Topic 5

Chapter 5
Management of Small
Business
Learning Outcomes
By the end of this chapter, student should be able to:

i. analyse the human resources functions
ii. understand the marketing terms
iii. evaluate the Marketing Strategy and Process
iv. explain the Marketing Mix (4P)
v. Describe the operation management of small business.
Human Resource
Management
Human Resource Management
 Human resource – the resource that resides in the knowledge, skills

and motivation of people.
 Human resource is the scarcest and most crucial productive resource

as it improves with age and experience, which no other resource can
do, and therefore can create the largest and longest lasting
advantage for an organization.
 Human resource management (HRM) is the governance of an

organization’s employees.
 An effective human resource management will help to propel the firm

to a higher level of strength, growth and performance.
How Small Business HRM is
Different
 Size : Most small businesses do not have dedicated HR

staff
 Priorities : HR is usually not a high priority in the firm
 Informality : HR is not a formal process
 Nature of the entrepreneur: Entrepreneurs, or the

business owners, tend to be somewhat controlling
HRM Functions
Human
Resource
Planning
Industrial
Relations and Job Analysis
Employment Laws
Safety and HRM Recruitment

and Selection
Health Functions
Compensation Training and

and Benefits Development
Performance
Management
 All the human resources functions are closely related and support
one another. HRM Functions
 In case the manpower is insufficient, manpower recruitment
exercise will be done to attract potential candidates to apply for the
vacant position.
 Then, the selection process is done to find the best candidate for
the job.
 A successful candidate will be accepted as an employee and he will
then be trained and developed.
 Employees are expected to perform and their performance is
monitored by a system known as performance management
system.
 Employee performance will be evaluated and employees who do
not perform will either be trained further or might be terminated.
Normally, those who perform well will be rewarded.
 HR needs to observe the laws especially the employment laws to
ensure that the HR practices are in line with the legal requirements.
Acts that need to be specifically observed include the Employment
Act 1955, Industrial Relations Act 1967, EPF Act 1991, SOCSO Act
1969, Trade Union Act 1959, and Occupational Safety and Health
Act 1994, to just name a few.
HRM Functions
 Successful small- and medium-sized enterprises (SMEs)

place a great importance on:
1. Human resource planning
2. Job analysis
3. Recruitment and selection
4. Training and development
5. Performance management
6. Compensation and benefits
HRM Functions
1. Human resource planning = Human resource planning

refers to forecasting or assessing the supply of and
demand for current and future employee resources
(short term and long term planning).
2. Job analysis = analysis of jobs that need to be
performed by employees.
HRM Functions
3. Recruitment and selection = external and internal job

recruitment. External recruitment means that the firm
intends to get candidates from outside the firm to fill
the vacancies.
4. Training and development = Given the intense
pressure to compete in today’s business environment,
companies are aware of the importance of training
and developing employees as a key to organizational
survival and success.
HRM Functions
5. Performance management = It is important for firms to

try and improve the capability and performance of its
employees by adopting a system that has been
developed to systematically improve employees and
firm’s performance. The system is known as
performance management system or PMS.
6. Compensations and benefits = something, typically
money, awarded to someone in recognition of loss,
suffering, or injury
a. Human Resource Planning
 Human resource planning refers to forecasting or assessing the supply of and

demand for current and future employee resources (short term and long term
planning).
 Entrepreneurs must make sure the supply of and demand for various types of human
resources is adequate and according to their organization’s strategic planning.
 Availability and demand of human resources with the needed knowledge, skills and
abilities that suit the job requirement are highly influenced by the company’s external
and internal environments.
 For example, aiming to venture entirely into new and different market for the company
requires the company to identify the implications on the workforce, such as
identifying, hiring and/or training marketing people and product specialists. Therefore,
entrepreneurs need to identify whether they have competent resources from within or
to identify the possible external sources.
 Meanwhile, internal factors like changes in workforce such as voluntary and
compulsory retirements, terminations and the company’s strategic goals do influence
the labour demand.
a. Human Resource Planning –
Forecasting Personnel Needs
 The basic process of deciding personnel needs is to forecast the company’s
returns, sales volume, expected turnover, productivity changes, financial
resources and decisions to upgrade (or downgrade) products or services.
 There are several tools for projecting personnel needs:

i. Trend analysis
By studying the firm’s employment needs over a period of time and changes
in sales volume and productivity over the last few years will show some
trends of employment levels that might continue in the future. Therefore,
trend analysis can provide and initial estimate of future personnel needs.
ii. Ratio analysis

A technique for determining future personnel needs by using ratios between
some causal factors and the number of employees required. For example, a
salesperson can generate RM200, 000. Predicting to increase sales (if the
sales revenue to salesperson ration is constant) by RM1 million by next year,
the number of personnel need to be increased to 5 persons.
a. Human Resource Planning –
Forecasting Personnel Needs
iii. Computer forecasting

Computerized forecasts enable entrepreneur to build more variables
(such as working hours, measure of productivity, projected sales,
etc.) in personnel projections. However, most of the time we need to
modify the forecast based on subjective factors (such as feeling that
employees’ intention to quit will be high) that you believe will be
important. In other words, management judgement is also an
important forecasting tool.
b. Job Analysis
 Organizations consist of jobs that need to be performed by employees.
 It is very important that the firm identifies which jobs should be performed by
what kind of employees.
 Job Analysis is the process of gathering information about the job.
 The information that need to be gathered include the job activities, the duties,
responsibilities, scope, work environment, person behavior and characteristic of
person that can effectively perform the job.
 Job analysis produces information for writing job descriptions (a list of what the
job covers) and job specifications (what kind of people to hire for the job).
 The information gathered will also help organizations to design and redesign
jobs.
b. Job Analysis
Step 1
Select job to be analysed
Step 2process is depicted below:

 The job analysis
Collect data using job analysis methods
Step 3
Prepare job description and job specification
b. Job Analysis – Methods of Job
Analysis
 There are various approaches to collect information for job analysis.

Firms can choose to adopt any one of them or combine together as they
see fit.
 Some of the most common methods to help firms gather these

information include using:
i. Interview – which includes a face to face meeting and getting
information from the selected informants)
ii. Questionnaires – requesting employees doing the selected job to fill
in the questionnaires
iii. Observation – directly observing employees performing the job and
writing down all the job activities performed in the selected job
iv. Incumbent diary/logs – examine the activities performed by job
incumbent as stated in the diary or logs
b. Job Analysis – Job Descriptions
& Job Specifications
 In job analysis, each task is defined by a job description – a formal
statement that summarizes what the employee will do in that role.
 A job description includes the job responsibilities, the conditions under

which the job will be performed, and its relationship to other functions in
the organization.
 Job descriptions are important because they define job objectives that
are used later in performance appraisals. They also can become a part
of the legal contract between the employee and the employer.
 To assist in recruiting the right person to fulfill the job’s requirements, job
specifications are also defined in the job analysis.
 Job specifications are the skills, education, experience, and personal

attributes that candidates need to possess to fulfill the role successfully.
b. Job Analysis – Job Descriptions
& Job Specifications
© 2010 Pearson Education, Inc. Publishing as Prentice Hall

b. Job Analysis – Uses of Job
Analysis
 Job analysis helps to perform at least four of HR functions, such as

recruitment and selection, training, performance appraisal, and
compensation.
i. Recruitment and selection

Job analysis provides information about the job duties and scope (job
description) and the human characteristics required to perform these job
effectively (job specification) to help firms attract, identify and hire the
right person for the job.
ii. Training
The job description underlines the job’s specific duties, responsibilities
and scope, and also the required skills that employee should possess.
Thus, an employee is expected to be trained so that he is up to the
required skills needed.
b. Job Analysis – Uses of Job
Analysis
iii. Performance appraisal

