Edited routes of entry to an optometric enterprise 2

ROUTES OF ENTRY TO AN OPTOMETRIC ENTEPRISEROUTES OF ENTRY TO AN OPTOMETRIC ENTEPRISE

Ms Rosmin Iqbal Hussain

BOptom (UKM), CMBA (UNIMAS)

Ms Rosmin Iqbal Hussain

BOptom (UKM), CMBA (UNIMAS)

Selection Of Business EntitySelection Of Business Entity

Before you want to start a business you must register first

You must select a business entity that is suitable to you.

Generally in small and medium industries (SMI) the most popular are Sole proprietorship Partnership A private limited company / sendirian berhad.

Before you want to start a business you must register first

You must select a business entity that is suitable to you.

Generally in small and medium industries (SMI) the most popular are Sole proprietorship Partnership A private limited company / sendirian berhad.

Selection Of Business EntitySelection Of Business EntityThe decision of how to enter a market

can have a significant impact on the results

Among other modes of entry are:Joint Venture/CollaborationStrategic AlliancesAcquisitionFranchising

The decision of how to enter a market can have a significant impact on the results

Among other modes of entry are:Joint Venture/CollaborationStrategic AlliancesAcquisitionFranchising

Routes Of Entry Of A Business ?(Selection Of Alternatives)Routes Of Entry Of A Business ?(Selection Of Alternatives)

BASED ON YOUR ABILITY AND CAPABILTY

Taking over the existing businessSelf Starter

ROUTES OF ENTRY OF A BUSINESS?

SUPPORT FROM THEPRINCIPALS

TechnicalAgreement

Franchise

Management Agreement

LicensingPatent Rights

Multilevel Marketing

Merger / JV

InternetAgency

How to choose TYPE of Business EntityHow to choose TYPE of Business Entity

Factors required to consider when you wants to choose entry mode to a business environment

Ability to borrow funds from external source Continuity of the business existence in the business

environment selected Liability of business owners Tax planning Whether there’s a need of partners Types of company structure you wants to venture Pre-requirement set by the Bank or agencies

concerned e.g. MOC, ROC

Factors required to consider when you wants to choose entry mode to a business environment

Ability to borrow funds from external source Continuity of the business existence in the business

environment selected Liability of business owners Tax planning Whether there’s a need of partners Types of company structure you wants to venture Pre-requirement set by the Bank or agencies

concerned e.g. MOC, ROC

Sole ProprietorshipSole Proprietorship

Company = YOUOwn by one person

Register RM60

Registration of Business Act 1956Amendment 1978 Act 197

Sole Proprietorship - AdvantageSole Proprietorship - Advantage

EASIER TO MANAGE

PROFIT TO OWNER :

OWNER HAS A FULL RESPONSILITY :

MINIMUM REGULATIONS :

FREE TO TERMINATE THE BUSINESS :

INCOME TAX IS MINIMUM

Sole Proprietorship - DisadvantageSole Proprietorship - Disadvantage

DIIFICULT TO GET LOAN/TO RAISE CAPITAL

UNLIMITED LIABILTY :

BUSINESS LIFE SPAN IS LIMITED :

LIMITED JOB OPPORTUNITIES :

PartnershipsPartnerships

2-20 persons : Section 14 (3)(b)2-50 persons: Section 14(3)(a)Intention to gain profit together

‘Contract letter’ - optional

Partnerships - AdvantagesPartnerships - Advantages

EASIER TO START :

ADDITIONAL OF SKILLS & EXPERIENCE :

INCREASE OF CAPITAL :

SIMPLE TAX :

Partnerships - DisadvantagesPartnerships - Disadvantages

UNLIMITED LIABLITY

AUTHORITIY (POWER) TO BE SHARED

LESS IN CONTINUITY OF BUSINESS

CAPITAL STILL LIMITED

Pvt Limited Company (Sdn Bhd)Pvt Limited Company (Sdn Bhd)

Members 2-50 at any one time,Company’s entity and owner’s entity

is separated,Needs:

Board of DirectorsMinimum 2 persons as directors,

one of them to be chairmanInternal audit, company secretary

or others.

