BUSINESS JUNE PAPER <3
TOPIC 1:INFLUENCES OF BUSINESS ENVIRONMENTS
COMPONENTS OF THE MICRO ENVIRONMENT
Vision, mission statement, goals and objectives.
Organisational structure
Organisational culture
Organisational resources
Management and leadership
Eight business functions.
COMPONENTS OF THE MARKET ENVIRONMENT
Customers/consumers
Suppliers
Intermediaries
Competitors
Civil society, NGOs, CBOs, regulators, strategic allies and unions.
COMPONENTS OF THE MACRO ENVIRONMENT
Legal
Political
Social
Economic
Technological
Physical
Global
TOPIC 2: CHALLENGES OF THE BUSINESS ENVIRONMENTS
CHALLENGES IN THE MICRO ENVIRONMENT
Difficult employees: employees that do not support the vision of the business can create conflict in the business.
Strikes and go-slows: a strike means employees refuse to go to work or they do not work until their complaints have been addressed which can result to the business losing many hours of production time for a period of a strike. A go-slow means employees choose to not work productively which will result in the business to have a decrease in profit and not meet its targets.
High employee turnover
Employee absenteeism
SHORTAGE OF SUPPLIES
The business productivity and profitability will decrease.
Without the availability of raw materials, a business cannot produce its products or services to meet the demands of the target market.
DEMOGRAPHICS AND PSYCHOGRAPHICS (DEFINITIONS/EXAMPLES)
Demographics refers to the statistics of the population such as gender, age, etc.
There are always constant changes in the demographic characteristics of their target market. When a lot of people emigrate, it will result in a decreased number of consumers and skilled labour.
An example of demographics, people are living longer which could lead to an increased demand of goods and services.
Psychographics refers to customers’ lifestyles and behaviour. It includes their attitudes, interests, opinions, desires and lifestyles.
It could be difficult to determine the psychographics of a target market because customers’ lifestyles and behaviours change frequently.
GOVERNMENT TENDERS
Government tenders are people or a company who has to provide the goods/services and the government must pay an agreed price at the agreed time.
WAYS THE BUSINESS CAN OVERCOME COMPETITORS
Businesses should have unique goods or services for the target market.
Businesses must produce high-quality goods/services that the customers would be interested in.
Businesses should ensure that they have been well trained and dedicated employees.
Businesses should make the prices of their goods lower than their competitors.
EXAMPLES OF CONTEMPORARY LABOUR LEGISLATION
Employment Equity Act - compels businesses to give preference to previously disadvantaged individuals when appointing new employees into the business.
National Credit Act- this act was established to protect both businesses and consumers from negligent lending practices that could result in over indebtedness by consumers.
Consumer protection Act-this act promotes and advances the social and economic welfare of consumer in South Africa.
Labour Relations Act- this legislation regulates the relationship between the employer and employes when resolving conflict in the workplace
The Basic conditions of employment act- this legislation provides minimum acceptable standard for any employment policy. It describes the conditions of employment.
The compensation for occupational injuries and diseases act
Skills development act- this legislation ensures that employers contribute towards the education and training of their employees.
Broad based black economic empowerment- this act ensures that previously disadvantaged individuals fully participate in the economy.
TOPIC 3: ADAPTING TO THE BUSINESS ENVIRONMENT
MERGERS
Mergers occur when two companies collaborate/join together to form one new business.
Emerged businesses share their resources which could lead to more growth and sustainability.
If its a public company, then the shareholders will swap their shares
NETWORKING
Refers to a situation whereby businesses share information and develop professional contacts to benefit all the members in the network.
Networking assists in acquiring new business leads.
Networking benefits the business by helping to identify best practice.
Networking can help the business identify new trends.
STRATEGIC ALLIANCES
STRATEGIC ALLIANCE: Businesses form partnership agreements to benefit from each other’s involvement. These alliances are designed to build on the expertise of each partner and on how they complement each other.
DIRECT INFLUENCE OF THE ENVIRONMENTS
Businesses need to investigate alternative environmental friendly production techniques and create environmental awareness.
Businesses can form joint ventures with other businesses and the government to protect the environment through conservation and preservation.
TRIPLE BOTTOM LINE
Triple bottom line is an accounting framework that focuses on people, planet and profit.
SOCIAL RESPONSIBILITY
Increases employees’ morale and job satisfaction when they are involved in social responsibility programmes.
CSI helps to attract investors because of increased profits/income.
Promotes customer loyalty resulting in more sales.
A business may have a competitive advantage, resulting in good publicity/an improved reputation.
