Business Studies Grade 11 PDF

Business Studies Grade 11 Management: 1. Management is the process of accepting accountability for the innovative application of resources to...

Business Studies Grade 11 Management: 1. Management is the process of accepting accountability for the innovative application of resources to achieve business goals. 1. Human Resources 2. Capital 3. Natural Resources 2. The textile industry uses the most water & oil. Levels of Management: Top Level: Middle Level: ☼ Small group of people. ☼ responsible for certain functions (8 business functions) ☼ Plan business future. ☼ Tactical decisions to make sure strategic plans are carried out. ☼ Long-term strategic planning ☼ Tactical – specific goals. ☼ CEO or Board of Directors ☼ Middle level managers monitor all activities in department. ✓ Vision: The future image of the business(dream) Vision: The future image of the business(dream) ✓ Mission: the broad purpose of the business is to achieve the Mission: the broad purpose of the business is to vision. achieve the vision. ✓ Objective: More specific goals include a timeline & can Objective: More specific goals include a timeline & can measure it. measure it. ✓ Strategy: general plan to implement objectives Strategy: general plan to implement objectives Lower Level: ☼ Specialised smaller functions. ☼ Implement the goals of the middle level & report back. ☼ Take routine decisions. ☼ Control everyday activities. ☼ Short-term planning – daily tasks Management Functions: Planning (5W 1H Method) 1. Why? Planning 2. When? 3. 4. Who? What? Leading 5. Where? 6. How? Organising Control  Principles of effective planning: 1. Rational process aimed at the future. 2. Flexible 3. Funnel approach. 4. Planning takes place at all levels of the business. Steps in the planning process: 1. Establishing objectives 2. Considering alternatives 3. Deciding the planning period 4. Implementing the plan 5. Control the process. Organizing: 1. Process to utilize resources to reach goals and objectives. 2. Define instructions, power & responsible channel. Steps in organizing steps(process) 1. Consider objectives. 2. Identify and group activities. 3. Assign duties. 4. Delegate authority. Leading: 1. Process to inspire people & guide them. Leaders provide: Guidance Inspiration to workers To work to the best of: Their capability Good communication Channels so workers are always informed. Leadership Styles: A manager has a position inside the business – the leader will influence the situation he finds himself in. A manager has formal power – leader had informal power. Autocratic Leaders: Democratic Leaders: Laissez Faire Leader: - They instruct. - Uses joint decision- - Doesn’t exercise control - Don’t ask for input. making. over the workforce. - Seems negative but - Gets team to get involved - POS – if workers are highly very positive to get in the whole process. competent & creative. quick results. - Takes time. - NEG – create uncertainty.  Control: 1. Match the actual performance against the predetermined: Standards Ask a lot of questions & feedback. Do spot checks. Take corrective action. Extra functions done by management: 1. Good: transfer, receiving & Communication understanding 1. Take all factors into consideration Decision-making before making a decision. 2. Factors from all environments 1. Distribution of work to subordinates Delegating 1. Inform all departments what is Co-ordination expected of them to make sure there is synergy in their work schedules. 1. What is misconduct & what are the Discipline consequences. 1. Encourages workers to perform to the Motivation best of their abilities. 2. Ability = Willingness = Performances Entrepreneurship Characteristics: 1. Initiative 2. Risk Taker 3. Planner 4. Experience 5. Credibility 6. Persistence 7. Problem-solver 8. Self-confidence. Difference between manager & entrepreneur: Manager Entrepreneur Business already exists. Build your own business Employee Owner No financial risk All risk Salary Profits Execution of plans. Innovates  Ethics & Professionalism Ethical Theories Principal Based Theory A set of values or rules determine if an action is ethical or not. Consequence Based Theory The outcome of the actions will determine whether the action is ethical or not. Utilitarian Theory Focuses on the outcome of the action but states that the actions are justifiable if most of the group benefits Narrative Theory They use stories/folklore to illustrate to people what is acceptable behaviour or not. They do not take a stand on what is right is wrong. Only the listener/reader to come to their own conclusion Virtue Based Theory People are judged on their reputation rather than the individual action. Deotology If the person upholds their obligation towards another person, the action will be ethical. FYI: Batho Pele framework – principles for ethical behaviour for public servants. Code of Ethics vs Code of Conduct Code of Ethics: Describes the principle that a business considers as important when decisions are made. Code of Conduct: States the conduct that will prevent racism, abuse of company property and sexual abuse etc. Unethical Behaviour: How to ensure the success of the codes: Bribery, corruption & fraud ❖ Give the employees the opportunity to give their input. Conflict of interest ❖ Management must lead by example. Insider trading ❖ Write the code in easy language, so it’s easier to understand. Receiving gifts ❖ Provide training. ❖ Proofread the document. Intellectual Property ❖ Make sure employees know what the consequences are of Whistle blowing (not misconduct. allowed to name the snitch) Implications of unethical business practices: Running of own private - Atmosphere of mistrust. business while working - Embarrassment for business & individuals. Use of company resources - Business reputation suffers. for personal use. - Legal Action - Large fines for the business - Lower profits may lead to investors losing confidence in business - More regularities introduced to try & govern behaviour.  