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Published by odllab, 2019-12-20 04:28:20

BBM210/03 Entrepreneurship Development

BBM210/03 Entrepreneurship Development - 1st version @ v1.0

Keywords: BBM210,Entrepreneurship,Entrepreneurship Development

COURSE MODULE

Scchoouorl osfeBusiness and Administration (SBA)

School of Business and Administration (SBA)

ENTREPRENeURSHIP
DEVELOPMENT

Course Code: BBM210/03

CouArdseapWteridtebry: :MLsa.liLtahlaitha/apaR/pamRamsaamsaymy

PROJECT ADVISOR
Professor Dr Zoraini Wati Abas
COURSE MODULE DEVELOPMENT TEAM
Content Adapter: Lalitha a/p Ramasamy
Lead Instructional and Visual Designer: Fauziyah Md Aris
Instructional and Visual Designers: Norliza Mhd Rodzi and Nurain Mohd Hassan
Language Editor: Meilina Puteh
Cover Page and Content Design: Fauziyah Md Aris

COURSE COORDINATOR
Lalitha a/p Ramasamy

DESIGNED AND DEVELOPED BY
Online Digital Learning Lab (ODL Lab)

PRODUCED BY
Instructional Design for Engaging Experiences (IDeX)

Wawasan Open University
Acknowledgement: This course module has been adapted by the
School of Business and Administration (SBA) from the Online Course Materials for the
Entrepreneurship Development (BBM201/05) developed by Wawasan Open University.

First edition, December 2019
This course material was published to support the learning of students registered with Wawasan Open University.

Wawasan Open University does not grant any degree, certification or credits based solely on your completion
of this course material.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted,
in any form or by any means, electronic, mechanical, photocopying, recording or otherwise,
without prior written permission from Wawasan Open University.

Wawasan Open University - DU013 (P)

Wholly owned by Wawasan Open University Sdn. Bhd. (700364-W)
54 Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia

Tel: (604) 2180 333 Fax: (604) 226 9323 Email: [email protected] Website: www.wou.edu.my

© 2019 Wawasan Open University
Wawasan Open University is Malaysia’s first private not-for-profit tertiary institution dedicated to adult learners.

TABLE OF CONTENTS

01 Part 1 | About the Course

02 Part 2 | Course Overview

Course Synopsis
Course Contents
Course Learning Outcomes
Study Schedule
Assessment Methods

03 Part 3 | Study Guide
04
Unit 1: Fundamentals of Entrepreneurship
Unit 2: Starting a Business
Unit 3: Managerial Issues in Entrepreneurship
Unit 4: Ideas to Sustainable Business
Unit 5: The Business Plan

Part 4 | References

05 Part 5 | Feedback Form

BBM210/03 Entrepreneurship Development 3

Part 1
ABOUT THE COURSE

(Course Details & Allocation of Student Learning Time)

COURSE DETAILS

School : School of Business Administration (SBA)

Course Type : Core Course

Credit Hours : 3 hours

Learning Hours : 120 hours

Course Title : Entrepreneurship Development
C7Eo1u70rsFe Code : BBM210/03

Course Coordinator : Lalitha a/p Ramasamy

Email : [email protected]

Contact No. : 04 - 2180 389

Core Reading Materials : Course Materials in Learning
Management System (LMS)

ALLOCATION OF STUDENT LEARNING TIME

No Activities No. of
Hours

1 Study Learning Materials, Learning Activities & Self- Tests 40

2 Attending 5 Tutorial Classes (2 Hours per class) 10
3 Participation in Online Forum Discussions 10
20
4 Completing the Course Assessment 1 (CA1/Individual) 40
120
5 Completing the Course Assessment 2 (CA2/Group)
4
Total

BBM210/03 Entrepreneurship Development

Part 2
COURSE OVERVIEW

(Course Synopsis, Course Content, Course Learning Outcomes, Study Schedule
& Assessment Methods)

COURSE SYNOPSIS

BBM210/03N is a 3-credit course designed for students who are enrolled in degree
programmes offered by WOU. It emphasises both theories and applications. It introduces
you to concepts and theories that will help you understand and analyse various aspects of
entrepreneurship. This course contains five study units. Unit 1 elaborates on the basic
characteristics on entrepreneurs. It also gives a clear understanding on what motivates
entrepreneurs and what makes them creative. Unit 2 focuses on the basic understanding in
planning a new business, which also includes legal issues in business. Unit 3 explores
contemporary managerial issues that entrepreneurs face as they create and establish new
ventures. Unit 4 provides the information required to begin the business that gives an
in-depth study on opportunity recognition, competition and financing. Unit 5 is built upon
the framework by developing a business plan for your potential business idea. You will also
learn the importance of marketing in a small business entity and how to present your
business plan to potential investors or bankers.

BBM210/03 Entrepreneurship Development 5

COURSE CONTENTS

1. FUNDAMENTALS OF ENTREPRENEURSHIP 6
• Evolution of entrepreneurship
• Definition of entrepreneur and entrepreneurship
• Motivation to become an entrepreneur

2. STARTING A BUSINESS
• Strategies of starting a new business
• Legal consideration in starting a new business
• Types of business entities

3. MANAGERIAL ISSUES IN ENTREPRENEURSHIP
• Management
• Planning
• Organising and stuffing
• Directing and controlling

4. IDEAS TO SUSTAINABLE BUSINESS
• Opportunity Recognition
• The Competition
• Financing your New Business

5. THE BUSINESS PLAN
• The Business Plan
• The Marketing Plan
• Technology and the Entrepreneurs

BBM210/03 Entrepreneurship Development

COURSE LEARNING OUTCOMES (CLOS)

By the end of this course, you will be able to:
1. Outline the practical and problem-solving skills of entrepreneurship in terms of creativity and
innovation by producing new product or service ideas in a business context.
2. Demonstrate the entrepreneurial management skills of leadership, teamwork and
communication skills involved in entrepreneurial networking.
3. Illustrate the importance of technology in entrepreneurship and to lifelong learning skills.

BBM210/03 Entrepreneurship Development 7

STUDY SCHEDULE
(Weekly topic and study activities for each unit)

Unit Week Topic Focus Learning Activities
/ Self-Assessment

1 1,2 Fundamentals Evolution of Evolution of Entrepreneurship
of entrepreneurship,
https://www.youtube.com/watch?v=oEXIIkSZ0kM
Entrepreneurship Definition to
entrepreneur and Tutorial questions and Quizzes
entrepreneurship

1 3 Fundamentals Motivation to Motivation to become an entrepreneur
of become an
Entrepreneurship Entrepreneurship https://www.youtube.com/watch?v=ptD0T-ZcF2M

2 4,5,6 Starting Strategies of starting a Strategies to start a new business
a new business,
https://www.youtube.com/watch?v=iUrxK0HZlrE
Legal consideration in
New Business starting a new business,
Types of business entities
Tutorial questions and Quizzes

Opportunity
Managerial Recognition, The
3 7,8 Issues Competition, Tutorial questions and Quizzes
Financing your
New Business

Starting Management, Planning and goal setting
a Planning
3 9,10 New Business https://www.youtube.com/watch?v=29qE4FSxc1w

