Dicks Learner Guide

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Note to the teacher and learner
As you know, some changes have been made to the curriculum. This
book was written in accordance with the requirements of the CAPS
document. Be sure that the rest of the Head for Success range will be
adapted and updated to meet the requirements of the new curriculum as
the new curriculum implements in the various Grades.
The Author
© COPYRIGHT 2012
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Study guides available in the Head for success range
Grade 8 / Graad 8
 Grade 8 EMS
 Answer book
Head for success with  Teacher’s guide
 Teacher’s guide on CD
 Graad 8 EBW
 Antwoordboek
Op die wenpad met  Onderwysersgids
 Onderwysersgids op CD
Grade 9 / Graad 9
 Grade 9 EMS
 Answer book
 Graad 9 EBW
 Antwoordboek
Grade 10 / Graad 10
 Grade 10 Business Studies (CAPS)
 Graad 10 Besigheidstudies (CAPS)
Grade 11 / Graad 11
 Grade 11 Business Studies
 Graad 11 Besigheidstudies
Grade 12 / Graad 12
 Grade 12 Business Studies
 Graad 12 Besigheidstudies
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Table of content
Welcome to Business Studies Grade 11 5
About Business Studies Tests 7
Term 1 8
Topic 1: Influences on business environments 8
Activities: Topic 1 14
Revision test: Topic 1 17
Topic 2: Challenges of the business environment 18
Topic 3: Adapting to the challenges of the business environments 23
Topic 4: Contemporary socio-economic issues 27
Topic 5: Business sectors 38
Topic 6: Benefit of a company over other forms of ownership 40
Topic 7: Avenues of acquiring a business 51
Revision 57
Formal assessment: assignment 60
Term 2 62
Topic 1: Creative thinking and problem solving 62
Topic 2: Stress and crisis management 68
Topic 3: Transforming a business plan into an action plan 74
Topic 4: Setting up / starting a business 79
Topic 5: Professionalism and ethics 83
Topic 6: Presentation of business information 88
Revision 94
Formal assessment: presentation 101
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Term 3 104
Topic 1: Entrepreneurial qualities and success factors 104
Topic 2: Citizenship roles and responsibilities 110
Topic 3: Marketing function 113
Topic 4: production function 138
Revision 150
Formal assessment: project 153
Term 4 154
Topic 1: Team dynamics and conflict management 154
Topic 2: Introduction to human resources 163
Revision 173
Create an index 181
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Welcome to Grade 11 Business Studies
What am I going to learn this year?

Hi there!
You have made an excellent choice by selecting Business Studies. Let’s see what this year
has in store for you. The Business Studies Curriculum consists of four main topics:
BUSINESS STUDIES
Business environments Business ventures Business roles Business operations
Each topic deals with content which makes up the work you will be covering this year. Topics
are split up over four terms. Take a look:
Term 1 Term 2 Term 3 Term 4
Influences on Creative thinking and Entrepreneurial Team dynamics and

business problem solving qualities and success conflict management
environments factors
Challenges of the Stress and crisis Citizenship role and Introduction to
business management responsibilities human resources
environments
Adapting to the Transformation of a Marketing function
business business plan into an
environments action plan
Contemporary socio- Setting up/starting a Production function
economic issues business
Business sectors Professionalism and
ethics
Benefit of a company Presentation of
over other forms of business information
ownership
Avenues of acquiring
a business
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At the end of each term, you will be required to do some formal assessments:
Term Assessment Due date Your mark Total

Assignment 50
1
Test 100
Presentation 50
2
Mid-year examination 300
Project 50
3
Test 100
Total 650
Year mark 100
Final examination 300
4
Total 400
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About Business Studies Tests

At the end of each term you will write a formal assessment test.
A Business Studies test may look like the following. (This is just a guideline).
Section Description Marks

 Compulsory
A  Different types of short questions 20
 10 questions x 2 marks
 Answer in paragraph style
B  Case studies, scenarios or source based questions can be 40
included
 Choose any two of four questions
C  Answer in paragraph style 40
 1 question, 40 marks
Total 100
A Business Studies examination can look like this:
Section Description Marks Time

 Compulsory
A  Different types of short questions 40 30 min
 20 questions x 2 marks
 Choose any three of five questions
 Answer in paragraph style
B  Case studies, scenarios or source based questions 180 90 min
can be included
 3 questions, 60 marks each
 Choose any two of four questions
C  Answer in paragraph style 80 60 min
 2 questions, 40 marks each
Total 300 3 hours
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TERM 1: BUSINESS ENVIRONMENTS & BUSINESS OPERATIONS
Topic 1: Influences on business environments Duration: 1 week [Week 1]
1. Influences in the business environment
 The business environment is not isolated.

 The business environment exists within other environments and is influenced by these
environments.
 The degree of control businesses have over control factors differ from one environment to the
next.
1.1 Control of the micro environment
 The control factors in the micro environment are under control of an enterprise’s management.
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Element Description Control

 Management determines a business enterprise’s vision, mission, strategy and
Vision, mission,
Written statements of what a business objectives.
strategy and
enterprise hopes to achieve.  Management has full control over a business enterprise’s vision, mission, strategy
objectives
and objectives.
The means or resources available to a business  Management decides which resources are required to run a business.
Organisational enterprise, including human resources, capital  Therefore, management has full control over organisational resources.
resources resources, natural resources and
entrepreneurial resources.
 Managers and leaders are appointed by a business.
Management The people responsible for running a business.
 A business chooses the people it employs.
Eight business functions can be identified.  Management determines how each department is managed, what the functions of
Business
These functions refer to the different each department are and what each department is responsible for.
functions
departments in a business enterprise.  The various business functions are therefore under management’s control.
 Management decides how the employees of an enterprise are organised.
Organisational Refers to the way employees are organised in a
 Management can either choose a hierarchical management structure or a flatter
structure business enterprise.
organisational structure.
Organisational Refers to “the way things are done” in a The business enterprise’s culture and atmosphere are created by management.
culture business enterprise.  Management has full control over a business’s organisational culture and structure.
Working Refers to the atmosphere in which employees
environment work.
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1.2 Control in the market environment
 The control factors from the market environment give rise to opportunities and threats.
 The business enterprise has no control over these factors.
 The business enterprise is however able to influence some of the control factors from the market environment.

Market  A business enterprise cannot force consumers to buy its goods or services.
Buyers of the goods and services a business
(Consumers /  Businesses can however influence consumers to buy goods and services through
enterprise offers.
customers) advertising, sales promotions and fair prices.
 Business enterprises cannot control their competitors’ behaviour.
Other businesses who offer consumers the same
Competitors  Business enterprises can however influence its competitors’ behaviour by offering
or similar goods and services.
excellent services and low prices.
 Business enterprises depend on prompt delivery of good quality goods by suppliers.
Business enterprises and people who provide  Sometimes, suppliers experience problems which result in goods being late.
Suppliers resources to other enterprises to produce goods  It also happens that suppliers deliver sub-standard goods.
or services.  Business enterprises cannot control problems experienced by suppliers.
 However, if a business is not satisfied with a supplier, it can change suppliers.
 Business enterprises acquire the services of intermediaries to sell goods and services
on their behalf.
 Intermediaries usually work for commission.
Also known as agents who help promote, sell and
Intermediaries  This means that the more products intermediaries sell, the more money they earn.
distribute products to consumers.
 Businesses cannot control the actions of intermediaries.
 Businesses can influence intermediaries to a great extent because intermediaries
depend on selling a business’s goods and service to earn commission.
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 Business enterprises form part of civil society.

 Business enterprises can play an active role in civil society by getting involved in the
fight against corruption, poverty and unemployment.
Civil society consists of organisations at local,  Regulators make rules for enterprises in different industries.
provincial and national level. Most civil society  An enterprise must follow the actions of a regulator.
organisations focus on welfare. Civil society  Businesses can however influence regulators by getting involved in the law-making
Other
includes: process.
organisations
 CBOs and VGOs  Business enterprises cannot control the decisions or actions taken by its allies
(civil society)
 Regulators because strategic allies are separate businesses and are managed independently.
 Strategic allies  Strategic allies work together so they do influence one another in order to obtain the
 Unions maximum benefit from the relationship.
 Businesses cannot control the actions or decisions of unions. However, businesses
can work together with unions to establish good working conditions and fair
workplace policies.
Opportunities are trends or events than can be  Businesses cannot control opportunities or threats which may appear suddenly in the
Opportunities utilised to the advantage of a business enterprise. business environment. But, a business must position itself in a way that it can react
and threats Threats are trends or events that affect a to opportunities and threats.
business enterprise negatively.
1.3 Control in the macro-environment
 Management cannot influence or control the control factors from the macro environment:
Social / cultural / People and factors that influence  Challenges relating to this environment include the HIV/Aids pandemic, skills shortages and
demographic consumer behaviour. Includes the crime.
environment personal values, perceptions,  These problems influence both business operations and consumer spending.
behaviour and preferences that  Business enterprises cannot exercise control over these problems.
influence consumers’ buying
decisions.
Institutional Refers to institutions that provide a  Business enterprises must meet the standards set by the institutions they deal with.
environment series of services to business  For example, the SABS will not approve a product if the product does not meet the standard set
enterprises, for example the SABS, JSE by the SABS.
and the CSIR.
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Legal and political The laws and legislation that  Business enterprises must comply with legislation.
environment businesses have to comply with. Also  New laws can influence the way business enterprises operate.
refers to the political situation in a  If business enterprises do not obey laws, they are fined or punished.
country.  Business enterprises cannot control new legislation.
 Politics influence business enterprises because investors do not invest their money in businesses
operating in countries which are politically unstable.
 Business enterprises cannot control the election of the government, or the decisions made by
government.
Economic Refers to global and local economic  The economic environment has a big influence on both business operations and consumer
environment forces that influence business spending because it includes control factors such as inflation, interest rates and exchange rates.
enterprises, including exchange rates,  Business enterprises cannot control any of these factors.
interest rates and labour action.
Global/international Global and international forces that  Local business enterprises operate in the global environment.
environment influence business operations, for  In order for local business enterprises to compete internationally, the goods and services of
example international competition. local businesses must meet international standards.
 Local business enterprises are influenced by the global environment and o not have any control
over factors influencing the global market.
Physical / natural Refers to forces that are present in  The world is facing major crises regarding the availability of natural resources such as oil, coal
environment the natural environment, including and food.
natural resources, infrastructure,  Business enterprises should get involved in finding solutions to these problems, but cannot
pollution and finding alternative control the availability of natural resources.
sources of generating energy.
Technological New technology creates new business  New technology does not only influence business enterprises that sell technological products,
environment opportunities and influences the way technology also influences the way in which business operations are conducted.
business is conducted. The internet  Upgrading to new technology is usually very expensive and often employees need to be trained
has, for example, enable businesses to use these new technology.
to market their products globally.  Access to new technology does however benefit business enterprises in the long run.
 Business enterprises do not have control over the development of new technology that have an
impact on business operations.
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1.4 Getting involved in the macro-environment
 Management cannot influence or control any of the challenges that occur in the macro-
environment.
 Management must still react to these challenges before they develop into dangerous threats.
 One way in which business enterprises can deal with the challenging macro-environment, is by
getting involved in the macro-environment.
 Business enterprises can get involved in the macro-environment in the following ways:
 Investing money to train employees to keep up to date with the latest technological
inventions.
 Investing money in research to develop new technologies.
 Fighting inflation by offering products at reasonable prices.
 Applying for government tenders. If a tender is granted to an enterprise, it creates the
opportunity to interact and influence government.
 Making use of lobbying to influence parliamentary decision making.
 Getting involved in the fight against HIV/Aids, by:
o providing counselling to HIV/Aids positive employees and their families.
o providing HIV/Aids education to all employees.
o providing anti-retroviral medicine to HIV/Aids positive employees.
1.4.1 Advantages of getting involved in the macro-environment

 A business’s involvement in the macro-environment can hold the following advantages for the
business enterprise:
 Potential employees will recognise the business enterprise as a good employer.
 Consumers will recognise the enterprise as an entity that promotes the interests of
consumers.
 Involvement in the macro-environment gives an enterprise a platform from which to
influence the business environment.
 Involvement in the macro-environment will help the business keep informed about
challenges and developments in the macro-environment.
 A business’s involvement in the macro-environment can help a business anticipate
challenges and deal with these challenges quickly.
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Activities: Topic 1 - Influences on business environments
1. Short questions
1.1 State whether the following statements are true or false. If the statement is false, correct the
underlined word to make the statement true.
1.1.1 A business’s vision, mission, strategy and goals are determined by competitors.
1.1.2 Businesses that offer the same or similar goods and services are known as regulators.
1.1.3 Intermediaries usually earn commission.
1.1.4 Opportunities are trends and events that impact negatively on businesses.
1.1.5 Organisational culture refers to the way employees are organised in a business.
1.1.6 The institutional environment refers to institutions that provide advice to businesses, for
example SABS, JSE and the CSIR.
1.1.7 The economic environment refers to global and local economic forces that influence a business
enterprise, including exchange rates, interest rates and labour action.
1.1.8 Management can influence or control any of the challenges that occur in the macro-
environment.
1.1.9 Advertising means to influence parliamentary decision making.
1.1.10 HIV/Aids is a challenge that exists in the micro-environment.
1.2 Match Column A with Column B.
Column A Column B
1.2.1 Vision, mission, strategy and A Refers to laws and legislation that businesses have
goals to obey, as well as the political situation in a
country.
1.2.2 Competitors B Businesses influence customers to buy certain
goods and services.
1.2.3 Management C Global and international forces that influence
business operations, for example international
competition.
1.2.4 Suppliers D A written statement of what a business hopes to
achieve.
1.2.5 Legal and political E The more you sell, the more you earn.
environment
1.2.6 Commission F Businesses that break the law.
1.2.7 Fines G Businesses, regulators, strategic allies and trade
unions.
1.2.8 International environment H People and businesses that sell resources to other
businesses to produce goods and services.
1.2.9 Civil society I Other businesses that offer the same or similar
goods or services.
1.2.10 Advertising, sales promotions J The people that are responsible for ensuring that
and fair prices business functions are carried out.
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2. Read the case study and answer the questions that follow.
The queen of leather
Gladys is the owner of a company that manufactures leather goods. She employs ten people. Eight
of these employees work in the factory – four upholsterers, three sewers and one floor manager.
The other two employees, the accountant and the administrative clerk, work in the office. Gladys
makes all the important decisions herself.
Gladys exports most of her products to Europe and the United States, where the goods are sold in
high-end boutiques. At first, she tried marketing her leather goods in South Africa, but soon realised
that South Africans who could afford high quality leather products, preferred imported brands.
Gladys was not deterred. She believed that, just as there was a market for imported western leather
goods in South Africa, there had to be a market for imported African leather goods in the West. She
spent weeks making phone calls and sending emails and samples to every potential supplier she
could think of. Finally she was presented with an opportunity - a large British department store
ordered 300 pairs of boots with a promise to order more, as soon as the first consignment was sold
out. Word quickly spread, and within months Gladys was getting orders from all over the world.
Then, one year ago, Gladys almost lost her business. She had just received a large order from her
biggest client, Selfridge’s of London, when her leather supplier, Mike, informed her that he had lost
80% of his stock in a fire. Gladys knew that she would lose her biggest client to her competition if
she failed to deliver. With time running out, she made contact with a Zimbabwean farmer who
claimed to be able to supply the leather for a much lower price. The farmer even invited to fly Gladys
up to Zimbabwe so that she could inspect his farm. Gladys was reluctant, as she had heard that
Zimbabwe was politically unstable. When she visited the farm, however, she was so impressed that
she made a deal on the spot.
One year later Gladys is still importing leather from Zimbabwe. She says she is very happy with her
new supplier as he always has stock, always delivers on time and charges less than anyone else!
2.1 The business environment consists of three parts – the micro-, market and macro-environments.
Describe the level of control businesses have over each respective environment.
2.2 Identify two business functions mentioned in the scenario.
2.3 Which element of the micro-environment is represented by Gladys’ employees?
2.4 Which element of the macro-environment is represented by the loss of Mike’s stock?
2.5 Which business environment is Mike an element of?
2.6 Quote a sentence from the case study that refers to the organisational structure of Gladys’
business.
2.7 Name the business environment and control factor the following statement refers to: Gladys’
products compete against products from all over the world.
2.8 Give an example of an intermediary from the case study.
2.9 Name one way for Gladys’ company to get involved in the macro-environment.
2.10 The scenario mentions that South Africans prefer imported brands. Is this a control factor from
the micro-, market or macro-environment?
3. Fill in the missing word(s).

3.1 Control factors in the micro-environment are under the control of ______.
3.2 Gladys ______ most of her products to Europe and the USA.
3.3 ______ refers to the way Gladys’ employees are organised.
3.4 Management cannot influence or control the control factors from the ______
environment.
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3.5 Challenges relating to the social / cultural / demographic environment can influence both
business operations and ______.
3.6 Opportunities and threats are control factors from the ______ environment.
3.7 ______ refers to global and local economic forces that influence Gladys’ business, including
exchange rates, interest rates and labour action.
3.8 Political instability is an example of a control factor from the ______ environment.
3.9 Businesses have a certain degree of influence over the ______ environment.
3.10 In order for Gladys’ business to compete internationally, her products must meet ______.
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Revision test: Topic 1 - Influences on business environments
Good news! You are have to study for this test. You should know the answers to these questions, if
you were paying attention in class. This mark will not constitute towards your year mark – this test is
merely to help you prepare for formal tests.
1. Discuss the extent to which a business can control the control factors in each business
environment.
Micro environment
Market environment
Macro environment
2. Write down any two control factors from each business environment.
Micro environment 

Market environment 

Macro environment 

3. Write down any advantage of a business’s involvement in the macro environment.
__________________________________________________________________________________
Answers count one mark each.
Total: / 10
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Topic 2: Challenges in the business environment Duration: 1 week [Week 2]
2.1 Challenges from the micro environment
Difficult employees are a challenge to the business enterprises that employ them, because
Difficult employees difficult employees:
 tend to complain a lot.
 influence new and positive employees in a negative way.
 are usually not passionate about their jobs.
 can harm an enterprise’s image if they say negative things about the enterprise.
 A business enterprise’s mission and vision is supposed to direct business operations in a
Lack of vision and way that allows the business enterprise to become a market leader.
mission  A business enterprise without a mission will be aimless and without direction.
 Managers will not be capable of providing meaningful guidance and leadership to
employees as management will not know where the enterprise is heading.
Inadequate managerial skills leads to the following:
 the business enterprise not achieving its objectives.

 subordinates are not be inspired by managers who lack important managerial skills.
Lack of adequate  managers lacking managerial skills will not be capable of managing their departments
managerial skills successfully.
 employees managed by managers with inadequate skills will be unhappy and frustrated -
unhappy employees are usually not very productive.
 unhappy employees could cause a high employee turnover rate which reflects badly on
the enterprise and complicates the recruitment process.
Unions  Unions aim to further the interests of employees who belong to the union.
 Sometimes, unions make demands that are impossible to meet.
 This creates tension between management and employees.
 If management and employees are unable to settle their differences, employees
sometimes resort labour action.
 Labour action is also known as striking.
Strikes and go-slows  A go slow is an example of labour action.
 Employees show up at their place of work, but work so slowly that the business cannot
meet its production targets.
 By the time management realises what is happening, the enterprise has lost many hours of
production.
 Sometimes business enterprises have difficulty finding employees with the right
Skills shortages combination of skills and experience.
among employees  Businesses are then forced to employ candidates who are inadequately qualified.
 Employing unqualified candidates can result in:
 accidents in the workplace.
 poor decision making.
 overloading qualified employees.
 High employee turnover means employees resign from their employers frequently and
High employee new employees constantly have to be recruited.
turnover
 A high employee turnover rate is a strong indication that a business enterprise is
experiencing problems.
 The challenges from the micro-environment are under the direct control of the enterprise’s
management.
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2.2 Challenges from the market environment
 Businesses offering the same or similar products often pose a serious threat to one
another.
Competition  Consumers will buy from the enterprise that offers the best value for money.
 This means that if an enterprise is unable to match the quality and prices of its
competitors, it is in danger of losing consumers.
 There can be a number of reasons why enterprises experience shortages of supply, e.g. a
Shortages of supply fuel crisis that complicates delivery or a supplier’s employees could go on strike.
 Nonetheless, an enterprise experiencing shortages of supply will lose consumers as the
consumers will buy goods from other enterprises.
 Factors such as economic conditions or the financial position of an enterprise’s target
Changes in consumer market can cause changes in the target market’s tastes and habits.
behaviour
 This will cause the target market to shrink, leaving the business with fewer people to
market its products to.
 Changes in the population are one of the most significant factors that influence business
enterprises. Demographic changes that are currently occurring in South Africa include:
Demographics  People tend to live longer. This leads to an increased demand for products.
 Many people immigrate or pursue job opportunities abroad. This not only leads to a
reduced consumer base but also to reduced availability of skilled labour.
Many South Africans are dying due from HIV/Aids. HIV does only influences the labour
force and the consumer force, but HIV-positive consumers have particular product
preferences.
 Psychographics is also known as lifestyle segmentation and involves determining
Psychographics consumer characteristics such as consumers’ attitudes, interests, opinions and lifestyles.
 Businesses can market their products effectively only if they know the psychographics of
their target market.
 It is difficult to determine the psychographics of a target market because it changes
constantly.
 Include factors such as language, ethnicity, customs, income levels and preferences
associated with particular cultures.
Socio-cultural factors  Socio-cultural factors influence enterprises’ product ranges and marketing campaigns.
 Extra care must be taken by a business enterprise to ensure that the marketing campaign
does not offend any cultural group.
2.3 Challenges from the macro-environment
 Factors such as unemployment, high interest rates and high inflation rates cause fluctuation
in consumers’ income levels.
 This can leave consumers with less disposable income.
Changes in  Reduced consumer spending results in lower profits for enterprises.
income levels
 Consumers experiencing financial difficulties spend their money on necessities, rather than
luxuries.
 Changes in consumers’ income levels can be a serious threat, especially for enterprises
specialising in luxury goods and services.
 Each government determines the objectives it wants to achieve while it is in office.
Political  Governments make laws to help them achieve these objectives.
changes  Businesses have to adapt to these laws.
 A change in government can result in political instability.
 Political instability scares off potential investors and potential tourists.
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 Failure to comply with legislation has serious consequences, such as harsh fines or prison
sentences.
 It seems obvious that business enterprises do not have any option but to meet legal
Contemporary requirements, but this is not always easy.
legislation
 For example, The Employment Equity Act suggests that candidates who were previously
disadvantaged should receive preference when an enterprise is recruiting new employees.
 This limits the number of candidates an enterprise can choose from and sometimes it is
difficult to find candidates with the right combination of qualifications and experience.
 Research has shown that some business enterprises feel that South Africa’s labour market is
overly regulated.
Labour  Restrictions that occur in the labour force that pose potential challenges to businesses
restrictions include:
 Shortage of skilled labour, BBBEE (Broad Based Black Economic Empowerment) and
affirmative action.
 HIV/Aids challenges business operations in more ways than one.
 HIV/Aids reduces the number of candidates an enterprise can choose from and impacts
HIV/AIDS negatively on the productivity of an enterprise.
 Some enterprises contribute towards an anti-retroviral fund to assist HIV-positive employees.
 This places a financial burden on enterprises.
 Micro-lending is the extension of small loans (micro-loans) to people who cannot gain access
to credit granted by banks.
 There are two reasons why people make use of micro lending:
o Many people fail to meet the minimum credit requirements set by financial
institutions, such as banks.
Micro-lending o Many people have obligations to meet, such as credit card payments, rental
expenses, or they want to buy products they cannot afford.
 The micro lending business is not regulated.
 There is therefore very little protection for people who make use of the services of micro-
lenders.
 The conditions set by micro-lenders are sometimes unreasonable.
 Globalisation refers to the exchange of goods, services, capital and labour across borders.
 This means that local businesses compete with international businesses for local consumers.
Globalisation  Globalisation has made it relatively easy to pursue career opportunities abroad, which can
and result in local skills shortages.
international
 In some countries, labour is very cheap.
challenges
 Cheap labour enables businesses to manufacture their products at low prices.
 This can make it even more difficult for local business enterprises to be competitive in the
global market.
 People’s values can influence their buying habits because consumers buy products they
identify with.
Social values  Social values that can impact on consumers’ buying habits include consumers’ attitudes
towards saving and brand loyalty.
 Business enterprises cannot control consumers’ social values.
Some demographical challenges currently influencing South African business enterprises include:
 immigration
Demographics  illegal immigrants
 shrinkage of the labour force (due to crime, disease, immigration, poverty)
Demographical changes can result in business enterprises having to train new employees and
selecting potential employees from a smaller pool of candidates.
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Activities: Topic 2 - Challenges in the business environment
1. Short questions.
1.1 Answer the following questions.

1.1.1 Name four challenges that exist in the micro environment.
1.1.2 Name two consequences of inadequate managerial skills for businesses.
1.1.3 Define “high employee turnover”.
1.1.4 Give one reason for the tension that often arises between employers and trade unions.
1.1.5 Define “psychographics”.
1.1.6 Name three socio-cultural factors.
1.1.7 Define “micro-lending”.
1.1.8 Discuss the impact of globalisation on local businesses.
1.1.9 Explain how consumer spending is influenced by social values.
1.1.10 Name one effect of demographic changes on businesses.
2.
Column A Column B
2.1.1 Difficult employees. A Immigration, illegal immigrants and shrinkage of the
labour force (due to crime, disease, immigration,
poverty).
2.1.2 Inadequate managerial skills. B Businesses have no control over the control factors.
2.1.3 Labour restrictions. C Challenges are under the direct control of businesses.
2.1.4 Market environment. D Employees resign frequently and new employees
constantly have to be recruited.
2.1.5 Micro environment. E Subordinates will not be inspired by managers who
lack important managerial skills.
2.1.6 Demographic challenges. F Influence new and positive employees in a negative
way.
2.1.7 High employee turnover. G Shortage of skilled labour, BBBEE (Broad Based Black
Economic Empowerment) and affirmative action.
2.1.8 Macro environment. H Businesses have a degree of influence over the
control factors in this environment.
Red Banana Advertising Media used to be a very successful advertising business. Unfortunately,
things changed for Red Banana when a new competitor entered the market. The new advertising
business entered the market with a bang and managed to win over some of Red Banana’s former
clients with their fresh and creative ideas. Red Banana suddenly found itself in trouble when it had
to apply for a loan to cover expenses. Unfortunately, the bank refused to grant the loan and they
had to resort to a private lending business, XYZ Loans. Although the Red Bananas were lucky to
obtain some cash, XYZ Loans charged excessively high interest rates.
It wasn’t long before the Red Bananas were in trouble again – this time because management didn’t
pay the employees on time. Almost half of the business’s employees decided to strike.
What made matters worse is that the industry is experiencing major skills shortages. Finding a
suitably skilled candidate for a job is not easy.
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2.1 Identify the business sector in which Red Banana Advertising Media operates. Give a reason
for your answer.
2.2 Explain why things started to go wrong for the Red Bananas.
2.3 Red Banana advertising media experienced several challenges. Identify these challenges and
state the business environment each challenge emanates from.
2.4 Why do you think the bank decide not to grant Red Bananas the loan?
2.5 The Red Bananas managed to obtain a loan from a micro-lending business. Write some
explanatory notes about micro-lending.
2.6 Suppose you were in charge of Red Bananas. Devise a strategy to help restore the Red
Bananas’ former position in the market.
Revision test: Topic 2 - Challenges in the business environment
Good news! You are have to study for this test. You should know the answers to these questions, if
1. Study the following block.
Changes in income levels / Unions / High employee turnover / Competition / Micro-lending /

Contemporary legislation / Shortages of supply / Socio-cultural factors / Strikes and go-slows / Skills
shortages among employees
1.1 Write down all the challenges from the micro environment.
1.2 Write down all the challenges from the market environment.
1.3 Write down all the challenges from the macro environment.
Total: / 10
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Topic 3: Adapting to challenges in the business environment Duration: 1 week [Week 3]
3.1 Ways in which businesses can adapt to challenges in the business environments
 Management cannot ignore the challenges in the business environment.

 Management must develop strategies to deal with challenges.
 Some of the strategies that can help business enterprises adapt to challenges include:
Information  Involves getting the right information to the right person, at the right place and at
management the right time.
Strategic responses  Involves knowing which problem-solving and crisis intervention processes to use
under which circumstances.
 Two business enterprises that join forces in order to become one enterprise through
Mergers mutual agreement.
 Mergers enable business enterprises to combine their strengths to respond to
challenges in the business environment efficiently.
 Refers to one company (the acquirer/bidder) purchasing another company (the
target).
 A take-over/acquisition may be friendly or hostile.
 A friendly take-over takes place when the board of directors of the companies that
Take-overs & are involved negotiate a deal that benefits both the bidder and the target.
acquisitions  If the take-over target does not want to be bought by the bidder or the target’s
board has no prior knowledge of the offer, the takeover is classified as a hostile
takeover.
 Acquisition usually refers to the purchase of a smaller business by a larger one.
 Some advantages of take-overs include:
o tax advantages.
o elimination of competition, increases turnover.
o the new management team can replace inefficient managers or employees.
Alliances  An agreement between businesses which leads to mutual benefits.
 Refers to the process of organising employees, information and technology in a
business enterprise.
Organisation design
and flexibility  The aim is to match the organisational design of the business enterprise with the
business enterprise’s purpose.
 Corporate social responsibility encourages business enterprises to take
responsibility for the impact of the business’s activities on customers, employees,
Social responsibility shareholders, communities and the environment.
 The amount of time and money an enterprise invests in the business environment
helps form the public’s opinion of the enterprise
3.2 Forming business relationships
 Forming relationships with significant parties in the business environment can help business
enterprises address challenges.
 Three important types of business relationships are:
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3.2.1 Power relationships
 Power refers to a person’s ability to influence other people’s thoughts, actions or choices.
 A relationship is where there is some sort of an understanding between two or more parties, e.g:
o there is a relationship between an employer and employees.
o there is a relationship between an enterprise and members of a union.
o there is a relationship between an enterprise and its suppliers.
 Every party to a relationship possesses a degree of power, for example:
o Employees have the power to strike.
o Employers have the power to give work orders to employees.
o An enterprise has the power to order materials from its suppliers.
o A supplier has the power to demand payment from an enterprise.
 Parties to a relationship do not possess the same degree of power.
 Sometimes, power in a relationship is abused to achieve a goal.
 Business people must try to sustain working relationships.
 As relationships grow, they become stronger and parties gain more from the relationship.
 If any party to a relationship abuses the power in they have, the relationship will suffer.
3.2.2 Networking
 Networking is the process of meeting new people and building relationships that could hold
mutual benefit.
 Networking involves building alliances with other people because you might need their services
in the future, or vice versa.
 Advantages of networking include:
o meeting new clients.
o discovering new business opportunities.
o finding new job opportunities.
o advertising your business enterprise.
3.2.3 Lobbying
 Lobbying refers to the process of influencing legislation or parliamentary decision making.

 Lobbying involves acquiring public support for an issue.
 An example of lobbying is when people protest against the enforcement of a new law.
 There are two different kinds of lobbying:
Grassroots lobbying Direct lobbying

Appealing to the public to influence government. Contacting government directly to try and influence
legislation.
3.2.4 Benefits of a business’s involvement in the macro environment
 Potential employees will recognise the business enterprise as a great place to work for.
 Consumers will recognise the enterprise as an entity that promotes the interests of consumers.
 Involvement in the macro environment gives an enterprise a platform from which the enterprise
can influence the business environment.
 Involvement in the macro environment will help the business keep informed about challenges
and developments in the macro environment.
 Being involved in the macro environment helps businesses anticipate and quickly deal with
challenges.
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Activities: Topic 3 – Adapting to challenges in the business environment
1. Short questions.
underlined word(s) to make the statement true.
1.1.1 Acquisitions enable business enterprises to combine their strengths to respond to challenges in
the business environment efficiently.
1.1.2 Information management involves getting the right information to the right person, at the right
place and at the right time.
1.1.3 A hostile take-over takes place when the board of directors of the companies that are involved
negotiate a deal that benefits both the bidder and the target.
1.1.4 Alliances are agreements between businesses which lead to mutual benefits.
1.1.5 Government encourages business enterprises to take responsibility for the
impact they have on customers, employees, shareholders, communities and
the environment.
1.1.6 The three most important business relationships are power relationships, networking and
lobbying.
1.1.7 Lobbying is the process of meeting new people because knowing them could be advantageous.
1.1.8 An example of networking is when people protest against the enforcement of a new law.
1.1.9 Grassroots lobbying involves contacting the government directly to try and influence
legislation.
1.1.10 Manipulation refers to a person’s ability to influence other people’s thoughts, actions or
choices.

1.2.1 Name three strategies businesses can adopt to cope with challenges in the business
environment.
1.2.2 Define “strategic responses”.
1.2.3 Name three advantages of take-overs.
1.2.4 Explain the difference between hostile take-overs and friendly take-overs.
1.2.5 Define “networking”.
1.2.6 Name three advantage of networking.
1.2.7 Define “lobbying”.
1.2.8 Differentiate between grassroots lobbying and direct lobbying.
1.2.9 Explain what it means if there is a relationship between two parties.
1.2.10 Name three benefits businesses can expect to enjoy from being involved in the macro-
environment.
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Revision test: Topic 3 – Adapting to challenges in the business environment
Good news! You don’t have to study for this test. You should know the answers to these questions, if
1. Give one word for each of the following concepts.
1.1 The company that acquires another company.

1.2 The process of meeting new people because knowing them could be
advantageous.
1.3 Two business enterprises that join forces in order to become one
enterprise through mutual agreement.
1.4 Contacting government directly to try and influence legislation.
1.5 Appealing to the public to influence government.
Total: /5
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Topic 4: Contemporary socio-economic issues Duration: 2 weeks [Week 4-5]
4.1 The impact of socio-economic issues on business operations and productivity
 Socio-economic issues refer to problems that affect people (socio) and the economy (economic)
of a country.
4.1.1 Income
 South Africa has one of the highest rates of income inequality in the world.
 This is due to large differences between salaries of high earners and low earners.
 Many South Africans are battling financially due to rising food prices, petrol prices and inflation
rates.
 Income inequality often leads to poverty.
 Poverty causes more unemployment and skills shortages because poor people cannot afford to
pay for education.
Influence on business operations and productivity Possible solutions

 People with limited or no income cannot spend much money.  Creation of job opportunities.
 Businesses can only expand if there is an increase in the demand  Initiatives to encourage
for their goods. entrepreneurship.
 People who earn low salaries and wages may become
disheartened – this will influence productivity in a negative way.
4.1.2 Inflation
 Inflation refers to the general increase in the prices of goods and services.
 Inflation influences consumers because inflation results in a reduction of buying power (money
consumers can spend).
 The cost of raw materials is also affected by inflation.
 This means that business enterprises must increase prices in order to maintain reasonable
profits.
 Price increases can scare off consumers easily.

 Goods and services become more expensive.  Initiatives to encourage
 Consumers have less money to spend entrepreneurship.
 Businesses cannot expand.
 Consumers spend less and goods become more expensive due to
inflation.
 This may lead to some businesses having to retrench employees.
 This has a negative effect on a country’s overall productivity.
4.1.3 Social, cultural and demographic issues
a) Population growth
 The word population refers to the number of people in a country.

 A population experiences growth when the number of people who are born in a particular year
exceeds the number of people who died during that year.
 If a population grows, the number of jobs available must increase.
 If this is not the case, a growing population can have a negative impact on unemployment.
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 Crime rates are usually higher in countries with high rates of unemployment.
 A growing population demands an increase in consumable resources such as food.
 If the agricultural industry is unable to produce more food, a nation could face starvation.
 A growing population needs housing.
 This means that land must be made available for building houses.
 An increase in the number of people results in an increase in waste products such as refuse and
sewage.
 Therefore, one could say that excessive population growth impacts negatively on employment,
food supplies, housing, pollution, infrastructure and even crime.
 Remember, if the demand for a scarce product is high, that product is very expensive.
 If products like food, housing, municipal services and health services become scarce due to the
growing population, these products will become very expensive.
b) Illiteracy
 If a person is illiterate, it means that the person cannot read or write.