Stakeholders: 1. Shareholders 2. Employees 3. Customers 4. Suppliers 5. Government 6. Broader community 7. Management Advantages of being a good corporative citizen: 1. A good image – less work for PRO. 2. Improved relations with stakeholders. 3. People want to work for you. Corporate Social Responsibility The primary goal of business: The primary goal of the business is based on the vision & mission statement – to make a profit. The profit motive should be balanced with other, less obvious interests such as: environmental, economic, & social responsibility (to maintain primary responsibility) Primary responsibility: The business’s obligation to look after the interests of stakeholders who are directly affected by the success of the business. Secondary or Broader responsibility: Stakeholders who are indirectly affected by the business’s activities. Blowfield & Murray suggest a different approach: Higher level of responsibility – business needs to build a brand Discretionary with values that all their Relationship activities include these values. Businesses should make Ethical Relationship decisions that don’t harm stakeholders & environment. Legal Responsibility Business should obey the laws of the country. Economic Basic level – selling products or Responsibility goods at a profit to benefit employees and shareholders. Arguments For Corporate Social Responsibility - Visibility increases in the community. - Positive business image – Positive feeling from customers - Recruitment tool – attract employees - Stronger team – shared values lead to greater commitment - More satisfied employees – knowing they make a difference - Valuable contacts with other businesses - The community supports the business by purchasing products and/or services therefore contributing to the business’ profitability - CSR greatly benefits the community as unlike charity, it is sustainable and more of a permanent nature. - Improves the welfare of society. - Improves the standard of living of the community. - By creating jobs it alleviates the proverty - Creates employment & helps to develop infrastructure. Arguments Against CSR - Legal requirements create red tape. - Difficult to measure CSR. - Bad for business image if rating requirements are not complied to. - Implementation and monitoring can be problematic. - Constraints on resources money could have been invested more profitably. - Businesses already pay tax to the government + CSI = double contribution. - CSR is allowing the state to shift its responsibility - CSR sometimes leads to businesses misleading their shareholders about their environmental practices – greenwashing - Communities may avoid taking responsibility for their own upliftment leaving it to CSI. - Some businesses may help communities for commercial benefit only. - Some CSR programs are a form of welfare and have no sustainability. A community can become dependent on CSR initiatives.  Stakeholders 1. 2. 3. 4. 5. 6. 7. 8. 9. According to Blowfield & Murray – stakeholders should be plotted on a graph to help the business to understand the stakeholder’s interest in the business and the business’s responsibility towards it. Business Influence LOW HIGH Signaficant Insignificant Interest Low Medium priority for priority for attention attention Stakeholders’ Medium High Priority for Priority for attention attention  Designing, implementing & reporting on a CSR Program CSR program = strategic plan. An inventory of skills and Management must resources needed to Implement the CSR communicate the need for implement the programme project(s) CSR across the business. is drawn up. Employees throughout the Management should create business should brainstorm a CSR policy for the Moniitor CSR initiatives to come up with initiatives business for CSR Management needs to Management should link communicate the CSR CSR to business success Make necessary changes or policy throughout the factors (make it part of go back to brainstorming business and ensure buy-in performance appraisels.) takes place at all levels. Implementation of a CSR strategy CSR Strategy Concept Of Citizenship Strategic Intent Leadership Structure Management Stakeholder Relationships Transparency CSR Reporting ❖ Business Profile – Vision & Mission of the business The size & operations The market in which it operates The overall brand of the business. ❖ Board Commitment Statements from CEO to the managers on their commitment to CSR. ❖ Environmental & Social Business Policy Where the business does have an impact How they handle social issues. & how results are measured ❖ Management Systems: internal & external audit systems  Forms of Ownership Sole Trader Characteristics Advantage Disadvantage Formation Procedures 1. Easy & not expensive ☼ Owner must work to start because the harder business does not have to register. 