ROUTES OF ENTRY TO AN OPTOMETRIC ENTEPRISE Ms Rosmin Iqbal Hussain BOptom (UKM), CMBA (UNIMAS)
Selection Of Business Entity <ul><li>Before you want to start a  business you must register first </li></ul><ul><li>You mu...
Selection Of Business Entity <ul><li>The decision of how to enter a market can have a significant impact on the results </...
Routes Of Entry Of  A Business ? (Selection Of Alternatives) BASED ON YOUR ABILITY  AND CAPABILTY Taking over the existing...
How to choose TYPE of Business Entity <ul><li>Factors required to consider when you wants to choose entry mode to a busine...
Sole Proprietorship Company = YOU Own by one person Register  RM60 Registration of Business Act 1956 Amendment 1978 Act 197
Sole Proprietorship - Advantage <ul><li>EASIER TO MANAGE </li></ul><ul><li>PROFIT TO OWNER : </li></ul><ul><li>OWNER HAS A...
Sole Proprietorship - Disadvantage <ul><li>DIIFICULT TO GET LOAN/TO RAISE CAPITAL </li></ul><ul><li>UNLIMITED LIABILTY : <...
Partnerships 2-20 persons : Section 14 (3)(b) 2-50 persons: Section 14(3)(a) Intention to gain profit together  ‘ Contract...
Partnerships - Advantages <ul><li>EASIER TO START : </li></ul><ul><li>ADDITIONAL OF SKILLS & EXPERIENCE : </li></ul><ul><l...
Partnerships - Disadvantages <ul><li>UNLIMITED LIABLITY </li></ul><ul><li>AUTHORITIY (POWER) TO BE SHARED </li></ul><ul><l...
Pvt Limited Company (Sdn Bhd) Members 2-50 at any one time, Company’s entity and owner’s entity is separated, Needs: Board...
Pvt Limited Company - Advantages <ul><li>LIMITED LIABILITY </li></ul><ul><li>EASY TO MOVE OWNERSHIP </li></ul><ul><li>CONT...
Pvt Limited Company - Disadvantages <ul><li>SOPHISTICATED MANAGEMENT </li></ul><ul><li>CHARTER RESTRICTIONS IN THE  M&A  <...
Public Corporation <ul><li>Public corporation: one whose stock is bought and sold by members of the public </li></ul><ul><...
Public Corporation… Advantages <ul><li>Limited liability </li></ul><ul><li>Can only lose the amount invested in the firm <...
Public Corporation… Disadvantages <ul><li>DOUBLE TAXATION!! </li></ul><ul><li>C orporate income is taxed (if it makes mone...
OTHER ENTRY MODES
Joint Venture / Collaboration <ul><li>Separate company created and jointly owned by two or more independent entities to ac...
Joint Venture / Collaboration <ul><li>There are five common objectives in a joint venture </li></ul><ul><ul><li>Easier mar...
Joint Venture / Collaboration <ul><li>Such alliances often are favorable when </li></ul><ul><ul><li>T he individual practi...
Joint Venture / Collaboration <ul><li>The key issues to consider in a joint venture are  </li></ul><ul><ul><li>Ownership  ...
Joint Venture / Collaboration
Joint Venture / Collaboration <ul><li>Potential problems include </li></ul><ul><ul><li>C onflict over asymmetric new inves...
Joint Venture / Collaboration <ul><li>Joint ventures have conflicting pressures to cooperate and compete </li></ul><ul><ul...
Strategic Alliance <ul><li>Entities cooperate (but do not form a separate company) to achieve strategic goals of each </li...
Making Strategic Alliances Work <ul><li>Partner selection   –   A good partner: </li></ul><ul><ul><li>Helps the company ac...
Structuring Alliances to Reduce Opportunism Opportunism includes the expropriation of technology or markets
Acquisition <ul><li>Acquisition is when one company purchases a majority interest in the acquired company </li></ul><ul><l...
Franchising… Symbol Group <ul><li>Within this form of contractual chain, a group name is utilised and: </li></ul><ul><ul><...
Franchising… Symbol Group <ul><li>Advantages: </li></ul><ul><ul><li>Loans and financial support  to develop or to extend/r...
Franchising… Franchisor <ul><li>Advantages </li></ul><ul><ul><li>Rapid Growth is possible </li></ul></ul><ul><ul><li>Less ...
Franchising… Franchisor <ul><li>Potential Disadvantage </li></ul><ul><ul><li>Less control over day-to-day operations </li>...
Franchising… Franchisee <ul><li>Advantages </li></ul><ul><ul><li>Retains some independence </li></ul></ul><ul><ul><li>Rewa...
Franchising… Franchisee <ul><li>Potential Disadvantage </li></ul><ul><ul><li>Turnover and income may not meet expectations...
Entry Modes: Strategic Factors Cultural environment Political/Legal environments Market size Production costs Experience A...
END
QUIZ
QUESTIONS <ul><li>List various eye professions & short description to differentiate them in table form </li></ul><ul><li>L...
<ul><li>What does game theory describe? What is the use of Game theory? </li></ul><ul><li>What is dominant strategy, domin...
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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

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

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