 We can therefore accept that illiterate people do not possess a proper education.
 Many illiterate people cannot find work because most jobs require some reading and writing
skills.
 Illiteracy impacts on business enterprises because it is very hard to market products to people
who they cannot read.
c) Lack of skills
 South Africa is currently experiencing severe skills shortages in fields such as education,
medicine, engineering and the finance industry.
 South Africa is also experiencing a shortage of educators – this means that future generations
will experience skills shortages as well.
 Enterprises looking to recruit candidates often struggle to find someone with the right
combination of skills and experience.
 Often, the cost of training falls on the enterprise.
 Training employees is an expensive process which impacts on productivity because it takes time
for a newly trained employee to learn the ropes of his/her new job.
 Candidates are sometimes recruited from abroad, which is expensive and time consuming.
 Sometimes, enterprises have no choice but to appoint a candidate who lacks certain skills.
 This will result in lowering an enterprise’s standards as management cannot expect the same
quality of work from an unskilled employee as from a skilled employee.

 Increase in the demand for goods and services.  Job creation.
 Excessive population growth increases unemployment, crime and  Skills development.
pollution.  Initiatives that encourage
 Difficult to market products to people who cannot read or write. entrepreneurship.
4.1.4 Economic crime

Economic crime is also known as white collar crime. White collar crime includes the following
criminal activities:
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Fraud Money laundering

Fraud refers to the unauthorised use of funds.  Money laundering refers to hiding the source of
Unauthorised means “without permission.” Examples money that was obtained illegally.
of fraud includes:  Money can be obtained illegally in different ways,
 Using the business’s petrol card to fill up your own for example stealing and drug dealing.
car to go on a personal trip.  Money that was obtained illegally is known as
 Earning money on behalf of a business without “dirty money”.
telling the other business owners about the  Dirty money is sometimes used to run legal
earnings. businesses.
 Claiming more expenses on a trip that were actually  The money made from legal business, then
incurred. appears “washed” or “laundered”.

 Business owners who are involved in money  Implement fraud prevention strategies.
laundering face criminal charges.  Limit the number of people who have access to a
 Loss of income if money has been stolen from a business’s money to the absolute minimum.
business.  Identify vulnerable areas in the business.
 Loss of jobs if a business closes down.  Conduct regular internal audits.
4.1.5 Ethical misconduct
a) Sexual harassment
 Sexual harassment in the workplace involves unwelcome or unwanted attention of a sexual

nature from someone at work that causes discomfort, humiliation, offence, distress, and/or
interferes with the job.
 Sexual harassment includes:
 unwelcome sexual advances
 requests for sexual favours in return for employment benefits
 pressure for sexual favours to clinch sales deals
 It is immoral, wrong and unethical to abuse your position to take advantage of another person.
 Employers should be proactive and prevent the problem, rather than having to address it after
damages have been suffered.
b) Corruption
 Corruption refers to acts of dishonesty.

 Involves the abuse of one’s position for dishonest gain. Examples of corrupt acts include:
 money is offered to a person to influence that person.

Bribery  example: money is offered to a traffic officer by an offender to “forget” about a
traffic offence.
 money is paid back to a person who makes a transaction possible.
Kickbacks  example: a road construction company pays some of the money made back to the
government official who awarded the job.
c) Mismanagement of funds
 Mismanagement of funds refers to the wrongful use of funds that do not belong to you.
 Often used in the same context as fraud.
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 Examples of mismanagement of funds include inappropriate procurement procedures and

irregular expenses.
Influence on business operations Possible solutions

and productivity
 Employees who have been Sexual harassment
victims of sexual harassment will  Steps than can be taken to deal with SH include:
experience a lack of  Formulating a clear policy regarding sexual harassment.
concentration, anxiousness and  Making others aware of the problem, of their own
lack of productivity. rights and of the rights of others.
 Corruption and mismanagement  Implementing clear complaints and disciplinary
of funds will lead to a loss of procedures.
income.  Formulating an employment equity programme that
ensures well planned career paths that are based on
merit, for all employees.
 Working in a positive corporate culture, where the
rights and dignity of all staff members are respected.
Corruption and mismanagement of funds

 Adopt a zero tolerance approach towards corruption.
 Conduct regular internal audits.
 Limit the number of people who have access to a business’s
funds.
 Offer awards to whistle-blowers.
4.1.6 Natural resources
a) Unavailability of natural resources

 Some natural resources e.g. oil, coal, food, water and gold, are scarce.
 This means that if we do not monitor the use of natural resources, some resources will soon be
depleted.
 The depletion of resources will not only impact business enterprises, but human life in general.
 South Africa has already experienced load shedding.
 Many business enterprises have lost millions of rands because of load shedding.
 Business enterprises, as well as the population in general, must guard against the inefficient use
of natural resources, because resources are limited.
b) Inefficient use and exhaustion of resources
 Inefficient use of resources means that resources are being wasted.

 Businesses must devise strategies to make sure that natural resources are used efficiently.
 If resources are used inefficiently they become even scarcer.
 This will lead to an increase in the price of goods and ultimately to the exhaustion of certain
resources.
 Some resources, like oil and coal, cannot be reproduced.
 The growing human population means an increasing demand for resources – this also
accelerates the depletion of resources.
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 Businesses cannot continue with business operations if natural  Finding alternative sources of
resources are depleted. energy.
 Businesses must develop and implement environmental policies.  Recycling.
 Loss of productivity if business operations come to a halt due to  Fining businesses that fail to
unavailability of natural resources. comply with environmental
laws.
 Creating environmental
awareness among businesses
and individuals.
4.1.7 Dumping
 Dumping is when other countries dump their excess products on the South African market to
dominate the local market.
 Dumped products are usually very cheap.
 Dumping has a negative influence on local businesses because local businesses are unable to
produce the same products at an equal or lower price.
 Consequently, consumers buy the dumped products.
 This hurts local businesses as they are unable to sell their products.

 Loss of income.  Initiatives that encourage entrepreneurship.
 Loss of job opportunities.  Limit the number of imported goods.
 Loss of productivity.  Creating awareness among consumers about
locally produced goods through marketing.
4.1.8 Piracy
 Piracy takes place when a person makes copies of goods that are protected by either copyright
laws or trade mark laws, without the consent of the true owner of the goods.
 Products that are often associated with piracy are computer software, CD’s and DVD’s.
 The following definitions will help you to understand piracy.
 A product, for example artwork, music or poetry that was the product
Intellectual property of someone’s mind.
 Intellectual property belongs to its creator.
 Only an owner of intellectual property has the right to produce and
Copyright
copy it.
 An invention.
Patent  Someone who holds a patent has the sole right to produce and sell an
invention.
 A unique mark that represents a business enterprise and that belongs
to the business enterprise.
Trade mark  Includes words, slogans, designs, signs and symbols.
 Registered trademarks may not be used by anyone other than the
business enterprise/person it belongs to.
 Consumers create a demand for pirated goods.

 If no one buys pirated goods, then criminals will have no-one to sell pirated goods to.
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 Loss of income.  Create awareness among
 Increase in prices of authentic goods. consumers about the effects
 Loss of productivity. of piracy on business
operations.
 Take action against people
who produce and sell pirated
goods.
4.1.9 Strikes
 A strike is usually the result of a labour dispute.
 A strike takes place if workers refuse to work.
 A labour dispute is a conflict of interest between members of a trade union and their employer.
 The most common reasons for strikes are wages, working hours and working conditions.
a) Different kinds of strikes
employees show up at work, but work very slowly and produce fewer goods than
Go-slow
usual.
Sympathy members of other trade unions, who are not in dispute with their employer, join the
strike strike to support workers who are in dispute with their employer.
Sit-down
employees show up at work, but refuse to do any work.
strike
Wildcat
against the law – takes place without any warning.
strike
workers cause a decrease in production by doing only the minimum of what is
Work to rule
expected of them, according to the rules of the workplace.
Lockout employees are locked out by their employer and refused entry to their workplace.
b) The Labour Relations Act: nature and purpose

 Makes provision for collective bargaining, e.g. during wage disputes.
 Makes provision for the settling of labour disputes, e.g. unfair dismissals.
 Makes provision for trade unions and discusses the roles and rights of trade unions.
 Regulates the right to strike and the recourse to lock-out in terms of the constitution.
 Promotes employee participation in decision-making through the establishment of workplace
forums.
 Provides simple procedures for the resolution of labour disputes through conciliation,
mediation, arbitration or independent alternative dispute resolution services.
c) What is a trade union?

 A trade union is an employee organisation that focuses on improving working conditions.
Examples of trade unions are COSATU and Solidarity.
d) History of trade unions
 The Trade Union movement originated in Great Britain.

 Due to the fact that workers were uneducated and illiterate, workers could not negotiate better
terms of employment and they did not have power to influence their employers.
 However, workers realised that they have more power when they stand together.
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 Workers formed trade unions to use their collective bargaining power for negotiating better
working conditions.
 Initially, trade unions were not recognised by the law and employers did not want to deal with
trade unions.
e) The role of trade unions

 Improve working conditions and terms of employment.
 Ensure that workers are treated fairly at work.
 Strive to ensure that workers get a fair share of the wealth generated by business enterprises.
 Try to improve social security.
 Achieve greater control over the management of employment relationships.
 Resolve grievances and disputes in the workplace.
 Try to prevent retrenchment.
f) Functions of trade unions

 Represent people at work.
 Lobby government and other decision-makers to ensure the best possible deal for workers.
 Take part in collective bargaining processes.
 Protect the rights of members in the workplace.
 Negotiate equitable wages and benefits.
 Support gender equality.
 Provide and restructureg medical aids.

 Loss of productivity.  Employers and employees
 Loss of income. must adhere to labour
 Can lead to the improvement of employer/employee relationships. legislation.
 Issues between members of
trade unions and employers
must be resolved before
labour action takes place.
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Activities: Topic 4 – Contemporary socio-economic issues
1. Short questions.
1.1 Choose the correct option between the words in brackets.

1.1.1 South Africa has one of the (highest/lowest) rates of income inequality in the world.
1.1.2 (Inflation/interest) refers to the general increase in the prices of goods and services.
1.1. A (sympathy/go-slow) strike is when employees show up at work, but work very slowly and
produce fewer goods than usual).
1.1.4 Crime rates are usually (higher/lower) in countries with high rates of unemployment.
1.1.5 (Money laundering/fraud) refers to hiding the source of illegally obtained money.
1.1.6 Money paid to the person who made a transaction possible is called a (kick-back/bribe).
1.1.7 (Piracy/fraud) takes place when a person makes copies of goods protected by either copyright
laws or trade mark laws, without the consent of the true owner of the goods.
1.1.8 The concept of trade unions developed rapidly after the (Industrial Revolution/First World
War).
1.1.9 (Trade unions/employers’ organisations) represent workers at the workplace.
1.1.10 (The Basic Conditions of Employment Act/The Labour Relations Act) makes provision for
collective bargaining, e.g. during wage disputes.
underlined word(s) to make the statement true.
1.2.1 Socio-economic issues refers to problems that affect people and the economy
of a country.
1.2.2 Income inequality often leads to poverty.
1.2.3 A product, for example artwork, music or poetry that was created by someone’s mind is called
immovable property.
1.2.4 Load-shedding is when other countries dump their excess
products on the South African market to dominate the local market.
1.2.5 A strike is usually the result of a political dispute.
1.2.6 Go-slow strikes occur when workers cause a decrease in production by doing only the
minimum of what is expected of them, according to the rules of the workplace.
1.2.7 The Labour Relations Act makes provision for trade unions and discusses the roles and rights
of trade unions.
1.2.8 A trade union is an employee organisation that focuses on improving productivity levels.
1.2.9 Workers formed trade unions to use their individual bargaining power to negotiate better
working conditions.
1.2.10 Trade unions strive to ensure that workers get a fair share of the wealth generated by
business enterprises.

1.3.1 Discuss the influence of income on business operations and productivity.
1.3.2 Explain the effect of dumping on local economies.
1.3.3 Explain why the inefficient use of resources leads to an increase in the price of goods and
services.
1.3.4 Define “patent”.
1.3.5 Name the most common reason for strikes.
1.3.6 Define “trademark”.
1.3.7 Explain what a “work-to-rule strike” is.
1.3.8 Name three purposes of The Labour Relations Act.
1.3.9 Differentiate between copyright and patent.
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1.3.10 Name four functions of trade unions.

Column A Column B
1.4.1 Bribe A Inappropriate procurement procedures and irregular
expenses.
1.4.2 Work to rule B Includes words, slogans, designs, signs and symbols.
1.4.3 Money laundering C Provides simple procedures for the resolution of labour
disputes through conciliation, mediation, arbitration or
independent alternative dispute resolution services.
1.4.4 Dumping D Conflict of interest between members of a trade union
and their employer.
1.4.5 Inflation E The general increase in the prices of goods and services.
1.4.6 Mismanagement of funds F Employees show up at work, but refuse to do any work.
1.4.7 Trade marks G A police officer illegally accepts money to “look the
other way”.
1.4.8 Labour dispute H Workers cause a decrease in production by doing only
the minimum of what is expected of them, according to
the rules of the workplace.
1.4.9 Sit-down strike I Hiding the source of illegally obtained money.
1.4.10 The Labour Relations Act J Local markets are flooded with imported goods.
S’bu is a 28 year old mine worker who lives in Rustenburg. S’bu’s father was an illiterate, unskilled
labourer and his mother died when he was five. He grew up in an informal settlement with a high
rate of unemployment. S’bu had no interest in studying after school and got a job as a miner as soon
as he matriculated.
As the years went by, S’bu became increasingly aware of environmental issues, especially issues
concerning the efficient use of natural resources in the mining sector. He loved his job, but
understood that resources could be depleted.
After discussing some of his thoughts with his boss, it was suggested that S’bu draw up a plan for the
mine to use resources more efficiently. S’bu came up with a few simple ideas that he knew would
work, and his bosses agreed. In fact, they were so impressed that S’bu sensed a major promotion
was imminent.
That’s when the trouble started. Some of the workers had been complaining about their wages for a
few weeks and then, one Wednesday morning, a few hundred workers went on a wild-cat strike. The
number of striking workers grew as the day progressed until finally almost every single employee
had joined the action. Trade union representatives were booed off stage and accused of corruption
and mismanagement when an attempt was made to get the workers to go back to work. On the
second day, twelve people were killed when police, claiming self-defence, opened fire on the crowd.
The strike has been going on for over two weeks now and a compromise is nowhere in sight. S’bu
fears that unless the mine becomes operational very soon, it will have to close down, leaving him
jobless.
2.1 Explain why income inequality can lead to unemployment and poverty.
2.2 Name two socio-economic issues mentioned in the first paragraph of the scenario.
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2.3 Complete the following sentence: Mismanagement of funds is a form of ______ misconduct.
2.4 Explain the influence of inefficient use and exhaustion of resources on business operations and
productivity.
2.5 Explain why most strikes occur.
2.6 Workers at S’bu’s mine accused trade union representatives of corruption. Define “corruption”.
2.7 The scenario mentions the term “wild-cat strike”. Differentiate between wild-cat strikes and
sympathy strikes.
2.8 Define “trade union”.
2.9 Discuss the role of trade unions.
2.10 Name four functions of trade unions.
2.11 Trade union representatives addressed the striking workers in an attempt to resolve the
grievance. Name three other roles of trade unions.
3. Complete the following sentences by filling in the missing word(s).
3.1 If a person is illiterate, it means that he/she cannot ______.

3.2 The scenario mentions economic crime. Economic crime is also known as ______.
3.3 Mismanagement of funds is a form of ______ misconduct.
3.4 S’bu knows that unless we ______ the use of natural resources, some resources will soon be
depleted.
3.5 S’bu’s boss was interested in his ideas because businesses must develop and implement ______
policies.
3.6 ______ involves the abuse of one’s position for dishonest gain.
3.7 Wildcat strikes are illegal because they take place ______.
3.8 The ______ Act makes provision for trade unions and discusses the roles and rights of trade
unions.
3.9 The LRA provides simple procedures for the resolution of labour disputes through ______,
mediation, arbitration or independent alternative dispute resolution services.
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Revision test: Topic 4 – Contemporary socio-economic issues
1.1 Money is offered to a person to influence that person.

1.2 A product that was created by someone’s mind.
1.3 When workers refuse to work.
1.4 The number of people in a country.
1.5 An employee organisation that focuses on improving working
conditions.
1.6 Unauthorised use of funds.
1.7 A unique mark that represents a business enterprise.
1.8 A general increase in the prices of goods and services.
1.9 Money is paid back to a person who made a transaction possible.
1.10 Unwelcome attention of a sexual nature.
Total: / 10
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Topic 5: Business sectors Duration: 1 week [Week 6]
5.1 Introduction
 There are three economic sectors: the primary sector, the secondary sector and the tertiary
sector.
 Every business enterprises in at least one of the three economic sectors.
5.2 Primary enterprises
 Primary enterprises are responsible for extracting raw materials from the earth, e.g. farming and
mining.
 Primary enterprises provide raw materials to secondary enterprises.
 For example, trees are cut down to be converted to timber.
5.3 Secondary enterprises
 Secondary enterprises are responsible for converting raw materials received from primary
enterprises into manufactured goods.
 For example, timber is cut into smaller pieces used to manufacture furniture, or pulverised to
make paper.
5.4 Tertiary enterprises
 Tertiary enterprises focus on distributing products from where products are manufactured to
the final consumer, which can either be individuals or other business enterprises.
 Tertiary enterprises also render services to individuals or other business enterprises.
 For example, furniture that was manufactured by secondary enterprises will now be transported
to furniture stores to be within reach of consumers.
5.5 Links between primary, secondary and tertiary enterprises
 Production starts in the primary sector.

 However, primary enterprises need products from other enterprises.
 For example, extracting gold from the earth is a primary activity.
 In order to extract gold from the earth, people need different kinds of tools and equipment.
 These tools and equipment were made by the secondary sector and sold by the tertiary sector.
 Sometimes, primary enterprises need products from other primary enterprises as well.
 For example, a poultry farmer needs corn to feed his poultry.
 It is clear that the business operations of each sector depends on activities that are performed
by other sectors.
 We can therefore say that primary enterprises, secondary enterprises and tertiary enterprises
are linked.
 Secondary enterprises are responsible for converting raw materials into manufactured products.
 In order to do this, secondary enterprises need to acquire raw materials from the primary sector.
 The secondary sector uses machines that were manufactured by other secondary enterprises
and that were sold and distributed by tertiary enterprises.
 Tertiary enterprises are responsible for distributing products and rendering services to
consumers.
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 In order to do this, tertiary enterprises need to acquire manufactured products from the
secondary sector.
 Tertiary enterprises also need to make use of services rendered by other tertiary enterprises.
 For example, a grocery store needs products from suppliers - often, suppliers are tertiary
enterprises.
 These products are transported by a transport company (tertiary enterprise) from the supplier
to the grocery store.
 The grocery store needs to insure the products with an insurance company (tertiary enterprise).
 The grocery store also needs banking services (tertiary enterprise) and marketing services
(tertiary sector) to buy supplies and sell products.
Activities: Topic 5 – Business sectors
1. Short questions.

1.1.1 Name the three economic sectors.
1.1.2 Differentiate between the functions of the primary, secondary and tertiary sectors.
1.1.3 Which economic sector is responsible for delivering services?
1.1.4 Which economic sector is responsible for converting raw materials into finished goods?
1.1.5 Which economic sector is responsible for extracting raw materials from the earth?
2. Discuss the links between the economic sectors in an essay.
Revision test: Topic 5– Business sectors
1. Complete the table below.
Sector Main responsibility Example

1.1
1.2
1.3
Answers count one mark.
Total: /9
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Topic 6: Forms of ownership Duration: 2 weeks [Week 6-7]
6.1 Forms of ownership: recap
Sole proprietor
Forms of ownership
Partnership
Close Corporation
Non-profit companies Private companies
Companies
Profit companies Personal liability companies
Co-operatives
Public companies
F
State owned companies

 Most businesses can be divided into one of two categories:
Businesses that are NOT legal entities  Sole proprietorships

 Partnerships
Businesses that ARE legal entities  Close Corporations
 Companies
 Co-operatives
6.1.1 Sole proprietorship
Definition
 When the owner does business without registering as a company.
 Could have employees, even though sole proprietorships are owned and managed by one person.
 Suitable for small enterprises
Characteristics Advantages Disadvantages
 Sole proprietorships are  The owner can simply start  Owner contributes only his/her own
owned and managed by a doing business – there are no skills, time and energy to the
single owner. registration formalities. business.
 It is simply the owner doing  Owner runs the business as  Sole proprietorships do not have
business - there is no he/she sees fit. continuity – this means that the
distinction between the  The owner does not need business cannot continue to exist if
owner and the business. anyone else’s permission to the owner retires or dies.
 Sole proprietorships are make a business decision.  The owner pays tax in his/her
not legal entities.  The owner usually has direct personal capacity - personal tax
 Assets belong to the owner. contact with consumers. rates are much higher than tax rates
 Profit belongs to the owner.  The owner is not accountable for companies at the high end of
 The owner pays tax in to other owners. the scale.
his/her personal capacity.  The success of the business  Capital is limited to the amount of
 The owner is liable for all belongs to the owner. money the owner has access to.
debts incurred by the  The owner has unlimited liability for
business. the debt of the business.
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6.1.2 Partnerships
Definition
 A partnership is where the owners do business without registering as a company.
 The number of partners depends on the nature and size of the partnership.
 There are four essentials to forming a partnership:
 every partner must make a contribution.
 the business must be carried on for the joint benefit of all the partners.
 the object must be to make a profit.
 the partnership contract must be legal.
 A partnership is an agreement  Partnerships can be financially  Partners do not always
between two or more persons. strong because up to twenty agree – this can slow down
 Each partner makes a people can contribute to the decision-making.
contribution to the partnership, capital of a partnership.  A bad decision by one
e.g. skills, time, effort or money.  Partners have a personal interest partner can lead to losses
 Partnerships are not legal in the business. This encourages for the partnership.
entities. partners to work hard.  Partners are bound by the
 Partners are jointly and severally  The different skills of partners decisions of other partners.
liable for the debts of the are combined to achieve  There is no continuity –
partnership – one partner can be synergy. partnerships must dissolve
held liable for the total debt of a  Responsibilities such as paying when a partner dies or
partnership. The partner who telephone, water and electricity retires.
paid the debt must then collect accounts are shared.  Partners have unlimited
each partner’s share of the debt  Stress is reduced because liability for the debt of the
from that partner. decisions can be taken in partnership.
 Profits and losses are shared collaboration with other
among partners according to the partners.
terms in the partnership
agreement.
 The partners pay tax in their
personal capacity.
6.1.3 Close corporations
Definition
 A registered business with a membership of 1-10 persons.
 Exists under the Close Corporations Act (Act No. 69 of 1984).
 Specially created for smaller businesses.
The future of close corporations

 The new Companies Act (Act No. 71 of 2008) does not make provision for the formation of new Close
corporations.
 However, all existing Close corporations may continue to exist indefinitely, or until their members decide
to convert the CC into a company.
 Existing companies may not be converted into Close corporations.
 Existing Close corporations will be treated as private companies.
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 Owned and managed by 1 - 10  Members have limited  Capital is limited to the
members. liability for the debts of the contribution of up to ten
 Name must end with the words CC – unless they have stood members.
Close corporation or CC. surety.  Creditors will normally
 Close corporations have  Appropriate for small and require members to stand
continuity. medium businesses. surety before they lend
 Close corporations are legal  Usually has greater access to money to the CC.
entities. capital than sole  All members of the CC must
 Assets belong to the CC and not to proprietorships. give their approval if a
its members.  Financial statements need member wishes to sell
 Profit belongs to the CC and not to not be audited. his/her interest.
its members.  Tax rates for businesses are  The financial statements of
 Tax is paid by the CC. lower than tax rates for some CC’s (as determined
 Members are sometimes required individuals. by the Companies Act) are
by creditors to stand surety for  Auditing of financial subject to an independent
the debt of the business – this statements is voluntary, review and/or audit.
means that debts can be except when regulations
recovered from members in their under the Companies Act
personal capacity. require financial statements
 Members may become personally to be audited.
liable for the debts of the CC, for
example:
 if the business of the CC
was carried on recklessly.
 grossly negligently.
 fraudulently.
6.1.4 Companies
 Companies can be divided into two categories:

 Non-profit companies: formed for public benefit purposes.
 Profit companies: formed for the financial benefit of shareholders (owners).
 Private companies
 Personal liability companies
 Public companies
 State owned companies
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a) Non profit companies
Definition
 Companies that do not exist to make profit.
 The main goal of non-profit companies is for  Aims to benefit the  Not sensitive to
public benefit purposes. community. commercial
 All income and assets of non-profit companies considerations.
must be used for public benefit purposes.  Difficult to raise
 Members, directors and incorporators of non- money.
profit companies may not gain any financial
benefit from the company, other than
reimbursement for costs incurred on behalf of
the company.
 The names of non-profit companies end with
NPC.
 A minimum of three directors are appointed.
 Dependant on financial support from the
community, sponsorships and fundraising
projects to raise money.
b) Private company
Definition
 A profit company is a private company if:
 its securities may not be offered to the public; and
 the transferability of securities is restricted.
 Name must end with  More capital can be raised by  Double taxation: companies
“Proprietary Limited”, or “(Pty). a company than by an pay tax on taxable income of
Ltd”. individual. the company as well as
 Owned by shareholders.  Creditors are less likely to secondary tax on the
 Minimum number of require surety from members dividends distributed to
shareholders is one. if the company is financially shareholders.
 Managed by directors. strong.  Restricted from raising funds
 Minimum number of directors is  Continuity of existence. directly from the public.
one.  Auditing of financial  Costs and formalities
 Securities are not offered to the statements is voluntary, associated with forming a
public. except when regulations private company.
 If a shareholder wishes to sell under the Companies Act  The financial statements of
his/her shares, the shares first require it. some companies (as
have to be offered to existing  Not necessary to appoint an determined by the
shareholders. auditor, audit committee or Companies Act) are subject to
 A securities register must be company secretary. an independent review
kept.  Not necessary to hold annual and/or an audit.
 Shareholders have limited general meetings.
liability for the debts of the
company.
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c) Public company
Definition
 A public company is a profit company that may offer its securities to the public.
 Owned by shareholders.  Shareholders have limited  Double taxation: companies pay
 Minimum number of liability for the debt of the tax on taxable income of the
shareholders is one. company. company as well as secondary tax
 Managed by directors.  Funds may be raised directly on the dividends distributed to
 Minimum number of from the public by offering shareholders.
directors is three. securities to the public.  Poor performance by a public
 Name of public companies  Continuity of existence. company may lead to
must end with “Limited”, or  Companies can raise more management losing their jobs.
“Ltd”. capital than other forms of  Annual general meetings must be
 Securities may be offered to business enterprise. held – this places an
the public.  The prices of the securities administrative burden on the
 A securities register must be serve as a barometer of the company.
kept. company’s performance.  Incorporating a public company is
a complicated process.
 An auditor, audit committee and
a company secretary must be
appointed.
 Public companies have extensive
corporate governance duties.
d) State owned company
Definition
 A state owned company is a registered company that is either
 owned by the state; or
 is a municipality.
 The state is the only  State owned businesses can  It is difficult to enforce
shareholder. be managed more efficiently accountability.
 Examples of state owned as state owned companies.  A company secretary has to be
companies are Eskom, Telkom,  The format of the state appointed – this places a
SAA and the SABC. owned company provides a financial burden on the
 The board of directors are vehicle for holding state company.
appointed by the government. owned businesses  The state as an owner is less
 The remuneration of directors is accountable. sensitive to commercial
determined by government.  State owned companies considerations.
 Name ends2 with “SOC Ltd”. allow for a compromise  State owned companies often
between the state’s operate at a financial loss.
interests and commercial
considerations.
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6.1.5 Co-operatives
Definition
 A co-operative is an:
 autonomous association of persons
 who are united voluntarily
 to meet their common economic and social needs
 through a jointly owned and democratically controlled enterprise
 that is organised and operated by co-operative principles.
 Not driven by profit.  Creates an opportunity for  Not as sensitive to
 Reason for existence is usually service people to work together commercial
delivery. towards a common goal. considerations as a
 Name includes the word “co-  Aims at benefiting the company.
operation” or “co-op” and ends with community.  Not as effective at
the word “Limited” or “Ltd”.  Bulk buying often enables raising capital as a
 Controlled by the members of the co- co-operations to negotiate company.
op. good prices with suppliers.  Because the main aim of
 Members have equal voting rights –  Co-operatives do not aim to a co-operative is not to
one member has one vote. make profit so they are make profit, co-
 Co-operatives specialise in particular usually capable of selling operatives can easily get
fields, e.g. agricultural co-operatives goods at affordable prices. into financial trouble.
and consumer co-operatives.  Difficult to dispose of
 Returns are paid out to members. shares.
 Co-operatives must establish a reserve  Subject to annual audits.
fund – at least 5% of the surplus must  Compelled to hold
be kept as a reserve and may not be annual general meetings
divided among members. – this is an
administrative burden.
Principles Values Kinds

 Member economic participation  Self-help  Agricultural co-operative
 Autonomy and independence  Self-responsibility  Social co-operative
 Co-operation among co-operatives  Equality  Housing co-operative
 Concern for community  Equity  Consumer co-operative
 Democratic member control  Democracy  Service co-operative
 Education, training and information  Solidarity
 Voluntary and open membership
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6.2 Benefits of starting a public company versus other forms of ownership
6.2.1 Benefits of starting a public company versus sole proprietorships and partnerships
Public company Sole proprietorships and partnerships

 Shareholders have limited liability for  Owners of sole traders and partners in partnerships have
the debt of the company. unlimited liability for the debt of their businesses.
 Funds may be raised directly from the  Funds cannot be raised from the public. Funds are limited
public by offering securities to the to loans from a bank and money saved by the owner or
public. partners’.
 Continuity of existence.  No continuity of existence.
 Tax rates.  Tax rates of companies are usually lower than personal
tax rates – owners of sole traders and partners in
partnerships pay tax in their personal capacities.
6.2.2 Benefits of starting a company versus close corporations, personal liability companies and
private companies
Public company Close corporations, personal liability companies and

private companies
 Funds may be raised directly from the  Funds may not be raised from the public, but are
public by offering securities to the restricted to what company owners can borrow from the
public. bank.
 Companies can raise more capital  More money can be raised by selling securities to the
compared to other forms of businesses. public than by borrowing from a bank.
6.2.3 Benefits of starting a public company compared to co-operatives
Public company Co-operatives

 The prices of the securities serve as a  Not as sensitive to commercial considerations as a
barometer of the company’s company.
performance.  Not as effective at raising capital as a company.
 Companies can raise more capital
compared to other forms of business
enterprise.
6.3 Challenges of starting a company versus other forms of ownership

 Sole traders and partnerships can start doing business without having to go through registration
formalities.
 Companies need to be incorporated - this process takes time and costs money.
 Raising money from the public is also a complicated process – public companies issue
prospectuses to convince the public to buy their shares.
6.4 Formation of companies
6.4.1 Memorandum of Incorporation (MoI)

 The Memorandum of Incorporations (MoI) serves as the constitution of a company.
 The MoI sets out the rights, responsibilities and duties of shareholders and directors.
 It also includes detail about incorporators (people who complete and lodge the documents
necessary for the registration of a company), number of directors and share capital.
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6.4.2 Name of the company
 The first step to registering a company is reserving a name for the new with CIPC.
 The name of a company is subject to approval by CIPC.
 The name of a company must be original and may not be misleading.
 The name of a company indicates the type of company:
 The name of non-profit company must end with NPC.
 The name of a personal liability company must end with Incorporated or Inc.
 The name of a private company must end with Proprietary Limited or Pty Ltd.
 The name of a public company must end with Limited or Ltd.
 The name of a state owned company must end with SOC Ltd.
6.4.3 Incorporation and commencement of the company

 A company is registered and may start doing business once:
 The name of the company has been approved.
 The prescribed fees have been paid.
 The Notice of Incorporation and Memorandum of Incorporation have been lodged.
 The application to incorporate a new company has been processed by CIPC.
6.4.4 Prospectus
 The securities of a company may not be offered to the public unless it is accompanied by a
prospectus.
 A prospectus is a written invitation to the public to buy the securities offered by a public
company.
 The securities of a company may include shares in the company or debentures of the company.
 Shareholders advance capital to a company but are not entitled to a return on their capital
except in the case of redeemable shares.
 A company can also borrow money by issuing debentures to the public.
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Activities: Topic 6 – Forms of ownership
1. Short questions.

1.1.1 Name two advantages of sole traders.
1.1.2 Name the four essential requirements to forming a partnership.
1.1.3 Name three characteristics of close corporations.
1.1.4 Explain how to differentiate between close corporations and public companies by looking
at their names.
1.1.5 Explain the main difference between public and private companies.
1.1.6 Name two advantages of public companies.
1.1.7 Name four characteristics of co-operatives.
1.1.8 Define “co-operative”.
1.1.9 Explain the function of the Memorandum of Incorporation.
1.1.10 Define “prospectus”.
1.2 State whether the following statements are true or false. If the statement is false, give a reason
for your answer.
1.2.1 Sole proprietorships have unlimited access to capital.
1.2.2 Partnerships are financially strong because up to fifty people can contribute to the capital of a
partnership.
1.2.3 Companies can start doing businesses without any formalities.
1.2.4 Public companies’ names must end with Proprietary Limited or (Pty) Ltd.
1.2.5 The minimum number of directors for public companies is one.
1.2.6 All income and assets of non-profit companies must be used for public benefit purposes.
1.2.7 If business is carried out recklessly, members of cc’s may become personally liable for the
debt of the company.
1.2.8 Members of CC’s always have limited liability for the debt of the company.
1.2.9 According to the new Companies Act (Act No. 71 of 2008), all existing closed corporations
must convert to companies.
1.2.10 A mission statement is a written invitation to the public to buy securities offered by a public
company.
AB and Lance are two brothers with two very different businesses. AB owns a pool cleaning business
with his partner, Fernando, and Lance owns a carwash, “Lance’s Carwash CC”, with his wife, Lana.
In AB’s business, AB drives the bakkie and handles the clients and his partner cleans the pools and
keeps the books. The business was never registered.
Lance’s business belongs to himself and his wife. The business owns a building and some equipment
and has six permanent employees.
The following is an excerpt from a conversation between AB and Lance:
A.B.: Partnerships are so much better than close corporations. I didn’t have any of the schlep you
had to go through when you registered your company. Fernando and I simply decided on who would
do what, shook hand and off we went.
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Lance: That may be A.B., but your partnership has no continuity. If Fernando decides to move to
Cape Town tomorrow, your company is history. My company, on the other hand, will carry on
existing even if something happens to me or Lana.
AB: Ok, ok. But you pay more tax than I do. And your books have to be audited.
Lance: Incorrect. Tax rates for businesses are lower than tax rates for individuals and partnerships,
and auditing is voluntary, except when required by the Companies Act. No really A.B., this form of
ownership suits us well and besides, I don’t like the idea of having unlimited liability.
A.B.: You’ve got me there – losing personal assets in a failed business deal is a very scary prospect.
2.1 Name the main difference between A.B. and Lance’s businesses.
2.2 Differentiate between close corporations and partnerships in terms of continuity.
2.3 Explain why A.B. cannot convert his partnership to a closed corporation.
2.4 Describe the circumstances under which Lance and his wife could be held personally liable for
their company’s debt.
2.5 Which essential to partnerships is referred to in the following sentence: “AB drives the bakkie
and handles the clients and his partner cleans the pools and keeps the books.”
2.6 Lance and his wife own a closed corporation. What is the maximum number of members a closed
corporation can have?
2.7 According to Lance, A.B.’s business has no continuity. Explain what he means by this.
2.8 The new Companies Act (Act No. 71 of 2008) does not make provision for the formation of new
close corporations. Does this mean that Lance will have to convert to another form of
ownership? Give a reason for your answer.
2.9 Explain what Lance means by “unlimited liability”.
2.10 Which Act states whether a cc’s financial statements are subject to independent reviews
and/or audits?
3.1 Members of closed corporations have limited liability for the debts of the company – unless they
stood ______.
3.2 Profit made by “Lance’s Carwash CC” belongs to ______.
3.3 If Lance wants to borrow money, a ______ will probably require some sort of surety.
3.4 The amount of partners A.B. can have depends on ______.
3.5 According to A.B., partnerships do not have to be registered to do business. ______ is the only
other form of ownership that does not require registration.
3.6 A.B. and his partner pay tax in their ______ capacity.
3.7 A.B. and his partner are ______ liable for the debts of the partnership, which means that one of
them can be held liable for the total debt of the partnership. The partner who pays the debt can
then collect the other partner’s share of the debt from him.
3.8 A.B. and his partner share profits and losses according to the ______ in the partnership
agreement.
3.9 According to Lance, tax rates for businesses are ______ than tax rates for individuals.
3.10 Existing close corporations may continue to exist indefinitely, or until their members decide to
convert to ______.
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Revision test: Topic 6 – Forms of ownership
1. Write down three types of forms of ownerships that are legal entities.
2. Explain what a prospectus is.
3. Describe what the Memorandum of Incorporation is.
4. Write down any two essentials of forming a partnership.
5. Write down three types of profit companies.
Total: / 10
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Topic 7: Avenues of acquiring a business Duration: 1 week [Week 8]
 Several options are available if someone is interested in acquiring a business.

