BTMW 4012:

ENTREPRENEURSHIP TECHNOLOGY

Lecture 7:
MANAGEMENT OF A SMALL
BUSINESS

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INTRODUCTION

Small and Medium Enterprises (SMEs) plays an

important role in the Malaysia economy.
2012

Total Business in Malaysia 662,939

SME in Malaysia 645,136
Non SME 17,803
Micro-sized 77,0%
Small Enterprises 20,0%
Medium-sized Enterprises 3,0%
Source: Cencus, 2011.

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INTRODUCTION

CRITERIA OF

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INTRODUCTION

NEW CRITERIA OF

Source: http://www.ecommercemilo.com/2013/12/malaysia-sme-statistics-ecommerce-readiness.html#.UxXKi7dWGUl

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CHARACTERISTICS OF SMEs

1. OWNERSHIP
2. MANAGEMENT
3. RESOURCES
4. ORGANIZATIONAL
STRUCTURE
5. FLEXIBILITY OF
CHANGE

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MANAGEMENT FUNCTION
The performance, growth and survival
of SME depend on owners managerial
skills and capabilities
Four functions
Planning,
Organizing,
Leading, and
Controlling organizational resources.

Managers use a multitude of skills to

perform functions
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PLANNING

For example:
Vision: to be a reputable halal food producer in
the region and serve the needs of the global
At least, in
Muslim community.
planning
Mission: to be a market leader in the production
activity we
and distribution of halal food product in Malaysia
describe:
within 5 years and in Asia within the next 10 years.
Vision
Objective: to be establish and operate an
Mission international standard production facility for halal
objective food product in Malaysia. To produce 10 types of
in-house products within the first year of operation
and identify 5 vendors to support production
capacity.
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Refer:
Designing Organizational Structure
ORGANIZING
Dividing & Assigning Jobs,
Task among Department,
Handling Infrastructure,
Handling Operation method.

Its mean, to
properly
arrange.
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LEADING

GETTING THE Involves:

JOB DONE Assigning of jobs and responsibilities,
THROUGH Motivating employees,
OTHER
PEOPLE. Conducting effectively communication,
Providing and receiving feedback,
Making correction if necessary.
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CONTROLLING

MONITORING
FUNCTION TO
ENSURE THAT
ACTIVITIES For example, how to control business cost:
CARRIED-OUT Bring Together Data and Voice,
ARE ON THE Reduce Communication Costs,
RIGHT TRACK
IN ACHIEVING Work more Efficiently,
THE GOALS. Monitor Cost,
Reduce Staff Turnover.
http://www.cisco.com/web/solutions/smb/need_to/five_ways_to_control_business_costs.html
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LEVEL OF MANAGEMENT IN A SMALL BUSINESS

Early Stage
Spend most of the times on the operation
Involves in daily routines such as contacting and
liaising with suppliers, serving the customers and
arranging stock
2nd Stage
Employed workers to do some of the tasks and
they report directly to the owner
Able to allocate some of his time to managerial
functions
3rd Stage
Business has grown more organised
Employed a group of management staffs to
assist in supervising tasks
Some managerial functions delegate to the
middle managers
Pay more attention on managerial function .
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ORGANISATIONAL PRINCIPLES AND STRUCTURE

What is Organisation?
A social unit which comprises people performing different tasks in a
coordinated manner to achieve organisational goals
Organisational Principles (OP)
Division of work
Authority and responsibility
Unity of Command
Span of control
Delegation of authority and responsibility.
Organisational Structure (OS)
Based on shift
Based on number of workers
Based on functions products
Based on regions
Based on shift clients
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Steps in Designing OS
1. Set clear goal,
2. Identify and summarise work to be
done,
3. Gather all activities according too 6
unit or department that related to
each other,
4. Assign manager/supervisor to lead
each unit and provide appropriate
authority for manager to carry out
identified task and responsibilities,
5. Arrange the unit or department
vertically or horizontally relative to
each other to create the chain of
command,
6. Prepare the controlling mechanism
to measure the effectiveness and 1
development of the organisation.
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1. Advertising,
PERSONNEL 2. Labor office,
3. Private employee agency,
PLANNING 4. Technical and vocational
institutions,
5. Employee references,
6. Job seeker website,
7. Nepotism.
Recruitment is
searching suitable
candidate base on job
specification.
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3 most commonly used tools to

PERSONNEL facilitate Selection are:

PLANNING i. Job application form; to gather

basic information about applicants
ii. Job interview; to gain in-depth
information about applicants
iii. Selection tests; to evaluate
applicants, include: performance,
Selection, Involves aptitude, interest, intelligent, skill or
practical test.
the task of reviewing
the applications, short-
listing applicants and
selecting the best
candidate for the job.
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Component of Remuneration

PERSONNEL package are:

PLANNING 1)
2)
Salary
Wages
3) Sales commission
4) Contribution to EPF
Contribution to SOCSO
Retaining, how to 5) Allowances
6) Fringe benefits
develop a good reward
system by mutually
beneficial both
employer and
employee.
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EPF

PERSONNEL
EPF board is responsible for the
implementation, administration and
enforcement of the EPF Workers Act
PLANNING 1991, EPF Regulations 1991 and EPF
Procedures 1991
SOCSO
SOCSO is responsible for the
implementation, administration and
enforcement of the Workers Social
Personnel Management Safety Acts 1969 and Workers Social
Safety Regulations 1971
and Legal Acts: Two Insurance Schemes offered:
The Employment Injury Scheme
EPF Invalidity Pension Scheme
SOCSO
Contribution by employers and
employees, Employer must make a monthly
contribution for each eligible employees
Contribution according to specified rate under the Act
(2.5% of basic salary), Employee is
required to contribute 0.5% of basic salary
to Invalidity Pension Scheme only
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Provides protection for