PROJECTS THAT CAN BE UNDERTAKEN BY BUSINESSES AS PART OF SOCIAL RESPONSIBILITY
Businesses must allow employees to get involved in social development programmes.
Engage in environmentally friendly campaigns such as recycling or re-using scarce resources.
Businesses must protect the environment and participate in community upliftment programmes.
Businesses should support less fortunate people, by providing donations to charity organisations.
TOPIC 4: CONTEMPORARY SOCIO-ECONOMIC ISSUES
LACK OF SKILLS AND IMPACT ON THE BUSINESS
Unskilled employees could spend considerable time seeking assistance to perform their work.
They may perform tasks without the appropriate knowledge and expertise which could lead to poor performance.
The time spent on assisting unskilled workers can reduce productivity levels in the workplace.
Businesses may be required to increase the budget for skills development programmes.
INFLATION RATE AND IMPACT ON THE BUSINESS
This leaves customers with less money to spend on goods and services.
Reduced spending will lower profits for the business.
Can create retrenchment.
MEANING OF PIRACY
Piracy is the illegal use or imitation of another person’s work. This may affect the artist’s and producer’s productivity levels.
COPYRIGHT
Refers to an exclusive legal right assigned to the authors,artist or producer of artistic work to print, publish, perform or record the work.
Copyright holders of Intellectual Property are allowed to take legal action.
PATENT
This right is granted by government for a limited period of up to twenty years for the exclusive right to an invention.
If anyone uses the invention without permission, the creator may take legal action against them.
TRADEMARK
A trademark refers to a sign, character or word that is protected by the law to represent the company or a product.
These are used by businesses so that their products or the business itself is easily identifiable.
DUMPING
Dumping occurs when a country or company exports a product at a price that is lower in the international importing market than the price in the exporter’s local market.
THE IMPACT OF DUMPING
Local businesses lose profit as the cannot compete with cheap prices.
They can lose income and be forced to shut down their operations.
This may lead to a decrease in local production and a loss of jobs.
It is not possible for local businesses to manufacture the same products at an equal or lower price.
EXAMPLES OF ETHICAL MISCONDUCT
Sexual harassment
This unwelcome or unwanted conduct causes discomfort for the victim and causes them to be embarrassed.
The victim may also be unable to concentrate or focus on their work.
Corruption
Corruption refers to any act of dishonesty such as bribery/theft/collusion/kickbacks and so on.
It occurs when two parties enter into an illegal agreement from which they both benefit.
Mismanagement of funds
Mismanagement of funds refers to the wrongful use of funds.
It involves dishonest activities in which a person entrusted with authority in a business abuses their position of trust to achieve personal gain.
EXHAUSTION RESOURCES
This refers to the over-usage of resources which could lead to the resources being depleted.
This can be devastating for businesses whose operations solely rely on these natural resources.
Businesses may be forced to substitute exhausted natural resources with chemicals which can lead to a strong contribution of climate change.
INDUSTRIAL RELATIONS
Industrial relations refer to the relations between management and its employees in the industry. It explains the relationship between employees and the management that stems directly or indirectly from union versus employee relationship.
LRA
The act provides the structure for governing the relations between an employer and their employees.
It encourages collective bargaining in the workplace.
The act further encourages fair labour practice between employer and employee.
The transfer of employment contracts between existing and new employers are explained.
TRADE UNIONS (FUNCTIONS AND ROLES)
FUNCTIONS:
Trade unions represent their members and protect their members against unfair labour practices.
They empower employees about their rights in the workplace and how to apply these rights.
Trade unions negotiate for better working conditions, salaries and wages, and other benefits to improve the standard of living for employees.
They may take legal action on behalf of their members when necessary.
ROLES:
The main role of Trade unions is to represent staff members in the workplace.
They highlight the need for job creation in the economy.
They ensure that poverty levels are kept low in the country through fights against reckless retrenchment processes by employers.
INDUSTRIAL ACTIONS (STRIKES, LOCKOUTS AND GO-SLOWS)
STRIKES:
A strike is the result of unresolved disputes.
It is the join action organised by employee or their union representatives to stop working and try to force employers to accept their demands.
GO-SLOWS:
This is a form of industrial action where workers decide to deliberately work unproductively or slow as a form of protest.
The goal of a Go-slow is to reduce business productivity.
This is often used by essential serve industries where strikes are not allowed.
LOCKOUTS:
Lockouts occur when an employer prevents striking employees from entering the business premises.
Employees need to be notified 48 hours in advance and in writing of their intention to use the lockout clause.
Employers may resort to the lockout clause to ensure that equipment and the workers who aren’t striking are kept safe.
