Term 1 : The micro-environment, business functions and quality


Vision, mission statement, obiectives and goals

Vision and Stategry

An aspirational description of what an organization would like to achieve or accomplish in the mid-term or long-term future. It is intended to serves as a clear guide for choosing current and future courses of action.

The planning and actions rr-hich top management take a meet their vision is called a strategy.

Mission Statement

A mission statement is a short sentence or paragraph used by a company to explain, in simple and concise terms, its purpose(s) for being.

A mission is different from a vision in that the former is the cause and the latter is the effect; a mission is something to be accomplished whereas a vision is something to be pursued for that accomplishment.

Objectives (purpose) and goals

Goal is something which we strive to achieve. Purpose is something that influences goal. Purpose is the reason for achieving the goal.

Objective is the specific action which one try to achieve as a short term plan.



Organisational culture and resources

Organisational culture

The culture of an organisation is based on three key issues: value, beliefs and purpose.

  • Value could include the upliftment of disadvantage people and equal job opportunities.
  • Belief in business could be where an organisation feels that their employees should dress as they are comforatble at all times
  • Purpose the business should not only focus of generating profit but should also be socially resbonsible by uplifting others.

Organisational resources

To start a business, an entrepreneur needs to have, or have access to, organisational resources which are:

  • Human resources Human resources is used to describe both the people who work for a company or organization and the department responsible for managing resources related to employees
  • Physical resources / operating resources include raw materials, office furniture, equipment, machinery, delivery vehicles as well as the prernises (building or plant) necessary to operate the business successfully.
  • Financial resources in the form of cash, bank overdrafts, short and mediumterm Ioans. These financial resources are necessary to buy stock or raw materials for the business and to pay everyday expenses such as water, electricity, stationery, wages and salaries to run the business.
  • Technological resources - include computers, voice mail and e-mail or production technology. Production technology could gve the business an advantage over its competitors, so it needs to be protected by patent right or copyright to prevent competitors from imitating it.


Business management, leadership and organisational structure

Management and leadership

Management is a tasklfunction performed by a manager. Managers are in charge of the running of a business. Their most important tasks include: planning, organising, leading and controlling (POLC).

Leadership is a relationship or social interaction whereby the leader influences other people by motivating and inspiring them. Leaders have a vision for their businesses and are always looking for new businesses.

Organisational structure

The typically hierarchical arrangement of lines of authority, communications, rights and duties of an organization. Organizational structure determines how the roles, power and responsibilities are assigned, controlled, and coordinated, and how information flows between the different levels of management.

A structure depends on the organization's objectives and strategy. In a centralized structure, the top layer of management has most of the decision making power and has tight control over departments and divisions. In a decentralized structure, the decision making power is distributed and the departments and divisions may have different degrees of independence.

Example of an organisation structure (organogram)


The Eight Business functions

In order for a Business to operate successfully it has to have this 8 business function in place.

Management can be divided into 8 business functions

  • GENERAL MANAGEMENT FUNCTION
  • PURCHASING FUNCTION
  • PRODUCTION FUNCTION
  • HUMAN RESOURCES FUNCTION
  • FINANCIAL and Accounting FUNCTION
  • MARKETING FUNCTION
  • PUBLIC RELATIONS FUNCTION
  • ADMINISTRATIVE FUNCTION

Role and Importance of the 8 business function

  • makes it easier for business to reach it goals
  • ensures sustainablilty of the business
  • makes the business easier to operate
  • business operates much better

Small business

With a small business all eight business functions are managed by a single person who started the business.

Businesses with an annual turnover of less than R5 million are consided small business in south africa according to the South African Revenue Services (SARS).

Medium-sized business

As a business grows some role will be given to certain people to handle different parts of the business functions e.g A Marketing manager maybe appointed to fulfill the marketing function.

Corporate business

Should the business grow to a point that warrants the business becoming a company, the role and importance of the business functions will change again. Each function will have its own director to make all the strategic decisions pertaining to that function. Board meetings will be held to ensure that there is complete interaction and interdependence (called synergy) among all the business functions.



GENERAL MANAGEMENT FUNCTION

  • Develop, implement and monitor effective strategic plans.
  • Organise in an effective manner by ensuring that all departments have the necessary resources.
  • Ensure that structured standards and norms are in place so that control mechanisms can be implemented.
  • Learn about and understand changes in the business environment on an on-going basis.
  • Set direction and establish priorities for their business.
  • Communicate and share vision, mission statement and values effectively.
  • Be proactive and always seek to improve comparative advantage over competitors.
  • Take disciplinary steps against employees when the need arises by following the correct disciplinary procedures.

What are the Levels of Management

  • Top-level management - are responsible for the business as a whole. They determine the mission and goals e.g CEO and board of directors
  • Middle-level management - are responsible for specific departments in the business, such as finance, marketing etc...
  • lower-level management - alsi called supervisory-level management These managers are directly reponsible for a high level of productivity and also assist in motivating employees and accomplishing day-to-day objectives.

What are the Four Management tasks

  • Planning
    • Helps business outline what the business do to acheive its goal
    • Helps know how to reach its targets
  • Organising
    • Helps puts the plan into action
    • Minimises cost by making best of resources and time in the business
  • Leading
    • Motivates and ensourages employees
    • set good examples to look follow
  • Control
    • Creating realistic standards to measure the performance of employees

Risk management

Risk management is the identification, evaluation, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities.

The role of risk management is to design a risk management process with includes:

  • Identifying possible risks
  • Analysiing each risk
  • evalute the potential impact of risk
  • controlling or monitoring the risk
  • treating the risk by determining what actions should be taken

Different levels and tasks of management within a public or private organisation

The application and implementation of the different levels of management and the clifferent management tasks is exactly the same whether it is for a private organisation, such as South African Breweries & Milier (SABMiller), or a public organisation, such as South African Airways (SAA). However, the board of directors could follow a different format. One format which is seen quite often in developed countries, but not often in South Africa, is the tier board of directors. In the tier format, the board of directors appoint secondary boards of directors, such as marketing, finances, human resources and operations, and the secondary boards in turn appoint tertiary level boards.

Success, strengths and weaknesses of business within the micro-environment

A successful manager is a ieader who achieves an organisation's objectives by working with both the strengths and the weaknesses of the organisation.

The strengths (positive aspects) of the business can be used as a competitive advantage, contributing to the success of the business. An example of an organisational strength could be a highly skilled employee who is able to customise the company's accounting system and so save the business both time and money.

The weaknesses (negative aspects) of the business can limit the success of the business. An example of an organisational weakness could be outdated equipment which is ineffective in the workplace and so costs the business both time and money.

A successful manager will attend to organisational weaknesses and do everything possible to turn these weaknesses into strengths. By replacing outdatecl equipment with new technology, for example, the manager can turn a weakness into a strength.

In South Africa today, a weakness of many manufacturers is their low productivity levels which cause them to operate at a huge financial loss. Yet these manufacturers have a responsibility towards their shareholders and investors. They also need to meet their core aim of sustaining their business. So, to turn their weakness into a strength, many manufacturers choose to replace manual iabourers with expensive machinery to increase both their productivity and their income.



The purchasing function

  • Buy raw materials in bulk at lower prices.
  • Select reliable suppliers that render the best quality raw materials/capital goods at reasonable prices.
  • Ensure effective co-ordination between purchasing and production departments so that purchasing staff understand the requirements of the production process.
  • Implement and maintain stock control systems to ensure the security of stock
  • Maintain optimum stock levels to avoid overstockingltoo much outdated stock.
  • Involve suppliers in strategic planning, product design, material selection and quality control processes.
  • Ensure that there is no break in production due to stock shortages
  • Establish relationships with suppliers so that they are in alignment with the business's vision/mission statement/values.
  • Ensure that the management has a thorough understanding of the supply chain.

PRODUCTION FUNCTION

  • Provide high quality goods and services according to specifications.
  • Conduct the production/operating processes of a business properly through proper production planning and control
  • Products and services should be produced at the lowest possible cost to allow for profit maximisation.
  • Communicate the roles and responsibilities clearly to the production team.
  • Ensure that products meet customers' requirements by being safe, reliable and durable

MARKETING FUNCTION

  • Acquire a greater market share through good customer service
  • Win customers' loyalty by satisfying their needs/wants and build positive relationships.
  • Adhere to ethical advertising practices when promoting products/services
  • Identify competitive advantage by conducting regular market research
  • Differentiate products to increase target market and profitability
  • Constantly review value issues.
  • Communicate effectively with customers to get feedback about their experiences of the products/services sold.
  • Co-ordinate distribution with the production and advertising strategies
  • Use pricing techniques to ensure a competitive advantage

Two Acts that directly affect the marketing and purchasing functions

  • The National Credit Act 34 of 2005
    • The purpose of the National Credit Act is to outline a number of basic consumer rights on the credit market.

  • Objectives of the National Credit Act are to:
    • prohibit unfair credit-lending practices
    • promote responsible credit-granting pratices by credit providers
    • prohibit reckless credit-granting
    • promote black economic empowerment and ownership
  • Some of the consumer rights under the Act include:
    • the right to apply for a credit
    • the right to plain and understanable language
    • the right to a copy of the credit agreement

The National Consumer Protection Act 68 of 2008

The National Consumer Protection Act defines all consumer types and looks.,at all relationships in the supply chain, from importers, manufacturers and wholesalers to retailers. Quality of service is one of the requirements of the Act. Some of the key areas which businesses need to be aware of are:

  • Products and services - all products must be clearly marked with the correct price. The quality of products must be of fair value and safe for human consumption
  • Marketing - incentives may not be offered to customers who refer potential customers. Overselling will not be allowed. This will affect airlines and hotels which sell more accommodation and seats than they actually have
  • Operational - all contracts must be written in plain language so that it can be understood by customers. If the business delivers more items than ordered, then the customer can keep the extras at no charge. A refund plus interest may be claimed and credit vouchers are insufficient.
  • Returning goods - consumers are allowed to return goods if they were not allowed to examine them before purchase.


PUBLIC RELATIONS FUNCTION

  • Deliver goodslservices that promote the brand/image with key stakeholders, e.g. ment/service providers,
  • Publish regular positive press releases.
  • Achieve a positive image and a respected position in society through thorough publicity.
  • Handle negative publicity speedily. Implement sustainable Corporate Social Investment (CSI) programmes.
  • Compliance with recent legislation, e.g. BBBEE compliant.

HUMAN RESOURCES FUNCTION

  • Find the most suitable person for a position.
  • Appoint a person in a position where he/she is able to use their skills to the advantage of the business.
  • Ensure continuous training and development of staff.
  • Provide suitable training and development programmes that can lead to a stable workforce and low employee turnover.
  • Make use of learnership programmes.
  • Offer attractive remuneration packages.

ADMINISTRATIVE FUNCTION

  • Acquire a fast and reliable data capturing and processing system.
  • Supply reliable information to management on time.
  • Make relevant information available for quick decision-making.
  • Handle complaints quickly and effectively.
  • Use modern technology efficiently.
  • Implement effective risk manage policies to minimise business losses.
  • Record evaluation of quality assurance and control evaluations accurately.

FINANCIAL FUNCTION

  • The financial team and management should be able to account for all costs and justify the quality provided to the process
  • Implement a policy with regard to the granting of credit and se limits.
  • Draw up realistic budgets and implement good budget control.
  • Determine the need for funds.
  • Acquire funds from suitable sources.
  • Effective application of funds.
  • Keep debt within acceptable limits.
  • Take legal action against debtors and customers who do not pay

Types of financing

There are two main types of financing: short-term financing and long-term financing.

