Monday, January 27, 2020
The Dynamic Hotel And Hospitality Industry
The Dynamic Hotel And Hospitality Industry Hotel and hospitality industry is dynamic industry which changes fast with times. All the industry stake holders and business people have to be sharper and well prepared to keep them with the pace of changing environment. It is one of major industry on its outreach all over the world. In hospitality sectors decision makers have to go with proper tools to make their decisions. One of the most effective a popular business tool for industry analysis is porter five forces analysis. It was coined by Michael Porter. In this assignment we are going to study the brief history background, methods and its utilization in hotel industry. We will try to find what porter five forces are and how to use them for better understanding and analysis of happenings in hotel industry. Back Ground of Hotel industry The hotel industry consists of profitable business where people can stay in their time of need either for some work of for some holiday. During the 1920s this industry got a major increase and demand. Growth in world economy supported this industry to grow fast. Though the depression in 1930es slightly brought break to its expansion. Many hotels survived in this time of major crash as they were successful in starting hotel chains. In mid twentieth century these industries start for a new change when demand for affordable cheap and healthy lodging was increased. This introduced new trend of motels business in the market. This new motels business competed better way with hotels till1960s, up to this these motels had a growth period with their size and facilities. To cover the business gap hotel industry made innovation of motor hotels. Stay at motor hotels was bit costly and it did not attract the business. By year 1970 hotel s start chains and they expand through franchises and thus industry was over extended. In 80s hotel industry made a boom once again by controlling their costs. Furthermore there was concept of new lodging ways like suite hotel. All the major runners in business started a diverse way to make more progress. 1990s was new era with better focus on commercial ways and advertisement. In recent years this industry taken new measures like reduction in wages, debt control, low interest rate financial investments and low rate area for installations of new venues. There are some major players like Hilton Hotels Corp., Marriott International, Trump Hotels Casino Resort, Starwood Hotels Resorts Worldwide, Promus Hotel Corp, Host Marriott Corp, Red Roof Inns, Inc. and MGM Grand Inc., These hotels performing well and making me than 30 billion dollar in industry alone in USA. Background of porter five forces There is always an interest by the academics and researchers in knowing the forces which impact performance of an organization or business. Many ideas and new models appeared in late 1970es and early 1980s these were focusing mostly on competitive advantage that any business can have over its rivals in same industry. Harvard professor Michael Porter came with his idea of five forces analysis that according to him are always faced by any industry while doing business these are internal and external forces. Businesses have to get the understanding all dynamics in the market. Porter (1980) himself defined these forces that make competition and lead to competitive environment for a business. There is always rivalry existing between firms and also there is constant threat of new rivals in the market. Similarly suppliers and buyers also have impact. Porters Model makes outline of five important elements shaping any industry. Features of Porter five forces Porters five forces model simply identifies five factors that are most important and the formation of industry in order to identify it attractive for new entrants, or as a means to formulate a strategy for competitors in the industry. There is continuing interest in the study of the forces that affect the organization, especially those that can be harnessed to provide a competitive advantage. There were many ideas and models that have emerged during the period from 1979 to the mid-1980s (Porter, 1998) on the idea that competitive advantage comes from the ability to get a return on investment that was better than the average for the industry sector. It also tells that five forces analysis sees the factors outside any industry that affect the nature of competition in business within the industry. These things affect on profits of any business. If we go into the definition made by Porter (1980a) it says about forces which affect directly on competition, and it also considers that this competitive environment is created due to interaction between various forces. Main Aspects of Porterà ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒ ¢Ã¢â‚¬Å¾Ã‚ ¢s Five Forces Analysis As suggested by Porter forces which can affect the performance and behavior in any industry. These are included following forces : Competition between sellers in market. the customers power in the market. Suppliers power in dealing on to the sellers. Threat of new entries. Threat of any substitute for buyers . Force one: Rivalry among Sellers It is intense competition to control the market and get more customers among the sellers. They use every tool to attract customers to them. It is main power in the industry where everyone facing tough competition. It is likely high in many of those industries in which a threat of new alternative products and is constant. Force Two : The Threat of New Entry It is not only about current rivals but there is threat of new entries always with the business. Both present and potential competitors can impact industry profitability. There is always discouragement of such new entries by all business people. Force Three : The Threat of Substitutes The is another threat pose by new substitute products within industry as the profitability always depends margins in price so it can make negative impact on performance. This always costs industries to make enough resources for their research and development department. Force four : Buyer Power Buyer try to get maximum from their investment or money it is important that buyerà ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒ ¢Ã¢â‚¬Å¾Ã‚ ¢s size values more in profit gains. Higher the buyers higher the profits are even with less margins. Normally this force very high especially with globalization of business. Force Five : Supplier Power Supply plays life line for any business so many times power supply makes your business into problems as they affect your sales. Because supply is necessary to sales without it one cannot make progress. So in industry there is always competition for getting low rates and proper supply according to demand. Where suppliers find they have chance or bargain they start utilizing it. Nature of industry determined the nature of any competition in all industries. The powerful forces of all the buyers, suppliers, threats of entry and substitution and increase in competition can make negative impact on business. Porter five also have limits in its use. So it depend show it is being used by any of user. With a smaller number of properties being built and a strong economy, and the industry enjoys steady increases in demand that exceeded the increase in supply over the past five years. And cause an increase in the demand for occupancy and average daily room rates to increase also According to the hotels and hostels Association of America, 30 percent of the clients industry and business travelers and 25 percent of the tourists. Business conferences, representing 25 percent of customers in the industry, while 20 percent of the customers is to stay for a family or personal reasons10. Dominant Economic Characteristics Trends within the Industry It was the hotel industry enjoyed strong conditions during most of the 90 s but is now facing a slowdown due to industry over capacity and the weakness in demand1. The decline in occupancy rates of about 65% in the past few years to 64.5% in 19 972. The hotel industry is going through a boom of mergers and acquisitions. Its cheaper than buying the building. Management is now focusing more on value, and brand development and management experience rather than the number of rooms, using the franchise and property management1. Are the restoration of the oldest hotels are being added and upgraded features added such as voice mail, laptop hookups and computer centers of the rooms. Is now the hottest category extended stay category, which serves people stay five nights or more. Room to provide accommodation and amenities such as kitchens and laundries. General Economic Conditions affecting the industry Transport and fuel costs to play a major role in determining the ability of consumers to travel. Ticket and fuel prices, as well as other complications such as recent industry pilot curb demand for housing. The political climate and economic conditions within and outside the United States play a role in driving demand for housing as well. Porter 5-Forces Model In general, competition in the housing industry is in itself a powerful factor of control. Government regulations, suppliers and agents representing moderate, and new entrants, buyers, substitute products are the most determining factors in the industry. Model Porter 5 Forces attached to provide further details on the factors that affect the strategic decisions of