PERSONNEL employees in the following
categories:
PLANNING Employees in the private sector
who earn < RM 1,250/month
Labor artisans who earn > RM
1,250/month
Transport workers involved in
transportation of passengers or
goods
Labor supervisor
Housemaid
Employment Acts Ship workers on vessels that
registered in Malaysia
1955 The Act elaborates on the
employment contract, salary,
leave, benefits and
allowances
Managing Entrepreneurial
Growth

Entrepreneurship
Technology
 Organizational changes
during growth
Entrepreneur must give up some
decision making authority
Corporate culture changes from small to
larger business
Such changes are often difficult for the
entrepreneur and other founding
members to adapt to

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 Making the transition as an entrepreneur
whos business has grown
Communicate all matters to key employees
Be a good listener
Be willing to delegate responsibility
Provide feedback regularly and consistently
Provide continuous training of key
employees
Emphasize results to key managers with
incentives built in to encourage them to
train and delegate within their roles
Establish a we spirit not a me spirit in
memos and meetings

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 New skills for the entrepreneur
Record keeping and financial control
Inventory control
Human resources
Marketing skills
Strategic planning skills
Time management skills
Negotiation skills

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Growth Strategies

Penetration
Product
Existing Development

Market
Diversification
Market
New Development

Existing New
Product
 Strategies
Penetration- Growth By Selling More of Existing
Product to Existing Customers

Market Development
New Geographic Market
New Demographic Market
New Product Use

ProductDevelopment- Sell New Products To Existing

Customers

Diversification- Sell New Product To New Market

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 Pressures On Firm Growth
1. Existing Financial Resources

2. Human Resources

3. Management Of Employees

4. Entrepreneurs Time

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 Overcoming
Financial Resources Pressure

Manage Cash Flow- Budget vs. Actual

Manage Inventory
Manage Fixed Assets
Manage Costs/Profits- Compare Actual
vs. Standard Percentages
Taxes
Record Keeping

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Generic Strategies

Cost Leadership
In conjunction with differentiation
Economies or diseconomies of
scale
Capacity utilization achieved
Linkages w/ suppliers & distributors
Generic Strategies

Low Cost Producer Advantage

Many price-sensitive buyers

Few ways of achieving differentiation
Buyers not sensitive to brand
differences
Large # of buyers w/bargaining power
Generic Strategies
Differentiation

Greater product flexibility

Greater compatibility
Lower costs
Improved service
Greater convenience
More features
Generic Strategies

Focus

Industry segment of sufficient size

Good growth potential
Not crucial to success of major competitors
 Three strategies for managing
fast growth
Scaling
Duplication
Granulation

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 Scaling doing more of what
you are good at
Focus on concrete product, technology,
or customer segment
Invest aggressively
Expand product development around core
technologies, expand product lines, increase
marketing using existing channels to reach
new groups
Specialize and standardize
Hire the right mix
Adapt the structures
Learn from customers

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 Duplication: Repeat the
business model in new regions
Balance standardization and adaptation
Hire flexible, independent managers
Duplicate key parts of the infrastructure
Duplication entrepreneurial knowledge
Be aware of the limitations

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 Granulation: Growing select
business cells
Focus on specific areas of business
Balance the old and the new
Balance formal and informal
Evaluate and monitor
Learn from customers, partners, and
competition

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 Bear Opportunities
Leverage your relationships
Advertise value propositions
Control costs
Pursue traditional marketers

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 Understanding Quality
This is about meeting or exceeding
customer requirements. It also refers to
the expression of the degree of
perceived satisfaction by the customer.
Entrepreneurs need to make sure that
they keep their promises hence to
maintain both conformance and
performance quality.

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 Total Quality Management
is a people focused management system
that aims at continuous increase in customer
service at continuously lower real costs

Definition management approach to long-

term success through customer satisfaction.
TQM initiatives is where all members
continuously improved in the processes,
products, services that ultimately lead to a
customer-focused organization.

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 Make TQM a Success!

Entrepreneurs need to be customer-

driven
Being effective and efficient
Being innovative continuously (Make
market research and work on feedback)

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 Importance of TQM
TQM ought to be everyones job in the
organization
The entrepreneur needs to appreciate
the concept of TQM
Employees should be motivated to work
towards quality improvement on a
continuous basis.

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 Corporate Entrepreneurship
As a process to create new ventures within
a business corporate
Characteristics of a Corporate entrepreneur
Proactive
Innovative
Propensity to make moderate and calculated risk
Inspiration to do more than current capacity
Team work
Creative problem solving
Listening the feedback
Need for achievement

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 Innovation
Spotting and exploiting opportunities
quickly
Definition
Is the process of implementing new ideas
of turning creative concepts into realities
2 phase of Innovation:
Creating an idea
Make sure it results in something new

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 Sources of Innovation
Technology
The types and pattern of activity, equipment
and material, knowledge and experience
used to perform task
Customers
Annoying habit of expecting-demanding
Competitors
Allbusiness need to know what their
competitors are doing
Creativity

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 Types of competitor
There 3 types of competitor
Direct competitors
Compete against on a day-to day basis
Close competitors
Those that similar, but not identical
products/services
Indirect competitors
More varied

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 What we can learn from competitors?

Products and services

Product line
Promotional activities
Distribution

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 Creativity
Is the ability to generate novel and
useful ideas and solutions to everyday
problems and challenges

Being creative is seeing thing as

everybody else but thinking of
something different

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 Why is creativity a major
source of innovation?
innovation is usually regarded as the
successful exploitation of news ideas,
creativity clearly has a major role to
play during the early stage of innovation
and new products/ service development

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 Thank you

Champions believe in themselves even if

no one else does. In order to succeed, we
must first believe that we can. They can
because they think they can.

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