  • Short-term financing

    Examples of short-term financing

    • Trade Credit - When a suppler does not request an immediate payment when it delivers goods or services to the business.
    • Accruals - expenses which the business pays only after delivery of services such as wages, salaries, water and electricity.
    • Bank overdraft - when the business arranges with the bank to draw money than what it actually has in the bank.
    • Invoice discounting - a business hands the accounts of its good debtors finance company in return for cash.
    • Factoring - the financing company, usually a bank such as Standard Bank, administration and collection of debts
  • Long-term financing
  • Long-term financing

    Financing is needed for bigger loans or greater risk, for example there is no security that the business will remain sustainable or too much owner's own capital is required

    • Ordinary shares - the business issues shares to the public in exchange of ownership
    • Preferential shares - shares are issued to the public with the proposition the shareholders will be paid dividends before the ordinary shareholders
    • Debentures - the business borrows money from the public or investors issuing certicate, called debentures to them.
    • Bonds - the business borrow large sums of money and gives fixed proportions such as the office block or busines premises as security
    • Leasing - instead of buying office equipment or vehicles for the business the business leases the equipments for a period of time

Sources of financing

Some examples of sources of financing are:

  • Industrial Development Corporation - requires entrepreneurs to provide some portion of the funding required
  • Business Partners - offers a full service to entrepreneurs including mentorship, business support and consultation. Business Partners will not finance entrepreneurs with high-risk proposals
  • Khula Enterprise - operates through a network of channels such as commercial banks and Business Partners.
  • National Empowerment Fund - assists different sectors of the BEE market.
  • National Youth Fund - focuses on young people and offers them access to finance.
  • SA Micro-Finance Apex Fund - a micro-credit outlet which facilitates access to finance for micro, small and survivalist businesses

Types of capital

  • fixed capital - such as office equipment, vehicles and or premises
  • Working captial - such as stock, deposits on water and electricity accounts, and money to finance customers who cannot afford to pay immediately
'


What does Quality Stand for ?

Quality is a state of meeting high standards, and, in a business context quality implies that consumer expectations are met or even exceeded.

How quality relates to some business functions

  • Quality Management - is the process managing the product or service to ensure total client satisfaction, and invloves proper planning, organising, leading and control.. Quality managment includes the following
    • Quality control - is the process that checks the finished product to ensure that the required levels of quality have been met.
    • Quality assurance - is the process of ensuring that during and after the production process required standards are reached/have been met during each step of the process.
    • Quality improvement - is the process of consistantly improving the quality of the product or services to fulfill customer needs/expectations.

Quality business image (public relations)

A poor business image can create the impression that also the business is of poor quality. This can affect the business in ways e.g loss of slaes.

Customer will always consider the business image with its products or services.

Product quality

Improved product quality is possible through improved manufacturing teachnology.

Quality human resources

The trend in human resources is to appoint employees with uniqueness, abilities and experience to obtain quality results. To ensure quality, it is necessary for the business to organise their human resources functions into small functions. This will help management to identify the business and human resources needs and, where necessary, outsource certain required services.

Quality administration

The administration function, better known as the information function, is spread throughout the entire organisation. It is responsible for all documentation, data collection and data retrieval. Information needs to be of the highest quality for management at all levels to make the correct decisions. Inferior quality information could result in incorrect decisions which could have devastating results for the business, including losing its customers (market share).

Quality and healthy financial function

Every year, independent, external auditors check the quality and accuracy of the financial statements and records of the business. The records document all the financial transactions of the business, including the procurement of assets such as equipment, vehicles and furniture. The auditors will also verify business transactions to assess the accuracy of the recording system used. Small businesses are allowed to use an accounting officer to audit their financial records and statements.

Correlation between management and business success

The success of a business is based on the quality, and therefore the education and experience, of management. Experience is necessary in order to make the right decisions, and education leads to higher quality of performance. Quality decisions and performance contribute significantly to the achievement of business objectives. Good quality management practice will also ensure successful business results because it will ensure that customer needs are satisfied. Quality business performance will have a positive effect on society and the proper management of resources. All these success factors enhance the strengths of the business, which make it more competitive in the marketplace. A business which makes quality assurance its priority will be abie to convert its weaknesses into strengths.

Term 1 : The market environment


Consumers and customers

consumers people who buy goods and services in the market environment.

customer a consumer who buys products or services from a business is that business's customer.

consumerism the protection of consumer rights.

1.2 The consumer market

The consumer market can be subdivided into markets for:

  • durable products (e.g. TV sets, washing machines)
  • semi-durable products (e.g. furniture, clothing)
  • non-durable products (e.g. newspapers, food)
  • services (e.g. repairs, consultancy).

Consumers will have different decision-making behaviours depending on the market. For example, customers are unlikely to obtain information and make strategic decisions about purchases of non-durable products. This is because nondurable products are inexpensive and are used up or obsolete within a very short time. When customers buy durable or semi-durable products they are likely to go through a much more rigorous decision-making process as the products are much more expensive and will last a long time.



Suppliers

Suppliers are individuals or agents who provide resources such as raw materials products or services.

Suppliers of raw material, products or services are referred to as first and are characterised by:

  • being the first link in the distribution channel or supply chain

Intermediaries

Intermediaries bridge the gap between the manufacturer and the consumers bring the products and services within reach of the consumer.

example :

  • Marketing intermediaries are wholesalers, retailers, spazas, agents and representatives. For example, the fresh fruit and vegetable markets.

Competitors

Competitors are other businesses that sell the same or similar products or similar service.

Five factors that affect competition

  • new entrants - often new entrepreneurs enter an industry where greater than supply.
  • bargaining power of customers - customers tend to shop around for the best price
  • threats of substitute products or services - substitution reduces the demand for a particular class of products or services as customers switch to the alternative. This depends on whether the substitute has more value for the customer.
  • competitive rivalry - this includes organisations with similar products and services aimed at the same customer group. If competing businesses are the same size, competition could lead to a price war.


Special interest groups are a group of people, local business communitites and unions who provide special services in specific areas.

Community-basedorganisations(CB0s)

Community-based organisations have been established to assist in job creation, socio-economic development.

Non-government organisations (NG0s)

Non-government organisations are non-profit organisations that do not belong under the control of the government.

They are established to enable improving in specific areas in communities in need.

Regulators

Regulators are organisations that ensure that the code of conduct and rules of fair business are aclhereci to. One example of such an organisatior-r is the Advertising Authority of South Africa, which serves as a watchdog over all aclvertisements that are releasecl. Should any citizen loclge a complaint with the Advertising Authority concerning misleading or embarrassing advertising, this regulator will ensure that the necessary steps are taken to rectify the situation. Another example is the Competition Board. which intervenes in cases of unfair or unethical competition.

Strategic alliances

The concept 'alliances' refers to two or more business that work together in joint venture. This could be to obtain expertise from one another, for survival or to become more competitive in the business world.

Unons

The trade union movement in South Africa is the larget on the continent.

Trade unions are not only concerned about the well-being of employees in the work environment. including suitable working conditions. fair pay structures and employees benefits. they are also involved in business transactions to ensure that such deals will not result in job losses.



There is a lot of competition between businesses. Sometimes management sees competition as an opportunity, perhaps because consumers are made more aware of the product if it is marketed by different companies. Sometimes management sees competition as a threat, for example, when a company that sells similar products opens in the same area.

Opportunities

Today in South Africa, some of the best opportunities are between existing companies and black empowerment groups. Businesses with a proper empowerment strategy can be involved in productive relationships with black empowerment partners.

As long as there are consumer needs to satisfy, there will always be opportunities available to businesses. Potential windows of opportunity for businesses to explore are to:

  • expand product lines to serve a broader Iange 0t CUSt0mgIS,l0I examp\el Warner Brothers, the fitm producers, added printing to their business and became more diversified
  • add complementary products to their current product line, such as the small coffee bar added to Exclusive Books outlets
  • enter into new markets, for example, Nike initially focused purely on athletes and then expanded their product to new market segments such as children's wear. They did this by making the footwear fun and fashionable for children to wear by having built-in wheels and reflectors in the soles of the shoes.

Threats

A threat exists if a business is unable to produce or to perform as desired, because of reasons outside the business such as competition, changing government legislation or global economic trends.

  • new competitors entering the market with a lower price product, such as London ornaments made in China
  • government introducing new legislation which could limit business transactions, for example, the competition tribunal which could see certain business transactions as unfair competition
  • changing buyer needs and tastes, for example, when Loxum hats came into fashion, almost every young person wore them but, after two years, the consumers'taste for the product diminished
  • slower market growth, for example, the palm top which was introduced to the South African market in the late 1990s, increased very slowly and still shows a slow growth. In addition, the pdm top now faces competition from Apple's Iatest product, the iPad.
Term 1 : The macro-environment


Natural and physical environment

South Africa produces sufficient food to supply local markets and can export products such as sugar, maize and fruit. South Africa is also rich in natural resources, including:

  • mineral resources, such as platinum, gold, iron ore, coal, uranium, tin and manganese
  • an abundance of marine life

Economic environment

Economic changes in the macro-environmrnt affect businesses. For example, it the rand becomes stronger against foreign currencies, business pay less to improve raw materials, computer components and products.



Technological environment

The technological environment has shown the fastest changes of all the macroenvironment factors as new technologies constantly develop. These developments provide businesses with opportunities as well as threats. The most successful businesses are those that are willing and able to adapt to these new developments. It is important for any business to predict changes in technology and when new technologies will be economically feasible.

Water scarcity is predicted to be one of the most important global challenges in future. A company in the United States invented a water cooling system called 3D Trasar which is being used by industries in South Africa. This system reduces industrial water usage and saves energy.

Operations technology

Operations technology improves the entire production process by substituting human labour with machinery, such as electronic and computer equipment as well as robots. For example, the assembly operations at WV Motors at Uitenhage in the Eastern Cape rely heavily on robotics. Robots perform repetitive tasks such as welding and painting. Unlike human labourers, robots are not at risk of health problems caused by exposure to chemicals or other hazardous materials. However, introducing robots means that many people lose their jobs.

Information technology

Information technology also has a positive effect on the internal operations of a business. Arguably the greatest innovation of the 20th century, the computer, is a great threat to the jobs of many people. However, it is very valuable in companies where a vast amount of data and information has to be stored. The development of the computer industry has also created endless new market opportunities, such as computer manufacturing, programming services and network installation.



Defining the legal environment

The legai component of the macro-environment consists of legisiation that has been passed. This includes the rules and laws that indivicluals and the private ai-rcl public sector must obey. Some examples of legisiation specifically aimed at the operation of businesses are:

  • The Environment Cclnservation Act 73 of 1989, which focuses on minimising air pollution and aims to control hazardous waste
  • The Occupational Health and Safety Act 85 of 1993, which focuses on a safe workplace
  • The Labour Relations Act 66 of 1995, which created a mechanism to resolve disputes between employer and employee. The Act also created structures such as the bargaining and statutory council, Labour Court and CCMA for collective bargaining. Over time, new laws are passed and some old ones are amended or eiiminated.

The Protection of Personal lnformation Bill to be enacted 2011

Until now, many South African companies have collected and divulgecl consumers' personal information on the basis that the general public often do not know their rights to their personai information. Once the Protection of Personal Information Bill is enacted, companies will no longer be allowed to sell their customers' information to marketing companies.

A regulator will be appointecl to police and enforce this legislation. Companies will then be obliged to provide the regulator with all the information that they have about the customers. including their customers' names, ID numbers and contact details. The regulator also expects companies to monitor and protect customers' information.

Debt Collectors Act 114 1998 as amended

The Council for Debt Collectors have taken new decisions to deal with tenants who do not pay their rent on time and property owners within an estate who fail to pay their levies.



South Africa has a multi-party government which consists of two houses, the National Assembly and the National Council of Provinces. The political party with the majority votes became the ruling party within the country. In the House of Assembly, seats are allocated based on the percentage of votes each party received with the ruling party having the majority seats (representation).

Political environment

The political environment refers to the fact that the public elect the government. South Africa has been through a period of major political change. Establishing a government of national unity has brought relative political stability. This means that international businesses and other countries have invested in businesses in South Africa. This has created jobs and helped economic growth.

The changed political feeling has allowed for the economic empowerment of people of all races, especially those who had no privileges under apartheid rule. Black empowerment ensures that a previously disadvantaged sector of the community is able to grow in economic power. This means that the national wealth will be more widely distributed, with an increased portion belonging to black-owned enterprises.

Institutional environment

The institutional environment includes local authorities (municipalities), regional authorities and central government.

Government authorities are involved in the economy in three ways.

  • firstly, the state is a major supplier of goods and services such as health and educationa, which are provided free to consumers and paid for out of taxation.
  • Secondly, the government is a buyer of goods and services. for example, a cut in spending on government hospitals has a major impact on the companies that provide the government with medical equipment.


The International environment

  • International forces that affect South Africa
    • International teachnology - the south african market is still too small to manufacture its own high-tech machinery. Local businesses have to import teachnology from countries such as China, Japan, Britain and the USA.
    • International economic trends - exchange rates, recession, interest rates, and the price of products in the USA, Europe and Asia all have a strong influence
    • International politics - Markets often open up for countries with a policy of democracy and human rights

Globalisation

What is the difference betweeen international trade and globalisation?

International trade is when companies trade with companies in other countries.

Globalisation is when companies operate in two or more countries while based in one home country. Companies such as Ford, IBM and BMW started this globalisation trend.

