UniKL Technopreneurship CHP 4 - Building Your Own Start-Up Technology Venture

CHAPTER
4 4
Building Your Own
Start-up Technology
Venture
Learning Outcomes
At the end of the topic, students should be able to:
• Outline the role of SMEs in the Malaysian economy

• Discuss the definition and importance of SMEs in
economy
• Describe the characteristics of small businesses
• Identify the levels of management and the general
management functions
• Differentiate the various types of business
establishments in Malaysia
TECHNOPRENEURSHIP Second Edition All Rights Reserved

© Oxford Fajar Sdn. Bhd. (008974-T), 2016 4– 3
Small Medium Enterprise (SMEs)
• SMEs play a major role in the Malaysian economy.
• The development of SMEs started during the New Economic
Policy (1971–1990).
• A survey done in 2011 found that there were 645,136 SMEs
established in Malaysia, which made up 97.30%of 662,939 total
establishments.
• These SMEs employed a total of 3,669,259 workforce in 2011
and contributed up to 35.9% of total GDP in 2014.
• The importance of small and medium-sized businesses:
 creating job opportunities,
 contributing to the prosperity of big and multinational
corporations
 enhance the industry through their creativity and innovation

Small Medium Enterprise (SME)
(cont.)
• On 2 October 2009, Small and Medium Enterprise Corporation Malaysia
(SME Corp Malaysia) was setup.
• SME Corp is now the central point of reference for information and
advisory services for all SMEs in Malaysia.
• The SME Masterplan 2012-2020 will be the 'game changer' to
accelerate the growth of SMEs to achieve high income nation status by
2020.
• The Masterplan is based on public-private partnership whereby the lead
agencies will undertake this programme in collaboration with the private
sector.
• The SME Masterplan aims at raising the contribution of SMEs to the
economy to 41% by 2020.
• SME GDP has been growing at a faster pace of 6.6% compared to 5%
of the overall GDP growth.
• The employment associated with SME is to increase from 59% to 62%.
(cont.)
The use of common definitions for SMEs will:

•Strengthen the government’s efforts to create effective
policies and support programmes for specific targets;
•make it easier to provide technical and financial
assistance to SMEs; and
•allow for the identification of SMEs in various categories
and levels.

(cont.)
Defining SME’s
•Malaysian SMEs can be grouped into three categories:

micro, small, or medium.
•These groupings are decided based on either the number

of people a business employs or the total sales or revenue
generated by a business in a year.

(cont.)

(cont.)

(cont.)
Characteristics of a Small Business
•Management - The entrepreneur leads the company and acts

as both manager and worker.
•Resources - often has limited resources.
•Organizational structure - structure is often flat and informal.
•Flexibility of change - The business has more flexibility to adapt
to changes in the environment due to its size and informal
structure.
•Firm Age - business can still be considered as new if the
establishment ages two-to-five years.
•Annual Revenue - annual revenue of five million ringgit can be
used as the proximity to characterize the upper limit of SMEs.

SME Contributions to the
Economy

SME Contributions to the
Economy (cont.)

Economic Transformation
Programme (ETP)

Management Functions

Management Functions (cont.)
Planning
•A management function that involves defining goals,
establish strategies for achieving those goals, and
developing plans to integrate and coordinate activities.
•Much of this information will come directly from the vision
and mission statements of the company.
•Setting objectives for the goal and following up on the
execution of the plan are two critical components of the
planning function.

(cont.)
Planning (cont.)
•Plans are developed for the entire organizational unit and
individuals for a certain period of time. Its activities include:
• analyzing current situations;
• anticipating the future;
• determining the organizational objectives;
• deciding the activities to be involved;
• choosing strategies, and
• determining resources to achieve organizational
goals.

(cont.)
Organizing
•A management function that involves determining what tasks
are to be done, who is to do them, how the tasks are to be
grouped, who report to whom, and where decisions are to be
made.
The specific roles of a manager include:

• specifying job responsibilities;
• grouping jobs into work units, and
• allocating resources.