firms in the industry. In business and hospitality, and technology should focus the rest of the way in which services are produced and delivered. It would be incorrect, however, to assume that the manufacturing techniques do not apply to the hospitality industry. Consider, for example, the impact of computer technology to hotels or airlines distribution. Certainly, a similar revolution and the Sabre GDS reservation systems even before the Internet industry flourished. (12) global distribution systems are still active, while the Internet has fundamentally changed the way many people make hotel reservations, airlines and car rental. Technology has made the current, much less expensive to implement a wide range of procedures for obtaining services. Instead of using a card file (as in the previous day), and can maintain the features of hotel clients on your computer. Ritz-Canton, for example, tracks the tastes and preferences of regular visitors. Ritz-Carlton properties to use their database as guest of a good feature by arranging to express check-in regular guests, who need only to call and say when you plan to access. Everything is ready when you push up to the curb. (13) and technology to track this type of information were not accessible until a few years ago and the size of the market to make the manual operation is not applicable. Companies can also use the hotel technology to extract the data, and for intensive research and compile information in databases, as shown in the accompanying article in this issue than a quarter of Cornell. (14) In another example, he drew attention to the Wingate bars for the fi rst time as a series a few years ago by installing the fonts that ections high-speed Internet in every room. This helped Wingate differentiation strategy to expand rapidly by appealing to business travelers and value-conscious World Health Organization, at the time, was known to sponsor this well-established processes and Hampton and Courtyard. (15) Political and Legal Trends and Influences Evaluation of policy and regulatory environment is vital to planning for the future, as evidenced by the implications of the lifting of restrictions on airlines in the United States (and other carriers). Although the restaurants and hotels did not have to face as the overwhelming change in the competitive environments of the airlines did after the lifting of restrictions and procedures, the government still does not resonate with these industries. And caused the 1991 war in the Persian Gulf sudden austerity in travel, which left many of the hotels are empty until the war led by the United States ended a brief and travelers ventured out again. Also, some government leaders are more protectionist than others, which have a direct impact on such things as tariffs and foreign trade. In general, its a good idea to follow up the situation of political leaders with regard to business factors, as well as any signal with respect to their positions on certain industries. With regard to foreign investment, it is important to assess the stability of the system of government, as well as Attitude towards foreign investors. Major Innovations and Trends in Other Industries The final category, you must also follow the main trends and innovations in other industries than those that you are working at the moment. Competitive advantage rarely comes from the tradition of innovation from other companies in the same industry. Following the example of the initial selection of hotels and most hotels currently operating a range of brands, each one usually used different, but related, the brand name. Although the work in the hotel several levels is still an idea worth pursuing, at this point than it is to create a competitive advantage to match the competition. On the other hand, a company that is the first to successfully apply the heresy of other industry usually have first-mover advantage that is sometimes difficult to pressure competitors to mimic. While it is true that can be easily most of the hotels, industry and innovations can be copied, and examples of the ideas that emerged directly from the innovations and trends in other industries include hotels loc ations in large shopping centers, locate and described staurants re fast food in the shops the gas station, offering video screens personal Each seat of the plane, and identify business service centers within the hotels. After the completion of an analysis of the environment and wide, it is necessary to study the work environment. Environment and broad context in which the company, industry, and other external stakeholders are present. In contrast, the task environment includes external stakeholders with the organization interact on a regular basis to some extent, especially customers. External Stakeholders Michael Porter proposed that can be defined on the nature of competition in the industry by the market power of customers and suppliers, and the level of competition among companies, the strength of alternatives and barriers to entry. (16) despite the fact that these five forces socalled model stood the test of time, and boundaries of the process is also unclear. For example, despite the fact that Porters five forces approach helps to identify the competition by customers, suppliers, competitors, and alternatives to, barriers to entry, and it does not include an assessment of stakeholders other significant impact on industry and company performance, such as unions, financial institutions and the media , and local communities. Also, the model does not include political factors. Starting from Porters five forces 0.4 gallery contains a full description of the environment task. Strategic collection of information on external stakeholders for a variety of purposes, many of which are clear and self. If you run a hotel, for example, it makes sense to follow the preferences frequent guests to meet their needs more effectively. Also, you must study competitors to search for innovations in products and services, processes and strategies. In fact, it can come excellent ideas from stakeholders, almost any. Industries, hotels and restaurants clearly adept at this aspect of environmental monitoring task. Analysis is an important one to assess the impact of competitive, which stems from economic power and political power . Stakeholders with a strong influence big competitiveness requires more attention in the strategic planning process of doing this with less impact. And more powerful and stakeholders in the largest influence on the identification of strategies and more, you must try to anticipate the reactions that entity to any changes that may look. Stakeholders strong attractive candidates for partnerships. and the end of this section includes a table that displays the tactics that your company can be considered to establish partnerships with a variety of stakeholders (see Chart 5). Economic Power The influence of external stakeholders on the companys ability to compete is partly a result of the economic power which has stakeholders. As Porter pointed out, economic power gives stakeholders the ability to extract profits or other benefits at the expense of the Company subject. the first column in Gallery 4 examples of factors that give the different stakeholders of economic power. For the purposes of illustration, and will touch briefly on some of these factors to Walamlae, suppliers, competitors and trade unions. Customers and suppliers of power. There are a few of the customers with the company exposed to the risk of losing significant revenue and should be one client leave. Such a situation gives the clients economic strength. In general, customers are relatively strong, if a few or if they make large purchases. By the suppliers of the same vein, tend to be a great economic power if there is a hack only a small number of suppliers that provide precise type of commodity or service that is required. It is also a strong if there is a high level of differentiation across suppliers, or if you were not particularly concerned about the sale for you because you were not wide range of customers for them. Rival power. Competitors have economic power based on their ability to compete. May be players with strong resource bases are disproportionately to be aggressive and create strong competition. It is important to determine the nature of competition in all markets, as well as the industry as a whole. Competition in some key markets hotel pricing, for example, while in other cases it may be brand differentiation. In other markets is still the key to success is to identify the characteristics of the hotel near Qaim. He called the case of companies that have multiple properties in different markets and compete often against some of the same companies in many markets, and multi-point competition. In that case, it is important to assess the effects of strategic moves in one market responses to a potential competitor in other markets. The labor force. Greater economic power of trade unions when the work is a high degree of organization. Trade unions and the enormous economic influence in Germany, for example. The nature of the trade union work-related (such as strikes and slowdowns) also gives the economic power of trade unions, which may be exercised during contract negotiations. To some extent, and the size of the EU budget is also a factor in the power that it possesses. Unions can be large, big-budget to participate in activities to protect its members.