TOPIC 5: BUSINESS SECTORS
BACKWARDS LINKING:
A manufacturing company (secondary sector) may provide a mining company(primary sector) with machinery and equipment it needs to operate its business.
The mining company (primary sector) may outsource the management of their information systems to a specialist IT company (tertiary sector).
The manufacturing company (secondary sector) may outsource the management of their information system to a specialist IT company (tertiary sector)
BUSINESS OPERATIONS
TOPIC 10: MARKETING FUNCTION
STANDARDISATION
Refers to the process of ensuring goods are produced to the same standards in terms of size/weight/colour.
There should be no differentiation.
GRADING
Products that cannot be manufactured according to pre-determined standards are graded according to the quality of the product.
FINANCING
Refers to the act of obtaining funds to ensure that businesses can operate effectively in pursuit of the organisations’ objectives.
The business acquires funding from financial institutions/investors to expand and maintain operations.
RISK BEARING
This provides businesses with the opportunity to reduce losses incurred should a business venture not succeed by sharing the risk with another party.
Investments in business opportunities are subject to constant risks, despite the prediction of positive results.
PRODUCT POLICY
This policy explains how a business is going to develop a new product, design, and package.
The product policy deals with the features, appearance and the benefits of the product itself.
PRICING POLICY
Pricing policy is set after considering the competitive situation in the market environment. The pricing policy has significance under imperfect competition.
DISTRIBUTION POLICY
Every business needs a distribution policy so that it knows how and where products need to be distributed.
COMMUNICATION POLICY
The focus of the marketing communication policy is to increase sales and generate higher overall profitability for the business.
Effective marketing communication must take place with customers to maintain interest in the business as well as purchasing products and services.
TYPES OF CONSUMER GOODS
CONVINENCE GOODS
These are low priced goods purchased by consumers without much thought.
Examples of coincidence goods are bread, milk, soft drinks, etc.
SHOPPING GOODS
These goods are more expensive than convenience goods.
Examples of shopping goods are television, motor vehicles, clothing, etc.
SPECIALITY GOODS
These goods usually have specific brand names.
Examples of speciality goods are jewellery, branded clothing, etc.
SERVICES
Services are not tangible.
Examples of services are garden services, etc.
UNSOUGHT GOODS
These are goods that consumers do not think of until the need for such products arise.
Examples of unsought goods are funeral services, encyclopaedias, fire extinguishers and reference books.
INDUSTRIAL GOODS
These are goods used in the manufacturing process to produce other goods.
Examples of industrial goods are spare parts, equipment and machinery, etc.
STEPS IN THE PRODUCT DESIGN (1ST THREE STEPS IN DETAIL)
Generating a new idea: A business should aim to identify opportunities that competitors have not done yet. Ideas for new products can come from: using creative thinking techniques, competitor research, a need that was identified, solving a problem, and analysing market trends.
Screen and evaluate the idea: Screening means that the newly generated idea is critically evaluated to see if there is a need in the market and whether it could be workable and profitable for the business. The business needs to decide whether the product can be developed at the right price with suitable profit margins.
Testing and developing the concept: At this stage the product will be decided whether it will be profitable within a reasonable time period. Businesses must determine how the product will best provide the necessary benefits and how best to produce the product in the most cost-effective way.
PACKAGING EXAMPLES
Packaging for immediate use - Packaging will be immediately thrown away once used.
Packaging for double use - Packaging can be used for different purposes than the original purpose.
Packaging for resale - Buying products in bulk like a big box containing small boxes of washing powder.
Kaleidoscopic packaging - Packaging used to advertise a sporting event.
Speciality packaging - Packaging should suit the product like a new phone.
Combination packaging - When products are packaged together such as soap and a face cloth/shower gel and sponge/matching perfume and cream.
PRICING TECHNIQUES
Cost-based pricing: this is the practice of setting prices based on the cost of the goods or services being sold.
Mark-up pricing: this is calculated as a percentage. Cost per unit.
Target-based pricing: when companies set certain targets to achieve based on what the business believes customers are prepared to pay.
Competition based pricing: a pricing method that involves setting prices in relation to the prices of competitors.
Promotional pricing: a sales strategy in which a business temporarily reduces the price of a product or service to attract more customers.
Penetration pricing: happens when products are sold at very low prices to attract consumers to products that are being introduced to the market.
Psychological pricing: customers will read the slightly lower price and consider it to be lower than the price is. E.g. R6.99 can be changed to R7.00 and customers will view it as cheaper.
Bait pricing: when prices are set lower than the item’s cost price in order to attract customers.
Skimming prices: involves charging the products higher prices when introduced then gradually decreasing the price over time.
TRADEMARKS (REQUIREMENTS AND IMPORTANCE FOR THE BUSINESS)
REQUIREMENTS:
A trademark should be attractive for the customer.