Pvt Limited Company - AdvantagesPvt Limited Company - Advantages LIMITED LIABILITY

EASY TO MOVE OWNERSHIP

CONTINUITY OF BUSINESS IS FOREVER :

PROFESSONAL MANAGEMENT TEAM :

EASIER TO RAISE CAPITAL

PERCEPTION TOWARD COMPANY IS MORE GLARING OR RECEPTIVE :

Pvt Limited Company - DisadvantagesPvt Limited Company - Disadvantages

SOPHISTICATED MANAGEMENT

CHARTER RESTRICTIONS IN THE M&A (Mergers & Acquisition advisory firm)

GOVERNMENT CONTROLS:•Business regulations/laws •Meetings among directors •Business tax and personal tax•Audit report---------------------------------------------------------------------------

Public CorporationPublic CorporationPublic corporation: one whose stock is

bought and sold by members of the publicMost well-known corporations are this

typeAnyone who can afford shares can buy

themShares bought and sold on a stock

exchange

Public corporation: one whose stock is bought and sold by members of the public

Most well-known corporations are this type

Anyone who can afford shares can buy them

Shares bought and sold on a stock exchange

Public Corporation… AdvantagesPublic Corporation… Advantages Limited liability Can only lose the amount invested in the firm Continuity and stability Ownership is easy to transfer (sell your shares!) Company not totally dependent on one owner Availability of capital Corporations can access capital through share

Offerings, and are more able to borrow money Professional management Managers have specialized skills

Limited liability Can only lose the amount invested in the firm Continuity and stability Ownership is easy to transfer (sell your shares!) Company not totally dependent on one owner Availability of capital Corporations can access capital through share

Offerings, and are more able to borrow money Professional management Managers have specialized skills

Public Corporation… DisadvantagesPublic Corporation… Disadvantages DOUBLE TAXATION!! Corporate income is taxed (if it makes money) Some of the corporation’s after tax income is

paid out as dividends to shareholders Dividends are taxed as personal income to Shareholders--this is double taxation Can be costly to start up and maintain Loss of control for owners Any individual owner has little influence Corporations are most heavily regulated

DOUBLE TAXATION!! Corporate income is taxed (if it makes money) Some of the corporation’s after tax income is

paid out as dividends to shareholders Dividends are taxed as personal income to Shareholders--this is double taxation Can be costly to start up and maintain Loss of control for owners Any individual owner has little influence Corporations are most heavily regulated

OTHER ENTRY MODESOTHER ENTRY MODES

Joint Venture / CollaborationJoint Venture / Collaboration Separate company created and jointly owned by Separate company created and jointly owned by

two or more independent entities to achieve a two or more independent entities to achieve a common business objectivecommon business objective

Collaboration may help to achieve advantage or avoid competition

Collaboration can be Between potential competitors or Between buyers and sellers

Collaboration is advantageous when the transaction costs are lower than when operating alone

Separate company created and jointly owned by Separate company created and jointly owned by two or more independent entities to achieve a two or more independent entities to achieve a common business objectivecommon business objective

Collaboration may help to achieve advantage or avoid competition

Collaboration can be Between potential competitors or Between buyers and sellers

Collaboration is advantageous when the transaction costs are lower than when operating alone

Joint Venture / CollaborationJoint Venture / CollaborationThere are five common objectives in a joint

ventureEasier market entry / penetrationRisk/reward sharingTechnology sharing Joint product development/purchasingConforming to government regulations

Unlicensed practitioners + licensed

Distribution channel access that may depend on relationships

There are five common objectives in a joint ventureEasier market entry / penetrationRisk/reward sharingTechnology sharing Joint product development/purchasingConforming to government regulations

Unlicensed practitioners + licensed

Distribution channel access that may depend on relationships

Joint Venture / CollaborationJoint Venture / CollaborationSuch alliances often are favorable when

The individual practice’s size, market power, and resources are small compared to the industry leaders

Partners' are able to learn from one another while limiting access to their own proprietary skills

Such alliances often are favorable whenThe individual practice’s size, market

power, and resources are small compared to the industry leaders

Partners' are able to learn from one another while limiting access to their own proprietary skills

Joint Venture / CollaborationJoint Venture / CollaborationThe key issues to consider in a joint

venture are Ownership Control Length of agreementTechnology transfer Firm capabilities and resources

The key issues to consider in a joint venture are Ownership Control Length of agreementTechnology transfer Firm capabilities and resources

Joint Venture / CollaborationJoint Venture / Collaboration

Joint Venture / CollaborationJoint Venture / CollaborationPotential problems include

