Then, I think that the form of business ownership that I would like to recommend for Luke’s new business is that he can form a partnership business in which he can partner with his housemate Eric. Firstly, I think that Partnership Company is easier to form and it also easier to be manages. Because forming a partnership business do not need high capital in which that they just need a few hundreds ringgit to start the business and it is easier to manage because Luke is specialized in Information Technology in which he will provide lesson to others while Eric which is specialized in Business. Therefore, if they form a partnership business they will have sufficient skill and knowledge. Secondly, I think that forming partnership is good for them because Luke do not have sufficient capital to start his business, so if they become partner they will have sufficient capital for them. Thirdly, starting a partnership business is lack of legal requirement. Fourthly, partnership is good because it will become a source of motivation to each other’s and support. Fifthly, when their business become much better, they can the partnership into private limited in which they can sell their shares so as to have much more capital to form the largest company.
After that, the forces in the business environment in which can potentially affect Luke’s business are based on ‘Porter’s Five Forces’. Firstly, the forces which potentially affect Luke’s business are rivalry among existing competitors is high because of the number of competitors’ increases. The competitors become more equal in size and capability because the business that Luke’s going to start with already got others firm which much larger therefore I think that when Luke start the business he need to put a fair price or much more lower than other firms. Besides that consumers always switch to other company easily therefore he need to make those consumers become loyal customer in which that will keep them stay on his new form business. For example, Luke can give some bonus to his customers once in awhile so as to maintain a good relationship with his customers. Secondly, threat of new entrants is high because the capital to start this business is low and the only little time required entering this market and competing effectively. Therefore, Luke need to be very specialized in this business in which that all the customer will be introduced this company to others. And government should come in handy because government should create a barrier so as to gain economies of scale. Then Luke’s business need to gain technology and specialized know-how I which that the technology is important because he need the latest technology to advanced his teaching lesson on how to use internet. In addition, Luke need to have possession of patents in which that if competitors copy Luke’s business patent, Luke can sued the company. For example, Edwin Land introduced Polaroid camera in 1947 and held a monopoly in the instant photography industry, then, in 1975, Kodak attempted to enter instant camera market and sell comparable camera. After that, Polaroid sued for patent infringement and won. Thirdly, threat of substitute will increase if the relative price of substitutes decreases because consumers attempt to have something with a high quality and in a lower price. Besides that, if consumers’ switching cost is high therefore they will not switch to other tutor to teach. For example mobile phone, the switching cost for IPhone switch to Nokia is high therefore consumers will not switch their phone because of the cost. Fourthly, one of the forces of business environment is bargaining power of buyers. This bargaining power of buyers increases when there are few of having power and influence over others buyers and many sellers in an industry. Besides that, if the product is standardized the bargaining power of buyer will be much greater because the product is simple and can be get anywhere. However, if the products that are provided are unique, the power of bargaining for buyers will be lesser in which that the products will be more special from other firm. In addition, Luke’s have to give more information about what will be provided in the lesson, prices and cost. And, if Luke did not provide sufficient information, the bargaining power of buyer will be greater. For example, a restaurant which has unique dishes therefore, the consumers cannot bargain about the price because it does not have at other restaurant. Fifthly, bargaining power of suppliers will increases when there are just a small number of suppliers in which that if Luke’s need to up-to-date for his technology, he can’t bargaining much about the price because he do not have much choice for him when there are just a small amount of suppliers. For example, internet services in Malaysia are Unifi, Celcom, Maxis, Streamyx, and much more, therefore we can choose those with a better services if the switching cost is low.