Sunday, January 19, 2020
Behaviourist Thoery Essay
E.L.Thorndike(1874-1949) was the chief exponent of th theory of connectionism or trial and error. He was an American Psychologist who conducted Stimulus – Response(S-R) theory experiment with the help of animals. Thorndike was the first to study the subject of learning systematically using standardized procedure and apparatus. All learning, according to Thorndike is the formation of bonds or connections between Stimulus- Response. The Puzzle Box Experiment Thorndike’s Experiment on cat in the puzzle is widely known and often quoted in psychology of learning. The experimental set up was very simple. A hungry cat was confined in a puzzle box and outside the box a dish of food was kept. The cat, in the box had to pull a string to come out of the box. The cat in the box made several random movement of jumping, dashing and running to get out of the box. The cat atlast succeeded in pulling the string. The door of the puzzle box opened, the cat came out and ate the food. He promtly put the cat to next trial. The cat again gave a lot of frantic behaviour but it soon succeeded in pulling the string. It repeated for several time, Thorndike noticed as the repetition increases the error also reduced i.e., Thorndike’s cat showed slow, gradual and continous improvement in performance over successive trials. He concluded that learning of cat in the puzzle box can be explained in term of formation of direct connectionism between stimulus and response. Features of Trial and Error Learning 1. Learning by trial and error is gradual process. 2. For learning to occur, the learner must be definitely motivated. 3. The learner makes random and variable response. 4. Some responses do lead to the goal (annoying response) 5. Some responses lead to the goal. (satisfying responses) 6. With the increase in number of trials the annoying responses will tend to be eliminated and the satisfying responses will be strengthened and repeated. 7. The time taken to perform the task (to repeat the satisfying response) decreases with successive trials. The experiment sum up the following in the process of learning: 1. Drive : In the present experiment, drive was hunger and was intensified with the sight of food. (motivation) 2. Goal : To get the food by getting out of the box. 3. Block: The cat was confined in the box with a closed door. 4. Random Movement: The cat, persistently, tried to get out of the box. 5. Chance of Success: As a result of this striving and random movement the cat, by chance, succeeded in opening the door. 6. Selection (of proper moevement) : Gradually the cat recognised the correct manipulation of latch. 7. Fixation: At last, the cat learned the proper way of opening the door by eliminating all the incorrect responses and fixing the only right responses. Through the experiment, Thorndike explains that the learning is nothing but the stamping in of correct responses and stamping out of incorrect responses through trial and error. Thorndike’s Laws of Learning i) Law of Readiness : The law states â€Å"When any conduction unit is ready to conduct, for it do so is satisfying. When a conduction unit is not ready to conduct. for it to conduct is annoying. When any conduction is ready to conduct, for it not to do so is annoying.†ii) Law of Effect: The law states â€Å"When a modifiable connection between a stimulus and response is made and is accompanied or followed by a satisfying state of affairs the strength of connection is increased. When a connection between stimulus and response is made and accompanied or followed by an annoying state of affairs , it strength decreases. iii) Law of Execise: The law states â€Å"Any response to a situation will, other things being equal, be more strongly connected with the situation in proportion to the number of times it has been connected with that situation and to the average vigour and duration of the connection.†The law has two sub parts: a) Law of Use and b) Law of Disuse a) Law of Use states that â€Å"When a modifiable connection is made between a situation and response that connection strength is increased if it is practised.†b) Law of Disuse states that â€Å"When a modifiable connection is not made between a situation and response, during a length of time, that connection’s strength is decreased.†This means, any act that is not practised for sometime gradually decays. Educational Implication 1. Thorndike’s theory emphasize the importance of motivation in learning. So learning should be made purposeful and goal directed. 2. It stresses the importance of mental readiness, meaningful practise and incentive in learning process. 3. The law of readiness implies that the teacher should prepare the minds of the students to be ready to accept the knowledge, skills and aptitudes before teaching the topic. 4. More and more opportunities should be given to the learners to use and repeat the knowledge they get in the classroom for effectiveness and longer retention. 5. To maintain learned connection for longer period, review of learned material is necessary. 6. The law of effect has called atention to the importance of motivation and reinforcement in learning. 7. In order to benefit from the mechanism of association in the learning process what is being taught at one situation should be linked with the past experience of the learner.
