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Chapter 4


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Chapter 4

  2. 2. THE OBJECTIVES OF THIS CHAPTER <ul><li>To identify the concepts of business </li></ul><ul><li>To describe the business process </li></ul><ul><li>To explain the external and internal environment in business </li></ul><ul><li>To explain the functional of business </li></ul><ul><li>To know the types of business in Malaysia </li></ul>Mohd Fauzwadi Mat Ali / FPP
  3. 3. THE DEFINITIONS OF BUSINESS <ul><li>A scholars and practitioners defined a difference meaning and various definitions and concepts of business </li></ul><ul><li>In Arabic, business is means muqabalah or mubadalah or exchange </li></ul><ul><li>Business is a commercial activity engaged in as a means of livelihood or profit, or an entity which engages in such activities ( </li></ul>Mohd Fauzwadi Mat Ali / FPP
  4. 4. Cont’ <ul><li>According to the Legal Dictionary definition: </li></ul><ul><li>“ 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.” </li></ul>Mohd Fauzwadi Mat Ali / FPP
  5. 5. Cont’ <ul><li>Based on the definitions, the basic concepts of business activities can be 4 elements: </li></ul><ul><li>Fulfilling the customer needs and wants </li></ul><ul><li>Products & Services </li></ul><ul><li>Exchange value </li></ul><ul><li>Profitability </li></ul>Mohd Fauzwadi Mat Ali / FPP
  7. 7. THE CONTRIBUTIONS OF BUSINESS <ul><li>Country </li></ul><ul><li>Increased an economy and social development </li></ul><ul><li>Increased an economic of scale </li></ul><ul><li>Income growth </li></ul><ul><li>Society </li></ul><ul><li>Provided financial supports </li></ul><ul><li>Fulfill the need and want </li></ul><ul><li>Provided a good infrastructure </li></ul>Mohd Fauzwadi Mat Ali / FPP
  8. 8. THE FACTORS OF PRODUCTION <ul><li>The factors of production refers to use all natural sources to produce products and services </li></ul><ul><li>Factors of production are resources used in the production of goods and services in economics ( </li></ul>Mohd Fauzwadi Mat Ali / FPP
  9. 9. Cont’ <ul><li>The factors of production are: </li></ul><ul><li>Land or natural resource </li></ul><ul><li>Naturally occurring goods such as soil and minerals that are used in the creation of products. </li></ul><ul><li>The payment for land is rent. </li></ul><ul><li>b) Human Resource or Labor </li></ul><ul><li>Human effort used in production which also includes technical and marketing expertise. </li></ul><ul><li>The payment for labor is a wage. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  10. 10. Cont’ <ul><li>c) Capital </li></ul><ul><li>Capital has many meanings including the finance raised to operate a business. </li></ul><ul><li>Capital means investment in goods that can produce other goods in the future. </li></ul><ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  11. 11. Cont’ <ul><li>d) Entrepreneurships </li></ul><ul><li>- Entrepreneurs are people who organize other productive resources to make goods and services. </li></ul><ul><li>- The success and/or failure of a business often depends on the quality of entrepreneurship. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  12. 12. BUSINESS PROCESS <ul><li>A business process refer to all activities to transform from input to output. </li></ul><ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  13. 13. Cont’ <ul><li>There are three types of business processes: </li></ul><ul><li>Management processes - the processes that govern the operation. Typical management processes include &quot;Corporate Governance&quot; and &quot;Strategic Management&quot;. </li></ul><ul><li>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. </li></ul><ul><li>Supporting processes - these support the core processes. Examples include Accounting, Recruitment, IT-support. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  14. 14. Cont’ <ul><li>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.” </li></ul><ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  15. 15. Mohd Fauzwadi Mat Ali / FPP Input Sources Process Output Direct Product Service Indirect Tax Salary etc. BUSINESS PROCESS Customers Cost Entrepreneurs Profit/Loss
  16. 16. BUSINESSES ENVIRONMENT <ul><li>Businesses environment refer to all activities and forces that can be impact to organization. </li></ul><ul><li>The factors influencing business environment are 2 dimensions: </li></ul><ul><li>Internal factor </li></ul><ul><li>External factor </li></ul>Mohd Fauzwadi Mat Ali / FPP
  17. 17. EXTERNAL ENVIRONMENT <ul><li>External forces can be divided into five broad categories: </li></ul><ul><li>economic forces; </li></ul><ul><li>social, cultural, demographic, and environmental forces; </li></ul><ul><li>political, governmental, and legal forces; </li></ul><ul><li>technological forces; </li></ul><ul><li>competitive forces. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  18. 18. 1. Economic Forces <ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  19. 19. 2. Social, Cultural, Demographic, and Environmental Impact <ul><li>Social, cultural, demographic, and environmental changes have a major impact on virtually all products, services, markets, and customers. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  20. 20. 3. Political, Governmental, and Legal Factors Represent Key Forces . <ul><li>Political, Governmental, and Legal Factors Represent Key Forces . Federal, state, local, and foreign governments are major regulators, deregulators, subsidizers, employers, and customers of organizations. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  21. 21. 4. Technological Forces <ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  22. 22. 5. Competitive Forces <ul><li>An Awareness of Competitive Forces is Essential for Success </li></ul><ul><li>Competitive Intelligence (CI) Programs </li></ul><ul><li>Cooperation Among Competitors </li></ul>Mohd Fauzwadi Mat Ali / FPP