4 11,12 Ideas to Organising and Tutorial questions and Quizzes
4 13 Sustainable Staffing, Financing a franchise business
5 14,15
Business Directing and http://www.mfa.org.my
Ideas to Controlling
Sustainable Tutorial questions and Quizzes
Business Opportunity Financing a franchise business
Recognition, The
The http://www.mfa.org.my
Business Competition,
Financing your How to write a business plan?
Plan New Business
https://www.youtube.com/watch?v=Fqch5OrUPvA
Business
Plan

5 16,17 The Marketing Creating an entrepreneurial marketing plan.
Business Plan
https://www.youtube.com/watch?v=oz4KVRSxL9s&pbjreload=10
Plan

5 18 Technology Tutorial questions and Quizzes
and the
8
Entrepreneurs

BBM210/03 Entrepreneurship Development

ASSESSMENT METHODS

COURSE
ASSESSMENT
1 (CA1)
COURSE
Individual Assessment: ASSESSMENT 2
Case Study Questions &
(CA2)
Essays
Group Assessment:
Group Work,
30% Presentation, Proposal,
Essay, Annotated
Bibliography.
The student will be
assessed through the 70%

following methods

TOTAL

100%

FINAL EXAM

0%

Note: The students are assessed through the above methods. The grade for a
course is assigned based on the overall score, it combines both the contiuous
assessment and the final examination components (please refer to the Student

Handbook for details).

BBM210/03 Entrepreneurship Development 9

PART 3

LIST OF CONTENTS

UNIT U1: FUNDAMENTALS OF ENTREPRENEURSHIP

1 1.1 Evolution fo Entrepreneurship
1.2 Definition of Entrepreneur and Entrepreneurship
1.3 What Motivates People to Become Entrepreneurs
1.4 Characteristics of Entrepreneurs

U2: STARTING A NEW BUSINESS

2 2.1 Strategies to Start a New Business
2.2 Legal Considerations in Starting a New Business
2.3 Types of Business Entities

U3: MANAGERIAL ISSUES IN ENTREPRENEURSHIP

3 3.1 Management
3.2 Planning
3.3 Organisation and Staffing
3.4 Directing and Controlling
3.5 Communication and Coordination

4 U4: IDEAS TO SUSTAINABLE BUSINESS
4.1 Opportunity Recognition
4.2 Competition
4.3 Financing your New Business

U5: THE BUSINESS PLAN

5 5.1 The Business Plan
5.2 The Marketing Plan
5.3 Technology and Entrepreneurs

BBM210/03 Entrepreneurship Development 10

U1 FUNDAMENTALS OF ENTREPRENEURSHIP

UNIT STRUCTURE

1.1 EVALUATION OF ENTREPRENEURSHIP
Learning Activity 1.1
Self-Check 1.1

1.2 DEFINITIONS OF ENTREPRENEUR AND ENTREPRENEURSHIP
Learning Activity 1.2
Self-Check 1.2

1.3 WHAT MOTIVATES PEOPLE TO BECOME ENTREPRENEURS
Learning Activity 1.3
Self-Check 1.3

1.4 CHARACTERISTICS OF ENTREPRENEURS
Learning Activity 1.4
Self-Check 1.4

1.5 Summary

1.6 References

BBM210/03 Entrepreneurship Development 11

U1 FUNDAMENTALS OF ENTREPRENEURSHIP

INTRODUCTION Please watch this video to understand more about Entrepreneurship.
Title: Entrepreneurship, Apprenticeship and Lifelong Learning
Duration : 35.28 minutes

Source: https://www.youtube.com/watch?v=5USCz1OktDo

This section should spark your interest in entrepreneurship. Entrepreneurship is not a new phenome-
non in any society or country. It started when humans realised the importance of societal living. The
word “entrepreneur” was first used by the economist Richard Cantillon in the year 1725. Another
economist who was famous for his research on entrepreneurship in the early 18th century was J.B.
Say. Since then, various entrepreneurship theories and concepts have emerged and most of these
theories include the perspectives of sociology, psychology and other fields. One of the main contri-
butions of sociology to the field of entrepreneurship is found in the book Protestant Ethics and the
Spirit of Capitalism, written by Max Weber in 1905. The field of psychology also contributed signifi-
cantly to the field of entrepreneurship in the 1960’s.

Entrepreneurs recognise a viable idea for a product or service and transform the idea into reality.
They will synergise resources, such as money, people, machinery, location, networking and informa-
tion to undertake the business venture. Although they expose themselves to financial and social
risks, the returns from their venture may make them successful people who enjoy unlimited income.
Thus, entrepreneurs are individuals who have special qualities in managing their own lives and their
businesses.

BBM210/03 Entrepreneurship Development 12

UNIT LEARNING OUTCOMES

By the end of this Unit 1, you should be able to:
1. Explain the evolution of entrepreneurship
2. Define the terms entrepreneur and entrepreneurship in your own words.
3. Describe the factors that motivate people to become entrepreneurs.
4. Describe the characteristics to be an entrepreneur.

1.1 EVOLUTION OF ENTREPRENEURSHIP

The word “Entrepreneurship” became widely used in Malaysia following the implementation of the
New Economic Policy 1970. However, today’s entrepreneurial rules and the characteristics of entre-
preneurs are different when compared to those found in the early days of entrepreneurship in
Malaysia.

Early The earliest definition of the entrepreneur as a go-between is Marco Polo.
Ages He tried to establish trade routes to the Far East. He used to sign a contract
with a venture capitalist to sell his goods. The capitalist was the risk bearer.
The merchant adventurer took the role of trading. After his successful selling
of goods and completing his trips, the capitalist and the merchant shared the
profits.

Middle The term entrepreneur referred to a person who was managing large proj-
Ages ects. He was not taking any risks but was managing the projects using the
476 - 1453 resources provided. An example is the cleric who was in charge of great
architectural works such as castles, public buildings, cathedrals, etc.

17th. An entrepreneur was a person who entered into a contractual arrangement
Century with the government to perform a service or to supply some goods. The
1601 - 1700 profit was taken (or loss was borne) by the entrepreneur.

BBM210/03 Entrepreneurship Development 13

18th. It was Richard Cantillon (1680), a French Economist, who applied the term
Century entrepreneur to business for the first time. Some regard him as the founder
1701 - 1800 of the term. He defined an entrepreneur as a person who buys factory
services at certain prices with a view to sell them at uncertain prices in the

19th. Entrepreneurs were not distinguished from managers. They were viewed
Century mostly from the economic perspective. They take risks, contribute their
1801 - 1900 own initiative and skills. They plan, organise and lead their enterprise.

20th. During the early 20th century, Dewing equated the entrepreneur with a busi-
Century ness promoter and viewed the promoter as one who transformed ideas into a
1901 - 2000 profitable business. Joseph Schumpeter described an entrepreneur as an
innovator. According to him, an entrepreneur is an innovator who develops
untried technology.

21st. Research scientist De Bone pointed out that it is not always important that an
Century individual comes up with an entirely new idea to be called an entrepreneur.
2001 - 2100 However, if he is adding incremental value to the current product or service,
he can rightly be called an entrepreneur.