Saturday, January 11, 2020
Building a Coalition Essay
PART I: Group Development At this point in time, the group is not yet even development. It almost seems as if all the individual organizations are storming because they want to make sure that each one of their opinions is heard, and they have control of the situation. No one wants to give up their own power or control. They have started off correctly as it is stated in the case that HR representatives from each organization have been selected to pick individuals from each organization that they feel will have the best impact and will be proficient leaders. The individuals chosen need to understand the stages of group development to help them get along and build a cohesive coalition. They will have to understand that the initial stage will be the forming. Here the newly formed group will test each other out. They will be able to get a feel for whom their co-workers are, what strengths and weaknesses each member has, and they will be able to develop a set of guidelines on what is acceptable behavior for the mem bers. This is when they realize that they are no longer individuals representing just their organizations but instead their own group of people representing the students, and the students’ best interests with the backing of their individual organizations. They will lead into storming, where they will butt heads over power and what steps to take first. I believe here is where the true leader of the group will come out. It will be the individual who will be able to get the storming under control, get everyone to focus on what the main goal is and will help guide the group into the norming stage. In the norming stage, the main goal will be highlighted, the scope of the project defined, and a project plan created. Goals and guidelines will be set along with milestones and progress meetings. This is where they will start feeling like a group and start feeling like the project is finally moving along, and they all know how to get to the end. This leads us into performing, where the team moves forward with the project working together and adjusts timelines as needed, resolving issues, and getting the job done. The final step is adjourning where the project will come to a wrap. The team will have a guidebook to help train any new personal that will be coming in and to help further build what they have already started. Knowing the steps of group development, help guide team members to establish proper guidelines not only for the project but for their own person behaviors. It helps members realize their own strengths and weaknesses and how the team can build upon those to make everyone successful. It also teaches the team how to function well together, develops relationships, and help motivate each other. All this is important in keeping the group motivated and keeping a positive dynamic to the group. PART II: Problem Identification The initial problem the group will face is for power. Each organization wants to make sure that their opinions are heard, and each feels that they are the most correct and should have the most power because they have the best influence and the students’ best interests in mind. Getting everyone on a common ground will be the hardest part since it seems that everyone thinks that they are right. Egos will need to be put aside and the storming phase may be longer than anyone would really like. As I had mention, before the true leader will come out of this phase and be the one that will be able to get a handle over the group. This will be an individual that everyone will respect and be able to relate to. I do not feel that there was much that there was much that could have been previously done in essence to understanding individual membership in teams to prevent the issue of the power struggle. This seems to be an ego struggle and also a difference of opinions. Everyone feel like they know what is best for the students and want to be involved, and have their opinion heard. In this case each organization is correct in their own way. Developing a coherent plan will be the biggest struggle incorporating everyone’s opinions as much as possible and trying to please everyone at the same time will be the additional struggle. The plan will have to be easy enough to follow so that it can be implemented as quickly as possible now and slowly change as time goes on. It will be easier for students to adjust to the smaller changes over a longer course of time, than having their worlds turned upside down all at once. Also implementing changes a little at a time will help teachers to adjust and keep up their motivation and not be burnt out too quickly as students will be less resistant to small changes. This will also help with training new staff members as they come in. Having a handbook to guide further changes will help to continue moving the project forward in further years, and keep up with the progress of changed making sure the project stays successful and is not just a quick fix. PART III: Retrospective Evaluation The primary problems will be the power struggle and diversity will also play a role in this power struggle, and who relates best to the students. Also another issue will be making sure that the individual organizations feel that they are being equally represented, and heard. Each individual has their own struggles and comes from different backgrounds, we cannot judge what we have not gone through and cannot say how it affects that individual. Each member is here because they can relate to the students in their own personal way. We will need to put our own personal issues aside for the better of the students. Again the storming phase maybe long and members learn to work together and get over their difference. Each organization will have to give up power and the group that is made up of the representatives from each organization will have to identify themselves and their own organization not 3 individuals. Picking the team members will be the most crucial. The members cannot be egotistical but should also be respected members from their individual organizations. They will have to work together to come up with a project plan that they feel is the best way to proceed forward and will have to also convince their individual organizations and the community that they are making the best decisions. The pros of developing one main group to represent all and having this group break off and be seen as their own will help develop a stronger group dynamic between these individuals. The more they feel like a group the more they will be able to convince their individual organizations that they are being equally heard and that their opinions and suggestions are being incorporated into the overall plan. There may be backlash from the organization that they are developing on their own but this will need to be done in order to establish authority, and not have individual organizations trying to go behind the backs of the group and work on their own. The biggest issues will be with establishing authority and making sure that each organization feel that is it being equally represented and their opinions are being heard and incorporated. PART IV: Reflection Diversity is an issue that is long over do in needing to be resolved. We as American’s need to embrace that we are a culture made up of many differences. We are the mute! This school and its new program for helping these students should be a great representation of that. These students will be representing our future and they can show that when differences are put aside and people work hard to work together they can be successful. Each individual contributes something and makes up for where the others lack. Difference should be embraced because they can show us a new way of thinking, acting, or doing. We should forever be evolving. My advice to program leaders would be to set your difference aside. Let us find what our common goal is and see how we can get their together. Ask what peoples string suites are, what their weaknesses are, and even what they would like to learn from this. This gives each member a sense of ownership to the project and will help keep them motivated by giving them their own individual goal to work towards succeeding. Giving them a their own sense of ownership to the project gives them a sense of pride to the project and will help lead them.