The employee performance will be measured based on how
effective employees are in achieving the set goals or key
performance indicators KPI). Usually these goals or KPI are set by
the supervisors based upon the employees’ job description.
iv. Compensation
Job analysis helps firms to identify the nature and the difference in
complexity of the job. The more complex the job is, the more the
job should be compensated for. Job analysis ensures that each job
is being fairly compensated.
c. Recruitment and Selection
 Recruitment is the process of attracting the right candidate with the right skill
and behavior to apply for the position available in the organization.
 It is usually done when firms are having shortages in its human resources due
to firms acquiring new projects or due to its expansion programmes.
 Attracting the right candidate for the job is very important in a sense that firms
have more choice in their selections and are able to provide the best fit
candidate for the job. It also reduces the cost of having to process or interview a
vast number of employees who might not be the right candidate for the job.
 It is very important to have the candidate that fit nicely with the job requirement
as this will ensure the candidate can perform the job immediately and without
much supervision.
 This is crucial in small companies as many of the managers and supervisors do
not have much time to monitor and supervise the new employees in the
department as they are very much engaged with their own tasks or works.
 Therefore, getting the right and best candidates for the job will ensure new
employees have the right attitude, competencies and enthusiasm to perform the
task well.
c. Recruitment and Selection –
Internal Recruiting
 By doing internal recruitment, it means that a firm looks at its own
internal employees (potential employees from within the firm or its
subsidiaries) to fill up the available vacancies.
 Internal recruiting, or filling job vacancies with existing employees

within the firm or its subsidiaries, is the first choice of many
companies.
 Internal recruiting methods include:

i. Company intranet
ii. Staff notice boards / memorandum
iii. In-house newsletters
iv. Staff meetings
v. Performance review meetings
vi. Job posting notification via email
Internal Recruiting
Advantages Disadvantages
• Morale booster for employees
because they know that the
company has an interest in
promoting their own staff • Limited pool of candidate
• Less risk of selecting an • Creates cascading internal

inappropriate candidate as vacancies that must be
employer and employee have subsequently filled
already established a working
relationship • May discourage new perspectives
and ideas and eventually make
• Faster as there will already be an the business resistant to change
availability of potential candidate
• Less costly
External Recruiting
 External recruitment means that the firm intends to get candidates from outside the
firm to fill the vacancies.
 Depending on the job requirements and specification, firms can choose any of these
sources of external recruitment to help them solicit the potential candidate to apply
for the position available in the firm.
External Recruiting
Advantages Disadvantages
• Provides new ideas and fresh

• Takes longer and costs more
perspectives
• Risk of candidate’s inability to fit
• May be more able to initiate a
with the rest of organization
turnaround
• Demoralizing for existing
• Brings in experienced employees
employees
• May be less upsetting to present
• Outsider takes time to become
organizational hierarchy
familiar with current systems
• Allows rapid growth
• Current organization members
may fight new ideas
• Can increase diversity
Selection
 Selection is the process of choosing the best candidate for the
job.
 It is another function of HR that is very strategic to firms as

selection helps to ensure that the right candidate with the right
skill, competency, attitude, and behavior is being employed.
 Having the best candidate for the job and with the right attitude
and behavior would reduce the possibility of mismatch between
job and person which might potentially cause dissatisfaction,
discomfort and high intention to leave among the new recruits. It
is also costly to do recruitment exercise over and over again.
 Thus, a good screening process (refer to the flowchart in the next

slide) might help to avoid the firm from choosing the wrong
candidate for the job.
Selection
Receive application form
Review of application and resume
Selection tests
Employment interviews
Background and reference checks
Selection decision
Medical examination
Employ individual
Selection
1. The firm receives the resume from the potential applicants.
2. After carefully going through and reviewing the resume, the

candidates who perfectly match the job requirement will be called to
attend an interview session.
3. Usually, candidates are required to go through several assessment

activities such as test, assessment centre and background
investigation, prior to the interview.
4. Based on the result from these screening tools, the high potential
candidates will then be identified and called for employment
interview to obtain further information about the candidate’s
cognitive ability, knowledge, prospects, perspective, personality and
attitude towards the job and also assess their potential contributions
to the firm.
Selection
5. The panels of interviewers, usually comprising a HR department
representative and one or two functional department heads, will
compile all the information from the interview session and deliberate
on their points before recommending the candidates for
employment.
6. Once the panels have decided on the successful candidates, the

HR department will then propose the names to the top management
for approval. Once approved, the potential candidates will then be
given a conditional job offer which requires them to go through a
thorough medical check-up at the firm’s panel clinic to ensure that
the candidate they hire are free from serious health problems.
7. Once the candidate is certified healthy and free from serious

diseases, the candidate will be officially employed.
d. Training and Development
 Given the intense pressure to compete in today’s business environment,

companies are aware of the importance of training and developing employees as a
key to organizational survival and success.
 Moreover, the importance of training and employee development has initiated the
Malaysian government to establish the ‘Human Resource Development Council’
(HRDC) under the Ministry of Human Resources.
 Established in 1993, the HRDC’s main objective is the imposition and collection of
a human resource development levy from the employees for the purpose of
promoting training of employees in workplace, and the establishment and
administration of the Human Resources Development Fund (HRDF).
 The HRDF is a pool of funds that comprises Human Resources Development
levies collected from employers of the manufacturing and service sectors to
encourage the employers to retrain and upgrade the skills of their employees in line
with the needs of their business and industrialization strategy of the country.
 This indicates the important of training and employee development not only to
companies but also to the government.
 Hence, entrepreneurs should understand the concept and practical aspect of
training and employee development as a mechanism to excel in business and to
expand in the future.
d. Training and Development –
Employee Orientation
 Employee orientation involves providing new employees with the
information about the company departments in which they will be
working and the community they will be with throughout their tenure.
 Specifically, information such as company’s vision, mission, goal, history

of the company, language, performance proficiency, and rules and
regulations will be shared.
 Advantages of conducting an orientation programme for new employees

include:
i. To make them feel welcome and accepted as a new member of the
company
ii. To appreciate the company’s culture and values and adopt the newly
required behavior
iii. To make them understand the job requirements demands and
performance expectations
Employee Orientation
 In general, most orientation programmes consist of three stages:

i. A general introduction to the organization
ii. A specific orientation to the department and their job
iii. A follow-up meeting to ensure that all important issues have been
addressed
 It is also common among companies to explain and elaborate the

contents of the ‘Employee Handbook’, which will be given to each new
employee.
 The handbook content normally includes statements of company

policies, benefits and regulations.
Training Process
 Training refers to a planned effort to improve employee performance on a
currently held job or one that is related to it.
 This involves enhancement of an employee’s knowledge, skills and abilities.
 Training activities can be developed using a five-steps development program
called ADDIE:a
Analysis (Training needs assessment/analysis: TNA)
Design
Development
Implementation
Evaluation
Training Process
Step 1: Analysis (Training Needs Assessment)
 The primary task of this stage is so that we can completely understand the
current situation (reality or actual organizational performance), the desired
situation or organizational performance (goals), and then to determine what
the gaps are in employee knowledge, skills and attitude (between the actual
and desired situation).
 Information is collected to determine if training is needed in terms of who,
where and what kind of training is needed.
 Below are a few key questions that can be asked in this stage:
 What are the organizational goals?
 What are the training program objectives?
 Who is the audience and what are their characteristics?
 What does the audience need to learn?
 What is the extent of the participant knowledge/skills prior to training?
 What are the anticipated benefits of the training?
Training Process
Step 2: Design
 The primary tasks in this stage are to take the information gathered during
the Analysis stage and do some further questioning to establish a
framework for the training program in question.
 The end product of this stage is a program design outline – a document that
contains all the strategies for the training program.
 Initial decisions are made regarding course content, goals and objectives,
delivery methods, activities and exercises, and implementation strategies.
 Below are a few significant factors to take into considerations when
designing a program:
 How do the organizational and program objectives translate into specific
learning objectives?
 Based on the learning objectives, what content must be developed?
 What will be the program structure, sequence, and duration?
 What will be the mode(s) of delivery?
 How will the training program be evaluated?
Training Process
Step 3: Development
 During this stage, the training topics identified during the first two steps are
researched and the training program content is determined.
 It is important to remember that it is not only important to come up with the
content that addresses the true learning needs, but it is also just as important to
put thoughtful consideration into how the information will be presented.
 Below are the products that should come out of this step:
 Training lesson plans
 Trainer guides
 Participant workbooks and handouts
 Trainer and participant resources
 Training and job aids
 Coaching/mentoring guides and resources
 Technology infrastructure and software (if needed)
 Participant knowledge/skills/attitude assessment tools
 A review of implementation and evaluation costs, effort required and schedule
Training Process
Step 4: Implementation
 It is during this stage that all the work up to this point is put into action –
the program is delivered to the target audience.
 The actual hard-copy products of this stage are the completed
knowledge/skills/attitude assessments, attendance records, and
completed participant feedback forms.
 Below are the tasks to be completed in this phase of the process:
 Produce program materials and aids
 Prepare coaches/mentors/trainers
 Set up venue for the program
 Schedule participants
 Conduct training sessions
 Conduct participants assessments
 Collect participant feedback
Training Process
Step 5: Evaluation
 Participants’ feedback are collected and the information is
taken to learn how to improve the training program – and then
necessary changes are taken for that improvement.
 There must also be a continual assessment of the impact the
training have on the employees, the department, and the
organization as a whole to ensure that the training is achieving
the desired results.
 If it stops doing this, the training must be changed or replaced
with something more appropriate.
 The products of this stage are completed evaluations and
reports that summarize the implications of the evaluations.
Employee Development
 Employee development refers to formal education, job experiences,
relationships and assessment of personality and abilities that help
employees prepare for the future.
 Conceptually, employee development is different from training because