2. Owner receives all profit Legal Entity ☼ The owner is the legal If a business is registered the entity therefore business becomes a carries all the risks separate legal persona Continuity ☼ The business has no If the business is a legal continuity if the entity, it will have continuity owner dies the of existence. Meaning the business dissolves. business exists as an entity and functions independently of the owner Liability ☼ The owner has Limited – his/her personal unlimited liability – belongings cannot be used to private possessions pay the debts of the business may be sold to settle Unlimited- his/her debt of business belongings can be used to pay the debts of business Tax Implications ☼ Owner is taxed on ☼ The higher the If the business is the legal profit of business income the higher the entity the business is tax bracket responsible for paying tax, if not the owner is. Capital Requirements ☼ Own or borrowed ☼ Growth is limited Based on the size and nature money because the owner is of the business. the only one who contributes. Management & Control ☼ Owner makes all the ☼ No one to bounce The law has certain demands decisions. ideas off if a business is registered. ☼ Gains experience in all aspects of business ☼ Easy to adapt to changing circumstances  Partnership Characteristics Advantage Disadvantage Formation Procedures ☼ Easy & not expensive ☼ If there is no to start because the partnership business does not agreement in place it register. could make ☼ Min – 2 disagreements Max – 20 difficult to solve. ☼ May enter into partnership agreement (verbal, written, tacit – implied) Legal Entity ☼ The partners are the If a business is registered the legal entity, business becomes a therefore, carry all separate legal persona the risks Continuity ☼ The business has no If the business is a legal continuity if one of entity, it will have continuity the partners or owner of existence. Meaning the dies or leaves - the business exists as an entity partnership dissolves and functions independently & a new partnership of the owner agreement must be set up. Liability ☼ The partners have Limited – his/her personal unlimited liability – belongings cannot be used to the partners are pay the debts of the business jointly and severally Unlimited- his/her liable for debts. belongings can be used to pay the debts of business Tax Implications ☼ Partners are taxed on If the business is the legal the profits of the entity the business is business responsible for paying tax, if not the owner is. Capital Requirements ☼ More partners can Based on the size and nature contribute capital to of the business. the business. Management & Control ☼ Joint decision making ☼ Makes decision- The law has certain demands gives better results. making slow as more if a business is registered. ☼ Division of workload people must be and responsibilities consulted. ☼ The agreement is based on utmost good faith – a partner binds the co-partners by their actions.  Public Company Characteristic Advantage Disadvantage Formation Procedures ☼ Register with the CIPC ☼ Annual financial (Companies & Intellectual statements must be Property Commission) audited. ☼ Pay Fee ☼ Company must appoint a ☼ Complete a Notice of company secretary, Incorporation internal auditor ☼ Register a Memorandum committee and an of Incorporation (MOI) external auditor. Founding ☼ Takes time to register & is document expensive Stipulates different shares. Describes duties and responsibilities of directors. ☼ Minimum shareholder is one. ☼ Name must end in LIMITED Ltd. ☼ Not the same as any other business/may not pretend to be associated with any other person or organization. ☼ Issues a prospectus. Written invitation to the public to buy shares. General information on the company Legal Entity ☼ The business is a legal If a business is registered the entity therefore carries all business becomes a separate legal the risks persona Continuity ☼ The business has If the business is a legal entity, it continuity if one of the will have continuity of existence. shareholders dies or sells Meaning the business exists as a their shares the company business exists as a entity and continues functions independently of the owner Liability ☼ The shareholders have Limited – his/her personal limited liability therefore belongings cannot be used to pay they can only lose their the debts of the business capital investment in the Unlimited – his/her personal company belongings can be used to pay the debts of the business Tax Implications ☼ The business pays If the business is the legal entity the company tax business is responsible for paying tax, if not the owner is. Capital Requirements ☼ The company can invite Based on the size and nature of the the public to buy shares in business.  