Friday, January 3, 2020
Financial Sources Avalible To New Businesses Finance Essay - Free Essay Example
Sample details Pages: 16 Words: 4695 Downloads: 3 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? For many businesses, the issue about financial sources (where to get funds from for starting up) can be crucial for the success of the business. They are divided into internal and external sources. We have to choose the best financial option in order to open our new retail pharmacy. In fact, the type of finance being chosen will depend on what kind of business and how much money is needed and how the money is spent. Don’t waste time! Our writers will create an original "Financial Sources Avalible To New Businesses Finance Essay" essay for you Create order 6.1 Internal Sources 6.1.1Personal savings Personal savings are amounts of money that a business person, partner or shareholder has at their disposal to do with as they wish. For example, if someone uses his or her savings to invest in his or her own or another business, then the source of finance comes under the heading of personal savings. The financial sources of our new retail pharmacy is solely from our personal savings with each of us comes out with RM 100,000. Therefore, the sum of our capital is RM 500,000 from 5 individuals. However, there are other financial options available other than personal savings such as from family and friends (internal sources), from banks, outside investors, grant and community development finance institution (external sources). 6.1.2 Family and friends When the money is insufficient to start a new business, friends and family may be willing to help. They might lend money for the new business or they might invest in the business, such as by buying shares. A written agreement in place that sets out terms and conditions, including any interest and repayment terms should be made to avoid misunderstandings. Advantages Friends or family may be more willing to lend money than a bank, particularly if security for a loan is not provided. Friends and family may offer easy terms such as an interest-free loan. It should make it easier to get additional finance from the bank if some finance can be raised from own resources or friends and family. 6.2 External Sources 6.2.1 Bank After a credible business plan is made, borrow from a bank is much easier. Many businesses use overdrafts for day-to-day borrowing and loans to finance large purchases such as equipment. Moreover, when business is likely to have peaks and troughs in its cash flow, its essential to be able to clearly illustrate these to the bank so an overdraft can be planned. 6.2.2 Outside investors A larger business with good prospects might attract outside investors. For example, business angels typically invest RM 100,000 or more in exchange for a share in the business. 6.2.3 Grant Some of the business is qualified for a grant from government. For example, if a business is setting up in a deprived area. 6.2.4 Community development finance institution If your business is setting up in a deprived area, or in a sector that is not normally catered for by mainstream lenders, finance from a community development finance institution will be an option as well. 6.3 Accounting 6.3.1 Introduction Accounting is a process of: i. Collecting source documents as evidence of transactions and as the source for recording business transactions. ii. Recording relevant details from source documents in the respective books of prime entry. iii. Summarising from the books of prime entry and transferring these summaries to the respective ledgers. iv. Communicating the accounting information to users, by preparing the financial statements. Figure 8: The Accounting Cycle Source Documents are written documents that contain details of the business transactions. They provide evidence that the transactions have taken place. Source Documents Explanations Invoice To inform customer the amount to be paid, amount of discount given, whether in cash or credit term and interest charges for late payment. Credit Note To deduct an amount overcharged in the invoice, e.g. returns of goods from customers. Debit Note To add to the amount of Invoice for any additional charges, e.g. transport fee, interest charges and any amount undercharged. Cash Bill Same as invoice. Used only when transactions is on cash terms. Payment voucher To record the payment by cheque or cash. Official receipt To acknowledge money has been collected. Memo A written note from the management to inform about decision on certain transactions. Table 1: Sources of documents The 7 Books of Prime Entry record the daily business transactions in chronological order based on the source documents. The 7 Books of Prime Entry Explanation Cash Book Cash/cheque transactions Petty Cash Book Small amount of daily payments, such as stationery, wages for cleaning and minor repairs. Sales Journal Sales of goods on credit terms. Purchases Journal Purchases of goods on credit terms. Sales Returns/ Returns Inwards Returns of goods that were sold on credit terms. (defective/damaged goods) Purchase Returns/ Returns Outwards Returns of goods that were purchase on credit terms. (defective/damaged goods) General Journal All other business transactions. Table 2: The 7 Books of Prime Entry The 3 ledgers are the final sets of accounts containing the summarised accounting information that have been transferred/ posted from the books of prime entry, using double entry system. The 3 Ledgers Explanation General Ledger This is the main ledger that contains all the accounts that summarises all the business transactions that occurred. Sales Ledger Contains all the individual trade receivables accounts (customers on credit terms). Purchase Ledger Contains all the individual trade payables accounts (suppliers on credit terms). Table 3: Ledgers 6.3.2 Management and Financial Accounting Management Accounting is an area of accounting associated with providing financial and other information to all levels of management in an organisation to enable them to carry out their planning, controlling and decision making responsibilities. It is used in all forms of organisations-profit-seeking and not-for-profit business undertakings; sole traders, partnerships and companies; retailing, manufacturing and service businesses; and government. Management accounting covers: Cost behaviour and cost-volume-profit relationships, Decision making through incremental analysis, Budgeting for financial planning and control, Capital budgeting, Accounting and reporting for business segment operations. Financial Accounting is concerned with reporting information to users external to an entity in order to help them to make sound economic decisons about the entitys performance and final position. Types of reports used in management accounting and financial accounting are as below: Management accounting Financial Accounting Special-purpose reports for internal users: Financial budgets Sales forecasts Performance reports Cost-of-production reports Incremental analysis reports Do not have to comply with accounting standards. General-purpose financial reports for external users: Balance sheet Income statement Statement of changes in equity Cash flow statement Required by regulatory authorities; must comply with accounting standards. Table 4: Differences between management accounting and financial accounting We need accounting information (i.e. financial statements) to aid in decision making, planning, control and coordination of our pharmacy business activities. Apart from this, our finance providers (i.e. banks and financial instituitions who lend money to a business) need to ensure our finance stability and ability to repay the amount borrowed (principal sum) and pay interests. 