BBM210/03 Entrepreneurship Development 14

Learning Activities 1.1

Please watch the following video on Evolution of Entrepreneurship. This video will help you
further understand the evolution of entrepreneurship and provide an idea on entrepreneurship
in the 21st century.

Title : Evolution of Entrepreneurship
Duration : 5.22 minutes
Instruction : Write a brief summary of the history of entrepreneurship.

At the end of the summary, describe what you think will be the most

likely scenario for entrepreneurs in the 21st century.

Source: https://www.youtube.com/watch?v=oEXIIkSZ0kM

BBM210/03 Entrepreneurship Development 15

Self-Check 1.1

To refresh your memory, try summarising the key elements of:
i. Early ages of entrepreneurship
ii. Middle ages of entrepreneurship
iii. 17th. and 18th. century entrepreneurship
iv. 19th. and 20th century entrepreneurship
v. 21st. century entrepreneurship

1.2 DEFINITION OF ENTREPRENEUR AND ENTREPRENEURSHIP

Now that you have understood the evolution of entrepreneurship let us look into the definition
of entrepreneur and entrepreneurship. An entrepreneur is ordinarily called a business person. He
is a person who combines capital and labour for the purpose of production. He organises and
manages a business unit assuming the risk for profit. He is the artist of the business world. In the
words of Say (1974), “An entrepreneur is one who brings together the factors of production and
combines them into a product”. He made a clear distinction between a capitalist and an entre-
preneur. Capitalist is only a financier. Entrepreneur is the coordinator and organiser of a business
enterprise. Schumpeter (1934) defines an entrepreneur as “one who innovates, raises money,
assembles inputs and sets the organisation going with the ability to identify them and opportuni-
ties, which others are not able to fulfill such economic opportunities”. He further added, “An
entrepreneur is an innovator playing the role of a dynamic businessman adding material growth
to economic development” Schumpeter (1934).

In the words of Stevenson and Jarillo (1990), “Entrepreneurship is the process of creating value
by bringing together a unique package of resources to exploit an opportunity.” According to
Cole (1942), “Entrepreneurship is the purposeful activities of an individual or a group of associat-
ed individuals undertaken to initiate, maintain or organise a profit oriented business unit for the
production or distribution of economic goods and services”. An entrepreneur with the quality to
undertake various activities to bring a business unit into existence possesses entrepreneurship.
It is the process of changing ideas into commercial opportunities and creating values. Therefore,
entrepreneurship is the process of creating a business enterprise.

BBM210/03 Entrepreneurship Development 16

Nature and functions of entrepreneurship are summarised as follows:
(a) It is a function of innovation.
(b) It is a function of leadership.
(c) It is an organisation building function.
(d) It is a function of high achievement.
(e) It involves creation and operation of an enterprise.
(f) It is concerned with unique combinations of resources that make existing methods or products
obsolete.
(g) It is concerned with employing, managing, and developing the factors of production.
(h) It is a process of creating value for customers by exploiting untapped opportunities.
(i) It is a strong and positive orientation towards growth in sales, income, assets and employment.

Learning Activities 1.2

With relevant examples, define “entrepreneurs” and “entrepreneurship” in your own words.
Read Section1.2 page 14.

Self-Check 1.2

You may give examples of enterprises and local entrepreneurs from your community.

BBM210/03 Entrepreneurship Development 17

1.3 WHAT MOTIVATE PEOPLE TO BECOME ENTREPRENEURS

Now that you have understood who are entrepreneurs and what is entrepreneurship, so now, let us
focus on what motivates people to become an entrepreneur. What leads a person to strike out on
his or her own and struggle to start and own a business? Perhaps that person has been retrenched
one or more times. Perhaps that person is frustrated with his or her current job and does not see
better career prospects on the horizon. Sometimes, that person may realise that his or her job is in
jeopardy. Perhaps that person sees no opportunities in existing businesses for someone with his or
her interests and skills. Some people actually do not relish the idea of working for someone else.

Most people are attracted to entrepreneurship by the advantages
of starting a business. These perceived advantages include:

(i) Entrepreneurs are their own bosses. They make their own decisions.
They choose whom to do business with and what work they will do. They
decide what hours to work, as well as how much to pay themselves and
their workers. They also have a choice on whether to take vacations.

(ii) Entrepreneurship offers a greater possibility of achieving significant
financial rewards than working for someone else.

(iii) It provides the ability to be fully involved in the operation of the
business, from concept to design and creation, from sales to business
operations and customer response.

(iv) It offers the prestige of being the person in charge.

(v) It gives an individual the opportunity to build equity, which can be
kept, sold or passed on to the next generation.

(vi) Entrepreneurship creates an opportunity for a person to contribute to
society. Most entrepreneurs help the local economy. A few through their
innovations contribute to society as a whole.

BBM210/03 Entrepreneurship Development 18

Every successful entrepreneur brings about benefits not only for himself or herself, but for the family,
society and nation as a whole. The benefits derived from entrepreneurial activities are as follows:

01 Enormous personal financial gain.
02 Self-employment, offering more job satisfaction and flexibility.
03 Employment for others, often in better jobs.
04 Development of more industries, especially in rural areas or regions disadvantaged
by economic changes, for example, due to the effects of globalisation.
05 Encouragement of the processing of local materials into finished goods for
domestic consumption as well as for export.
06 Healthy competition, which encourages higher quality goods and services.
07 More goods and services made available.
08 Development of new markets.
09 Encouragement of the processing of local materials into finished goods for
domestic consumption as well as for export.
10 Promotion of the use of modern technology in small-scale manufacturing to
enhance higher productivity.
11 Encouragement of more research/studies, and the development of modern
machines and equipment for domestic use.
12 Development of entrepreneurial qualities and attitudes among potential entrepre-
neurs to bring about significant changes in the rural areas.
13 Freedom from the dependency on jobs offered by others.
14 The ability to have great accomplishments.
15 Emigration of talent is reduced by better domestic entrepreneurship climate.

BBM210/03 Entrepreneurship Development 19

Learning Activities 1.3

Please watch the following video on Steve Jobs’ motivation journey of entrepreneurship. This
video will help you hear from the business icon himself on his personal journey of becoming a
successful entrepreneur. This video will inspire you to become an entrepreneur.

Title : Steve Jobs Motivational Speech | Inspirational Video | Entrepreneur
Motivation | Startup Stories
Duration
Instruction : 2.51 minutes
: Discuss the motivation shared by Steve Jobs and how does it influence

you to become an entrepreneur. Find the differences between your
motivations and those of your friends.

Source: https://www.youtube.com/watch?v=ptD0T-ZcF2M

Self-Check 1.3

To refresh your memory, refer to page 16 -17 on the motivations shared by Steve Jobs to influence
you to become an entrepreneur.

BBM210/03 Entrepreneurship Development 20

1.4 WHAT MOTIVATE PEOPLE TO BECOME ENTREPRENEURS

Personality is the nature of an entrepreneur that will influence his or her interaction with the environ-
ment. It involves the behaviour patterns, manner of thinking and emotional maturity shown by the
entrepreneur. The characteristics of entrepreneurs are:

1. Self-confidence
An entrepreneur who is confident about his or her own capacity and self-potential in implementing
entrepreneurship activities has the following strengths:
(i) Experience acts as a guide to venturing into future business activities.
(ii) Benefits from the experiences of others.
(iii) Willingness to develop skills, capability and knowledge with full confidence, along with being
able to accept mistakes as part of the learning process.