the business by issuing a prospectus Management & Control ☼ At least three directors ☼ Must be a separation The law has certain demands if a ☼ The company is managed between owners and business is registered by a Board of Directors management. ☼ Directors have fiduciary ☼ Annual meeting for duty meaning they must shareholders act in the best interest of the company and no self interest JSE – Johannesburg Stock Exchange ROI – Return on investment – dividends. Blue chip shares – shares that stay financially stable over a period. Private Company Characteristic Advantage Disadvantage Formation Procedures ☼ Register with the CIPC ☼ Pay fee. ☼ Complete a notice of ☼ Takes time to register and incorporation. is expensive. ☼ Register a MOI ☼ Must indicate that no shares will be available to the public. ☼ Minimum 1 shareholder ☼ Name must end in (Pty.) Ltd Legal Entity ☼ The business is the legal If a business is registered the entity therefore carries all business becomes a separate the risks. legal persona Continuity ☼ The business has If the business is a legal entity, it continuity if one of the will have continuity of existence. shareholders dies or sells Meaning the business exists as a their shares the company entity and functions continues independently of the owner Liability ☼ Shareholders have limited Limited – his/her personal liability therefore they can belongings cannot be used to pay only lose their capital the debts of the business. investment in the Unlimited – his/her personal company. belongings can be used to pay the debts of the business. Tax Implications ☼ The business pays If the business is the legal entity company tax. the business is responsible for paying tax, if not the owner is. Capital Requirements ☼ As mush as the shareholders can invest. Management & Control ☼ At least one director. Market Environment The market is any place (physical or electronic) where goods and services are sold. An environment scan can be done using the O and T of the SWOT analysis and Porters’ Six forces. Porters Six Forces is based on: Competitors with the same product Competitors with a similar product Competitors who may enter the market. Suppliers of products Buyers who may buy Complementary products Porters 6 forces 1. Level of rivalry (current C) What are they doing R and W? Gives you O and T. Watch out for the following: ☼ size of the business. ☼ market share ☼ quality of product and service ☼ brand loyalty ☼ pricing of products and services ☼ convenience of location and distribution ☼ trading hours 2. Threat of new entrants A business needs to build barriers to prevent new businesses from entering the market ☼ Barriers: Bigger retailers will negotiate with the management of the malls to make sure not too many competitors can enter. Large amounts of money spent on advertising and marketing. Government creates barriers. Tax on imported goods acts as a deterrent. 3. Availability of substitute products ☼ A substitute covers the same need. ☼ Simba vs Willards = different brands ☼ Butter vs Margarine = substitute ☼ Big challenge: Not only does the business have to contend with competitors with the same products but also with indirect competitors. 4. Power of suppliers ☼ Any business needs a supplier that supplies at a good price, timely, good quality, right quantity. ☼ If no stock is available, then: Producers cannot manufacture without raw materials – no sales – no profit. Difficult to negotiate prices with no stock. You may lose customer goodwill. 5. Power of the buyer  ☼ Different buyers??? ☼ When the final customer is your last customer: look out for the following: Type of product e.g. specialty vs convenience goods Is the customer brand loyal? Price sensitivity – pay more for delivery or guarantee. Snob value – an image associated with a product. 6. Power of complementary products ☼ When the use of one product is interrelated with another product e.g. bread and butter e.g. toothpaste and toothbrush e.g. coffee and milk e.g. fish and chips Teamwork and Conflict Management A good team depends on: 1 Each member needs to know his duties, rights, and responsibilities. 2 There must be team synergy = combined output of the team is more than their combined individual efforts put together. 3 Each should give and receive. 4 Respect each other’s opinions. 5 Communication – clear instructions and constant feedback. 6 A strong leader with flexible leadership styles. Stages of team development: Forming 1 Roles of each member still not clear 2 Get to know each other – work experience etc to see where they will fit. 3 Test boundaries – task roles. 4 Managers must give clear guidelines on the purpose of the team and, the roles of each member. Storming 1 Personal relationships start forming in the team – which could lead to cliques. 2 Members compete for positions in the team and challenge each other. 3 Managers must offer guidance on overcoming differences and working towards a common goal. Norming 1 Members settle in their roles and work together. 2 Open communication – constructive criticism 3 Members communicate more freely on a social level. 4 Manager encourages members and celebrates success. Performing 1 High awareness of what should be done. 2 Roles are more flexible, and members take responsibility for their contributions. 3 Manager now supports individual members who may be struggling.  Adjourning 1 Task is finished – the team is terminated. 