6.3.3 Basic Financial Statements Three types of information contained in financial statements serve to inform users about the entity. Firstly, we want information about our business performance. As a business entity, information about its ability to earn profits is an essential part of our financial reports. The second type of information that is necessary for making decisions about our entity is its financial position. The financial position deals with the economic resources controlled by an entity, its financial structure, its capacity to adapt to changes in its environment, and its liquidity and solvency. Lastly, information about the entitys cash flows is useful for us to assess the entitiys operating and financing activities. Operating activities includes: The collection of cash for service provided, The sale of goods to customers, The purchase of goods for sale, The payment for supplier for goods or services purchased, Collection of debts from customers, Payment of wages to employees and The payment of income tax to the government. On the other hand, financing activities engaged by our business would probably includes raising of capital by issuing shares or borrowing money from financial institution, and the repayment of these borrowed funds. The Balance Sheet reports the financial position of an entity at a specific point of time. The financial position is reflected by the assets of the entity, its liabilities or debts owed, and the owners equity. 6.4 Balance Sheet Statement 6.4.1 Balance Sheet Definition A balance sheet is a complete view of how a business is doing financially. The balance can be prepared in one of two ways: By using a general ledger, By adding all of the assets, liabilities and equities to your balance sheet. 6.4.2 Why Is Balance Sheet Important? A Balance Sheet is important because it gives the information of a business financial situation at any given time period. 6.4.3 How to Read A Balance Sheet? The balance sheet is broken down into three main sections. The top section includes the company name, the title of the company and the time period of the form. The assets section is one of the two sections below the top section. This section includes all of the companys assets. The assets are the items the company owns which may include, accounts receivable, inventory, equipment, furniture, automobile, prepared expenses and so on. The liability section is on the other side of the asset section. The liabilities may include items like, accounts payable, notes payable, interest payable, payroll accrual, long term liabilities, short term liabilities and so on. The equities can be included on the same side as liabilities. The equities are shareholders and the owners equities (what the owner has put into it). It includes such items as; capital, stock, retained earning and so on. If, the assets are more than the liabilities and equities you will have a net profit. But, if the liabilities and equities are more than the assets you will have a net loss. Assets= Liabilities + Owners Equity Assets Liabilities + Equities Net Profit Assets Liabilities + Equities Net Loss Balance Sheet Template 1 Sample Business Plan Balance Sheet Template For the Month Ended ______. Right Side      Current Assets Fixed Assets Other Assets  Left Side Current Liabilities  Long Term Liabilities  Shareholders Equity  Balance Sheet Template 2  Sample Business Plan Balance Sheet Template For the Month Ended __________.  Assets  Current Assets               RM_______ (Cash)  Petty Cash                      RM_______  Accounts Receivable    RM_______  Inventory                         RM_______  Short Term Investments  RM______  Prepaid Expenses           RM_______  Long Term Investments  RM______  Fixed Assets (Land)       RM______  Buildings                          RM_______  Improvements                 RM_______  Equipment                         RM_______  Furniture                           RM_______  Automobile / Vehicle      RM______  Other Assets  1.                                        RM_______  2.                                        RM_______  3.                                        RM_______  4.                                        RM_______  5.                                        RM_______  6.                                        RM_______  7.                                        RM_______  8.                                        RM_______  Liability  Current Liabilities            RM_______  Accounts Payable               RM_______  Notes Payable                     RM_______  Interest                                RM_______  Payable                                RM______  Taxes Payable                     RM_______  Federal Income Taxes                                    RM_______  State Income Taxes                                    RM_______  Self Employment Tax                                       RM_______  Property Tax                                        RM_______   Payroll Accrual                  RM_______  Long Term Liabilities        RM_______  Notes Payable                     RM_______  Total Liabilities                  RM_______  Net Worth (Owner Equity)                   RM_______  Proprietorship                     RM_______ or Partnership                         RM_______ or Corporation                         RM_______  Capital Stock                       RM_______  Surplus Paid In                   RM_______  Retained Earnings              RM_______  Total Net Worth                  RM_______ Total Assets                 RM_______ Total Liabilities           RM_______ The Income Statement (also known as profit and loss statement or an operating statement) reports the results of financial performance for a specific time period. Profit for the period is the excess of income over expenses for that time. If expenses for the period exceed income, a loss is incurred. The statement of changes in equity serves as a connecting link between the balance sheet and the income statement, and explains the changes that took place in equity during the period. 6.5 Accounting for a Partnership Most partnerships are not reporting entities and hence do not have to comply with accounting standards and financial reports are thus special-purpose reports. In a partnership, ownership interests generally are not equal because the capital investments and drawings of each partner vary over time. The profit or loss reported each accounting period is distributed to the partners in accordance with the partnership agreement. There are two commonly used methods for accounting equity in a partnership: Method 1: use of Capital accounts for each partner which record capital contributed and withdrawn; and each partners periodic share of profits and/or losses. Method 2: use of Capital accounts with fixed balances for each partner reflecting only the capital contributed and capital withdrawn. A partners share of profits and/or losses and drawings from profits are recorded in separate Retained Earnings (or Current) account for each partner. 6.5.1 Allocation of partnership profits and losses We consider 3 elements in establishing an equitable way to allocate profits and losses: A return for the personal services performed by the partner, A return on the capital provided by the partners, A return for the business risks assumed by the partners. Others more common profit and loss sharing agreements includes: A fixed ratio, A ratio based on capital balances, A fixed ratio established by the partners after allowing for interest on capital contributions and salaries to partner for services rendered to the partnership. 6.5.2 Financial Statements for a Partnership If the partnership is not a reporting entity, it will prepare a special-purpose report. If the partnership is a reporting entity, it must prepare general -purpose financial reports complying with accounting standards. Each individual partners equity in business is reported separately on the balance sheet or in a separate statement of changes in partners equity; so does the profit or loss allocation for a specific period. Also, salaries authorised for each partner, interest on capital investments and interests on drawings is recognised as an allocation of profit. In our retail pharmacy, the partnership is a reporting entity, therefore, a general -purpose financial reports are prepared which are complying with accounting standards- an income statement, a statement of changes in partners equity, a balance sheet and a cash flow statement. 