These companies are called multinationals because they operate in more than one country.

Term 1 : Business sectors


The Three Economic/Business Sectors

The Primary sector is the part of an economy that extracts, cultivates and gathers natural resources from the physical environment and sells these raw and unprocessed materials to businesses in the secondary sector for processing.

  • example
    • farming
    • forestry
    • fishing
    • mining
    • raw material

The Secondary sector (industrial sector) is the part of an economy that buys raw materials from the primary sector and processes these into finished products.

The Tertiary sector is the part of an economy that is involved in providing finished goods and services to other businesses or to the end consumer.

  • example
    • Wholesalers
    • Retailers


The formal sector and the informal sector

The difference between formal sector and informal sector

Decription of businesses in this sector

Formal sector business

  • Comprise large, legally registered businesses
  • Fall within the mainstream of the economy
  • Complies with all required regulations and laws applicable to them

Informal sector businesses

  • Activities by people unable to find jobs
  • Fall outside the mainstream economy (so also referred to as the second or marginalised economy)
  • People are self-employed, it is labour intensive with adapted technology
Characetristics of businesses in this sector

Formal sector business

  • Contribute towards the GDP of the country because they are legally registered
  • Made up of highly skilled, semi-skilled and unskilled labour
  • Not easy to enter this sector as businesses have to be legally registered

Informal sector businesses

  • Contribute little towards the GDP and fall outside the mainstream economic activities
  • Made up of large numbers of poor people within the rural and urban areas
  • Easy to enter this sector
Economic activities of businesses in this sector

Formal sector business

  • About 8.1 million South Africans work in the formal sector
  • Employment in the mining sector and quarrying
  • Employment in service industries, such as financial services, real estate, insurance and consultancy

Informal sector businesses

  • An estimated 1.74 million people are employed in the informal sector
  • Involved in small-scale agriculture
  • Provide services such as taxis, tailor, gardening and washing cars
Advantages and disadvantage for busineses in this sector

Formal sector business

  • Employees enjoy protection provided by labour laws
  • Employees have a steady income
  • During economic downswings, thousands of jobs are lost

Informal sector businesses

  • No protection is rendered to employees as health and safety rules are not applied
  • Income is inconsistent
  • Entrepreneurs are their own boss


Differences between the puhlic sector and the private sector

Description of businesses in this sector

Formal sector business

  • Aim to meet the needs of society
  • State-owned or state-run (known as parastatals)
  • Generally non-profit organisations, with exceptions such as SAA and Denel

Informal sector businesses

  • Aim to meet both the needs and the wants of society
  • Privately owned by entrepreneurs
  • Profit-driven institutions
Forms of ownership of businesses in this sector

Formal sector business

  • State ownership or parastatals (state-run businesses)

Informal sector businesses

  • Different forms of ownership, such as sole proprietorship, partnership, private company and public company
Products and services provided by businesses in this sector

Formal sector business

  • Water and electricity as a need-satisfying product
  • Justice and defence to protect members of the community in criminal cases
  • Refuse removal as a collective service

Informal sector businesses

  • Everyday household commodities, such as food, clothing and cleaning materials
  • Legal representatives for civil cases and private security firms to secure customers' lives and protect their possessions
  • Private refuse removal from companies such as Wastech

The move towards privatisation of the public sector

The main reasons why the government chose to sell state-owned enterprises were to:

  • improve the services of these enterprises
  • obtain large amounts of capital for other government projects
  • boost the coffers (store of money) of the government.
Term 2 : Contemporary socio-economic issues


What is inequality?

Social inequality occurs when resources in a given society are distributed unevenly, typically through norms of allocation, that engender specific patterns along lines of socially defined categories of persons.

Different types of inequalities may face

  • Economic (wealth or income) inequality
  • Racial inequality
  • Gender inequality

Poverty

Poverty is the scarcity or the lack of a certain amount of material possessions or money. Poverty is a multifaceted concept, which may include social, economic, and political elements.

Inequality and poverty

  • Inequality is the degree to which people do not have the same opportunities and are treated differently because of their social status.
  • Inequality leads to the rich becoming richer and the poor becoming poorer.
  • Poverty is the state in which people have little or no money to buy their basic needs, including lack of proper housing, clean water, proper sanitation, electricity, transport and a shortage of cash.
  • People in poverty usually have poor living conditions, hunger and increased susceptibility disease.

Impact of poverty and inequality on business

  • People do not have enough to live on and cannot participate fully in the economy.
  • Poverty and inequality create a cycle where parents cannot afford to supply their children with good education, which means that they will grow up in poverty and remain in poverty because of a lack of education, skills, job opportunities and finance.
  • This ultimately leads to a culture of crime and violence.
  • As a result of poverty, businesses are targets of shoplifting, theft, burglary and corruption.
  • This gives rise to industries such as security services, increasing business expenses.


What is inclusivity?

Inclusivity means giving everyone opportunities without discriminating on the basis of age, race, gender, sexual orientation, disabilities or HIV status

Aim of inclusivity

  • To make the best use of all human resources in the organisation.
  • To make use of people's different talents and skills.
  • To decrease inequality.
  • To increase education and training.
  • To decrease poverty.
  • To increase the number of middle-class people participating in the economy.

Equity and Prevention of Unfair Discrimination Act 2000 was designed to prohibit direct and indirect discrimination on the grounds of age, gender, race, sexual orientation, disabilities and HIV/Aids.

Encouraging inclusivity in the workplace

Efforts to create an inclusive workforce

  • The client base of organisations increases and becomes representative of the wider community.
  • Organisations need to appoint people who can talk to and serve clients.
  • Through this a more inclusive workforce is created.
  • To speed up this process, the government approved the Employment Equity Act, which requires that employees must represent the wider community in terms of race, gender and disabilities.

Businesses can improve inclusivity in the workplace in a variety of ways. Some examples include:

  • Gender - Inclusivity has increased in many workplaces by including women in leadership positions and decision making.
  • Sexuality - At Barclayg Bank, employees are treated fairly regardless of their sexual orientation. In 2008, Barclays dank in the UK was named Britain's top employer for gay, lesbian and bisexual people. i
  • HIV/Aids - To raise awareness about the epidengic, it is important for all businesses to have workplace HIV/Aids policies ahd programmes, including how to prevent the spread of HIV and, most importantlfl how to care for people living with HIV/Aids.
  • (Dis)ability - People with disabilities are still not fully absorbed into the job market. The Wits Language School encourages people to learn sign language to communicate with deaf colleagues.
  • Race - Organisations need to ensure that as many race groups as possible are represented in the workplace.


Definition
  • Unemployment is the condition where people want to work and can work, but cannot find work. Unemployment is the result of a lack of skills, the wrong skills, or a downturn in the economy.
  • An unproductive labour force produces less than it should. This is the result of too little or poor training and leads to tension between employer and employees, low profits and stress for the employee.

Unemployment

Unemployment thestate of job-seeking people in the economically active population who are unable to find work despite being willing and able to work.

Possible solutions to unemployment

How can unemployment be solved ?

  • Improvement of skills, including better education ancl training.
  • Changes in labour laws
  • Upgrading of infrastructure.

Unproductive labour force

workers who do not work at the required level of productivity for a busir. to be sustainable

Driving factors

A number of factors contribute towards the increase of an unproductive labour force in the country.

  • Labour laws with dismissal protection ensure that once an employee is appointed, the employer can do little to counteract poor performance or low productivity.
  • Heavy labour unionisation, causing widespread boycotts, strikes and go-slow actions, and the collective bargaining system ensure that real wages continue to go up despite low productivity from employees.
  • The majority of the local workforce is illiterate or unskilled, but immigration aws prevent highly skilled foreigners from competing with local workers. As a result, the pay rate for high-end jobs (low skilled) is artificially high and productivity is very low.

The impact of an unproductive labour force on business sectors

An unproductive labour force:

  • is a major stumbling block to economic growth and sustainability
  • leads to a decrease in productivity and a drop in profits which make difficult for businesses to survive an economic recession
  • increases the cost of labour
  • pushes up production costs and makes way for cost-efficient foreigners who employ highly qualified, skilled and motivated people
  • could result in decreased employment opportunities

Impact

  • Unemployment lowers the standard of living.
  • It also causes an increase in corruption, poverty, crime and suicide rates in society.


What is a strike?

Strike, or labour dispute, is collective action taken by a group of unhappy employees to force employers to accept their demands.

Types of Strikes
  • go slow - an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties
  • lock-out - A lockout is a temporary work stoppage or denial of employment initiated by the management of a company during a labor dispute.
  • sympathy strike - A sympathy strike is when one union strikes in support for another involved in a dispute, even though the first union has no disagreement with the employer. It is a labor strike that started by workers in one industry and supported by workers in a separate but related industry.

Actions to be taken for a strike action to be legal

  • the majority of employees must approve the strike by means of a secret ballot
  • the union must provide the employer with the results of the ballot
  • the union must give the employer at least 7 days' advanced notice of the impending strike.

Political disturbances or public disorder

Crime which involves acts that interfere with the operations of society and the ability of people to function efficiently", it is behaviour that has been labelled criminal because it is contrary to shared norms, social values, and customs.


Strikes

  • A strike is a collective refusal of employees to work because of an issue in the workplace, aimed at forcing the employer to give in to demands.
  • Employers lose on production, but can enforce the 'no work, no pay' rule.
  • Employers fear for survival of their businesses.
  • Strikes often turn violent when strikers attack workers who are not taking part, yet gaining in the benefits of the strike (known as 'free-riders').
  • Striking workers often intimidate other workers who are not striking.
  • Employees can get in other workers to continue production (called 'scab labour').
  • Strikers often attack such workers.

Lock-out

  • Action by the employer to prevent striking workers from coming into the workplace to prevent damage.

Go-slows

  • Form of industrial action where employees work at a much slower pace than usual.
  • Because they work slower it affects productivity.
  • Employees use this to force the employer to listen to demands.


Violence

the way individuals express physical or verbal force on themselves or other people to cause pain.

To get their own way, people might use violence as a tool to threaten and manipuiate others. Violence contributes to emotional and psychological trauma which may be long lasting. The Centre for the Study of Violence and Reconciliation recognises several different types of violence, including: gender violence, school bullying, gun violence, farm attacks and killings, murder of policemen and women. and people taking the law into their own hands (vigilantism).

Factors which contribute to violence include :

  • Alcohol or drug abuse,
  • a lack of confidence,
  • the desire for infamy, and growing up in a violent home or society.

Factors can overcome to violence include :

  • Good communication skills, such as co-operation. controlling aggressiveness and overcoming conflict, can prevent arguments from escalating into physical violence.

Violence has a great impact on society as well as the workplace.

Workplace violence includes physical assault, verbal abuse and intimidation, for example.

  • threatening colleagues by shaking fists or destroying property
  • verbally abusing colleagues with insults or by swearing or shouting
  • harassing colleagues with inappropriate actions or gestures, including sexual harassment and embarrassment
  • physical abuse of colleagues involving pushing, kicking or hitting

Certain work-related factors may contribute to workplace violence, including

  • with emotionally unstable people or people who lack self-confidence
  • on premises where alcohol or drugs are consumed
  • alone or in small numbers in isolated areas such as storerooms or washrooms
  • in community-based jobs such as nursing, social work and correctional Victims are often too traumatised to concentrate on their work, leading to poor

Crime

  • Economic crime - including theft and house robbery, rnainly perpetrated by Juveniles in response to poverty and unemployment.
  • Domestic crime - such as rape, violence within the family and child abuse.
  • White coliar crime - such as fraud and corruption committed by people in authoritative or powerful positions.

Gambling

a behaviour which invol-res risking money or valuables on a game or contest of chance.

illegal gambling - gambling which is not legally allowed by the government.

Money laundering

Criminals such as illegal gamblers, drug traffickers, corrupt politicians, mobster-q and con artists often have to deal with large amounts of illegal cash which can draw the attention of law-enforcement officials. Illegal cash is laundered into the mainstream economy in three stages:

  • illegal cash is deposited into a bank account
  • the money is sent through several bank-to-bank transfers to make it difficult to trace
  • the money then enters the mainstream economy through purchases or investments

Pyramid schemes

Pyramid schemes promise participants huge payments for enrolling other peoplt in the scheme, but only the people at the very top of the pyramid ever make from the scheme.


Gambling

Gambling is being involved in a game of chance in which a person risks losing or gaining money or other possessions.

  • Examples include lottery tickets, scratch cards, slot machines, horse racing, Internet gambling.