It must indicate the name and contact details of the manufacturer.
Should promote the image of the business.
Should be different from competitors.
IMPORTANCE FOR BUSINESSES:
It establishes an identity for the products.
Protects the business against competitors who sell similar products.
A well-known trademark helps to make the brand recognizable.
Can be used to market or advertise products.
DIFFERENT TYPE OF MARKETS (EXAMPLE MONOPOLY/PERFECT COMPETITION)
Perfect competition - the number of buyers and sellers are huge. example: shares traded on JSE.
Monopoly - Only one seller/supplier controls prices and products. Example: Eskom.
DIRECT AND INDIRECT DISTRIBUTION (EXAMPLES ONLY)
Manufacturer-consumer: example, a famer may sell his/her fresh produce directly to customers. (Direct distribution)
Manufacturer-retailer-consumer: example, retailers such as Spar, Pink n Pay buy their stock from the manufacturers and sell them to customers.
Manufacturer-agent-retailer-consumer
Manufacturer-wholesaler-retailer-consumer: example, wholesalers such as Makro buys goods in large quantities from manufacturers and then sells them in bulk to retailers. Retailers then sell the bulk goods in units to their customers.
Manufacturer-agent-wholesaler-retailer-consumer
SALES PROMOTIONS
MEANING OF SALES PROMOTIONS:
Sales promotion is used by the business to complement other promotion methods.
Refers to short-term customer-orientated strategies applied by the business to increase the sale of products and services.
PURPOSE OF SALE PROMOTIONS:
To increase and improve the number of products and services sold to customers and increase the sales of products of the business.
To inform existing and new potential customers about the products and services of the business.
Persuade immediate purchases with potential customers.
Determine which sales promotion works best at reaching the target market.
EXAMPLES OF SALES PROMOTIONS:
Free gifts
Buy one, get one free
Bundle discounts
Free samples
AIDA-PRINCIPALS OF ADVERTISING
Attract- Grab the attention of potential customers.
Interest- Spark interest in the product/service
Desire- Develop the desire in the customer to acquire what is being offered.
Action- Induce action which may potentially lead towards purchasing the product or service.
PERSONAL SELLING
MEANING:
Personal selling is a form of face-to-face selling in which the salesperson tries to convince the customer to purchase a product/service.
The salesperson highlights the features of the product to convince the customer that the product would add value to their lives.
EFFECTIVENESS:
Improves customer relationships and customer loyalty because it is an effective marketing communication tool that can be a powerful source of customer feedback.
Increases immediate sales as personal selling is directed at potential members of the target market.
Creates and improves brand awareness with existing and new customers.
Provides detailed demonstrations off the usability of the product with the customer.
PUBLICITY AND THE ROLE OF PUBLIC RELATIONS
THE ROLE OF PUBLIC RELATIONS IN PUBLICITY
Aims to present a favourable image of the business and its products and services.
Plays a critical role in developing positive publicity and minimising the effects of negative publicity on the business.
The public relations function and marketing function are interconnected as they aim to establish and build brand loyalty.
The public relations strive for members of the external stakeholders to view the business in a positive light.
MEANING:
Publicity creates public awareness of the business through media coverage and other forms of communication.
Refers to unpaid communication in the mass media about the business and its operations.
It is often considered to be part of the public relations of the business.
TOPIC 13: PRODUCTION FUNCTION
PLANNING
This process will include the layout of the factory to suit the production system.
It will determine the flow of materials to optimise the process.
It must include decisions on the purchasing of the materials, machinery and equipment.
LOADING
Involves the allocation of every person to a specific task and/or machine.
It is linked to the output required to fulfil orders and the prevention of overloading employees and machines.
ROUTING
Involves planning of the sequence in which the operation will take place.
Management must decide what the best and cheapest way to sequence the production process will be.
IMPORTANCE OF PRODUCTION PLANNING
Aims at decreasing costs and time and increasing output by organising the resources and workplace to maximise efficiency.
DISPATCHING
CORRECTIVE ACTION
ASPECTS OF WORKPLACE SAFETY POLICY
Signature of the CEO
Review date of the policy
Be visibly displayed for all workers to see.
Acknowledge the right of each employee to work in a safe and healthy environment.
SABS: FUNCTIONS
Sets and publishes national standards.
Provides training regarding all aspects of standardisation.
Testing products
Promotes design excellence.
ASPECTS INCLUDED IN TQM
TQM involves every part of the business and quality’s everyone’s responsibility.
Machines and equipment are checked regularly.
All impute are checked thoroughly and discussions are held on how to improve quality.