chapter 4

Mohd Fauzwadi Mat Ali / FPP 1

INTRODUCTION FOR INTRODUCTION FOR BUSINESSBUSINESS

CHAPTER 4CHAPTER 4


THE OBJECTIVES OF THIS CHAPTERTHE OBJECTIVES OF THIS CHAPTER

To identify the concepts of business To describe the business process To explain the external and internal

environment in business To explain the functional of business To know the types of business in Malaysia


THE DEFINITIONS OF BUSINESS THE DEFINITIONS OF BUSINESS

A scholars and practitioners defined a difference meaning and various definitions and concepts of business

In Arabic, business is means muqabalah or mubadalah or exchange

Business is a commercial activity engaged in as a means of livelihood or profit, or an entity which engages in such activities (www.investorwords.com)


Cont’Cont’

According to the Legal Dictionary definition:

“business is any activity or enterprise entered into for profit. It does not mean it is a company, a corporation, partnership, or have any such formal organization.”


Cont’Cont’

Based on the definitions, the basic concepts of business activities can be 4 elements:

1. Fulfilling the customer needs and wants2. Products & Services3. Exchange value4. Profitability


DEFINITIONS OF BUSINESS DEFINITIONS OF BUSINESS MANAGEMENTMANAGEMENT


THE CONTRIBUTIONS OF BUSINESSTHE CONTRIBUTIONS OF BUSINESS

Country- Increased an economy and social development- Increased an economic of scale- Income growth Society- Provided financial supports- Fulfill the need and want- Provided a good infrastructure


THE FACTORS OF PRODUCTIONTHE FACTORS OF PRODUCTION

The factors of production refers to use all natural sources to produce products and services

Factors of production are resources used in the production of goods and services in economics (www.wikipedia.com)


Cont’Cont’

The factors of production are:

a) Land or natural resource - Naturally occurring goods such as soil and

minerals that are used in the creation of products.

- The payment for land is rent.

b) Human Resource or Labor - Human effort used in production which also

includes technical and marketing expertise. - The payment for labor is a wage.


Cont’Cont’

c) Capital - Capital has many meanings including

the finance raised to operate a business. - Capital means investment in goods that

can produce other goods in the future. - It can also be referred to as machines,

roads, factories, schools, and office buildings in which humans produced in order to produce other goods and services.


Cont’Cont’

d) Entrepreneurships

- Entrepreneurs are people who organize other productive resources to make goods and services.

- The success and/or failure of a business often depends on the quality of entrepreneurship.


BUSINESS PROCESSBUSINESS PROCESS

A business process refer to all activities to transform from input to output.

A business process is a set of linked activities that create value by transforming an input into a more valuable output. Both input and output can be artifacts and/or information and the transformation can be performed by human actors, machines, or both.


Cont’Cont’

There are three types of business processes: Management processes - the processes that

govern the operation. Typical management processes include "Corporate Governance" and "Strategic Management".

Operational processes - these processes create the primary value stream, they are part of the core business. Typical operational processes are Purchasing, Manufacturing, Marketing, and Sales.

Supporting processes - these support the core processes. Examples include Accounting, Recruitment, IT-support.


Cont’Cont’

According to Hammer & Champy’s (1993) a process is define as “a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer.”

A business process is a set of coordinated tasks and activities, conducted by both people and equipment, that will lead to accomplishing a specific organizational goal.


InputSources

Process OutputDirect

ProductService

IndirectTax

Salary etc.

BUSINESS PROCESS

CustomersCost

EntrepreneursProfit/Loss


BUSINESSES ENVIRONMENTBUSINESSES ENVIRONMENT

Businesses environment refer to all activities and forces that can be impact to organization.

The factors influencing business environment are 2 dimensions:

- Internal factor- External factor


EXTERNAL ENVIRONMENTEXTERNAL ENVIRONMENT

External forces can be divided into five broad categories:

(1) economic forces;

(2) social, cultural, demographic, and environmental forces;

(3) political, governmental, and legal forces;

(4) technological forces;

(5) competitive forces.


1. Economic Forces1. Economic Forces

Economic factors have a direct impact on the potential attractiveness of various strategies. For example, if interest rates rise, then funds needed for capital expansion become more costly or unavailable.


2. Social, Cultural, Demographic, and 2. Social, Cultural, Demographic, and Environmental ImpactEnvironmental Impact

Social, cultural, demographic, and environmental changes have a major impact on virtually all products, services, markets, and customers.


3. 3. Political, Governmental, and Legal Factors Political, Governmental, and Legal Factors Represent Key Forces . Represent Key Forces .

