CHAPTER 5 : MANAGING

SMALL AND MEDIUM ENTERPRISE

(SME)
SESSION OBJECTIVES

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

 Differentiate between small and medium-sized business and
its characteristics.
 Understand the importance of management functions in small
and medium-sized business.
 Prepare the organizational plan.

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 DEFINITION OF SME IN
MALAYSIA

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Sources:
u nd rDefinitions
sh for Small and Medium Enterprises in Malaysia (approved for adoption by
NSDC F u
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TOTAL ESTABLISHMENT IN
MALAYSIA
• SME = 98.5% of total firms establishment in Malaysia

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Sources: u nd hEconomics
ip Census (2016); SME Annual Report (2018)
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SECTORS IN MALAYSIA

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DEFINITION OF A BUSINESS ORGANIZATION

A business organization comprises of human beings that carry out specific tasks or activities
in a coordinated manner for the purpose of achieving the objectives of the organization.

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ROLES OF ENTREPRENEURS AS THE OWNER-
MANAGERS

Setting out Vision, Mission & Objective

Management: Planning, Organizing, Directing/ Leading and Controlling
Personnel Planning
Business location selection

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VISION, MISSION & OBJECTIVE

Vision – It is the long-term goal of the organization

Mission – It is a statement of purpose of the organization came into being
Objective – It is the short-term goal of the organization

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OBJECTIVE – THE SMART CONCEPT

A good objective should be based on the SMART concept:

 S – Specific
 M – Measurable
 A – Achievable
 R – Realistic
 T – Time-frame

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MANAGEMENT FUNCTIONS
The four basic management functions are as
follows:
 Planning
 Organizing
 Directing/Leading
 Controlling
The management functions are used to manage
organizational inputs effectively.

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ORGANIZATIONAL INPUTS

Generally, organizational inputs are as follows:

 Money or capital
 Personnel or labor
 Technology or plant, machinery & equipment
 Raw materials or inventory
 Information

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PLANNING
Planning involves all activities of formulating company policies and procedures for
the purpose of achieving the stated goals in an effective manner.
Long-term plan – strategic to the company
Short-term plan – more on operational issues

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 ORGANIZING

Organizing involves activities of dividing and coordinating the tasks and responsibilities into
departments, sections or units
It also involves establishing managerial authority

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 DIRECTING
Directing is a process whereby specific instructions are given to the subordinates to
execute the tasks assigned to them
Important issues – unity of command, clarity of instructions, span of control

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 CONTROLLING

Controlling involves all activities of measuring and monitoring the actual against the
planned performance and taking corrective actions to rectify the discrepancies if needed

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 RELATIONSHIPS BETWEEN
BUSINESS INPUTS, FUNCTIONS AND
OBJECTIVES

BUSINESS
INPUTS

MANAGEMENT
FUNCTIONS

ORGANIZATIONAL
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 ORGANIZATIONAL STRUCTURE

Each organization has to be structured according to the purpose and function of the specific
organization
The structure should explain the following:
 The hierarchy
 Division of task & responsibility
 Span of control

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 TYPES OF ORGANIZATIONAL STRUCTURE
Functional
 Finance, Marketing, Operation etc.
Divisional
 By product
 By geographical location
 By customer
Matrix
 Combination of functional and divisional
Others
 By shift
 By number of employees

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 ORGANIZATIONAL CHART

It is a schematic representation of the organizational

structure
It shows:
The hierarchy
Span of control
Intra-relationship
Division of jobs and responsibilities
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PERSONNEL PLANNING
Personnel planning - analyze and evaluate the human resources available in the
organization, and to determine how to obtain the kinds of personnel needed to
staff positions ranging from assembly line workers to chief executives.
Smaller companies put personnel planning in the human resource or personnel
department.
Some of the largest corporations have established separate departments for this
function.

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PERSONNEL PLANNING

Perform job analysis

 What tasks to perform in what order?
 How critical/difficult is the task?
 How many workers needed?
 Job designation?
Develop job description
 Task and responsibilities of each job designation
Develop job specification
 Minimum qualification needed to effectively perform a job

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PERSONNEL PLANNING
Recruitment procedures & remuneration
schedule
 Specify recruitment procedures
 Hiring
 Selection
 Retention
 Identify sources of personnel
 Determine the remuneration scheme (basic salary, EPF,
SOCSO, allowances, commission, etc.)
 Fringe benefits (holidays, medical, insurance, bonus,
maternity, etc.)

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BUSINESS LOCATION SELECTION

TYPE CONSIDERED
Location State/city/part or town

Premise Buy – what is the cost

Rent – rental per month/deposit
Cost of renovation
List of office equipment & furniture Quantity and cost per unit
Identify the sources
Administrative overheads Salary of administrative personnel
Utilities: telephone, electricity & water, rental of
equipment
Other expenditure Office stationaries
Business registration & licenses
Misc. expenditures
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ADMINISTRATIVE BUDGET

Cost of premise
 Buy/Build – cost of premise
 Rent – monthly rentals
 Renovation costs
Total cost of furniture and equipment
Monthly administrative overheads
Other expenditures
Rental & utility deposits

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