training focuses on current performance requirement and it is compulsory for
an employee to participate.
 On the other hand, development can be a result from work experience future
orientated and it involves learning that may not necessarily be job related.
 In addition, development prepares an employee for other positions in the

company and increases opportunity to move into another level of job
position.
 Generally, four approaches are used to develop employees and they are
formal education, assessment, job experiences and interpersonal
relationships.
i. Formal education
 Formal education includes both at the workplace or off-site
programmes designed for the company’s employees short
courses/workshops offered by universities and university
programmes done either on full-time or part-time basis.
 This programme may include lectures by experts, in-house

development programmes offered by training and development
centres or corporate universities.
 Many companies sponsor their employee to enrol for formal

education in universities either on full-time or part-time basis.
 Meanwhile, some companies provide ‘tuition reimbursement’ to

their staff who enrols for formal education.
ii. Assessment
 Assessment involves collecting information and providing feedback to
employees regarding their behavior, attitude, skills and communication
styles.
 Information for assessment may come from the employees, their
peers, managers and customers.
 The purpose of assessment is to identify employees with managerial
potential, to measure current managers’ strengths and weaknesses,
and to identify managers with potential to move into higher-level
executive positions.
 Companies use various methods in assessing their employees.
 Performance appraisals, psychological tests, ratings of behaviours and
teamwork behavior and styles are popular methods and sources of
information for employee development assessments.
 The common tools used for assessment include Myers-Briggs Type
Indicator, assessment centres, the Benchmarks assessment,
performance appraisal, and 360-degree feedback.
iii. Job Experience
 In most cases, employee development occurs through job experience.
 Job experience refers to the relationships, problems, demand tasks,
and other features that employees face in their jobs.
 When employees indicate a mismatch between his/her skills and past
experience and the skills required for the job, he/she needs to learn
new skills, apply the new skills and knowledge and master new
experience.
 Job experiences can be used for employee debelopment in various
ways such as:
1. Job enlargement – to add new responsibilities/challenges to
employees’ current job
2. Job rotation – the process of systematically moving an individual
employee from one job to another over the course of time. The
movement could be between jobs in a single department or through
different functional areas of the company
3. Transfer – to assign employee a job in a different area of the

company
4. Promotions – giving advances into positions with greater
challenge, more responsibility and more authority than previous
job
5. Externship – allowing an employee to take a full-time operational
role at another company
6. Temporary assignments – such as sabbatical leave and voluntary
assignments. Sabbatical leave is a leave of absence from the
company to renew or develop skills. Meanwhile, voluntary
assignments also involve giving employees opportunities to have
high level responsibilities and be exposed to other jobs either
within the company or in another company. Both approaches allow
employees to receive full pay and benefits.
iv. Interpersonal Relationships

 Interactions with more experienced company members and its
customers is another way for developing employees’ skills and
knowledge.
 Mentoring and coaching are two types of interpersonal
relationship approaches.
Mentoring
 In mentoring, an experienced productive senior employee (mentor) will
help develop a less experience employee (protégé).
 Most mentoring relationships develop informally based on the mentor and
protégé shared interest and values.
 However, a formalized mentoring programme enables participants in the
mentoring programmes to know what is expected of them.
 In addition, the management can easily access the mentoring
programme.
 One of the main purposes of the mentoring programme is to socialize
new employees and to provide more opportunities to gain the exposure
and skills needed for higher managerial positions.
 As such, mentoring is a good mechanism that provides career support
and psychological support to protégés.
 In mentoring, the mentor could be anybody as long as he is very
experienced and productive in the company.
Coaching
 For coaching, the coach shall be a manager or peer who works with the
employee.
 The coach is responsible to motivate, help the employee to develop skills
and provide feedback and reinforcement.
 In other words, a coach plays 3 important roles as follows:
1. To coach one-on-one with an employee
2. To help employees learn from themselves
3. To provide resources such as mentors, courses or job experience for
the protégé
e. Performance Management
 It is important for firms to try and improve the capability and performance of its
employees by adopting a system that has been developed to systematically
improve employees and firm’s performance.
 The system is known as performance management system or PMS.
 Performance management is a system that aims to maximize the potential,
competency, and performance of the employees through a continuous process of
communicating, coaching, motivating, training, feedback, evaluating and
reviewing employees’ performance by supervisors in order to eventually help
firms achieve their goals.
 Performance management is a process by which executives, managers, and
supervisors work to align employee performance with the firm’s goals.
 An effective performance management process defines what performance to
measure, measure employees’ performance accurately, and provides feedback
to employees about their performance.
Performance
planning
 There are 4 stages in the performance management

Rewarding cycle:
Managing
performance performance
Reviewing and
evaluating
performance
Stage 1: Performance Planning

 The supervisor is expected to highlight and communicate to subordinates the
firm’s strategic goals, department goals, and individual goals.
 Once employees are clear of the goals, the supervisor is expected to clarify and
get agreement on the job expectation, the key performance indicators, targets,
standards of performance, and measurements.
Stage 2: Managing Performance

 The employee is expected to perform the task that has been assigned by the
supervisors.
 During the process of performing the task, the supervisor is expected to provide
assistance to the subordinates should they encounter problems while performing
the tasks.
 The supervisor needs to determine whether the subordinates require counselling,
coaching, training, motivation, or guidance.
 This is to ensure that subordinate is performing according to plan or expectation.
Stage 3: Reviewing and Evaluating Performance
 Employee performance will then be reviewed by the supervisor.
 Constructive feedback will be given to subordinates for future improvement.
 At this stage, subordinates’ performance will also be evaluated by comparing
their actual performance with expectations.
 Various methods of evaluation and measures will be used to determine the
subordinates’ level of performance.
Stage 4: Rewarding Performance

 Employee’s performance will be rewarded based on their level of
performance or achievement.
 Rewards can take the form of a salary increment, bonus, promotion,
scholarships, and attending development programme.
 For employees whose performance level is below expectation, they might be
sent to a training programme, transferred, required to attend a special
performance improvement programme, or even terminated.
e. Performance Management –
Performance Appraisal
 Performance management ≠ performance appraisal
 Performance management encompasses a bigger role and scope as

opposed to performance appraisal.
 Performance appraisal is part of the performance management system.
 According to Dessler (2011), performance appraisal is a process of

evaluating employee’s current and/or past performance relative to his or
her performance standards.
 Performance appraisal always involves setting work standards,

assessing employee’s actual performance relative to these standards,
and providing feedback to the employee with the aim of motivating
him/her to eliminate performance deficiencies.
Who Should Conduct Appraisal?
 Performance appraisal should be done fairly and thus it is important that the
person selected to be the appraiser needs to have sufficient information and
is familiar with employee’s performance.
 There are five groups of people that normally conduct the appraisal:
i. Immediate supervisors
This is based on the assumption that immediate supervisor is the closest
person to the employee and knows very well what the subordinate is
doing. The supervisor is the one that sets the goals, KPIs, performance
standards, coach, motivate, and monitor the employee’s performance.
ii. Peer appraisal

In this type of appraisal, the peers are requested to rate their colleagues
in their own team. The rating will depend on how effective the team
members’ contribution is to the performance of the group project or task.
However, some argue that this kind of appraisal will affect team work
negatively.
Who Should Conduct Appraisal?
iii. Employee self-appraisals
Some firms provide opportunity for their employees to do self rating to allow them to
state what they think of their own performance (whether above or below expectations).
This kind of appraisal has its disadvantage as some employees tend to exaggerate on
their performance.
iv. Committee appraisals