2 Roles are more flexible, and members take responsibility for their contribution. 3 A feeling of loss – mourning. The Belbin theory on team dynamics: Team dynamics – interaction between team member, their personalities and working relationships. Can either be positive or negative. Belbin Theory: - Nine different roles are classified into three groups. Thinkers: 1. Evaluator: monitors situations and looks for opportunities 2. Plant: creative person, who thinks outside the box to solve problems. 3. Specialist: has a valuable skill and shares with the group. Task orientated: 1. Finisher: very conscientious and fixes mistakes to deliver on time. 2. Implementer: converts ideas into practical actions. 3. Shaper: loves pressure and pushes to overcome obstacles. People Orientated: 1. Resource Investigator: loves talking to others. Networking and building connections. 2. Team Worker: listens to others and keeps harmony. 3. Coordinator: a natural leader who knows when to delegate. Conflict: Reasons for: ❖ Bad communication leads to miscommunication leads to conflict. ❖ Lack of resources to do the work. ❖ People not respecting rules. ❖ Power struggle between members. ❖ Uncertainty about roles ❖ Not understanding cultural differences. ❖ Different personalities. ❖ One member not performing causes frustration. Functional Conflict: A conflict handled in a manner that has a positive outcome. Advantages: Arguing may lead to positive change when developing new ideas. People with little in common start talking to each other. May help to build a group identity instead of us vs them. Investigating the reasons for disagreements – problems are identified. Conflict leads to better communication. Dysfunctional conflict: People are obsessed with being right and lose focus on goals. A fighting environment leaves people with low morale and less job satisfaction. Resources such as time are wasted on petty arguments. Creates a negative working environment when fighting is the norm. Verbal disagreements may lead to aggressive behaviour. Conflict management skills: Learn to say no – to explain why it cannot happen now. “It is not my job” is not the answer unless somebody is consistently slacking. Eat right, exercise, relax and enough sleep – all contribute to better skills. Crisis management: 1. Time management – incapacity to reach deadlines creates conflict. 2. Prioritise tasks – most important first. 3. Break large projects into smaller projects. 4. Explain to people why change is necessary. 5. Find the positive in the new situation. 6. Don’t be shy to ask for help and also offer help. Research and presentation of business information: Barriers to business communication: 1. Language – slang, jargon, acronyms. 2. Cultural – knowing the belief system of others. 3. Physical noise – pops ups. 4. Physiological factors – hungry, tired, sick? Verbal communication: 1. Telephonic – handled without delay. 2. Business letters – answered on letter hand of business. 3. Emails, SMS, Twitter, FB – do not answer or upset WAIT. 4. Business magazines (these days mostly digital) 5. Oral presentations – make sure you understand the question. 6. Business report Non-verbal communication: 1. Body Language 2. Graphs, tables, diagrams & illustrations. Primary research: 1. Field research where original or new data is collected. 2. Done as market research in businesses to determine the wants and needs of the target market. 3. Protocol: (Correct procedure) ☼ Define the research topic in writing. ☼ Do secondary research first to find what has been done on the topic. ☼ Choose a research methodology e.g. observation, questionnaires, experiments. ☼ Consider ethical questions. Harmful? Permission from subjects ☼ Research sample must be sufficient.  ☼ Timeline must be clearly outlined – start – finished. Issues to keep in mind: ☼ Vague questions ☼ Sensitive questions ☼ Leading questions ☼ Double-barreled questions ☼ The Halo effect – the quality of a person is transferred to an object. Secondary research: ☼ The researcher looks at what other researchers have said on the topic and formulates his own opinion. ☼ PLAGIARISM!!! ☼ Using one source is not research. ☼ Do not generalise. Risk Management: Risk can be seen as: Mere uncertainty A Threat An opportunity Risk Profile: ❖ The degree that a business is willing to accept risks in pursuit of achieving its goals. ❖ It is directly related to the strategy of the business. Risk Culture: ❖ Refers to the collective attitude of the business in accepting risks. ❖ Depends on if risk-taking or risk avoidance is rewarded. Types of risks: ❖ Operational risks – risks that occur during normal operations. ❖ E.g. processes, people, data. ❖ Country Risks – locating a business in a specific country. ❖ E.g. Political events, instability ❖ Strategic Risks – poorly formulated mission, vision as well as unrealistic goals. ❖ Environmental risks ❖ E.g. Floods/drought, traffic, high crime levels, increased levels of unemployment, obsolete equipment, level of competition. ❖ Financial risks ❖ Credit risk – debtor not paying. ❖ Fluctuations in the exchange rate. ❖ Interest rate increases ❖ Solvency risks – liabilities exceed your assets. ❖ Reputational risk – damage because of consumer complaints, environmental damage caused by