Oakland Academy

Economic Management Science Booklet

Term 3

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CHAPTER 1 – ENTREPRENEURSHIP

 Characteristics – Different parts of a person’s personality.

 Innovative – Creative, original.

 Motivated – Eager to take action.

 Independent – Able to work alone.

 Skills – Abilities.

 Potential – Possibility yet to be discovered, explored.

 Convert – Change something into something else.

 Target market – Group of people to whom a business aims to sell its product.

 Convenient – Easy, handy.

 Franchise – A developed and reproduced way of doing business under a trademarked name
with a standardised approach to delivering the product to the consumer.

 Staff – Employees.

 Labour – Mental and physical work.

 Analyse – Break a concept down into smaller parts and study each part individually.

 Advisable – Worth doing.

 Competitors – Business selling similar products or services.

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 Measurable – Able to be measured.

 Intention – Idea, aim.

 Consistently – Reliably.

 Communicating – Pass on information or news.

 Eye-catching – Attracting your attention.

 Original – New, unique.
 Memorable – Not easily forgotten.
 Kindle – Ignite.
 Estimating – Making a calculated guess.
 Reduced – Made less.
 Assisting – Helping.
 Protect – Take care of, not destroy.
 Advance – Before due time.
 Additional – Extra.
 Theme – Main idea or message.

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An entrepreneur is a person who starts his or her own business. An entrepreneur must first
identify a business opportunity, create, and organise the capital and resources of the business,
and then make a product or create a service. This involves taking risks as it will be necessary to
invest money into the new business venture. Some entrepreneurs build large businesses that
make them very wealthy, and others run very small businesses where they make a small profit
on which to survive. These entrepreneurs are called survivalist entrepreneurs.

Characteristics of an entrepreneur:

 Innovative – Entrepreneurs need to be able to think in a fresh way, have exciting ideas and
solve problems creatively.
 Committed and dedicated – They need to focus on their work so their business succeeds.
 Motivated and independent – They need to be self-starters and make their own decisions.
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 Energetic – They must have the energy to work hard and for long hours.
 Risk taking – They need to be prepared to take calculated risks or they’ll not expand their
businesses and move forward.
 Bold and courageous – They need to see the problems they will encounter as challenges
and obstacles.

SKILLS OF AN ENTREPRENEUR:

 Communication – Be able to communicate well with clients, suppliers, and staff.

 Planning – Know how to prepare for the future, both long term and short term.
 Marketing – Be able to sell product ideas.
 Management – Be able to direct people to complete tasks as efficiently as possible.
 Financial – Be able to handle money wisely and effectively and track the flow of cash in and
out of the business.

BUYING, SELLING AND PRODUCING A PRODUCT

Retailers and wholesalers are two types of entrepreneurs. They purchase goods in bulk from
the producers, divide them into more manageable portions, and then resell them to their
clients. Entrepreneurs who produce their own items also exist. These business owners purchase
raw materials from vendors and transform them into semi-finished and final products. They sell
the products directly to customers or to retailers and distributors.
The target market is the group of people the entrepreneur wants to buy his or her product. To
sell a product successfully to his or her target market, an entrepreneur must think carefully
about the following aspects:
 Price – must suit the financial position of the target market.
 Business location – must be convenient for the customer and easy to find.
 Promotion – products must be advertised and promoted so potential customers come to
hear about them.

INCOME – EXPENSE = PROFIT/LOSS

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ACTIVITY 1
1.) Max sells donuts at school to earn extra pocket money. He buys the donuts from a local
bakery for R3,50 each. At school he sells them for R5. Max sells on average 25 donuts a day.
What is his daily profit?
2.) Miecah sells samosas to earn extra pocket money. He only sells them on a Friday. He buys
the samosas for R6 and sells them for R10.
a) What profit is Miecah making on each samosa?
b) How many samosas does Miecah have to sell to make R80 profit?
3.) Joel runs a hot dog stall. He pays R50 rent a day for his site. To make each hot dog, it costs:
Vienna – R2
Roll – R1,50
Butter and sauce – R1
Joel sells a hot dog for R7.
a) What is the total cost of each hot dog?
b) What profit does he make from each hot dog?
c) How does the R50 daily rent affect Joel’s profit?

ENTREPRENEURSHIP: STARTING A BUSINESS

NEEDS AND WANTS OF CONSUMERS

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An entrepreneur must understand that while everyone has basic necessities, everyone has
quite different wants. Needs are necessities for human survival. The luxuries we can live
without but would like to have, are known as wants. It's critical for entrepreneurs to
comprehend consumer behaviour in order to create products that potential customers would
find appealing. Age, gender, financial situation, interests in culture, religion, and lifestyle, as
well as hobbies, are some of the most significant factors influencing consumers' decisions.

HOW TO ANALYSE YOUR STRENGTHS, WEAKNESSES, OPPORTUNITIES

AND THREATS (SWOT)
STRENGHTS
To run a successful business, if would be advisable to select a product you are good at making.
Consider skills you have that could be used to make a successful product.
WEAKNESSES
Those things which we do not do well are our weaknesses. We may be good at producing a
product but we may not be good at handling money. Sometimes it is best to face our
weaknesses and try to improve on them.
OPPORTUNITIES
These are aspects of the external environment that will help your business flourish. The
weather, for example, presents all sorts of different opportunities. Hot weather presents the
opportunity to sell cold drinks and ice lollies.
THREATS
There are also external factors that may harm your business. These are called threats.
Competitors are people selling products similar to yours and they may be seen as threats.