(cont.)
Leading
•Leading is influencing people’s behavior through motivation,
communication, group dynamics, leadership and discipline.
•The purpose of directing is to channel the behavior of all personnel
to accomplish the organization’s mission and objectives.
•It involves the manager’s efforts to stimulate high performance
through directing, motivating and communicating with employees.
•Managers who want to lead effectively need to discover what
motivates their employees and inspires them.
•As leaders, managers increase productivity by:
─ directing the workforce;
─ motivating their subordinates, and
─ communicating with employees.

(cont.)
Controlling
•Controlling is a four-step process of establishing performance
standards based on the firm’s objectives, measuring and reporting
actual performance, comparing the two, and taking corrective or
preventive action as necessary.
•The controlling function involves monitoring the firm’s performance
to make sure goals are being met.
•An effective manager will share this information with his or her
employees. Controlling activities include:
─ setting performance standards that indicate progress towards
long-term goals;
─ monitoring staff performance through performance data
evaluation, and
─ identifying performance problems by comparing performance
data against standards and taking corrective actions.
Management Levels
Top-level managers (Strategic managers)

•Senior executives are responsible for the overall management and
effectiveness of the organization.
•They also focus on long-term issues and emphasize on the survival and
growth of the organization.
•They are concerned with the interactions between the organization and its
external environment.
•Top-level managers include the Chief Executive Officer (CEO), Chief
Operating Officer (COO); President, Vice-President, and members of the top
executive committee.
Management Levels (cont.)
Middle-level managers (Tactical managers)

•Middle-level managers are managers who are located in the middle of the
organizational hierarchy, and at work, they report to top-level managers.
•They are the link between top-level managers and frontline managers.
•They are responsible for translating the general goals and plans developed
by strategic managers into more specific objectives and activities.
Frontline managers (Operational managers)

•They are the lower level managers who supervise the operational activities
of the organization.
•They are the link between management and non-management personnel.
•They implement the specific plans developed with middle managers and
serve as the link between management and non-management personnel.

Management Skills
In order to be a good manager, there are certain skills

that are crucial to be acquired by the managers. Those
skills involve both hard skills and soft skills.
Technical Skills
Technical skill is the ability to perform a specialized task

involving a particular method or process. The tasks can
be in the areas of engineering, business, computer, etc.

Management Skills (cont.)
Conceptual and decision skills

Conceptual and decision skills are about a manager’s ability:
•To recognize complex and dynamic issues;
•To examine the numerous and conflicting factors that
influence these issues and problems;
•To resolve the problems for the benefit of the organization
and its members;
•To demonstrate skills in creating clarity out of confusion,
ambiguity, and uncertainty;
•To be able to define skilfully and gain agreement on who has
what responsibility and authority, and
•To manage in a way that builds motivation and commitment
to cross-departmental and corporate goals.
Interpersonal and Communication Skills

•Interpersonal and communication skills are ‘people skills’. They are
about the ability to lead, motivate and communicate effectively with
others.
•Managers who have excellent interpersonal and communication
skills show the following traits:
─ Ability to create, through management, a climate and spirit
conducive to high performance.
─ Ability to understand the relationships among tasks and
between the leader and followers.
─ Ability to lead in those situations where it is appropriate.
─ Skilled at helping, coaching, and managing conflict.
─ Creatively handle conflicts, generate consensus decisions,
and share power and information.

─ Recognize that high-quality decisions require a rapid flow of

information in all directions.
─ Accept that knowledge, competence, logic, and evidence
need to prevail over official status or formal rank in an
organization.
─ Encourage innovation and calculated risk rather than
punishing or criticizing whatever is less than perfect.
─ Expect and encourage others to find and correct their own
errors and to solve their own problems.
─ Make heroes out of other team members and contributors.
─ Generate trust among colleagues and subordinates.
─ Perceived as honest, direct, open and spontaneous.