This is an approach used by firms to reduce the tendency of bias among appraisers. The
committees usually consist of the supervisors, head of departments, and other
individuals appointed by the firms. The committee will make detailed elaboration on the
employee’s performance before making the final decision. The combination and
involvement of these individuals in the committee will hopefully enhance reliability,
validity, and fairness of the appraisals.
v. Multisource appraisals
This kind of appraisal utilizes various sources of information on employee’s
performance. Information about employee’s performance is obtained from peers,
supervisors, head of departments, subordinates, and internal and external customers.
Multisource appraisal will use the information obtained from various sources to help
firms identify the strengths and weaknesses of its employees and will improve
employee’s performance further.
Performance Appraisal Methods
i. Category Rating Methods
In these methods, appraisers are required to mark employee’s level
of performance on a specific form which had been divided into
categories of performance. Two common methods under category
rating are graphic rating scale using a scale that allows the
appraiser to mark an employee’s performance on a continuum and
checklist methods that use a list of statements or words that are
checked by appraisers.
ii. Comparative Methods

These methods require the appraisers to directly compare the
performance of their subordinates against one another.
Comparative methods include: (1) Ranking on a list of all
employees from highest to lowest in performance, and (2) Force
Distribution where appraisers are ‘forced’ to rate and distribute
employees’ performance according to the bell-shaped curve.
Performance Appraisal Methods
iii. Narrative Methods

These methods require the appraisers to have good writing skills. The
appraisers need to describe in detail the actions, activities, and behaviours
of the employees. The written documents will be used to rate employee’s
performance. Examples of these methods are: (1) critical incidence
methods where appraisers keep a written record of both highly favourable
or unfavourable actions in an employee’s performance during the entire
rating period, (2) essays where appraisers are to write an essay describing
each employee’s performance during the rating period, and (3) field
reviews when an outside reviewer provide information about an
employee’s performance to the appraisers based on the interviews with the
managers.
iv. Behavioural/Objective Methods

These methods attempt to assess an employee’s behaviours instead of
other characteristics. The most popular approach is the Behaviourally
Anchored Rating Scales (BARS).
f. Compensation and Benefits
 Compensation and benefits assist firms in attracting the best candidate

in the market to work with the firm, motivating employees to achieve
productivity, improving employees satisfaction, helping retain and
maintain existing high performers, and ensuring employees loyalty.
 Employees are more sensitive and concerned with the compensation

package that the firm could offer more than anything else. The more
interesting the compensation package, the more attracted and motivated
the employees will be in the firm.
 Compensation is defined as any kind of rewards whether tangible or

intangible that the employees obtain from employers in return for their
services.
f. Compensation and Benefits
 Tangible rewards include the direct monetary reward such as salary,

wages, bonus, commission, shares and overtime claims.
 Indirect monetary rewards would be the various kinds of mandated or non-

mandated benefits such as EPF, SOCSO, annual leaves, maternity leaves,
medical leaves, loans, scholarships, and all kinds of services provided by
the firms to their employees.
 All employees under the contract of employment with the firm are eligible
for these kind of benefits and services.
 Intangible rewards include the non-monetary reward such as conducive

work environment, management support, recognition, empowerment,
supervision, etc.
f. Compensation and Benefits –
Employee Compensation
 Compensation is payment to an employee in return for their contribution to the
organization for doing their job. The most common forms of compensation are
wages, salaries and tips.
 Compensation is usually provided as base pay and/or variable pay.
 Base pay is based on the role in the organization and the market for the expertise
required to conduct that role.
 Variable pay is based on the performance of the person in that role, for example,
for how well that person achieved his or her goals for the year. Incentive plans,
for example, bonus plans, are a form of variable pay (some people may consider
bonuses as a benefit, rather than a form of compensation).
 Employees have certain monies withheld from their payroll checks, usually
including income tax, and employee contributions to the costs of certain benefits
(often medical, insurance and retirement).
Employee Benefits
 Employee benefits typically refer to retirement plans, health life insurance,
life insurance, disability insurance, vacation, etc.
 Benefits are forms of value, other than payment, that are provided to the
employee in return for their contribution to the organization, that is, for
doing their job.
 Prominent examples of benefits are insurance (medical, life, dental,
disability, etc.), vacation pay, holiday pay, and maternity leave, contribution
to retirement (pension pay), profit sharing, stock options, and bonuses.
 You might think of benefits as company-paid and employee-paid. While the
company usually pays for most types of benefits (holiday pay, vacation
pay, etc.), some benefits, such as medical insurance, are often paid, at
least in part, by employees because of the high costs of medical
insurance.
 You might think of benefits as being tangible or intangible. The benefits
listed previously are tangible benefits. Intangible benefits are less direct,
for example, appreciation from a boss, likelihood for promotion, nice office,
etc.
Equity in Compensation
 Compensation system that is acceptable and effective is the one that is
perceived by employees as fair.
 To ensure fairness, it must have at least 3 types of equity, namely internal,
external and individual.
1. Internal equity
 It is concerned with ensuring that employees with the same qualification,
grade, and experience are getting the same pay in the company.
 An executive in marketing department needs to be paid equal to the
amount obtained by finance and HR executives, and a manager in
technical department is paid equal to the pay of managers in finance and
HR.
2. External equity
 External equity ensures that the compensation package in the company is
competitive enough with what the others are offering for the same kind of
job in the same kind of industry.
Equity in Compensation
3. Individual equity
 Individual equity is more focused on ensuring that employees are paid
and rewarded, beside their grades, according to their competencies and
performance.
 The more competent the employee is the more pay he will get.
Marketing
Management
Marketing Management
 Marketing is the exchange of something of value between the seller and the
buyer. The exchange that takes place ranges from products, services,
properties to ideas and information.
 To the seller, the aim is to provide satisfaction from the exchange to enable
them to maintain a profitable relationship by keeping existing customers and
continuously attracting new customers.
 The buyer, on the other hand, pays a price, often in monetary form, for
something of value to them.
 Marketing management is the process of managing the marketing inputs

of the organization to achieve the desired exchange which is beneficial and
satisfying to both the business and the customer.
 The marketing inputs are analysed, integrated and controlled to ensure the
implementation of an effective marketing programme.
Marketing Management – Market-
ing Terms
i. Market
 For an exchange to take place, a market must exist.
 The market can be a physical market place but most often a market refers to
buyers and potential buyers of goods and services.
 The market can be an individual purchasing for consumption or any entity
making a purchase to fulfill its needs and wants.
 These entities include the consumer market, government and institutional
market, business market, reseller market and the international market.
ii. Needs and Wants
 Humans have needs, which are basic requirements in life – which include
the need for food, clothing, shelter and safety.
 Human wants are something that are more than basic needs, and they are
influenced by the environment, such as society, culture and social factors,
and also the personality of the individual.
 It is important for business organizations to continuously research on
consumers needs and wants to ensure that the marketing strategies
developed are in line with the market changing needs and wants.
Marketing Management – Market-
ing Terms
iii. Products and Services
 Products are physical goods that are tangible (consumers can see, touch
and own the product) such as mobile phones and houses.
 Services are intangible and are not physical in nature – often it cannot be
seen, touched or owned but are benefits obtained from the exchange
process.
 Products and services that are offered to the market by the seller are
known as market offerings.
iv. Customer Value and Satisfaction

 Customers place a value to any market offerings.
 Customers are willing to pay if the market offerings are of value to them,
hence the commonly used phrase of ‘value for money’.
 Value given by a customer to market offerings can be a result of many
factors such as expectations, past experiences, and perception.
 When a customer feels that the market offering is of value, the customer will
be satisfied.
Marketing Management –
Marketing Terms
v. Relationship Marketing
 Marketers have discovered that it is easier and less expensive to maintain
a satisfying relationship with existing key parties (e.g. customers,
suppliers, distributors) than to develop new ones.
 The essence and objective of relationship marketing is to build a long-
term win-win and satisfying relationship between the parties involved.
 This is accomplished by making a conscious effort to understand the
needs and wants of the other parties and to offer competitive prices for
the companies’ offerings.
vi. Analysis of the Marketing Environment

 Managing the marketing inputs begin with an analysis of the internal and
external environment of the organization.
 Marketers identify and analyse internal strengths, weaknesses and
external opportunities and threats, and work out suitable strategies so
that internal capability matches with external opportunities.
Marketing Terms
Internal Environment Analysis

