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Edited routes of entry to an optometric enterprise 2
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Edited routes of entry to an optometric enterprise 2

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  • 1. ROUTES OF ENTRY TO AN OPTOMETRIC ENTEPRISE Ms Rosmin Iqbal Hussain BOptom (UKM), CMBA (UNIMAS)
  • 2. Selection Of Business Entity
    • Before you want to start a business you must register first
    • You must select a business entity that is suitable to you.
    • Generally in small and medium industries (SMI) the most popular are
      • Sole proprietorship
      • Partnership
      • A private limited company / sendirian berhad.
  • 3. Selection Of Business Entity
    • The decision of how to enter a market can have a significant impact on the results
    • Among other modes of entry are:
      • Joint Venture/Collaboration
      • Strategic Alliances
      • Acquisition
      • F ranchising
  • 4. Routes Of Entry Of A Business ? (Selection Of Alternatives) BASED ON YOUR ABILITY AND CAPABILTY Taking over the existing business Self Starter ROUTES OF ENTRY OF A BUSINESS? SUPPORT FROM THE PRINCIPALS Technical Agreement Franchise Management Agreement Licensing Patent Rights Multilevel Marketing Merger / JV Internet Agency
  • 5. How to choose TYPE of Business Entity
    • Factors required to consider when you wants to choose entry mode to a business environment
    • Ability to borrow funds from external source
    • Continuity of the business existence in the business environment selected
    • Liability of business owners
    • Tax planning
    • Whether there’s a need of partners
    • Types of company structure you wants to venture
    • Pre-requirement set by the Bank or agencies concerned e.g. MOC, ROC
  • 6. Sole Proprietorship Company = YOU Own by one person Register RM60 Registration of Business Act 1956 Amendment 1978 Act 197
  • 7. Sole Proprietorship - Advantage
    • EASIER TO MANAGE
    • PROFIT TO OWNER :
    • OWNER HAS A FULL RESPONSILITY :
    • MINIMUM REGULATIONS :
    • FREE TO TERMINATE THE BUSINESS :
    • INCOME TAX IS MINIMUM
  • 8. Sole Proprietorship - Disadvantage
    • DIIFICULT TO GET LOAN/TO RAISE CAPITAL
    • UNLIMITED LIABILTY :
    • BUSINESS LIFE SPAN IS LIMITED :
    • LIMITED JOB OPPORTUNITIES :
  • 9. Partnerships 2-20 persons : Section 14 (3)(b) 2-50 persons: Section 14(3)(a) Intention to gain profit together ‘ Contract letter’ - optional
  • 10. Partnerships - Advantages
    • EASIER TO START :
    • ADDITIONAL OF SKILLS & EXPERIENCE :
    • INCREASE OF CAPITAL :
    • SIMPLE TAX :
  • 11. Partnerships - Disadvantages
    • UNLIMITED LIABLITY
    • AUTHORITIY (POWER) TO BE SHARED
    • LESS IN CONTINUITY OF BUSINESS
    • CAPITAL STILL LIMITED
  • 12. Pvt Limited Company (Sdn Bhd) Members 2-50 at any one time, Company’s entity and owner’s entity is separated, Needs: Board of Directors Minimum 2 persons as directors, one of them to be chairman Internal audit, company secretary or others.