  23. 23. INTERNAL ENVIRONMENT <ul><li>Internal environment can be analyze based on functional business Management </li></ul><ul><li>The common types of functional business Management are: </li></ul><ul><li>Marketing </li></ul><ul><li>Finance/Accounting </li></ul><ul><li>Production/Operation </li></ul><ul><li>Research and Development (R & D) </li></ul><ul><li>Management Information System (MIS) </li></ul>Mohd Fauzwadi Mat Ali / FPP
  24. 24. 1. Management <ul><li>The functions of management consist of five basic activities: planning, organizing, motivating, staffing, and controlling. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  25. 25. Cont’ <ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  26. 26. Cont’ <ul><li>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 </li></ul>Mohd Fauzwadi Mat Ali / FPP
  27. 27. Cont’ <ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  28. 28. Cont’ <ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  29. 29. Cont’ <ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  30. 30. 2. Marketing <ul><li>Marketing can be described as the process of defining, anticipating, creating, and fulfilling customers ’ needs and wants for products and services. </li></ul><ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  31. 31. Cont’ <ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  32. 32. Cont’ <ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  33. 33. Cont’ <ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  34. 34. Cont’ <ul><li>Pricing. Five major stakeholders affect pricing decisions: consumers, governments, suppliers, distributors, and competitors. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  35. 35. Cont’ <ul><li>Distribution includes warehousing, distribution channels and coverage, retail site locations, sales territories, inventory levels and location, transportation carriers, wholesaling, and retailing. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  36. 36. Cont’ <ul><li>Marketing research is the systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  37. 37. Cont’ <ul><li>Opportunity Analysis. The next function of marketing is opportunity analysis, which involves assessing the costs, benefits, and risks associated with marketing decisions. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  38. 38. 3. Finance/Accounting <ul><li>Financial condition is often considered the single best measure of a firm ’ s competitive position and overall attractiveness to investors. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  39. 39. Cont’ <ul><li>According to James Van Horne, the functions of finance/accounting comprise three decisions: </li></ul><ul><li>the investment decision, </li></ul><ul><li>the financing decision, </li></ul><ul><li>the dividend decision. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  40. 40. 4. Production/Operation <ul><li>The production/operations functions of a business consist of all those activities that transform inputs into goods and services. </li></ul><ul><li>Production/operations management deals with inputs, transformations, and outputs that vary across industries and markets. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  41. 41. 5. Research and Development (R&D) <ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  42. 42. 6. Management Information System <ul><li>Information ties all business functions together and provides the basis for all managerial decisions. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  43. 43. TYPES OF BUSINESS AND NON BUSINESS ORGANIZATION IN MALAYSIA <ul><li>In Malaysia, a business and non business organizations may be carried on in any one of the following forms: </li></ul><ul><li>Sole Proprietorships </li></ul><ul><li>Partnerships </li></ul><ul><li>Companies </li></ul><ul><li>Franchise </li></ul><ul><li>Co-Operation </li></ul>Mohd Fauzwadi Mat Ali / FPP
  44. 44. SOLE PROPRIETORSHIPS <ul><li>Sole proprietorship is a type of business organization in Malaysia. </li></ul><ul><li>The business of a sole proprietorship is owned by one person only and is the simplest form of business organization. </li></ul><ul><li>However, it need not be a one-person business. They can have large numbers of employees. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  45. 45. Cont’ <ul><li>It is the simplest form of business organization with minimal legal requirements. </li></ul><ul><li>Sole proprietorship can be started fairly easily with minimal capital requirements. </li></ul><ul><li>Only a Malaysian citizen and a permanent resident (PR) can register a business as sole proprietor. </li></ul><ul><li>The owner receives all the profits and can exercise his entrepreneurial skills to the full. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  46. 