However, overconfidence in entrepreneurship activities may lead to hasty decisions made and the
refusal to face reality. This may lead to an entrepreneur taking an extremely high level of risk.

2. Willingness to take risk
An entrepreneur is willing to face a high level of risk and to make quick decisions using very little
information when needed.

3. Type ‘A’ and ‘B’ personalities
Two types of personalities have been identified in entrepreneurs; namely, type ‘A’ and type ‘B’.

PERSONALITY DESCRIPTIONS
TYPE
Entrepreneurs with type ‘A’ personality love competition, are
Type Á’ greedy and hardworking, have a quick temper, and are quick
to act, but do not necessarily produce results. They are impa-
tient and often take on two or more tasks simultaneously, as
they are not prepared to waste time.

Type ‘B’ Entrepreneurs with type ‘B’ personality are more relaxed,
“easy-going” and are not competitive. For them business is
pleasure. They prefer to have good relationships with vari-
ous people and organisations. This is because they are more
patient and tolerant, and tend to avoid conflicts.

BBM210/03 Entrepreneurship Development 21

4. Proactive
Entrepreneurs are more responsive and try to shape or influence the environment. They are always in
search of business opportunities. Entrepreneurs will:
(i) Be ready to present proposals without the fear of being ridiculed by others.
(ii) Make the effort to identify and find opportunities.
(iii) Be ready to take action even though they have to face risks.
(iv) Be ready to make changes because they have the confidence that the changes will determine the
direction of the business venture.

5. Locus of control
An entrepreneur’s locus of control is the extent to which they believe that it is being controlled by
internal or external powers. There are two types of locus of control:

LOCUS OF DESCRIPTIONS
CONTROL
Internal confidence enables such an entrepreneur to control
Internal Control his or her own future. Such entrepreneurs are confident that
the commitment they give to their business will determine the
total profit obtained.

External Control Such entrepreneurs see that the success of a business
depends on the support of others. Therefore, it is difficult to
predict future success and they depend on luck. They
believe that their destiny is controlled by people who are
more powerful than they are.

6. Machiavellianism
According to Niccolo Machiavelli, an individual who has a “High-Mach” personality is pragmatic,
maintains an emotional distance and is confident that the ends justify the means. This confidence
allows them to make use of others and to use various methods to attain personal goals. This will
result in entrepreneurs acting in the following ways:
(a) Ignoring moral and ethical behaviour.
(b) Manipulating situations to achieve success in running a business.
(c) Acting aggressive and rude.

BBM210/03 Entrepreneurship Development 22

SUMMARY

In this unit, you have looked at the history of entrepreneurship. You have learnt the evolution of the
concept from the early ages up to the present time, and hence you are now able to think and assess
future entrepreneurship scenarios. This should give you an advantage over non-entrepreneurs in the
extremely competitive business world. Entrepreneurs are the people who will organise, manage and
assume the risks of a business.

Entrepreneurship is the process of discovering new ways of combining resources. Entrepreneurship
arises when enterprising individuals identify an unsolved problem, or an unmet need or want, which
they then proceed to solve or satisfy in order to gain financial and social advantages. Entrepreneurs
will bring about change and new opportunities, both for themselves and for the betterment of the
community.

The next unit will provide you details on how to start a new business. As an entrepreneur, one has to
know the process and procedures on a new venture and Unit 2 will expose you to it. See you in Unit
2. Now that you have completed Unit 1, you should be able to:

1. Explain the evolution of entrepreneurship.

2. Define the terms entrepreneur and entrepreneurship in your own words.

3. Describe the factors that motivate people to become entrepreneurs.

4. Describe the characteristics of an entrepreneur.

BBM210/03 Entrepreneurship Development 23

REFERENCES

Abrams, R (2004) Six -Week Start Up, A Step-by-step Program for Starting Your Business,
Making Money and Achieving Your Goals, Palo Alto California: The Planning Shop.

Cole, A. (1942). Entrepreneurship as an Area of Research. The Journal of Economic History, 2(S1),
118-126. doi:10.1017/S0022050700083467

Crouch, A and Shepherd, D A (p.3) On The Concept of New Venture.

Gorman, G (1989) Work Out Business Studies, GCSE, Macmillan Education LTD, London.

Jaquiery, M (n.d) Learning About Small Business, Canada: Commonwealth of Learning.

Kuratko, D.F., & Hodgetts, M.R. (2020). Entrepreneurship: Theory, Process and Practices
(11th Edition) Boston: South-Western College Publishing.

Lake, L. (n.d.) Marketing vs. Sales: What is the Difference?
http://marketing.about. com/cs/advertising/a/mrktingvssales.htm
(Accessed 25 October 2019)

Lowrey, Y (2009) Start Business Characteristics and Dynamics: A Data Analysis of Kauffman Firm
Survey, Working Paper, SBA Office of Advocacy. www.sba.gov/advo
(Accessed 24 October 2019)

Mariotti, S (2006) Entrepreneurship, How to Start and Operate a Small Business, New York, NY.
NFTE

Nieman, G, Hough, J. and Nieuwenhuizen, C (2003) (eds) Entrepreneurship, A South African
Perspective, USA:Van Schaik Publishers.

Oviatt, B M and McDougall P, P (2015) Toward a Theory of International New Ventures,
http://www.aib.msu.edu/awards (Accessed 25 October 2019)

Say, J. B. (1816). Catechism of political economy, or, Familiar conversations on the manner in which
wealth is produced, distributed, and consumed in society. London: Printed for Sherwood,
Neely, and Jones.

Schumpeter, J. A., & Opie, R. (1934). The theory of economic development: An inquiry into profits,
capital, credit, interest, and the business cycle. Cambridge, Mass: Harvard University Press.

Stevenson, H. H. and J. C. Jarillo (1990). "A Paradigm of Entrepreneurship: Entrepreneurial
Management." Strategic Management Journal 11: 17‐27.

Stutley, R (2002) The Definitive Business Plan, 2nd edn, London, UK: Prentice Hall Education.

BBM210/03 Entrepreneurship Development 24

Learning Activities 1.4

Please watch the following video on the characteristics and abilities of Tony Fernandez as a success-
ful entrepreneur. This video gauges the characteristics of a true business leader of Air Asia. This
video will encourage one to possess the characteristics of an entrepreneur.

Title : AirAsia CEO Tony Fernandes: Driving ASEAN entrepreneurship
Duration : 2.32 minutes
Instruction : What are the characteristics of Tony Fernandez that led him to be a

successful entrepreneur?

Source: https://www.youtube.com/watch?v=5ZurQ_M9z08

Self-Check 1.4

To refresh your memory, try identifying the characteristics of Tony Fernandez that led him to
become a successful entrepreneur. Think of another successful entrepreneur with similar
characteristics.