  • 13. Pvt Limited Company - Advantages
    • LIMITED LIABILITY
    • EASY TO MOVE OWNERSHIP
    • CONTINUITY OF BUSINESS IS FOREVER :
    • PROFESSONAL MANAGEMENT TEAM :
    • EASIER TO RAISE CAPITAL
    • PERCEPTION TOWARD COMPANY IS MORE GLARING
    • OR RECEPTIVE :
  • 14. Pvt Limited Company - Disadvantages
    • SOPHISTICATED MANAGEMENT
    • CHARTER RESTRICTIONS IN THE M&A
    • (Mergers & Acquisition advisory firm)
    • GOVERNMENT CONTROLS:
    • Business regulations/laws
    • Meetings among directors
    • Business tax and personal tax
    • Audit report
    • ---------------------------------------------------------------------------
  • 15. Public Corporation
    • Public corporation: one whose stock is bought and sold by members of the public
    • Most well-known corporations are this type
    • Anyone who can afford shares can buy them
    • Shares bought and sold on a stock exchange
  • 16. Public Corporation… Advantages
    • Limited liability
    • Can only lose the amount invested in the firm
    • Continuity and stability
    • Ownership is easy to transfer (sell your shares!)
    • Company not totally dependent on one owner
    • Availability of capital
    • Corporations can access capital through share Offerings, and are more able to borrow money
    • Professional management
    • Managers have specialized skills
  • 17. Public Corporation… Disadvantages
    • DOUBLE TAXATION!!
    • C orporate income is taxed (if it makes money)
    • S ome of the corporation’s after tax income is paid out as dividends to shareholders
    • D ividends are taxed as personal income to
    • Shareholders--this is double taxation
    • Can be costly to start up and maintain
    • Loss of control for owners
    • A ny individual owner has little influence
    • Corporations are most heavily regulated
  • 18. OTHER ENTRY MODES
  • 19. Joint Venture / Collaboration
    • Separate company created and jointly owned by two or more independent entities to achieve a common business objective
    • Collaboration may help to achieve advantage or avoid competition
    • Collaboration can be
      • Between potential competitors or
      • Between buyers and sellers
    • Collaboration is advantageous when the transaction costs are lower than when operating alone
  • 20. Joint Venture / Collaboration
    • There are five common objectives in a joint venture
      • Easier market entry / penetration
      • Risk/reward sharing
      • Technology sharing
      • Joint product development/purchasing
      • Conforming to government regulations
        • Unlicensed practitioners + licensed
      • Distribution channel access that may depend on relationships
  • 21. Joint Venture / Collaboration
    • Such alliances often are favorable when
      • T he individual practice’s size, market power, and resources are small compared to the industry leaders
      • P artners' are able to learn from one another while limiting access to their own proprietary skills
  • 22. Joint Venture / Collaboration
    • The key issues to consider in a joint venture are
      • Ownership
      • Control
      • Length of agreement
      • Technology transfer
      • Firm capabilities and resources
  • 23. Joint Venture / Collaboration
  • 24. Joint Venture / Collaboration
    • Potential problems include
      • C onflict over asymmetric new investments
      • M istrust over proprietary knowledge
      • P erformance ambiguity - how to split the pie
      • L ack of parent firm support
      • C ultural clashes - different rights & wrong perception
      • I f, how, and when to terminate the relationship
  • 25. Joint Venture / Collaboration
    • Joint ventures have conflicting pressures to cooperate and compete
      • S trategic imperative: the partners want to maximize the advantage gained for the joint venture, but they also want to maximize their own competitive position (internal & external conflict)
      • T he joint venture attempts to develop shared resources, but each firm wants to develop and protect its own proprietary resources
      • T he joint venture is controlled through negotiations and coordination processes, while each firm would like to have hierarchical control
  • 26. Strategic Alliance
    • Entities cooperate (but do not form a separate company) to achieve strategic goals of each
    • Disadvantages
      • Create competitor
      • Partner conflict
    • Advantages
      • Share fixed cost & risk
      • Tap complementary skills & assets
      • Facilitate entry
      • Set tech standards for the industry
      • Gain channel access
      • Protect interests
    Some alliances benefit the company. Beware, alliances can end up giving away technology and market access with very little gained in return.