Illegal gambling

Includes all gambling operations not allowed by law:

  • Internet gambling, as it is sometimes linked to organised crime
  • animal fighting.
  • unlicensed operations offering gambling to the public.

Pyramid schemes

  • Deposit-taking business promising high interest returns to convince people to place money on the scheme.
  • People at the top of the scheme make money illegally.
  • People who want to join pay an entrance fee to join in the opportunity to make money.
  • Promoters offer high returns.

Money launderin

  • Criminals invest 'dirty' undeclared profits from crimes in illegal businesses so that the money becomes 'clean'.
  • It hides criminal activities.
  • It reduces productivity as it encourages crime and corruption.

Violence and crime

Violence includes domestic violence, emotional violence or abuse, violence during robberies and assault, murder, rape and violence in the workplace.

Domestic violence

  • An extreme form of aggression; the use of physical force with intention to cause injury, damage or death
  • Employees call in sick and miss work because of injuries.
  • Employees, who fear violence against their family, stay off work.

Emotional violence

  • This includes treating other employees in ways that make them afraid, threatened, ashamed or not able to control what is done to them.
  • An employee who is subjected to emotional violence at home may lose concentration.
  • Employees subjected to emotional violence lack self-confidence, become timid and are less able to develop fully at work.

Violence in the workplace

  • Theft, assault, bribery and corruption can lead to violence in the workplace.
  • Stress in the workplace to meet deadlines, theft, bribery and corruption can cause violence.
  • Another example is xenophobic attacks on immigrant workers.
  • Violence is a dismissible offence.

Crime
  • Any unlawful and harmful act related to loss of goods in a business due to burglaries, robberies, theft, corruption and hijackings.
  • Theft is the unlawful taking of someone else's property to make it your own.
  • Loss of goods in a business can happen as a result of burglaries, shoplifting, customer theft and employee theft.
  • Corruption is the abuse of power to use or take resources from the government or business for personal gain.
  • Hijacking is taking a vehicle from the owner or driver through a possible act of violence.
  • Burglary differs from theft in that it includes the breaking of property to enter a building.

Impact of crime on business

  • Employees fear to be robbed on pay-day and take off early leading to loss of productivity.
  • The crime of murder takes away skilled labour causes mourning and therefore a slower production rate.
  • Rape leads to time taken off work for counselling, hospitalisation and court cases.
  • Businesses try to protect themselves against crime by having secure premises, installing burglar bars, security systems and security guards.
  • Businesses take out insurance to cover themselves against possible risks of losing assets such as stock and fixed assets.
  • All of the above increases cost for the business, which affect profits.
  • Crime disrupts business activities and productivity.


  • Piracy - Piracy is the unauthorized distribution, theft, reproduction, copying, performance, storage, sale or other use of intellectual property (IP) protected under copyright law.
  • Counterfeiting - Intentional and calculated reproduction of a genuine article (such as money or trademark) for the purpose of misleading
  • bootlegging - supply and sale of goods that are subject to government prohibition or taxation.

Piracy

  • Illegal act of copying or reproducing someone else's work and producing it as your own.
  • Theft of ideas or intellectual property.

Counterfeiting/ Imitations

  • Copies of products made without the consent of the creator and with the intent of passing them off as the real product.

Bootlegging

  • The production and illegal selling of alcohol produced informally.
  • Technological bootlegging is recorded music on CDs and DVDs.

The relationship between piracy and copyright

  • Content of publications or recordings are the intellectual property of the people who created them.
  • Strict laws protect property rights – punishment for transgression is severe.
  • Patent laws protect new inventions and intellectual property. Protection for seven years (usually) to allow recouping investments.
  • Trademarks are used by businesses to identify themselves and their products. A trademark name has the sign ™ after it as evidence that the name is trademarked.
  • Copyright is the exclusive rights given to a creator of original work, including the right to change, copy or distribute the work and applies to books, music, maps, drama productions, photographs, drawings, paintings and computer programmes.

How do piracy, counterfeiting and bootlegging affect business operations?

Business will not invent or invest if they are not protected

  • Businesses and individuals lose out on profit.
  • If businesses are not protected by law, they will not invest in new business and product ideas.

Consumers are protected

  • Anti-piracy laws protect consumers from counterfeit products.
  • Anti-piracy laws mean consumers can trust what they buy and pay is what name suggests.
  • Counterfeit medicine and food can pose a risk to customers, who are unable to identify ingredients.
  • Criminals selling counterfeits are stealing investment and ideas from the original maker.
  • Pirate products reduce the value of genuine articles.
  • Bootlegging is similar, with added danger as bootleg liquor can be poisonous.


HIV and Aids

HIV and Aids is an incurable disease transferred by means of body fluids such as blood and semen.

The impact of HIV/Aids on business

  • The young and economically active people become HIV positive.
  • Treatment is possible, but people take long to recover, leading to high absenteeism from the workplace.
  • An HIV-positive person does not get well completely and slowly becomes weaker. This causes:
    • The productivity of the business to be lower as people with HIV/Aids work slower
    • because of a lack of energy.
    • The skilled labour force to be reduced due to loss of lives.
    • The business to spend more money on skills training to replace the employees they lost.
Term 2 : Social responsibility


What is social responsibility?

Definition of social responsibility

Social responsibility is the moral obligation to address socio-economic issues and challenges and so give back to society.

Definition of Corporate Social Responsibility

CSR is the willingness of a business to carry out social duties to improve the quality of life for the employees, owners or shareholders and the community (stakeholders).

Why CSR?

  • The business cannot make a large profit in a poor community.
  • If a business helps to improve the standard of living of its stakeholders, it will also make more profit in the long run.

Who are stakeholders in the business?

  • Community – a richer community will lead to more profits.
  • Suppliers – this includes suppliers of raw materials, stock, finance and labour.
  • Trade unions – they negotiate with the employer on behalf of the workforce.
  • Employees – including fair salaries and wages as well as other benefits as part of their payment.
  • Competitors – can be used as an advantage because they open up new methods.
  • Government – places limits on what businesses are allowed to do and protect businesses against crime and unfair competition.
  • Consumers – buys from the business and the business therefore need to make sure that products are of quality, safe and sold at reasonable prices.


How do businesses address socio-economic issues?

Unemployment, inequality and poverty

  • People who are poor cannot afford much and therefore it will be in the interest of the business to help to increase their disposable income.
  • This can be done by creating employment.
  • Business also needs to make a profit and offer investment opportunities, such as pension funds.
  • Businesses can allow young volunteers to get work experience that will help them get jobs in the future.

Unproductive labour force

Many workers are poorly trained or not trained at all. Businesses can:

  • give in-service training to employees, especially in new technologies
  • give bursaries to employees for further study
  • give bursaries to prospective students.

HIV/Aids>

HIV-positive employees often are unable to perform their duties well. Businesses can:

  • formulate a clear HIV/Aids policy
  • initiate an HIV/Aids awareness campaign
  • distribute condoms to employees
  • give financial support to NGOs that work with people who live with the disease
  • supply anti-retroviral medicines and counselling to HIV-positive employees.
Term 2 : Entrepreneurial qualities


What is an entrepreneur?

An entrepreneur is someone who:

  • starts their own business
  • manages or organises the management of their own business
  • identifies new business opportunities
  • has creativity and insight to produce, sell and finance a service or product
  • organises or controls financial resources (capital), human resources (labour) and materials in order to make a profit
  • has the finance or can get financing for their business
  • is willing to take calculated risks
  • employs other people.


Entrepreneurial qualities can be divided into three groups, namely achievement, planning and power.

Achievement group of entrepreneurial qualities

Opportunity-seeking

  • Successful entrepreneurs see business opportunities where other people see nothing.
  • Entrepreneurs look for opportunities to do things faster, better and cheaper.
  • They look for opportunities to get hold of the necessary resources such as finance, equipment, workspace, and technical assistance.
  • They get ahead of competitors.
  • They make more profits and capture or hold on to a growing market share.

High degree of commitment

  • Entrepreneurs continuously work hard.
  • They try their best to build something they can be proud of.

Perseverance

  • Perseverance is the quality that drives a successful entrepreneur to keep on until the job is done.
  • Entrepreneurs keep on working towards the goals that they set for themselves.

Risk taker

  • Successful entrepreneurs will only take careful and calculated risks.
  • They try to minimise their risks by getting others to share the risk.
  • They will not take more risk than is necessary and they will also not run away from unavoidable risks.
  • Entrepreneurs take financial, career, emotional, family and social risks.
  • High risks often lead to big profits.
  • Successful entrepreneurs will usually only take on those risks that they can manage.

The planning group of entrepreneurial qualities

Big dreams with a clear vision

  • Entrepreneurs have big dreams and turn them into ideas that make profit.
  • They set clear and specific goals and objectives for themselves and their business.
  • If their goals are realistic they will have a feeling of being in control of achieving their goals and dreams.

Flexibility and adaptability

  • Entrepreneurs can make free choices of whether, when and what they respond to.
  • They look for information so that they can make informed decisions with regard to their customers, suppliers and competitors.
  • They constantly develop plans that are used to monitor and evaluate the progress of their business.
  • When things do not go according to plan they develop alternative plans to achieve their goals.

The power group of entrepreneurial qualities includes

Desire for responsibility

  • Entrepreneurs accept full responsibility for their business.
  • They believe they are morally, legally and financially accountable for the business.
  • They accept responsibility for meeting their contractual commitments or completing jobs for their customers.

Good management and leadership

  • Entrepreneurs are often accountable to many people, such as customers, suppliers, investors, employees, creditors, families and their communities.
  • Entrepreneurs therefore must have good leadership skills.
  • They have the ability to persuade others to maintain business contacts.
  • Entrepreneurs should be good managers themselves or employ good managers to help them.

Confidence in the ability to succeed

  • Many successful entrepreneurs have a strong belief in themselves, are confident and can complete difficult tasks.

High levels of energy

  • High energy levels can help to be successful.
  • Many older people do not have high energy levels, but succeed because of their knowledge, skills, experience and contacts.

Passion

  • Many successful entrepreneurs are driven by passion and their will to succeed in the things they believe in.
  • They are driven to achieve their goals.
  • Goals may include financial goals, respect and recognition.

Exceptional organisational skills

  • Entrepreneurs are good at combining the other three factors of production: physical resources (land), human resources (labour) and financial resources (capital).
  • Entrepreneurs are people who have exceptional organisational skills.

Willpower to overcome obstacles

  • Entrepreneurs have the desire and drive to solve problems and to establish a successful business.
Term 2 : Forms of ownership


Capital

Money or assets provided by the owners to set up the business.

Legal personality

Companies and CCs have legal personality. This means that they are seen as legally separate from their owners. Partnerships and sole proprietors do not have legal personality and are seen as one with their owners. Businesses with legal personality may accept contracts in their own name, can sue and be sued separately from their owners.

Continuity

The ability of the business to carry on operating after the death or retirement of the owner or more than one of the owners.

Liability

  • Liability refers to the responsibility of the owner for the debt of the business.
  • Limited responsibility means that the owner/s (could be shareholders or members) only lose their investment in the business in the case of a business declared insolvent (bankrupt). The owners will not lose their personal belongings.
  • Unlimited responsibility means that the owner/s could lose their personal belongings when the business has been declared insolvent as they have to take full responsibility to clear the business debt.

Tax

Tax depends on the legal persona of the business. Sole Proprietors and Partnerships pay tax according to the progressive tax system up to a maximum of 40%, depending on the amount of income of their owners. Close corporations and companies are legal entities and pay 28% tax on their profits and a further secondary tax of 10% on profits paid out to members or shareholders. The tax amounts may vary every year and should be adapted to the amounts set in the national budget by the minister of finance.

Formation procedure

The legal route a business has to follow before it may start trading.

Jointly and severally

This refers to businesses with more than one owner involved and means that all the owners are responsible for each other's actions and for the debt of the business.