6.6 Computerized Business Managing System We have chosen a computerized business managing system called POS, which stands for Point of Sale. This technology is widely used in retail business management. When a customer would like to purchase an item or pay a bill, the POS system is extremely useful to register the purchase, keep track of inventory, and purchase details such as time, date and store location. These data are saved in the database which then can be used for getting information or records from a huge amount of data (data mining). POS systems usually work via infrared bar code readers, a register and bar code reader are connected to a computer terminal. The consumers are benefited because the check out is fast, reliable and accurate. On the other hand, we are able to keep track of daily sales as well as departmental sales analysis and have the sales record for future reference. Another advantage of POS system is the ability to manage the account of the pharmacy business. The accounting software system includes the system as followed: Debtors System. Creditors System. General Ledger System. Stock System. Sales Invoicing System. Sales Order System. Purchase Order System Consignment Stock System Club Membership System. Equipment Warranty Tracking System. 6.7 Taxation Income Tax is defined as incomes of individual or companies which are derived from Malaysia or received in Malaysia. Income Tax Act 1967 is the principal statute on taxation and the following are sources of income that are subjected to tax: income from employment, trade, profession and business dividends and interests premiums other form of income 6.7.1 Company Tax All companies in Malaysia are taxed at the rate of 26% on the total income. However, tax from corporation is reduced to 25% in year 2009. 6.7.2 Personal Income Tax The taxation rate depends on the individuals status that is determined by the period of stay in the country, under Section 7 of the Income Tax Act 1967. Generally, individual who is staying in Malaysia for more than 182 days in every year is subjected for taxation. However, a non-resident individual is subjected to tax at rate of 28%. Income Tax is defined as incomes of individual or companies which are derived from Malaysia or received in Malaysia. SECTION 7: LICENSING Before establishing a new retail pharmacy, we need to apply the business license and license A so that we can run our business legally. Those forms can be downloaded from the respective website. The forms that are required include: 7.1 Premise and signboard license application form 7.2 Pharmacist annual retention form 7.3 Business name application form 7.4 Architecture checklist form 7.5 Fire extinguisher examination and approval form 7.6 Business license supporting form 7.7 Business advertising form SECTION 8: HUMAN RESOURCE ORGANIZATION STRUCTURE: Owners / Presidents 1. FUM HOANG JEN KOK LE FEI LAI YIK SHAN LIM SYOK HUA PHUA LI YUNG Sales person Cashiers Assistant Pharmacists Accounting Manager Drugs Manager / Supervisor (Pharmacist) Sales / Marketing Manager / Supervisor Clerk The retail pharmacy is owned by us, the 5 registered pharmacists whose name Fum Hoang Jen, Kok Le Fei, Lai Yik Shan, Lim Syok Hua and Phua Li Yung. A marketing manager is employed for managing the sales and marketing of the pharmacy business. He or she is in duty to come out with marketing strategies to increase the profit and build up the reputation of the pharmacy business. In addition, 2 cashiers and 2 sales people are employed to assist the operation of the pharmacy business. Furthermore, among the 5 of us, one of us will be the drug managers or supervisors while being in the possession of presidents of the pharmacy. The other 4 of us are hospital pharmacists who are just the partners of the pharmacy business. Besides that, 2 assistant pharmacists are employed to in our pharmacy. On the other hand, an accounting manager is employed to do the accounting of the pharmacy business. Additionally, an accounting clerk is also employed to assist the accounting manager. SECTION 9: PHARMACY MERCHANDISING Pharmacy merchandising involves the proper placement of goods on pharmacy shelves. The space of a pharmacy available for goods to be displayed is limited by the size and design of the store. Therefore, our retail pharmacy separates the space of our pharmacy into departments or sections that contain major categories of products. In fact, merchandise in a pharmacy tends to flow from one department to the next. This flow is accomplished by placing related departments next to or near each other so can attract the attention of the target customers. For example in our retail pharmacy, beside the cosmetic area is the area arranged with hair care products, oral care products and skin care products. The target of these products is normally the female customers. So, if they are placed beside the cosmetic area, they are more accessible to the female customers. Pharmacy aisles should be taken into consideration as well as aisles are of various lengths and heights. If an aisle is longer, cross aisles should be provided. Cross aisles are a break in a long run of shelving creating an aisle that allows customers to move easily across the store. In our retail pharmacy, cross aisles are provided for smooth traffic flow and increase visible space for item placement. Moreover, our retail pharmacy uses the space at the beginnings and ends of the aisle runs where these spaces often are referred to as end caps. We use end caps in our retail pharmacy to display promotional and seasonal items, bulk items, impulse items and new products to highlight specific products in order to gain shoppers attention. In addition to this, floor-stand displays will be used in our retail pharmacy to place large quantities of an item on display and making the products easily accessible to consumers as manufacturers often supply these displays and other promotional materia ls to pharmacy to highlight their products. Pharmacy shelves are used for storing and displaying drugs and related items. The biggest challenge with these shelving would be that the shelves should be easy to clean. The pharmacy shelving used in our retail pharmacy is shelves that are blend functionality with flexibility with high quality shelving display to draw customers into our pharmacy. More storage, less space, easy to install, easy to clean and maintain are the key criteria for our retail pharmacy shelves. Figure 9: Pharmacy shelves for oral care, skin care and hair care products Figure 10: Pharmacy shelves for supplements and OTC products SECTION 10: PHARMACY SERVICES Pharmacists are the more frequently and more accessible to patients or often see on a consistent basis compared to doctors. This is because no appointment is needed to see pharmacist where customers can talk to pharmacists in confidence even about symptoms that are very personal. In order to provide a more comfortable place for our customers, there is a counseling room in our pharmacy to provide privacy for our customers. There are many services available in our retail pharmacy include: Full clinical medication review our pharmacists will review the prescribed medicines written on the prescription where this service is about having an in depth look at the medicines to confirm the dosage, strength, frequency and drug-drug interactions before dispensing. Dispensing and counseling of medicines our pharmacists will dispense the medications after a full clinical medication review and will counsel the patients on the indication, instructions of use, side