 Buying a franchise, outsourcing and leasing are three examples.
7.1 Franchising
 A franchise is an agreement between a franchisee and a franchisor according to which the

franchisee obtains the right from the franchisor to use the name and trademark of the franchisor
and to sell the franchisor’s products.
 A franchise is not a form of ownership, franchises serve as a marketing and distribution system
for franchisors.
 Franchisees pay an upfront fee for the right to use the name and trademark of the franchisor –
known as the initial fee.
 Franchisees are obliged to pay a continuous, monthly turnover-based fee in return for guidance
and marketing assistance from the franchisor - known as royalties.
Advantages for the franchisee Disadvantages for the franchisee

 The franchisee enters into an existing  Some franchise agreements specify suppliers
market. from which stock must be bought.
 The franchisee receives marketing and  The franchisee must pay turnover-based royalties
management assistance from the to the franchisor.
franchisor.  It is usually very expensive to buy a franchise.
 The franchisor provides the franchisee  The franchisee may only sell products permitted
with training. by the franchisor.
 Market research is done by the franchisor.  The franchisee is contractually bound by the
 The franchisor assists the franchisee in guidelines of the franchisor.
finding a suitable location.  It is difficult to sell a franchise that is not
 The franchisor provides the franchisee performing well.
with equipment.  The franchisee is influenced by bad decisions
 The franchisee benefits from using the made by the franchisor.
good name and trademark of the
franchisor.
Advantages for the franchisor Disadvantages for the franchisor

 Franchising allows entrepreneurs to  The franchisor will have to invest a great amount
expand their businesses. of money and time to establish a franchise.
 The franchisor retains control over the  The franchisor must keep a close eye on
operations of franchises. developing franchises and provide developing
 Dedicated franchisees will work hard to be franchises with guidance.
successful. This reduces the risk of failure  Franchisees that are not performing as they
for the franchisor. should be, cannot simply be fired. Instead, they
 The franchisor has access to distribution will require more guidance and assistance from
channels through the different franchise the franchisor.
outlets.  An underperforming franchise can hurt the name
 The franchisor has access to wider market and image of the whole franchise group.
exposure through the franchise outlets.  The income of the franchisor is limited to
royalties.
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7.1.1 Contractual implications of franchise agreements
 A franchise agreement refers to the agreement between a franchisee and a franchisor.

 Franchise agreements must be in writing and in plain and simple language.
 The franchise agreement will include detail such as:
 Operational details
 Financial arrangements
 The rights and responsibilities of the franchisee
 The rights and responsibilities of the franchisor
 The duration of the franchise agreement
 The following documents are important to both franchisors and franchisees:
Secrecy This document is signed by the franchisee to protect the confidentiality of information that the
undertaking franchisee acquires from the franchisor.
The disclosure document provides prospective franchisees with information regarding the
franchise. The aim of the disclosure document is to enable franchisees to make informed
Disclosure
decisions. According to the Franchise Association of South Africa’s (FASA) Code of Ethics and
document
Business Practices, the information included in the disclosure agreement must be updated at
least once a year.
Operations and The Operations and Procedures Manual (OPM) describes the way in which the franchise must be
Procedures run. It is a very important document, because it aims to provide franchisees with enough
Manual information to run and manage their franchises.
7.2 Outsourcing
 Outsourcing is when a business pays another business to perform an activity which the business
could perform in-house.
 The most important reason for outsourcing is to allow the outsourcing business to concentrate
on its core activities.
 Examples of activities that are commonly outsourced include cleaning services and call centre
services.
7.2.1 Advantages of outsourcing
 The outsourcing company can focus on its core business activities.

 The administrative burden of the outsourcing company is relieved in terms of personnel issues
such as salaries and wages and labour relations.
 Outsourcing has the potential to save money. The outsource provider is usually able to render
the service at a lower cost because it specialises in the particular service.
 The outsourcing business has fewer capital expenses because it does not have to invest in
equipment, e.g. a cleaning company supplies its own polishers and vacuum cleaners.
7.2.2 Disadvantages of outsourcing
 The outsource provider may acquire access to confidential information.

 A business can become dependent on its outsource providers.
 This can potentially create a crisis for the business if the outsource provider suddenly terminates
its contract.
 Managing the outsource provider could be more difficult than managing employees.
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7.2.3 Contractual implications of the outsourcing agreement
 The outsourcing company has the responsibility of paying the outsource provider.
 The outsource provider has the responsibility of delivering the service to the outsourcing
company, as agreed.
 The following issues is addressed in the outsource agreement:
 The duration of the contract.
 A secrecy clause to protect the outsourcing company’s patents.
 The rights and responsibilities of both the outsourcing company and the outsource provider.
 A confidentiality clause to protect the confidentiality of privileged information.
7.3 Leasing
 A lease agreement is an agreement entered into by a lessor and a lessee according to which the
lessee acquires the right to use goods provided by the lessor for a specific time, in return for
payment.
 Reasons why enterprises consider leasing include the fact that leasing can be arranged quickly
and does not require a large capital investment from the lessee.
Advantages for the lessee Disadvantages for the lessee
 The lessee obtains the use of the goods  The lessee never acquires ownership of the
without having to worry about maintenance. goods.
 The lessee obtains the use of the goods but  The lessee is bound by the contract for the
does not have to insure the goods. duration of the contract.
 The lessee does not bear the risk of defects.  The lessee cannot use the asset as security to
 Goods can easily be replaced when they borrow money.
become obsolete.  The lessee cannot sell the goods in times of
 Very little cash is required. financial difficulty.
Advantages for the lessor Disadvantages for the lessor

 The lessor receives continuous rent  The lessor is responsible for insuring the goods.
income.  The lessor is responsible for maintaining the
 The lessor receives quantity discount if goods.
goods are bought in bulk.  The lessor is exposed to bad debt.
7.3.1 Contractual implications of the lease agreement
 The lessor has the responsibility of delivering the goods to the lessee in good, working condition.
 The lessee has the responsibility of paying the lessor and protecting the goods.
 Issues that will be addressed in lease agreements include:
 The duration of the contract.

 Amount of rent payable by the lessor to the lessee.
 The rights and responsibilities of both the lessor and the lessee.
 A penalty clause describing the penalties payable by the lessee if the lessee decides to terminate
the lease agreement before the agreed date of termination.
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Activities: Topic 7 – Avenues of acquiring a business
1. Short questions.
1.1 State whether the following statements are true or false. If the statement is false, give a reason
for your answer.
1.1.1 A franchise is a form of ownership.

1.1.2 The franchisor provides the franchisee with equipment.
1.1.3 Lessees bear the risk of defects.
1.1.4 Businesses can become dependent on outsources providers.
1.1.5 Franchisees that are performing poorly are summarily fired.
1.1.6 The most important reason for outsourcing is to allow businesses to concentrate on core
activities.
1.1.7 The Operations and Procedures Manual (OPM) provides prospective franchisees with
information regarding the franchise.
1.1.8 Lessees can use the assets they lease as security to borrow money.
1.1.9 Outsourcing increases a company’s administrative burden.
1.1.10 The outsourcing business has fewer capital expenses because it does not have to invest in
equipment.
1.2.1 Discuss the rights and responsibilities of lessors and lessees in terms of a lease agreement.
1.2.2 Name two advantages franchising holds for franchisors.
1.2.3 Define “lease agreement”.
1.2.4 Name two advantages of leasing for lessees.
1.2.5 Discuss the advantages of outsourcing.
1.2.6 Name three issues addressed in the lease agreement.
1.2.7 Explain why outsourcing can place companies in a vulnerable position.
1.2.8 Discuss the contractual implications of outsourcing agreements.
1.2.9 Describe the circumstances that can lead to the enforcement of the penalty clause in a lease
agreement.
1.2.10 Explain the nature of the franchise agreement.
Avenues of acquiring a business
Salma is a business woman who lives in Johannesburg. On holiday in Italy five years ago, Salma came
across a product that she thought was perfect for the South African market. The product, called
Cateye Quartz, was a patented mixture of quartz, resin and dye which, when combined, created a
durable and attractive alternative to tiles.
Salma tracked down the supplier of Cateye Quartz and, after some negotiation, concluded a
franchise agreement in terms of which the product would be produced locally (in South Africa) and
sold under the name Cateye Quartz. In short, the deal was that Salma would pay R 1 000 000 to the
Italian supplier, in return for which she was awarded the sole right to produce and distribute Cateye
Quartz in South Africa. In addition, an Italian representative would be flown to Salma’s factory to
provide training and assistance as soon as the factory became operational.
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After incurring all the initial expenses, Salma had little money to spend on marketing. She placed a
few advertisements in local newspapers and met with property developers and suppliers of building
material. Almost as soon as Cateye Quartz hit the market, Salma started getting orders. Some
developers liked it so much that they used it to cover whole buildings. By month six, Salma had to
open a second, much larger factory just to keep up with demand.
Salma’s company grew rapidly and in her second year she appointed Triple A Recruitment to help
her find the best candidates to fill vacant executive positions. Triple A Recruitment advertised the
positions and interviewed potential candidates on Salma’s behalf. The two best candidates were
invited back for a personal interview with Salma. Even though she had to pay Triple A Recruitment a
fee for a service she could have performed in-house, this process saved her a lot of time, allowing
her to focus her attention on growing her business.
2.1 Is Salma the franchisee or the franchisor?

2.2 Salma paid a fee of R1 000 000 to the Italian supplier. What is this fee called?
2.3 Discuss the contractual implications of the franchise agreement between Salma and the owner
of Cateye Quartz.
2.4 Differentiate between initial fees and royalties.
2.5 According to case study, the supplier flew in a representative to provide training and assistance.
Name two other advantages the franchise agreement is likely to hold for Salma.
2.6 Name one possible disadvantage the franchise agreement can hold for Salma.
2.7 Explain the nature of the relationship between Salma and Triple A Reqruitment.
2.8 Name the main reason for the existence of this type of business relationship.
2.9 Explain why companies such as Triple A Recruitment are sometimes required to sign a
confidentiality clause.
2.10 What do we call the document that describes the relationship between Salma’s company and
Triple A Recruitment?
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Revision test: Topic 7 –Avenues of acquiring a business
1. Define each of the following:
1.1 Franchising
1.2 Outsourcing
1.3 Leasing
Answers count two marks each.
Total: /6
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Term revision exercise
Question 1
1.1 Choose the correct answer from the options given below. Only write down the correct answer.
1.1.1 Land and buildings are examples of

A natural resources
B human resources
C capital resources
D entrepreneurial resources
1.1.2 The following are examples of control factors in the market environment:
A Civil society
B Government
C The exchange rate
D The interest rate
1.1.3 The information in the following table represents:

Brown bread Margarine
January 2007 R6 R30/kg
A income inequality
B inflation
C high interest rates
D food shortages
1.1.4 Brown bread and margarine are examples of:

A substitute goods
B complementary goods
C related goods
D independent goods
1.1.5 “Digging for Diamonds” is a diamond mine. The enterprise operates in the:
A informal sector
B secondary sector
C tertiary sector
D primary sector
1.1.6 The following business is not a legal entity:

A Judi’s Parties
B Judi’s Parties CC
C Judi’s Parties Ltd
D Judi’s Parties (Pty) Ltd
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1.2 Give one word/concept for each of the following descriptions.
1.2.1 The socio-economic problem that refers to people who cannot read or write.
1.2.2 The economic sector responsible for manufacturing.
1.2.3 Includes behaviour such as discrimination and theft.
1.2.4 A concept which encourages business enterprises to take responsibility for the impact of the
business’s activities on the environment.
1.2.5 People who promote and sell products on behalf of a business enterprise.
1.2.6 When a business pays another business to perform an activity that could have been
performed in-house.
1.2.7 This document is signed by franchisees to protect the confidentiality of information that the
franchisee acquires from the franchisor.
Question 2
2.1 Read the following scenario and answer the questions that follow:
Thandeka has a passion for plants. She recently opened her own nursery in her home town. Even
though Thandeka’s nursery is doing very well, she is faced with various challenges. One of these
challenges is the presence of other well known and established nurseries in the vicinity. A few days
ago, Thandeka discovered that some of the roses are carrying pests. This situation requires
Thandeka’s urgent attention. The local municipality also decided to introduce water restrictions due
to the current drought in the country. Unfortunately, Thandeka’s nursery does not have a borehole
yet.
2.1.1 Copy the following table on your answer sheet and complete it. (15)
To what extent can the

Element mentioned Business Give a reason for your
business enterprise control
in the scenario environment answer
this element
2.1.2 Thandeka decided to apply for a micro-loan to expand the nursery. Briefly explain what a
micro-loan is and comment on Thandeka’s decision to apply for a micro-loan.
2.1.3 Discuss how the following socio-economic problems can impact on Thandeka’s nursery:
(a) Crime
(b) HIV/Aids
2.1.4 In which sector does Thandeka’s nursery operate?
2.1.5 Briefly discuss the role of this sector.
2.1.6 Thandeka trades as a sole trader. List four advantages of sole traders.
2.1.7 Discuss the benefits of starting a company versus sole proprietorships and partnerships.
2.1.8 Thandeka dreams of one day franchising her business idea. Explain what a franchise is.
2.1.9 Discuss any two advantages and any two disadvantages of franchises.
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Question 3
Forming relationships with significant parties in the business environment can help business
enterprises cope with challenges. There are different kinds of relationships in the business
environment. One of these relationships involves influencing people’s actions and thoughts, because
of a particular position. Another example of a relationship in the business environment involves
people or business enterprises influencing legislation or parliamentary decision-making.
The scenario mentions two different types of business relationships. Discuss these two business
relationships in detail.
Question 4
Give a detailed explanation of how public companies are formed. Refer to the following in your
answer:
 Memorandum of Incorporation
 Name of the company
 Incorporation of the company
 The prospectus
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Formal assessment: assignment
Socio-economic issues
 Research assignment
 Individual assignment
 Assessment tool: rubric and marking memorandum
Instructions
 Read the scenario and answer the questions.
Many people are concerned about global warming. Some experts even predict that large parts of the
planet will soon be under water. Business enterprises operate in the natural environment and
although business enterprises contribute towards economic growth, they also contribute towards
global warming and other environmental problems.
1. Explain what global warming is. (4)
2. According to the scenario, business enterprises contribute towards economic growth. Do you
agree with this statement? Give two reasons for your answer. (3)
3. Business enterprises operate in the primary sector, the secondary sector or the tertiary sector.
Explain the role of each sector. Identify one environmental problem that results from business
operations taking place in that particular sector and give a reason for your answer. Use the
following template to answer this question: (15)
Sector Role of the sector Environmental problem Give a reason for your answer
Primary sector
Secondary sector
Tertiary sector
4. Discuss in an essay how excessive population growth can lead to the development of other socio-
economic issues. (10×2)
5. Collect articles from newspapers and magazines about any socio-economic issue/s. Paste these
articles on an A4 paper to compile a scrapbook. Make sure that you have at least ten articles. (8)
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Assessment rubric
Scrapbook 1 2 3 4
Complete 0-2 articles 3-5 articles 6-9 articles 10 or more articles

included. included. included. included.
Neat Not yet Satisfactory. Good. Excellent.
satisfactory.
Learner’s effort
could still improve
considerably.
Total 8
 Articles may not be downloaded off the internet.

 Two marks will be subtracted for every day that the assignment is submitted late.
TOTAL: 50
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TERM 2: BUSINESS VENTURES & BUSINESS ROLES
Topic 1: Creative thinking and problem solving Duration: 1 week [Week 1]
1.1 Introduction
 Business enterprises are under constant pressure to outperform their competitors.
 In order to maintain market position, business enterprises need to solve their problems efficiently
and find creative solutions to problems.
1.1.1 Acquiring problem solving skills in a business context

 All people and business enterprises experience problems.
 The problem solving cycle is a problem solving tool that is used to solve problems.
 The process comprises seven steps which can be presented in a cycle diagram – it is presented as a
cycle, because the process needs to be repeated if the problem is not solved by working through
the process the first time.
Evaluate the Identify and

chosen define the
solution/strategy problem
Implement the Analyse potential

solution causes
Identify
Develop an
alternative
action plan
solutions
Choose the best

solution
Identify the problem  Make a list of all factors that can potentially cause the problem.
Analyse potential  Write down what the symptoms of the problem to ensure that everyone involved fully
causes of the understand the problem.
problem
Identify alternative  Generate a list of potential solutions through applying creative thinking techniques
solutions such as brainstorming, the force field analysis or the Delphi technique.
 Develop a set of criteria that the solution must meet to solve the problem in terms of
the:
Choose the best  costs and time involved
solution  probability of success
 risks involved
 degree of resistance or acceptance by employees
Develop an action  Create a Gantt chart indicating tasks, employees responsible for the respective tasks
plan and deadlines.
Implement the  The solutions that were developed in the previous steps of the problem solving
solution process are now put into action.
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 This step involves comparing actual results with desired results and deciding which
Evaluate the chosen strategies worked and which strategies didn’t.
strategy  This step aims to determine whether the problem was solved and to record the
lessons learnt in order to create better solutions in future.
1.1.2 Routine thinking versus creative thinking
Routine thinking Creative thinking

 Routine thinking refers to thinking in a way you  Creative thinking, on the other hand, refers to
always do. thinking differently.
 This means that you apply old thinking patterns to  This means applying new ways of thinking to old
new situations. situations.
 Routine thinkers tend to make the same mistakes
over and over.
 If we are not used to thinking creatively, we can easily get stuck in old thinking patterns.
 We should try breaking our routine thinking habits, because routine thinking hampers creative
thinking.
 Some people believe that they have a mental block to creativity. Have a look at the following
mental blocks to creativity:
Our own thinking patterns often limit our creativity because we tell ourselves that
The belief that you
we cannot be creative. Start telling yourself that you are creative and be positive
cannot be creative
about your capabilities.
Sometimes, we critisise an idea because the idea is not practical, without letting the
Trying to be too
idea grow on us. If we make minor adaptations to an idea which at first seems
practical
impractical, we might discover that the idea is practical after all.
Logical thinking can limit our creativity because being creative means looking at
Logical thinking
problems differently and even approaching them illogically.
Rules limit our behaviour because rules can act as boundaries. Breaking general
Following rules rules concerning the way we think will require us to be brave and to move outside
our comfort zones. If we can manage to do this, we will be more creative.
Mistakes allow us to learn. We must therefore view making mistakes as learning
Believing that being
opportunities and allow ourselves to become more creative through the lessons we
wrong is bad
learn from our mistakes.
1.1.3 Recap: Complex problem solving techniques

a) Delphi technique
 The Delphi technique aims to obtain the opinions of experts, without bringing the experts together
face-to-face.
 Useful for generating and clarifying ideas, reaching consensus and making decisions.
 Makes use of a series of questionnaires.
 The purpose of the questionnaires is to obtain feedback from different people.
b) Force field analysis

 The force field analysis is a useful technique for looking at all the forces for and against a decision.
 It is often used to plan and implement change in a business.
 To carry out a force field analysis you need to follow these steps:
 Divide your page into three columns. The heading of the left column is “forces for change”.
State the problem in the middle column. The heading of the right column is “forces against
change”.
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 List all the forces for change in the left column and all the forces against change in the right
column.
 Assign a score from 1 to 5 to each force. One indicating that the effect of the force is weak and
five indicating that the effect of the force is great.
 Calculate the total score for each column.
 You can now decide whether the change you want to implement, is viable or not.
 Other complex problem solving techniques include:
Some problems may fall outside the business’s scope of expertise. Management can then
Involving others
make use of consultants.
Some problems are too complex to be dealt with by individuals. Dividing employees into
problem solving teams is a creative problem solving technique with several advantages,
including:
Working in teams
 Viewing the problem from different perspectives.
 Having access to a broad base of knowledge, skills and expertise.
 Obtaining a careful analysis of the problem.
Pro-active problem solving means to anticipate problems and to prevent them from
Pro-active
occurring. This strategy will ensure that resources are not wasted on problems that could
problem solving
have been prevented.
Problem solving teams are often required to make a decision or solve a problem when time
Intuitive decision and information are limited. As a result, teams cannot always rely on the problem solving
making cycle. In these cases, problem solving teams must rely on their intuition, common sense
and past experience.
A SWOT analysis forces management to analyse the enterprise’s strengths and
SWOT analysis weaknesses. This helps management anticipate problems and prevent them from
occurring.
The PEST analysis assesses a business’s position in terms of political, economical, social and
PEST analysis technological factors and will help management anticipate problems on these fronts. The
PEST analysis is more useful to larger business enterprises.
1.1.4 Working with others to solve problems

 Some problems are too complex to be dealt with by individuals.
 Working with others can help us be more creative because we are exposed to other people’s
thinking patterns and to the way other people approach problems.
 Dividing employees into problem solving teams is a creative problem solving technique with
several advantages, including:
 The problem is viewed from different perspectives.
 Team members have access to a broad base of knowledge, skills and expertise.
 Teams will analyse the problem in greater detail which will lead to a better understanding of
the problem.
 Brainstorming is a useful problem solving tool for groups.
 Brainstorming aims to promote creative thinking and idea generation by thinking of as many ideas
possible to solve a problem, without any of the ideas being critisised during the creative thinking
process.
 One of the biggest advantages of brainstorming is that group members can build on one another’s
ideas, because an idea of one person can spark another person’s creativity.
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1.1.5 Acquiring creative thinking skills
 A person can acquire creative thinking skills by:

 Looking at problems, but trying to see opportunities.
 Being open-minded and not being judgmental.
 Applying new solutions to old problems.
 Expanding your knowledge by reading about a variety of topics.
 Identifying things that inspire you.
1.1.6 Conventional versus non-conventional solutions
Conventional solutions Non-conventional solutions

Conventional solutions are ordinary and Non-conventional solutions are different and
unimaginative creative
 What a person perceives as being conventional or non-conventional depends on that person’s

background and culture.
 For example: some cultural groups think the conventional solution to being sick is to see a doctor,
other cultural groups think that the conventional solution to being sick is to see a traditional
healer.
 The advantage of applying conventional solutions to problems is that we are certain of the
outcome.
 But, applying conventional solutions can hamper creativity or limit personal growth.
 Non-conventional solutions allow us to discover alternative paths to solving problems.
 Non-conventional solutions can even lead to the discovery of new opportunities.
 Referring to indigenous knowledge systems is (to many people) a non-conventional approach.
 Indigenous knowledge is local knowledge, for example knowing which plants to use as medicine.
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Activities: Topic 1 – Creative thinking and problem solving
1. Read the scenario about SuperSave Enterprises and answer the questions that follow:
SuperSave is an enterprise that specialises in manufacturing and importing electronic gadgets such
as i-pods, notebooks and electronic games. Although Supersave is a market leader, top management
is concerned about the high employee turnover rate that is beginning to emerge. In recent months,
SuperSave has lost many of its top employees to some of its main rivals. This has resulted in a
decrease in production, an increase in recruitment costs and a lack of continuity at SuperSave. Top
management suspects that the following factors are contributing to the high employee turnover
rate:
 Salaries paid to employees are not market related.

 The working conditions at SuperSave are not as good as at SuperSave’s competitors.
Management will have to make improvements at SuperSave in order to retain employees. Some of
the improvements management may have to consider include revising salaries and investigating
ways of improving working conditions.
1.1 Apply the first three steps of the problem solving cycle to the scenario above.
After SuperSave’s management team considered all the options, they decided on the following
strategies:
 Flexi-hours will be implemented and from now on employees can choose whether to work from
7:00 to 16:00, 8:00 to 17:00, or 9:00 to 18:00.
 All employees will receive a salary increase of 9%.
 Outstanding performers on all levels of the enterprise will be identified each month. At the end of
the year, these names will be thrown into a hat. The employee whose name is drawn from the hat,
will win a two week, all expenses paid holiday to Europe.
 Employee representatives across all levels of the enterprise will be elected. These representatives
will be involved in all decisions that affect the employees at SuperSave in general.
 All the strategies will be implemented in the following month.
Top manager A will be responsible for introducing employees to the flexi-hour system. Top manager
A must brief employees on the system and find out what times employees prefer to work. Top
manager B is responsible for drawing up a new salary budget. Top manager C will be responsible for
co-ordinating the European holiday scheme, while Top manager D will be responsible for
coordinating the election of employee representatives.
1.2 Apply step 4, step 5 and step 6 of the problem solving cycle to the scenario above.
1.3 The managers at SuperSave made use of the Delphi technique to find solutions to the
enterprise’s problems. Briefly explain what the Delphi technique entails.
1.4 During recent months it has become clear that some changes have to be implemented at
SuperSave. Use the information provided in the two scenarios to conduct a force field analysis.
Use the following template to answer this question:
Weight Forces for change Should SuperSave Forces against change Weight
revise the salaries
of employees?
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1.5 Discuss any five other problem solving techniques (apart from the Delphi technique and the
force field analysis), that SuperSave’s managers could have used to find solutions to the
business’s problems.
1.6 Look at the solutions that are going to be implemented at SuperSave. Identify one solution that
was a result of routine thinking and one solution that was a result of creative thinking. Give a
reason for your answer.
1.7 Differentiate between routine thinking and creative thinking.
1.8 Many people believe they are incapable of finding creative solutions to problems. Discuss any
three mental blocks to creative thinking.
1.9 SuperSave’s managers worked together in teams to find solutions to SuperSave’s problems.
Write down any three advantages of working together in problem solving teams.
1.10 Write down any two techniques that SuperSave’s managers probably used when they
tried to solve SuperSave’s problems as a team.
1.11 Differentiate between conventional solutions and unconventional solutions.
Revision test: Topic 1 – Creative thinking and problem solving
1. Write down the seven steps in the problem solving cycle.
2. Identify the problem solving technique.

2.1 This technique makes use of a series of questionnaires that are sent to experts. __________
2.2 This technique assesses a business’s position in terms of, amongst others, political and economic
factors. __________.
2.3 Problems are solved by using past experience and intuition. __________
Total: / 10
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Topic 2: Stress and crisis management Duration: 1 week [Week 1]
2.1 Introduction
 The fast pace at which we are living nowadays and the fast rate at which change is occuring in
the business environment, are two major causes of stress.
 If we do not learn to manage stress, the results can be disastrous for our physical and emotional
well-being.
2.2 Stress management
 Stress is our body’s response to difficult situations.

 There are two kinds of stress: positive stress and negative stress.
 Positive stress can spur us into action and motivate us to perform.
 Negative stress is bad for our health and can lead to conditions such as:
 Sleeplessness
 Loss of appetite
 High blood pressure
 Heart conditions
 A weakened immune system
 Ulcers
 Stress not only affects our bodies, it also affects our emotions.
 Stressed people tend to be more emotional and less rational.
 This means that stressed people sometimes have trouble making good decisions.
 We cannot eliminate stress from our lives, but we can learn how to cope with it.
 The following measures can be implemented in your life to help you deal with stress:
 Prioritise
 Do not procrastinate
 Plan your time
 Follow a balanced diet
 Get enough sleep
 Because the corporate environment is so stressful, business enterprises are increasingly realising
the importance of stress management.
 Stress management involves teaching employees to cope with stress and providing facilities to
employees to help them reduce stress levels.
 People who are capable of managing stress will be:
 Absent less
 More productive
 Less irritable
 Better able to control their emotions
 More rational
2.3 Crisis management

 A crisis is a difficult situation.
 Have a look at the following tips on handling a crisis at work:
 Do not get involved in other people’s crises.
 Act promptly.
 Remain calm.
 If the crisis falls within your field of expertise, act on it. However, obtain expert advice if the
crisis falls outside your scope of expertise.
 Discuss the crisis with a colleague you trust as this will help you gain perspective.
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A crisis can take on many forms. Have a look at ways of dealing with the following situations:
2.3.1 Tight deadlines

 A deadline is a point in time by which a particular task has to be completed.
 Careful planning is necessary to avoid a crisis due to missing a deadline.
 Many people make the mistake of first completing tasks they like and leaving less enjoyable
tasks for later.
 Instead, a person should complete tasks that are due soon first.
 After these tasks have been completed, tasks with a later due date should be completed.
 Missing a deadline can make you appear incompetent and unprofessional.
2.3.2 Loss of property to fire

 Losing property to fire results in financial losses.
 Business owners should check that their insurance covers fire damages and that buildings are
insured at replacement value.
 Back-ups of important documents should be made regularly.
 Stock records should be kept in a fire proof safe.
 This helps managers determine the exact number of stock that is lost in a fire.
 These steps will help minimise financial losses and enable business enterprises to recover from
damages sooner.
2.3.3 Illness
 Each employee brings a unique set of competencies and experience to his/her place of work.
 If a person gets sick, it means that that person’s tasks remain undone.
 This is not a crisis if a person is only absent from work for a day or two.
 It can however become a crisis if a person is seriously ill and has to stop working for a week or
more.
 This is one of the reasons why communication in an enterprise is important, because
communication provides important information to colleagues and enables them to temporarily
take over from a sick employee if that becomes necessary.
2.4 Change management
2.4.1 Types of change
 Change can either be triggered by factors outside the business enterprise (external change), or
by factors inside the business enterprise (internal change).
External change Internal change

 Triggered by factors which are outside the business  Aims to address the weaknesses within a
enterprise’s control. business enterprise.
 Usually takes place in reaction to factors such as
legislation, the actions of competitors, changing economic
conditions or socio-economic factors, such as HIV/Aids.
 Because business enterprises operate in a dynamic environment, change will always be part of
business.
 Business enterprises that resist change do not grow.
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 It is therefore vitally important that business enterprise recognise the need for change and
implement change.
2.4.2 Theories of change management
 Business enterprises grow and develop through change.

Change initiates growth  A business enterprise will therefore strengthen its position in the market
through effective change management.
 Because change is uncertain, it sometimes causes people to feel insecure
Most people have a natural during the change management process.
tendency to resist change  Successful change management depends on management’s ability to motivate
the employees to accept the proposed change.
 Change management is primarily top management’s job, but all employees
Everyone should play an
contribute to successfully implementing change.
active role in the change
 Employees are more likely to accept change if they are given an active and
management process
important role in the change management process.
 Employees are more likely to accept change if the proposed change will benefit
The change should result in them.
tangible and visible benefits  Management should therefore aim to achieve short term results which will
benefit employees.
 The business environment changes continuously.
Change management is a
 A business enterprise without an effective change management policy will not
continuous process
survive the demanding business environment.
2.4.3 Reasons why people resist change
 Change removes people from their comfort zones.

 People are afraid that they may not be able to acquire the new skills required by the change.
 People are afraid that they might lose their jobs.
2.4.4 How to cope with change resistance
 Keep employees informed.