Political, Governmental, and Legal Factors Represent Key Forces . Federal, state, local, and foreign governments are major regulators, deregulators, subsidizers, employers, and customers of organizations.


4. Technological Forces4. Technological Forces

Technological Forces Play a Key Role. The Internet is changing the very nature of opportunities and threats by altering the life cycles of products, increasing the speed of distribution, creating new products and services, erasing limitations of traditional geographic markets, and changing the historical trade-off between production standardization and flexibility.


5. Competitive Forces5. Competitive Forces

An Awareness of Competitive Forces is Essential for Success

Competitive Intelligence (CI) Programs

Cooperation Among Competitors


INTERNAL ENVIRONMENTINTERNAL ENVIRONMENT

Internal environment can be analyze based on functional business Management

The common types of functional business Management are:

Marketing Finance/Accounting Production/Operation Research and Development (R & D) Management Information System (MIS)


1. Management1. Management

The functions of management consist of five basic activities: planning, organizing, motivating, staffing, and controlling.


Cont’Cont’

Planning consists of all those managerial activities related to preparing for the future. Specific tasks include forecasting, establishing objectives, devising strategies, developing policies, and setting goals.


Cont’Cont’

Organizing includes all those managerial activities that result in a structure of task and authority relationships. Specific areas include organizational design; job specialization, descriptions, etc


Cont’Cont’

Motivating involves efforts directed toward shaping human behavior. Specific topics include leadership, communication, work groups, behavior modification, delegation of authority, job enrichment, and so on.


Cont’Cont’

Staffing activities are centered on personnel or human resource management. Included are wage and salary administration, employee benefits, interviewing, hiring, firing, training, employee safety, and so on.


Cont’Cont’

Controlling refers to all those managerial activities directed toward ensuring that actual results are consistent with planned results. Key areas of concern include quality, financial, sales, inventory, and expense control; analysis of variances; rewards; and sanctions.


2. Marketing2. Marketing

Marketing can be described as the process of defining, anticipating, creating, and fulfilling customers’ needs and wants for products and services.

There are seven basic functions of marketing: (1) customer analysis, (2) selling products/services, (3) product and service planning, (4) pricing, (5) distribution, (6) marketing research, and (7) opportunity analysis.


Cont’Cont’

Customer Analysis. Customer analysis—the examination and evaluation of consumer needs, desires, and wants—involves administering customer surveys, analyzing consumer information, evaluating market positioning strategies, developing customer profiles, and determining optimal market segmentation strategies.


Cont’Cont’

Selling Products/Services. Successful strategy implementation generally rests on the ability of an organization to sell some product or service. Selling includes many marketing activities such as advertising, sales promotion, publicity, and so on.


Cont’Cont’

Product and Service Planning. Product and service planning include activities such as test marketing; product and brand positioning; devising warranties; packaging; determining product options, product features, product style, and product quality; deleting old products; and providing for customer service.


Cont’Cont’

Pricing. Five major stakeholders affect pricing decisions: consumers, governments, suppliers, distributors, and competitors.


Cont’Cont’

Distribution includes warehousing, distribution channels and coverage, retail site locations, sales territories, inventory levels and location, transportation carriers, wholesaling, and retailing.


Cont’Cont’

Marketing research is the systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services.


Cont’Cont’

Opportunity Analysis. The next function of marketing is opportunity analysis, which involves assessing the costs, benefits, and risks associated with marketing decisions.


3. Finance/Accounting3. Finance/Accounting

Financial condition is often considered the single best measure of a firm’s competitive position and overall attractiveness to investors.


Cont’Cont’

According to James Van Horne, the functions of finance/accounting comprise three decisions:

1) the investment decision,

2) the financing decision,

3) the dividend decision.


4. Production/Operation4. Production/Operation

The production/operations functions of a business consist of all those activities that transform inputs into goods and services.

Production/operations management deals with inputs, transformations, and outputs that vary across industries and markets.


5. Research and Development (R&D)5. Research and Development (R&D)

Many firms today do not conduct R&D, and yet many other companies depend on successful R&D activities for survival. Firms pursuing a product development strategy especially need to have a strong R&D orientation.


6. Management Information System6. Management Information System

Information ties all business functions together and provides the basis for all managerial decisions.


TYPES OF BUSINESS AND NON BUSINESS TYPES OF BUSINESS AND NON BUSINESS ORGANIZATION IN MALAYSIAORGANIZATION IN MALAYSIA

In Malaysia, a business and non business organizations may be carried on in any one of the following forms:

Sole Proprietorships Partnerships Companies Franchise Co-Operation


SOLE PROPRIETORSHIPSSOLE PROPRIETORSHIPS

Sole proprietorship is a type of business organization in Malaysia.