 An internal environment analysis involves an audit of the organization
various departments and units, and whether these departments have good
teamwork and interdepartmental working relationship.
 The various departments: marketing, administrative, finance and operations

must be able to work together to achieve the common goals of the
organization.
 An analysis of the internal environment enables an organization to evaluate

what has worked and what has not worked in the past.
 An analysis of the internal environment enables an organization to answer

questions on whether the organization is ready to take advantage of
opportunities in the external environment and how it will manage the threats.
Marketing Terms
External Environment Analysis
 The business external environment is made up of the microenvironment and
the macro-environment.
 The microenvironment consists of components that have a direct influence on

the organization’s ability to develop marketing strategies that create beneficial
exchange of value with the customers.
 The microenvironment factors can be controlled to a certain extent and include

the suppliers, marketing intermediaries, customers, competitors and the public.
 The macro-environmental forces are uncontrollable variables in the external

environment and they include demographic, economic, political-legal, cultural,
technological and natural forces.
 An analysis of the external environment helps an organization identify

opportunities and threats.
Marketing Terms
Microenvironment Factors
(a) Suppliers
 The suppliers are parties that provide the resources for the production of
products and services.
 Choice of supplier is important to ensure supplies are delivered as and when
needed and at a price that allows the purchasing business organization to
remain competitive.
 The new economy has made it easy for producers to obtain supplies from
other parts of the world at a lower price and an acceptable delivery time.
(b) Competitors
 Competitors are other organizations that offer similar or alternative products
or services.
 To remain relevant in the market place, a business must analyse the
competitors’ strengths and weaknesses and offer better value than the
competitors.
 Understanding the competitors will enable the business to develop effective
marketing strategies to respond to the changes made by the competitors.
Marketing Terms
(c) Marketing Intermediaries
 These are the channel members, or middlemen, that assist a business to
distribute its products to the customers.
 Marketing intermediaries are made up of wholesaler intermediaries and

retailer intermediaries who assist producers and manufacturers in the
distribution tasks by providing a huge order processing facility, maintaining
huge inventory and warehouses and transportation to customers .
 Producers and manufacturers understand that in order to satisfy

customers, products must be made available when, where and how
customers want them.
 Producers and manufacturers utilize the services of marketing

intermediaries as often they lack resources and expertise in distribution.
Marketing Terms
(d) Customers
 Customers are made up of the consumer market, government and institutional market,
business market, reseller market and the international market:
 The consumer market: consists of end-users, who are individuals or households who
purchase for their own personal use or to give to others for personal consumption.
 The government and institutional market: government bodies or institutions that

purchase for their own consumption or to provide service to others.
 The business market: consists of the business entities that purchase goods and
services to use in their business operations or to process and develop for other market
offerings.
 The reseller markets: consist of the wholesalers and the retailers who purchase to
resell at a profit. They offer an assortment of products from different manufacturers,
break bulk to meet customers’ needs for smaller quantity and often offer advice and
technical support.
 The international market or export market: consists of buyers from foreign

countries. International market often requires some adjustment to either the market
offerings or the marketing strategies of the organization.
Marketing Terms
(e) Public
 The microenvironment of the organization also includes the public whose
interest will be impacted by activities of the organization.
 The public refers to the general public, media public, financial public or any
groups that has direct or indirect interest in the organization.
Marketing Terms
Macro-environment Factors
(a) Demographic
 Demographic factors reflect the current characteristics and trend of the people,
who are the consumers of products and services, which include age, occupation,
education level, income level, gender and number of family members.
 Understanding demographic changes enable marketers to meet the needs and
wants of the consumers and to design marketing strategies aimed at satisfying
these needs and wants.
 For example, the better educated, technology-savvy population have influenced
not only demand for certain market offerings such as telecommunications and
safety gadgets, but also how these market offerings are sold to the market.
(b) Political-legal
 The political environment, laws, policies, regulations and restrictions affects
marketing strategies development.
 Marketers must adhere to legislations of the country the product is marketed.
 Many countries have laws covering areas ranging from consumer rights, product
safety, labelling, to protection of the environment.
Marketing Terms
(c) Economic
 The economic environment that is of particular concern to marketers includes consumer
income, inflation and recession.
 Changes in income directly cause a change in consumer spending patterns.
 During period of rising income, consumers’ disposable income increases and consumers can
afford more than the necessities.
 Inflation, on the other hand, often results in decreased spending power as prices of goods
increase but this increase is not in tandem with salary increase.
 An increase in the interest rate affects demand for market offerings linked with interest
charges such as car, house and even furniture.
 During a recession, economic activities generally slow down, followed by overall reduction in
demand for goods and services.
(d) Technological
 The technological environment is changing rapidly and it helps organization to penetrate
existing market and create new market.
 Innovation and new product development are now necessary for survival of a business
organization.
 Consumers demand for a better way of doing things has shortened the technology life cycle
of many products making companies continuously improve their products and develop
something new to remain competitive.
Marketing Terms
(e) Cultural
 Cultures influence basic beliefs, values, preferences, perception and how
people behave and view things.
 Marketers must be sensitive to the culture of a society when making
marketing decisions and developing marketing strategies.
 Words, colours, shapes and signs may have different meaning in different
cultures, thus the need for marketers to research the culture of the society
and make necessary changes in their products or marketing strategies.
(f) Natural factors (Green Technology)

 Businesses are affected by the natural environment as many utilize natural
resources as inputs.
 With depleting supply, natural resource management has become a concern
of many governments.
 Marketers in developing marketing strategies must take into consideration
issues of shortages of natural resources, environmental quality, ecology and
taking care of the world for the future generations.
Marketing Strategy and Process
 Business organizations analyse opportunities for existing and potential products and translate
these opportunities into marketing strategies beneficial to both the seller and the buyer.
 This marketing process involves a series of activities consisting of:
i. Identifying Market Opportunities
 Businesses identify market opportunities by identifying consumer current needs and wants,
and other external factors that might create and influence demand.
 Marketers scan the environment to analyse potential markets and to research the trend and
lifestyle of the vast consumer market.
 Marketers study the opportunities that result from new laws and regulations and
technological advancement.
ii. Selecting Target Markets
 A target market is an identified group of potential customers with similar needs and wants
that will most likely purchase a firm’s product or services.
 Companies normally have limited resources and thus have to focus on satisfying the needs
or wants of a particular segment of consumers as their target market.
 Marketing strategies have to be developed to match the requirements of this groups of
consumers.
 Marketers select target market through the market segmentation process.
iii. Market Segmentation
 Market segmentation is the process of dividing a market into groups of people
or entities with similar traits and characteristics (e.g. at least a college diploma)
based on the assumptions that these groups have similar needs or wants.
 Segmentation is often based on geographic, demographic, psychographic, and
behavioural variables.
 The identified group is called a market segment.
 Market segmentation is done for various reasons:
- It enables marketers to allocate their limited resources to a market segment
or several market segments, depending on the organization marketing
objectives.
- By identifying market segments to serve, a business can develop effective
marketing strategies for these different segments, taking into consideration
unique characteristics of the different segments.
- The segmentation process gives a business organization a better view of the
different markets, opening up opportunities for new product development or
market development.
(a) Geographic Segmentation
 This is when markets are segmented by regions, countries, states, market
density or climate.
 When marketer chooses the Asian region to market the organization skin care
line, the marketer is said to choose geographic segmentation.
 Marketing mix strategies will be developed in line with the market preferences,
maybe with some adjustments in the promotional strategy to cater for cultural
differences.
 The business can enter a new geographic market to exploit the opportunity in
an untapped territory.
(b) Demographic Segmentation

 Consumers’ preferences and what and where they purchase often relate to
their demographic profile.
 Consumers in the same group tend to have similar preferences and have
similar needs and wants.
 Due to this similarity, marketers can reach out to this group using the same
marketing strategies.
(c) Psychographic Segmentation
 Variables such as consumer personality, life-styles, values, belief and motives are used as bases
for segmenting the market.
 An example of a market segment based on lifestyle will be group of customers who practice
healthy living lifestyles in their daily life and have special needs for products and services known
to promote healthy living such as organic product, exercise equipment, health care products and
programmes offered by fitness centres.
(d) Behavioural Segmentation