  • Name of Business
    • No requirement s. Can be chosen by owne
  • Number of owners
    • 1
  • Who are the owners?
    • Sole trader
  • Continuity of existence
    • No
  • Personal liability and legal and personality
    • Fully liable for business debts and no legal personalit
  • Who shares in the profit?
    • Owner shares in all profits and suffers all losses
  • Who manages the business?
    • Owner or manager
  • Formation procedure
    • Easy and cheap to start. Only trading license(s) needed Must register with SARS for tax
  • Other


  • Name of Business
    • No requirement s. Some partners like to link name to their surnames
  • Number of owners
    • 2-20
  • Who are the owners?
    • Partners
  • Continuity of existence
    • No
  • Personal liability and legal and personality
    • Jointly and severally liable for business debts and no legal personality
  • Who shares in the profit?
    • Partners share in all profits and suffer all losses
  • Who manages the business?
    • Some or all of the partners
  • Formation procedure
    • Easy and cheap to start. Only trading license(s) needed Must register with SARS for tax Verbal/written partnership agreement needed
  • Other


  • Name of Business
    • Letters 'CC' must appear after the name of the business on all legal documents
  • Number of owners
    • 1-10
  • Who are the owners?
    • Members
  • Continuity of existence
    • Yes
  • Personal liability and legal and personality
    • Limited liability and has legal personality
  • Who shares in the profit?
    • Members share in all profits and suffers all losses
  • Who manages the business?
    • Some or all of the members
  • Formation procedure
    • Name must be reserved with CK7 Founding statement registered with registrar CK1, any amendments are easily done with a CK2
  • Other
    • No annual general meetings required


  • Name of Business
    • Must end with (Pty) Ltd
  • Number of owners
    • 1- the amount of shares issued by the company
  • Who are the owners?
    • Share- holders
  • Continuity of existence
    • Yes
  • Personal liability and legal and personality
    • Limited liability and has legal personality
  • Who shares in the profit?
    • Shareholders get dividends on shares
  • Who manages the business?
    • Minimum of 1 director
  • Formation procedure
    • Procedure is more expensive and lengthy. A Notice to incorporate and MOI (memorandum of incorporation) needs to be filed with the Registrar of
  • Other
    • Must appoint audit committee and social and ethics committee Must appoint auditor and have financial statements independently reviewed Must appoint a company secretary (The same for all profit companies)


  • Name of Business
    • Must end with NPO
  • Number of owners
    • N/A
  • Who are the owners?
    • Members and directors
  • Continuity of existence
    • Yes
  • Personal liability and legal and personality
    • Limited liability
  • Who shares in the profit?
    • Money or property may not be distributed to members or staff other than wages and salaries
  • Who manages the business?
    • Minimum of 3 directors
  • Formation procedure
    • Procedure is more expensive and lengthy. A Notice to incorporate and MOI (memorandum of incorporation) needs to be filed with the Registrar of
  • Other
    • Must appoint official auditors


  • Name of Business
    • Must end with Co-operative
  • Number of owners
    • Minimum of 7 for agricultural and minimum of 25 for trading
  • Who are the owners?
    • Members and directors
  • Continuity of existence
    • Yes
  • Personal liability and legal and personality
    • Limited liability and legal personality
  • Who shares in the profit?
    • Members share in profit
  • Who manages the business?
    • Board of directors chosen by members
  • Formation procedure
    • Many legal formalities involved
  • Other
    • Books must be audited


Sole Proprietor

  • Advantages
    • Easy and cheap
    • Quick decision-making
    • Owner gets all profits
    • Owner is eager to succeed
    • Gains all-round experience
    • Close contact with customers, suppliers and employees
    • No formal documentation needed
  • Disadvantages
    • Owner focuses on some areas and neglects others
    • Owner is overworked
    • No continuity
    • Unlimited liability
    • Capital is limited
    • No job security
    • May not be able to buy in bulk to negotiate discounts

Partnership

  • Advantages
    • Easy, quick and cheap
    • More capital than sole trader
    • Expenses, responsibilities and tasks are shared
    • Easier to get credit
    • Each partner is motivated to make business a success
    • All benefit from profits
  • Disadvantages
    • Partners may disagree
    • Decisions take time
    • Capital limited to number of partners allowed
    • Unlimited liability
    • One partner's dishonesty and deals affect the rest
    • No continuity

Partnership

  • Advantages
    • Easy, quick and cheap
    • More capital than sole trader
    • Expenses, responsibilities and tasks are shared
    • Easier to get credit
    • Each partner is motivated to make business a success
    • All benefit from profits
  • Disadvantages
    • Partners may disagree
    • Decisions take time
    • Capital limited to number of partners allowed
    • Unlimited liability
    • One partner's dishonesty and deals affect the rest
    • No continuity

Close Corporation

  • Advantages
    • Easy and cheap
    • Easy to change Founding statement
    • Has continuity
    • Limited liability
    • No annual general meeting required
    • Financial statements don't have to be audited
  • Disadvantages
    • Capital limited to 10 members
    • If a member acts without skill and care, the member is liable for losses
    • Banks require financial audit for loans
    • Decision-making takes time as all members are involved
    • Can lead to conflict

Non-profit Company (NPO)

  • Advantages
    • Publicly responsible which creates trust
    • Can get funding from National Lotteries Trust and other agencies
    • Exemption of tax from SARS
    • Has continuity
    • Limited liability
    • All benefit from profits
  • Disadvantages
    • Difficult to set up
    • Assets must be transferred to company with similar purpose when company dissolves
    • Must keep financial and accounting records
    • May make some profit but may not distribute property or profit to members
    • Must hold annual general meeting

Private Company (Pty) Ltd

  • Advantages
    • Limited liability
    • Legal personality
    • Has continuity
    • Number of shareholders allow more capital
    • No annual general meetings required
  • Disadvantages
    • Complicated formation procedure
    • Cannot get money from general public for capital
    • Can only rely on capital contributed by members

Personal liability company-PLC (Incorporated / Inc after name)

  • Advantages
    • No maximum number of owners
    • Can raise a lot of capital as there is no limit to the number of owners
  • Disadvantages
    • Directors liable for debts of the business

Public Company (Limited or Ltd)

  • Advantages
    • Can raise large amounts of capital
    • Has continuity
    • Limited liability
    • Legal personality
    • Can be involved in large projects to benefit country
    • Attract skilled staff as they can pay them well
    • Offer job security
    • Shares are open to members of the public on the JSE
  • Disadvantages
    • Complicated formation procedure
    • Failure can lead to large-scale unemployment
    • Certain information needs to be published by law
    • Annual general meetings need to be held
    • Many other requirements such as social and ethical committees

State-owned company (SOC)

  • Advantages
    • Limited liability
    • Government support
    • Greater power negotiating contracts
  • Disadvantages
    • Not a true form of ownership as government controls all decisions
    • Many other legal requirements and strict regulations
    • Regulated by PFMA before it may obtain a loan
    • Difficult to raise capital as shares are restricted

Co-operatives

  • Advantages
    • Able to control and stabilise prices of produce
    • Share facilities
    • Extra income/profit shared by members
    • Limited liability
    • Has continuity
    • Better production due to loyal and committed members
  • Disadvantages
    • Competition is tight
    • Cannot pay high salaries
    • Success depends on loyalty, commitment and support of members
    • Shares are not freely transferable
    • Compulsory to audit books
Term 3 : Creative thinking and problem-solving


What is creative thinking?

  • ‘Creative’ means to be able to think of something new and original.
  • Creativity in business can help you to:
    • think of a completely new business idea
    • improve an existing product in an unique way
    • think of better ways to serve your customers
    • attract new customers
    • solve problems that your customers might experience.

Develop your own creativity

There are several things you can do to maintain and to develop creative abilities.

Think, think, think

  • Develop the habit of thinking about what is happening around you.
  • Question everything.

Write it down

  • Write down ideas as they come into your head.
  • Revise your ideas.
  • Compare one idea with another.
  • Combine one idea with another.

Ask questions

  • Ask questions about something that you have always just accepted.
  • Do not stop asking questions when you come up with an answer; continue to find a better answer.

Break the rules

  • People create habits and fall into a rut.
  • If you do things differently for only one day, it can help to stimulate your thought processes.

Banish fear

  • Do not be afraid of making mistakes.
  • Support friends if they think of something new, instead of suggesting reasons why it would not work.
  • If you have a business, encourage new ideas.


Problem solving

  • A problem occurs when things are not going as they should.
  • Some problems, such as natural disasters, we cannot predict.
  • Other problems develop over a period of time and are predictable.
  • Monitoring the performance of business helps to recognise problems.

Research skills

There are numerous ways in which you can find information to help you recognise when there is a problem. These include:

  • quality control of production
  • sales reports indicating a sudden drop in sales figures
  • consumer feedback and complaints
  • magazines and business newspapers with financial information.
  • monitoring your own organisation for problems such as staff turnover due to unhappy staff.

Problem-solving versus decision-making

  • Problem-solving is the process of analysing a situation in a systematic, step-by-step way, and then generating solutions, implementing the solutions, and evaluating the results.
  • Decision-making is part of the process of problem-solving and takes place at every step of problem-solving.

Problem-solving cycle

The steps of the problem-solving cycle are:

  • identify the problem – recognise the problem by asking questions.
  • define the problem – give the problem a label to make it easier to find a solution.
  • formulate the strategy – think of various solutions to the problem.
  • allocate resources – allocate and get more money, staff, time, equipment if needed.
  • implement the strategy – implement according to carefully thought through plan.
  • monitor the problem-solving – keep a careful watch on the process.
  • evaluate the problem-solving process – evaluate so that you can see what was done right and where it can be improved.

Problem solving techniques

Force-field Analysis

  • Force-field analysis is used to plan a change in product or service.
  • Negative forces are identified and steps taken to limit them. (restraining forces)
  • Positive forces are identified and strengthened. (driving forces)

Chair Technique

  • Chair Technique: Explain the problem aloud to an imaginary person sitting in a chair. It encourages clear thinking.

Empty Chair Technique

  • Empty Chair Technique: Some people find it easier to talk when there is 'nobody' to hear them. Somebody who has a problem can talk to an empty chair to voice frustrations. Another person writes down the problems and possible solutions.

Brainstorming

Steps for brainstorming

  • Write down all the thoughts about a problem.
  • The group will evaluate the ideas in the last step.
  • Take the ideas one by one and list the advantages and the disadvantages.
  • Evaluate each idea and choose the best one.

    Guidelines for brainstorming

  • Do not criticise any ideas during the first step.
  • Do not judge any idea before evaluation time.
  • Accept all ideas, even if they seem ‘silly’ at the time.
  • Generate as many ideas as possible.
  • You can extend some of the ideas, or combine ideas.

Delphi Technique

The Delphi technique involves the use of a series of confidential questionnaires to solve a problem. Experts Experts Experts in a field are asked for their opinion independently from one another. These are the steps involved:

  • Step 1: Identify the problem and ask the group members to write down five possible solutions to the problem on a specially designed questionnaire.
  • Step 2: Each group member completes the questionnaire, independently and anonymously.
  • Step 3: The results are analysed in a central place.
  • Step 4: Give a copy of the results to each group member.
  • Step 5: Ask group members to give new or revised solutions, after they have studied the results of the questionnaire.
  • Steps 3, 4 and 5 can be repeated until all members in the group agree.

Nominal Group Technique

The nominal group technique (NGT) encourages thinking, because contributions are anonymous. NGT uses the following steps:

  • Start with a clear, open-ended question.
  • Each person spends a few minutes in silence to brainstorm all the possible ideas.
  • Each person contributes one idea in turn.
  • Record all the ideas on a flip chart.
  • A number or letter to each idea.
  • Each person in the group then votes and the idea with the most votes wins.

Forced Combinations

Combine two seemingly unrelated ideas to come up with a new idea. For example:

  • Write down a number of words on separate scraps of paper.
  • Put all of these into a hat.
  • Draw two scraps of paper, read the two words, and think of something that would combine the two words.

SCAMPER

Start off with an existing product or service, then follow these steps:

  • S Substitute (Can we use something/someone else for this purpose?)
  • C Combine (Can we combine this resource with something else?)
  • A Adapt (Can we use this differently?)
  • M Modify (How can we rearrange this product? Can we change the packaging, shape, size or texture?)
  • P Put to another use (Can we use this for something else?)
  • E Eliminate (Can we remove a component or a part of it?)
  • R Reverse (What if we did it the other way around?)

Indigenous knowledge

  • Indigenous people are the people who were born in a particular place.
  • In South Africa we have a number of indigenous groups, each with their own culture and traditions.
  • In the past people were thought to be intelligent only if they were schooled in the Western way.
  • Today people acknowledge the diversity of knowledge systems that help people to understand their world and solve their problems.
  • Indigenous knowledge in South Africa refers to the knowledge that is part of African philosophical thought and social practices, developed over thousands of years.
  • Some of these are already part of our modern life, for example: the practice of ‘stokvels’ to encourage saving herbal cures for problems, such as citronella candles to keep mosquitoes away, instead of harmful pesticides.
  • This knowledge may help us to solve problems where Western thinking fails.