 Do not deviate from the original plan.
 Put employees at ease by explaining the reasons for the change.
 Involve employees in the transformation process.
2.4.5 Dealing with and adapting to different kinds of change
a) Unemployment
 There are a number of reasons why people face unemployment.
 Some people are unemployed because they were fired; some people are unemployed because
they quit their jobs; some people are unemployed because they were retrenched.
 Many matriculants and students are unemployed because they simply cannot find employment.
 Whatever the reason for unemployment, one must understand that being unemployed is a
stressful situation.
 Unemployed people must remember that they are entitled to compensation from the
Unemployment Insurance Fund for the duration of their unemployment, provided they made
contributions towards this fund when they were employed.
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b) Retrenchment
 Retrenchment involves cutting jobs, eliminating product lines or announcing plant layoffs in an
attempt to put a business enterprise in a better financial position.
 Many business enterprises consider retrenchment to relieve financial pressure.
 It is important to note that there is a difference between getting fired and getting retrenched.
 A person usually gets fired for doing something wrong.
 Retrenchment is an attempt to relieve financial pressure faced by an enterprise by cutting salary
expenses.
 Retrenchment is a traumatic experience with financial implications for the people who are
retrenched.
 The business enterprise now has to do the same amount of work with fewer employees.
 The remaining employees may become overworked and disheartened by their circumstances.
c) Globalisation
 Globalisation is an example of external change and refers to the free exchange of money,
information and ideas.
 Due to globalisation, business enterprises are now global players - this means that business
enterprises compete in an international market where there are many more competitors.
 Some of the changes that were necessitated by globalisation include:
 Adapting the business enterprise’s marketing strategy.
 Complying with international standards of quality.
 Complying with international trade laws.
 Upgrading the business enterprise’s Information Technology (IT) network to enable
online purchasing.
d) Affirmative action
 Affirmative action aims to redress the disadvantages in employment that were previously
experienced by designated groups, in order to ensure equal representation in the workforce.
 This means that an enterprise’s workforce must be representative of the country’s
demographics.
 Affirmative action has been a reality for several years now.
 Most people accept affirmative action.
 However, when affirmative action was first implemented, it was greeted with resistance.
 People were scared that they were going to lose their jobs and that they would not be
considered for promotion.
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Activities: Topic 2 – Stress and crisis management
1. Read the following scenario and answer the questions that follow:
CitiCars is an enterprise that operates in the motor industry. Although the enterprise has always
been highly successful, it is currently facing serious problems. Since implementation of the new
National Credit Act, consumers are struggling to afford new cars. This means that Citicars has to find
alternative ways to cut down on costs in order to survive. CitiCars had no other choice but to
retrench 120 employees. Some of these employees managed to find other employment, but the
majority are still unemployed. Even though only 120 employees were retrenched, the retrenchment
process created stress among all employees, because the employees did not know who was going to
be the next one to receive bad news. Things at CitiCars are now starting to look up again.
Management has decided to implement a stress management programme to help employees cope
with the changes that were implemented at the enterprise.
1.1 The word “stress” is mentioned in the scenario. Briefly explain what stress is.
1.2 Differentiate between positive stress and negative stress.
1.3 How can people deal with stress?
1.4 Explain why the National Credit Act had such a large impact on Citicars.
1.5 CitiCars decided to implement a stress management programme. Briefly explain what a
stress management programme is.
1.6 Name any five objectives that CitiCars wants to achieve by implementing a stress
management programme.
1.7 Discuss the five theories of change management in an essay.
1.8 The scenario mentions two kinds of change. Discuss these two kinds of change in a short
essay.
1.9 Leading a balanced lifestyle will also help us cope with change. Briefly explain what it means
to lead a balanced lifestyle.
2. Explain how the following factors can contribute to a crisis. Also mention what an enterprise
can do to minimise the effects of a crisis due to these factors:
2.1 Tight deadlines
2.2 Loss of property to fire
2.3 Illness
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Revision test: Topic 2 – Stress and crisis management
1. Explain what stress is. ______________________________________________________________
2. Explain what a crisis is. _____________________________________________________________
3. Write down five theories of change management.
 ________________________________________
 ________________________________________
 ________________________________________
 ________________________________________
 ________________________________________
4. Write down two reasons why people tend to resist change.
 ________________________________________
 ________________________________________
5. Write down one strategy of dealing with change resistance.
 ________________________________________
Total: / 10
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Topic 3: Transforming a business plan into an action plan Duration: 2 weeks [Week 2-3]
 Timelines, Gantt charts, Work Breakdown Structures (WBS) and project planning are four planning
tools that can help entrepreneurs transform their business plans into action plans.
3. 1Timelines
 A timeline indicates tasks to be completed and indicates when each task need to be completed.
 Timelines help to determine the order in which tasks must be completed.
 Business enterprises make use of different sequencing rules to determine which tasks should be
completed first:
First-come first-served This is when you complete the first task assigned to you first.
Shortest processing time This is when you complete the task that will take up the least time first.
Earliest due date This is when you complete the task with the nearest due date first.
Most valued customer This is when you complete a task for your most valued customer first.
Most profitable job This is when you complete the most profitable job first.
3.2 Gantt charts
3.2.1 Definition of a Gantt chart
 A Gantt chart is an instrument that helps project managers do project planning and is represented
as a type of bar graph.
 Gantt charts show project managers:
 the tasks that must be carried out to complete a particular project
 when each activity must take place
 the time it will take to complete each task
3.2.2 Functions of Gantt charts

 Functions of Gantt charts include:
 helping project managers to plan projects and to monitor progress of projects.
 indicating how long it will take to finish a project.
 sequencing the activities that must be carried out.
 indicating the tasks that can be carried out simultaneously.
 helping project manager instantly see what activities should have been completed at a
certain point in time.
 helping project managers identify the resources they will need to complete a project.
3.2.1 Drawing a Gantt chart
 Although Gantt charts have many uses, most Gantt charts have one disadvantage – projects
often appear easier and less complicated than they actually are.
 Project managers make use of the following steps to draw Gantt charts:
 Write down all the activities that must be carried out to complete a project.
 Decide how much time you will need for each activity.
 Determine which activities need to be completed before others can be started and which
activities can be carried out simultaneously.
 We now draw the axes of the graph – draw an x-axis and a y-axis.
 Write each activity of the project in order, down the y-axis
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 Time appears on the x-axis – draw a horizontal bar that covers the appropriate time on the
timeline next to each activity. The left side of the bar must indicate the time the activity
should start, the right side of the bar indicates when the activity should be completed.
Let’s say you are organising a party. Your Gantt chart will look something like this:
Activities Week
1 2 3 4 Person responsible
Draw up a budget
Organise a venue
Send out invitations
Organise music
Follow up to determine who will be attending
Organise a caterer
3.3 Work Breakdown Structures
 As the name indicates, a Work Breakdown Structure (WBS) is a diagram that breaks down all
tasks that must be performed to complete a project.
 A WBS is a hierarchical structure.
 The project is stated at the top of the diagram.
 All tasks that must be performed to complete this project are then grouped or packaged
together.
 These chunks of work, or “work packages” are then presented as “branches” of the WBS.
 A work package is a chunk of work that cannot be broken down further. Each work package
includes:
 The tasks included in a particular package.
 The costs associated with a particular work package.
 Duration of the particular package.
Let’s create a WBS for preparing for and writing a test:
P Preparing for and writing a test
Preparation Studying Write the test
Set a time table for studying Study your summaries Read all the questions
Find out what the test is Do revision Answer all questions

about
Make summaries Work through past papers
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3.4 Project planning
 Project planning is a detailed description of all the activities that need to be completed in order to
execute a project successfully.
 People in charge of projects are known as project managers and are held responsible for the
success or failure of projects.
 The following steps will help a project manager execute the task at hand:
Determine why the project

Step 1  What is the goal of the project?
must be executed.
Determine who will need to  The project manager must choose competent, experienced and
Step 2
be involved. motivated team members.
Identify and analyse all the  Make a list of all the activities that need to be completed.
Step 3 activities required to  Assign a date of completion to each activity.
complete the project.  Delegate activities to the right team members.
 Follow up to make sure that the team stays on track.
 This step aims to ensure the availability of resources you will need
Identify the resources you to execute the task.
Step 4
are going to need.
 The project manager needs to budget for the resources that are
required to complete the project.
Step 5 Identify risks.  Ask yourself what could go wrong and develop a risk management
plan.
 During this stage, all the different activities are co-ordinated.
Step 6 Execute the project.  If team members did what they had to do, the execution of the
project will run smoothly and the enterprise’s objectives will be
achieved.
Evaluate and reflect on the  It is important that the project manager writes a report that
Step 7 analyses the strengths and weaknesses of the way the project was
project.
managed.
 A project manager is responsible for the successful execution of a project.

 Other responsibilities of project managers include:
 Assigning the right task to the right person.
 Keeping the team motivated.
 Determining specific and clearly defined goals.
 Not underestimating the project.
 Following up. Never assume people are doing what they are supposed to do.
 Being reasonable – time allocated for the completion of particular tasks must be sufficient.
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Activities: Topic 3 – Transforming a business plan into an action plan
1. Read the following scenario and answer the questions that follow:
Cheyeza and Lauren are two entrepreneurs. Since their passion lies in the hospitality industry,
Cheyeza and Lauren have decided to start an enterprise that supplies home-cooked meals. The
business is called “La Cheeza” and focuses mainly on supplying meals to households. The two young
entrepreneurs negotiated with the local school’s principal to rent the school’s kitchen. The contract
with the school is already signed. Lauren and Cheyeza still have to complete the following activities:
 Finalise the menu

 Open a bank account
 Print business cards
 Buy their first batch of supplies
The girls want to start doing business in ten days’ time.
Lauren and Cheyeza are both confident that they will make a success of this venture. They are
passionate about food and love working with people. Since they’ve both worked as managers at
restaurants before, Lauren and Cheyeza feel they know what customers want. The girls have
resigned from their jobs as managers, so they know that they have to make a success of La Cheeza,
no matter what.
1.1 According to the scenario, Lauren and Cheyeza are entrepreneurs.

1.1.1 Briefly explain what an entrepreneur is.
1.1.2 Make a list of five entrepreneurial characteristics.
1.1.3 Which entrepreneurial characteristics do Lauren and Cheyeza possess according to the
scenario? Give a reason for your answer.
1.2 Use the information provided in the scenario to create a timeline of everything that Cheyeza and
Lauren must do to get their business started.
1.2.1 Briefly explain what a timeline is and what timelines are usually used for in business.
1.3 Lauren and Cheyeza had a short meeting this morning and decided that the following tasks need
to be completed urgently.
A The school that Lauren and Cheyeza are working from is planning a prize giving function in three weeks’
time. The principal asked La Cheeza to cater for the function. This is La Cheeza’s first contract!
B Phone the printers to ask when La Cheeza’s business cards will be ready.
C Open a bank account because the consultant who handles accounts for new enterprises is going on leave
at the end of the week.
1.3.1 In what order will Lauren and Cheyeza complete the tasks if they follow the rule of “most
profitable job”?
1.3.2 In what order will Lauren and Cheyeza complete the tasks if they follow the rule of “earliest
due date”?
1.3.3 In what order will Lauren and Cheyeza complete the tasks if they follow the rule of “shortest
processing time”?
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1.4 The two entrepreneurs decided to draw up a Gantt chart.

1.4.1 Explain what a Gantt chart is.
1.4.2 Discuss four reasons why Lauren and Cheyeza decided to draw up a Gantt chart.
1.4.3 Use the information provided in the scenario to help Lauren and Cheyeza draw up a Gantt
chart. The following must be indicated on your chart:
 Activities that must be completed
 Time indicated in days
 An indication of who will be responsible for each activity
1.5 The two girls are now working very hard on their planning for the prize giving ceremony.
Cheyeza suggested she and Lauren work through the seven steps of project management to
make sure that the event is successful. However, Lauren is not familiar with these steps. Explain
the seven steps of project management to Lauren.
1.6 Explain what a “WBS” is.
Revision test: Topic 3 – Transforming a business plan into an action plan
1. Write down any four sequencing rules.
2. List any two functions of a Gantt chart.
3. Project planning involves seven steps, including:

 Determine which people need to be involved.
 Identify and analyse the activities required to complete the project.
 Execute the project.
Write down the OTHER four steps to the project planning process.
Total: / 10
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Topic 4: Setting up / starting a business Duration: 2 weeks [Week 4-5]
4.1 Initiating and setting up a business venture
 Being an entrepreneur and a business owner is very fulfilling.

 Entrepreneurs can watch how their businesses grow and develop.
 Business owners make a very important contribution to the economy, because they are creating
jobs.
 Now the burning question is: how does one become a business owner? The answer to this all
important question is discussed in a couple of topics in this book. Let’s try to tie everything
together in one answer.
 To start a business an entrepreneur needs three things:
 A great plan. This plan is in the form of a business plan. Refer to your Grade 10 book for
more information about business plans.
 Entrepreneurial qualities, for example the ability to take risks.
 Funding, either own capital or borrowed capital. It is difficult to obtain borrowed capital
from a financial institution. Banks are scared that a new business may not survive and
then all money invested in the business is lost.
 If an entrepreneur has a great plan and some funding he/she must decide whether to start a
new business or to buy an existing business.
 The benefits of buying an investing business are that an entrepreneur can study the business’s
financial statements, strengths and weaknesses.
 However, buying a business is usually extremely expensive.
 Alternatively, an entrepreneur can start a brand new business.
 Once the formalities of reserving a name, lodging the Memorandum of Incorporation and paying
the prescribed fees, a business venture has been set up.
4.2 Acquiring funding
 Money needed to start a business is known as funding. There are different kinds of funding, for
example:
4.2.1 Equity capital
 Equity capital refers to capital that was contributed by the owner/(s) of a business. In a
company, equity capital refers to securities.
 Securities are the shares and bonds of a company.
 Remember that companies belong to shareholders. Shareholders buy shares in a company.
Buying shares is a risk, because a return on investment cannot be guaranteed. Equity capital is
therefore also called risk capital. Equity capital is not repaid to the owners of a company. But,
the owners of a company receive dividends on their investment. In Accounting we say that
Equity = Assets – Liabilities.
4.2.2 Loans and debt
Loans refer to money that was borrowed from a financial institution like a bank. Loans need to be
repaid with interest. The financial institution specifies the terms of the loan agreement, i.e. the
duration of the loan and the interest rate. A person or business is in debt when money is owed. We
can therefore say that loans result in debt.
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4.2.4 Capital
Capital refers to the money that a business owner contributed to a business. We can distinguish
between own capital and borrowed capital. Own capital is contributed by the owner. Own capital
includes equity capital. Borrowed capital refers to capital that was borrowed and that need to be
paid back with interest.
4.2.5 Other sources of funding
Other sources of funding that can be considered include:
Bank overdraft A business (or person) arranges with the bank to withdraw more money than
what is available in the business’s account.
Suppliers’ credit The supplier agreed that goods can be taken by a buyer, but only paid for at a
later stage.
Lease account Instead of buying an expensive asset a business can rather consider hiring the
asset. The asset remains the property of its owner. The person who hires the
asset (lessee) pays a monthly amount to enjoy the use of the asset.
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Activities: Topic 4 – Setting up/starting a business
Read the scenario and answer the questions.
Starting a business
Walter lives in the city and, until about a year ago, worked as a litter picker for the municipality.
Before becoming a business owner, his job involved visiting all the parks in the city, picking up trash
and emptying rubbish bins.
One of the parks on Walter’s route was next to a large crèche where he noticed that, every day
between one o’clock and four o’clock, the park was filled with kids and their parents. This gave
Walter an idea.
One of Walter’s cousins owned an ice-cream van. He gave this cousin the address of the park,
explained the situation and told him to be there the next day with a van full of ice-cream. As luck
would have it, the next day was a scorcher. Walter’s cousin sold out of ice-cream within ten minutes
and had to make three trips back to the factory to fill up on stock, which was sold out too.
Walter knew that if he wanted the business to really take off, he would have to make a deal with the
municipality to open a full-blown shop inside the park. Walter quit his job, registered his business
with the CIPC, gathered as much information as he could and then he approached the bank for a
loan. The loan officer at the bank was impressed with Walter’s sales up to date, but said that the
bank was only prepared to put up 75% of the R500 000 Walter needed for construction and other
initial expenses. Luckily, his cousin was in a position to put up the other 25% capital.
1.1 Name the three most important elements of starting a business.

1.2 Walter decided to register a new business. In which other way could Walter have acquired a
business?
1.3 Walter’s cousin provided equity capital to start the business. Explain what this means.
1.4 Explain how Walter’s cousin hopes to earn a return on his investment.
1.5 The scenario mentions own capital and borrowed capital. Differentiate between the two forms
of capital.
1.6 Name three other sources of capital.
1.7 ______ means that a business arranges with its bank to withdraw more money than is available
in its account.
1.8 ______ means that a supplier allows a buyer to take goods but only pay for it later.
1.9 ______ means a business hires assets instead of buying it.
1.10 In your own word, explain why people start businesses.
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Revision test: Topic 4 – Setting up/starting a business
1. Define.
Equity capital
Capital
Bank overdraft
Suppliers’ credit
Lease account
Total: / 10
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Topic 5: Professionalism and ethics Duration: 1 week [Week 6]
5.1 Ethics and professionalism: definitions and differences
 Ethics and professionalism are two concepts often used in the same context.
 Ethics has a wider definition than professionalism which is more specific.
 Ethics refers to doing the right thing in general, while professionalism refers to a set of
behaviour.
 This behaviour differs from one occupational field to another.
Ethics Professionalism
 Doing the right thing.  A set of behaviour for a particular occupation.
 Most occupations have their own codes of Ethical and Professional conduct.
 Ethical behaviour refers to generally doing the right thing.
 Unethical behaviour can take a variety of forms, for example accepting a bribe, using time at
work for personal interests, making personal telephone calls from work.
 Professionalism is about how to behave in a certain occupation.
 In general, we can say that being professional means to:
 Do what is expected for a particular occupation.
 Dress appropriately.
 Be on time.
 Avoid making promises that cannot be kept.
 Use appropriate language.
 Avoid gossip about colleagues.
5.2 Theories and principles of ethics and professionalism

 Ethics involve doing the right thing, but how do we differentiate between right and wrong?
 The laws of the country define illegal behaviour but everyone has to decide what is right and
wrong for themselves and which guidelines to use to make this decision. Look at the examples
and the table below.
Consequences Some people make decisions based on the consequences of a decision. A

decision is based on the answer to the question “what if I get caught?”
Belief Some people make decisions based on their beliefs.
A decision is based on what a person is taught to believe, or what a person
chooses to believe.
Opinion of other Some people make decisions based on the opinion of others.
A decision is based on the question: “what would other people think if they
found out what I did?”
5.3 How does professionalism and ethics relate to the business environment?
 Profit is the reason for the existence of most businesses is to make profit.
 Competition in the market is tough.
 In order for a business to be successful it needs to do well in many areas, for example good
pricing and excellent service delivery.
 A business will only be able to achieve these goals if employees are professional and hard
working.
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 Unprofessional employees will only harm a business’s image and reputation.

 A business with a professional image will enjoy the following benefits:
 A professional image which leads to customer satisfaction.
 A professional image which attracts customers to a business.
 A business with a professional image which attracts good employees.
 Ethics in the business environment refers to principles of right and wrong, regulating the
conduct of business people and business enterprises.
 The topic of ethics is very wide and can be applied in all sections of a business. Look at the
following examples:
Ethics and production Avoid unethical behaviour such as dumping waste in rivers.
Avoid unethical production processes, especially processes that harm people,
for example expecting employees to work without safety gear.
Ethics and public relations Press releases about a business should be true.
Ethics and purchasing Buy from suppliers who adhere to ethical codes of conduct, for example do
not support a meat supplier who is cruel to animals.
Ethics and general Avoid unethical behaviour like lying to employees and shareholders about
management the financial position of a business.
Sometimes, managers grant themselves excessive bonuses while employees
only receive small increases – this is also unethical.
Ethics and marketing Avoid exploiting people, for example people with disabilities.
Ethics and human Recruitment and selection should be fair.
resources Avoid unethical behaviour such as nepotism.
Ethics and administration Avoid leaking confidential information.
Ethics and the financial Avoid unethical behaviour such as tax evasion, fraud (also unlawful) and
function bribery.
5.4 The difference between good and bad decisions

 All decisions have consequences.
 The consequences of a decision should be determined before a decision is made.
 From a business enterprise’s perspective, decisions should be assessed against criteria such as:
 the financial implications of the decision.
 the legal implications of the decision.
 the ethical implications of the decision.
 the effect the decisions will have on employees.
5.5 Principles and skills of professional, ethical and responsible business practice
 Each business enterprise determines its own set of principles of professionalism.

 Examples of principles include:
 Do not accept any form of bribery.

Maintaining high levels of
 A person should act within his/her area of professional competency.
professional integrity
 Avoid actions which could be perceived as a conflict of interest.
 Adopt an attitude of lifelong learning.
Honouring professional
 Honour all promises and agreements, oral and written.
business practices
 Ensure that confidential information remains confidential.
 Show respect towards all people.
Respecting diversity
 Avoid any kind of discrimination.
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5.6 Different perspectives on ethics
 People hold different values and beliefs - this means that what one person regards as wrong,
another person could regard as right.
 Have a look at a few different ethical perspectives:
 Some people believe cloning animals or people is wrong, other people believe cloning is
inevitable scientific development.
 Some people believe bribery is wrong, while other people think bribery creates a “win-win”
situation.
 Some people believe tax evasion is wrong, others believe tax evasion indicates creative
bookkeeping.
5.7 Ethical business ventures
 Ethical business ventures are ventures that firstly abide by all laws and, secondly, look for
opportunities to do the right thing.
 Have a look at the following examples of ethical business behaviour:
Not starting a business  Business operations should not harm the community, or employees.
venture at the expense  Before an entrepreneur starts a business, the entrepreneur must consider the effects
of someone else of the enterprise on the community and its employees.
 Fair remuneration should be paid to all employees because employees help to create
wealth for the business enterprise.
 Employers must make sure that wages paid to the workers are in accordance with the
Payment of fair wages
minimum wages as determined by The Basic Conditions of Employment Act (No 75 of
1997).
 Underpaid workers will feel unhappy and will be unproductive.
 All employees must receive equal opportunities and equal treatment.
Not discriminating  It is both unethical and unfair to allow privileges to some employees and not to
against employees others.
 Unfair treatment influences employee morale negatively and creates disloyalty
among employees.
 Some people and business enterprises view tax evasion as a way to save money.
Regular payment of tax  Tax evasion is not only illegal, it is unfair towards all people and enterprises that pay
their taxes regularly.
 If all people and business enterprises pay their tax regularly, authorities will probably
consider decreasing tax rates.
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Activities: Topic 5 – Professionalism and ethics
1. Does the following behaviour suggest unethical or unprofessional behaviour? Briefly explain
why this behaviour is unprofessional or unethical.
1.1 The financial manager’s personal assistant told her colleague friends how much the
managers received in bonuses as she was responsible for typing the letters informing the
managers about their bonuses.
1.2 The human resource department does not let candidates know that their applications were
not successful.
1.3 A police officer accepted a bribe to let an offender off the hook.
2. Differentiate between ethical and professional behaviour.
3. Briefly explain why the following behaviour can be considered as unethical behaviour:
3.1 A business owner who does not pay fair remuneration to employees.
3.2 Tax evasion.
4. Which ethical principles apply to the following situations? Give a reason for your answer.
You are sitting next to the cleverest learner in the Business Studies class. You can clearly see the
answers she is writing down in the Business Studies test. The teacher is not looking.
4.1 You decide not to cheat, because you are scared of what others might think of you if they find
out.
4.2 You decide not to cheat, because you are scared the teacher might catch you.
4.3 You decide not to cheat, because cheating is against your beliefs.
5. Describe how ethics can be applied in each business function.
6. Find any newspaper article about ethics and paste it into your book.
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Revision test: Topic 5 – Professionalism and ethics
1. Differentiate between professionalism and ethics.
Professionalism Ethics
2. List three benefits enjoyed by businesses with a professional image.
Total: / 10
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Topic 6: Presentation of business information Duration: 1 week [Week 6]
6.1 Presentation and validation of business related information
 Business information can be presented in a verbal or non-verbal (written) format:
Verbal presentations Non-verbal (written) presentations

 information is conveyed to an audience  a typed document which is presented in a
orally by a presenter. file or in a book.
 can be heard.  can be read.
 cannot be stored.  can be stored.
 Business information often include tables, graphs, diagrams and illustrations:
 Tables consist of columns and rows.

 Columns are vertical and rows are horizontal.
 Tables are often used to:
Tables  compare information.
 present information clearly.
 draw graphs.
 Tables can easily be constructed with the aid of Microsoft Excel.
 A graph is a visual representation of data.
 Graphs are often used to:
 identify trends
 draw comparisons
 make assumptions
Graphs
 Types of graphs include:
 line graphs
 pie charts
 bar graphs
 pictographs
 Diagrams are often used to:
 illustrate a process
 represent information in a logical way
Diagrams  Types of diagrams include:
 cycle diagrams
 Venn diagrams
 organisational charts
Illustrations  Drawings, pictures or symbols used to present written information.
6.2 Design and layout
Audio visual aids Design and layout of support materials

 Use a legible font and font size.
 Refrain from using busy borders, different fonts or too many different
colours.
Handouts
 Structure handouts logically.
 Do not overspend on handouts as they are often discarded after the
presentation.
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 Use a legible font and font size.

 Make use of bullet points rather than paragraphs.
Transparencies and  Limit the amount of information per slide.
slides  Slides must be simple – refrain from using busy borders, different fonts
or too many different colours.
 Make sure there are no spelling errors.
 Use the chart that is most suitable for the information that needs to be
presented.
Charts  Make sure the chart is legible.
 Name the chart.
 Name the axis: time is usually on the x-axis.
 Make sure that the model is a true representation of the real thing.
Models
 Provide the scale according to which the model was built.
 Make use of headings.
 Make sure all relevant information appears on the poster.
Posters
 Use bright colours to enhance visibility.
 Use short phrases instead of full sentences.
 Make use of pictures.
6.3 Written information
 Written information is information that can be read.

 It is usually typed and bound in a file or book.
 Examples of written information include business plans, business information, flyers and
advertisements.
 Business reports comprise three sections:
 Purpose is to introduce the topic under discussion to the reader.

Introduction  Should be powerful because it influences the reader’s decision to read to the
rest of the presentation.
 Part of the report where the majority of information is given.
Body
 Visual aids, such as graphs, are used mainly in the body.
Conclusion  The most important points of the report are reinforced.
 We can therefore say that the steps in report-writing are as follows:
 Decide on the main message of the report.
 Collect data and facts you want to include in the presentation.
 Once you’ve collected all the data you need for the presentation you can start to put it all
together:
 Introduction: put extra effort into the introduction. Look for an interesting way of
introducing the topic. An interesting introduction will create a desire in the reader to read
more.
 Body: structure all relevant information in a logical manner. Use “bullets” for lists or steps.
Use shorter sentences. Use plain and simple language.
 Conclusion: conclude the report by reinforcing the main message.
 Remember the following when composing an advertisement or flyer:
 The heading must attract the attention of readers.
 Make sure all the necessary information is included.
 Make sure the information provided on the flyer makes sense.
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6.4 Responding to feedback
 Once business information has been gathered and analysed, it must be communicated to the
right employees, in writing.
 Written business information is known as business reports.
 Pictures, diagrams, charts and illustrations can be included in business reports to make them
easier to understand.
 To avoid confusion, difficult issues must be explained to all relevant employees.
 The presenter should encourage members of the audience to ask questions.
 Once a question has been asked, the presenter should acknowledge the question by saying:
“That is a good question.”
 If the presenter is not sure if he/she understands the question correctly, the presenter must
paraphrase the question. This means that the presenter should say: “I am not sure if I
understand the question correctly. Do you want to know…?”
 If the presenter does not know an answer, it is best to be honest about it.
 Difficult questions can be referred to the audience because a member of the audience might
know the answer. If this is the case, it remains the responsibility of the presenter to verify the
answer.
 The presenter must remember to address the whole audience when questions are answered.
 The presenter must avoid getting involved in any kind of debate as this might bore members of
the audience who are not interested in the issue being debated.
 The presenter must rather offer to meet the person who wants to spark the debate after the
presentation to discuss the matter.
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Activities: Topic 6 – Presentation of business information
1. The Cake Club is a coffee shop that has been in business for a couple of months. The
following information has been made available:
A
Sales
90000
80000
70000
Sales(R)
60000
50000
40000 Series1
30000
20000
10000
0
y r r
ar ch ay ly be be
nu ar M Ju m m
Ja M pt
e ve
Se No
Time
Total cost: June
Ingredients
Insurance
Rent
Cleaning services
Advertisements
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2.1 Identify the graph represented by A.

2.1.1 This graph indicates a particular trend. Identify this trend and give a possible explanation for
it.
2.2 Identify the graph represented by B. The total cost for June was R30 000. 50% of the total
cost was spent on ingredients; 2,5% on insurance; 35% on rent;
6,25% on cleaning services and 6,25% on advertising.
2.2.1 Calculate the amount that was spent on:
a) advertising
b) rent
c) insurance
d) ingredients
2.3 The Cake Club supplied you with a summary of income statements:
2009 2010 2011 2012 2013
Sales 1 500 000 1 900 000 1 360 000 1 300 000 E
Cost of sales (300 000) (570 000) (272 000) D (280 000)
Gross profit A 1 330 000 1 088 000 1 040 000 1 120 000
Total
(700 000) B 799 620 (820 944) (843 136)
expenses
Rent 240 000 288 000 285 120 285 120 285 120
Wages 300 000 330 000 346 500 363 824 382 016
Other 160 000 184 000 168 000 172 000 176 000
expenses
Net profit 500 000 528 000 C 219 056 276 864
2.3.1 Determine the values of A, B, C, D & E.

2.3.2 Present the net profit (2009 – 2013) on a line graph.
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Revision test: Topic 6 – Presentation of business information
1. Business reports comprise three sections. Discuss.
2. Identify the following diagrams.
15 6
5
10 4
3
5 2
1
0 0
Total: / 10
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Revision
Question 1
1.1 Choose the correct answer from the options given below. Write down only the correct answer.
1.1.1 Skills shortages among employees is a challenge that emanates from the:
A micro-environment
B market-environment
C macro-environment
D informal environment
1.1.2 Skills shortages among the general South African public is a challenge that emanates from
the:
A micro-environment
B market-environment
C macro-environment
D informal environment
1.1.3 Doctors putting pressure on the Minister of Health to ban the use of particular medication is
an example of:
A a power relationship
B grassroots lobbying
C direct lobbying
D indirect lobbying
1.1.4 A sliced brown bread is currently priced at R10. A year ago, the same bread was priced at R8.
This is an example of:
A income inequality
B deflation
C depreciation
D inflation
1.1.5 This document is signed by the franchisee to protect the confidentiality of information that
the franschisee acquires from the franchisor.
A Operations and Procedures Manual
B Secrecy undertaking
C Disclosure document
D Confidentiality agreement
1.1.6 Jack & Jill Florists is an example of a:

A private company
B partnership
C sole trader
D close corporation
1.1.7 When presenting information to an audience, one member of the audience made the
following comment: “The information about franchises is incorrect.” The best response to
this comment is:
A You have a point, sir. I will look into the matter and come back to you.
B It is not possible. I don’t make mistakes.
C Please leave the room, sir. Your comment is unfair.
D You are absolutely right, sir. I am sorry.
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1.1.8 This business enterprise can start operating after receipt of a founding statement.
A John’s Plumbing Services
B John, Jo & Jake Plumbing Services
C John’s Plumbing Services (Pty) Ltd.
D John’s Plumbing Services CC
1.1.9 This business enterprise can start operating after receipt of the Certificate of Incorporation.
A John’s Plumbing Services
B John, Jo & Jake Plumbing Services
C John’s Plumbing Services (Pty) Ltd.
D John’s Plumbing Services CC
1.1.10 This problem solving technique considers all the forces for and all the forces against a
decision.
A Delphi
B SWOT analysis
C Force field analysis
D Brainstorming
1.1.11 A diagram that breaks down all tasks that must be performed to complete a project.
A Gantt chart
B WBS
C Timelines
D Line structure
1.1.12 The shares and bonds of a company.

A Equity capital
B Loans
C Securities
D All of the above
1.1.13 Doing the right thing.

A Ethics
B Professionalism
C Moral principles
D Professional code
1.2 State whether the following statements are true or false.

1.2.1 Civil society forms part of the macro-environment.
1.2.2 One of the main reasons people apply for bank loans is because they do not qualify for a
micro-loan.
1.2.3 Lobbying refers to the process of meeting new people.
1.2.4 Timelines help project managers determine the order in which tasks must be completed.
1.2.5 ZZZ Suppliers (Pty) Ltd. must appoint at least one director.
1.2.6 Creative thinking refers to thinking the same way you always do.
1.2.7 Conventional solutions are ordinary and unimaginative.
1.2.8 Adrenalin is the body’s response to a difficult situation.
1.2.9 Retrenchment aims to redress the disadvantages in unemployment that were previously
experienced by designated groups in order to ensure equal representation in the workforce.
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1.2.10 Globalisation refers to the free exchange of money, information and ideas.
1.3 Give one word/concept for each of the following descriptions.

1.3.1 A person who is unable to read or write.
1.3.2 When foreign countries sell their excess products on our markets at very low prices.
1.3.3 This type of crime includes activities such as fraud and bribery.
1.3.4 ZZZ Suppliers Limited may start business operations after receipt of this document.
1.3.5 A written invitation to the public to buy shares.
1.3.6 Problems are anticipated and prevented from occurring.
1.3.7 A difficult situation.
1.3.8 A point in time by which a task must be completed.
1.3.9 Transformation triggered by external factors.
1.3.10 Information that can be read.
Question 2
2.1 Read the scenario and answer the questions that follow.
Chop Stix is an oriental restaurant in Cape Town. The restaurant is owned and managed by five
business associates. The restaurant has been in business for ten years now and the associates are
thinking about opening a second branch. One of the most difficult decisions the associates are
confronted with is deciding on a suitable location for the new restaurant. Chop Stix imports many of
its ingredients from Indian and Chinese suppliers, therefore it makes sense to locate the business
close to a seaport. However, import taxes have increased considerably during recent years and one
of the managers has suggested that, alternatively, local suppliers should be found. The owners
should also keep in mind that consumer tastes can differ from one area to another.
2.1.1 Identify the elements from the three business environments that are mentioned in the
scenario. Explain the extent to which Chop Stix can exercise control over the elements that
you have identified. Copy the table below onto your answer sheet to answer the question.
Element mentioned in Business environment To what extent can the business enterprise
the scenario control this environment?
2.1.2 Chop Stix can deal with the challenges it is facing from the macro-environment by getting
involved in the macro-environment. Discuss any five advantages of macro-environment
involvement for Chop Stix.
2.1.3 Chop Stix can consider forming business relationships as a method of dealing with
challenges from the business environment. Discuss any five advantages of the formation of
business relationships for Chop Stix.
2.1.4 Due to the occurrence of skills shortages, business enterprises such as Chop Stix may be
forced to employ unqualified employees. Discuss four reasons why employing unqualified
employees may not be such a good idea.
2.1.5 The management team of Chop Stix has realised that teenagers are becoming active
consumers. Explain why demographic changes have the potential to influence Chop Stix’s
operations significantly and mention any three other demographic changes that are
currently occurring in South Africa.
2.1.6 Explain how the following socio-economic challenges can influence Chop Stix’s operations:
(a) unavailability of natural resources
(b) economic crime
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2.1.7 Explain to the owners of Chop Stix how the problem solving cycle can be used to help them
decide on a location for their new restaurant.
2.1.8 Explain to the owners how new creative thinking skills can be acquired.
Question 3
Felix is an entrepreneur who recently opened his own computer shop. Although Felix has a degree in
business management, computers are his passion. Until recently, Felix worked as an IT specialist, but
he got tired of having to take orders from a manager. Felix decided to quit his job and to combine his
qualifications with his passion by opening his own computer store.
3.1.1 Identify any five entrepreneurial qualities from the scenario. Quote from the scenario to
support your answer.
3.1.2 The following four activities are applicable:
Activity 1 Making a telephone call
Activity 2 Writing a letter to a client who has just ordered stock of R1 million.
Activity 3 Start production on a R5 million order that is due in eight weeks’ time.
Activity 4 Writing a report that is due tomorrow.
(a) Which sequencing rule are you following if you complete “Activity 3” first?
(b) Which sequencing rule are you following if you attend to “Activity 1” first?
(c) Which activity will you attend to if you were following the rule of “earliest due date”?
(d) Which activity will you attend to if you were following the rule of “most valued customer”?
3.2 Take a look at the following visual representation:

Activities Week
1 2 3 4 Person responsible
3.2.1 Identify the visual representation above.

3.2.2 The visual representation is mostly used as a planning tool. Discuss any five functions of
this planning tool.
3.3 The following graph represents the relationship between the net profit and the gross profit of
Felix’s business over the past five years.
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Relationship between Gross Profit and Net Profit
2500
2000
1500
1000
500
0
Year 1 Year 2 Year 3 Year 4 Year 5
Time
3.3.1 Identify the graph.

3.3.2 Differentiate between gross profit and net profit.
3.3.3 Identify the trend in this graph.
3.3.4 Provide a possible explanation for this trend.
3.3.5 Explain the role of business information in managing an enterprise such as Felix’s computer
shop.
3.4 Felix’s life changed when he quit his job.