 Marketers may also divide customers based on behavioural variables such as benefits sought,
usage rate, user status, and occasions.
 Benefit segmentation is segmentation based on benefits customers seek to derive from the
purchase. (e.g. customers purchase toothpaste for the different benefits they hope to get from the
purchase such as whiter teeth, tartar removal or a nice smelling mouth).
 Business firms also develop marketing strategies based on customers’ usage rate (i.e. heavy
users, average users, or light users) (e.g. mobile phone company may design a special low-rate
talking time package to reward its heavy users).
 For user status, marketing strategies are designed to keep existing customers, to attract potential
customers or to lure back ex-customers to purchase.
 Certain products and services see higher demand on a particular occasion. (e.g. cakes, cookies
and baking materials will increase in demand during festive season). With the occasion in mind,
marketers can develop marketing strategies to take care of the needs and wants of the
consumers during this time.
Marketing Management – Selection
of Target Market Segments
 The next step after market segmentation is to select target market segments.
 Three general strategies are used in target market selection – undifferentiated,
differentiated and concentrated marketing strategy.
 Each has its own strengths and weaknesses and selection is made with the business
organization objectives and resources in mind.
 The aim is to develop an exchange that is mutually satisfying and beneficial to both the
seller and the buyer.
i. Undifferentiated Marketing
 In undifferentiated marketing strategy, the market is viewed as one big market with
customers having needs and wants that are similar.
 Based on this assumption, the organization designs common marketing mix that will
appeal to the broadest number of customers.
 The usage of undifferentiated marketing reduces overall cost of product
development, distribution, promotion and product management.
 However, undifferentiated marketing ignores differences in customers needs and
wants.
 This strategy is used by very large firms to get full market coverage.
Marketing Management – Selection
of Target Market Segments
ii. Differentiated Marketing
 Differentiated marketing recognizes each market segment as having different needs and
wants, thus different marketing strategies is developed for each segment.
 In differentiated marketing, the company offers different variation of products and
marketing programmes for different market segments.
 By reaching out to several market segments, the company hopes for higher sales.
 The drawback is the increased cost of personalizing the product and developing
separate marketing efforts for the different market segments.
iii. Concentrated Marketing

 When a business focuses its marketing efforts to only a single market segment or market
niche by understanding its chosen market segment, this is called concentrated
marketing.
 Smaller business firms find that is more profitable to concentrate their limited resources
to serve markets that are overlooked by larger firms.
 Often they build their reputation as specialist and develop a strong market position in the
industry.
 The disadvantage with concentrated marketing is the risk the business firm takes by
serving a single market segment or just a few segments with the same needs and wants.
Marketing Management – Develop-
ing Marketing Mix
 After identifying the market segments it wishes to serve, the business
organization develops a specific marketing mix to convince the
targeted segments that its market offerings is of superior value
compared to what the competitors are offering.
 The marketing mix is an arrangement of product or service offerings,
place (i.e. location or distribution channels), pricing and promotion
used by a business to satisfy its chosen or selected customers and to
achieve marketing performance objectives.
4Ps 4Cs
Product Customer needs and wants
Price Cost to customer
Place Convenience
Promotion Communication
Four P and Four C Marketing Strategies

ing Marketing Mix
Product and Service
 A company or business must try to identify the specific ways it can
differentiate its product to obtain its competitive advantage.
 Product is referred as the firm’s tangible offer in the market.
 In marketing, the term product refers to both goods and services. It can be
viewed as a combination of attributes:
- Product variety - Warranties
- Product quality - Return policies
- Product performance
- Product designs
- Product durability
- Product features - Product reliability
- Branding - Product reparability
- Packaging - Product style
- Product design
- Sizes
- Services
ing Marketing Mix
 In service businesses, the marketing attributes that need to be considered are

as follows:
- Service quality: consistency of service offering
- Service package: combination of services at competitive price
- Service differentiation: offering that is unique and can be differentiated from
the competitors
- After sales services: follow-up to ensure customers are satisfied
- Ordering ease
- Delivery
- Installation
- Customer training
- Customer consulting
- Maintenance and repair
- Miscellaneous services
ing Marketing Mix
Branding
 It is vital for a business to create its product brand name.
 A brand is a name, term, trademark, symbol, or combination that gives
recognition and differentiates its product from their competitors.
 A brand identifies the seller or maker.
The name should suggest features of the product
The name should suggest product qualities
The name should be easy to pronounce, recognize and

remember. Short and catchy name is preferred and easy to
Characteristics of Branding stay in consumers’ memories
The name should be unique and represent a positive meaning

to the consumers
The name should portray the product quality to consumers’

mind
ing Marketing Mix
Labelling
 A label is part of a product that carries verbal information about the product
or seller.
 There is a close relationship between labelling and branding:
Types of Labels
Brand labels Grade labels Descriptive labels

Stamped or affixed on Identify the grade of Labels that provide
products to indicate the products (e.g. information about
their characteristics eggs are graded as A, the use, construction,
or quality B or C) care, performance or
other features of the
product
ing Marketing Mix
Packaging
 Packaging can be defined as an action of designing, shaping and producing the container
or wrapper for a product.
 Following are factors that need to be considered in determining the products’ packaging:
self-service, consumer affluence, innovational opportunity, and company and brand
image.
 Well-designed and friendly packaging can give convenience and added value to
consumers, and will have promotional value to the producer.
Self-service
The package attracts attention, describes the product features, create consumers’
confidence and positive overall impression
Consumer affluence
The package influences consumers to pay a higher price for the convenience or handling
and dependable
Functions of packaging
Innovation opportunity
The package offers a better and improved product offering such as reusable package
Company and brand image

Good package design contributes to instant recognition of the company
ing Marketing Mix
Price
 Price may be defined as the quantity of money that is exchanged for goods or
services offered in the market.
 An entrepreneur needs to make wise decisions on pricing in order to be competitive in
the market.
 A business can decide to impose wholesale or retail prices, discounts, allowances
and credit terms.
 These elements need to be strategized wisely to win the competition in the market:
List price
Discounts
Pricing elements Allowances
Payment period
Credit terms
ing Marketing Mix
Factors affecting pricing decisions
 Pricing decisions need to consider internal and external factors.
 The external factors to be considered are:
- Government, ministries and agencies
- Demand for the product and economic conditions
- Consumer associations and groups
- Competitors and competitive reactions
- Distribution (distributors)
- Suppliers (supply of raw materials)
 The internal factors to be considered are:

- Objectives of marketing
- Survival of the company in the market competition
- Profit making
- Market share leadership
- Product quality leadership
ing Marketing Mix
Factors affecting pricing decisions

 Marketing mix:
- Coordinated with the product design, distribution and promotion decision
 Operation cost:
- Pricing needs to cover all the fixed and variable costs including production,
promotion, distribution, and selling the product or services
 Company’s policy on pricing decision:

- Involves top management, divisional, product line managers or the sales
person to decide on pricing
ing Marketing Mix
Factors affecting customers’ sensitivity to price
 Buyers perception and preferences
 Unique value effect:
- Customers are willing to pay for more if they perceive the products or
services are unique and have extra benefits; when the product or services
are extraordinary and there is no other substitute
 Price quality effect:
- A product or service that offers high quality standards, exclusive or prestige
the customers will become less price sensitive
 Buyers’ ability to pay:
- Customers’ incomes are relatively higher, they have high purchasing power
and the prices offered are lower than their expectations
 Buyers’ awareness of and attitude toward alternatives:
- Customers are willing to pay at any prices if they are unaware of any other
competitors’ products or services
ing Marketing Mix
Pricing Methods and Strategies

 The various pricing methods fall into three categories:
Cost-oriented methods
Pricing methods Competition-oriented methods
Customer-oriented methods
ing Marketing Mix
i) Cost-oriented Methods
 Cost-oriented method is the simplest method where a standard mark-up is added
to the price of the product.
 Mark-up is a percentage of profits that a company or business would get.
Fixed cost + Variable cost + Desired margin = Price decision
 In cost-oriented methods, a business or company can use target pricing.