  • 27. Making Strategic Alliances Work
    • Partner selection – A good partner:
      • Helps the company achieve strategic goals
      • Shares the firm’s vision for the purpose of the alliance
      • Is unlikely to try to exploit the alliance to its own ends
      • Conduct research on potential partners
    • Alliance structure
      • Risk of giving too much away is at an acceptable level
      • Guard against opportunism by partner in alliance agreement
    • Manner in which alliance is managed
      • Sensitivity to cultural differences
      • Build relationship capital through interpersonal relationships
    Successful partners view the alliance as an opportunity to learn rather than purely as a cost- or risk-sharing device.
  • 28. Structuring Alliances to Reduce Opportunism Opportunism includes the expropriation of technology or markets
  • 29. Acquisition
    • Acquisition is when one company purchases a majority interest in the acquired company
    • Acquisitions can be either be friendly or unfriendly
      • Friendly acquisition: when the target firm agrees to be acquired
      • Unfriendly acquisition: don ’t have same agreement from the target firm
  • 30. Franchising… Symbol Group
    • Within this form of contractual chain, a group name is utilised and:
      • The retailers normally are required to obtain a specified proportion of their goods from the group wholesalers
      • The basis of of the contract is that the retailer sacrifices some freedom of action for the sake of big retailer disciplines that the sponsoring wholesaler seeks to provide
      • Member retailers normally pay a levy towards the costs of the services that the group provides.
  • 31. Franchising… Symbol Group
    • Advantages:
      • Loans and financial support to develop or to extend/refurbish units
      • Group buying power normally leads to better prices than an independent could obtain
      • Benefits are gained through own-brand products and the group image
      • Turnover is increased through lower prices, group marketing expertise, promotions, etc.
      • Selling costs as a percentage of turnover are therefore reduced
      • Labour productivity is improved through higher turnover and better administrative systems
      • Space productivity improves through advice on space allocations, merchandising and display
      • Profitability and return on capital is improved
  • 32. Franchising… Franchisor
    • Advantages
      • Rapid Growth is possible
      • Less capital required
      • Franchisees make highly motivated owner-managers
      • Lower monitoring costs
      • Chain can include some directly managed outlets
      • Scope for internationalization
      • Low-risk way to test/develop a market
  • 33. Franchising… Franchisor
    • Potential Disadvantage
      • Less control over day-to-day operations
      • Reputation may be damaged by some franchisees
      • Franchisee motivation may wane over time
      • Some Franchisees take short-term view
      • A franchisee may become too powerful
      • Restricts use of other channels if exclusive geographical area agreed
  • 34. Franchising… Franchisee
    • Advantages
      • Retains some independence
      • Rewards proportional to success achieved
      • Less start-up risk
      • Loans more readily available
      • Support and advice in setting up and operating
      • Use of well-known brand name
      • National/international marketing activity
  • 35. Franchising… Franchisee
    • Potential Disadvantage
      • Turnover and income may not meet expectations
      • May start to resent restrictions
      • Less scope for initiative and localization
      • Cheaper supplies may be available from other sources
      • Still paying fees for marketing, even when a loyal customer base is established
      • As turnover increases, so typically does the fee
  • 36. Entry Modes: Strategic Factors Cultural environment Political/Legal environments Market size Production costs Experience Access to supplier channels
  • 37. END
  • 38. QUIZ
  • 39. QUESTIONS
    • List various eye professions & short description to differentiate them in table form
    • List the two Markets in the circular flow
    • Explain how bout both interconnects briefly
    • List the 4 types of market structure
    • Which gp of mket structure does optical business belong in? Why?
    • Name the different types of Oligopoly that may exist
    • What are the interdependence among oligopolistic firms based on?
    • When is collusion difficult?
    • When is collusion possible?
    • List type of price leadership
    • What happens when one firm a. cuts price b. increases price?
  • 40.
    • What does game theory describe? What is the use of Game theory?
    • What is dominant strategy, dominated strategy & nash equilibrium?
    • List the rules in game theory concept
    • Which is better quantity / price competition? Why?
    • How do you obtain credibility? And what are the principles underlying?