Mind-mapping, brainstorming

Mind-mapping

  • Some people think more creatively if they can draw ‘pictures’ of their thinking processes.
  • Ideas or thoughts can be changed into a diagram or a mind-map. Write down the main idea in the centre of a sheet of paper. Think of things that are connected to this main thought, and write down key words. Draw lines to connect these phrases or words to your main idea. As you continue working, other ideas might pop into your head. Continue adding them to your mind map.

Brainstorming

Brainstorming of ideas as discussed above can also be used to identify business opportunities. The same steps must be followed as discussed under 'Problem-solving techniques'.

Creative thinking/ idea generation

This starts off with familiar concepts and then develops them into something completely different. Use the following three steps:

  • Step 1: Make a list of existing products or services.
  • Step 2: Make a second list of ways in which these products or services can be changed.
  • Step 3: Apply the changes (on the second list) to each product and service on the first list.

Use of non-conventional thinking

The SCAMPER method is an example of non-conventional thinking. Another method is lateral thinking (Designed by Robert de Bono). Lateral thinking is a way of solving problems by using methods that do not seem logical at first.

Lateral thinking - The six 'thinking hats' technique
  • Each thinking hat has a colour and everybody mentally wears the same hat at the same time and thinks from that specific point of view.
  • When you have generated enough ideas from that particular hat, move to the next hat.
  • This method of creative thinking enables you to generate many ideas within a short space of time.

    The yellow hat

    Only the most optimistic point of view is considered.

    The purple hat

    The purple hat is the judgmental and critical hat.

    The white hat

    This hat is the factual hat, where you look at data and information.

    The red hat

    This hat symbolises emotion and feelings. If you wear this hat, you are allowed to express your instinctive or ‘gut’ feel about the product or service.

    The green hat

    This hat symbolises true creativity and is used to generate new ideas.

    The blue hat

    The blue hat is different in that only one person wears it at a time. The blue hat has to control the process and enforce certain rules.

    Sensory creativity

    • Our senses help us to experience the environment around us.
    • Sensory creativity brainstorms all the ideas that involve the senses.

    Implementing creative business opportunities

    There are various ways of implementing creative business opportunities.

    • The best way will depend on how much capital you have
    • think of a new idea in an established business
    • start a new business
    • offer a new product
    • offer a new service.
  • Term 3 : Business opportunities


    Strengths The factors that make a product or service unique, giving competitive advantage

    Weaknesses Factors or characteristics of a product or service that could be a disadvantage

    Opportunities External factors that could place a business idea at an advantage

    Threats External factors that could place a business idea at a disadvantage

    • Primary data can be collected by the entrepreneur.
    • Primary data are collected by means of: observation, by watching consumer behaviour and buying patterns interviews that can take several forms, for example personal face-to-face interviews telephonic interviews and postal surveys

    Test sample

    Before collecting data it is important to decide on your test sample. The test sample refers to which people and how many people from whom to collect primary data.

    Who?

    • Decide who makes up your target population by thinking about the product or service you are going to offer.

    How many?

    • This is known as the sample size and is influenced by how much time you have and your budget.
    • All the households in an area do not need to be interviewed to determine the need for a product or service, but enough need to be interviewed to establish the need.

    Avoid bias

    • Bias means your sampling is not valid and not completely objective.
    • Do not interview only known positive or negative customers; interview a wide range of people.

    Observation

    Collecting information by means of observation does not include interaction with the sample population, but only watching what they do.

    Interviews

    There are several interview methods you can use, including:

    • personal interviews
    • telephonic interview
    • postal surveys
    • direct computer interviews
    • email interviews.

    The choice of interview method depends on various factors, such as:

    • how soon you need the answers
    • your available budget
    • the literacy levels of the target population
    • the personal sensitivity of the questions.

    Designing the questionnaire

    • The questions should be clear and unambiguous.
    • Do not ask too many questions. Start off with easy questions, working towards more difficult ones.
    • Work on a layout that is easy to complete.

    Testing the questionnaire

    Test the questionnaire on a small number of people, to make sure that people understand all the questions, and that your questions are clear.

    Protocol of conducting research

    • The research protocol is the set of ‘rules’ you should keep in mind when doing research.
    • The appropriate way of approaching businesses or individual people need to be used when doing interviews.
    • This depends on the type of information you need.

    Consent

    The interviewee gives his or her permission that you can go ahead with the interview. This is particularly important when children are interviewed. Remember the following:

    • Always start off by introducing yourself.
    • State the purpose of the interview.
    • Make sure the interviewee knows that his or her name will not be mentioned.
    • If people do not want to answer questions, politely thank them and move on.

    When conducting interviews at a company, remember the following:

    • Approach management before you interview employees.
    • Make appointments with staff members you want to interview, and keep to the appointments.

    Basic ethics in research

    • ‘Ethics’ refers to the morally right way to do something.
    • It is unacceptable to spy on people who do not know that you are collecting information from them.
    • Sometimes people display the information that you need for all to see (like wearing branded clothing) and if so you are permitted to use it.


    Before an entrepreneur can establish a new business, he or she needs to:

    • identify a gap in the market
    • decide which products or services can be provided
    • identify the target market
    • identify the competition
    • identify the suppliers.
    Term 3 : Business location decisions


    Labour regulations

    The government puts laws in place to regulate labour. Three important labour laws in South Africa are:

    • The Labour Relations Act 66 of 1995 provides basic rules for communication and negotiations between employers and employees.
    • The Basic Conditions of Employment Act 77 of 1997 aims to improve the working conditions of employees by regulating working hours, leave, pay, notice of termination, health and safety issues.
    • The Employment Equity Act 55 of 1998 provides for affirmative action in the areas of employment, training, promotion and pay.
    • These labour regulations can help to decide where to locate the business, choosing one country over another. 2 Environmental factors The environmental impact of a business can determine the location. If a business is likely to cause a lot of pollution, the authorities may prohibit it in some areas, or insist that a detailed environmental impact assessment (EIA) must be done before a decision is made.
    • Air or water pollution - A factory that causes air or water pollution should be situated in an industrial area, away from residential areas.
    • Noise pollution - Some businesses are noisy and therefore not allowed to be located in a residential area.
    • Toxic waste - If a factory produces toxic waste products, it should follow regulations as to how to dump these and will locate close to where they are allowed to get rid of waste.
    • Most factories in S.A. are in the four main industrial regions: Gauteng (Pretoria-Witwatersrand-Vaal Triangle) area Durban-Pinetown area Port Elizabeth-Uitenhage area Western Cape area.
    • Access to the business and enough parking spaces play a role in the location of businesses in residential areas.

    Transport

    An important factor is the availability of transport.

    • Transport of goods from suppliers by rail, road, air, water or pipeline must be cost-effective and reliable.
    • Transport of goods to customers, should keep costs such as fuel, toll and maintenance on vehicles as low as possible.
    • Transport for employees (busses, trains or taxis) to get to work should be reliable and cost-effective.

    Infrastructure and availability of electricity and water

    • Infrastructure is all the basic facilities a business will need to operate, including access to running water, electricity, cellular networks and other telecommunication services, railway lines, roads, harbours and airports.
    • Businesses such as mines and factories need a lot of electricity and water.

    Potential markets

    • The demand for the product or service creates a market.
    • A business in the tertiary sector must try to locate close to its target market. A business in the secondary sector should be located in a industrial area close to suppliers.
    • The business must assess the current demand for the product and predict the future demand.
    • Businesses must look at characteristics of consumers such as age, gender, culture and income.

    Raw materials

    • Raw materials are needed to make a final product.
    • If the manufacturer can keep related costs low it means higher profits for the business.
    • It may be cheaper to be close to the source of the raw materials, especially if:
      • the transport costs are high
      • the product is very big or heavy
      • the product does not keep fresh for long and needs to be refrigerated.

    Labour markets

    Owners who want to set up businesses need to think about:

    • How many and what type of workers the business will need.
    • Businesses that employ many workers are labour intensive businesses and need to locate close to where many workers live.
    • Other businesses, using mainly machinery, may need only a few workers.
    • Some businesses need skilled or highly skilled workers and need to locate where people with these skills live.

    Climate

    • Agricultural products depend on the right climate.
    • Some climates may attract tourists.
    • Very hot or very cold weather will affect the productivity of workers as most people prefer moderate climates.

    Government, local regulations and taxes

    • Owners choose places where costs will be lowest to maximise profits.
    • Businesses pay for municipal service and rates and taxes on property.
    • The government or municipalities encourage businesses in specific industries to locate in certain towns by charging lower rates and taxes for services or cheap business sites.

    Competition

    • Competition is any other businesses that offer the same or similar types of products or services.
    • Owners have to consider present and future competition.
    • If there are too many businesses offering the same products or services in the same area, it might be difficult for all of them to survive.

    Crime

    • The crime rate in an area will influence the choice of location for a business.
    • It is costly to install security systems to safeguard property.
    • Employees and customers also want to feel safe.
    • Transporting cash to and from the bank in an area with a high crime rate is risky.
    • Parking in high-crime areas is also a risk for workers, customers and suppliers.
    Term 3 : Types of contracts


    A contract is an agreement between two or more people and is binding by law.

    • One party makes an offer and another accepts.
    • It can be verbal or in writing.
    • Some contracts are only legal in writing, as a written contract agreement.

    Employment contract (between employer and employee)

    • An employment contract is an agreement between an employer and an employee where the employer promises to pay the worker for specific work which the worker promises to do.
    • The contract has to follow the stipulations of the Basic Conditions of Employment Act 75 of 1997 (BCEA).
    • The Act specifies: minimum payment maximum working hours minimum leave deductions from salaries or wages minimum period of notice for ending the contract and should be included in the contract
    • Other information that should appear on the contract includes the employer details and employee details, (name, ID, contract details, tax number of employee) as well as any other matter of importance such as benefits offered.

    Insurance (between insurer and insured)

    • A business needs to protect itself from risks that could result in a loss.
    • Insurance policies cover them against losses.
    • An insurance contract is an agreement between the business that needs insurance and the insurance company.
    • The insured promises to pay the insurer a fixed amount per month (called a premium) and the insurer in return promises to cover the insured for any losses suffered from specific events or risks.
    • The insurer will replace the losses or pay an amount to cover the losses.
    • There are two types of insurance: Life or long-term (lives of important people in the business can be insured. Should these people die, money will be paid out by the insurance company to cover loss.) Short-term (covers loss of assets due to accidents or crime).
    • The contract must include: Insurer details (name and address of insurance company that offer insurance) Insured details (name and address of business that wants insurance) Terms and conditions (explanation of what it covers, duration of cover, conditions for cover) Description of goods insured or details of life insured The sum insured Monthly premiums Excess (a specific amount the insured has to pay every time a claim is made).

    Lease agreement (between lessor and lessee)

    • Contract where one business leases goods to another business.
    • It involves the lessor (business that owns goods) and lessee (business that rents goods such as equipment, copiers, and computers).
    • The lessee uses the goods and never becomes the owner.
    • The lessor agrees that the lessee will use the asset for a period of time.
    • Lessee agrees to pay lessor a specific sum of money.
    Advantages for the lessee:
    • A large capital outlay is not required.
    • Goods never become outdate.
    • The lessee can deduct leasing expense for tax purposes.

    Hire purchase (between seller and buyer)

    • One business sells goods to another person or business and allows them to take the goods immediately.
    • Payment is done in instalments over a specified period.
    • A hire purchase transaction is a credit transaction.
    • Maximum interest charged and maximum period to repay is laid down by law.
    • The National Credit Act and the Hire Purchase Act regulate credit transactions and hire purchase agreements.
    • The buyer only owns the goods once last instalment has been paid.
    • The seller can take the goods back if the buyer does not honour the agreement.
    • The types of goods that can be bought on hire purchase include things such as furniture, equipment and vehicles.

    Rental agreement (between landlord and tenant)

    • The Rental Housing Act 50 of 1999 regulates all rental contracts.
    • A rental agreement is drawn up to rent premises.
    • The rented property never becomes the property of the tenant.
    • The rental agreement specifies: the period of agreement deposit paid by the tenant amount of rent payable each month and date of payment percentage increase every year rights and responsibilities of the landlord and tenant other terms and conditions like payment of water and electricity and maintenance.


    What makes a contract legal?