Conflict over asymmetric new investmentsMistrust over proprietary knowledgePerformance ambiguity - how to split the

pieLack of parent firm supportCultural clashes - different rights & wrong

perceptionIf, how, and when to terminate the

relationship

Potential problems includeConflict over asymmetric new investmentsMistrust over proprietary knowledgePerformance ambiguity - how to split the

pieLack of parent firm supportCultural clashes - different rights & wrong

perceptionIf, how, and when to terminate the

relationship

Joint Venture / CollaborationJoint Venture / CollaborationJoint ventures have conflicting pressures to

cooperate and competeStrategic imperative: the partners want to

maximize the advantage gained for the joint venture, but they also want to maximize their own competitive position (internal & external conflict)

The joint venture attempts to develop shared resources, but each firm wants to develop and protect its own proprietary resources

The joint venture is controlled through negotiations and coordination processes, while each firm would like to have hierarchical control

Joint ventures have conflicting pressures to cooperate and competeStrategic imperative: the partners want to

maximize the advantage gained for the joint venture, but they also want to maximize their own competitive position (internal & external conflict)

The joint venture attempts to develop shared resources, but each firm wants to develop and protect its own proprietary resources

The joint venture is controlled through negotiations and coordination processes, while each firm would like to have hierarchical control

Strategic AllianceStrategic Alliance Entities cooperate (but do not form a separate Entities cooperate (but do not form a separate

company) to achieve strategic goals of eachcompany) to achieve strategic goals of each Entities cooperate (but do not form a separate Entities cooperate (but do not form a separate

company) to achieve strategic goals of eachcompany) to achieve strategic goals of each

DisadvantagesCreate competitor

Partner conflict

Advantages Share fixed cost & risk

Tap complementary skills & assetsFacilitate entry

Set tech standards for the industry Gain channel access

Protect interests

Some alliances benefit the company. Beware, alliances can end up giving away technology and market access with very little gained in return.

Making Strategic Alliances WorkMaking Strategic Alliances Work Partner selection – A good partner:

Helps the company achieve strategic goals Shares the firm’s vision for the purpose of the alliance Is unlikely to try to exploit the alliance to its own ends Conduct research on potential partners

Alliance structure Risk of giving too much away is at an acceptable level Guard against opportunism by partner in alliance

agreement

Manner in which alliance is managed Sensitivity to cultural differences Build relationship capital through interpersonal

relationships

Partner selection – A good partner: Helps the company achieve strategic goals Shares the firm’s vision for the purpose of the alliance Is unlikely to try to exploit the alliance to its own ends Conduct research on potential partners

Alliance structure Risk of giving too much away is at an acceptable level Guard against opportunism by partner in alliance

agreement

Manner in which alliance is managed Sensitivity to cultural differences Build relationship capital through interpersonal

relationships

Successful partners view the alliance as an opportunity to learn rather than purely as a cost- or risk-sharing device.

Structuring Alliances to Reduce OpportunismStructuring Alliances to Reduce Opportunism

Opportunism includes the expropriation of technology

or markets

AcquisitionAcquisitionAcquisition is when one company

purchases a majority interest in the acquired company

Acquisitions can be either be friendly or unfriendlyFriendly acquisition: when the target firm

agrees to be acquiredUnfriendly acquisition: don’t have same

agreement from the target firm

Acquisition is when one company purchases a majority interest in the acquired company

Acquisitions can be either be friendly or unfriendlyFriendly acquisition: when the target firm

agrees to be acquiredUnfriendly acquisition: don’t have same

agreement from the target firm

Franchising… Symbol GroupFranchising… Symbol GroupWithin this form of contractual chain, a

group name is utilised and:The retailers normally are required to obtain

a specified proportion of their goods from the group wholesalers

The basis of of the contract is that the retailer sacrifices some freedom of action for the sake of big retailer disciplines that the sponsoring wholesaler seeks to provide

Member retailers normally pay a levy towards the costs of the services that the group provides.

Within this form of contractual chain, a group name is utilised and:The retailers normally are required to obtain

a specified proportion of their goods from the group wholesalers

The basis of of the contract is that the retailer sacrifices some freedom of action for the sake of big retailer disciplines that the sponsoring wholesaler seeks to provide

Member retailers normally pay a levy towards the costs of the services that the group provides.

Franchising… Symbol GroupFranchising… Symbol Group Advantages:

Loans and financial support to develop or to extend/refurbish units

Group buying power normally leads to better prices than an independent could obtain

Benefits are gained through own-brand products and the group image

Turnover is increased through lower prices, group marketing expertise, promotions, etc.