effects and the expiry date of the medications. One-to-one consultations is provided to ensure patients are getting the most information on the medicines particularly useful for those patients on multiple or long-term medication. Advice on supplements our pharmacist will provide knowledge on the variety of supplement available and assist customers in purchasing supplement products for certain medical conditions. Minor Ailments Service our pharmacists are able to provide treatments for a range of minor ailments such as athletes foot, headlice, allergic conjunctivitis, dandruff, acne and other minor ailments. Stop smoking service our pharmacists can help patients give up smoking through advice, support and if appropriate the Nicotine Replacement Therapy. Blood pressure testing our pharmacists can check your blood pressure and offer lifestyle advice about how to stay healthy. Cholesterol testing Our pharmacists can offer a simple finger prick test that can reveal the cholesterol level and give advice on how to reduce cholesterol level and stay healthy. Blood glucose testing Our pharmacists can offer a simple finger prick test that can reveal the blood glucose level and give advice on how to keep it low or reduce it as having too much glucose in blood may indicate a greater risk of diabetes. Family planning Our pharmacists can counsel couples about the information on family planning by providing knowledge on the medications available such as OCP (Oral Contraceptive Pill) or other additional contraception method such as condom. SECTION 11: INSURANCE 11.1 Introduction The primary risk exposure for pharmacists was related to traditional business risks (i.e., fire, theft, etc.), coupled with negligence related to prescription-filling errors. Modern pharmacy practice now must also consider new risks related to the use of technology and electronic data transmission, patient counselling and drug utilization review requirements, and protected private health information. 11.2 Definition of risk Risks are asscociated with negative outcomes. A risk may best be described as some degree of probability that exposure to a hazard will lead to a negative outcome or consequence such as loss, damage, injury or death. 11.3 Criteria for insurable risk For a pure risk to be insurable, it must meet certain requirement: The loss must be measurable in dollar figures, easy to measure, and result in a substantial loss. The loss must have a defined time and place. The loss must be accidental for the insured. There should be no prospect of gain or profit for the individual. The probability of the event occurring in a population can be accurately calculated. There must be a sufficiently large number of homogeneous individuals with similar risks to make losses predictable. The insured must have an insurable interest. Compensation cannot be awarded to those not actually suffering the loss. The insurance premium must be available for a reasonable cost. One would not want to pay an insurance premium greater than the value of the item insured. For our retail pharmacy, a risk management process should be developed to analyze and identify strategies to manage risk threats in order to protect the vital assets of a pharmacy through coping with uncertainty. This process involves not only identifying risks but also assessing the threat potential and making decisions on managing those risks. There are many types of insurance for a pharmacy. The geographic location, type of practice and services offered will influence the types of insurance needed. In fact, the risk management process is a continuous process, and periodic evaluations are necessary to address new or emerging risk threats to the pharmacy. 11.4 Types of Insurance For our retail pharmacy, the types of insurance that needed to protect our pharmacy include: Figure 11: Types of insurance needed 11.4.1 Property Insurance This is one of the most common types of insurance for protecting the property and physical assets of any business entity. The policy Scope of Cover Destruction to the property insured whilst contained in the business or trade premises arising from: Theft consequent upon actual forcible and violent entry into the insured premises Theft or any attempt thereat by a person feloniously concealed on the said premises Hold up or armed robbery Damage to the building due to theft or attempt thereat. 11.4.2 Public Liability Insurance The Public Liability Insurance Policy is designed to protect in order to pay compensation for accidental damage to the property of the other person caused by or through the negligence of the insured or his employees or by any defect in the premises owned or any defects in the ways, works of the insured. In addition, the Policy also pays for the litigation costs and expenses for defense that are incurred with the written consent of the Company. The policy scope of cover The company shall indemnify at law for damages and claimants expenses in respect of: a. accidental bodily injury to any person not being a member of the Insureds household or any person in the service of the Insured. b. accidental damage to property not belonging to or in the custody or control of the Insured. c. any legal expenses incurred by the Insured in defending legal proceedings with the Companys written consent. 11.4.3 Professional Indemnity Insurance Professional Indemnity Insurance is effected to protect professional persons who supply a skill or service and owe a duty of care to their clients. The policy will indemnify in the event of any breach of professional duties or responsibilities by reason of any negligent act wherever committed or alleged to have committed by the Insured or any person who may enter into the firm insured in a professional capacity or any person employed by the Insured. The policy scope of cover Unlike other general liability policies, Professional Indemnity policy normally provides indemnity to the Insured against financial losses only arising from the provision of professional services. Indemnity for defence costs and expenses is also provided. 11.4.4 Employers Liability Insurance Employers Liability Insurance Policy is designed to provide indemnity to the Insured against his liability at law and claimants cost for bodily injuries or diseases to Insureds Employees. The policy scope of cover The Employers Liability Insurance Policy indemnifies the Insured in order to pay compensation and claimants costs and expenses in respect of the bodily injury by accident or disease to the Insureds Employees for which he is liable and pay all costs with the company. 11.4.5 Fire Insurance Fire Insurance provides protection for losses to property such as buildings, contents, furniture, plant and machinery as well as stock. The basic fire policy covers losses and/or damages caused by fire, lightning and domestic gas explosion. The basic fire policy can be extend to cover loss or damage caused by the extraneous perils such as: Aircraft damage Earthquake volcanic eruption Bush/Lalang Explosion (with / without boilers) Impact damage by vehicles Subsidence landslip Riot strike malicious damage Storm tempest Flood Damage by falling trees or branches Spontaneous combustion Sprinkler leakage 11.4.6 Fire Consequential Loss Insurance Fire Insurance covers physical loss or damage to property insured but does not include resultant losses in business profits and due to partial or complete cessation of operations. The Fire Consequential Loss policy also allows you to pay the continuing overheads or standing charges such as rent, mortgages and loans, salaries / wages of employees not gainfully employed during the interruption including payments to employees whose services are no longer required, additional working expenses reasonably incurred to reduce the effects of damage on the business such as renting of temporary premises and hiring of machinery or additional labour costs.
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