deviate from standards. Controlling
consists of three steps, which include
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.
ControllingSlide17
Types of
Business OwnershipPrivate SectorSole TraderPartnerships
Private Limited Company (Ltd)
Public Limited Company (plc)
Franchise
Public Sector
Public Corporations
Municipal Undertakings
TrustsSlide18
Sole Trader
Key FeaturesA Sole Trader has:1 owner0 to any number of employees
A Sole Trader is in the Private SectorSlide19
Sole Trader
Advantages
Disadvantages
Unlimited liability
No one to share decision making
Lack of specialisation
No continuity of existence
Time off/holidays
Limited financeSlide20
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.Slide21
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 controlGreater opportunity for flexible workingKeep all profitsEasy to set up – few legal requirementsEasy 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
)Slide22
Limited
source of capital
Lack of capital to expand the business further.
The liability is unlimited
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.
Disadvantages
Sole
Proprietorship Slide23
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 Slide24
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 makingIncreased capital investedIncreased specialisation
Easy to set up – few legal requirements
Partnership –
AdvantagesSlide25
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 liabilityProfits have to be shared between partnersNo continuity of existence
Partners may have disagreements
Limited finance
Partnership – Advantages & DisadvantagesSlide26
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.Slide27
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.Slide28
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.Slide29
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.Slide30
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 DirectorsRun by a Managing DirectorA Private Limited Company is in the Private SectorSlide31
Private Limited Company (Ltd)
AdvantagesLimited liabilityGreater availability of financeSpecialisation can occur
Disadvantages
More complicated to set up - legal formalities
Loss of individual controlSlide32
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 DirectorsRun by a Managing DirectorA Public Limited Company is in the Private SectorSlide33
Public Limited
Company (plc)AdvantagesLimited liabilityGreater availability of finance
Specialisation can occur
Disadvantages
More complicated to set up - legal formalities
Loss of individual control
Greater threat of takeoverSlide34
Franchise
KeyA 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 etcA Franchise is in the Private SectorSlide35
Franchising
AdvantagesFor Franchisee
Established name
Support of Franchiser
For Franchiser
Quick way to grow
Royalties from Franchisee
Disadvantages
For Franchisee
Lack of total controlFor FranchiserRisk of reputation from unsuitable franchiseeSlide36
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)Slide37
Public Sector
Business and organisations controlled by the governmentMain 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 CouncilsSlide38
explain the nature of the business to be run by your product.
DISCUSSION
Notes By : Farihan Elyana Bt ZahariSlide39
Notes By : Farihan Elyana Bt Zahari
Register with MMC, if your business activity relates to telecommunication sector.Register with CCM as a business enterprise
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.
Register and declare income with the Inland Revenue Board of Malaysia
How to Do Online Business in
MalaysiaSlide40
Notes By : Farihan Elyana Bt Zahari
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?Buying a Business in MalaysiaSlide41
Notes By : Farihan Elyana Bt Zahari
franchise