Welcome to Business Studies
Select a module to explore the course materials.
Franchises & Buyouts
Sir Muhammad Syukran bin Jamil
Explore franchise terminology, evaluating opportunities, pros/cons, and the process of buying existing businesses.
Starting a Business
Sir Muhammad Syukran bin Jamil
Learn about startup idea types, feasibility analysis, opportunity recognition, and business strategy models.
The Family Business
Sir Muhammad Syukran bin Jamil
Understand family business dynamics, the three-circle model, management succession, and sibling partnerships.
Franchises and Buyouts
Sir Muhammad Syukran bin Jamil
Learning Outcomes
- Define franchising, and become familiar with franchise terminology.
- Understand the pros and cons of franchising and the structure of the industry.
- Describe the process for evaluating a franchise opportunity.
- List four reasons for buying an existing business, and describe the process of evaluating a business.
What is Franchising?
A business relationship in which an entrepreneur can reduce risk and benefit from the business experience of all members of the franchise system.
Franchisor
The party in a franchise contract that specifies the methods to be followed and the terms to be met by the other party.
Franchisee
An entrepreneur whose power is limited by a contractual relationship with a franchising organization.
Terminology & Strategies
Pros of Franchising
- Reduced risk of failure
- Business for yourself, not by yourself
- Use of valuable trade name/trademark
- Access to proven business system
- Management training provided
- Immediate economies of scale
- A way for an existing business to diversify
Cons of Franchising
- Misleading/exaggerated earnings claims
- Franchisor becomes competitive threat
- Restrictions on liquidating holdings
- Conflicts of interest (captive outlets)
- Churning: terminating successful op to resell
- Encroachment: new outlet too close to existing
- Non-compete clauses & one-sided contracts
- Franchisor intimidation of associations
Franchise Organizations & MFA
Organizations exist globally: FCA (Australia), HKFA (Hong Kong), FLA (Singapore), FANZ (New Zealand).
Malaysian Franchise Association (MFA)
Formed in 1994. Serves as a resource center. Membership includes franchisors, master franchisees, govt agencies, banks, consultants. Everyone is subservient to MFA's Code of Ethics.
Buying an Existing Business
Reasons to Buy
- Reduce uncertainties/unknowns of starting from ground up.
- Acquire ongoing operations and established relationships.
- Obtain business at a price below starting new/franchise.
- Get into business more quickly.
Finding a Business
Matchmakers: specialized brokers that bring together buyers and sellers.
- Determine your commitment & what you can afford
- Figure out what skills you have
- Consider lifestyle impact
Due Diligence & Valuing
Due Diligence: Exercise of reasonable care in evaluating opportunity (contracts, financials, tax returns, inventory, employee roster).
- 3 Valuation Approaches: Asset-based, Market-comparable, Cash flow-based.
- Non-Quantitative Factors: Market, Competition, Union contracts, Buildings, Future dev.
Comparison of Options
| Factor | Start Up | Purchase | Franchise |
|---|---|---|---|
| Market/customer base | Unknown | Defined | Predetermined |
| Advertising strategy | Unknown | Defined | Predetermined |
| Future growth | Unlimited | Unlimited | Restricted |
| Staffing flexibility | High | Low | Moderate |
| Decision making flex | High | Moderate | Low |
| Risk of failure | High | Moderate | Low |
| Initial financial outlay | Owner's discretion | Substantial | Substantial |
| Ongoing commitments | Nil | Nil | Yes (royalties) |
Local Spotlight: Tan Sri Vincent Tan (Berjaya Corporation)
A prime example of a Master Licensee and multi-brand franchising in Malaysia. Tan Sri Vincent Tan successfully acquired the master franchise rights to bring major global brands into the Malaysian market. His portfolio under Berjaya includes Starbucks, 7-Eleven, and Kenny Rogers Roasters, demonstrating how leveraging established foreign business formats can build a massive local retail and food empire.
Case Study: Elevation Burger
Danny and Dennis Bone investigated franchising "Elevation Burger" in Austin, TX. Despite Danny's due diligence, an unexpected economic recession hit right before opening. Financing tightened and forecasts turned negative. Nevertheless, the brothers remained committed.
Q1: Should they have anticipated the downturn?
Q2: Steps to attract customers trying to save money?
Q3: How can the franchisor help during a recession?
Starting a Business
Sir Muhammad Syukran bin Jamil
Startups
New business ventures created "from scratch".
Opportunity Recognition
Identification of potential new products/services leading to promising business.
Entrepreneurial Alertness
Readiness to act on existing, but unnoticed, business opportunities.
Types of Ideas
Type "A" (New Market)
Providing customers with an existing product/service not available in their market.
Ex: Targeting "New Age" beverage market by selling soft drinks with nutritional value.
Type "B" (New Technology)
Involving new or relatively new technology to provide a new product.
Ex: Using high-tech computers to develop a simulated helicopter ride.
Type "C" (New Benefit)
Centered around providing customers with new or improved products/services.
Ex: Developing a personal misting device to keep workers cool.