business. Risk Assessment: Identify The Risk: Using the following methods: ☼ Risk workshops – internal or external. ☼ Benchmarking – best practice ☼ Auditing – internal or external ☼ Stakeholder consultations – if a third party has been identified. ☼ Scenario planning – what if? ☼ Surveys – asking questions internally and externally. Descriptions of the risk: Describe the risks in detail to ensure everybody understands the risk issues and their origins. Estimation of the impact of risks Estimation tools are: - Pro, Cons chart. - Cost/risk-benefit analysis. - Decision trees. - PESTLE - SWOT Plot on an estimation matrix. Risk Management policy. Develop a comprehensive policy. Communicate with all parties. Implement it throughout the business. Risk Response. Avoidance – prevent or limit the activities that lead to risk e.g. not investing in RSA. Reduction- having strict control mechanisms – restricting the possibility of the risk happening. Acceptance – no action to stop or limit the risk – totally beyond control. Risk reporting: Report to internal stakeholders – people involved in decision-making. Report to external stakeholders – the public.  Marketing STRATEGIC ROLE OF MARKETING (Top level management): Strategic planning involves: 1. Formulating a vision for the business 2. Translate this vision into a mission statement 3. The strategic role of marketing is creating and supporting a strong and positive brand identity in the market through a well-planned and well-implemented marketing strategy. Marketing involves: 1. Building a brand image in the customers’ mind. 2. Helps remind customers about the products and services on offer. 3. They create a marketing buzz around a product and service. 4. Engage customers to get feedback and therefore build a stronger brand (Interactive). Marketing Strategy Process: 1. Environmental Scan 2. Define the target market and the USP (Unique Selling Point) 3. Determine the marketing budget. 4. Implement the marketing mix. 5. Evaluate the process and take corrective action. 1. Environmental Scanning External Industry Analysis scan the industry the business is operating in. Use PESTLE to identify threats and opportunities. Competitor Analysis Get an overall picture of all competition in the market. Evaluates the competition’s S & W and impact on the business. Porter: Level of rivalry/Threat of new entrants and substitute products. Market mapping: Visual representation of the trends in the market. When the business knows its own position in the market all marketing efforts will be geared to get a competitive advantage. Customer Analysis Porter: Power of the buyer. Current and potential customers whose needs aren’t satisfied. Identify the potential market segmentation (LSM) 29 variants. Purpose of LSM: To get an understanding of the LSM groupings. To assess how these groups spend their money. To group customers with similar spending patterns. Internal: Inside the business: 8 business functions. Tools: SWOT, Resource-based/Value chain Step 2: Target market and USP - WHAT do the target market need and WHY they would buy our product? - Factors of the Unique Selling Proposition (Point) are: Costs Brand identity Utilisation of technology Quality Step 3: - Marketing is not an expense to minimise, it is an investment that will yield long-term benefits. - The amount of money spent depends on the methods of marketing. Step 4: Marketing mix: Traditional 4 P’s: 1. Product 2. Price 3. Place 4. Promotion Service orientated 3 P’s: 1. People 2. Physical evidence 3. Processes Types of Products: 1. Convenience goods Customers are not brand loyal. Want to buy as speedily as possible E.g. Bread and milk. 2. Select goods Customers only buy after considering price, quality and brand. E.g. Jewellery & clothing. 3. Specialty goods Customers take time to make informed decisions – once in a lifetime. Customers very aware of brands E.g. Cars, expensive tech products 4. Services Intangible – direct e.g. hairdresser or part of overall product e.g. Debonairs. Life Cycle Of A Product: Start-up Phase: Product is new - few customers have one because of high cost. Decline phase Maturity Phase End of life cycle - People know the people do not buy. product and continuosly. Growth Phase People are still Withdrawal phase transitioning to new Product not available on product - still too the market. expensive Packaging of products: ☼ Protects the product. ☼ Makes it possible to stack. ☼ Helps to identify the brand. ☼ Gives the consumer information of the ingredients. ☼ Helps to target different sections of the market. Price: Monetary value of a product. When deciding the price consider: 1. Will the customer be willing to pay the price – consider snob value. 2. How does the price compare to the competitors’ price. 3. How price sensitive are consumers – consider price changes to necessities and luxuries. 4. How available is a substitute product – comparing quality & price. Price Strategies: Market Penetration Business is prepared to sell product at a low price to get customers to buy, even at a loss. Price will be increased as consumer get familiar with product. Leader Pricing The business decreases the price of some products to get consumers to come to the shop. Promotional Pricing Discounts for a special event or increase because of a special event. Bulk discount buy large quantities. Prestige Pricing Expectation of paying more – snob value.  