3.4.1 Explain why people tend to resist change.
3.4.2 Discuss how managers can deal with people who resist change.
3.5 Did you know that the first McDonald’s was built in the USA in the 1940’s? By the time
McDonalds was twenty years old, the enterprise had already sold more than one million
hamburgers.
3.5.1 McDonalds is a franchise. Briefly explain what a franchise is.
3.5.2 Write down the names of any two of McDonalds’ competitors in South Africa and provide a
3.5.3 Discuss any five reasons why buying a McDonald’s franchise should be a good investment.
Question 4
Joseph is a twenty year old entrepreneur with a passion for cooking. He used to help his mother in
the kitchen by preparing lunch boxes for his siblings and himself. Joseph soon discovered that his
talents could be put to better use, as many of his friends offered him money in exchange for his
lunch box. Joseph decided to start a small business venture that specialises in catering. He’s decided
to start trading as a sole proprietorship, because he wants to see if things work out. Joseph’s venture
was so successful that he realised he was not capable of running the business by himself. Joseph
then decided to convert Joseph’s Catering Services into a private company and to appoint his mother
as a director.
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4.1.1 Joseph first started out as a sole trader but decided to convert the business enterprise
to a private company. Discuss any five disadvantages of trading as a sole proprietorship
that may have influenced Joseph’s decision.
4.1.2 Discuss any three advantages of forming a private company.
4.1.3 Compare the differences in paying tax for the two forms of ownership mentioned in the
scenario.
4.2 Joseph’s other option was to form a partnership with his mother.
4.2.1 The partnership would have come into existence after conclusion of a partnership
agreement. Write down any four details that must appear in such an agreement.
4.2.2 Identify the two main reasons why Joseph decided against forming a partnership.
4.3 After a while, the company needed to hire an administrative assistant. Joseph decided to employ
a recruitment agency to help with recruiting potential candidates.
4.3.1 What is this process called?
4.3.2 Discuss any three advantages of this process.
4.3.3 Discuss any three disadvantages of this process.
4.4 Joseph’s enterprise is subject to many challenges. However, there are many
strategies at Joseph’s disposal to help him deal with challenges. Match the strategy in
Column A with the right description in Column B.
Column A Column B
4.1.1 Information A Encourages business enterprises to take responsibility for
management the impact of business’s activities on society and the
4.1.2 Strategic responses environment.
4.1.3 Mergers B Involves knowing which crisis intervention process to use
4.1.4 Alliances under which circumstances.
C Involves an acquirer purchasing a target.
D An agreement between business enterprises which hold
E mutual benefits.
An agreement between business enterprises which
F involves two business enterprises combining their strengths
to form one enterprise.
G Involves providing the right employees with information to
enable the employees to act pro-actively.
4.5 Joseph imports china from China. Joseph pays two Chinese Yuan for one plate. Calculate the
cost of 1 500 plates if the current exchange rate is: R100 = Y 1000.
4.6 Describe how ethics can be applied in the following departments of Joseph’s business.
4.6.1 The marketing function
4.6.2 Human resources
4.6.3 General management
Question 5
Business operations take place in the primary sector, the secondary sector and the tertiary sector.
Explain the role of each sector and analyse the links between the three sectors in an essay.
Question 6
A group of fifty business associates decided to start a low cost airline - “Fly Gravyplane Limited”. As
starting such a venture requires a considerable capital investment, the associates have decided to
sign a lease agreement with another airline.
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Discuss the following in an essay:

 The advantages and the disadvantages associated with the form of ownership that is mentioned in
the scenario.
 The advantages and disadvantages of leasing for both the lessor and the lessee.
 Contractual implications of lease agreements.
Question 7
Discuss any five theories of change management.
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Formal assessment: presentation
Converting a business plan into an action plan
 Presentation
 Assessment tool: rubric
In Grade 11, you are required to convert a business plan into an action plan. Your teacher will
present you with the opportunity to display your entrepreneurial skills by organising a market day at
your school in which you will be participating. This is a group assignment and you will be allowed to
keep all the profit that your group makes during the market day. Remember to organise some float
(change)! Enjoy the market day, start planning in time and be original.
Instructions
 Divide into groups of four to six members each.

 Choose a name for your venture.
 Plan how you will go about changing your business plan into an action plan by constructing a Gantt
chart. Indicate the names of people who will be responsible for each activity on your Gantt chart.
 Create an A4 poster advertising your group’s product(s). This advertisement must be developed
with the AIDA principle in mind.
 Present your group’s expenditure on a bar graph. (Your expenditure may include the ingredients
that you needed for the market day, as well as the cost of the poster).
 Draw up an income statement indicating the net profit that your group has made. Use the
following format for your income statement:
Sales Amount
 Include all the products that your group sold at the market day.
Minus expenditure:
 List all the ingredients/materials that your group needed here.
Net profit
 Write a business report at the end of the market day where you reflect on the success of your
group’s venture. Include the following in your report:
 A detailed description of your group’s venture.
 Discuss the strengths of your group’s venture.
 Identify areas for improvement (in other words – what could your group have done better?)
 Each group member must submit the following to the teacher as this information will be included
in your portfolio:
 Gantt chart
 Advertisement
 Income statement
 Bar graph that indicates your group’s expenditure
 Business report
TOTAL: 50
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Assessment rubric
Criteria 1 2 3 4 5 Weighting Total

Gantt chart  Poor  Not yet  Satisfactory  Good  Excellent
Take the following into consideration:  Not achieved satisfactory
 Learner needs  Learner’s effort
 Gantt chart is constructed according to the
a lot of support could improve
required format
 All activities that need to be carried out are in this area considerably
listed on the Gantt chart ×1 5
 Time when the activity will take place is
indicated on the Gantt chart
 Person responsible for each activity is
indicated on the Gantt chart
Participation during the market day  Poor  Not yet  Satisfactory  Good  Excellent
 Not achieved satisfactory
Take the following into consideration:
 Appearance of the stall a lot of support could improve
×2 10
 Choice of the product – is the product in this area considerably
suitable for the target market?
 Originality of the product
 Participation of group members
 Co-operation between group members
 The way in which customers are attended to
Advertisement  Poor  Not yet  Satisfactory  Good  Excellent
 Does the advertisement attract attention?
 Does the advertisement create interest in ×2 10
the product? in this area considerably
 Does the advertisement create a desire to
purchase the product?
 Will you buy the product after looking at the
advertisement?
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Income statement  Poor  Not yet  Satisfactory  Good  Excellent

Take the following into consideration:  Not achieved satisfactory
 Income statement is complete  Learner needs  Learner’s effort
 Income statement is according to the a lot of support could improve
required format ×1 5
in this area considerably
 Calculations are correct
 Net profit is indicated
Bar graph  Poor  Not yet  Satisfactory  Good  Excellent
 Learner has provided the graph with a title
 Bar graph is correct ×1 5
 Axes have been named
Business report  Poor  Not yet  Satisfactory  Good  Excellent
 Detailed description of the group’s venture
has been included ×2 10
 Strengths have been identified and in this area considerably
discussed
 Areas for improvement have been identified
and discussed
 Sentences are short and meaningful
Appearance  Poor  Not yet  Satisfactory  Good  Excellent
 Neat
 Spell checked ×1 5
 Typed or written extremely neat
 Professional appearance
 Suitable for portfolio purposes in terms of
size
Total
50
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TERM 3: BUSINESS ROLES & BUSINESS OPERATIONS
Topic 1: Entrepreneurial qualities and success factors Duration: 1 week [Week 1]
1.1 Entrepreneurial qualities

 One of the major elements contributing to business failure is the lack of entrepreneurial
qualities.
 Entrepreneurs are responsible for combining the other three factors of production (labour,
capital and natural resources).
 Although all entrepreneurial qualities are important, some qualities will lead you to success,
while others will not.
 For every successful venture, there are many unsuccessful business ventures.
 One of the reasons is because all entrepreneurial qualities are not necessarily good qualities.
 Entrepreneurs have a tendency to have too many projects going at once.
 Although entrepreneurs are resourceful, they may be using a lot of energy reacting to a crisis.
 Entrepreneurs often work too many hours, thereby compromising their relationships and good
health.
 Important entrepreneurial qualities are:
 Entrepreneurs like to prove themselves as being innovative and hard

Desire for responsibility working.
 Entrepreneurs are responsible for creating their own income.
 Risks involve a degree of uncertainty.
 There are many examples of risks:
 Some entrepreneurs risk the financial security of a day-job to
start their own business venture.
 Sometimes entrepreneurs must take the risk to borrow money
to grow their business.
Take risks
 Sometimes entrepreneurs must take the risk to change the
image of their business.
 Sometimes a new partner must be taken in.
 Some risks have a greater possibility of having a positive outcome than
other risks.
 These risks are known as calculated risks.
 To persevere means to keep trying until you reach your goal.
 Usually, this does not happen with the first or second attempt.
Perseverance
 Most successful entrepreneurs worked very hard to build their
businesses.
 Entrepreneurs must be capable of inspiring other people to believe in
Good management and
their vision.
leadership skills
 Entrepreneurs must also have the skills to manage their own businesses.
 If you want to start your own business, you must believe in yourself.
Confidence in one’s ability  But it is very important not to have a false sense of confidence.
to succeed  You must know your own strengths and weaknesses very well before
starting your own business.
 Most entrepreneurs, when first starting out, have to do everything
themselves.
High levels of energy
 This requires a lot of energy.
 Entrepreneurs can easily burn out because of their workload.
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 You cannot start a business if you are not passionate about your
business and your product.
 Being passionate about something means you love doing it.
Passion  Entrepreneurs spend most of their time thinking about their businesses,
managing their businesses and working on their businesses.
 Lack of passion will result in poor service delivery and eventually the
downfall of the business.
 Most entrepreneurs have a vision of what they want to achieve.
 It is not always possible to explain this vision to others, especially when
a brand new idea is involved.
Dreams with a clear vision
 Entrepreneurs must therefore know exactly what they want to achieve
and how they are going to convert their vision into a sustainable
 Starting and running a business does not end at having a good idea.
 Entrepreneurs need to possess organisational skills to manage their
Organisational skills businesses on a day to day basis.
 Examples of organisational skills include administrative skills, time
management skills and people management skills.
 Being committed means to see something through despite difficulties.
 If you want to make a success of your business, you have to work very
High degree of
hard.
commitment
 Entrepreneurs must be willing to make sacrifices to build their
businesses.
 Entrepreneurs are part of the business environment.
 The business environment is dynamic – this means that the business
Flexibility
environment is constantly changing.
 Entrepreneurs must be flexible to adapt to these changes.
 Entrepreneurs face many obstacles, for example employees who resign,
Willpower to overcome changing laws, financial difficulty and new competitors.
obstacles  Entrepreneurs who lack the willpower to overcome obstacles do not last
very long.
1.2 Key success factors that make a business venture successful
 A business venture refers to an undertaking that involves some risk (e.g. time or money), but the
entrepreneur hopes to make profit.
 There are many factors that help to contribute to a business venture’s success, including:
 Successful businesses are sustainable.

Sustainability  This means that the business can continue to exist despite all the challenges and threats it
is confronted with.
 Money is managed in such a way that a good return on investment can be guaranteed to
investors.
Profitability
 This attracts even more investors, which enables the business to expand its activities and
to become even more profitable.
 Successful businesses have a continuous customer base to sell their goods and services to.
Customer base
 Successful businesses are always on the lookout for ways to expand their customer base.
 Goods and services must fulfil the needs and desires of consumers.
A great idea
 A successful business has to offer better goods and services than its competitors.
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Competent  Competent workers are experts in their fields, they are motivated and productive and
workers they contribute towards the success of the enterprise.
 A clear vision will provide the business and its employees with direction to where they are
Vision headed.
 A clear vision will ensure that a business is always looking for ways to improve.
 Inadequate financial control is one of the biggest reasons for business failure.
Financial
 Money that is not managed well will lead to cash flow problems and the enterprise will
control
not be able to operate smoothly.
 Businesses are constantly subjected to changes such as:
o new legislation
o competitors
Ability to
o political change
adapt to
o managerial change
change
 Change can be threatening.
 Successful businesses can anticipate, implement and adapt to change by turning threats
into opportunities.
Goods and
services of  A business that delivers goods and services of quality will attract and retain customers.
quality
Keeps looking
 Successful businesses are always looking for ways to improve and expand.
for new
 Ways to expand include finding new markets and developing new products.
opportunities
1.3 Identifying areas for improvement

 Running a business is a continuous process that requires management to constantly come up with
ideas for improvement.
 One of the tools that business owners use to identify areas for improvement is the SWOT analysis.
 Business enterprises comprise several departments/functions.
 Areas of improvement in the different departments include:
Department Areas for improvement

 Find better suppliers.
Purchasing function
 Only purchase products of good quality.
Production  Ensure that the area where production takes place adhere to safety regulations.
function  Investigate new technology that can improve productivity.
Public relations  Ensure that the business receives sufficient good publicity.
function  Provide staff training to ensure that phones are answered promptly and professionally.
 Offer incentives to increase productivity.
General
 Constantly evaluate the enterprise’s performance against pre-determined goals.
management
 Offer good salary packages to attract good candidates.
 Draw up budgets to ensure the availability of sufficient funds for marketing purposes.
Marketing function
 Market the enterprise in a way that makes the product appealing to the target market.
 Recruit employees that are experts in their fields.
Human Resources
 Provide regular staff training so that staff members are up to date with the latest
function
trends and technology.
Administrative
 Look out for ways to improve IT-systems.
function
 Draw up budgets to make sure that all expenses are accounted for.
Financial function
 Spend money on projects that are most likely to be profitable.
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Activities: Topic 1 – Entrepreneurial qualities and success factors
1. Short questions.
1.1.1 Explain why having high levels of energy is an important entrepreneurial quality.
1.1.2 Name four entrepreneurial qualities.
1.1.3 Define “business venture”.
1.1.4 Which business function is responsible for providing staff with training?
1.1.5 Name four areas of change that businesses are constantly subjected to.
1.1.6 Discuss the responsibilities of the purchasing function.
1.1.7 Name one tool that businesses can use to identify areas for improvement.
1.1.8 Discuss the role of profitability as a key success factor.
1.1.9 Which business function is responsible for drawing up budgets to ensure the availability of
sufficient funds for marketing purposes?
1.1.10 Which business function is responsible for evaluating an enterprise’s performance against
pre-determined goals?
Column A Column B
1.2.1 The financial function A Keep trying until you reach your goal.
1.2.2 The production function B Money is managed that investors earn returns.
1.2.3 Profitability C Administrative skills, time management skills and people
management skills.
1.2.4 Leadership skills D Seeing something through despite difficulties.
1.2.5 Organisational skills E Investigates new technology that will improve
productivity.
1.2.6 General management F Offer incentives to increase productivity.
1.2.7 Perseverance G Draw up budgets to make sure that all expenses are
accounted for.
1.2.8 Commitment H Being capable of inspiring other people to believe in your
vision.
Turning junk into gold
American entrepreneur Brian Scudamore started his company 1-800-GOT-JUNK? in 1989 straight out
of high school with $700 and an old truck. Today the company is in 47 of North America's top 50
cities, with 95 franchise partners across North America.
Scudamore was a risk-taker with a firm vision. "With a vision of creating the 'FedEx' of junk
removal," says Scudamore, "I dropped out of university with just one year left to become a fulltime
JUNKMAN! Yes, my father, a liver transplant surgeon, was unimpressed, to say the least." He
chuckles, "He’s come around since..."
Many entrepreneurs minimize their risks by outsourcing to contractors. Scudamore chose a different
route. "I hired my first employee a week after I started. I knew I needed the help. His name was
David Sniderman — a good friend of mine. I really didn’t know yet how to hire so I just asked a
buddy." It may have started as a matter of simply not knowing what else to do, but it became a
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philosophical issue for him. "On a bigger level, I always believed in hiring people vs. contract workers
or consultants. I felt that if I wasn’t willing to make the investment then I was questioning my own
faith in the business."
Brian’s recipe for success has been simple. Take a fragmented business, add clean shiny trucks that
act as mobile billboards, uniformed drivers, on-time service and up-front rates, and then mix in with
a culture that is young, fun and completely focused on solid, healthy growth.
Although this is a simple business, they couldn't possibly have grown this quickly without
technology. Taking a low tech business and putting a high tech spin on it allowed them to rapidly
distinguish themselves from their competition. All calls come into a central 1-800-GOT-JUNK? call
centre where they do all the booking and dispatch for their franchise partners. Franchise partners
then assess all of their real time reports, schedules, customer info, etc., off of JUNKNET, their
corporate intranet. This allows franchise partners to get into business quickly, and to focus solely on
growth — working on the business vs. working in the business.
1-800-GOT-JUNK? will do about $32 Million in 2014 — not a bad return on a $700.00 investment!
Brian's BHAG (Big Hairy Audacious Goal) is $100 million and 250 franchise partners by 31 December
2016. He says confidently, "We will get there."
{Adapted from: www.entrepreneurs.about.com/od/casestudies/a/1800gotjunk.htm}
2.1 Brian’s vision was “to create the 'FedEx' of junk removal”. What does this tell you about his
character?
2.2 Quote the sentence that refers to Brian’s organisational skills.
2.3 Quote the sentence that refers to 1-800-GOT-JUNK?’s customer base.
2.4 Adopting the franchise model has allowed Brian to retain financial control over his business.
Discuss financial control as a factor that contributes towards a business venture’s success or
failure.
2.5 Name the “tool” one would use to identify areas for improvement in Brian’s business.
2.6 Identify eight areas of improvement for Brian’s business.
2.7 Which business function does the following sentence refer to: “...clean shiny trucks that act as
mobile billboards.”?
2.8 Brian is passionate about his business. Discuss what it means to be passionate about your
business or product.
2.9 Which business function does the following sentence refer to: “...not a bad return on a $700.00
investment!”?
2.10 For Brian, starting a junk removal company turned out to be a good idea. Name six other key
success factors for businesses.
3.1 Brian took a ______ by dropping out of university to start his business.
3.2 One of the reasons for the success of 1-800-GOT-JUNK? is Brian’s ability to ______ to change.
3.3 The ______ function is responsible for finding ways to improve 1-800-GOT-JUNK?’s IT-system.
3.4 The ______ function is responsible for ensuring that 1-800-GOT-JUNK? receives good publicity.
3.5 ______ is responsible for constantly evaluating the enterprise’s performance against pre-
determined goals.
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Revision test: Topic 1 – Entrepreneurial qualities and success factors
1. Explain what an entrepreneur is.
2. Write down any five entrepreneurial characteristics.
3. Write down any four factors that make a business successful.
Total: / 10
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Topic 2: Citizenship roles and responsibilities Duration: 1 week [Week 2]
 Just like employees in an enterprise work together, citizens of a country should also work together.
 As citizens of South Africa we assume many roles and we have many responsibilities:
 Some citizens fulfil leadership roles, for example politicians.
 Some citizens research ways to achieve sustainable development.
 Some citizens fulfil caring roles, for example nurses.
 Some citizens gather information to share with the rest of us so that we can make informed
decisions, for example journalists.
 Perhaps our most important role is to make a meaningful contribution to our country.
 We can contribute towards the development of our country by:
 Being economically productive. Being economically productive means earning a salary and
contributing to the development of the country by regularly paying tax.
 Caring for our fellow human beings. Some people, for example AIDS orphans, are not
capable of taking care of themselves. They are dependent on the goodwill of other people.
 Exercising our voting rights.
 Spending money wisely so that we do not become a burden to other people when we
reach old age and are unable to work.
 Obeying the laws of the country. People who are in jail are not economically productive.
Instead, tax money is used to provide food and medical services to people in jail.
 Treating the people who work for us with respect.
 Many business enterprises have decided to contribute towards social en economic development of
communities by launching Corporate Social Responsibility Programmes.
 Business enterprises aim to give something back to the community through Corporate Social
Responsibility contributions.
 Take a look at the roles of other role players in the business community:
The role of business  Business enterprises create job opportunities.

enterprises  Business enterprises also generate money to spend on uplifting communities
through Corporate Social Investment Programmes.
The role of civil society,  Civil society refers to all organisations in a country, e.g. NGO’s and CBO’s.
non-governmental  These organisations make meaningful contributions towards the economic
organisations (NGO’s) and social development of the country.
and community based  Civil society, NGO’s and CBO’s are actively involved in combating socio-
organisations (CBO’s) economic issues such as HIV/Aids, poverty, corruption and unemployment.
 Individual business practitioners contribute towards society by creating job
opportunities.
 Tax revenue is generated through the operations of individual business
The role of individual
practitioners and is used to develop the country.
business practitioners
 Individual business practitioners also contribute towards the social and
economic development of communities by educating employees and by
helping employees acquire the skills they need to perform their jobs.
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Activities: Topic 2 – Citizenship roles and responsibilities

1.1.1 What, in your opinion, is your most important role as a citizen?
1.1.2 Explain what a Corporate Social Investment Programme is.
1.1.3 Explain how business enterprises can contribute towards social en economic development of
communities.
1.1.4 Name the economic player that is responsible for creating the most jobs.
1.1.5 Explain what it means to be economically productive.
1.1.6 Discuss three ways in which you can contribute towards the development of your country.
1.1.7 Discuss the role of civil society, non-governmental organisations and community based
organisations in the business community.
1.1.8 Discuss the role of business enterprises in the business community.
1.1.9 Define “civil society”.
1.1.10 Discuss the role of individual business practitioners in the business community.
Having fun whilst making the world a better place
Axiom Skate Camp is the brainchild of South African skate legend Joubert Jansen. Established in
2009, Axiom is the incarnation of Joubert’s dream to create an environment where young people of
different ages and backgrounds can connect through the medium of skateboarding, learning not
only about the sport, but also about themselves, nature and life in general.
Joubert, himself a professional skateboarder, had the idea for Axiom while studying audio-visual
production at the University of Cape Town. His vision was to create a camp that offered its guests
not only exclusive access to a world-class skate park and coaching from some of South Africa’s best
skaters, but also life lessons and inspirational talks by distinguished guests, cultural excursions to
rural villages and environmental awareness programmes.
In 2007, Joubert met Geoff Vallelly, vice-president of American Skateboard brand Ethics
Skateboards, at a skating contest in Spain. Joubert told Geoff about his idea to create a business that
used skateboarding as a tool to build character and to benefit the community at the same time.
Geoff must’ve liked the idea, because a month later Joubert got an email from Ethics, offering to
sponsor the project.
The American sponsorship enabled Joubert to lease land from a small community in Kwa-Zulu Natal,
as well as build a skate park, along with buildings for shops, accommodation and storage. Joubert
then invited members of the community to participate economically by setting up a community-
based grocery store and gallery, where local artists display and sell their art to skaters and their
parents.
Joubert’s goal has always been simple: “Make the world a better place, but have an awesome time
doing it.”
2.1 Joubert is a citizen of South Africa. Do you think Joubert makes a meaningful contribution to the
country? Give a reason for your answer.
2.2 Explain how the community that own the land Axiom Skate Camp is built on, benefit from the
camp’s presence.
2.3 Explain how the country benefits from the existence of Axiom Skate Camp.
2.4 Explain why businesses donate money to community-based projects.
2.5 What would you do to expand your operation if you were Joubert?
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Revision test: Topic 2 – Citizenship roles and responsibilities
1. Write down five ways in which the citizens of a country can contribute towards the development
of the country.

Total: / 10
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Topic 3: Marketing function Duration: 4 weeks [Week 3-6]
3.1 Introduction
 The marketing function comprises four policy instruments: the product policy, the pricing policy,
the distribution policy and the marketing communication policy.
 These four policy instruments are known as the four p’s: product, price, place and promotion.
 Goods and services

Product policy  Product development and design
 Packaging
 Trademarks
 Importance of pricing
 Pricing techniques/strategies
Pricing policy  Price determination
 Factors influencing pricing
 Price adjustments
 Channels of distribution
Distribution policy  Direct and indirect distribution
 Intermediaries
 Sales promotion
Marketing  Advertising
communication policy  Publicity
 Personal selling
 E-marketing
3.2 Marketing activities
3.2.1 Locating the consumer
 Marketing is aimed at consumers - it is therefore important to know where the consumers who are
interested in buying the products are located.
 This activity is done with the aid of market research.
 Market research aims to locate consumers and provides information about:
 The spending power of consumers.
 The preferences of consumers.
 Consumers’ willingness to spend.
 The demographics of consumers.
3.2.2 Standardisation and grading
 Standardisation is the process of developing and establishing a uniform set of criteria to ensure the
production of quality goods.
 Grading is the process of classifying agricultural products into particular categories, for example
Grade A potatoes.
3.2.3 Storage
 After goods have been produced, it must be stored until it is consumed or dispatched to
intermediaries, wholesalers or retailers.
 The storing facility will be influenced by the type of goods that need to be stored.
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 Perishable goods such as milk, meat, vegetables or flowers can only be stored for a limited period
of time.
3.2.4 Transport
 Products must be transported from storage facilities to intermediaries, wholesalers or retailers.

 The method of transport will be influenced by the type of products that need to be transported.
 Business enterprises can choose among several methods of transportation, for example road
transport, railway transport, air transport and sea transport.
 Before an enterprise decides which methods of transportation to use, the following important
factors must be taken into consideration:
 speed
 cost
 safety
3.2.5 Financing
 Money must be made available for activities such as marketing the product and insurance.
 Marketing aims to recover the money spent on producing the product.
3.2.6 Risk bearing (insurance)
 From the moment an enterprise takes ownership of raw materials or semi-finished goods, the
business enterprise is responsible for the goods.
 This means that the business enterprise carries the risks involved with owning the goods - the
factory or warehouse can, for example, catch fire, goods can be stolen or goods can perish.
 The business enterprise only stops being responsible for the goods once wholesalers, retailers or
intermediaries acquire ownership of the goods.
 The goods then become the responsibility of the new owner.
3.2.7 Buying and selling
 Some business enterprises produce goods, while other business enterprises buy finished goods
which are sold for a profit.
 Business enterprises that produce goods have to buy raw materials in order for production to take
place.
 Various other products are also purchased, e.g.:
 maintenance services to maintain and repair machinery
 water and electricity
 marketing services
 Once goods have been acquired or produced, it must be sold.
 If business enterprises are unable to sell the goods it has produced or purchased, the goods will
either become obsolete, or the goods may perish.
3.3 Product policy
3.3.1 Goods and services
 A product is something that satisfies consumers’ needs and wants.

 Consumers buy products, because they believe that they will benefit from owning the product.
 A product can either be a good, a service or a combination of a good and a service:
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Goods Services Combination of goods and services

Bread Dental services Meal at a restaurant
Toothpaste Hair styling services Cell phone contract
Clothing Internet service provider Products ordered by mail
Goods Services
 Physical, tangible things  Non-physical and intangible
 Can be separated from the producer  Cannot be separated from the producer
 Can be bought and owned  Can be experienced or used
 First produced, then sold  First sold, then produced
 Consumer knows exactly what he/she is  The consumer does not always exactly know
buying what he/she is buying before the service is being
 Can be transported and stored delivered
 Perishable, cannot be transported or stored
 Products are classified into different categories.

 Most products are intended for consumers or for businesses.
 Products that are meant for consumers are known as consumer products, and products that are
meant for businesses are known as business products or industrial products.
 Business products or industrial products are mainly used in the production of other products.
 It is possible that one product can fall into both categories.
 For example, consumers buy paint to paint their houses, but business enterprises also buy paint
to paint the products they manufacture.
 The reason why products are classified as either consumer products or business products is
because different marketing strategies are used to market these products.
 Consumer products are divided into five groups: convenience goods, select goods, specialty
goods, unsought goods and services.
Convenience goods Bought regularly, without hesitation. Consumers are not  Bread
willing to spend time or effort on buying convenience  Milk
goods because convenience goods differ very little in  Maize meal
terms of price, quality and the satisfaction it provides to
consumers.
Select goods Also known as shopping goods, because consumers  Lounge suite
spend time and effort in comparing similar goods.  Fridge
Specialty goods Consumers know exactly what they want and are willing Branded products that
to search until they find exactly what they are looking for. consumers insist on buying.
Consumers do not compare products because they do  Green Cross shoes
not want any product other than the one they have  Diesel jeans
decided on. Manufacturers want consumers to view their
products as specialty products, because consumers insist
on buying particular brands.
Services Services are not tangible. Services are rendered by  Garden services
service providers to consumers. Services cannot be  Au-pair services
separated from the service provider.
3.3.2 Product development and design
 Business enterprises need to develop new products to replace products that lose popularity over
time.
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 The popularity of a product changes as the product moves through the different stages of its life
cycle.
 The life cycle of a product refers to all the stages that a product goes through from the time it is
introduced to the market until the time it is withdrawn from the market.
 The product life cycle is divided into four stages:
Stage 1:  Sales are low, because customers are not aware of the product yet.
Introduction  Promotion efforts need to be informative to familiarise consumers with the product.
 Sales increase as consumers become aware of the product
Stage 2:
 Profits grow rapidly at first and then gradually start to even off.
Growth
 Competitors start to enter the market by introducing similar or better products.
 Sales remain at a constant level.
 Competition gets tougher as an increased number of competitors enter the market.
Stage 3:  Promotion efforts need to be convincing and persuasive because consumers must be
Maturity persuaded to remain brand-loyal as there are now many similar products available on
the market.
 The maturity stage can last for several years.
Stage 4:
 Sales start to decline because new products inevitably replace old ones
Sales decline
 It is therefore clear that business enterprises need to develop new products to:
 replace older products that have reached the “sales decline” stage.
 maintain market share by attracting customers through developing new products.
 remain competitive, because competitors are constantly on the lookout for ways to
improve their products.
 satisfy the changing needs and wans of consumers.
 Business enterprises that need to design and develop new products, usually make use of the
following steps:
 Ideas can be obtained from various sources, including staff, intermediaries,

Generate ideas
competitors and consumers.
Select a few good ideas and  All possible product ideas must be evaluated to determine which idea is most
evaluate each one likely to result in a successful new product.
Analyse the profitability of  Managers need to determine if manufacturing the product will be profitable.
the product  Possible costs, revenue and profit must be calculated.
 During this stage, product ideas are analysed in detail through a process called
Develop the product research and development.
 Product ideas are then converted into drawings and designs.
Commercialise of the product  During this stage, the product is put on the market.
 As the new product is still in the introduction phase, marketing efforts need to
be focused on informing consumers about the product.
Market the product
 Later, as the product becomes well known, marketing efforts should become
more aggressive in order to persuade consumers to keep buying the product.
3.3.3 Packaging
 After a product has been designed and developed, management must decide on the best way to
package the product.
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a) Requirements of good packaging
 Good packaging:
 protects and promotes the product
 prevents spoiling or damage
 links the product to the promotion strategy used to promote the product
 informs consumers on how to use the product
 draws the attention of consumers
 reduces storing costs by minimising breakage
 must be easy to handle
 must be easy to display on the shelves in store
 indicates the correct mass or volume of the contents of the product
 Packaging could have ethical implications.
 While some people might say that the following practices are unethical, others might argue that
they are good marketing strategies, e.g.:
 Some packaging makes consumers believe that the content of the packaging is much
more than it actually is.
 Some products are packaged in a way that it might easily be confused with
competing products.
 Plastic bags are not environmentally friendly and contribute to pollution.
b) Different kinds of packaging

Form of packaging Description Example
Also known as unit packaging. Packaging needs to
Packaging for  A chocolate in a wrapper.
be cheap, because once the product is consumed,
immediate use  A can of cold drink.
the packaging is thrown away.
Packaging can be used for purposes other than for
 Tubs originally used to pack
storing the original contents as well. Consumers
Packaging for ice-cream, margarine or
will be reminded of the particular brand after the
double use washing powder can be used
original contents have been consumed, because
to store other products.
packaging can be re-used.
 A box of chocolates -
Retailers buy products in bulk from wholesalers or
Packaging for chocolates are taken from the
suppliers. Retailers unpack the products to sell
resale original packaging to be sold
them separately or in smaller quantities.
separately.
Also known as frequently changing packaging.  Cold drink cans which
Although the basic colours and design of the advertise the Soccer World
Kaleidoscopic
packaging remain unchanged, some detail of the Cup or the Olympic Games.
packaging
packaging changes to advertise an important  Health cereal that advertises a
sporting event, or a competition. new diet on its packaging.
Packaging must suit the product. Smart products,
such as a grand watch or an expensive new phone  An expensive watch in a smart
Specialty packaging
must be packaged in a way that matches the price jewellery box.
and nature of the product.
Complementary products are packed together
because these products are usually purchased
 Shower gel and sponge.
Combination together. Combination packaging is also a strategy
 Hand cream and perfume.
packaging to increase profits, because consumers who were
 Baby diapers and baby wipes.
only interested in buying one product, now spend
more money by buying a complementary product.
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3.3.4 Trademarks
 A trademark is a registered mark (under the Trade Marks Act) that a manufacturer puts on its
products to distinguish its products from other manufacturers.
 Trademarks include words and symbols that are legally registered.
 Branding refers to any means used by an enterprise to identify a product and to distinguish it
from other products, including names, symbols and trademarks.
 Advantages of branding and the use of trade marks include:
 Consumers know what they are buying. Sales staff therefore do not need to spend a lot
of time and effort on convincing consumers to buy a particular product.
 Trademarks enjoy legal protection. Trademarks can therefore not be copied by
competitors.
 Consumers are more likely to accept new products that are marketed under a well
known brand or trade mark.
 A good trademark needs to meet certain requirements:
 A good trademark makes it easy for consumers to recognise the product.
 A good trademark is easy to recognise, remember and pronounce.
 A good trademark helps build brand familiarity.
 A good trademark is an indication of quality.
3.4 The pricing policy
 The price of a product refers to the amount of money that must be paid by the buyer to
experience the benefits of the product.
 Businesses should have a pricing policy that enables them to maintain and increase profits,
maintain market share, increase sales and remain competitive.
3.4.1 Importance of pricing
 Determining the most suitable price for a product is important, because:

 pricing affects the number of products that an enterprise is able to sell which, in turn,
affects profitability.
 the price given to a product can influence consumers’ attitudes towards the product or
the whole brand.
 the pricing policy should explain when and to whom discounts will be granted.
 the price of a product must make provision for transport costs.
 the price of a product must make provision for VAT.
3.4.2 Pricing techniques/strategies
 Sometimes it is necessary for business enterprises to change their prices to attract more
customers.
 Businesses can make use of several pricing techniques or strategies to achieve pricing objectives.
Prices are set very low, although still above cost price. The aim is to draw customers into
stores so that customers do not only buy the items on sale, but other products as well.
Leader pricing
Leader prices are specials that are advertised regularly. Leader items are usually products
which are frequently used, so consumers will recognise a bargain.
Prices are set very low to attract customers. However, once customers enquire about the
bait priced product, sales staff point out all the disadvantages of buying the product on
Bait pricing
promotion, compared to other more expensive products that are not. The aim of bait
pricing is to encourage customers to upgrade and to buy a more expensive product.
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Prices are set in a way that the prices have special appeal to customers.
Psychological Odd-even pricing is an example of psychological pricing. Odd-even prices are set a few rand
pricing or cent lower than the next even figure, for example R99.95 instead of R100. Odd-even
prices make products appear cheaper.
Consumers are concerned with the quality of a product. Prices are set high to suggest
quality. If prices are too low, consumers will assume that there is something wrong with the
Prestige pricing product and will not be interested in buying the product. Prestige pricing is often used to
sell services because consumers look at the price to determine the quality of service they
will receive.
The price of one product is set low in order to increase the sales volume and profit of
Complementary
another product. For example, the price of a shaver might be very low to enable the retailer
product pricing
to sell the blades which are more expensive.
Enterprises aim to obtain maximum levels of profitability by setting prices relatively high
when the product is still in the market introduction stage. During this stage competitors
Skimming have not yet emerged and consumers have nothing to compare the product by. As time
passes, the price is decreased to make products more affordable to a wider range of
consumers.
Products are sold at very low prices to attract consumers when the product is introduced
Penetration to the market. The aim is to convince consumers to buy a product. As soon as the
pricing introductory offer is over, the price is increased. Market penetration prices are sometimes
known as stay-out pricing, because competitors are often unable to match such low prices.
Setting a fair price that gives consumers good value. Value pricing is about offering quality
Value pricing
products to consumers at lower prices than those of competitors.
3.4.3 Methods of price determination
 A combination of the following methods is usually used to determine prices.
a) Cost as basis for price setting

 It is important that business enterprises determine suitable prices for products to recover the
costs that were incurred to sell the product and to ensure that the enterprise makes a profit.
 Business enterprises therefore need to sell their products for more than cost price.
 Business enterprises usually add an amount to the cost price to determine the selling price, this
amount is known as mark-up.
 For example: if XYZ Grocery store pays R3 for a chocolate bar, they need to sell it for a higher
price to make a profit. If XYZ Grocery Store adds R1 to the cost price of R3, we can say that the
mark-up is 331/3% on cost price.
b) Competitors’ prices as basis for price setting

 It is a good idea to have a look at prices of direct competitors.
 For example, if Airline A charges R800 for a return ticket from Johannesburg to Cape Town and
Airline B charges R850 for the same trip, Airline C can charge a price in the same range as Airline
A and Airline B.
 If competitors supply products at a particular price and if consumers are willing to pay the price,
it does not make sense to charge less for those products.
c) Consumer buying power as basis for price setting

 It is a good idea to determine, with market research, what consumers are willing to pay for a
particular product.
 If consumers are, for example, willing to pay R800 for a pair of designer jeans, it does not make
sense to charge less than R800.
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 Consumers’ attitudes and consumers’ ability to pay also influence price setting.
 Consumers’ spending power changes as economic conditions in a country change.
 Manufacturers must aim to keep prices in line with what consumers are willing and able to pay
for products.
 When manufacturers increase prices, consumers can be expected to show resistance towards
the higher prices.
 But, as time passes, consumers will grow used to and accept the new prices.
1.4.4 Factors influencing pricing
 Even if manufacturers have taken the cost to produce a product, competitor’s prices and the
buying power of consumers into account, other factors remain that also influence pricing:
a) Form of markets
 Many buyers and sellers.