BBM210/03 Entrepreneurship Development 25

COURSE MODULE
School of Business and Administration (SBA)

UNIT 2
STARTING A NEW BUSINESS

ENTREPRENeURSHIP
DEVELOPMENT

Course Code: BBM210/03

Adapted by: Lalitha a/p Ramasamy

PROJECT ADVISOR
Professor Dr Zoraini Wati Abas
COURSE MODULE DEVELOPMENT TEAM
Content Adapter: Lalitha a/p Ramasamy
Lead Instructional and Visual Designer: Fauziyah Md Aris
Instructional and Visual Designers: Norliza Mhd Rodzi and Nurain Mohd Hassan
Language Editor: Meilina Puteh
Cover Page and Content Design: Fauziyah Md Aris

COURSE COORDINATOR
Lalitha a/p Ramasamy

DESIGNED AND DEVELOPED BY
Online Digital Learning Lab (ODL Lab)

PRODUCED BY
Instructional Design for Engaging Experiences (IDeX)

Wawasan Open University
Acknowledgement: This course module has been adapted by the
School of Business and Administration (SBA) from the Online Course Materials for the
Entrepreneurship Development (BBM201/05) developed by Wawasan Open University.

First edition, December 2019
This course material was published to support the learning of students registered with Wawasan Open University.

Wawasan Open University does not grant any degree, certification or credits based solely on your completion
of this course material.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted,
in any form or by any means, electronic, mechanical, photocopying, recording or otherwise,
without prior written permission from Wawasan Open University.

Wawasan Open University - DU013 (P)

Wholly owned by Wawasan Open University Sdn. Bhd. (700364-W)
54 Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia

Tel: (604) 2180 333 Fax: (604) 226 9323 Email: [email protected] Website: www.wou.edu.my

© 2019 Wawasan Open University
Wawasan Open University is Malaysia’s first private not-for-profit tertiary institution dedicated to adult learners.

U2 STARTING A NEW BUSINESS

UNIT STRUCTURE

2.1 STRATEGIES TO START A NEW BUSINESS
Learning Activity 2.1
Self-Check 2.1

2.2 LEGAL CONSIDERATIONS IN STARTING A NEW BUSINESS
Learning Activity 2.2
Self-Check 2.2

2.3 TYPES OF BUSINESS ENTITIES
Learning Activity 2.3
Self-Check 2.3

2.4 Summary

2.5 References

BBM210/03 Entrepreneurship Development 28

U2 STARTING A NEW BUSINESS

INTRODUCTION

Before venturing into the world of entrepreneurship, you have to make orderly physical and mental
preparations besides choosing the product or service to offer, the location of the business, the nature
of the business, employees, marketing strategy and strategy to handle competition. All these aspects
need careful consideration so that you can select them appropriately based on your experience,
knowledge and capability. An entrepreneur needs to be cautious in making decisions on these
aspects because trial and error methods are not encouraged in the field of entrepreneurship. There-
fore, every action taken should be analysed based on the costs involved and the potential resulting
benefits, Other relevant matters need to be considered before a decision is made to venture into the
world of entrepreneurship.

UNIT LEARNING OUTCOMES

By the end of this Unit 2, you should be able to:

1. Describe the strategies to start a new business.

2. Explain the essence of compliance with the legal business regulations.

3. Describe the business entities available to a new business.

2.1 STRATEGIES TO START A NEW BUSINESS

Before starting a business, entrepreneurs should make orderly preparations so that they are able to
select an appropriate entrepreneurship activity based on their strengths. The preparations should
include the following:

1. Entrepreneurship activity planning
Entrepreneurs must make plans before venturing into the field of entrepreneurship. They must know
the proper time to venture into a particular business. They should plan to start a business where they
can gain profits from day one. They should also attempt to find out whether it is possible for them to
survive in the field. To do this, they must gather facts relating to their target markets such as market
size, competitors’ strengths and the restrictions that they may face. They should also assess whether
incoming competitors may offer something new and interesting that will disrupt their plans.

BBM210/03 Entrepreneurship Development 29

2. Identifying the market
Entrepreneurs must research their target market’s size and determine the percentage of the market
that they want to capture. They should be able to identify the target market in terms of the age,
gender, location, education level and the buying power of their future customers. Successful entre-
preneurs have said that the only way to see opportunities is to know customers and their problems.
This knowledge provides entrepreneurs with opportunities to create new products. The assessment
of the market should help entrepreneurs identify where the potential business lies.

3. Price setting strategy
The price of a product will influence customers’ acceptance of the product. Price will also determine
the amount of profit that entrepreneurs gain. Entrepreneurs can set prices based on those of their
competitors, or act bravely and implement a price differentiation strategy. When setting prices,
entrepreneurs should take into consideration that customers also consider other factors when
making a purchase. These factors include:
a. The time involved in selecting a product to purchase.
b. The physical effort involved in selecting a product to purchase.
c. Sensory and psychological costs.

4. Marketing strategy
After deciding the price of the product or service and considering all the costs involved, an entre-
preneur must create a strategy to ensure that the product or service is made known to everyone,
especially the target groups. The strategy must first create an interest among potential customers to
purchase the product, assure them that the product is the best that they can find, and inspire in
them the confidence to buy the product continuously. A marketing strategy includes specifications
of how the product is presented through packaging, usage and storage. The second part of the
strategy concerns the identification of suitable marketing locations (urban or rural) and the place of
manufacture. The third part of the strategy focuses on the selection of distribution channels; that is,
whether the product will be distributed through sales agents or by the company itself.

5. Developing skilled manpower
Possessing skilled manpower with enthusiasm and commitment is an essential factor for the success
of a company. Therefore, it is the responsibility of an entrepreneur to select suitable employees,
provide a competitive salary, upgrade workers’ skills by providing them with training and prepare an
effective performance evaluation system. Efforts to avoid a high absenteeism rate have to be
made, retrenchment, creating conflicts with employees and taking measures that might cause
dissatisfaction and depression among employees.

BBM210/03 Entrepreneurship Development 30

6. Total project cost
Entrepreneurs must look at the assets that they own, which can be used to fund the business they
are about to venture into. They must consider total fixed property in hand that can be mortgaged
and cash that can be used as capital. They must look into their financial resources, whether from
their own savings or loans from their family and financial institutions. If entrepreneurs obtain a loan
from a financial institution, they must look at the terms and conditions of the loan, the payment
methods and the payment period.

1. Entpraelcaptnrivneiintnyegurship

6p.rcoToojsettcatl 2. Identifying
the

market

5. Developing s3ste.raPtttrieincggey
skilled

manpower

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BBM210/03 Entrepreneurship Development 31

Learning Activities 2.1

Please watch the following video on the strategies to help you start your business by Dan Martell.
This video will indicate the strategies to help a new entrepreneur to start a business. This video
will give you the inside strategies to have a successful start-up.

Title : 5 Strategies To Help You Start Your Business | Dan Martell
Duration : 6.06 minutes
Instruction : If you would like to start a new business, what are the strategies mentioned

in the video that you would consider taking. Explain any three (3) strategies.

Source: https://www.youtube.com/watch?v=iUrxK0HZlrE

Self-Check 2.1

To refresh your memory, try summarising the strategies of your business start-up by focusing on:
i.Planning
ii.Market identification
iii.Price setting and etc.

