CHAPTER 2

PLANNING AND ORGANIZING A BUSINESS

A business can be defined as an organization that
provides 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.


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 more
partners but not exceeding 20 persons
partners carry out the business, share the
capital, profits and losses
Partnerships comprise two or more business
partners 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
Active partners:
The partners who actively participate in the day-
to-day operations of the business are known as
active partners. They contribute capital and are
also entitled to share the profits of the business.
They also share the losses that the business
faces.
Dormant partners:
Those partners who do not participate in the
day-to-day activities of the partnership firm are
known as dormant or sleeping partners. They
only contribute capital and share the profits or
bear the losses, if any.
Nominal partners:
These partners only allow the firm to use their
name as a partner. They do not have any
real interest in the business of the firm. They do
not invest any capital, or share profits and also
do not take part in the business of the firm.
Minor as a partner:
In special cases a minor can be admitted as
partner with certain conditions. A minor can only
share the profit of the business. In case of loss
his liability is limited to the extent of his capital
contribution for the business.

cannot sell shares to the public
distinguished by the appellation
"Sendirian Berhad", shortened to "Sdn
Bhd" or "S/B
private limited company is limited to
50 members, minimum 2 members
A minimum paid-up capital of only RM2
is needed to start a private limited
company
AMTIS SOLUTION SDN BHD
(SDN.BHD.)
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
(BHD)
ADVANTAGES DISADVANTAGES
Easy to manage because the
owner or proprietor can make
decisions by himself.
Limited source of capital; limit
the business activity.
All profits will go to the owner.

The future development of the
business is limited and depends
on the management capability
of the owner and the condition
of his health.
The owner pays income tax based
on his total individual income.

The liability of business is
unlimited. The owner must be
prepared to settle the debt
with his personal assets.
Flexibility; can react quickly and
positively regarding necessary
changes in business.

The lifespan of the business
depends upon the age of the
owner and how efficiently he
manages the business.
SOLE PROPRIETORSHIP
ADVANTAGES DISADVANTAGES
Easy to set up with few
formalities.
Business liabilities are unlimited,
which may involve personal
assets of all partners of the
company.
Business risks can be reduced
and distributed among
partners. In cases of loses,
each partners will share the
burden.
Risks of personal clashes among
partners.
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 an
agreement otherwise.
The responsibilities of
managing and handling the
business can be divided equally
among partners.

If no Letter or Agreement is
being made, unethical or
misconduct behavior may
happen.
PARTNERSHIP
ADVANTAGES DISADVANTAGES
Limited liability

More complicated
to set up - legal
formalities
Can raise capital
by selling shares

The profits must
be shared
The board of
director can
choose who can
buy and who
cannot buy share
Private Limited Company (sdn. Bhd.)
ADVANTAGES DISADVANTAGES
Limited liability

More complicated
to set up - legal
formalities
Increase the skill
in the business.
(Specialisation)
Loss of individual
control
Greater threat of
takeover
PUBLIC Limited Company (Bhd.)
Running a franchise
TOPIC 2.1.4
Establishing a new business
Buying an existing business
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
High commitment
High risk
Delayed profitability
Limited financing

What type of business should you buy?
Finding a business to buy
Research the Businesss history and finances
Closing the deal

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
Running A Franchise
WHAT IS A FRANCHISE?
A franchise is a right granted to an individual or group to
market a company's goods or services within a certain territory
or location.
There are over 120 different types of franchise businesses
available today, including automotive, cleaning &
maintenance, health & fitness, financial services, and pet-
related franchises.
An individual who purchases and runs a franchise is called a
"franchisee."
The franchisee purchases a franchise from the "franchisor."
The franchisee must follow certain rules and guidelines already
established by the franchisor, and in most cases the franchisee
must pay an ongoing franchise royalty fee, as well as an up-
front, one-time franchise fee to the franchisor.
Your business is based on a proven idea.
You can use a recognized brand name and trade
marks. You benefit from any advertising or promotion
by 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.
Costs may be higher than you expect.
The franchise agreement usually includes
restrictions on how you run the business.
The franchisor might go out of business, or
change the way they do things.
Other franchisees could give the brand a bad
reputation.
Reduced risk means you might not generate
vast profits.

FEATURES SOLE TRADER PARTNERSHIP SDN BHD BHD 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)
Every Business need a manager to coordinates all
business activities.
In fact, all the manager do the same tasks in
business management such as:
Planning
Organizing
Leading
Controlling

The first component of managing is planning.

Planning covers the activity of formulating
companys policy and procedure to ensure the
attainment of business mission, objectives and how
to achieve them

As a manager of the business has to determine his
business mission, objectives and device a workable
strategy to achieve.




