CHAPTER 2

BUSINESS MANAGEMENT
D
E
F
I
N
I
N
G

Small and Medium Enterprise (SME) plays a
major role in the Malaysian economy
The development received much attention
since the implementation of the New
Economic Policy ( 1971-1990) and then
emphasized in the 2
nd
Long Term Malaysian
Plan (1991-2000)

D
E
F
I
N
I
N
G

D
E
F
I
N
I
N
G
Survey done in 2010 found that there were
567,480 SMEs established in Malaysia
(19% total countrys export)
The Government has setup an agency
dedicated to help and spur the development
and growth of SMEs by providing
infrastructure facilities, financial assistance,
advisory services, market access and other
support programmes in 1996

In Malaysia, Proton Holdings Bhd has a total of 287
vendors and 3000 sub-vendors to assist the
company to produce 80% of the total of 20,000 to
30,000 parts and components that are required to make a
Proton car
Presently, in Malaysia, increasing numbers of SMEs are
selling their products to supermarket chains such as
Tesco, Mydin, Giant TMC, Carrefour, Pacific and the Store.
For instance, Tesco Malaysia sources its products from
1,272 suppliers. Out of the total number of 1,272
suppliers, 60% are local SMEs
develop a group of diverse and competitive small
and medium enterprises is a central theme
towards achieving sustainable economic growth
SMEs are crucial to the economic growth process
and play an important role in the countrys overall
production network
SMEs comprise over 98% of total establishments
and contributing to over 65% of employment as
well as over 50% of the gross domestic product
D
E
F
I
N
I
N
G

Definitions of SMEs is based on two
criteria, namely:

Number of employees; or
Annual sales turnover.
D
E
F
I
N
I
N
G

SMEs sectors
Primary
Agriculture
Manufacturing
( including
agro-based)
Manufacturing-
Related Services
(MRS)
Services ( including
Information &
Communications
Technology)
Micro
Small
Medium
These groupings are based on either number of
employees or total sales or revenue generated by
a business in a year
C
H
A
R
A
C
T
E
R
I
S
T
I
C
S

1. Ownership privately owned by individual or
partners, typically registered as a sole
proprietorship, partnership or private limited
(Sdn. Bhd.) company.
2. Management the business is managed and
operated by the owner(s).
3. Resources often has limited resources.
4. Organizational structure structure is often
flat and informal.
5. Flexibility of Change- more flexibility to
adept to changes and vulnerable to develop
in the business environment

A
D
V
A
N
T
A
G
E
S

It can be started at a very low cost and on a
part-time basis
It is typically easier to respond to the
marketplace quickly
Freedom to operate independently
Small business owners have the satisfaction
of making their own decisions
Motivated by personal and family
considerations
A desire for independence and a strong
sense of initiative


F
U
N
C
T
I
O
N
S

MANAGEMENT
FUNCTIONS
Planning Organizing
Leading
Controlling
F
U
N
C
T
I
O
N
S

planning is selecting priorities and
results (goals, objectives, etc.) and
how those results will achieved.
Planning
allocating resources and ensuring the
team have everything they need to do the
work they have been asked to do.
Organizing
involves motivating staff, praising or
criticising, setting individuals' objectives
and ensuring these are being achieved
Leading


Controlling
monitoring & adjusting resources and
processes to achieve goals
Business in Malaysia can be registered under the following acts:
Business Registration Act 1956 (Amendment 1978) and Procedures
Of Business Registration 1957:
- Sole proprietorship
- Partnership
Company Act 1965
- Limited company by Guarantee
- Limited company by Share
Private Limited Company (Sdn Bhd)
Public Limited Company
Foreign Owned Company
- Unlimited Company
Cooperatives Act 1948
Parliamentary Act or State (Government) Enactment

Some characteristics of the business entities
Sole Proprietor Partnership Private Limited
Company
Ownership Single, normally
owned by the
entrepreneur
Owned by up to 20
partners (for
professional buss.
up to 50 partners)
Separate legal entity
must have
members not
exceeding 50
members
Act Business Registration
Act 1956 (amended
1978) & Procedures
of Business
Registration 1957
Similar to sole
proprietor plus
Partnership Act 1961
Companies Act 1965
Income Tax Personal income tax Personal income tax Corporate tax
Cost of setting The lowest Second after sole
proprietor
The highest
compared to all three
entities
Some characteristics of the business entities
Sole Proprietor Partnership Private Limited
Company
Formalities (in term
of setting up and
dissolve business)
Minimum formalities Minimum with few
formalities. Need to
have Contract or
Partnership
Agreement
Complex
Memorandum of
Association & Articles
of Association
Submission of yearly
financial statements
Yes, but without
auditor validation
Yes, but without
auditor validation
Audited accounts
Source of capital Limited Larger than sole
proprietor
Largest compared to
all three
Business liabilities Unlimited Unlimited Limited to the capital
members contribute
to the company
Some characteristics of the business entities
Sole Proprietor Partnership Private Limited
Company
Life span of business
entities
Depends on the age
of owner & business
itself
Depends on the age
partners & business
itself
Does not depend on
age of members or
resignation of
members
Management Managed individually
by owner
The responsibility can
be divided equally
among partners
Handled by Board of
Directors appointed
by shareholders
Business decision
making process
Very flexible as owner
can react very quickly
Must get agreement
from all members
Under the preview of
the Board of Directors
(as stated in
Companies Act 1965
& Articles of
Association)
Profit (or Loss) All go to owner Shared among
partners
Distribute as
dividends, another
portion will go to the
company
Some characteristics of the business entities
Sole Proprietor Partnership Private Limited
Company
Registration of
business
FORM A
(FORM A1 for annual
renewal)
FORM A
(FORM A1 for annual
renewal)
FORM 13A
Certificate of
approved registration
FORM D FORM D FORM 9 (corporate
declaration
certificate, business
license)
Notification of change
of business, partners,
business address
FORM B FORM B FORM 44 (notice of
legal business
address)
FORM 24 (notice of
shares allotted)
Termination of
business
FORM C FORM C