The business of a sole proprietorship is owned by one person only and is the simplest form of business organization.

However, it need not be a one-person business. They can have large numbers of employees.


Cont’Cont’

It is the simplest form of business organization with minimal legal requirements.

Sole proprietorship can be started fairly easily with minimal capital requirements.

Only a Malaysian citizen and a permanent resident (PR) can register a business as sole proprietor.

The owner receives all the profits and can exercise his entrepreneurial skills to the full.


Cont’Cont’

No public disclosure of accounts is required and business affairs can be kept private.

The Registrar of Companies Malaysia (SSM) under Companies Act 1965 are the principal legislation governing the formation and operation of sole proprietorship in Malaysia.

For examples: Jasmin Nasi Kandar Kamil Enterprise, etc.


PARTNERSHIPSPARTNERSHIPS

A partnership exists when at least 2 or more persons pool their capital and work together.

The partners share the risk. As with the sole proprietorship, the partners are owners of its property and are fully responsible for meeting the partnership's debts.


Cont’Cont’

The legalities required to set up a partnership are minimal and is similar to that of sole proprietorship.

As like sole proprietorship, a partnership does not exist as a separate legal entity.

Only Malaysian citizens and permanent residents (PR) can register a business as partnership.


Cont’Cont’

It provides a wider capital base compare to a sole proprietorship. In a partnership, partners pool their capital and work together in business.

If you need to operate a business where different skills can be utilized, partnership is an excellent arrangement. Each partners can contribute to the business be it specific knowledge, skills or strong contacts.


Cont’Cont’

The Act of Partnerships 1961 is the principal legislation governing the formation and operation of partnership in Malaysia

For examples: Ariffin & Nazri Advocates & Solicitors Adam & Hawa Travel Agency, etc


COMPANYCOMPANY

A company is a legal entity that is separate and distinct from its members and shareholders. When a company is formed, it is said to have become "incorporated".

When a company is formed, it has become 'incorporated' under the Companies Act, 1965.

The company formed is treated as a separate entity, independent of its members.


Cont’Cont’

A company is capable of owning property, making contracts, employing people and being sued or of suing.

Unlike sole proprietorships or partnerships, companies have continuity of succession, as it is unaffected by the death or incapacity of one or more of its members.


Cont’Cont’

There are three types of companies: A company limited by shares, where the

members personal liabilities are limited to the per value of their shares

A company limited by guarantee, where the liabilities of the members will be restricted to the amount each agrees to contribute to the assets of the company in the event of dissolution or liquidation

An unlimited company where there is no limit to the members liabilities.


Cont’Cont’

Company limited by shares is the most common type of company structure in Malaysia.

It’s consist to two categories Public limited companies (Syarikat Awam

Berhad Private limited companies (Syarikat Sendirian

Berhad


Cont’Cont’

The Companies Act 1965 is the principal legislation governing the formation and operation of companies in Malaysia.

The Act enables an association of persons to form various types of corporate organization known as registered company.

In addition to protecting the right and interests of shareholders in particular and investors in general.


Cont’Cont’

Private limited companies Private limited companies cannot sell shares

to the general public. The name of private limited company ends

with the word "Sendirian Berhad" or abbreviation "Sdn. Bhd.". (e.g.


Cont’Cont’

Public limited companies Public limited companies raise capital by

selling shares and are run by a board of directors elected by shareholders.

They show their status by using the abbreviation "Bhd." or the word "Berhad" after their name. (e.g.


Cont’Cont’

Public limited companies can only offer shares to the public if a prospectus which complies with the requirements of the Companies Act 1965 has been registered with the Registrar of Companies.

Before a prospectus can be accepted for registration, the proposal for the issue or offer of shares to the public have to be submitted to the Securities Commission for approval.


FRANCHISEFRANCHISE

A franchise refers to an agreement between two or more persons whereby a franchisor grants the right to a franchisee to operate a business in accordance to the franchise system established by the franchisor during a term to be determined by the franchisor.

It involves the franchisor giving the franchisee the rights to use a mark, or trade secret or any confidential information or intellectual property of the franchisor.


Cont’Cont’

A franchise is not a service contract, an agency nor a partnership between a franchisor and a franchisee.

A franchisee operates the business separately from the franchisor.

A franchisor is a person who grants a franchise to a franchisee

The Franchises Act 1998 is the principal legislation governing the formation and operation of franchise in Malaysia.


CO-OPERATIONCO-OPERATION

Co-operation is a type of non business organization in Malaysia.

Organized by groups of individual By volunteer Profit is not a main purpose of co-operation The Acts of Co-operation 1948 (Revised 1965) is the

principal legislation governing the formation and operation of co-operation in Malaysia.


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