Other Management Competencies Needed
•Marketing – product management, pricing strategy, promotion and
advertising strategy, distribution management.
•Operations/production – manufacturing management, inventory control,
cost analysis and control, quality control, production planning.
•Finance – managing cash flow, credit and collection management, public
and private offerings.
•Entrepreneurial management – problem solving, communications,
planning and negotiating, decision-making
•Law and taxes – company law, contract law, Malaysian tax law
•Information technology – information and management systems tools,
business to business, business to consumer, business to government, all via
the Internet, sales, marketing, manufacturing, and merchandising tools,
financial, accounting, and risk analysis and management tools,
telecommunications and wireless solutions for corporate information, data,
and process management.
Types of Business
Establishments in Malaysia

Types of Business Establishments
in Malaysia (cont.)
• Business in Malaysia can be registered under any one

of the following Acts:
(1)Business registration Act 1956 (Amendment 1978)
and Procedures Of Business Registration 1957. Two
types of businesses that can be formed under this Act:
sole proprietorship and partnership.
(2)Company Act 1965. There are three types of
companies that can be formed under this Act: private
limited, public limited and unlimited. There are
companies that are limited by shares.

in Malaysia (cont.)
Sole Proprietorship
•A sole proprietorship is formed under the Business Act 1956
(Amendment 1978).
•This form of business structure is solely owned by one person, where
the management rests on that person whose liability is unlimited.
•A sole proprietorship is by far the simplest business structure.
•A sole proprietorship may have any number of employees or may grow
to any level in the sales revenue.
•The name of the owner or any other name may be used for the name
of the business.
•Normally, a sole proprietorship business requires a small amount of
capital to start with, compared with other forms of business entities.
•Examples of sole proprietorship businesses are tailor shops, beauty
saloons, restaurants, launderettes and mini markets.

in Malaysia (cont.)

in Malaysia (cont.)
Partnership
•A partnership is a legal business entity with two or more partners.
•A partnership business is also incorporated under the Business
registration Act 1956 (Amendment 1978).
•A partnership is carried out by more than one person but not exceeding
20 persons.
•Professional businesses, such as legal firms, architectural and
accounting firms, the members could amount up to 50 persons
•In a partnership, partners agree to undertake a joint business and jointly
own the business.
•In this form of business entity, partners carry out the business, share the
capital, profits and losses.
•Every partner is considered the company’s representative and acts on
behalf of the company.
in Malaysia (cont.)

in Malaysia (cont.)
Private Limited Company
•A private limited company is a legal entity and its identity is separated
from the identity of the company’s members (Companies Act 1965).
•Private limited companies cannot sell shares to the public, and are
distinguished by the title ‘Sendirian Berhad’, or shortened to ‘Sdn Bhd’
or ‘S/B’.
•The minimum members in a private limited company is two (2) and
the maximum is fifty (50).
•The characteristics of a Private Limited Company are as follows:
Right and responsibility
A company has a specific right and responsibility. It can acquire
assets under its own name. A company can also take a legal
action and face legal action under its own name.

in Malaysia (cont.)
Private Limited Company (cont.)

Lifespan
 The lifespan of a company is not dependent upon the
death or resignation of its members.
 A company can be dissolved when its members are no
longer interested in continuing the business.
Liabilities
 The liabilities of the members in a company are limited to
the local shares contributed to the company’s capital.

in Malaysia (cont.)
Private Limited Company (cont.)

 Personal assets are not affected regardless of what
happens to the company.
Memberships
 The two members of the company can act as a director
and founder of the company.
 The members of the company will appoint The Board of
Directors who will manage and run the business
operations subject to the Companies Acts 1965.

in Malaysia (cont.)