 This is used by a company that wishes to achieve a certain return from their sale
volumes in order to recoup some of the costs of developing the product.
ii) Competition-oriented Methods

 The basis of this type of pricing is to use other competitors’ pricing strategies.
 The company’s product or services prices are either lower than those of its
competitors or, in some cases, will be slightly higher than their competitors.
ing Marketing Mix
iii) Customer-oriented Methods

 Customer-oriented methods emphasize what the consumer will pay,
given the current state of demand.
 A company needs to do a thorough research to find out what the
potential buyers or customers perceive on the value of the total offer
and need to avoid overcharging or underestimating the prices that
customers will be prepared to pay for factors like better durability, better
service, and greater reliability.
ing Marketing Mix
Place and Distribution

 Place includes the various activities the company undertakes to make the product
accessible and available to target customers.
 In another word, place refers to the distribution channels that a company adopts to market
its product.
 There are various channels of distribution in the marketplace:
i) Channel A
 Manufacturer directly sells its product or services to consumers.
Manufacturer Customer
ii) Channel B
 It consists of one selling intermediary that is the retailer who will sell the product to the
consumer
Manufacturer Retailer Customer

ing Marketing Mix
iii) Channel C
 Through this channel arrangement, wholesalers mediate between manufacturers and
retailers.
 The wholesalers will buy products from manufacturers and sell the items to retailers who
in turn sell the products to the consumers.
Manufacturer Wholesaler Retailer Customer
iv) Non-store retailing

 Non-store retailing is another option for a business to place its product or services.
 A business that opts for non-store retailing medium can take the form of:
- Door to door selling
- In-house selling
- Mail-order selling / direct response selling
- Teleshopping
- Automatic vending
- Internet: websites, blogs, social network medium (i.e. Facebook, Twitter, lelong.com.,
mudah.com, etc.)
ing Marketing Mix
v) Non-store retailing
 Non-store retailing is another option for a business to place its
product or services.
 A business that opts for non-store retailing medium can take the
form of:
- Door to door selling
- In-house selling
- Mail-order selling / direct response selling
- Teleshopping
- Automatic vending
- Internet: websites, blogs, social network medium (i.e. Facebook,
Twitter, lelong.com., mudah.com, etc.)
ing Marketing Mix
Determining Distribution Strategy
 There are several factors to be considered in determining the
distribution strategy:
Type of
product
Factors in
Transportation determining Target market and
ease distribution market coverage
strategy
Product
standardization
ing Marketing Mix
Promotion
 Promotion is the marketing tool used to create awareness and favourable attitude within the target market,
community and among various groups of people that are connected to the business.
 It consists of all the activities the business uses to communicate and promote its products or services to the
target market.
 The objectives of promotion may be varied, including:
- To retain ‘loyal’ customers
- To retrieve ‘lost’ customers
- To recruit ‘new’ customers
- To reassure ‘old’ and ‘new’ customers are making wise decision in buying the product or service
 A business or a company can decide the best or appropriate medium to create awareness through the
chosen promotional strategies:
Advertising
Sales promotion
Promotional strategies
Personal selling
Publicity
ing Marketing Mix
i) Advertising
 Advertising is dissemination of marketing information through various
media of communication for the purpose of increasing and maintaining
effective demand and helping the sale of goods and services.
 Advertising channel can be categorized as printed medium, electronic
and digital medium, and at outdoor settings.
Printed medium Electronic and digital Outdoors settings

medium
• Newspaper • Billboards
• Magazines • Television • Banners
• Yellow pages • Radio • Transportation
• Brochures • Internet
• Business cards • Short messaging
system
ing Marketing Mix
ii) Sales Promotion
 Sales promotion refers to promotional activities or incentives carried out
or offered within a set time frame to influence purchase.
 The common sales promotional strategies are:
- Rebates
- Coupons
- Purchase-with-purchase
- Samples
- Premiums
- Contest
- Point-of-purchase promotion
- Sweepstakes
- Free delivery
- Extended warranty
ing Marketing Mix
iii) Personal Selling
 Personal selling is the most cost-effective tool at later stages of buying process.
 It is a face-to-face selling in which a seller attempts to persuade a buyer to
make a purchase.
 Personal sales presentation is normally conducted by a trained sales person to
influence potential customers and it is most often used for products that require
demonstration or explanation.
 Benefits of personal selling:
- Alive, interactive and immediate relationship between the seller and buyer
- Cultivation of short- and long-term relationship through sales activities. It can
also create extensive networking
- Immediate response by the buyer
iv) Publicity
 Publicity is about efforts taken by the company to develop and maintain good
relationship with the public to ensure good favourable image of the business.
Operations
Management
Operations Management
 Operations management or production management can be defined as

the management of the process of marshalling resources (inputs),
organizing and designing the transformation process (production
process) to produce products and services (outputs) according to the
target quality, cost, quantity, delivery time, and safety:
Operations Management
Operations Management – Relationship
with Business Strategies
 Operations management is an integral part of the whole business organization setup.

 Its objectives are linked with other functional areas such as marketing, finance and
human resources management.
 The following are examples of business strategies that involve operations
management:
- Product design and development to produce better or new products and services to
the customers
- Managing quality management system
- Process and capacity design
- Location strategy
- Layout strategy
- Human resources and job design
- Supply-chain management
- Inventory and material requirement planning
- Job scheduling and project management
- Maintenance
Operations Management –
Location Planning
 It is crucial for an entrepreneur to choose the right location for business

because a good location can result in higher sale, lower operating cost
and higher profit.
 In general, the choice of location will depend on the following factors:
- Close proximity to customers
- Close proximity to raw materials
- Lower rental cost
- Availability of good infrastructures and facilities
- Availability of manpower
- Good visibility
- Easier accessibility
- Convenient parking space
- Less risk to crime
- Availability of services such as school, hospital, bank, sport facilities,
etc.
Process and Layout Planning
 In a small business employing a traditional production process, products are made
in small quantity and they are normally produced to fulfill specific customers’ need.
 Generally tools and machine used are designed to perform a specific isolated task
to help operators perform their work.
 However, the arrival of mass production and marketing, modern technology and
computer systems has enabled some of these production process to be
transformed and improved to produce greater volume of production, higher quality
specification, greater mechanization and automation.
 An entrepreneur has to plan his process strategy so that he can produce a product
that can meet his business objectives such as target cost/unit, quality specification,
production quantity, delivery time requirement and safety standard.
 He may have to consider various options from manual, semi-automatic, fully
automatic and perhaps an advance integrated, robotic and computerized production
system.
 He then has to outline the process flowchart for all these activities from
start to finish. Following is an example of a simple process flowchart for
making a beef burger:
Picking raw material from
freezer box
Heating of patty + bun
Placement of cooked
patty and condiment into
bun
Wrapping of the burger

and deliver to customer
 Based on the activities on the process flowchart, all the related requirement and specification for
each of these activities such as capacity (quantity of machine and number of manpower), quality
specification (input specification, output specification, manpower specification, and machine
quality), space and layout design requirement have to be planned.
Layout Plan
 The layout plan refers to the arrangement of the floor plan of the operation areas.
 The following are the objectives that need to be considered when designing the
layout:
- Ideally the area required should be economical (i.e. minimal but adequate).
- Layout design should facilitate higher utilization of space, equipment, and
people. It should improve flow of information, materials, or people. Based on
process flow or sequence, certain activities may need to be placed in close
proximity or clustered together to facilitate (minimize) material movement,
minimize workers movement, create convenience working arrangement, enable
effective supervision, and provide adequate space and accessibility for service
and maintenance work
- Wet area, hot area or dangerous area may need to be separated for safety
reason
- The layout plan should be flexible and can possibly accommodate future
expansion
Type of Layout
 The type of layout can be broadly divided into:
- Office layout
- Retail layout
- Warehouse layout
- Fixed position layout such as ship building or building construction
- Process layout such as metal press job shop
- Product oriented layout such as assembly line production
Production Planning and Capacity Management
 From your market study, you will have a sales forecast for your business which
will be used for production planning.
 The objective of production planning is to meet this forecast demand and minimize
operational cost in business through strategies such as planning for production
rates, working hours, manpower and managing inventory levels.
 In other words, you must plan and produce a production plan, known as Master
Production Schedule (MPS) that will effectively utilize the organization’s resources
to match expected demand.
 Basically, an entrepreneur must plan and decide on the:
- Production output rates and raw materials required
- Number of employees
- Number of working hours
- Inventory levels (quantities)
- Numbers of machines (capacities)
- Work that needs to be subcontracted
- Number of suppliers
 Generally speaking, production planning is closely connected to the

budgeting process and cost planning.
 Production planning process flow is shown below:
Capacity Management
 In order to capture market demand, an entrepreneur must know the production

capacity of his operation so as to meet the market or customer demand;
and/or to convince the customers or clients to award him the sale contract or
project.
 Capacity is the maximum output or the number of units a facility or a system

can produce, hold, store or accommodate in a period of time.
 The objective of capacity planning is to specify the capacity level that will meet
the market demands in a cost efficient way.
 Factors such as types of products, processes, use of facilities (electricity,

water and gas) need to be considered during capacity planning.
 The example below shows the capacity planning for an oven for a bakery
operation:
Inventory Management
 Managing inventory stocks is important to a business, particularly to meet market
demand for your products.
 Inventory refers to stocks, or items, products or resource used in your business or

operations.
 Inventory is actually valuable capital and having too much inventory will increase
holding or storage (carrying) costs, and stocks also occupy more space; while too
little inventory may cause stock out and affect service to customers.
 As such, stock should not be too much as the used up capital will be idle and it
should not be too few to the point that it may not be available or adequate to serve
the customers.
 In the case of retail business, the general rule of thumb is inventory for fast moving
items should be adequately stocked while the inventory for slow moving items should
be few but adequate.
 The objective of inventory management is to determine the levels of inventory that

should be maintained and secondly, when to order and replenish stocks, and thirdly
how much (quantity) to order.
 There are several inventory models available to suit the nature of your business. The inventory models
are:
- ABC store inventory model (for managing a store or retail business)
- Independent inventory model, economic order quantity (EOQ) model
- Dependent inventory model (materials requirement planning for purchase of raw materials)
- Just in time (JIT) delivery model
Dependent Demand Inventory System or Materials Requirements Planning (MRP)