BBM210/03 Entrepreneurship Development 32

2.2 LEGAL CONSIDERATIONS IN STARTING A NEW BUSINESS

In the previous unit, we discussed the regulatory framework that your business needs to work in.
This means choosing to register your business as a sole proprietor, partnership, limited company or
public limited liability company. However, this is just the first decision that you must make. You must
also learn to operate your company within the legal and ethical framework within your country or
region.

As part of your business planning process, you must be familiar with the laws and regulations in your
country or community that guides the start-up and operations of a small business. These may
include:
• Requirements for registering a business, including procedures for naming your business.
• Local laws that govern business operations.
• Guidelines that govern the health and care of employees and customers.
• The tax code for small business operations.
• Codes of conduct relevant to specific industries, sectors or professions.

Governments may offer certain facilities or incentives to entrepreneurs starting a new business.
These may take the form of:
• Grants to set up a small business.
• Micro-financing opportunities.
• Tax relief.
• Recognition in the community, etc.
• Legal aid.

Naming a business
The easiest way to name your business without any legal or regulatory hassle is to use your own
name (e.g., Smith and Associates, or Smith Manufacturing). If you intend to use a name other than
your own (e.g., Golden Globe Productions) then you must complete a legal name search to ensure
that no other business entity is legally registered under the proposed name. Your country or regional
business naming registrar must approve the name before you can use that name on your business
cards, building signs, etc.

Your name can only include the terms “Incorporated’ or “Limited” if you are registered as a limited
company or corporation. Remember when selecting a name for your company, you must live with
the selected name for a long time. The name reflects who you are and what you do.

BBM210/03 Entrepreneurship Development 33

Reflects the products

01 and services you provide

to clients.

Can be easily under-
02 stood by potential
Naming clients.
a business:
Make sure 03 Has
marketing value.
your
company

name

Can potentially be em-
04 ployed as a registered
trademark in the future.

As part of the process of starting a company you need to complete a name search before you register
your company or produce any marketing materials. In most countries, a name search is built into the
registration process, but it may take time for you to get approval. You may want to think of two or three
names just in case the name you have chosen is already in use. Once you have the approval to use the
name of your choice, you can move on to register your business.

Government regulations and your business

As the owner of a small business/enterprise, you will have to deal with local and national government

regulations and laws. Taking the time to research the applicable regulations before you start your busi-

ness is as important as knowing your market. It is important for you to be familiar with the laws that will

govern your business so that you can plan ahead to ensure that your operations will be law abiding. The

Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia (SSM)) is a statutory body formed

under an Act of Parliament that regulates corporate and business affairs in Malaysia. The SSM was

formed in 2002 under the Companies Commission of Malaysia Act 2001, assuming the functions of the

Registrar of Companies and Registry of Business.

BBM210/03 Entrepreneurship Development 34

The main purpose of SSM is to serve as an agency to incorporate companies and register businesses as
well as to provide company and business information to the public. The commission has launched SSM
e-Info Services to allow information on companies and businesses obtainable via its website.

As the leading authority for the improvement of corporate governance in Malaysia, the commission also
handles monitoring and enforcement activities to ensure compliance with business registration and
corporate legislation.

In 2003, the SSM began a review of the Companies Act 1965, with the aim of simplifying the process of
incorporation in Malaysia and reducing businesses’ costs of compliance with Malaysian corporate law.

Licenses and registration
Depending on the type of business you wish to start, you may need to apply for the different types of
business operating licenses. However, not all may be applicable to your type of business. Here are some
examples of different licenses you may need to get once you register your business:

Examples of Different Types of Descriptions
Business Operating Licenses

Trader’s License • Trader’s license gives individuals the permission to operate businesses in
specific areas and permit trading in specific types of business.

Certificate of Occupancy • Certificate of Occupancy/Permission from the Planning Division in your
/ Permission country/area of operation must be sought if you intend to put up a build-
ing/stall or if you intend to change the use of an existing building or stall.

Liquor License • Liquor license must be obtained if your business involves the sale of
alcoholic beverages.

Tour Guiding License • Tour Guiding License that allows individuals to organise and conduct tours
in the region.

Vehicle Operating License • Vehicle Operating License to operate special equipment, buses, tractor
trailers, etc.

BBM210/03 Entrepreneurship Development 35

You will also be required by law to register your business for tax purposes. Some common forms of
tax are:
• GST (Goods & Services Tax), which is also known as VAT or the value added tax in many countries is
a multi-stage consumption tax on goods and services.
• Business/Corporate tax requirements, in many countries, small business enterprises sole proprietor
and partnerships are exempted from direct taxes. However, the business owners become liable. Most
companies/corporations are required to pay corporate taxes. In some countries, the company corpo-
ration may be tax-exempted for a specified period or if their sales value does not reach a certain
amount per year.
• Malaysia’s new Sales and Service Tax (SST) replaced the former Goods and Services Tax (GST). SST
has only one phase to pay taxes, compared with every phase of GST. All SST registration applications
will be approved the Malaysian Royal Customs Department.

Learning Activities 2.2

Explain the importance of applying for a business license and give examples of some of the
license that an entrepreneur may need to run his/her business legally.
* Read Section 2.2 page 25.

Self-Check 2.2

You may browse the internet on Suruhanjaya Syarikat Malaysia (SSM) on the procedures and
processes to register a new business.

BBM210/03 Entrepreneurship Development 36

2.3 TYPES OF BUSINESS ENTITIES

A business entity is a voluntary association formed and organised to carry on a business in the legal
name of the association. In Malaysia, the most common types of businesses are sole proprietorships,
partnerships and private limited companies. In this section, we will discuss the types of business
entity that an entrepreneur can start.

Sole proprietorship
Sole proprietorships have only one business owner and only Malaysian citizens or permanent resi-
dents can register this type of business in this country. Personal names or trade names can be used
as business names. Some names, such as those associated with government agencies or royalty or
the name of another person who is not the owner of the business, cannot be registered. The Appli-
cation of Business Name form must be registered by the sole proprietorship.

ADVANTAGES OF SOLE PROPRIETORSHIP:

1. Easy to manage because the owner or proprietor can make decisions
by himself.

2. The owner enjoys a certain degree of flexibility since as a sole owner
he can react quickly and positively regarding necessary changes.

3. Easy to form and dissolve with minimum formalities.

4. All profits will go to the owner.

5. Not subjected much to government rules and regulations. For
instance, the yearly financial statement that a sole proprietorship needs
to submit to the Inland Revenue Board does not require validation by a
qualified auditor.

6. The owner pays income tax based on his total individual income.

BBM210/03 Entrepreneurship Development 37

DISADVANTAGES OF SOLE PROPRIETORSHIP:

1. A sole proprietorship usually has a limited source of capital that could
limit its business activities.

2. The liability of a sole proprietorship is unlimited. If the business incurs
debts for which the business assets are not sufficient to cover, the owner
must be prepared to settle the debts with his or her personal assets.

3. The future development of the business is limited and depends on the
management capability and health of the owner.

4. The owner is solely responsible for carrying out all tasks; therefore, a
lot of time and effort needs to be put aside to manage the business.