46. Cont’ <ul><li>No public disclosure of accounts is required and business affairs can be kept private. </li></ul><ul><li>The Registrar of Companies Malaysia (SSM) under Companies Act 1965 are the principal legislation governing the formation and operation of sole proprietorship in Malaysia. </li></ul><ul><li>For examples: </li></ul><ul><li>Jasmin Nasi Kandar </li></ul><ul><li>Kamil Enterprise, etc. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  47. 47. PARTNERSHIPS <ul><li>A partnership exists when at least 2 or more persons pool their capital and work together. </li></ul><ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  48. 48. Cont’ <ul><li>The legalities required to set up a partnership are minimal and is similar to that of sole proprietorship. </li></ul><ul><li>As like sole proprietorship, a partnership does not exist as a separate legal entity. </li></ul><ul><li>Only Malaysian citizens and permanent residents (PR) can register a business as partnership. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  49. 49. Cont’ <ul><li>It provides a wider capital base compare to a sole proprietorship. In a partnership, partners pool their capital and work together in business. </li></ul><ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  50. 50. Cont’ <ul><li>The Act of Partnerships 1961 is the principal legislation governing the formation and operation of partnership in Malaysia </li></ul><ul><li>For examples: </li></ul><ul><li>Ariffin & Nazri Advocates & Solicitors </li></ul><ul><li>Adam & Hawa Travel Agency, etc </li></ul>Mohd Fauzwadi Mat Ali / FPP
  51. 51. COMPANY <ul><li>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 &quot;incorporated&quot;. </li></ul><ul><li>When a company is formed, it has become 'incorporated' under the Companies Act, 1965. </li></ul><ul><li>The company formed is treated as a separate entity, independent of its members. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  52. 52. Cont’ <ul><li>A company is capable of owning property, making contracts, employing people and being sued or of suing. </li></ul><ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  53. 53. Cont’ <ul><li>There are three types of companies: </li></ul><ul><li>A company limited by shares, where the members personal liabilities are limited to the per value of their shares </li></ul><ul><li>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 </li></ul><ul><li>An unlimited company where there is no limit to the members liabilities. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  54. 54. Cont’ <ul><li>Company limited by shares is the most common type of company structure in Malaysia. </li></ul><ul><li>It’s consist to two categories </li></ul><ul><li>Public limited companies (Syarikat Awam Berhad </li></ul><ul><li>Private limited companies (Syarikat Sendirian Berhad </li></ul>Mohd Fauzwadi Mat Ali / FPP
  55. 55. Cont’ <ul><li>The Companies Act 1965 is the principal legislation governing the formation and operation of companies in Malaysia. </li></ul><ul><li>The Act enables an association of persons to form various types of corporate organization known as registered company. </li></ul><ul><li>In addition to protecting the right and interests of shareholders in particular and investors in general. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  56. 56. Cont’ <ul><li>Private limited companies </li></ul><ul><li>Private limited companies cannot sell shares to the general public. </li></ul><ul><li>The name of private limited company ends with the word &quot;Sendirian Berhad&quot; or abbreviation &quot;Sdn. Bhd.&quot;. (e.g. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  57. 57. Cont’ <ul><li>Public limited companies </li></ul><ul><li>Public limited companies raise capital by selling shares and are run by a board of directors elected by shareholders. </li></ul><ul><li>They show their status by using the abbreviation &quot;Bhd.&quot; or the word &quot;Berhad&quot; after their name. (e.g. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  58. 58. Cont’ <ul><li>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. </li></ul><ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  59. 59. FRANCHISE <ul><li>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. </li></ul><ul><li>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. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  60. 60. Cont’ <ul><li>A franchise is not a service contract, an agency nor a partnership between a franchisor and a franchisee. </li></ul><ul><li>A franchisee operates the business separately from the franchisor. </li></ul><ul><li>A franchisor is a person who grants a franchise to a franchisee </li></ul><ul><li>The Franchises Act 1998 is the principal legislation governing the formation and operation of franchise in Malaysia. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  61. 61. CO-OPERATION <ul><li>Co-operation is a type of non business organization in Malaysia. </li></ul><ul><li>Organized by groups of individual </li></ul><ul><li>By volunteer </li></ul><ul><li>Profit is not a main purpose of co-operation </li></ul><ul><li>The Acts of Co-operation 1948 (Revised 1965) is the principal legislation governing the formation and operation of co-operation in Malaysia. </li></ul>Mohd Fauzwadi Mat Ali / FPP
  62. 62. Mohd Fauzwadi Mat Ali / FPP