 Prices are determined by supply and demand.
Perfect  Products are similar (homogenous) and there are many substitute goods.
competition
 If a manufacturer in a perfectly competitive market increase its prices, consumers can buy
the same or similar products elsewhere.
 Profit margins are relatively low.
Monopolistic  Many suppliers/sellers.
competition  Each supplier has its own brand of a particular product.
 For example SAB manufactures different kinds of beers which compete with each other.
 Only few suppliers/sellers who control the prices of products.
Oligopoly
 Products are homogenous, for example MTN, Vodacom and Cell C or Kulula, 1Time and
Mango.
 Only one supplier/seller who controls prices and products.
 Difficult to enter a market that is controlled by a monopoly, usually because of high entry
Monopoly costs or because a particular business enterprise has exclusive rights over a particular
resource.
 Profit margins are usually high because consumers have no alternative, for example Eskom.
b) Availability of substitute goods

 Substitute goods are similar products that are used for the same purpose, for example butter
and margarine.
 If a certain product becomes too expensive or scarce, consumers will start buying substitute
goods.
c) Nature of demand
 The demand for products is either elastic or inelastic.
 An elastic demand means that the demand for a product will change depending on the price of
the product and the buying power of consumers, e.g. the demand for designer clothing.
 An inelastic demand means that the demand for a product remains unchanged, e.g. the demand
for toothpaste.
d) Normal trade practices

 Some enterprises offer cash or other types of discounts.
 These discounts should be taken into consideration when the enterprise decides on prices for its
products to ensure that even though an enterprise offers discounts to customers, it is still
profitable.
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e) Consumer reaction
 Consumers have unlimited needs and wants which they want to satisfy with limited buying
power.
 If prices of particular products become too high, consumers will either stop buying the products
or try to find cheaper alternatives.
 On the other hand, if consumers think that products are too cheap, consumers might think that
there is something wrong with the products.
f) Reaction of distributors/sellers
 Expensive products are difficult to sell.
 If distributors/sellers know that consumers will not buy the products on the shelves because the
products are too expensive, distributors/sellers might not be willing to stock expensive products.
 Instead, distributors/sellers will be more willing to stock cheaper alternatives, because
consumers will buy the cheaper alternatives which will result in increased profits for
distributors/sellers.
g) Manufacturing, distribution and marketing costs

 The price of a product should cover all the costs incurred to manufacture, distribute and market
the product.
 Manufacturers/sellers must ensure that the prices of products cover all such costs, but remain
good enough to attract consumers.
1.4.5 Price adjustments

 Sometimes prices need to be adjusted sometimes.
 Price adjustments can be due to several reasons, including attracting new customers,
maintaining market share, inflation or the fact that consumers have less money to spend.
 One way of adjusting prices is to grant discount:
Quantity aim to encourage consumers to buy in large quantities.

discounts
Cash discounts aim to encourage consumers to pay cash.
Seasonal aim to encourage consumers to buy products before they actually need the products, for
discounts example buying winter clothes for the following season at the end of the current winter season.
Trade discount offered by one supplier to another.
discounts
Sales price discount offered to consumers. Aim to encourage consumers to buy when the products are on
discounts sale and not when they actually need the products.
 Business enterprises also make use of price discrimination as a technique to adjust prices.
 Price discrimination means that not all consumers pay the same price for the same product.
There are different forms of price discrimination, including:
Consumer’s different prices are charged to different consumers. For example landscape architects receive
discrimination discounts when they buy from certain nurseries.
Product snacks bought at the cinema are more expensive than the same snacks bought from a grocery
discrimination store.
Place
front row tickets at a sporting match are more expensive than other tickets.
discrimination
some agricultural products are not available all year round. When these products are scarce,
Time
they are more expensive. Avocados are a good example. Sometimes during the year they are
discrimination
much more expensive than at other times.
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3.5 The distribution policy
 Once products have been developed and priced, they need to be made available to consumers at
the right place and at the right time.
 Products need to be distributed from the place where they were manufactured to the market
place. The market place is where consumers come together to buy the products they need.
3.5.1 Channels of distribution
a) Manufacturer  consumer
 This distribution channel is known as the basic channel of distribution, because goods move
directly from the manufacturer or the producer to the consumer.
 Manufacturers making use of this channel take responsibility for marketing the products.
 E.g. when a farmer sells his fresh produce directly to members of the public.
b) Manufacturer  retailer  consumer

 Goods move from the manufacturer to the retailer before the goods are sold to consumers.
 In this channel of distribution, retailers take responsibility for advertising the goods.
 E.g. when a retail store like Pick-‘n-Pay buys stock from manufacturers like Clover and Hullets and
then sell these goods to consumers.
c) Manufacturer  agent  retailer  consumer

 Goods move from the manufacturer to an agent.
 Goods are then sold by agents to retailers before being sold to consumers.
 The responsibility to sell goods falls on both the agent and the retailer.
 E.g. when manufacturers of slimming products or dietary supplements use agents to market the
products to retailers like pharmacies. Consumers then buy the products from the retailer without
ever having contact with the agent.
d) Manufacturer  wholesaler  retailer  consumer

 This channel of distribution is also known as the traditional channel of distribution.
 According to this channel, goods move from the manufacturer to the wholesaler.
 Goods are then bought by retailers and sold to consumers.
 E.g. when a wholesaler, such as Makro or Trade Centre, buys goods in bulk from manufacturers.
Retailers such as cafes then buy products in bulk from wholesalers. The retailers unpack the goods
in smaller quantities before the products are sold to consumers.
e) Manufacturer  agent  wholesaler  retailer  consumer

 This channel of distribution is the most complicated channel.
 According to this channel, goods move from the manufacturer to an agent.
 The agent is then responsible for selling the goods to wholesalers.
 Small retailers then buy the goods from wholesalers.
 Retailers take responsibility for selling the products to consumers.
 E.g. when manufacturers of fabric use agents to sell the fabric to wholesalers. Smaller fabric
retailers then buy the fabric from the wholesalers where it is finally sold to consumers.
3.5.2 Direct and indirect distribution
 A direct distribution channel is where goods move directly from the manufacturer to the
consumer.
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 An indirect distribution channel is when goods do not move directly from the manufacturer to
consumers, but pass through the hands of other role players, such as agents, wholesalers and
consumers.
 Reasons why manufacturers prefer to make use of direct or indirect distribution methods include:
Direct distribution Indirect distribution

 Manufacturers want complete control over  Consumers are usually spread over a large geographical
the marketing process. area.
 Manufacturers sell goods more effectively to  Because consumers are often spread over large
consumers than intermediaries. geographical areas, distribution becomes very expensive.
 Products may become very expensive if  Direct distribution requires a large investment in
intermediaries add their mark-ups. advertising. Manufacturers may want to avoid spending
 A manufacturer, who is in direct contact with large amounts on advertising by transferring the
consumers, knows consumers well. marketing of its products to intermediaries.
 Suitable intermediaries may not be available,  Intermediaries sometimes provide credit to consumers,
or if intermediaries are available they might which helps attract consumers.
not be willing to sell the particular goods on  Intermediaries often have expert knowledge of
behalf of the manufacturer. distribution.
3.5.3 Intermediaries
 Intermediaries are also known as agents or middlemen.
 Intermediaries are mainly tasked with the distribution and marketing of products to consumers,
or to other role players such as wholesalers or retailers.
 There are numerous kinds of agents in commerce.
 The actual authority of the particular agent will depend on the commercial relationship between
the agent and his or her principal.
 A principal is the head of an agency and has the right to empower agents.
Buying agents  A person who has authority from a principal to purchase certain commodities on the
principal’s behalf.
 Selling agents sell buildings and fixed property such as houses or businesses.
Selling agents  Selling agents bring buyers and sellers together.
 Selling agents facilitate transactions between buyers and sellers.
 It is not unusual for selling agents to take control of pricing, selling and advertising.
 Agents who sell businesses on behalf of business owners are often referred to as business
brokers.
 Agents who sell insurance are referred to as insurance brokers.
Brokers
 Other brokers buy and sell commodities that cannot be specifically individualised, for
example grain, wheat or shares.
 Brokers usually have short relationships with clients because the relationship ends when
the transaction is concluded.
 Factory representatives are often employees of an enterprise with authority to conclude
Factory agreements and to act as seller or purchasing agent on behalf of the enterprise.
representatives  Some factory representatives are independent contractors who have the authority to
market products of one or more business.
 Factory representatives often sell similar, yet non-competing products.
Import and  Export or import agents are agents who specialise in international trade.
export agents  It is their responsibility to ensure that the import and export processes run smoothly.
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3.6 Marketing communication policy
 Once products have been developed, priced and distributed, they need to be marketed.
 The marketing communication policy mainly refers to different ways of selling products.
 These different methods include sales promotion, advertising, publicity and personal selling.
3.6.1 Sales promotion
 Sales promotion refers to activities aimed at stimulating consumers’ interests in an enterprise’s

products through activities such as:
 Handing out free samples of products to consumers.
 Handing out sales coupons to consumers.
 Demonstrating products to consumers in stores.
 Launching competitions.
 Sponsoring sporting events or sports teams.
 Organising a sales promotion is quite easy and results are usually achieved immediately, but the
effects of a sales promotion are often short lived.
 Consumers tend to buy the product on promotion just because the product is on promotion, but
the next time consumers do shopping, they tend to buy the products they usually buy.
 Sales promotion has three main objectives:
 The first objective is to inform consumers about a product.
 The second aim of sales promotion is to persuade consumers to buy a product.
 Thirdly, sales promotion aims to remind the target market of the availability of a product.
3.6.2 Advertising
 Advertising involves communication with a large number of consumers at the same time.
 Advertising is neither personal nor personalised.
 The advertiser pays for the message he/she wants to convey to consumers.
 Advertising aims to persuade consumers to try out new products and to keep buying
products the market already knows.
 Advertisement media includes:
Advertising media Advantages Disadvantages

 reach many people  expensive form of advertising.
Television and
 appeal to consumers’ eyes and  compete with hundreds of advertisements for
cinema
ears similar products.
 reaches many people  expensive form of advertising.
 quick to place  often thrown away once the newspaper is read.
Newspaper
 usually placed a few times per  illiterate consumers cannot understand
week or month advertisements.
 relatively inexpensive  exposure is short lived.
Radio  many people are reached  many people don’t really pay attention to what
is said on the radio.
 message can easily be changed  often thrown away, because it is seen as junk
Direct mail
mail.
Magazines  reaches specific target market  compete with several other advertisements.
Outdoor  relatively inexpensive  exposure relatively short, because billboards
advertising  attracts attention are changed regularly.
 The advertising media in the above table represents the most commonly used advertising media.
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 However, there are several other types of advertising media including cell phone advertising,
advertising on elevator-doors or advertising on the covers of rented DVD’s.
 The type of advertising media an enterprise will use depends on factors such as:
 the advertising objectives.
 the target market the enterprise is aiming to reach.
 the amount of money that is available.
 Once an advertiser has chosen the most suitable advertising medium, the advertiser must decide
on a message to communicate to the target market.
 This message must reflect the AIDA principle:
Attract attention  Advertisers should make use of large headlines, shocking statements or any kind of
special effect to attract the interest of the target market.
Hold interest  Once a person’s attention has been drawn by an ad, the ad must keep the person’s
interest.
 Advertisers hope that people will remember how good the advertisement made them feel
and therefore remember the ad.
Arouse desire  The advertisement must convince people that the particular product will meet their
specific needs and that they will be better off if they buy the product.
 Advertisers sometimes rely on testimonials from other people to convince consumers to
buy a product, or comparisons between products are drawn to emphasise the benefits of
a particular product.
Inspire action  Advertisements must convince people to actually buy the product.
 Some products are expensive and potential consumers might need encouragement to buy
the product.
 It is therefore a good strategy to include a toll free phone number in an ad so that
consumers can call the number and operators can then try and convince consumers to
buy the product.
 Advantages of advertising include:

 Advertising increases sales.
 Advertising informs consumers about products.
 Advertising simplifies the jobs of sales personnel because consumers know exactly what they
want by the time they enter a store.
 Advertising shows people what products are available - this may inspire people to work harder
so that they can afford the product they desire.
 Consumers compare the advertisements of competing products. Because advertisements focus
on the advantages of a particular product, advertising can indirectly lead to the improvement
of products.
3.6.3 Publicity
 Publicity is unpaid communication in the mass media about a business enterprise, its employees,
its goods or services.
 Because publicity is not paid for, business enterprises can not control what is said about them -
publicity can therefore either be positive or negative.
 Publicity can, for example, take the form of a news story in a newspaper, a press release or a
media statement.
 The main difference between publicity and advertising is that publicity is not paid for.
 Consumers also tend to perceive publicity as more credible than advertising.
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3.6.4 Personal selling
 Personal selling is an aggressive sales method that involves face-to-face communication between
salespersons and consumers.
 Personal selling is an effective sales method because the salesperson is ready to answer all the
questions asked by the consumer.
 The salesperson can also adjust his/her message so that the message is more attractive to the
person the message is delivered to.
 Unlike advertising, personal selling can take factors like the consumer’s culture or language into
account.
 The message delivered by sales people can be individualised to suit the needs of the consumer.
3.6.5 E-marketing
 The internet is a very powerful marketing medium, because billions of people globally have access
to the internet.
 Many business enterprises have created websites which can be accessed by consumers.
 Publicity articles about an enterprise can be displayed on the website.
 Nowadays, many consumers do their shopping online.
 Cell phone advertising is another form of electronic marketing.
 Some businesses build up a database with consumers’ cell phone numbers.
 Consumers then receive text messages informing them about specials offered by the store.
 Electronic advertising is usually much cheaper than advertising in a newspaper or magazine.
 Another advantage of sending text messages is that the enterprise is in direct contact with the
target market.
3.7 Marketing in the formal and informal sector
3.7.1 Marketing in the formal sector
 The formal sector is also known as the primary economy.

 People participating in the formal sector either own registered businesses or are employed by
registered businesses.
 Participants in the formal sector are registered for tax purposes which enable them to make a
meaningful contribution to the economy through tax contributions.
Advantages of the formal sector Disadvantages of the formal sector

 Activities that take place in the formal sector are regulated.  The formal sector is
 Products supplied by the formal sector are legal. sometimes overly regulated.
 People employed in the formal sector contribute towards the  Entry into the formal sector is
Unemployment Insurance Fund. They are therefore entitled to claim from more difficult than entry into
the Unemployment Insurance Fund in case it becomes necessary. the informal sector.
 Government is able to generate income in the form of tax from the formal  Jobs in the formal sector are
sector. scarce.
 Products bought from the formal sector can be returned if they are faulty.
 The formal sector can make use of services offered by the informal sector
because services offered by the informal sector are often cheaper than
services offered by the formal sector.
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3.7.2 Marketing in the informal sector
 People participating in the informal sector do not own registered businesses and they are not
registered for tax, for example street vendors and hawkers.
 The informal sector is also known as the second economy.
 The informal sector is mainly a cash industry.
Advantages of the informal sector Disadvantages of the informal sector

 Easy and inexpensive to enter the  People participating in the informal sector do not pay tax.
informal sector. Yet, they make use of public services such as public hospitals
 No education needed to enter the and roads.
informal sector.  Illegal products such as drugs or stolen goods are often sold
 Provides job opportunities for in the informal sector.
unemployed people.  Faulty goods cannot be returned.
 People who are employed in the informal  The quality of products sold by the informal sector is not
sector gain working experience that guaranteed.
enables them to qualify for job  Employees are not protected. They cannot belong to trade
opportunities in the formal sector. unions or claim from the Unemployment Insurance Fund
because employees employed in the informal sector do not
contribute towards the Unemployment Insurance Fund.
3.8 Foreign marketing
 Foreign marketing occurs when a business enterprise markets its products to consumers in foreign
countries.
 The aim of foreign marketing is to increase the enterprise’s consumer base and to sell more
products, which ultimately results in increased profits.
 Marketing products in foreign markets can be quite challenging - sometimes the product will have
to be adapted to suit the needs of the consumers in the foreign market.
 An enterprise will also have to adapt its marketing strategy because different cultures have
different beliefs and values.
 Despite the challenges associated with foreign marketing, foreign marketing has contributed to:
 globalisation
 improved products
 cheaper products
 the formation of multi-national ventures
 an improvement in transportation services
 the development of railways, roads, seaports and airports
 Foreign marketing involves importing and exporting:
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Imports Exports
 Take place when an enterprise in one country buys  Take place when an enterprise in one country sells its
products from a business in another country. products to businesses or consumers in foreign
 Some imports are voluntarily, some imports are countries.
forced.  Some business enterprises export surplus products to
 An enterprise may choose to import products foreign markets where these products are sold very
voluntarily because it may be cheaper to import the cheap - this is known as dumping.
products than to buy or produce the products  South African business enterprises export a range of
locally. products and resources, such as gold, diamonds,
 Forced imports take place when an enterprise wine, fruit and flowers, to foreign countries.
needs products or resources that are not available
locally or, if consumers demand products that are
only available in foreign countries.
 An enterprise should consider importing when the
local currency has appreciated against foreign
currencies.
 There are many laws that regulate imports and exports.

 These laws mainly aim at combating tax evasion and the import or export of illegal products such
as drugs.
 Some countries forbid the import of particular products because pests and viruses are sometimes
found in goods such as wooden products or plants.
3.9 Foreign marketing and production
 If an enterprise decides to export products, production will be influenced, for example:

 Management must decide where production should take place.
 It will probably be most beneficial to move the production process to the country
where production costs are the lowest.
 Production costs differ from one country to the next due to the availability of labour
and resources.
3.9.1 Production systems
 If the uninterrupted production system is used, management must decide whether machines
will be bought in the country where production takes place, or whether machinery will be
transported/exported to the country where production takes place.
 If the interrupted production system is used, management must devise a plan to bring
customers in contact with the producer.
3.9.2 Production planning
 Production planning must take place in the same country where production takes place.
 Sufficient time must be allowed for exporting the products and finishing all the paperwork
associated with the export and import processes.
3.9.3 Safety
 Each country has its own occupational health and safety rules and regulations.
 If production is moved to another country, management must ensure that all safety procedures
and policies are sufficient and that the safety procedures comply with the laws of the country.
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3.9.4 Quality
 Each country also has its own quality control bodies.

 Management must ensure that the products that were manufactured meet the quality
requirements set by the country where production takes place, as well as the quality requirements
of the countries where the products are exported to and sold.
3.9.5 Costing
 The total production cost per unit must be determined before a product can be priced.
 If production takes place in another country, this calculation must be done carefully to take the
exchange rate into account.
Activities: Topic 3 – Marketing function
underlined word to make the statement true.
1.1.1 The marketing function comprises four policy instruments: the recruitment policy, the pricing
policy, the distribution policy and the marketing communication policy.
1.1.2 Sales promotion, advertising, publicity and personal selling are addressed in the pricing policy.
1.1.3 Consumer products can be divided into five groups: necessities, select goods, specialty goods,
unsought goods and services.
1.1.4 Setting a fair price that gives consumers good value is known as prestige pricing.
1.1.5 Market penetration prices are sometimes known as knock-out pricing, because competitors
are often unable to match such low prices.
1.1.6 Specialty packaging is also known as frequently changing packaging.
1.1.7 In markets that are based on monopolistic competition, products are homogenous and there
are many substitute goods.
1.1.8 An inelastic demand means that the demand for a product remains unchanged, e.g. the
demand for toothpaste.
1.1.9 Complementary goods are similar products that are used for the same purpose, for example
butter and margarine.
1.1.10 Cell phone advertising is a form of electric marketing
1.1.11 The formal sector is also known as the second economy.
1.1.12 The formal sector is also known as the principal economy.
1.1.13 Activities that take place in the formal sector are regulated.
1.1.14 The actual authority of the particular agent will depend on the personal relationship between
the agent and his or her principal.
1.1.15 Jobs in the formal sector are scarce.
1.1.16 If the interrupted production system is used, management must devise a plan to bring
customers in contact with the retailer.
1.1.17 Agents who sell insurance are often referred to as insurance hawkers.
1.1.18 When marketing in foreign countries, enterprises may have to adapt their production
strategies because different cultures have different beliefs and values.
1.1.19 Enterprises should consider importing when the local currency appreciated against foreign
currencies.
1.1.20 Production costs differ from one country to the next due to the availability of labour and
resources.
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Column A Column B
1.2.1 Standardisation A Goods move from the manufacturer to the wholesaler.
1.2.2 Oligopoly B An aggressive sales method that involves face-to-face
communication between salespersons and consumers.
1.2.3 Place discrimination C Snacks bought at the cinema are more expensive than the
same snacks bought from a grocery store.
1.2.4 Dumping D The process of developing and establishing a uniform set
of criteria to ensure the production of quality goods.
1.2.5 AIDA E Aim to encourage consumers to buy in large quantities,
for example buy-one- get-one-free promotions.
1.2.6 Seasonal discount F The prices of products are determined by only a few
suppliers/sellers.
1.2.7 Traditional channel of G Only one supplier/seller controls prices and products.
distribution
1.2.8 Personal selling H The process of classifying agricultural products into
various categories.
1.2.9 Product discrimination I Also known as shopping goods, because consumers spend
time and effort on comparing similar goods.
1.2.10 Monopoly J Front row tickets at a sporting match are more expensive
than other tickets.
1.2.11 Specialty goods K Aim to encourage consumers to buy products before they
actually need the products, or example buying winter
clothes for the following season at the end of the current
winter season.
1.2.12 Trademarks L Attract attention, hold interest, arouse desire and inspire
action.
1.2.13 Grading M Consumers know exactly what they want and are willing
to search until they find what they were looking for.
1.2.14 Quantity discount N Words and symbols that are legally registered.
1.2.15 Select goods O Surplus products are exported to foreign markets and
sold cheaply.
1.3 Complete the following sentences by filling in the missing word(s).

1.3.1 The ______ policy addresses issues such as channels of distribution, direct or indirect
distribution and intermediaries.
1.3.2 Products that are meant for consumers are known as consumer products, while products that
are meant for businesses are known as business or ______ products.
1.3.3 The ______ of a product refers to all the stages that a product goes through from the time it is
introduced to the market until the time it is withdrawn from the market.
1.3.4 The product life cycle comprises four stages; introduction, growth, ______ and sales decline.
1.3.5 Pricing affects the number of products that an enterprise is able to sell which, in turn, affects
______.
1.3.6 Business enterprises usually add an amount to the cost price to determine the selling price, this
amount is known as ______.
1.4.7 ______ pricing is when prices are set in a way that the prices have special appeal to
customers.
1.4.8 Business enterprises make use of price discrimination as a technique to ______ prices.
1.4.9 The ______ of a product refers to the amount of money that must be paid by the buyer to
experience the benefits of the product.
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1.4.10 Factors that influence pricing include the form of market, the availability of substitute goods,
the nature of demand, normal trade practices, consumer reaction, ______ and ______.
1.4.11 People who are employed in the informal sector gain working experience that enables them
to ______.
1.4.12 Laws regulating imports and exports are aimed at combating tax evasion and the import or
export of ______.
1.4.13 People participating in the ______ sector either own registered businesses or are employed
by registered businesses.
1.4.14 Unlike advertising, personal selling can take factors like ______ or ______ into account.
1.4.15 If the ______ production system is used, management must decide whether machines will be
bought in the country where production takes place or whether machinery will be
transported/exported to the country where production will take place.
2. Answer the following questions.

2. Present the headings of the four policy instruments (the four p’s) of the marketing function in a
mind-map.
2.2 Match the descriptions in Column B with the concepts in Column A.

Column A Column B
2.2.1 Market research A The process of classifying agricultural
products into different categories.
2.2.2 Standardisation
B The process of finding out what consumers
2.2.3 Grading want and don’t want.
C The process of establishing a uniform set of

criteria to ensure the production of quality products.
2.3 Magnificent Mangos is a mango farm in Limpopo. Discuss the seven marketing activities in an
essay by applying your answer to Magnificent Mangos.
2.4 Present the headings of the product policy in a mind-map.
2.5 Briefly explain what a product is.
2.6 Explain why a product can either be a good, a service or a combination of goods and services.
2.7 Are the following examples of goods, services or a combination of goods and services? Give a
short reason for your answer.
2.7.1 Garden services
2.7.2 Clothing
2.7.3 Buying a meal at McDonalds’ drive through.
2.7.4 The installation of a telephone line at your house.
2.7.5 Paying an architect to design a house.
2.8 Differentiate between goods and services in a table.
2.9 Goods are classified as either consumer goods or business goods. Explain why this is the case.
2.10 Classify the following goods as convenience goods, select goods or specialty goods.
2.10.1 Milk and eggs
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2.10.2 Nike running shoes

2.10.3 Defy tumble drier
2.11 Explain what is meant by the “life cycle of a product”.
2.12 Suppose motor manufacturers introduce an affordable car that doesn’t need any fuel. Explain ‘
what will happen with this product in terms of its life cycle.
2.12.1 Take a look at the following graphs. Each graph represents the life cycle of one of the
following products. Match the graphs with the products and give a reason for your answer.
The products are:
 Bread
 A fashion blunder
 The Volkswagen Beetle
(a) (b) (c)
2.13 A well-known cell phone manufacturer is losing market share due to new and better phones
that have been invented by competitors. This enterprise desperately needs to develop a new
product that would capture the interest of consumers.
2.13.1 Discuss the six steps in the product development process that this enterprise will have to
work through in order to develop a new product.
2.13.2 Mention any four reasons why business enterprises need to develop new products.
2.14 “Packaging can contribute to the success or failure of a product”.

2.14.1 Do you agree with this statement? Give a reason for your answer.
2.14.2 Write down the primary aim of packaging.
2.14.3 List five other requirements of good packaging (apart from the requirement mentioned in
question 2.14.2).
2.15 Identify the kind of packaging represented in each of the following pictures. Give a reason for
your answer.
2.15.1 2.15.2 2.15.3 2.15.4
2.16 Discuss trademarks in terms of the following:

2.16.1 What is a trademark?
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2.16.2 Advantages of using trademarks.

2.16.3 Requirements of good trademarks.
2.17 Identify the level of brand familiarity applicable to each of the following scenarios:
2.17.1 Your mother walks from shop to shop to find Crystal Clear dish washing liquid.
2.17.2 Your mother prefers buying Crystal Clear dish washing liquid. But, since it was out of stock
at the shops where she was looking, she will settle for another brand.
2.17.3 Your mother does not even consider buying Shine More dish washing liquid. She bought it
once, but was dissatisfied.
2.18 Present the headings of the pricing policy in a mind map.

2.19 Identify the following pricing strategies/techniques applicable to each of the following
scenarios:
2.19.1 Sales assistant: Good day sir. How can I help you?
Customer: I am interested in buying the TV set that was advertised for R1 500. Is it a good
option?
Sales assistant: That is not a very good choice, sir. Rather have a look at the TV sets over
here. These sets are much better and their prices start at only R8 000.
2.19.2 An advertisement reads: “New hair salon opening just around the corner. First fifty clients will
each receive a free hair cut.”
2.19.3 A leading low cost airline decided to cut air fares with 20%. The airline knows that its
rivals will not be able to match these prices.
2.19.4 The following products were advertised by a leading grocery store:
 Margarine R20/kilo
 Coffee R25/750 grams
 Sugar R7/kilo
 Sunflower oil R8/750 ml
 Tissues R7 per box
2.19.5 A pair of jeans is advertised for R299-95.

2.19.6 The first commercial car that runs without any fuel is initially sold for R700 000. As time
passes, the manufacturer decides to lower the price to R400 000.
2.20 Discuss price determination in terms of the following:

2.20.1 Cost as basis for price setting.
2.20.2 Competitor’s prices as basis for price setting.
2.20.3 Consumer buying power as basis for price setting.
2.21 Briefly explain what the concept “cost price” refers to.
2.22 High profit mark-ups do not necessarily result in large profits. Do you agree with this
statement? Base your decision on the following calculations.
2.22.1 Store A sells 1 000 units at R20 per unit. The cost price per unit is R8.
2.22.2 Store B also purchases the product for R8. Store B sold 10 000 units, because store B only
charged R14 per unit.
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2.23 Complete the following table:
Form of market What is it? Example

Perfect competition
Monopolistic competition
Oligopoly
Monopoly
2.24 AA Manufacturers decided to focus their production on the manufacturing of substitute goods.
2.24.1 Briefly explain what substitute goods are.
2.24.2 Mention any two examples of substitute goods.
2.24.3 Do you think AA Manufacturers’ decision to manufacture substitute goods was wise? Give a
2.25 AA Manufacturers’ rivals, BB Producers, decided to focus their production on the

manufacturing of complementary goods.
2.25.1 Briefly explain what complementary goods are.
2.25.2 Critically evaluate BB Producers’ decision to manufacture complementary goods.
2.26 Do you think the demand for the following products is elastic or inelastic? Give a reason for
your answer.
2.26.1 Toothpaste
2.26.2 Petrol
2.26.3 Diamond rings
2.26.4 Designer clothing
2.26.5 Restaurant meals
2.26.6 Bread
2.27 Explain how the following two factors influence price determination:
2.27.1 Consumers
2.27.2 Distributors
2.28 Identify any three reasons why business enterprises sometimes need to make price
adjustments.
2.29 Identify the following types of price adjustments:
2.29.1 You have three tubs of margarine in your fridge. Your local grocery store is currently
advertising margarine at an unbeatable price and you decide to buy five more tubs of
margarine.
2.29.2 Your mother has bought all your summer clothes for next season at a leading clothing store’s
summer sale.
2.29.3 A hardware store receives discount of 30% when it buys from its supplier.
2.29.4 The same hardware store offers a 5% discount to all consumers who pay by debit card.
2.29.5 A restaurant is offering a cup of coffee for R7 and bottomless coffee for R9.
2.29.6 Explain the aim of trade discount.
2.30 Identify the following types of price discrimination:

2.30.1 Mangos are more expensive in October than in December.
2.30.2 A stationery wholesaler that also sells to the public offers pens to distributors at a much
lower price than to members of the general public.
2.30.3 The corner café is much more expensive than the local grocery store.
2.30.4 Front row tickets for a rock concert are much more expensive than other tickets.
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2.31 Complete the following table:

Brief description of Who must take responsibility for
Channel of distribution this channel of marketing the products to the Example
distribution consumer?
E.g. Manufacturer consumer
2.32 Differentiate between direct and indirect distribution.

2.33 Would you recommend direct or indirect distribution in the following scenarios? Give a
2.33.1 Consumers are spread across the country.
2.33.2 An enterprise that develops computer systems prefers to install the systems themselves.
2.33.3 A manufacturer decided it was more profitable to invest surplus money in raw materials
than in advertising.
2.34 Explain the roles of intermediaries in the distribution process.

2.35 Discuss sales promotions in terms of the following:
2.35.1 What is sales promotion?
2.35.2 Objectives of sales promotions.
2.35.3 Disadvantages of sales promotions.
2.35.4 Advantages of sales promotions.
2.36 Discuss advertising in terms of the following:

2.36.1 What is advertising?
2.36.2 Why do business enterprises advertise?
2.36.3 Do you think advertising increases the final costs of products? Give a reason for your
answer.
2.36.4 Advantages of advertising.
2.37 Advertisements must be written with the AIDA principal in mind.

2.37.1 Explain the AIDA principal.
2.37.2 Take a look at the following advertisement.
PUPPIES FOR SALE!
 Only six of the cutest Jack Russel puppies available!!!

 Almost seven weeks old and ready to become part of your family.
 To avoid disappointment phone 0860PUPPY now!
a) Which part of the advertisement aims to attract the reader’s interest? Give a reason for your
answer.
b) Which part of the advertisement aims to hold the reader’s interest? Give a reason for your
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answer.
c) Which part of the advertisement aims to create the desire to buy the puppies? Give a reason
for your answer.
d) Which part of the advertisement aims to inspire the reader to take action? Give a reason for
your answer.
2.38 Identify the kind of advertising that is applicable to each of the following scenarios:
2.38.1 “The Original Coca-Chocolate – available at a store near you!”
2.38.2 “Coca-Chocolate: still the No. 1 chocolate in the world! Crema-Chocolate has tried to steal
our secret recipe for centuries. Do you think they’ve been successful? The proof is in the
taste…”
2.38.3 The new comp-u-phone: sends and receives e-mails and faxes, does word processing,
creates spreadsheets and business presentations to name but a few of this magnificent
phone’s functions! This technological wonder is now available at a store near you.
2.39 Differentiate between advertising and publicity.
2.40 Write down three reasons why personal selling is such an effective selling method.
2.41 Suppose you were in charge of marketing the new comp-u-phone. Explain how you will use
each element of the marketing mix to market the product.
2.42 Discuss both the formal and the informal sector in terms of the following:
2.42.1 Definition.
2.42.2 Advantages.
2.42.3 Disadvantages.
2.43 “The informal sector is mainly a cash industry.” Explain why you think this is the case.
2.44 Discuss foreign marketing in terms of the following:
2.44.1 Definition.
2.44.2 Aim.
2.44.3 Advantages.
2.44.4 Imports and exports.
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Revision test: Topic 3 – Marketing function
1. Give an example of:
1.1 A convenience good.
1.2 Select good.
1.3 Specialty good.
2. Explain what is meant by the lifecycle of a product.
3. Write down the main aim of packaging.
4. Define: trademark
5. Give an example of leader pricing.
6. Explain what a monopoly is.
7. Write down any two marketing communication methods.
Total: / 10
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Topic 4: Production function Duration: 3 weeks [Week 7-9]
4.1 Introduction
 Production refers to converting raw materials into final products.

 There are different production systems which can be used by business enterprises.
 Enterprises must aim to produce the maximum number of products at the lowest cost and in the
minimum time.
 But, in doing so, the enterprises must not compromise safety or quality.
 Enterprises must strive to continuously produce products that exceed customer expectations.
4.2 Production systems
 Production refers to the process of transforming raw materials into finished goods.
 Different enterprises manufacture different goods.
 This means that different enterprises will apply different systems of production and different
methods of production.
 The two main production systems are:
Production systems Production methods Description

Uninterrupted  Mass production  Uses conveyor belts to help transform raw
production system materials into final goods.
 Product variation is not possible, as production
continuously flows from one point to another.
 Produces a large number of similar products.
Interrupted  Batch production  Capable of accommodating greater product
production system  Job production variety.
(jobbing)  Fewer products are produced in the interrupted
production system, but product variety is
greater.
4.2.1 Mass production
 A production method according to which standardised products are produced in large quantities.
 Mass production involves conveyor belts that move goods from one worker to another.
 Workers perform easy tasks of a repetitive nature; workers are therefore productive as the same
tasks are being performed over and over.
 The machinery used in the mass production method is very expensive.
 Because the tasks performed by workers are relatively easy, the cost of the machinery is very high
in relation to the cost of the labour.
 Cost decreases as production increases.
 That is why products produced by the mass production method are usually cheaper per unit,
compared to products produced by other production methods.
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Advantages Disadvantages
 Production costs per unit are cheaper than other  Mass production is capital intensive.
production systems.  Breakdowns in machinery cause production to
 The labour required in a mass production method is stand still.
relatively cheap.  It is expensive to maintain and implement the
 The labour required in a mass production method is machinery used in mass production.
readily available.  Product changes cannot be accommodated.
 Product handling is limited due to the use of
conveyor belts.
 High levels of productivity can be achieved.
4.2.2 Batch production
 A production method used to produce batches - a limited number of similar goods.