5. The lifespan of the business not only depends on the age of the
owner but it also depends on how efficiently he or she manages the
business. The business will be dissolved if the owner passes away. If
someone wishes to continue the business, it will have to be re-regis-
tered.

6. As a sole proprietorship becomes bigger, it may want to raise more
capital, diversify its functions and share risks.

BBM210/03 Entrepreneurship Development 38

Partnership
Partnerships consist of two or more business partners combining their resources in a business. Only
Malaysian citizens or permanent residents can register partnerships.

A partnership agreement is usually drawn up by legal counsel and it outlines the responsibilities of
each partner, the conditions by which the partnership can be terminated and the means of resolving
intra-partner disputes. Personal names or trade names can be used as the business name. The
Application of Business Name form must be completed before such a business can be registered.
Some names, such as those associated with government agencies or royalty or the name of a
person who is not the owner, cannot be registered.

ADVANTAGES OF PARTNERSHIP:

1. Easy to set up with few formalities.

2. It is easier for a partnership to secure financial assistance from financial
institutions compared to a sole proprietorship.

3. Equity can be increased by enlisting additional partners.

4. Business risks can be reduced and distributed among partners. In
cases of losses, each partner will share the burden.

5. The responsibilities of managing and handling the business can be
divided equally among the partners.

6. A lot of ideas, talents and skills can be pooled for better management.

7. As in a sole proprietorship, income tax is not imposed on the partner-
ship itself but on the owners as individuals.

BBM210/03 Entrepreneurship Development 39

DISADVANTAGES OF PARTNERSHIP:

1. Business liabilities are unlimited and may involve the personal assets
of all partners of the company.

2. The lifespan of the partnership depends on the lifespan of each part-
ner. If any of the partners passes, away or declared bankrupt the busi-
ness automatically dissolved, unless there is an agreement otherwise.

3. If there is no agreement made, unethical behaviour or misconduct
may happen.

4. There are risks of personality clashes among the partners.

Private limited company
A private limited company is a registered legal entity formed by several persons. Private limited
companies can own property, enter into contracts and employ people. The most common type of
company in Malaysia is a company limited by shares (public limited and private limited companies).
Private limited companies cannot sell shares to the public and are distinguished by the appellation
“Sendirian Berhad”, shortened to “Sdn Bhd” or “S/B”.

Public limited companies source their capital by selling shares to the public and are distinguished by
the appellation “Berhad”, shortened to “Bhd”. Companies in Malaysia are governed by the Compa-
nies Act 1965, which protects the rights and interests of shareholders and investors, and provides
regulations for the incorporation of companies, the formulation of company constitutions, manage-
ment and closures. A company must have a minimum of two members, but a private limited compa-
ny is limited to 50 members (public limited companies have no member limit). A minimum paid-up
capital of only RM2 is needed to start a private limited company, while public limited companies
need a paid-up capital of not less than RM60mil (if it seeks to be listed on the Kuala Lumpur Stock
Exchange Main Board) or not less than RM40mil (if it seeks to be listed on the KLSE Second Board).

BBM210/03 Entrepreneurship Development 40

ADVANTAGES OF PRIVATE LIMITED COMPANY:

1. Funds are easy to acquire through the exchange of share ownership
or loans from a financial institution.

2. All shareholders are legally protected by law.

3. Shareholders are not burdened with the management of the business
because the responsibility to manage and run the business is held by
the Board of Directors, which is appointed by the company’s sharehold-
ers.

4. The liabilities of the company’s members are limited to the amount of
capital that they contribute to the company. Shareholders’ personal
assets are not affected.

5. The lifespan of the business is not dependent upon the age or resig-
nation of its members.

6. It has a greater potential for expansion.

7. Legally, the company is a business entity by itself.

BBM210/03 Entrepreneurship Development 41

DISADVANTAGES OF PRIVATE LIMITED COMPANY:

1. A private limited company is subjected to more rules and regulations
compared to the types of businesses described earlier. It must always
abide by the rules and fulfil the terms set by the Companies Commission
of Malaysia.

2. The company’s shares cannot be transacted in the share market.

3. The company must pay corporate tax.

4. Qualified auditors must audit the company’s yearly financial statement
and the statement must be complete and regularly updated.

5. The financial affairs of the company must be made transparent to the
general public.

6. The cost of setting up the company is high. The costs include the
payment charged according to the authorized capital, professional fees,
filing charges, and the printing of the company’s Memorandum of Asso-
ciation, Articles of Association, share certificates and the company’s seal.

Learning Activities 2.3

Explain the types of business which are ideal for online operations.
* Read Section 2.3 page 29.

Self-Check 2.3

You may browse the internet reading on starting a business. They can be browsed through
addresses below:
(a) http://www.ssm.com.my
(b) http://www.smecorp.gov.my
(c) http://www.mavcap.com
(d) http://www.mfa.org.my

BBM210/03 Entrepreneurship Development 42

SUMMARY

In this section, we discussed the various types of business entities, namely the sole proprietorship,
partnership and private limited company. We also looked at where you can locate a business; that is,
whether you want to establish a brick and mortar business, an online business or a hybrid business.
In addition, we briefly examined the impact of the Internet on entrepreneurship and described how
a website may be used to an entrepreneur’s advantage. We will be looking into the managerial
aspects of entrepreneurship. Entrepreneurs require a variety of skills in order to manage an enter-
prise successfully. Therefore, Unit 3 will give you a clear understanding on management issues
revolving an entrepreneur. See you in Unit 3.

Now that you have completed Unit 2 you should be able to:
1. Describe the strategies to start a new business.
2. Explain the essence of compliance with the legal business regulations.
3. Describe the business entities available to a new business.

BBM210/03 Entrepreneurship Development 43

REFERENCES

Abrams, R (2004) Six-Week Start Up, A Step-by-step Program for Starting Your Business, Making
Money and Achieving Your Goals, Palo Alto California: The Planning Shop.

Crouch, A and Shepherd, D A (p.3) On The Concept of New Venture.

Gorman, G (1989) Work Out Business Studies, GCSE, Macmillan Education LTD, London.

Jaquiery, M (n.d) Learning About Small Business, Canada: Commonwealth of Learning.

Kuratko, D.F., & Hodgetts, M.R. (2020). Entrepreneurship: Theory, Process and Practices
(11th Edition) Boston: South-Western College Publishing.

Lake, L. (n.d.) Marketing vs. Sales: What is the Difference?
http://marketing.about. com/cs/advertising/a/mrktingvssales.htm
(Accessed 25 October 2019)

Lowrey, Y (2009) Start Business Characteristics and Dynamics: A Data Analysis of Kauffman Firm
Survey, Working Paper, SBA Office of Advocacy. www.sba.gov/advo
(Accessed 24 October 2019)

Mariotti, S (2006) Entrepreneurship, How to Start and Operate a Small Business, New York, NY.
NFTE

Nieman, G, Hough, J. and Nieuwenhuizen, C (2003) (eds) Entrepreneurship, A South African
Perspective, USA:Van Schaik Publishers.