Place Distribution of the product 1. The manufacturer can sell directly to the consumer. 2. Manufacturers can sell to retailers to sell to the consumer. 3. Manufacturers can sell to the wholesaler, who sells to the retailer, who sells to the consumer. 4. Can make use of intermediaries. 5. Consider that the choice the business makes must be convenient for the consumer. Options: 1. Intensive distribution – sell to as many retailers as possible e.g. bread and milk. 2. Selective distribution – make the product available at exclusive retailers. 3. Exclusive distribution – products only available at specialist shops. (normally there’s some specialisation involved) Promotion Principles for a good marketing communication strategy: 1. Only good quality products may be advertised as good quality. 2. An in-depth knowledge of the product before selling features that do not exist. 3. A unique and memorable design 4. It is illegal to criticise the competition in the advertisements. 5. Stay in the budget – expense or investment? 6. Choose the correct advertising medium. Impact of social media: 1. Gives consumers the power to voice their opinions. 2. Business needs to build a presence on social media. 3. Way to promote online sales. 4. Competitions on social media entices consumers to interact with the brand. Marketing mix Advertisements 1. Impersonal massage sent to a wide audience – can be ignored 2. Business pays for the advertisement and has full control over its contents 3. The message has to be repeated many times for the consumer to react Advertising principles ☼ Engaging – can it attract the consumers’ attention ☼ Credible – facts in ad – convincing ☼ Leaves. An impression – lasting ☼ Does it prompt the consumers into action ☼ Is there integration with other promotional messages ☼ Is the brand still number 1 Personal selling ☼ Interaction between buyer and salesperson ☼ Buyer sometimes feel obligated to buy because of the efforts of the salesperson Sales promotion ☼ Sampling of products, discount coupons, buy one get one free entices buyers Too many sales portray the idea that the business is desperate, and the consumer questions the quality Publicity ☼ Has a higher degree of credibility – not being for by the business ☼ Business has no control over publicity ☼ Internal publicity – image of the business, attitude of staff, display of products People ☼ People always part of sales except for vending machines ☼ A lot of businesses sell the same product at the same price – difference in service The staff morale, attitude and skill will have a big impact on the service– face of the business The consumer perception of service directly influences their satisfaction with the product Quality of after-sales service determines consumer loyalty Physical evidence ☼ Appearance of the business and staff ☼ Business cards, brochures, signage, websites ☼ Differs from business to business Process ☼ Refers to the operating systems and procedures that make the buying experience as pleasant as possible ☼ Quickness in greeting, helpfulness, time spent in queues ☼ Every employee needs to know what to do when to do it, and how to do it Influences on marketing CONSUMER PROTECTION ACT Purpose: to protect the rights of the consumers Rights included in CPA: Right against discriminatory marketing practices No preferential treatment for a specific group When pricing no discrimination based on geographical location, gender or race Right to privacy Right to refuse unwanted direct marketing in whatever form Right to choose If the sale was a result of direct marketing – cooling off period of five days to allow the consumer to cancel the transaction No automatic renewal of contracts – if contract is over – month to month kicks in Supplier cannot charge consumers for quotations or cost calculations  Consumer has the right to return defective goods within a reasonable time frame and request a full refund Right to disclosure of information Language should be easy to understand by the target market Display prices in full view of consumers and right to demand the lower price if two prices are displayed Right to fair and honest dealing Supplier should not deceive or mislead consumer with advertising Overbooking and overselling is not allowed Right to fair value, good quality and safety May return good within 6 months if goods are of inferior quality, unsafe or defective The supplier must refund, replace or repair Implied warranty of quality and safety of goods and services. Can be held accountable Ethical vs unethical marketing Role of Advertising Standards Authority Develop a code of advertising with which all advertisers must comply Unethical advertising Advertising false needs Giving products deceptive names Selling second hand goods as new Competitive advertising Unacceptable language, cultural pollution Branding ☼ The name of the business ☼ The image of the business ☼ Impression that the staff leave when interacting with customers ☼ The values and beliefs of a business = Combination of the trademark and name of the business Types of brands ☼ Manufacturers trademark – the same