Selling costs as a percentage of turnover are therefore reduced Labour productivity is improved through higher turnover and

better administrative systems Space productivity improves through advice on space allocations,

merchandising and display Profitability and return on capital is improved

Advantages: Loans and financial support to develop or to extend/refurbish

units Group buying power normally leads to better prices than an

independent could obtain Benefits are gained through own-brand products and the group

image Turnover is increased through lower prices, group marketing

expertise, promotions, etc. Selling costs as a percentage of turnover are therefore reduced Labour productivity is improved through higher turnover and

better administrative systems Space productivity improves through advice on space allocations,

merchandising and display Profitability and return on capital is improved

Franchising… FranchisorFranchising… FranchisorAdvantages

Rapid Growth is possibleLess capital requiredFranchisees make highly motivated owner-

managersLower monitoring costsChain can include some directly managed outletsScope for internationalizationLow-risk way to test/develop a market

AdvantagesRapid Growth is possibleLess capital requiredFranchisees make highly motivated owner-

managersLower monitoring costsChain can include some directly managed outletsScope for internationalizationLow-risk way to test/develop a market

Franchising… FranchisorFranchising… FranchisorPotential Disadvantage

Less control over day-to-day operationsReputation may be damaged by some

franchiseesFranchisee motivation may wane over timeSome Franchisees take short-term viewA franchisee may become too powerfulRestricts use of other channels if exclusive

geographical area agreed

Potential DisadvantageLess control over day-to-day operationsReputation may be damaged by some

franchiseesFranchisee motivation may wane over timeSome Franchisees take short-term viewA franchisee may become too powerfulRestricts use of other channels if exclusive

geographical area agreed

Franchising… FranchiseeFranchising… FranchiseeAdvantages

Retains some independenceRewards proportional to success achievedLess start-up riskLoans more readily availableSupport and advice in setting up and operatingUse of well-known brand nameNational/international marketing activity

AdvantagesRetains some independenceRewards proportional to success achievedLess start-up riskLoans more readily availableSupport and advice in setting up and operatingUse of well-known brand nameNational/international marketing activity

Franchising… FranchiseeFranchising… FranchiseePotential Disadvantage

Turnover and income may not meet expectationsMay start to resent restrictionsLess scope for initiative and localizationCheaper supplies may be available from other

sourcesStill paying fees for marketing, even when a loyal

customer base is establishedAs turnover increases, so typically does the fee

Potential DisadvantageTurnover and income may not meet expectationsMay start to resent restrictionsLess scope for initiative and localizationCheaper supplies may be available from other

sourcesStill paying fees for marketing, even when a loyal

customer base is establishedAs turnover increases, so typically does the fee

Entry Modes: Strategic FactorsEntry Modes: Strategic Factors

Cultural environmentCultural environmentCultural environmentCultural environment

Political/Legal environmentsPolitical/Legal environmentsPolitical/Legal environmentsPolitical/Legal environments

Market sizeMarket sizeMarket sizeMarket size

Production costsProduction costsProduction costsProduction costs

ExperienceExperienceExperienceExperience

Access to supplier channelsAccess to supplier channelsAccess to supplier channelsAccess to supplier channels

ENDEND

QUIZQUIZ

QUESTIONSQUESTIONS1. List various eye professions & short description to

differentiate them in table form2. List the two Markets in the circular flow3. Explain how bout both interconnects briefly4. List the 4 types of market structure5. Which gp of mket structure does optical business belong in?

Why?6. Name the different types of Oligopoly that may exist7. What are the interdependence among oligopolistic firms

based on?8. When is collusion difficult?9. When is collusion possible?10. List type of price leadership11. What happens when one firm a. cuts price b. increases price?

1. List various eye professions & short description to differentiate them in table form

2. List the two Markets in the circular flow3. Explain how bout both interconnects briefly4. List the 4 types of market structure5. Which gp of mket structure does optical business belong in?

Why?6. Name the different types of Oligopoly that may exist7. What are the interdependence among oligopolistic firms

based on?8. When is collusion difficult?9. When is collusion possible?10. List type of price leadership11. What happens when one firm a. cuts price b. increases price?

12. What does game theory describe? What is the use of Game theory?

13. What is dominant strategy, dominated strategy & nash equilibrium?

14. List the rules in game theory concept15. Which is better quantity / price

competition? Why?16. How do you obtain credibility? And

what are the principles underlying?

12. What does game theory describe? What is the use of Game theory?

13. What is dominant strategy, dominated strategy & nash equilibrium?

14. List the rules in game theory concept15. Which is better quantity / price

competition? Why?16. How do you obtain credibility? And

what are the principles underlying?