For example, a manager of a new local
restaurant will need to have a marketing
plan, a hiring plan and a sales plan.


ELEMEN OF
PLANNING
BUDGET
PROGRAM
MISSION
STRATEGY
Emphasizes the achievement of goals
To facilitate the evaluation
Reduce risks and losses
Division of tasks
Identify opportunities and threats

Organize means to properly arrange

In Business organizing refers to the activities of
designing an organizational structure, dividing and
assigning jobs and task among departments sections
or units besides handling the infrastructure and
operation method.



Managers are responsible for organization of the
company and this includes organizing people and
resources.

Knowing how many employees are needed for
particular shifts can be critical to the success of a
company.

Without an organized workplace, employees will
see a manager as unprepared and may lose respect
for that particular managers supervisory
techniques.




Determination of work
Division of labor
Collect duties
Coordinate work
The act of getting the job done through other
people is referred to in managerial functions as
leading.

Leading involves :
Assigning of jobs and responsibilities.
Motivating employees
Providing and receiving feedback.





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 the
company objectives.

In other words a manager needs to develop
interpersonal and good communication skills to
enable him to lead and motivate the workers.
Delegates tasks
Facilitate communication
Motivate employees
Coordinate tasks


Controlling is a monitoring function to
ensure that activities carried out are on
the right track in achieving the goals set
out by the business,
A manager compares progress against the
objectives and targets of the business, and take
corrective actions or devices an alternative
strategy whenever deviation is found.

Managers need to pay attention to costs versus
performance of the organization. For example,
if the company has a goal of increasing sales by
5% over the next two months, the manager may
check the progress toward the goal at the end
of month one.




An effective manager will share this
information with his or her employees. This
builds trust and a feeling of involvement for
the employees.

Accuracy of information
Punctuality
Avoiding mistakes
Reasonable criteria
Actions
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

Overview
The
Organisation
The
Future
The
Process
Reflections
Business
Ecosystem
Planning is about learning
Planning is about increasing the possibilities
for the organisation
Planning is about discovering how fit the
organisation is for its environment
Planning is about discovering and telling
compelling stories about the future
Overview
The
Organisation
The
Future
The
Process
Reflections
Business
Ecosystem
Strategic planning is an organizations process of
defining 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.
Matt H. Evans, matt@exinfm.com
If you fail to plan, then you plan to fail be
proactive about the future
Strategic planning improves performance
Counter excessive inward and short-term thinking
Solve major issues at a macro level
Communicate to everyone what is most important


Step 1
Identify mission, objective and
current strategy for organization.
Step 2 Environment Analysis
Step 3 Identify opportunities and treat
Step 4
Analyzed resources and
capabilities of business
organization
Step 5
Identify strength and weakness
Step 6 Strategy Development
Step 7 Strategy implementation
Step 8
Evaluate the output
Matt H. Evans, matt@exinfm.com
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)

Matt H. Evans, matt@exinfm.com
Address critical performance issues
Create the right balance between what the
organization is capable of doing vs. what the
organization would like to do
Cover a sufficient time period to close the
performance gap
Visionary convey a desired future end state
Flexible allow and accommodate change
Guide decision making at lower levels
operational, tactical, individual
Matt H. Evans, matt@exinfm.com
Environmental Scan
Assessment
Background
Information
Situational Analysis
SWOT Strengths,
Weaknesses,
Opportunities,
Threats
Situation Past,
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 upstream
revise plans
PEST analysis is a framework strategy consultant
use to scan the external macro environment in
which firm operates.

P : Political factor
E : Economical factor
S : Social factor
T : Technological factor

PEST analysis should be performed per country
because macro economical can different per
continent country or even region.
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
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SWOT Analysis is a simple but
useful framework for analyzing
your organization's strengths and
weaknesses, 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 internal
attributes of the organisation
2. SWOT Analysis
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Opportunities - external factors which
could improve the organisations prospects

Threats - external factors which could
undermine the organisations prospects
2. SWOT Analysis
Strategic management
the art and science of formulating, implementing,
and evaluating cross-functional decisions that
enable an organization to achieve its objectives
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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.
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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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Strategy
formulation
Strategy
implementation
Strategy
evaluation
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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
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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.
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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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Strategy evaluation
reviewing external and internal factors that are the
bases for current strategies, measuring
performance, and taking corrective actions
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a. financial institutions
b. management and entrepreneurship
c. technology
d. location and business space
e. marketing
f. research and project identification
g. information
Copyright 2013 Pearson Education, Inc. publishing as
Prentice Hall 1-67

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