Oviatt, B M and McDougall P, P (2015) Toward a Theory of International New Ventures,
http://www.aib.msu.edu/awards (Accessed 25 October 2019)

Stutley, R (2002) The Definitive Business Plan, 2nd edn, London, UK: Prentice Hall Education.

BBM210/03 Entrepreneurship Development 44

COURSE MODULE
School of Business and Administration (SBA)

UNIT 3
MANAGERIAL ISSUES
IN ENTREPRENEURSHIP

ENTREPRENeURSHIP
DEVELOPMENT

Course Code: BBM210/03

Adapted by: Lalitha a/p Ramasamy

PROJECT ADVISOR
Professor Dr Zoraini Wati Abas
COURSE MODULE DEVELOPMENT TEAM
Content Adapter: Lalitha a/p Ramasamy
Lead Instructional and Visual Designer: Fauziyah Md Aris
Instructional and Visual Designers: Norliza Mhd Rodzi and Nurain Mohd Hassan
Language Editor: Meilina Puteh
Cover Page and Content Design: Fauziyah Md Aris

COURSE COORDINATOR
Lalitha a/p Ramasamy

DESIGNED AND DEVELOPED BY
Online Digital Learning Lab (ODL Lab)

PRODUCED BY
Instructional Design for Engaging Experiences (IDeX)

Wawasan Open University
Acknowledgement: This course module has been adapted by the
School of Business and Administration (SBA) from the Online Course Materials for the
Entrepreneurship Development (BBM201/05) developed by Wawasan Open University.

First edition, December 2019
This course material was published to support the learning of students registered with Wawasan Open University.

Wawasan Open University does not grant any degree, certification or credits based solely on your completion
of this course material.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted,
in any form or by any means, electronic, mechanical, photocopying, recording or otherwise,
without prior written permission from Wawasan Open University.

Wawasan Open University - DU013 (P)

Wholly owned by Wawasan Open University Sdn. Bhd. (700364-W)
54 Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia

Tel: (604) 2180 333 Fax: (604) 226 9323 Email: [email protected] Website: www.wou.edu.my

© 2019 Wawasan Open University
Wawasan Open University is Malaysia’s first private not-for-profit tertiary institution dedicated to adult learners.

U3 MANAGERIAL ISSUES IN
ENTREPRENEURSHIP

UNIT STRUCTURE

3.1 WHAT IS MANAGEMENT?
Learning Activity 3.1
Self-Check 3.1

3.2 PLANNING
Learning Activity 3.2
Self-Check 3.2

3.3 ORGANISATION AND STAFFING
Learning Activity 3.3
Self-Check 3.3

3.4 DIRECTING AND CONTROLLING
Learning Activity 3.4
Self-Check 3.4

3.5 References

3.6 Summary

BBM210/03 Entrepreneurship Development 47

U3 MANAGERIAL ISSUES IN ENTREPRENEURSHIP

INTRODUCTION

Unit 3 explores the contemporary managerial issues that entrepreneurs face as they create and
establish new ventures. This unit discusses in detail elements of planning, staffing, communication,
leadership, coordination and managerial control in entrepreneurship development.

UNIT LEARNING OUTCOMES

By the end of this Unit 3, you should be able to:
1. Define management in the context of entrepreneurship.
2. Communicate effectively as an entrepreneur or an intrapreneur (corporate entrepreneur).
3. Describe the leadership styles and types that can drive a business to success.
4. Analyse the functional areas of planning and staffing related to entrepreneurship.

3.1 WHAT IS MANAGEMENT

Giving a precise definition of management is not so simple because the term “management” has
been used in a variety of ways. Being a discipline by itself, management, it has drawn concepts and
principles from a number of disciplines such as sociology, economics, psychology, statistics, anthro-
pology, etc. The contributors from each of these groups have viewed management differently. For
example, economists have treated management as ‘a factor of production’ and sociologists treated
it as ‘a group of persons’. Hence, with all these views, it has become difficult to define management
in a comprehensive way and there has been no universally accepted definition of management.

BBM210/03 Entrepreneurship Development 48

What is management?
Various contributors on management gave many definitions; Mary Parker Follet (1933) gives one
popular definition. According to Follet, management is ‘the art of getting things done through
people’. This definition clearly distinguishes between the manager and other personnel of the
organisation. A manager is a person who contributes to the organisation’s goal indirectly by direct-
ing the efforts of others, not by performing the task by him/her. A person who is not a manager
makes his/her contribution to the organisation’s goal directly by performing the tasks given by the
manager. Sometimes a person may play both roles simultaneously.

A better definition is given by George R. Terry (1978) who defines management as “a process con-
sisting of planning, organising, actuating and controlling performed to determine and accomplish
the objectives by the use of people and resources”. According to him, management is a process "a
systematic way of doing things using four managerial functions namely: planning, organising, actuat-
ing and controlling”. ‘Planning’ means thinking of the manager’s action in advance. The actions of
the managers are based on logic, plan or some method rather than a hunch. Managers use people,
materials and other resources to accomplish the organisation’s objectives. The objectives may vary
according to different organisations. For example, the objective of a technical or management
institute may be to provide quality education according to the needs of the industry. The objective
of a hospital may be to provide medical care to the community at a reasonable price. Whatever the
objectives of the organisation may be, management is a process by which the objectives are
achieved.

BBM210/03 Entrepreneurship Development 49

Management functions or the process of management
A function is a group of similar activities. There are different views on “what functions are undertak-
en by managers in organisations?” Some management experts classify these functions into four
types and others classify into five types while some others classify them as seven items.

The list of management functions is too long. However it can be shortened by combining some
functions into one. For example, leading, motivating, communicating and commanding may be
combined into a single function, namely directing. For our purpose, we shall designate the following
five as the main functions of a manager. In addition, we briefly refer to “innovation” and “represen-
tation” as two additional managerial functions considered important by Earnest Dale (1973).

1. Planning: Planning is the primary function of management. It means looking ahead and preparing
for the future. It determines in advance what should be done. It is conscious determination of a
future course of action. This involves determining “Why to take action?”, “What action?”, “How to
take action?” and “When to take action?” Planning involves determination of specific objectives,
programmes, setting policies, strategies, rules and procedures and preparing budgets. Planning is a
function that is performed by managers at all levels: top, middle and supervisory. Plans made by top
management for the organisation as a whole may cover periods as long as five to ten years, whereas
plans made by low level managers cover much shorter periods.

2. Organising: Organising is the distribution of work in groups or section wise for effective perfor-
mance. Once managers have established objectives and developed plans to achieve them, they
must design and develop human organisation that will be able to carry out those plans successfully.
Organising involves dividing work into convenient tasks or duties, grouping duties in the form of
positions and subsequently grouping various positions into departments and sections. It also
involves assigning duties to individual positions and delegating authority to each position so that
the work is carried out as planned.

3. Staffing: Staffing involves managing various positions in the organisational structure. It involves
selecting and placing the right person in the right position. Staffing includes identifying the gap
between manpower required and available, identifying the sources from where people will be
selected, selecting people, training them, fixing the financial compensation and appraising them
periodically. The success of the organisation depends on the successful performance of the staffing
function.

BBM210/03 Entrepreneurship Development 50


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