 Piece parts, raw materials and components are categorized as dependent inventory items because to
place an order for such items is dependent on how many products the organization has planned to
produce.
 Dependent demand means, the demand for one item is related to the demand of another item, and also
the end products (finished goods).
 Ordering and managing of raw materials is referred to as the Materials Requirements Planning (MRP).
 MRP system is now available as a software operating system in the market – a computerized
management information system that incorporates a pool of huge database on all the requirements
needed to plan, forecast, schedule, to order, track and monitor the movements of items, components and
its inventories for all the production stages, the inventory stocks levels, the ordering and delivery status
for each unique item, and the product structure, to help in planning and making operational decisions.
 The MRP system encompasses the following requirements or inputs:
i. Master Production Schedule
 Master Production Schedule (MPS) outlines and dictates the master plan; product type, its
production quantity plan, completion or delivery time and duration (schedules) as planned
during production planning.
ii. Bills of Materials (BOM)
 A Bill of Materials (BOM) is the product structure that depicts the list of components,
ingredients, materials, items, and its quantities and part descriptions required to make a
product.
 In other words, BOM or Bill of Quantity (BQ) refers to the recipe or ingredients or raw materials
needed to manufacture or produce a unit of product or a unit of service rendered.
 Let’s say bill of material for 1 kilogram of cake is shown below:
iii. Inventory Stock Level
 Before placing an order (Purchase Requisition) for raw materials or subassemblies, one has to
check on the current in-house physical stocks and the ordered material that are in the delivery
process.
iv. Purchase Order (PO) Outstanding
 When Purchase Orders are raised and executed, records of those orders must be kept and its
delivery dates are monitored.
 Knowledge on outstanding orders must be made known to key personnel.
v. Lead Time Delivery
 In doing purchase requisitions or orders, the lead time delivery for the order must be made
known, that is, the time/date of order placed and the time/duration the order needed to be
processed and arrived.
 Lead time for an order includes the time the order is placed, processing time for the order, time
to assemble and produce, time to deliver, arrival time, and incoming processing time till it
reaches the requestor’s organization (or production).
 A production schedule is prepared based on the forecasted demand and this production
schedule together with the above data (i.e. bill of materials, inventory stock level, purchase order
outstanding, lead time delivery) will be used to outline material requirement needs and its
ordering and delivering schedules.
Quality Management
 Quality is defined as a measure of how close a product or service conforms to
standards and specifications that bears on its ability to satisfy stated or implied
needs.
 Quality is also defined as a product’s fitness for use; its success in offering features
that consumers’ want.
 The objective of quality management is to ensure the products or services produced

are of high quality and meet the customer’s requirements.
 Producing high quality products/services assure customer satisfaction, and they will
become regular and loyal customers.
 This simply means, higher sales will result in high profitability, and therefore assured
repeated business and retained market share.
 Besides, quality drives company growth, and reduces operational costs, thus
provides an additional competitive edge.
Quality Management
 Hence, the importance of quality in a business is to:
- Remain competitive in market and business survival
- Retain market share
- Acquire profitability
- Achieve customer satisfaction
- Assure greater customer loyalty
- Produce high quality products/services
- Reduce operational costs (reduced quality problems, scraps, yield loss,
wastages)
- Produce high productivity or yields
- Control processes with less variations
- Create sense of pride and image to the products and organization
- Establish a quality management system in the organization
- Achieve ISO 9001:2008 certification and to comply with international
trade regulations
Quality Management
 In business, quality is perceived by the customers in terms of various quality
dimensions as shown in the following table. Thus, product or services quality
dimensions are:
Product Quality Dimensions Service Quality Dimensions
Features Courtesy
Functions Communication
Durability Credibility
Reliability Creativity
Safety Customer satisfaction
Serviceability Reliability
Aesthetics Tangibles
Conformance On time delivery
Perceived quality
Quality Management
 Entrepreneurs must realize that cost of non-quality is very high.
 The external cost of non-quality involves poor reputation, loss of repeat customers,
cost of rejected or return product.
 The internal costs involved wasted cost on material and labour, rework cost and low
workers’ morale.
 An entrepreneur should initially focus of the preventive effort of eliminating defective

products or services.
 He must identify the most frequent form of defects and seek out the causes of the
defects, which could be due to method, material, manpower, equipment, management
procedure and system, layout and work place. Then he will have to work out a
suitable solution to solve the causes of these defects.
 As an implementation strategy, an entrepreneur can use ‘quality control circle’ (QCC)

to mobilize his workers to solve his quality problems.
Quality Management
Operations Plan
 The sales forecast from market study will be the basis of an

entrepreneur’s operation plan.
 He has to decide on the product design, its specification, type of

production process, capacity of production, input required (i.e.
manpower, equipment, fixed asset, location, layout, control
procedure, etc).
 He has to prepare operation budget which include cost of asset,

working capital and other items.

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Chapter 5

By the end of this chapter, student should be able to:

 Human resource – the resource that resides in the knowledge, skills

 Human resource is the scarcest and most crucial productive resource

 Human resource management (HRM) is the governance of an

 An effective human resource management will help to propel the firm

 Size : Most small businesses do not have dedicated HR

 Priorities : HR is usually not a high priority in the firm

 Informality : HR is not a formal process

 Nature of the entrepreneur: Entrepreneurs, or the

Safety and HRM Recruitment

Compensation Training and

 Successful small- and medium-sized enterprises (SMEs)

1. Human resource planning = Human resource planning

3. Recruitment and selection = external and internal job

5. Performance management = It is important for firms to

 Human resource planning refers to forecasting or assessing the supply of and

 There are several tools for projecting personnel needs:

ii. Ratio analysis

iii. Computer forecasting

 Organizations consist of jobs that need to be performed by employees.

 Job Analysis is the process of gathering information about the job.

Step 2process is depicted below:

 There are various approaches to collect information for job analysis.

 Some of the most common methods to help firms gather these

 A job description includes the job responsibilities, the conditions under

 Job specifications are the skills, education, experience, and personal

© 2010 Pearson Education, Inc. Publishing as Prentice Hall

 Job analysis helps to perform at least four of HR functions, such as

i. Recruitment and selection

iii. Performance appraisal

 Internal recruiting, or filling job vacancies with existing employees

 Internal recruiting methods include:

• Less risk of selecting an • Creates cascading internal

• Provides new ideas and fresh

 It is another function of HR that is very strategic to firms as

 Thus, a good screening process (refer to the flowchart in the next

Review of application and resume

Background and reference checks

2. After carefully going through and reviewing the resume, the

3. Usually, candidates are required to go through several assessment

6. Once the panels have decided on the successful candidates, the

7. Once the candidate is certified healthy and free from serious

 Given the intense pressure to compete in today’s business environment,

 Specifically, information such as company’s vision, mission, goal, history

 Advantages of conducting an orientation programme for new employees

 In general, most orientation programmes consist of three stages:

 It is also common among companies to explain and elaborate the

 The handbook content normally includes statements of company

Analysis (Training needs assessment/analysis: TNA)

 Conceptually, employee development is different from training because

 In addition, development prepares an employee for other positions in the

 This programme may include lectures by experts, in-house

 Many companies sponsor their employee to enrol for formal

 Meanwhile, some companies provide ‘tuition reimbursement’ to

3. Transfer – to assign employee a job in a different area of the

iv. Interpersonal Relationships

 There are 4 stages in the performance management

Stage 1: Performance Planning

Stage 2: Managing Performance

Stage 4: Rewarding Performance

 Performance management encompasses a bigger role and scope as

 Performance appraisal is part of the performance management system.