 Goods within a batch are identical, but goods can vary from batch to batch.
 Raw materials or semi-finished goods move through the production system one stage at a time.
 E.g.: a grocery store bakes a hundred custard tarts and a hundred condensed milk tarts every
day. First, all the ingredients for the custard tarts are mixed together. The batter is then used to
bake the custard tarts. Then, all the ingredients for the condensed milk tarts are mixed together
and the condensed milk tarts are baked.
 The batch production method can accommodate  Production must be planned carefully to determine
product variety. when a particular batch should be produced.
 It is cheaper to produce a number of identical  At some stage during the production process many
products simultaneously. items will be almost finished – these unfinished
 Workers are productive because the same tasks items, or works-in-progress, cannot be sold or
are performed over and over. converted into money and take up a lot of space.
 Workers make relatively few mistakes, because  Once a batch of semi-finished goods is in
they are specialists in what they do. production, changes cannot be accommodated.
4.2.3 Job production (jobbing)
 A production method according to which products are made once-off and exactly to the
customer’s specifications.
 Workers need a wide range of skills to be able to cope with the customers’ specifications and
requirements.
 E.g.: a front door custom made for a client, a birthday cake with a particular name on it or flower
arrangements made for a business enterprise’s year-end function.
 The quality of work is high.  Time consuming to produce goods.
 Products are made exactly according to the  Workers with the required skills are sometimes
customer’s preferences. difficult to find; labour is therefore more expensive.
 Workers do not get bored easily because each job  Production costs per unit are considerably higher
is different. compared to mass and batch production.
4.3 Production planning
 Involves drawing up an action plan according to which the production process must take place.
 Comprises the following steps:
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Routing  Aims to determine the quickest, easiest and cheapest sequence of production.
(Where?)
Scheduling  Involves calculating the time required to perform each activity in the manufacturing
(When?) process and the time required to complete all the activities in the manufacturing
process.
Loading  Involves executing the activities that have been identified during the routing
(Who?) process in the time that has been calculated during the scheduling process.
 Also involves determining who will be responsible for executing the activities.
Production control  Production control involves exercising control over each activity that takes place
during the production process.
 Production control comprises the following activities
 Involves issuing production orders to start production. Consent must be given to:
 move raw materials or semi-finished goods to different workstations.
Dispatching
 move tools and equipment required for each activity.
 start each operation in the production process.
 The progress of production must be closely followed to ensure that production takes place
according to the production plans.
Follow-up
 Following-up on the progress of production helps to prevent bottlenecks and
misunderstandings.
 Inspection aims to ensure that the goods produced are not faulty. Inspection will take place at
different points in the production process.
Inspection
 A few products out of every batch will be inspected to determine the overall quality of all the
products produced.
 If there are any differences between the planned production and the actual production,
corrective measures must be implemented. Corrective measures include activities such as:
Corrective  machine maintenance and repairs
measures  adjusting routing, scheduling or loading
 training of employees
 transferring employees to other sections
4.4 Safety management
4.4.1 What is safety management?
 Safety management aims to prevent workplace accidents from occurring by controlling worker
performance, machine performance as well as the working environment.
 Safety management includes activities such as:
 analysing safety risks
 training employees in safety procedures and first aid
 investigating why accidents occurred
 assessing workers’ performance
 An enterprise’s safety management system should be assessed regularly to determine the
efficiency of the system.
 Common methods of assessing a safety management system include:
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 Measurement of safety management performance is either proactive or reactive.

Measurement of  Proactive measurement means investigating the extent to which safety measures and
safety procedures are being followed.
performance
 Reactive measurement occurs after an accident or incident has occurred when such an
accident or incident is analysed and investigated.
 Safety audits aim to determine whether all the legal safety requirements are being met
Safety audits and whether the safety measurements that are implemented by the business enterprise
are sufficient.
Management  Safety management systems need constant reviewing and improvement.
reviews  Sometimes, safety audits reveal ineffective safety measurement which have to be
reviewed.
4.4.2 Factory safety
 Workers handle dangerous machinery, equipment and chemicals on a daily basis and if safety
measures are not followed, accidents will occur often.
 Accidents in the workplace have serious consequences:
 Workplace accidents can result in injuries and deaths.
 Publicity of workplace accidents will also impact negatively on an enterprise’s image.
 Regular or serious workplace accidents may even cause investors to invest their money in
another company.
 Potential employees may decide not to accept a job offer at an enterprise where many
accidents have occurred.
 Ways to prevent accidents in the workplace from occurring include:
 Allowing sufficient time to complete activities to minimise the pressure on workers to
perform.
 Providing safety training to all employees.
 Providing employees with safety equipment such as protective gear and fire extinguishers.
 Developing a culture of safety in the business enterprise.
 Ensuring that the enterprise has an efficient safety policy.
 Familiarising employees with safety procedures.
 The Occupational Health and Safety Act (No 85 of 1993) makes provision for a number of
regulations concerning regarding safety:
 Workers must be provided with protective gear to protect themselves against potential
dangerous situations.
 First aid boxes must be readily available at the workplace and in the factory.
 Fire extinguishers must be readily available at the workplace and in the factory.
 Machinery must be maintained at regular intervals and repaired promptly.
4.4.2 Workplace safety policy
 A workplace safety policy is a policy that describes the rules and procedures related to safety in
a workplace.
 Before a workplace safety policy is developed, the manager in charge must carefully study the
Compensation for Occupational Injuries and Diseases Act (No 130 of 1993), as well as the
Occupational Health and Safety Act (No 85 of 1993), to ensure an enterprise’s safety policy
meets all legal requirements.
 Safety policies should include topics such as:
 Reporting workplace accidents.
 Emergency exits.
 Fire fighting equipment.
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 Procedures regarding the handling of machinery.

 Emergency planning.
 Employee training.
4.5 Occupational Health and Safety Act (Act no 85 of 1993)
 The Occupational Health and Safety Act (No 85 of 1993) aims to provide for the health and
safety of persons at work and for the health and safety of persons in connection with the use of
plants and machinery.
 Employers who employ more than twenty employees must appoint at least one health and
safety representative for every 100 employees in the case of shops and offices, and at least one
health and safety representative for every fifty employees in the case of all other workplaces.
 Functions of health and safety representatives include:
 Reviewing the efficiency of health and safety measures.
 Identifying potential hazards and potential incidents in the workplace.
 Examining the causes of incidents at the workplace in collaboration with the employer.
 Investigating complaints by any employee relating to the employee’s health and safety at
work.
 Making presentations to the employer concerning general health and safety issues at the
workplace.
4.6 Quality control
 Refers to the process of ensuring that goods or services are made to consistently high standards.
 Advantages of quality control include:
 Dealers and consumers are assured that products are of the required standard.
 Quality control encourages workers to continue to produce quality products.
 Production costs can be reduced through elimination of poor products.
 Leads to improved quality and product design.
 Manufacturers provide salary and wage incentives for quality work.
 Reveals poor performance by workers and faulty machines – this is important for training
workers and replacing machinery.
4.6.1 Quality management systems
Total Quality Management  Total Quality Management (TQM) emphasises the

importance of quality in all organisational processes, as
well as participation of all employees in the business
enterprise.
SABS  The South African Bureau of Standards aims to promote
standardisation and quality.
 Functions of the SABS include:
 Providing training regarding all aspects of
standardisation.
 Testing products.
 Certifying the quality of products.
 Developing technical regulations.
 Promoting design excellence.
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4.6.2 Quality control bodies and policies
 Business enterprises can appoint quality control bodies and create quality control policies to
ensure that products are produced at consistently high standards.
 A Quality circle is an example of a quality control body
 Quality circles are made up of workers who form groups on a voluntary basis to discuss how
improvements can be made to the workplace.
 Quality circles then present their ideas to management.
 Typical topics discussed by quality circles include improving safety, improving product design
and improving the manufacturing process.
4.7 Production costs
4.7.1 Primary costs and overhead costs
 Production costs refer to the costs that were incurred by an enterprise to produce a product.
 Production costs comprise the following components:
Primary costs
Direct raw material The cost of the raw materials used in the production of the actual
costs product.
Direct labour costs The cost of labour used to manufacture the actual product.
Overhead costs
Costs that do not vary with production, for example depreciation,
Fixed costs
insurance and rent.
Costs that change as the number of units produced change, for
Variable costs example water and electricity, indirect raw material costs, petrol and
telephone.
 Total production costs = Primary costs + Overhead costs.
4.7.2 Selling price and calculation of profit
 The price that a business pays for trading stock is called cost of sales.
 A business then sells these goods at a higher price to make a profit.
 This price is called sales.
 For example: let’s say the tuck shop at your school sells chocolates for R5 each. These chocolates
were bought from the chocolate factory for R3.
 Sales price: R5
 Cost price: R3
 Profit: R2
 The business decides what the profit mark-up on the trading stock will be.
 The following formulas are used to calculate the cost price, selling price and % profit.
Selling price 100

Cost price = x
1 100 + %
Selling Cost price 100 + %

= x
price 1 100
 The net profit is the difference between income and expenditure.
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 The gross profit is the difference between sales and cost of sales.
 The profit of a business enterprise belongs to the owner of the enterprise.
4.7.3 The breakeven point
 Break-even is the point where a business enterprise makes neither a profit nor a loss.
 In financial terms, one could say that breakeven is the point at which no profit is made, but the
fixed costs are recovered from the sale of goods.
Activities: Topic 4 – Production function
1. Complete the following statements by filling in the missing word(s).

1.1 ______ refers to converting raw materials into final products.
1.2The two main production systems are the ______ production system and the ______ production
system.
1.3 The ______ production system is capable of accommodating greater product variety.
1.4 ______ involves exercising control over each activity that takes place during the production
process.
1.5 ______ aims to ensure that goods produced are not faulty.
1.6 According to the Occupational Health and Safety Act, workers must be provided with protective
gear to protect themselves against ______.
1.7 Employers who employ more than two hundred employees must appoint at least one health and
safety representative for every 100 employees in the case of shops and offices, and at least one
health and safety representative for every fifty employees in the case of all other workplaces
1.8 A ______ is a policy which describes the rules and procedures related to safety in the workplace.
1.9 Identifying potential hazards and potential incidents in the workplace is one of the functions of
the ______.
1.10 Quality circles are made up of ______ who form groups on a voluntary basis to discuss how
improvements can be made to the workplace.
1.11 The South African Bureau of Standards aims to promote ______.
1.12 ______ refers to the process of ensuring that goods or services are made to consistently high
standards.
1.13 ______ change as the number of units produced change, for example water and electricity,
indirect raw material costs, petrol and telephones.
1.14 The profit of a business enterprise belongs to ______.
1.15 In financial terms, one could say that break-even is the point at which no profit is made, but the
______ are recovered from the sale of goods.
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2. Match Column A with Column B.
Column A Column B
2.1 SABS A Emphasises the importance of quality in all organisational
processes, as well as participation of all employees in the
2.2 Loading B Costs that do not vary with production, for example
depreciation, insurance and rent.
2.3 Fixed costs C Involves calculating the time required to perform each
activity in the manufacturing process and the time
required to complete all the activities in the
manufacturing process.
2.4 Gross profit D Involves investigating the extent to which safety measures
and procedures are being followed.
2.5 Direct labour costs E Occurs after an accident or incident has taken place when
the accident or incident is analysed and investigated.
2.6 Reactive safety F Provides training in respect of all aspects of
measurement standardisation, tests products, certifies the quality of
products, develops technical regulations, promotes design
excellence.
2.7 Net profit G The cost of labour used to manufacture the actual
product.
2.8 Primary costs H Help to prevent bottlenecks and misunderstandings.
2.9 Variable costs I The difference between sales and cost of sales.
2.10 Overhead costs J Involves executing the activities that have been identified
during the routing process in the time that has been
calculated during the scheduling process.
2.11 Total Quality K The cost of the raw materials used in the production of
Management the actual product.
2.12 Proactive safety L Direct raw material costs plus direct labour costs.
measurement
2.13 Scheduling M Fixed costs plus variable costs.
2.14 Direct raw material costs N The difference between income and expenditure.
2.15 Follow-ups O Costs that change as the number of units produced
change.
3. Read the case study and answer the questions.
Growing money in the back yard
Quintin is a Grade 11 learner who lives in Kwa-Zulu Natal. Despite his age, Quintin has already
cultivated several business interests. The first successful business Quintin ever launched was a chilly
sauce called Quinnie’s Homemade Hotsauce. Here’s how he did it:
Quintin started by invested R20 in a bag of fast growing chilly seeds which he planted in a vacant
piece of land behind his house. Three months later he had 3 kilograms of harvested chillies. After
spending another R60 on additional ingredients such as lemon juice, herbs, sugar, salt and pepper,
Quintin had converted the 3 kilograms of fresh chillies into 30 litres of chilly sauce – “Quinnie’s
Homemade Hotsauce”.
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Quintin then bought one hundred and fifty 200ml plastic bottles from a supplier, for R60, and
designed a simple logo which, together with his contact information, he printed on 150 stickers. The
stickers totalled R12. Quitin charged R30 a bottle and had no trouble selling his sauce to his friends’
parents and his parents’ friends, and knew that there was a market for his sauce when many of his
customers returned for second and third orders. Quintin sold out of stock in 3 weeks and invested all
of his profits into expanding the business.
In his second year he started contacting grocery store franchises. To his disappointment, however,
none of the purchasing agents for the larger chains could be convinced to stock his sauce. Even
though they all claimed to love the sauce, they said that because no one had ever heard of it,
Quintin had to spend hundreds of thousands of rands on marketing before they would consider
putting the sauce on their shelves.
The unwillingness of the grocery store owners compelled Quintin to come up with a clever new
strategy. Instead of spending a lot of money (which he didn’t have) on marketing, he decided to
target key family restaurants and supply the sauce to them at a discounted price. His thinking was
that if enough people liked the sauce, they would want the sauce to be available in stores, and
grocery stores would then want to stock it.
The strategy paid off. The sauce was a hit in every restaurant Quintin supplied it to. It created such a
buzz that it didn’t take long for some of the same purchasing agents who first rejected him to get in
touch with Quintin to place their orders.
3.1 Explain whether Quintin’s business makes use of an interrupted or an uninterrupted

production system.
3.2 Describe the production method used to produce Quinnie’s Homemade Hotsauce.
3.3 Discuss the disadvantages of the production method used to produce Quinnie’s Homemade
Hotsauce.
3.4 Calculate Quintin’s total production costs in his first year.
3.5 Calculate the selling price of Quinnie’s Homemade Hotsauce if it’s marked up with 40%.
3.6 Draw up an action plan according to which Quintin’s production process can take place.
3.7 Name two corrective measures Quintin can take in case of differences between planned
production and actual production.
3.8 Name the law that aims to provide for the health and safety of Quintin’s workers.
3.9 Calculate Quintin’s primary costs in his first year.
3.10 Calculate the amount of bottles Quintin sold before breaking even in his first year.
4.1 Quintin sells a product to make ______.

4.2 Quintin aims to produce the maximum number of products at the lowest cost and in the
minimum ______.
4.3 Chilly seeds, herbs, sugar and lemon juice are examples of ______ costs.
4.4 Allowing workers sufficient ______ to complete activities is a good way of preventing accidents
in the workplace.
4.5 ______ refers to the process of ensuring that Quinnie’s Homemade Hotsauce is made to
consistently high standards.
4.6 The production system used to produce Quinnie’s Homemade Hotsauce is known for producing
fewer products than some other production systems, but also for being able to accommodate a
greater ______ of products.
4.7 A ______ is a policy that describes the rules and procedures related to safety in the workplace.
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4.8 Quintin can implement a ______ to emphasise the importance of quality in all organisational
processes and participation of all employees in the business enterprise.
4.9 The ______ tests products and aims to promote standardisation and quality.
4.10 ______ was the point at which Quintin made no profit but did recover his fixed costs.
5. Answer the questions.

5.1 Differentiate between interrupted and uninterrupted production.
5.2 Identify the method of production applicable to each of the following scenarios. Also write down
the advantages and disadvantages of each method.
5.2.1 The school uniform manufacturer first finishes its order for School A before starting work on
the uniforms for School B.
5.2.2The chocolate factory has managed to minimise its labour expenses because most of the work
is being done by machines.
5.2.3 You asked a designer to design an outfit for your school’s annual Summer Ball.
5.3 Match the descriptions in Column B with the concepts in Column A:

Column A Column B
5.3.1 Loading A Involves calculating the time required to perform the activities in the
manufacturing process.
5.3.2 Scheduling
B Aims to determine the most efficient sequence of production.
5.3.3 Routing
C Involves procedures such as dispatching and inspection.
5.3.4 Production
control D Provides the answer to the question: “By whom should this task be performed?”
5.4 Identify the main aim of safety management in the workplace.

5.5 Write down any four consequences of workplace accidents.
5.6 Discuss four methods that can be used to assess an enterprise’s safety management system.
5.7 Write down any five steps that can be taken to prevent accidents in the workplace.
5.8 Discuss safety policies in terms of the following:
5.8.1 What is a safety policy?
5.8.2 Who is responsible for developing the safety policy?
5.8.3 Write down five topics that should be included in a safety policy.
5.9 A well known accountancy firm employs 120 accountants.

5.9.1 Calculate the number of health and safety representatives that this firm must appoint
according to the Occupational Health and Safety Act.
5.9.2 Write down any five responsibilities of health and safety representatives.
5.10 The quality of products delivered by an enterprise can impact on the success of the enterprise.
5.10.1 Do you agree with this statement? Give a reason for your answer.
5.10.2 Which process can be implemented by an enterprise to ensure that goods are being
produced to consistently high standards?
5.10.3 Write down five advantages of this process.
5.11 The SABS is responsible for promoting standardisation and quality. How does the SABS aim
to achieve this goal? Write down five ways.
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5.12 ZZZ Manufacturers specialise in the manufacturing of dolls. The factory employs fifty full time
staff members. Twenty of these factory workers earn a salary of R2 000 per month, while the
other thirty factory workers earn an annual salary of R36 000. The factory needs 1 000 kilograms
or raw materials @ R25 per kilo for one month’s production. Use this information to ‘
determine the primary costs for one month. Show all calculations.
5.13 The following information was taken from ZZZ Manufacturers’ financial statements: The
information is for one year, unless stated otherwise.
4.8% per year on the total value of the non-

Depreciation
current assets
Non-current assets 1 00 000
Telephone 12 000
Insurance 800 per month
Water and electricity 24 000
Fuel 30 000
Rent 1 500 per month
Indirect material costs 50 000
Labour: security staff (10 staff members) 1 500 per month
administrative staff (5 staff members) 24 000 per annum
5.13.1 Use the information above to determine the total overhead costs for one month. Show all
calculations.
5.13.2 ZZZ Manufacturers manufacture 8 300 dolls per month. Calculate the unit cost.
5.13.3 Calculate the selling price if ZZZ Manufacturers uses a 100% mark-up on cost price.
5.13.4 How many dolls does ZZZ Manufacturers need to sell during one month in order to break-
even?
5.13.5 The water and electricity bill was much less in January than it was in December. Can you think
why this was the case? Mention any two possibilities.
5.14 The following information applies to YYY Factories:

Cost of raw materials R560 000
Direct labour cost R160 000
Overhead costs R240 000
Number of units manufactured 2 400
5.14.1 Calculate the total production cost.

5.14.2 Calculate the production cost per unit.
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Revision test: Topic 4 – Production function
1. The following information regarding XXX Producers is available:

Direct raw material costs R150 000
Wages: factory workers R36 000
Rent of factory R13 500
Depreciation on machinery R3 000
Insurance premiums R16 500
Petrol R24 000
Salaries: security guards R36 000
Telephone and fax R9 000
Water and electricity R12 000
20 000 units were manufactured
1.1 Calculate the primary costs.

1.2 Calculate the fixed overhead costs.
1.3 Calculate the variable overhead costs.
1.4 Calculate the total overhead costs.
1.5 Calculate the total cost of production.
Total: / 10
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Revision
Question 1
1.1 Choose the correct answer
1.1.1 A list of all items in stock is known as

A inventory
B stock list
C grocery list
D item list
1.1.2 A school uniform is an example of:

A convenience goods
B select goods
C specialty goods
D unsought goods
1.1.3 The life cycle of products;

A Maturity – growth – sales decline - introduction
B Introduction – growth – sales decline – maturity
C Introduction – sales decline – maturity – growth
D Introduction – growth – maturity – sales decline
1.1.4 Toilet paper is on special at a grocery store.

A Bait pricing
B Psychological pricing
C Skimming
D Leader pricing
1.1.5 In this market there are many buyers and sellers.

A Oligopoly
B Monopoly
C Monopolistic competition
D Perfect competition
1.1.6 Discount offered by one supplier to another.

A Trade discount
B Sales prices discount
C Cash discount
D Quantity discount
1.1.7 The traditional channel of distribution.

A Manufacturer – consumer
B Manufacturer – retailer – consumer
C Manufacturer – agent – retailer – consumer
D Manufacturer – wholesaler – retailer – consumer
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1.1.8 A limited number of front doors are manufactured for a retirement village.
A Mass production
B Batch production
C Jobbing
D Limited production
1.1.9 A front door is made exactly according to the needs of a customer.

A Mass production
B Batch production
C Jobbing
D Limited production
1.1.10 Planning the sequence in which production planning will take place.
A Routing
B Scheduling
C sequence planning
D dispatching
1.2 State whether the following statements are true or false. If a statement is false, only correct the
underlined part.
1.2.1 Tolerance level refers to the number of faulty goods from a batch that will be allowed by the
product manager.
1.2.2 Primary costs = Direct raw material costs + variable costs.
1.2.3 Mass production is an uninterrupted production system.
1.2.4 Advertising is communication to the mass media based on real news or events.
1.2.5 A sample is a small specimen of the real product.
1.2.6 The demand for toothpaste is elastic.
1.2.7 Skimming is when prices are set low to lure customers to a business, but once there all the
disadvantages of a product is pointed out.
1.2.8 Brand recognition occurs when customers are not willing to buy a particular brand.
1.2.9 Specialty packaging is when complementary goods are packed together.
1.2.10 Grading is the process of establishing a uniform set of criteria to ensure the production of
quality products.
Question 2
2.1 List any six entrepreneurial qualities.

2.2 Outline five ways in which people can make a meaningful contribution towards the
development of our country.
2.3 Differentiate between goods and services in a table.
2.4 Discuss the four stages of a product’s life cycle.
2.5 Name any six requirements of good packaging.
2.6 Differentiate between the four different types of price discrimination.
2.7 Critically evaluate any four kinds of advertising media.
2.8 Evaluate the job production method.
2.9 Explain the importance of safety management in the workplace.
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Question 3
Answer the following questions in an essay. Remember to provide each essay with an introduction,
body and conclusion.
3.1 Discuss the following marketing activities in an essay:

 Locating the consumer
 Standardising and grading
 Buying and selling
3.2 Explain the classification of products in an essay.
3.3 Explain the product development process in an essay.
3.4 Discuss six different types of packaging in an essay.
3.5 Discuss five factors influencing price determination in an essay.
3.6 Discuss any two elements of the marketing communication policy in an essay.
3.7 Discuss the uninterrupted production system in an essay.
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Formal assessment: project
Entrepreneurial qualities, marketing & production
 Project
 Assessment tool: memorandum and rubric
1. Do you know the saying that success is 90% perspiration and 10% inspiration? Many an
entrepreneur will agree. Usually, we become aware of an entrepreneur’s success only after years
of hard work. Many entrepreneurs were unsuccessful with their first or even second attempts.
Discuss any five entrepreneurial characteristics. (10)
2. The festive season is around the corner. Soon we will start thinking about buying presents for our
loved ones. Your task is to create a product that can be given as a present to a family member.
The product must be useful and appealing. Be extra creative! (25)
3. Suppose the product is so successful that other people want to buy it from you. Create an
advertisement to advertise your product. (15)
Assessment criteria
Product
Criteria 0 1 2 3 4 5 Weighting Total

Creative 1 5
Appealing 1 5
Sales potential 1 5
Effort 2 10
Total /25
Advertisement
Criteria 0 1 2 3 4 5 Total
Creative 5
Neat 5
Effort 5
Total /15
Key
0 = Project not handed in

1 = Very poor
2 = Poor
3 = Average
4 = Good
5 = Excellent
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TERM 4: BUSINESS ROLES & BUSINESS OPERATIONS
Topic 1: Team dynamics and conflict management Duration: 2 weeks [Week 2-3]
1.1 Team dynamics
 A team is a group of people who work together towards a common goal.
1.1.1 Stages of team development
 Experts believe that a team will only be able to grow and perform if it moves through all four
phases of team development. The four phases of team development are:
Forming  Team members focus on getting to know one another and on making new friends.
 Team members demonstrate good behaviour, as they are still new to the situation.
 Team members are actively engaged in the tasks at hand.
Storming  Team members are starting to reveal their true character and they are starting to analyse and
criticise ideas of other team members.
 This phase is often characterised by conflict.
 Team members are settling down.
Norming  Team members are starting to accept and trust one another.
 During this stage, team members often set ground rules to govern their behaviour and to ensure
that completion of the project runs smoothly.
Performing  The team has dealt with all conflict and is now actively pursuing its goals.
 Team members are motivated and are working together well.
1.1.2 Team dynamics theories

 Team dynamics refers to the way in which team members are capable of working together.
 Team dynamics experts have researched thousands of teams and have come up with factors
which influence team dynamics. Take a look at a few of these team dynamics theories.
a) Belbin role theory
 According to Dr Meredith Belbin, people in teams tend to assume different team roles.
 Dr Belbin identified nine team roles and categorised those roles into three groups.
Action oriented roles

Shapers challenge a team to improve. They do not believe in quitting, even
Shapers
when the going gets tough.
Implementers are people who get things done. They are disciplined and
Implementer
organised.
Completer- Completer-finishers are responsible for ensuring that projects are completed
Finisher thoroughly. They are perfectionists who always try meeting deadlines.
People oriented roles
Co-ordinators are team leaders. They are rational thinkers who are capable of
Co-ordinator
delegating work effectively.
Team workers are responsible for ensuring that team members work together.
Team worker
They are supportive and diplomatic.
Resource investigators are responsible for exploring alternative options,
Resource
networking and negotiating resources on behalf of their team. They are often
investigator
extroverted people.
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Thought oriented roles

Plants prefer to work away from their team because of their introverted nature.
Plant
Plants are creative innovators, but struggle to deal with criticism.
Monitor-evaluators are analytical, strategic and unemotional. They are good at
Monitor-evaluator
scrutinising the ideas of other team members.
Specialist Specialists possess specialised knowledge that is required to complete a job.
b) Jungian theory
 Carl Jung was a psychologist who believed and emphasised the importance of finding balance and
harmony in one’s life.
 According to Jung, most people tend to adopt one of two attitudes towards life.
Extroverted attitude Introverted attitude

 Motivated by outside factors.  Happy to be on their own.
 Sociable and comfortable in unfamiliar situations.  Not comfortable being among strangers or
 Optimistic and enthusiastic. large groups.
 Establish and break off new relationships easily.  Often lacking in self confidence.
 Struggle to reflect on their behaviour.  Shy and hesitant to get to know strangers.
c) Management Team Roles Indicator (MTR-I) approach
 According to the MTR-I approach, different teams need to demonstrate different behaviours in
order to succeed.
 MTR-I investigates roles people assume in a work situation and is designed to show the
contribution made by each team member.
 MTR-I team roles can differ from one situation to another, depending on the pressures of a
particular working environment. The different team roles according to the MTR-I approach are:
Innovator  Innovators use their imagination to create new ideas and solutions.
 Innovators often demonstrate extraordinary vision.
Sculptor  Sculptors want to get things done urgently.
 Sculptors often motivate group members to start working.
Conductor  Conductors are good at organising.
 Conductors like planning and working in a well-structured environment.
 Scientists are good at providing explanations for why and how things happen.
Scientist
 Scientists collect and analyse information to obtain facts and to provide clear explanations of
particular situations.
 Coaches try to create harmony in the team.
Coach
 Coaches build relationships, create a positive team atmosphere and look after the welfare of
team members.
Curator  Curators are good at creating a clear picture of a particular situation.
 Curators listen, ask questions and gather information to understand a situation better.
 Crusaders give importance to ideas and thoughts.
Crusader
 Crusaders are value driven and focus the attention of other team members on issues that they
feel are important.
 Explorers aim to find better and more efficient solutions to problems.
Explorer
 Explorers are good at uncovering and opening up new opportunities by looking beyond the
obvious solution.
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d) Margerison-McCann profiles
 The Margerison-McCann Team Management Profile explains how people’s preferences influence
their approach to their jobs and performance as team members.
 The Team Managament Wheel forms the basis of the profile.
 The Team Management Wheel identifies critical success factors at work.
 According to Margerison’s and McCann’s Types of work model, nine essential team activities can
be described:
Advising Gathering and reporting information.

Innovating Creating and experimenting with ideas.
Promoting Exploring and presenting opportunities.
Developing Assessing and testing the applicability of new approaches.
Organising Establishing and implementing ways of making things work.
Producing Concluding and delivering outputs.
Inspecting Controlling and auditing the functioning of systems.
Maintaining Upholding and safeguarding standards and processes.
Linking Coordinating and integrating the work of others.
 However, people tend to prefer some activities over other activities.

 The Margerison-McCann profiles measure these work preferences in three different ways:
 preferences for extroverted or introverted work.
 preferences for practical or creative work.
 preferences for working in a structured or flexible way.
e) Group consensus
 A group can only perform if group members agree on the goal of the group.
 When group members work together they need to make several decisions.
 Group consensus is a process that guides groups through this decision making process and helps
groups to reach a decision.
 The group consensus process works as follows:
Step 1 Group members discuss the issue at hand with each other.
Group members raise their feelings about the issue during this stage.
Step 2 A proposal is made based on the group’s discussion.
Step 3 The group’s facilitator now calls for consensus.
This means that the facilitator asks the group if they are willing to accept the proposal.
Step 4 If the group agrees to accept the proposal, then consensus has been reached.
Step 5 If the group is not willing to accept a proposal, concerns are raised and discussed.
Step 6 Group members suggest a new proposal.
Step 7 The facilitator calls for consensus again.
If the group accepts the proposal, then consensus is reached.
If the group rejects the proposal, it needs to be modified until the group reaches a point
where all group members can accept the proposal.
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YES Consensus is reached
Discussion Proposal Call for consensus
NO Concerns are raised New proposal
YES
Call for consensus
NO
{Source: http://en.wikipedia.org/wiki/Consensus_decision-making}
1.2 Conflict management
 People differ in terms of their competencies, values, beliefs and personality traits.
 These differences can lead to conflict.
 Conflict needs to be managed and resolved before it becomes a destructive force.
 Although conflict has many disadvantages, conflict allows us to express ourselves and to find
alternative solutions to problems.
1.2.1 Definition of conflict
 Conflict refers to a situation where people differ from one another and creates tension among
team members.
1.2.2 Causes of conflict in a business
 Miscommunications that lead to certain expectations (an employee who is expecting a salary
increase of 10%, but only received an increase of 6%).
 Personality clashes (people who struggle to work together/communicate, because their
personalities are too different).
 Different values (e.g. a member of a team who is in trouble with the team, because he/she does
not want to work on a presentation after hours – he/she rather wants to spend time with
his/her family).
 Unfair treatment (e.g. it is overlooked when a certain member of staff arrives late or leaves
early, while all the other staff members are reprimanded for transgressions)
 Discrimination (e.g. a manager who treats female staff member different tan the male staff
members).
1.2.3 Definition of conflict management
 Conflict management involves dealing with conflict in a fair, efficient and sensitive manner to
minimise the negative effect of the conflict.
 If conflict is not handled it becomes worse - employees at a workplace may even side with
conflicting parties.
 This creates a tense working atmosphere and impacts negatively on productivity.
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1.2.4 Conflict management theories
 Also known as the “win-win” conflict management approach.

The collaborating conflict  According to this theory, the conflict resolving process will lead to finding innovative
management theory solutions which will benefit both parties.
 It is best to use this approach when there is a high degree of trust among conflicting
parties.
 Also known as the “win some/lose some” conflict management approach.
The compromising  According to this theory, both parties accept that something will be gained and
conflict management something will be sacrificed.
theory
 It is best to use this approach when conflicting parties are equally committed to their
goals.
The accommodating  Also known as the “I lose/you win” conflict management approach.
conflict management  According to this theory a person will try to save a relationship rather than pursue
theory his/her goals.
 It is best to use this theory when an issue is more important to the other person than
it is to you or when you realise that you are wrong.
The competing conflict  Also known as the “I win/you lose” conflict management approach.
management theory  This approach emphasises that power is sometimes necessary to resolve conflict.
 It is best to use this approach in situations where you know you are right and when
quick decisions need to be made.
 Also known as the “no winners/no losers” conflict management approach.
The avoiding conflict  According to this approach, the conflicting parties will try to avoid the conflict by
management theory withdrawing from the situation or by postponing the conflict resolution process.
 This approach should be used when you have to attend to more important issues,
when you are too emotional to confront the conflict or when the conflicting parties
need to obtain more information about the issue at hand.
1.2.5 Conflict management skills
 Conflict is inevitable, but it can be limited and turned into something positive.
 Effective conflict management builds trust, increases productivity and reduce absenteeism.
 No one likes to deal with conflict, but problems that aren’t dealt with become worse.
 The key to approaching conflict constructively, is to recognise conflict as a process to be
managed, not something to be avoided.
 Conflict management skills/steps to resolve conflict/conflict resolution techniques in the
workplace include:
 acknowledging that there is a conflict between parties.
 confronting the conflict by identifying the causes.
 arranging a meeting between the conflicting parties.
 devising ways of resolving conflict.
 recording the conflict resolution process by keeping minutes.
 move on without ever referring to the conflict.
1.2.6 Workplace forums
 A workplace forum is an elected organisation consisting of employees at a particular workplace.

 Workplace forums ensure that workers have a say in most decisions that affect their working
conditions.
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 The purpose of workplace forums is to:

 Prevent decision-making by employers only, especially in matters that directly affect
employees.
 Encourage worker participation in decision-making.
 Workplace forums play an active role in resolving conflict that occurs between employees and
management.
 Workplace forums may be formed when there are at least 100 workers at a workplace.
 Workplace forums perform several functions, for example:
 Promoting the interests of all workers, not only members of trade unions.
 Enhancing workplace efficiency
 Consulting with employers
 Taking part in decision-making processes
 Help to resolve conflict between employers and employees
1.2.7 Strikes
 A strike is the result of unresolved conflict.

 Workers strike when they refuse to work.
 Workers then use their collective power to pressurise management into submitting to their claims.
 One could say that a strike is a “lose-lose” situation.
 Management loses because no production takes place and the workers lose because they are
usually not paid for the days they were on strike.
1.2.8 Trade unions
 An employee organisation with the purpose of regulating employer-employee relations through

collective bargaining.
 Collective bargaining is the process where employer/employee organisations and trade unions
negotiate with one another to achieve an agreement regarding conflicting needs, interests or
goals.
 Trade unions aim to serve the workers’ interests by trying to improve working conditions and
terms of employment for their members.
 We can say that trade unions try to achieve a “win-win” situation.
 However, if management is not willing to give in to the claims of trade unions, the situation can
change into a temporary “I win-you lose” situation when members of the trade union decide to
strike.
 Ultimately, this situation will turn into a “lose-lose” situation, because neither party will benefit
from a strike.
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Activities: Topic 1 – Team dynamics and conflict management
1. Study the information below and answer the questions that follow.
Mio leads a team of project managers. Mio’s team has been together for eight months now, working
on an important project. Although the team works well together, they do experience conflict from
time to time. Let’s introduce Mio’s team members:
 Nay is a perfectionist who is always worried that the team misses a deadline.
 Sureshni is always making sure that team members are happy and content.
 Some team members think David is lazy, because he often delegates work.
 Only the team’s very best efforts are good enough for Michael.
 Suri is always investigating alternative ways to get things done.
 Jay is most productive when he is allowed the freedom to work on his own.
1.1 Mio is a team leader. Explain what a team is.
1.2 Teams move through different stages as they develop. In what stage do you think Mio’s team is
in? Give a reason for your answer.
1.3 Describe the other three stages of team development.
1.4 Every team has its own dynamics. Explain what team dynamics are.
1.5 Identify the following roles, according to the Belbin role theory.
1.5.1 Which team member is the shaper?
1.5.2 Which team member is the completer-finisher?
1.5.3 Which team member is the co-ordinator?
1.5.4 Which team member is the team worker?
1.5.5 Which team member is the resource investigator?
1.5.6 Which team member is the plant?
1.6 Co-ordinators are good delegators. What does it mean to delegate work?
1.7 What is the value of delegating work?
1.8 Which team member in Mio’s team is an introvert? Give a reason for your answer.
1.9 Write down any three characteristics of introverted people.
1.10 Complete the sentences below regarding the MTR-I approach.

