KCN 400 Mission Statements and Objectives

Copyright Permission

• Course: KCN 400, taught by Mrs. C. Bezuidenhout in the Building & HSD Department.
• 100 electronic copies permitted.
• Titles: Entrepreneurship and How to Establish your own Business, 7th Ed (JUTA) and Business Management for Entrepreneurs 5th Ed (JUTA).
• Permission restricted to unadjusted PowerPoint slides included by the publisher.
• Non-commercial use, distribution, and reproduction allowed under a time-limited emergency license (COVID-19), provided sources are credited and reused snippets link back to the original publisher.

Mission Statement and Objectives

• A mission statement defines a business's unique process, products/services, and customers, focusing on customer satisfaction.
• Developing a mission statement requires answering key questions about customer needs and how the business will meet them.
• Business objectives are goals to be achieved within a set timeframe, serving as progress measurement tools and adjusted based on industry changes.
• The SMART framework guides objective setting: Specific, Measurable, Attainable, Relevant, and Time-bound.

Market Analysis

• Total market potential calculation is crucial for estimating business income, requiring careful estimation to avoid overestimation.
• This involves estimating the total market, competitor market share, and the business's expected share.
• Market segmentation divides the market into demographic, geographic, psychographic, and behavioristic segments.
• Target market selection involves three steps: segmentation, evaluation and decision, and market positioning.
• Market positioning necessitates tailored marketing strategies when targeting multiple segments.
• Calculating market size uses a traditional method, factoring in customer units, average income per unit, income spent on the item and realistic market share percentage.
• A SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) is used to identify internal and external factors affecting the business.

Calculating Income

• Selling price calculation involves identifying manufacturing and sales costs, followed by adding a markup percentage.
• Cost calculation differentiates between variable (fixed per unit, varying in total) and fixed costs (fixed in total, varying per unit).
• It also distinguishes between direct (directly allocatable to product manufacture) and indirect costs.
• Selling price is influenced by competitor pricing, with higher prices justified only by offering superior benefits.

Calculating Expected Net Profit

• A Statement of Comprehensive Income summarizes income and expenditure over a specific period.
• Pro forma statements use estimated figures for financial projections.
• Profitability is determined by subtracting expected costs from (expected sales multiplied by expected selling price). Profit occurs when income exceeds expenses.

Calculating the Break-Even Point

• The break-even point is when all fixed expenses are covered.
• It involves identifying monthly/quarterly/yearly fixed expenses.
• Regular review (e.g., semi-annually) and recalculation are recommended.
• Lowering the break-even volume can be done by lowering direct costs (raising gross margin), controlling fixed expenses, or raising prices.
• The ultimate business aim is profit generation, not merely break-even. Understanding the break-even point aids better resource allocation, cost control, and profit maximization.

Cash Planning: The Cash Budget (Cash Forecast)

• A cash budget forecasts future cash receipts and payments over a specific period (month, quarter, or year).
• Sustained profitability alone is insufficient; consistent cash flow for daily business operations is essential.
• Cash budgeting helps plan short-term credit needs, present financial planning to banks, predict potential cash shortfalls, and identify payment schedule issues.
• Consistent budget checks involve comparing budgeted to actual figures using ratios or financial statements.

Summary

• The viability study is a crucial first phase in business planning.
• Market potential analysis involves market research to identify customers, determine customer needs satisfaction, analyze competitors, and establish business mission and objectives. Also includes conducting a market analysis.

This quiz covers the fundamentals of crafting mission statements and setting business objectives. It highlights the importance of customer satisfaction and the strategic process of aligning business goals with customer needs. Test your knowledge on the unique processes and products that define successful businesses.