trademark is used to brand all products e.g. Toyota bakkies, cars, trucks ☼ Individual trademarks – nestle manufactures a variety of products but under different trademarks e.g. chocolate husky dog food, Worchester sauce. ☼ Retailer trademarks – pick n pay no name Brand extensions ▪ An existing brand is used to launch a new product Brand stretching ▪ An existing brand is used as a platform to launch a product into an unrelated market e.g. virgin Advantages of a strong brand for the consumer  ❖ Helps the consumer to identify the product ❖ Consumers feel safe when buying a particular brand ❖ Some brands have the attraction of status/prestige ❖ Brand name gets known as a guarantee of quality – advertising leads to higher sales – reduce costs as brand is already known ❖ Businesses could charge more for a successful brand ❖ An established brand makes it easier to add new products to the brand ❖ Brand preference helps the business to dominate a segment of the market ❖ Illiterates see an image and associate it with the brand ❖ If a trademark is registered no other business may use it – protects business from imitation Factors contributing to strong brand ☼ Innovation not only being new but also: 1 functionality of the product 2 packaging of the product 3 delivery and distribution of product 4 pricing structure 5 Design of the website ☼ Clear Identity 1 the brand should represent something unique to the customer 2 the customer should have a clear picture of what the brand represents ☼ Distinctive Voice 1 the brand has strong values and communicates clearly what it stands for 2 the internal voice of the staff must be clear – live the brand 3 has distinctive ears – too-way communication – listening to the customer ☼ Relationship with Customer 1 the customer needs to feel that there is a strong relationship between the brand and them the brand delivers on their needs and wants Franchising A contract or agreement between the franchisor and the franchisee where the franchise agrees to distribute the product and/or service in line with predetermined terms and conditions From a marketing point of view: o An already successful business package is sold – creates more awareness in new areas o Franchise agreement allows for the original purchasing price, royalties (5-10%), and a monthly advertising fee o The franchisor must provide training on all fronts – if the franchise fails the whole franchise gets a bad name o Lot of competition in the franchise market therefore your marketing message must stand out  Public Relations The management of communication between the business and stakeholders Goals: 1. Pre-empt negative publicity by honest and clear communication with stakeholders 2. Make news – create buzz about new products or events 3. Reactive – apologise for the problem and turn the negative into positive Main goal: 1. Create a positive image of the business For PR to be successful it needs to be: 1. Planned o Be aware of all internal and external factors that could affect communication o Plan communication to generate positive change 2. Deliberate o Communication is internal and very specific 3. The message should: o Gain an understanding of the perceptions of stakeholders o Influence the desired group by providing correct information o Collect feedback to see if changes have to be made A management function: o PR must form part of strategic planning – useful to solve problems and conflict Involve two-way communication: o The business needs to listen to the stakeholders concerns or demands and respond in an effective manner. Promote Performance: o PR has to make sure people buy into the idea and to achieve this they need to properly communicate company policy. Be in the interest of the public: o Mutual benefit to the business and public Stakeholders Internal: o Employees are seen as brand ambassadors o Shareholders are the owners of the business – always need to be informed External: o The media - positive or negative o Customers – word of mouth o Suppliers – need to be ethical  o Distributors – make a huge impact on the image of the business o Financial Institutions – need to be informed of financial developments PR methods o Use media such as newspapers, magazines, radio and tv o Publicity stunts – Wimpy free coffee if you vote. o Sponsorships of big events o Charity drives o Public speaking – visit schools, trade shows o Social media – trending PR Process R A C E – maximum impact of the message ☼ Research – contributing factors are analysed then decide on appropriate action. ☼ Action – refer to the policies of the business before acting ☼ Communication – when do you tell relevant stakeholders about the problem/situation? ☼ Evaluation – the success of the PR drive and adjust Marketing vs PR 1. Objectives ☼ M – sell product through distribution at a price the consumer will accept as fair ☼ PR –build relationships with stakeholders 2. Target Market ☼ M – the consumers at which the product aims ☼ PR – broader stakeholders 3. Activities ☼ M – handles the position and sales of the product ☼ PR – shaping and promoting the business’ values 4. Integrated Marketing Communication Function ☼ Combining marketing and PR when selling the product to a given segment ☼ Reinforce the business’ image and brand