1.10.1 _____ often demonstrate extraordinary vision.
1.10.2 _____ are good at finding the best solutions to problems.
1.10.3 _____ build relationships and create harmony in the team.
1.10.4 _____ are value driven.
1.10.5 _____ like to work in an organised environment.
1.11 Mio’s team uses the group consensus approach to make important decisions.
1.11.1 Discuss the seven steps in the group consensus approach process.
1.11.2 Identify one advantage of this approach.
1.11.3 Identify one disadvantage of this approach.
1.12 Mio’s team experiences conflict from time to time.

1.12.1 Explain what conflict is.
1.12.2 Why does conflict exist?
1.12.3 Write down any four common causes of conflict in businesses.
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1.12.4 What is the name of the process used to deal with conflict?
Column A Column B
1.13.1 Competing conflict management A Also known as the “no winners/no losers
theory approach.”
1.13.2 Accommodating conflict B This approach is best when conflicting parties
management theory trust one another.
1.13.3 Compromising conflict C Use this approach when a relationship is more
management theory important than the conflict.
1.13.4 Collaborating conflict management D Use this approach when a decision needs to be
theory made quickly.
1.13.5 Avoiding conflict management E Use this approach when conflicting parties are
theory equally committed to the cause.
1.14 List any five conflict management skills.

1.15 Mio’s workplace employs 150 people.
1.15.1 Can a workplace be formed at Mio’s workplace? Give a reason for your answer.
1.15.2 Explain what a workplace forum is.
1.15.3 What is the main purpose of a workplace forum?
1.15.4 Identify the main difference between a workplace forum and a trade union.
1.15.5 Explain why workers sometimes go on strike.
1.15.6 Do you think striking is an efficient way of resolving conflict? Give a reason for your answer.
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Revision test: Topic 1 – Team dynamics and conflict management
1. Give one word for the following:
1.1 A group of people who work towards reaching a common goal.
1.2 A situation where people differ from one another.
1.3 Dealing with conflict in a fair and efficient manner.
1.4 An elected organisation consisting of employees at a particular workplace.
1.5 Workers refuse to work.
1.6 An employee organisation that regulates employer-employee relations.
2. Write down the four phases of team development.
Total: / 10
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Topic 2: Introduction to human resources Duration: 2 weeks [Week 3-4]
2.1 Human resources activities
 The HR function is responsible for:

 Recruiting potential employees.
 Selecting employees.
 Appointing employees.
 Orientating employees (induction).
 Motivating employees.
 Appraising and managing work performance.
 Managing employees’ careers.
 Training and developing employees.
 Remunerating employees.
 Providing incentives and benefits to employees.
 Establishing and maintaining employee wellness.
2.1.2 Recruitment
a) Definition
 All activities aimed at attracting suitable job candidates to fill job needs.
 A suitable candidate has the necessary potential, competencies, qualifications and traits to be
successful in a particular job.
b) Steps in the recruitment process

 Determine the job needs of the enterprise.
 Update the job description and job specification.
 Determine the key performance areas of the job.
 Choose the recruitment source.
 Decide on a recruitment method.
 Allow sufficient time for response.
c) Recruitment methods
Advertising  On the internet, in newspapers, notice boards or industry related publications.
Databases  Keep a list of all people who have previously applied for a position.
Head hunting  A person is approached with an offer, even though the person did not apply for
a job.
 Sometimes, recruitment advertisements are written with a specific candidate in
mind and that person is then asked to apply for a particular job.
Recruiting at  Schools, colleges, technikons and universities provide opportunities to recruit
educational bright candidates.
institutions
d) Sources
Internal sources Sources inside a business, for example
 recommendations by supervisors.
 jobs posted on a business’s intranet or notice boards.
External sources Sources outside a business, for example
 recruitments agencies.
 other businesses.
 tertiary institutions.
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2.1.3 Selection
a) Definition
 The process of trying to determine which individuals will best suit certain jobs, taking into
account individual differences and job requirements.
b) Procedure
 The HR department must separate the CVs of suitable candidates from the CVs
Screen responses
of candidates who are not suitable.
Draw up a short list of  Forward the names of suitable candidates to the relevant department so that
candidates the department can compile a short list of potential candidates.
 Inform all applicants about the outcome of their application so that
Provide feedback to
unsuccessful candidates can look for other employment options.
candidates
 Invite suitable candidates for interviews.
 An employment interview determines an applicant’s degree of suitability for a
Employment interview
job.
 Are conducted after the employment interview to find out more about an
Reference checks
applicant’s record of employment, education, training and performance.
 Based on all the information obtained, a suitable candidate is identified.
Offer employment  Discuss a provisional offer with the successful candidate.
 Issue the successful candidate with a letter of employment.
2.1.4 Employment interview

 Employment interviews are one of the most common tools used for selecting employees.
 Aim: to match the job requirements to a candidate’s qualifications, experience and personality.
 Different kinds, for example one-on-one interview and panel interview.
 Three components:
Preparation  Book a room for the interview.

 Study the applicant’s CV.
 Formulate questions for the applicant.
Open interview  Explain the purpose of the interview.
 Obtain information by asking open-ended, work-related questions.
 Avoid asking questions of discriminatory nature.
Close interview  Provide the applicant with an opportunity to ask questions.
 Tell the applicant when an answer can be expected regarding the outcome of
his/her application.
2.1.5 Contract of employment
 Once a candidate is appointed, the candidate will receive a letter of appointment and a contract
of employment.
 The letter of appointment is an offer to the chosen candidate to work for a particular employer.
 The contract of employment is a contract between the employer and the employee which binds
both the employer and the employee.
 The contract of employment should be in writing.
 Employees must be issued with contract of employment within two months of having started
working.
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 Contracts of employment can be changed if employers and employees agree to the change.
 The following is a summary of the minimum information that an employment contract should
include:
 The full name and address of the employer.
 The name of the employee and his/her occupation.
 The employee’s place of work.
 The date of commencement of the employment relationship and details of a probationary
period, if applicable.
 Ordinary days and hours of work plus arrangement pertaining to overtime.
 Ordinary rate of pay, overtime rate, other cash payments and payments in kind.
 Details of deductions to be made, for example PAYE, UIF and medical aid.
 Frequency of payouts and the mechanics thereof, for example by direct bank deposit.
 Details of termination, either period of notice or upon expiry of a fixed term contract.
2.1.6 Induction
a) Definition
 The process of introducing a new employee to an enterprise, the work station where he/she will
be working, the work that needs to be done, colleagues and procedures.
 Induction/orientation aims to:
 Reduce anxiety in a new employee.
 Create a feeling of security.
 Create realistic expectations.
 Ensure that new employees become productive as soon as possible.
b) Procedures
 Introduce the new employee to the enterprise, the work station where he/she will be working,
the work that needs to be done, colleagues, procedures and manuals.
 Appoint a colleague in the same department as the new employee’s mentor.
 Inform employees about policies, rules, communication channels, procedures and information
such as:
 Disciplinary code and procedure.
 Remuneration policy.
 Work rules and standard procedures.
 Issues relating to confidentiality.
 Conditions of employment and benefits.
 Training and development policy and facilities.
 Often takes the form of training just before an employee starts a new job.
2.1.7 Placement
 An employee must be placed where he/she will add the most value to an enterprise.
 The following aspects play a role in placement procedures:
 Determine an employee’s strengths, weaknesses, interests and aptitudes through a range of
psychometric tests.
 Define the responsibilities of the position.
 Business enterprises should focus on retaining the best employees, because high employee
turnover can result in:
 Significant costs involved in training new staff members.
 Loss of skilled employees.
 Increased recruitment costs.
 A decrease in productivity as new employee must first find their feet.
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2.1.8 Remuneration
 Employees are remunerated for the time, effort and skill they contribute to a business
enterprise.
 Most employees earn either salaries or wages.
a) Salary and wage determination

 The Basic Conditions of Employment Act describes minimum wages as well as guidelines relating
to payment for overtime, working on public holidays and Sundays.
 Remuneration paid to an employee on a monthly basis.
 Salaries are fixed (employees receive the same amount of money month after month)
Salary
and are not determined by the number of hours worked or number of units produced.
 An employee’s position in the enterprise will determine his/her salary.
 Remuneration paid to employees on a weekly or daily basis.
 Wages are usually paid to unskilled workers.
Wage
 Determined by the number of hours worked (time related) or units produced (piece
meal).
 Employees are remunerated for a specific piece of work.
Piece meal
 Positive influence on productivity, because once an employee has finished the job,
remuneration
he/she can start a new job.
Time related  Employees are remunerated according to an agreed hourly rate, irrespective of the
remuneration number of units produced.
 Type of remuneration based on the performance of the employees.
Commission  Employees usually receive a basic salary.
 Commission is paid according to the sales made by the employees.
 Companies use the term Cost to Company to calculate the total cost to employ a candidate.
 The following are examples of items usually included in the Cost to Company calculation:
 Gross salary (salary before any deductions).
 Company contributions to medical aid, pension fund or provident fund.
 Use of company property, e.g. car, petrol card, laptop.
 Cost of any loans, bursaries.
b) Compulsory deductions
 Employers are liable for compulsory deductions such as:
 SARS deducts personal tax from all sources of income, including:
 Salaries, wages, bonuses, overtime, fringe benefits.
 Annuities.
 Pensions.
 Investment income, such as interest and rental income.
 Personal tax is determined by income levels - the more you earn, the more tax you
pay.
SARS  SARS collects tax from salaries on a monthly basis through PAYE (pay-as-you-earn) or
SITE tax.
 Once a year, employers issue employees with an IRP 5 certificate.
 The IRP 5 shows the total amount earned and the total tax that was deducted.
 SARS compares the amount of tax paid to the amount of tax that should have been
paid.
 SARS will charge people for insufficient tax payments or refund people for excessive
payments.
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UIF  Employers must pay unemployment insurance contributions of 2% of the value of each
worker’s monthly pay - the employer and the worker contribute 1% each.
Trade  Monthly membership fees are deducted from an employee’s salary and paid to the
unions trade union.
c) Employee benefits
 Benefits are remuneration (other than salaries or wages), paid to an employee in return for
doing their job, for example employer contributions to an employee’s medical aid.
 Other employee benefits can include:
 Travel allowance and car allowance.
 Cell phone allowance.
 Death and funeral benefits.
 Issuing shares to employees.
2.2Legislation impacting on human resources
2.2.1 The Labour Relations Act (Act No. 66 of 1995)
 Aims to protect economic development, social justice, labour peace and democracy in the
workplace.
 Covers almost all employers and employees (not genuine independent contractors) including
jobseekers and former employees.
 Purpose of the Act
 Makes provision for collective bargaining, e.g. during wage disputes.
 Makes provision for the settling of labour disputes, e.g. unfair dismissals.
 Makes provision for trade unions and discussing the roles and rights of trade unions.
 Regulates the right to strike and the recourse to lock-out in according to the constitution.
 Promotes employee participation in decision making through the establishment of
workplace forums.
2.2.2 Basic Conditions of Employment Act (Act No. 75 of 1997)
 This Act sets down minimum conditions of employment.

 The purpose of the Act is to:
 Ensure that working conditions of unorganised and vulnerable workers meet minimum
standards.
 Remove rigidities and inefficiencies from the regulation of minimum conditions of
employment.
 Promote flexibility.
 Advance economic development and social justice.
 Regulate the right to fair labour practices.
 The Act addresses problems like:
 Gender discrimination.
 Excessive working hours.
 Working on public holidays.
 Child labour.
 Inadequate protection of vulnerable workers (such as farm, domestic and part time
workers).
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 The Basic Conditions of Employment Act states the following detail:
 Workers may take the number of days they would normally work in a six week period
for sick leave, on full pay, in a three year period.
 During the first six months of employment, workers are only entitled to one day of
Sick leave paid sick leave for every 26 days they worked.
 An employer may require a medical certificate before paying workers who are absent
for more than two consecutive days, or who are absent more than twice in an eight
week period.
 Workers must get annual leave of at least 21 consecutive days, or 1 day for every 17
Annual leave
days worked, or 1 hour for every 17 hours worked.
 Pregnant employees are entitled to at least four consecutive months of maternity
Maternity leave
leave.
 Full time employees are entitled to three days of paid family responsibility leave
during each annual leave cycle (12 month periods from date of employment).
 You may take family responsibility leave:
 When your child is born or sick.
 In the event of the death of your:
Family responsibility
 Spouse or life partner.
leave
 Parent or adoptive parent.
 Grandparent.
 Child or adopted child.
 Grandchild.
 Sibling.
Working on public  Workers must get paid time off for any public holiday that falls on a working day
holidays  Working on a public holiday is by agreement only and workers must be paid extra.
 Workers, who do not usually work on a Sunday, must get double their normal hourly
wage.
Working on Sundays  Workers who usually work on a Sunday must get 1.5 times their normal hourly wage.
 Workers who usually work on a Sunday, but work less than their ordinary shift, must
get their normal daily wage.
 Workers who work for five or less days per week may not work more than nine hours
per day, or 45 hours per week.
 Workers who work more than five days per week may not work for more than eight
Working hours
hours per day, or 45 hours per week.
 Workers must have a meal break of 60 minutes after five hours of work.
 Workers may not work more than ten hours overtime per week.
Child labour  Children under the age of fifteen years may not be employed.
2.2.3 Employment Equity Act (Act No. 55 of 1998)
 The purpose of this Act is to:

 Achieve equity in the workplace
 Promote equal opportunity and fair treatment in the workplace.
 Implement affirmative action (AA) measures to redress disadvantages in employment.
 Ensure equal representation of all population groups in the workplace.
 Prohibit unfair discrimination and unjust medical testing of employees.
 The most important provisions of the Act are:
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Elimination of
 Employment policies and practices must support the elimination of unfair
unfair
discrimination.
discrimination
 Unfair discrimination is prohibited.
Prohibition of  Unfair discrimination includes discrimination on grounds of race, gender,
unfair pregnancy, marital status, family responsibility, ethnic or social origin, age,
discrimination disability, sexual orientation, religion, political opinion, culture, language, HIV
status.
Medical testing  Medical testing of employees is prohibited, unless justified.
 Employment equity plans must contain specific AA measures to achieve
Affirmative action
equitable representation of people from designated groups.
 All designated employers must report to the Department of Labour on their
Report
equity plans.
2.2.4 Compensation for Occupational Injuries and Diseases Act (Act No 61 of 1997)
 The aim of the Occupational Injuries and Diseases Act is to provide compensation for:
 injuries sustained or diseases contracted by employees during the course of employment;
and
 death resulting from such injuries or diseases.
 Each month employers contribute towards the Compensation Fund. The Fund covers
occupational diseases and workplace injuries. An employee can then claim from this Fund if an
injury is sustained or a disease is contracted while the employee is:
 working.
 training.
 completing an apprenticeship.
 There are five kinds of compensation:
Temporary disability A person cannot work whilst injured. But, a person recover froms
the injury sustained or disease contracted.
Permanent disability A person never recovers from an injury
Death Death of a bread winner caused by an occupational injury or
disease.
Medical expenses Medical expenses will be paid up to two years after an accident
occurred or diagnosis was made.
Additional compensation In some cases, employees qualify for extra compensation.
{Source: http://www.westerncape.gov.za/eng/directories/services/7296/21409}
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Activities: Topic 2 – Introduction to human resources
1. Study the job advertisement below and answer the questions that follow.
Well known toy retailer is looking to recruit the services of a purchasing manager.
Qualifications and experience: B. Com or equivalent. Extensive knowledge of the toy industry.
Minimum five years’ experience in the toy and retail industry.
Responsibilities: Attending toy shows, both locally and abroad. Purchasing toys for boys and girls.
Reporting to the Managing Director on a weekly basis. Finding suitable suppliers. Ensuring
continuous availability of stock in all stores.
Skills: Good communication skills are essential. Preference will be given to candidates who can speak
Mandarin. Computer literate. Capable of working in a team.
Remuneration: Salary negotiable
1.1 The advertisement above advertises a job for a purchasing manager.

1.1.1 Explain what a job is.
1.1.2 Which level of management does this job represent?
1.1.3 Which human resources activity is represented by the job advertisement?
1.1.4 Explain what this human resources activity entails.
1.1.5 Discuss whether this advertisement is an example of internal recruitment or external
recruitment.
1.2 Quote from the advertisement to prove that this job requires the services of a skilled candidate.
1.3 Justify why the successful candidate needs to attend toy shows.
1.4 Explain why it is important to ensure continuous availability of stock in stores.
1.5 Clarify why preference will be given to candidates who can speak Mandarin.
1.6 According to the job advertisement, the salary is negotiable.

1.6.1 Explain what “salary negotiable” means.
1.6.2 Differentiate between salaries and wages.
1.6.3 Write down the term used to describe the total cost to employ a worker.
1.7 Describe the human resources activity that takes place once applications have closed. Include
the procedure that is associated with this activity in your answer.
1.8 Explain the main aim of an employment interview.
1.9 Describe the three components of an employment interview.
1.10 Explain the significance of an employment contract.
1.11 Write down any five details that usually appear in a contract of employment.
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1.12 Match Column A with Column B. The concepts in Column A can have more than one match in
Column B.
Column A Column B
1.12.1 Induction A A form that indicates a person’s total earnings and the total
amount of tax that was deducted.
1.12.2 Placement B Ensures that new employees become productive as soon as
possible.
1.12.3 Commission C Salary before deductions.
1.12.4 IRP 5 D Aims to reduce anxiety in new employees.
1.12.5 High employee turnover E Loss of skilled employees.
1.12.6 UIF F Performance based remuneration.
1.12.7 Gross salary G Psychometric tests are used to determine an employee’s
strengths and weaknesses.
1.12.8 Employee benefits H The employer and employee both contribute 1%.
I Increased recruitment costs.
J Phone and travel allowance
1.13 Make a list of information that employees will probably receive during the induction process.
Name any three.
1.14 Complete the table below regarding legislation impacting on the human resources function.
Labour Relations Act Basic Conditions of Employment Employment Equity Act COIDA
Act
Purpose 1.14.1 1.14.2 1.14.3 1.14.4
1.15 Differentiate between five types of compensation that are provided for in the Compensation
for Occupational Injuries and Diseases Act.
1.16 State whether the following statements are true or false. If the statement is false, only correct
the underlined word to make the statement true.
1.16.1 The Labour Relations Act addresses problems like gender discrimination and working hours.
1.16.2 Employees are allowed sick leave of 20 days per year.
1.16.3 Workers are entitled to a minimum of 12 days of leave per year.
1.16.4 Pregnant employees are entitled to maternity leave of three months.
1.16.5 Employees take annual leave to attend a family member’s funeral.
1.16.6 Office workers may not work more than eight hours per day.
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Revision test: Topic 2 – Introduction to human resources
1. Give one word for each of the following descriptions.
1.1 All activities aimed at attracting job candidates.
1.2 The process of trying to determine which individuals will best match particular jobs.
1.3 An agreement between an employer and an employee that binds both parties.
1.4 Employees are remunerated according to an agreed hourly rate.
1.5 Employees are remunerated for a specific piece of work.
1.6 This Act addresses issues like child labour and working on public holidays.
1.7 The purpose of this Act is to achieve equity in the workplace.
1.8 Tax is paid to this institution.
1.9 Monthly remuneration paid to employees.
1.10 Name any one recruitment method.
Total: / 10
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Revision Duration: 2 weeks [Week 5-6]
Question 1
1.1 Choose the correct answer from the options given below. Only write down the correct answer.
1.1.1 Grading is applicable to
A fabric
B avocados
C gold
D diamonds
1.1.1 Guess jeans are an example of:

A convenience goods
B select goods
C specialty goods
D unsought goods
1.1.2 The following graph represents the life cycle of:
A cell phones
B desk tops
C bread
D video recorders
1.1.3 Which problem-solving technique aims to obtain the opinions of experts without bringing
the experts together face-to-face?
A Problem solving cycle
B PEST analysis
C Brainstorming
D Delphi
1.1.4 According to this team dynamics theory, a person’s approach to his/her job will be
influenced by the person’s preferences:
A Jungian theory
B Margerison-McCann profiles
C MTR-I approach
D Belbin-role theory
1.1.5 _______ may be established in workplaces employing at least one hundred employees.
A Workplace forums
B Trade unions
C Working relationships
D Working teams
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1.1.6 This document describes the way in which franchises must be run.
A Franchise manual
B Operations and procedures manual
C Franchise agreement
D Disclosure document
1.1.7 Tom, Harry & Company is an example of a:

A close corporation
B private company
C public company
D partnership
1.1.8 Tom & Harry Limited may start operations after receipt of the:
A Certificate to commence Business
B Certificate of Incorporation
C Founding Statement
D Partnership agreement
1.1.9 Shortage of fuel is a challenge that emanates from the:

A market-environment
B macro-environment
C micro-environment
D formal-environment
1.2 Match the words/concepts in Column A to the descriptions in Column B. Only write down the
correct answer.
Column A Column B
1.2.1 The business itself A Lifestyle segmentation
1.2.2 Second economy B Formal sector
1.2.3 Advertising C Micro environment
1.2.4 Demographics D Informal sector
1.2.5 Psychographics E Predetermined communication aimed at
the masses
F Characteristics of the population
G Face-to-face contact with the customer
H A few sellers dominate the market
1.3 State whether the following statements are true or false. If the statement is false, only correct
the underlined part.
1.3.1 Conflict refers to differences in opinions, ideas and principles.

1.3.2 Professional behaviour includes treating other people in a dignified manner.
1.3.3 Manufacturerretailerconsumer is an example of formal distribution.
1.3.4 Quality circles aim to identify ways in which improvements can be made to the workplace.
1.3.5 Imports take place when an enterprise in one country sells products to businesses or
consumers in foreign countries.
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Question 2
Gamma Games is a local enterprise that creates and markets computer games. The demand for
computer games has increased considerably during recent years and Gamma Games has been quite
successful. However, management is anticipating a few problems. Not only is the current economic
climate forcing consumers to rethink their spending patterns, but the decrease in consumer
spending is opening the door for foreign countries to flood the market with imported stock.
Management is also finding it increasingly difficult to recruit qualified computer programmers and
animators.
2.1.1 Identify the challenge from each business environment that is mentioned in the scenario.
Discuss how this challenge can influence Gamma Games’ business operations and
mention the extent to which Gamma Games can control this challenge. Use the following
table to present your answer:
How does this challenge
Business To which extent can Gamma
Challenge influence Gamma Games’
environment Games control this challenge?
operations?
2.2 The scenario mentions that consumers are forced to rethink their spending patterns. Briefly
explain what this means and mention any two reasons that are causing this situation.
2.3 Management devised several strategies to help Gamma Games deal with the challenges it is
currently facing. The Managing Director suggested that Gamma Games should change its
packaging.
2.3.1 Mention any five requirements of good packaging that Gamma Games will have to consider
when deciding on new packaging.
2.3.2 Identify the type of packaging that will be most suitable for the following scenario/product:
(a) Packaging which also aims to advertise a competition that Gamma Games is
launching.
(b)
2.4 Gamma Games operates as a franchise.

2.4.1 Briefly explain what a franchise is.
2.4.2 Discuss any three advantages of franchising for the franchisee.
2.4.3 Discuss any three disadvantages of franchising for the franchisor.
2.4.4 Mention any two examples of franchises in South Africa.
2.5 Gamma Games has always been actively involved in the community. The local newspaper
recently published a publicity article about Gamma Games’ involvement in the community.
2.5.1 Briefly explain what publicity is.
2.5.2 Identify the business environment of which the community forms part of.
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2.6 Gamma Games’s advertising consultant designed the following advertisement:
Educational Computer Games!!!!
 Are you struggling to cope with examination stress?

 Start improving your results today – the Gamma Exam Game will help
you prepare for exams in a FUN and EDUCATIONAL way! Only R500 per
subject.
 Limited offer. While stocks last. Phone 0860FUNEXAM!
 “My son Steve’s Maths marks have improved by 20% since he started using the Gamma Game
System!”
 ‘”My daughter, Sandy, has improved her Life Orientation marks by 30% with the help of the
Gamma System!”
2.6.1 Do you think that this advertisement complies with the requirements of the “AIDA principle”?
Support your answer by providing a brief explanation of the AIDA principle and by applying
the AIDA principle to the advertisement.
Question 3
3.1 Read the scenario and answer the questions that follow:
Couch Potatoes is an enterprise that manufactures couches for

household use. The enterprise was recently awarded a tender to supply
a well known hotel group with 20 000 couches over the next three
months. In order to achieve this goal, all employees will have to work
efficiently and productively. Movement between machines is limited because Couch Potatoes makes
use of the conveyor belt system.
3.1.1 Identify the sector that Couch Potatoes operates in and discuss the role of this particular
sector.
3.2 Couch Potatoes can only achieve optimum levels of productivity if employees work together
as a team. However, team members need some time to establish their role in the team.
3.2.1 Briefly explain what “productivity” means.
3.2.2 Discuss the four stages of team development.
3.2.3 List any five characteristics of successful teams.
3.3 Three methods of production can be identified.

3.3.1 Identify the method of production that Couch Potatoes is using. Give a reason for your
answer.
3.3.2 Discuss any four reasons why Couch Potatoes decided to use this method of production.
3.3.3 Write down the names of the other two production methods that is not used by Couch
Potatoes.
3.3.4 Write down any disadvantage of the methods that you have mentioned in the previous
question.
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3.4 The following information regarding Couch Potatoes has been made available to you:
Direct raw material costs R300 000
Wages: factory workers R72 000
Rent of factory R27 000
Depreciation on machinery R6 000
Insurance premiums R33 000
Petrol R48 000
Salaries: security guards R72 000
Telephone and fax R18 000
Water and electricity R24 000
40 000 units were manufactured
3.4.1 Calculate the primary costs

3.4.2 Calculate the fixed overhead costs.
3.4.3 Calculate the variable overhead costs.
3.4.4 Calculate the total production costs per unit.
3.5 One of the employees at Couch Potatoes was recently paralysed in an accident
at the production plant.
3.5.1 Which act aims to contribute towards the future financial well-being of such employees?
3.6 Due to the significant costs involved in purchasing machinery, Couch Potatoes has decided
to rent machinery.
3.6.1 Discuss one advantage that this agreement holds for Couch Potatoes.
3.7 Couch Potatoes recently appointed a new Chief Executive Officer. The new CEO likes to use the
group consensus method to make difficult decisions as this method helps to avoid conflict.
3.7.1 Present the group consensus method in a diagram.
3.7.2 Describe any five causes of conflict in business.
3.7.3 The new CEO signed a contract of employment. List any five details that usually appear in such
a contract.
Question 4
Cheapsurance is an enterprise that sells insurance. Cheapsurance was the first business enterprise in
the insurance industry to offer “no claim bonuses” to its clients. Although this idea was at first
perceived as somewhat unconventional, it established Cheapsurance as a market leader in the
insurance industry. Since Cheapsurance first marketed this concept, many other business enterprises
have developed similar concepts. Despite the competition that
Cheapsurance is facing from other business enterprises in the insurance
industry, the enterprise has been able to retain most if its clients.
However, according to market research, many of Cheapsurance’s clients
are considering other insurance options. Cheapsurance’s management
decided to implement some changes at the enterprise in an effort to
retain its clients. One of the changes that Cheapsurance’s management
team has decided on, was improving customer services as this was identified as a weakness of many
of Cheapsurance’s competitors. Management hopes that good customer services will attract new
clients and help the enterprise retain its existing clients. Unfortunately, many of Cheapsurance’s
employees will have to undergo training which may result in increased costs for the enterprise.
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4.1.1 Identify the sector that Cheapsurance operates in. Give a reason for your answer.
4.2 One of the main challenges that Cheapsurance is facing comes from its competitors. Identify
the business environment that this challenge emanates from.
4.3 Forming business relationships is one of the strategies that Cheapsurance can employ to
cope with challenges in the business environment. Discuss the following two kinds of
business relationships:
4.3.1 Power relationships
4.3.2 Lobbying
4.4 Cheapsurance can also use the problem solving cycle to deal with challenges from the
business environment. The following table provides a summary of the problem solving cycle.
Complete the table by filling in the missing information.
Heading Description
4.4.1 Make a list of all factors that could potentially cause the problem.
Choose the best
4.4.2
solution
4.4.3 This step aims to eliminate the problem.
Evaluate the chosen
4.4.4
strategy
4.5 Cheapsurance’s management decided to improve customer services in an effort to retain

existing clients. Conduct a force field analysis in order to decide whether this plan should be
implemented. Use the information from the scenario.
4.6 Market research indicates the following concerning Cheapsurance:
Cheapsurance: Client Base (800 000)
Clients who are not

considering an alternative
insurer (400 000)
Clients who are
considering an alternative
insurer (250 000)
Clients who have changed
to an alternative insurer
(150 000)
4.6.1 Briefly explain what market research is.

4.6.2 Identify the type of visual representation.
4.6.3 Calculate the percentage of clients who are considering alternative insurance options.
4.7 The ultimate solution to Cheapsurance’s problem is to develop new and exciting insurance
products. List any four steps involved in the product development process.
4.8 Form of ownership can impact on the success or failure of a business enterprise.
Compare the five different forms of ownership by making use of the following table:
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Sole Close Private Public

Partnership
proprietorship Corporation company company
Number of
4.8.1 4.8.2 4.8.3 4.8.4
members
Liability 4.8.5 4.8.6
Taxation 4.8.7 4.8.8
Question 5
Business enterprises operate in the business environment where they are confronted with many
challenges. Some of these challenges include socio-economic issues. With regards to socio-economic
issues, discuss the following in an essay:
 Identify the business environment in which socio-economic issues occur.
 Define “socio-economic issues”
 Discuss the extent to which the following socio-economic issues influence business operations:
poverty and unemployment.
Question 6
Many entrepreneurs are realising the potential of outsourcing. Not only does outsourcing provide
the opportunity for the creation of employment opportunities, it has the potential to save the
outsourcing business a considerable amount of money. Discuss outsourcing in detail. Also refer to
the contractual implications of the outsourcing agreement. Discuss any five entrepreneurial qualities
that an entrepreneur will need if the entrepreneur wants to start a business enterprise as an
outsource provider.
Question 7
The business environment is constantly changing. Business enterprises must find ways to adapt to
these changes in order to remain a competitive force. With regards to change, discuss the following
in an essay:
 Different kinds of change. Support your answer by mentioning real life examples of recent changes
that occurred in the business environment.
 Theories of change management.
 Reasons why people often resist change.
 Strategies explaining how to cope with resistance to change.
Question 8
Determining a suitable price for a product is one of the key success factors for an enterprise. Due to
frequent changes that occur in the business environment, business enterprises sometimes need to
adapt their prices in order to either retain existing customers, or to attract new customers. Discuss
the following in an essay:
 Pricing techniques/strategies
 Theories of price determination
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Question 9
Explain how the following legislation impacts on human resources.

 The Labour Relations Act.
 The Employment Equity Act.
 The Compensation for Injuries and Diseases Act.
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Create your own index
Vision
Management
Business
culture
Market
Competitors
Suppliers
Intermediaries
Civil society
Demographics
Trade union
Employee
turnover
Micro-lending
Mergers
Acquisition
Social
responsibility
Power
relationship
Networking
Lobbying
Inflation
Population
Illiteracy
Fraud
Sexual
harassment
Corruption
Bribery
Kickbacks
Dumping
Intellectual
property
Copyright
Patent
Trade mark
Strike
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Primary sector
Secondary
sector
Tertiary sector
Memorandum
of
Incorporation
Prospectus
Franchise
Outsourcing
Leasing
Delphi
technique
Force field
analysis
SWOT analysis
PEST analysis
Stress
Crisis
Deadline
External change
Internal change
Retrenchment
Globalisation
Affirmative
action
Timeline
Gantt chart
Work
Breakdown
Structure
Project
planning
Equity
Loan
Capital
Bank overdraft
Suppliers credit
Lease account
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Ethics
Professionalism
Verbal
presentation
Written
presentation
Feedback
Entrepreneur
Goods
Services
Convenience
goods
Select goods
Specialty goods
Packaging
Trademark
Price
Leader pricing
Bait pricing
Penetration
pricing
Perfect
competition
Monopolistic
competition
Monopoly
Distribution
Sales
promotion
Advertising
Publicity
Personal selling
Formal sector
Informal sector
Uninterrupted
production
Interrupted
production
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Mass
production
Batch
production
Jobbing
Safety
management
Primary costs
Overhead costs
Fixed costs
Variable costs
Selling price
Cost price
184

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11E1

Note to the teacher and learner

Study guides available in the Head for success range

Welcome to Grade 11 Business Studies

What am I going to learn this year?

Business environments Business ventures Business roles Business operations

Term 1 Term 2 Term 3 Term 4

Influences on Creative thinking and Entrepreneurial Team dynamics and

Term Assessment Due date Your mark Total

About Business Studies Tests

Section Description Marks

A Business Studies examination can look like this:

Section Description Marks Time

TERM 1: BUSINESS ENVIRONMENTS & BUSINESS OPERATIONS

Topic 1: Influences on business environments Duration: 1 week [Week 1]

1. Influences in the business environment

 The business environment is not isolated.

1.1 Control of the micro environment

Element Description Control

1.2 Control in the market environment

Element Description Control

 Business enterprises form part of civil society.

1.3 Control in the macro-environment

1.4 Getting involved in the macro-environment

1.4.1 Advantages of getting involved in the macro-environment

Activities: Topic 1 - Influences on business environments

1.2 Match Column A with Column B.

The queen of leather

3. Fill in the missing word(s).

Revision test: Topic 1 - Influences on business environments

3. Write down any advantage of a business’s involvement in the macro environment.

Answers count one mark each.

Topic 2: Challenges in the business environment Duration: 1 week [Week 2]

2.1 Challenges from the micro environment

 the business enterprise not achieving its objectives.

2.2 Challenges from the market environment

2.3 Challenges from the macro-environment

Activities: Topic 2 - Challenges in the business environment

1.1 Answer the following questions.

Revision test: Topic 2 - Challenges in the business environment

1. Study the following block.

Changes in income levels / Unions / High employee turnover / Competition / Micro-lending /

Answers count one mark each.

Topic 3: Adapting to challenges in the business environment Duration: 1 week [Week 3]

 Management cannot ignore the challenges in the business environment.

3.2 Forming business relationships

3.2.1 Power relationships

 Lobbying refers to the process of influencing legislation or parliamentary decision making.

Grassroots lobbying Direct lobbying

3.2.4 Benefits of a business’s involvement in the macro environment

Activities: Topic 3 – Adapting to challenges in the business environment

1.2 Answer the following questions.

Revision test: Topic 3 – Adapting to challenges in the business environment

1. Give one word for each of the following concepts.

1.1 The company that acquires another company.

Answers count one mark each.

Topic 4: Contemporary socio-economic issues Duration: 2 weeks [Week 4-5]

4.1 The impact of socio-economic issues on business operations and productivity

Influence on business operations and productivity Possible solutions

Influence on business operations and productivity Possible solutions

4.1.3 Social, cultural and demographic issues

 The word population refers to the number of people in a country.