    • All parties that enter into the contract must have 'contractual capacity'. The person must be of legal age (18 years and older) and of sound mind.
    • The contract must be legal, covering activities regarded as legal by law.
    • The contract must be reasonable and all parties must understand what they must do under the contract and agree with the rights and responsibilities.
    • It must be possible to carry out the contract.
    • Some oral agreements can be enforced by law but most contracts must be in writing to be considered legal.

    If a contract does not answer to any of these conditions, the contract is null and void. This means that the ‘contract’ does not exist.

    Breach of contract

    When either party fails to carry out responsibilities it is called breach of contract. A contract is broken for one or more of the following reasons:

    • There are mistakes in the contract such as the wrong date, spelling errors with names, etc.
    • One of the parties was forced to sign the contract and did not really agree to conditions.
    • The requirements and responsibilities of parties in the contract are unclear.
    • The requirements and responsibilities of parties are physically impossible to carry out.
    • One of the parties lied about some information in the contract or withheld important information.
    Term 3 : Presentation of business information


    • Managers often have to present business reports to stakeholders.
    • Reports can be about the financial position of the firm, sales, marketing, production or turnaround strategies.
    • The information is necessary for the internal stakeholders.
    • The internal business stakeholders are the shareholders, employees, executive directors and Board of Directors.
    • All these stakeholders have an interest in how the business is doing.
    • It is necessary to report to main stakeholders about how the business is doing.
    • Business reports are also important to the bank that lends money to the business.

    Developing a business presentation

    The following questions need to be answered:

    • What is the purpose?
    • What information is important?
    • Who is the audience?
    • How long should the presentation last?
    • What will be covered?
    • What resources are necessary?
    • What are the possible questions that the audience can ask?

    Create and do presentations – a step-by-step summary

    Step 1: Define the purpose

    What do you want to achieve with your presentation?

    • Do you want to provide information?
    • Do you want something (such as money) from the audience?
    • Do you want the audience to do something, such as buy your products?

    The purpose of the presentation will determine the language you use and how you choose to organise your content.

    Step 2: Gather content and presentation ideas

    • Decide what to say and what not to say.
    • Make sure that reliable sources are used.
    • Choose how to present the information. Remember the KISS principle: Keep it Short and Simple.

    Step 3: Organise the subject matter

    • The title of a presentation should include the purpose.
    • This could be in the form of a question.
    • Present the information gathered after the problem statement.
    • The answer needs to be included or a solution to the problem statement.
    • List any disadvantages or dangers and how to deal with them.
    • Give a summary of the presentation.
    • Remember to ask again for what you want or what the audience needs to do.

    Step 4: Decide how to present it

    • The nature of information will determine the presentation.
    • Remember to keep it simple.

    Step 5: Prepare the presentation

    • Include graphs and diagrams.
    • List the objectives.
    • Ask questions.
    • Put it together.

    Step 6: Practise, practise, practise

    • Practise – do not just read through the presentation.
    • Dress up in work clothes or school uniform.
    • Stand up and do the presentation aloud.
    • Ask members of your family to listen to the presentation.
    • This will give you a good idea of how long the presentation is going to last and what questions the audience is likely to ask.

    Step 7: Plan, experience and control the environment

    • Inspect the room where the presentation is going to take place.
    • Check how the furniture is arranged.
    • Decide whether the arrangement is suitable. If not, change it.
    • If electrical equipment such as an overhead projector is going to be used, check where the power points are in the room.
    • Check to see that of equipment can reach the power points.
    • If not, arrange for enough extension cords.
    • Tape down any electrical cords.
    • Check to see that all equipment works and that you know how to operate it.
    • If refreshments are served, make sure that people will enjoy the refreshments away from electrical equipment.


    • Audio-visual aids include any device that uses sound or sight to communicate ideas.
    • Visual aids are useful in presentations for several reasons: People learn in different ways, engaging eyes and ears helps to get the message across. Visual aids also help to keep an audience engaged during the presentation. Good visual aids are interesting, relevant and support the presentation, but never overshadow it. Visual aids may include computer slide shows, transparencies, handouts, motion picture and video clips.

    Functions of audio-visual aids

    • To enhance a presentation.
    • To create excitement.
    • To engage the audience.
    • To help the audience to remember the presentation.

    Visual aids – different types of charts

    • Bar charts (quantitative information displayed in comparative parallel bars)
    • Pie charts (classes or groups of data in proportion to a set of data)
    • Run charts (line graphs)
    • Scatter diagrams (show how closely two variables are related)
    • Histograms (individual data points grouped together in classes)
    • Diagrams (Used to show processes or relationships)
    • Illustrations (pictures of what something will look like)
    • Maps (Useful to orientate)

    Other types of visual aids

    Transparencies

    • These are pieces of plastic film on which one can write, draw or copy to view on an overhead projector (OHP).
    • Transparencies are easy and cheap to make and use.
    • Disadvantages are:
      • the OHP needs a special screen mounted at an angle to the wall
      • the OHP sometimes can be difficult to focus.

    Slides and PowerPoint slides

    • Slides can be used in the form of photographic slides which can be shown with a slide projector.
    • Presenters often use PowerPoint slides. PowerPoint is a Microsoft program one can use to create slides on a computer.
    • The computer connects to a data projector and projects anything on the computer screen onto a wall or a screen.
    • Advantages of using PowerPoint are: It is relatively easy to do. Information can be re-arranged easily and adapted while the presentation is happening. Printed slides can be given to listeners as a hand-out. A data projector also can be used to show video clips or information from the Internet during a presentation.
    • The disadvantage is that data projectors are still relatively expensive.

    Models

    A model is a smaller, scaled-down three dimensional representation of a larger body.

    Diagrams

    • We use a diagram to show processes or relationships.
    • It could be used to show relationships within an organisation.
    • We call such a diagram an organogram.
    • A diagram that shows processes is often called a flow chart.

    Illustrations and maps

    • A presenter can use illustrations to explain a new idea.
    • Maps are useful to help listeners orientate themselves.

    Design and layout of the visual aids for a presentation

    The design of a presentation is vital for the success of the presentation. If visual aids are going to be used consider the following points:

    • How formal or informal do you want to make the presentation?
    • Which type of visuals will attract the audience and will they be able to understand?
    • Which heading should be used in your presentation?
    • Should sub-headings be used?
    • Plan how to create a good first impression.
    • Keep language ability of your audience in mind.

    Keep the following principles in mind to create the best layout:

    • keep it simple; the simpler, the better
    • avoid full sentences or paragraphs; just give a potent summary
    • make sure that people at the back of the room can read the text
    • avoid fancy decorations
    • use black text on a light background; this is easier to read than white on black.

    Use basic design principles when you design the layout of your visual aids. Here are the most important issues where layout is concerned.

    • Use strong, simple lines for the maximum impact.
    • Shape is the two-dimensional design of visuals. Make sure that the shapes suit the message.
    • Make sure that the colours chosen are easy to see and read, using contrast.
    • Allow for enough empty space in the layout.
    • Texture is a visual technique which will make it look as if the shape is relatively smooth or rough. Use texture to increase contrast.
    • Spread information evenly across the space so that it is balanced and in proportion. Use different letter sizes to convey the relative importance of the different pieces of information.
    Term 3 : Business Plan


    What is a business plan?

    The entrepreneur identifies a business opportunity, and then needs to gather information from the external environment:

    • Will potential customers be interested in the product or
    • Is there an existing market for this product or service?
    • Who will supply the business with all the resources needed?
    • Are there other competitors in the market and how strong are they?
    • How will my business impact the environment?
    • What are the legal requirements that my business must stick to?

    Analysis of environmental factors

    The type of business activities and the type of product or service will determine the impact on the environment. Be sensitive to:

    • Pollution – air, water, soil or noise
    • Managing use of dangerous materials or chemicals such as oils, grease, fuel, pesticides
    • Waste and management or the disposal of it
    • Impact of business activities on the community
    • Methods to lessen the impact of business activities on the environment.

    Components of the business plan

    Cover page

    The cover page has to make a positive impression. It lists business details and contact numbers:

    • name of the business
    • name(s) of owner(s) / entrepreneur(s)
    • address and contact details of the business
    • a picture of your business logo
    • the date that the plan was prepared.

    Contents page/ index

      The index lists the headings of different sections with corresponding page numbers that will help the reader to find information quickly.

    Executive summary

    • The executive summary must get the attention of the reader.
    • It summarises your reason for writing the business plan.

    Description of the business

    Vision, mission and long-term objectives

    • The vision of the business will be what the business wants to achieve.
    • The mission statement is how the business is going to achieve its vision.
    • Use smart objectives to set long-term objectives.

    The structure of the business

    • It is important to explain what form of ownership you decide on: sole proprietorship, partnership, close corporation, private company, public company.
    • This will depend on the following factors: number of owners involved size and type of business how much control the owners want how much legal protection the owners want.
    • If the business is producing or selling a product, the business plan should include: a description of the product, what it looks like and what it can be used for. a picture, drawing or photograph of what the product looks like. an explanation of the manufacturing process if the product is made, including where the business will get the raw materials or ingredients from.
    • If the business is providing a service, the business plan should include: an explanation of the service who will be using the service where you plan to provide the service.

    The product / service

    Industrial goods such as machinery used in the production process

    Consumer goods

    • convenience goods (such as bread and milk)
    • shopping goods (clothing and furniture)
    • speciality / select goods (cars).

    Services

    • personal (hairdressing)
    • professional (doctor, lawyer, teacher)
    • commercial or auxiliary (transport, insurance, grading, standardisation, storage).

    Legal requirements of the business

    • Most businesses need one or more permits and licenses to operate legally.
    • Sometimes businesses need only a basic business or occupational license, while others, like a restaurant, may need several.

    SWOT analysis (strengths, weakness, opportunity, threats)

    • A SWOT analysis examines internal and external environments facing a business.
    • Strengths and weaknesses occur in the internal environment and include the owners, products, services, brands and all other internal operations.
    • Opportunities and threats occur in the external environment and are issues that the business cannot control such as economic factors, social factors, demographic factors, cultural factors, competition, and political trends.

    Marketing plan

    • The marketing plan explains how you will market your product or service.
    • A study of customers and potential customers is necessary.
    • The business needs to know how to advertise its products or services, as this will tell the market about the new business and its products and services.

    Market research

    • The business needs to know who they are going to sell to.
    • The target market is the people who are most likely to buy the products or services.
    • The business needs to describe its target market by looking at age group, personality profile, gender, income, education and specific preferences.

    Marketing mix

    • Once the target market is identified, the marketer works out a marketing mix that best satisfies the needs of the target market.
    • This is a combination of the 7 Ps: Product, Price, Place, Promotion, People, Physical environment, Process.

    Product

    The business needs to ask the following questions:

    • What are you selling?
    • How will it be packaged?
    • What is your product's design?
    • Are you selling a physical product or a service?
    • At this point, make all of the decisions relating to your product or service:
      • design and style
      • packaging
      • trademarks (brands).

    Price

    A product is only worth what customers are prepared to pay for it.

    • Make sure the price you set is high enough to pay all costs and still leave enough to make a profit.
    • The price must not be so high as to stop potential customers from buying.
    • The price of a product can be the reason for success or failure of a business.
    • Calculate the average cost of making the product and add on a profit.
    • This is known as mark-up pricing.
    • The business needs to know what the customer is willing to pay for the product.
    • Pricing must be competitive.

    Place (distribution)

    Place refers to the place where the customers can buy the product.

    • The product must be available in the right place, at the right time and in the right quantity.
    • Decide if the product will be sold by using the following methods: direct selling door-to-door sales mail order telephonic selling the Internet.
    • The way in which a business gets its product to the customer is known as the channels of distribution.

        Manufacturer → Consumer

        Manufacturer → Retailer →Consumer

        Manufacturer → Wholesaler → Retailer → Consumer (Traditional Channel)

        Manufacturer → Agent → Retailer →Consumer

        Manufacturer → Agent → Wholesaler → Retailer →Consumer

    Promotion

    Promotion is making customers aware of the product or services that the business is selling.

    • Promotion must get attention, be attractive, tell a reliable message to give the customer a reason to choose the product.
    • Before promoting the product, establish the target customers.
    • The business can use a variety of different advertising media:

    Print : newspapers, magazines, brochures, pamphlets

    Sound : radio

    Sight and sound : television, cinema

    Outdoor : billboards, taxis buses

    Direct mail : data base

    Computer : Internet, web sites

    The requirements of a good advertisement (AIDA):

    • must attract the attention attentionattention attention of the target audience
    • must hold their interest
    • must stimulate a desire for the product
    • must encourage the action of actually buying the product.

    People

    Recruiting the right staff and training them in delivery of their service is important for customer satisfaction and competitive advantage.