in Malaysia (cont.)
Public Limited Company

•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.
•The proposal for the issue or offer of shares to the public has to be
submitted to the Securities Commission for approval.
•Public limited companies are distinguished by the title ‘Berhad’,
shortened to “Bhd”.
•Public limited companies must have a minimum of two members and
there is no maximum member limit.
•It can be either an unlisted or a listed company on the stock
exchanges.
•However, certain public limited companies (mostly nationalized
concerns) incorporated under special legislation are exempted from
bearing any of the identifying suffixes.
in Malaysia (cont.)
Unlimited company
•Unlimited companies are no different from the sole proprietorship and
partnership business entities.
•The only differences are that they have a special article of association
and are free to return the capital to their members.
•Members (also called “Shareholders”) are not liable for the company’s
debts beyond the amount of share capital they have subscribed.
•However, the public will have access to financial affairs of the company.
•In the event of death or changes among shareholders and/or directors of
the company, it need not be winded up.
•Every limited company has to appoint:
(1) Auditors to verify and report financial affairs, records, accounts and
statements; and
(2) Must have at least a company secretary for the annual general
meeting (AGM), board and shareholders’ meetings.
The Differences Between
Type of Business in Malaysia
Business firm Company limited by shares
1 Legal standing • Not separated from individual/ individuals who own the business • Legally separated from owners and individuals who run business
2 Liability • Not limited • Limited to the remaining unpaid amount of the members’ shares
3 Succession • Once the identity of individual participants changes (e.g. partners • There is perpetual succession
die, resign or new partners or sole proprietor dies or becomes
• Company continues to exist unless it is liquidated or deregistered
bankrupt) the sole proprietor is dissolved or the partnership is
dissolved • Can transfer interest to other parties by executing share transfer
forms
4 Formation • Register with Registrar of Business • Incorporated under the Companies Act 1965
• Some partnerships may have partnership agreements • Lodge statutory forms and memorandum of association and
articles of association with the Companies Commission of Malaysia
(“CCM”) otherwise known as Suruhanjaya Malaysia
5 Owner • 1 for sole proprietor • 2 to 50 max (no limit for PLCs)

• 2 to 20 max for partnership
6 Ownership of • Jointly owned by the individual/ individuals who own business • Owned by the company, not the shareholders
properties
7 Management • Managed by individual/ individuals who own a business. • Managed by the Board of Directors. Every company must have at
least 2 directors who are principally residing in Malaysia. Directors
• All partners are entitled to participate in the management of the
may or may not be the shareholders of the company.
partnership
• There must be at least 1 company secretary.
8 Annual returns • Not required to submit any report to the Registrar of Business • Lodge with Companies Commission of Malaysia’s returns
• Lodge annually with the Annual Return and audited accounts
9 Taxation • Profits made are added to the individual’s/ individuals’ personal • Company is subject to income tax at the rate applicable.
income and are individually liable for the profit under personal
income tax.

Companies Commission of
Malaysia
• Companies wishing to operate in Malaysia must
register with the Companies Commission of Malaysia
(Companies Division).
• Under the regulations of the Companies Commission
of Malaysia, there are different procedures established
for local companies and foreign companies.
• The company must submit copies of documents like
the Memorandum and Articles of Association, Statutory
Declaration of Compliance and Statutory Declaration,
plus relevant fees.

Companies Commission of
Malaysia
• The Registrar of Companies will bestow a certificate of
incorporation once registration procedures are completed
and approved.
• Companies must file the registration of its members,
directors, managers, secretaries and interest holders with
the Commission at all times.
• Foreign companies must incorporate a local company or
register a branch in Malaysia in order to conduct a
business in this country.
• The Registrar of Companies will bestow upon the applying
company the status of a foreign company operating in
Malaysia once all procedures are completed
and approved.

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CHAPTER

At the end of the topic, students should be able to:

• Outline the role of SMEs in the Malaysian economy

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

The use of common definitions for SMEs will:

TECHNOPRENEURSHIP Second Edition All Rights Reserved

•Malaysian SMEs can be grouped into three categories:

•These groupings are decided based on either the number

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

•Management - The entrepreneur leads the company and acts

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

The specific roles of a manager include:

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

Top-level managers (Strategic managers)

Middle-level managers (Tactical managers)

Frontline managers (Operational managers)

TECHNOPRENEURSHIP Second Edition All Rights Reserved

In order to be a good manager, there are certain skills

Technical skill is the ability to perform a specialized task

TECHNOPRENEURSHIP Second Edition All Rights Reserved

Conceptual and decision skills

Interpersonal and Communication Skills

TECHNOPRENEURSHIP Second Edition All Rights Reserved

─ Recognize that high-quality decisions require a rapid flow of

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

• Business in Malaysia can be registered under any one

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

Private Limited Company (cont.)

TECHNOPRENEURSHIP Second Edition All Rights Reserved

Private Limited Company (cont.)

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

Public Limited Company

5 Owner • 1 for sole proprietor • 2 to 50 max (no limit for PLCs)

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

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