Common Sources of Startup Ideas
| Factor Category | Change Factor | Definition |
|---|---|---|
| Industry or Enterprise Factors | ||
| The unexpected | Unanticipated events lead to success or failure (e.g. Pet pharmaceuticals) | |
| The incongruous | What is expected is out of line with what works (e.g. Low-fat ice cream) | |
| Process needs | Current tech is insufficient (e.g. Electric cars due to energy costs) | |
| Structural change | Changes in tech/markets alter dynamics (e.g. Digital cinema for 3D) | |
| External Factors | ||
| Demographics | Shifts in population size, age, income impact demand | |
| Changes in perception | Perceptual variations determine demand (e.g. Security threats -> Gated communities) | |
| New knowledge | Learning opens new product opportunities (e.g. Solar breakthroughs) | |
Integrating Internal and External Analysis
Inside: Strengths
- Core competencies & Financial strengths
- Innovative capacity & skilled management
- Well-planned strategy & entry wedge
- Strong network & positive reputation
Inside: Weaknesses
- Inadequate financial resources / facilities
- Lack of management skills/experience
- Poorly planned strategy & limited marketing
- Production inefficiencies
Outside: Opportunities
- Untapped market potential
- Favorable shift in industry dynamics / tech
- High potential for market growth
- Favorable deregulation / fragmentation
Outside: Threats
- New competitors & Rising demands of suppliers
- Sales shifting to substitute products
- Increased government regulation
- Adverse demographic shifts & business cycle
Strategy Options
Broad Based:
- Cost-based: Hold down costs to charge lower prices.
- Differentiation: Unique attributes valued by consumers.
Focus Strategy: Target restricted market segments. Drawbacks include imitation, structural erosion, or segment narrowing.
Feasibility Analysis
- Industry Attractiveness (5 Forces): Buyer power, Supplier power, Rivalry, Threat of entry, Threat of substitutes.
- Product/Service Feasibility: Customer surveys, focus groups, prototypes, demographic data.
- Financial Feasibility: Capital requirements, estimated earnings, ROI.
Local Spotlight: Anthony Tan & Tan Hooi Ling (Grab)
A classic example of Opportunity Recognition and a Type C (New Benefit) Idea. The founders identified a severe "process need" and a "pain" in the Malaysian transportation sector—unsafe and unreliable taxi rides. By leveraging new mobile technology (smartphones), they created MyTeksi (now Grab), streamlining customer activities and ultimately scaling it into Southeast Asia's leading super-app.
Case Study: Jonathan Lugar
Jonathan (17) had an idea to run garage sales for others for $200 (sales < $400) or 50/50 split (sales > $400). He provides value through pricing insights to maximize sales and minimize leftover risk. Startup costs are minimal (owns truck + fuel).
Q1: Type A, B, or C idea?
Q2: What was the source of his startup idea?
Q3: Would you recommend he try it?
The Family Business
Sir Muhammad Syukran bin Jamil
Family owned and controlled firms are among the world's largest and oldest enterprises, representing 80 to 98 percent of all enterprises in the world.
Family
Group bound by shared history and commitment to future together.
Owner-managed
Venture operated by a founding entrepreneur.
Sibling Partnership
Children of founder become owners and managers.
Cousin Consortium
3rd+ generation children of siblings take ownership.
Three-Circle Model
The complex overlap of different roles within a family firm.
- Family Members: Personal emotional bonds
- Employees: Management and operations
- Owners: Wealth and ownership focus
Note: The center intersection represents Family-Owner-Employees who juggle all three dimensions.
Family Business Momentum
Organizational Culture: patterns of behaviors and beliefs that characterize a firm. Can be an advantage or disadvantage.
Capable of nurturing stewardship cultures, where members care for the business as a resource to be nurtured and grown, not squandered.
Types of Commitment:
Advantages
- Values & Commitment
- Knowledge & Long-range thinking
- A stable culture & Speedy decisions
- Reliability and pride
Disadvantages
- Tradition vs Innovation
- Loyalty trumps opportunity
- Stability vs Instability
- Nepotism: employing relatives
Best Practices
- Promote learning & solicit outside input
- Establish constructive communication
- Promote strictly on skill levels
- Retain excellent nonfamily managers
Management Succession
Preparing the Next Generation
- Start at part-time/full-time to gauge interest.
- Do not allow child in senior management until they worked for someone else for at least 2 years.
- Give promotions only as earned.
- Devote half an hour daily to face-to-face teaching.
- Do not take business matters home.
Responsibilities
Local Spotlight: Dato' Sri Meer Sadik Habib (Habib Jewels)
A highly successful example of Management Succession in a Malaysian family business. Founded in 1958 by his father, Habib Mohamed, the business started as an owner-managed venture. Dato' Sri Meer Sadik underwent thorough preparation, working his way up and balancing the family's traditional values with modern corporate strategies. This successful transition allowed Habib Jewels to innovate and grow into a multi-brand powerhouse while maintaining family unity.
Case Study: Sebastian and Alfonso
Alfonso (engineer/R&D) and Sebastian (outgoing/CEO) built a business investing all profits into expansion. Sebastian became upset wanting his share of profits, doubting his brother. Their father offered to come in and run the business to ensure fairness.
Q1: What would you recommend to Sebastian?
Q2: What would you recommend to Alfonso?