    • Staff should have the right interpersonal skills, ability, and service knowledge to give the service that customers are paying for.

    Physical environment (evidence)

    A service is intangible and seen as risky by the customer.

    • Help customers to not feel insecure by providing them with proof that the business keeps its promises.
    • Facilities such as a clean, tidy and well-decorated reception area can help to reassure customers.
    • It is important that you help customer to see what she is buying by having brochures and pamphlets available.

    Process

    Process refers to the system used to help the business in delivering a service effectively.

    • The behaviour of those who deliver is important for customer approval.
    • Issues such as waiting time, information given to customers and helpfulness of staff are important.

    Competition

    • Businesses selling the same or a similar product satisfying the same need are competitors.
    • Customers want value for money and will shop around to find the right product at the best price with the best quality.
    • To ensure competitive advantage, it is important to make a study of competitors to find out what their weak and strong points are.
    • Offer something extra or slightly better than they do.
    • To be able to compete one does not always have to lower the price.
    • The following can be done: use clever advertising slogans make your product unique provide attractive product displays offer an improved service.

    Financial analysis

    • The financial analysis describes financial needs of the business venture and shows how funds will be used in the business.
    • This information is important for financial institutions and potential investors because they don't want to lose their money.
    • The financial analysis will show: the sources of capital (own and borrowed money) a budget, projected income statement and projected balance sheet of how the business plans to use the funds.
    • A budget is a plan showing how money received is to be spent. It helps with successful cash flow.
    • A projected income statement shows the predicted profit or loss calculated by taking into account income and expenditure.
    • A projected balance sheet shows the predicted worth of the business by calculating the possessions (assets like land and buildings, equipment, vehicles, money in the bank) and money the business owes (liabilities like loans, buying on account or bank overdrafts).
    Term 4 : Self-management


    What is self-management?

    Self-management is a skill that helps you to:

    • take control of your day and life
    • plan ahead
    • adapt to changes in your life
    • present yourself in a positive way to others, including employers
    • helps you to know yourself, your talents and strengths
    • helps you to improve in areas of weakness, so you can be successful.

    Factors that play a role in effective self-management include:

    • time management
    • setting personal goals
    • self-knowledge (what does ‘success’ mean to you, as well as your own strengths, weaknesses, talents and interests)
    • making the most of yourself
    • leading a balanced life and managing stress.

    Why is self-management important?

    Self- management helps you to:

    • know yourself to make the most use of talents and strengths
    • improve in areas where you are weak

    Time management

    • Time management is the skill to use your time in the best way possible to complete tasks in the given time.
    • Time is a resource that must be used wisely.

    Planning ahead

    • Manage time by planning ahead.
    • Use a diary or other planner.
    • Make a list of all activities and allocate time for each.

    Know your personal style

    • Know what you prefer, in order to plan more realistically.
    • Do you prefer studying early in the morning or late at night, working under pressure or having plenty of time?

    Symptoms of poor time management

    • postponing important things, and so missing important deadlines
    • having too much to do
    • an attitude of ‘tomorrow is another day’
    • being a perfectionist
    • not setting priorities
    • not able to say ‘no’ to less important things
    • always busy solving problems, because of incorrect planning.

    Time to think

    • Make time to think.
    • This helps to get fresh, new ideas and helps to solve problems.
    • Include ‘thinking time’ into your weekly programme.

    Personal goals

    • Planned steps to reach your dream will turn your dream into becoming a goal.
    • Short-term goals are goals you want to achieve in a few weeks’ time.
    • Medium-term goals will take a few months or even a year to reach.
    • Long-term goals are goals you want to achieve in a few years’ time.
    • Goals, especially long-term goals, take self-motivation, perseverance and commitment.
    • Set goals for different areas of your life.

    How to set goals

      Step 1: Do not set too many goals or too few goals.

      Step 2: Set at least three goals for personal development (music, public speaking, etc).

      Step 3: Set at least two goals for personal finances.

      Step 4: Set at least one goal to help you doing better at school.

      Step 5: Make sure that your goals are realistic and achievable.

      Step 6: Determine a specific period of time for the achievement of your goal.

      Step 7: Decide on how you will measure whether or not you have achieved your goal.

    Success

    • Different people have different ideas of what it means to be successful.
    • Be flexible to adapt to the management's view of success.

    A balanced lifestyle

    • Time is a resource that must be managed wisely.
    • Divide your time between work or study, recreational activities, as well as family and friends in a balanced way.
    • Sometimes it is necessary to allow a lot of time to complete a task such as a project.
    • If work becomes addictive it leads to isolation, stress and depression.


    It is very important to project the image you want, because first impressions last.

    Dress the part

    • Different job types have different ‘dress codes’ or ways in which workers dress.
    • Different companies within the same ‘job type’ also can have different dress codes.
    • Some companies have a more informal culture than others.
    • When going for a job interview, always dress neatly and formally to project a professional image.

    Body language

    • The way in which you walk or sit, as well as mannerisms such as fidgeting, convey a message.
    • This is called body language or non-verbal behaviour.

    Social skills

    • Good social skills are also very important.
    • Nobody will make use of your services if you are rude, ill-mannered or treat people without respect.
    • The way that you greet a person is very important. Introducing yourself and others with a smile.

    More than just an image

    • Apart from projecting a professional image, you must also pay attention to neatness, punctuality, reliability, accuracy and presentations to a client.

    Improving your professional image

    There are various ways to improve your image. These include:

    • Image consultants – people who can help you with planning a wardrobe, personal grooming and social etiquette.
    • Books – bookshops and libraries have books that can help with improving your image.
    • Friends and family – ask a good friend or family member to give you an honest opinion.



    Talents, skills and interests

    • Talents are the natural gifts we were born with. Some people have a natural talent for sport or music.
    • Interests are those things that we enjoy doing, for example, reading.
    • Skills are natural talents that have been developed.

    Strengths and weaknesses

    • Strengths are the things we are particularly good at.
    • It is the result of developing natural gifts or talents so that they turn into skills.
    • Weaknesses are the things we do not enjoy and for which we have no gift or talent.
    • One needs to work at improving weaknesses.
    • This will improve self-image.


    Self-knowledge

    • Self-knowledge is what you know about yourself – your likes, dislikes, strengths and weaknesses.
    • Assess yourself, think about the results of your assessment and understand the reasons for the results.

    Self-assessment

    • Self-assessment is when you judge yourself or your work objectively and learn from it.
    • Self-assessment is important for growth in your personal life.

    Self-reflection

    • Think about why you do certain things and understand your feelings about them.
    • Think whether there was anything you could have done differently.
    • Think back to identify exactly what the reason for the success or failure was.

    Self-confidence

    • Self-confidence is trusting your own abilities to do something and knowing your own worth.
    • Self-confidence leads to healthy relationships with family, friends and colleagues.
    • Self-confidence comes from self-knowledge.
    • Positive and negative experiences from the past can influence self-confidence.

    Stress management

    • Stress is the body’s reaction to a real or imaginary threat.
    • Your body releases stress hormones, particularly adrenaline, which cause your heart to beat faster.
    • A little bit of stress is good, because it helps us to perform at our best.
    • Stress becomes negative if you experience too much of it.
    • Too much stress can cause health problems, such as headaches or stomach ulcers, and even depression.
    • Regular physical exercise, taking up a hobby, leading a balanced life, eating healthily and sleeping enough can help you to cope with stress.

    Adaptability

    • Sometimes things do not go according to plan, circumstances change.
    • Re-evaluate plans and change them according to new circumstances.
    • Part of being successful is the ability to be flexible and think creatively about various alternatives.
    Term 4 : Relationships and team performance


    • Most people think a business only has one objective – profit.
    • Most businesses actually have THREE common objectives: survival sales maximum profit.
    • Other objectives may include: expansion – to grow into a bigger business providing charitable/public services working in an environmentally friendly way.
    • Make use of SMART objectives to make sure objectives are met.

    S Specific Set out clearly what you are trying to achieve

    M Measurable So that you know when it has been achieved

    A Greed Must involve everyone

    R Realistic It must be possible

    T Time frame When must goals be achieved

    Accomplishing business objectives

    Team members will operate effectively in achieving business objectives when members:

    • support one another in their working relationships
    • understand the business's goals
    • are committed to achieving the shared goals
    • have resources and skills available to complete the task.

    Interpersonal relationships in the workplace

    Different hierarchies

    • All organisations have structures that describe the different levels of responsibility and who needs to make which decisions.
    • People need to know what their responsibilities are, who has power over them, and to whom they report.
    • There are three levels of management: top-level, middle-level and lower- level.

    Management levels

    • Top-level managers are normally a small group of senior people who are responsible for what happens in the business (the Board of Directors, chief executive, and managing director).
    • Middle-level managers run departments according to their different functions.
    • Lower-level management is the supervisory level of management.

    The roles of different levels of management

    • Top-level management
      • decide on the objectives and policies of the enterprise
      • give instructions to departments
      • prepare strategic plans and policies for the enterprise
      • appoint departmental managers
      • control and coordinate the activities of all the departments
      • make contact with the outside world
      • provide guidance and direction
    • Middle-level management
      • carry out the plans of the organisation in agreement with the policies and orders from the top managers
      • take part in the appointment and training of lower-level management
      • interpret and explain policies from top-level management to lower-level management
      • co-ordinating the activities within the department
    • Lower-level management
      • manage quality as well as quantity of production
      • maintain good relations in the organisation
      • communicate workers’ problems or suggestions to higher levels and communicate higher levels goals and objectives to the workers
      • help to solve complaints of the workers
      • train the workers

      Importance of each individual working towards achieving the business objectives

      • Teamwork becomes important for a successful business.
      • Team members can work together if they are able to accommodate other people.
      • Different people have different ideas, personalities and beliefs and this can lead to conflict if it is not managed well.
      • Teams consist of different role players such as:
      • Leader – Someone who is in charge of a team and provides guidance, instruction, direction and leadership to achieving results.
      • Doer – Gets most of the work done and makes sure the leader's instructions are carried out.
      • Thinker – Creative and innovative to come up with good ideas.
      • Carer – Motivates team and helps team to get along.

      Personal beliefs and values and how they influence business relationships

      The following factors will influence whether or not people who work together will reach synergy.

      Prejudice

      • When people judge other people because of certain qualities such as skin colour, gender, religion or a social group they are prejudiced.
      • This creates conflict and team will not accomplish business objectives.

      Discrimination

      • It is illegal to discriminate against people based on their age, race, disability, gender, sexual orientation, religion or belief and it could lead to labour action.

      Equity

      • The Employment Equity Act requires employers to take steps to do away with workplace discrimination by employing people from different races, beliefs and religions so as to mirror the broader community.

      Diversity

      • Workplace diversity refers to the variety of people in an organisation.
      • This includes people of different genders, ethnic groups, ages, religions, personalities, levels of education, physical appearances and backgrounds.
      • Organisations employing a diverse workforce can supply a greater variety of solutions to a problem.
      • Values and beliefs influence our working relationships.
      • Work towards accepting differences.
      • Some beliefs have a positive influence and will empower you, and others can limit you.
      • Use beliefs to create positive business relationships.

      Values

      • Our values are those things that we believe are important.
      • Values include concepts such as fairness, honesty, education, effort, perseverance, loyalty, faithfulness and protection of the environment.
      • People value different things.
      • Accept one another.

      Beliefs

      • Our beliefs grow from what we see, hear, experience, read and think about and accept as true.
      • Respect the beliefs of other people so that the team can co-operate.


    Working in a team to accomplish business objectives

    Clear goals for direction

    • Team members must know what they want to achieve.
    • Team members who agree to the goals will be more committed.

    Openness, mutual respect, opportunities for individual development

    • An effective team will allow team members to develop new skills and allow them to grow and learn.
    • Team members must be able to share their feelings, thoughts, and ideas openly with one another. In this way different opinions can be evaluated and the best action taken.
    • Team members who do not respect one another will cause conflict. Individuals need to be adaptable and flexible to work together.

    Support and mutual trust

    • Team members must support and trust one another to be an effective team.
    • Reliability, doing what you say you will and taking risks with others help to build mutual trust.

    Members must all be committed to achieve

    • A team that has members who are passionate about their work is more likely to be successful and get positive results.

    Sound inter-team relations

    • The team needs a conscious effort to get groups of individuals working together as a team.

    Review the team progress

    • It is important to check the progress of the team against their goals on a regular basis.
    • The team can learn from mistakes to avoid future problems.
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