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Topic 4 :

Managing Small & Medium Size Business (SME/EKS/IKS)

Lecture Content

Introduction Business Strategies and goals Organization Structure Personnel Planning Administration Budget Personnnel Management and Legal Act

Learning Outcomes

To be able understand basic personnel planning in business plan To be able understand role and definition small and medium enterprises (SME) in entrepreneurship To be able identify managerial function in business venturing To be able develop the complete administrative budget



Managing and developing Small medium enterprises (SMEs) - New Economy Policy (1971-1990), RM4 (2011-2020) Survey 1994 12,000 SMEs in Malaysia Employed 33% of workforce in manufacturing sector (Soon-Yau Foong,1999)

Bank Negara Malaysia, SME & MIDA

Small business : Paid-up capital < RM500,000 EKS (Small and Medium Enterprises) : Paid-up capital < RM2.5 million

2 scope (annual sales value and total employee)
Medium sized business Annual sales turnover between RM10 million and RM25 million and employ not more than 150 full time workers Small sized business Annual sales turnover not more than RM10 million and employs not more than 50 full time workers

Characteristics of A Small Business


Ownership Operational scope Management style Resources Environmental threats

Managerial Functions

Planning Organizing Leading Controlling

Managing Part in Business Organisation


Administrative Finance Human Resources Logistic Inventory Production & Operation Marketing

Organisational Structure

Functions Structure Regions/Parts Structure Matrics Structure Clients Structure Products Structure

Personnel Planning

Job Analysis Job Description Job Specification Personnel Selection and Recruitment Employees Retaining

Administrative Budget

Human Resources (post, responsibilities,

salaries) Administrative Operating Cost Other Expenses


Personnel Management & Legal Acts


Employees Provident Fund (EPF) Social Security Organisation (SOCSO) Employment Act 1955

Characteristics Small Business


Ownership Management Resources Organisational Structure Flexibility of Change

Managerial Functions

Owner s managerial skill & capabilities In Msia: 46% new venture failed within 10 yrs; 64% owner-mgrs had no managerial experience and majority didn t acquire training in mgmt. Refer to planning, organizing, leading and controlling of business input. Business input capital, manpower, technology and materials.

Planning Function

Activity of formulating company s policy and procedure to ensure the attainment of business mission and objectives with effective and efficient means. Business vision, goals/objectives.

Organizing Function

Activity of designing an organizational structure, dividing and assigning jobs and tasks among departments, sections or units besides handling the infrastructure and .operation methods.

Leading Function

The act of getting the job done through other people Managing group of people, motivation, subordinates feedback.

Controlling Function

Monitoring function to ensure that activities carried out are on the right track in achieving the goals set out by the business. Compare progress against business objectives/targets. Deviation corrective action/ device an alternative strategy.

Management functions and Activities

Management functions: planning, organizing, leading, and controlling

Organisational Principles & Structure

Organisation a social unit which comprises people performing different tasks in a coordinated manner in order to achieve organisational goals. Organisational Principles: division of work, authority and responsibility, unity of command, span of control, delegation of authority and responsibility.

Organization structure
The ways an organization divides its labor into distinct tasks and then coordinates them the pattern of jobs and groups of jobs in an organization. It is an important cause of individual and group behavior. Often discussed as organizational chart

Common organizational structure

Functional structure

An organization in which similar and related occupational specialties are grouped together Jobs are combined according to the functions of the organization

Functional Structure
OBM Company




Public Relations



Human Resources


Divisional Structure
An organization made up of self-contained units

Exhibit 5.9

Product structure

All jobs associated with producing and selling a product or product line will be placed under the direction of one manager Product becomes the preferred basis as a firm grows by increasing the number of products it markets

Product Structure
OBM Company

Small Household Appliances

Large Household Appliances

Commercial Appliances

Building Materials and Products

Lawn and Garden Products

Automotive Products

Customer Structure

Structure is based on different categories of customers have independent needs that differ from each other The importance of customer satisfaction has stimulated firms to search for creative ways to serve people better

Customer Structure
OBM Company

Retail Stores

Mail Order

On-Line Sales

Institutional Sales

Government Contracts

Geographic/regional Structure

Establish groups according to geographic area The logic is that all activities in a given region should be assigned to a manager Advantageous in large organizations because physical separation of activities makes centralized coordination difficult Provides a training ground for managerial personnel

Example of Geographic Structure

Matrix structure

An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager

Sample of Matrix Structure

Exhibit 5.10

Sample of Matrix Structure

Exhibit 5.10

Mixed structure

Is a hybrid structure Combination of at least two structure Purpose to gain the advantages of one structure and reduce its disadvantages by incorporating the strengths of different structure

Example of mixed structure

Personal Planning

Three basic need to be prepare by entrepreneur: 1. Job Analysis (Analisis tugas) systematic process to indentify tasks and determine skill and knowledge to perform a job. 2. Job Description (Huraian Jawatan) Written statement outlining a given job. It states the functions, duties and responsibilities.

Personal Planning

Job specification (Spesifikasi tugas)

Minimum qualifications required to qualify for a position. To be specified in term of education level, work experience, skills, personality, physical capability and other necessary criteria related to the job.

Recruitment Process

Process of searching, identifying and selecting qualifies candidates for positions in organisation.
Selection process (3 common tools)
1. Job application form 2. Job interview 3. Selection test

Employee Retention:
1.Compensation  monetary rewards given to the employees in term of pay)

Salary Wages Sales commission EPF SOCSO Allowances

Employee Retention:
2. Fringe Benefit (monetary and non monetary rewards given to the employee)

Bonuses (Monetary) Insurance Paid holiday Training Club membership Parking lot