THE CONCEPT OF ADVERTISING

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When you run your own business not only will you have to produce your product but you will
also need to attract customers to buy your product. Advertising is a way of communicating with
your potential customers.

MEDIA USED IN ADVERTISING

 Print media – Media created through printing on paper.

 Outdoor media – Billboards are the most common form of outdoor media.
 Broadcasting media – Television, radio or the internet.
 Celebrity advertising – Some businesses pay celebrities to endorse their products.

PRINCIPLES IN ADVERTISING

All advertising should be legal, decent, honest, and truthful. The AIDA (attention, interest,
desire, action) concept is most important when designing an advertisement.

 Attract attention – Your advertisement should be eye-catching.

 Create interest – People must be interested in your product.
 Kindle desire – The advertisement must make people want whatever you are selling.
 Take action – The advertisement must be designed in such a way that the person goes out
and buys the product.

ACTIVITY 2

Bring an advertisement to school and paste it in your book (any advertisement).

1.) Write down 2 ways in which the advertisers have attempted to attract your attention.
2.) How is the advertiser attempting to make you interested in the product.
3.) What is the advertiser doing to make people desire their product?
4.) What would make it easy for a person who likes this product, to go and buy it?

USE OF RECYCLED MATERIALS

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 One way of increasing your profits is to decrease your production costs. Costs can be reduced if
recycled goods are used to make your product. By using recycled materials, you are assisting to
protect the natural environment and preventing waste of precious natural resources.

CALCULATING THE COSTS OF PRODUCING A PRODUCT

There are two different types of costs to consider when making a product:

 Fixed costs are those costs which do not change even if the quantity of the product changes.
For example, rent, rates, salaries.
 Variable costs are the costs which change according to the quantity of the product you are
producing. For example, the costs of the materials to make your product.

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ACTIVITY 3

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Chloe has decided to run a sandwich stall at her school’s Entrepreneur’s Day. The has decided to
serve cheese and tomato sandwiches. She has done some research on her costs for making the
sandwiches. The rent for her stall is R40 for the day.

To make one sandwich Chloe will need:

 2 slices of bread
 1 slice of cheese
 1 slice of tomato
 Butter

Costs

 Bread costs R7,50. There are 15 slices in a packet

 Butter costs R15 for a tub of 500g – this is enough for 30 slices of bread
 10 slices of cheese costs R10
 Tomatoes cost R1,50 each (One tomato makes 6 sandwiches)
 Transport for the ingredients is R15
1.) Calculate the variable costs.
2.) Calculate the fixed costs.
3.) What will it cost Chloe to produce one sandwich?
4.) Do you think her stall is profitable if she only makes one sandwich? Explain your answer.
5.) Calculate Chloe’s variable costs for 30 sandwiches.
6.) If Chloe sells one sandwich for R5, what will her profit for each sandwich be?
7.) If Chloe sells each sandwich for R8, what will her profit for each sandwich be?
8.) If Chloe sells all her sandwiches (60) for R8 each, what will her total profit be?

CHAPTER 2 – THE ECONOMY

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 Socio-economics – The study of the relationship between economic activity and social life.
 Imbalance – Lack of proportion.
 Inequality – Differences in the distribution of something.
 Epidemics – Multiple outbreaks of infectious diseases.
 HIV – Human immunodeficiency virus
 AIDS – Acquired immune deficiency syndrome, final stage of HIV disease.
 Facilities – Buildings.

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 Stranded – Behind.
 Rural areas – The large and isolated areas of an open country with low population density.
 Urban areas – Cities with high population density.

CAUSES OF SOCIO-ECONOMIC IMBALANCES

In South Africa, a small percentage of the population earns most of the income. Almost half of
South Africa’s population lives in poverty. They are mostly old people, unemployed people, low
wage earners, women, ill and disabled people and those living in rural areas. While some
people in society are very rich, others are very poor. This is called a socio-economic imbalance.

Various factors may cause socio-economic imbalance:

 Unemployment
 Gender imbalances
 Disproportionately high youth unemployment
 Legacy of apartheid
 Diseases and epidemics
 Disabilities
 Natural disasters

INEQUALITY IN SOUTH AFRICA

Many people in South Africa were denied their fundamental rights during the apartheid era.
Many schools, particularly those in rural areas, lack fundamental necessities including
classrooms, electricity, running water, furniture, textbooks, and stationary. The state of rural
roads, police stations, hospitals, and other infrastructure is bad. People must wait hours for
buses and taxis due to the poor quality of public transportation.

EXAMPLES OF HOW INEQUALITY ARE NEING ADDRESSED:

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 Providing the poor with skills to help them get jobs.
 Encouraging households to keep vegetable gardens or livestock.
 Training teachers properly.
 Upgrading schools.
 Creating job opportunities.
 Building more public roads, schools, hospitals, and clinics.
 Providing adequate healthcare.

ACTIVITY 4

Design a poster illustrating a situation that reflect poverty. Show the class your poster and tell
us about your idea on how to address or fix the problem.

CREATING SUSTAINABLE JOB OPPORTUNITIES

 Government should improve the transport infrastructure and public services.

 Banks and other financial institutions should consider ways of making more loans available
for poor people.
 Government should support the development of small towns.
 Government should consider ways of employing more people.
 Government should offer financial support to small scale farmers.

ACTIVITY 5

If the president of South Africa gives you R9 billion to create as many jobs as you can, what
ideas would you come up with to help solve the problem of poverty in South Africa?

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