Business Notes PDF

Business notes Term 1 Lecture 1 Purpose of business ○ To fulfil wants and needs ○ Ergonomic empowerment ○ Tangible vs intangible products Can be seen and touched Cannot be touched but can be bought to satisfy wants and needs ex se...

Business notes Term 1 Lecture 1 Purpose of business ○ To fulfil wants and needs ○ Ergonomic empowerment ○ Tangible vs intangible products Can be seen and touched Cannot be touched but can be bought to satisfy wants and needs ex services ○ Maslow hierarchy of needs Basic: Physiological, safety, Psychological: belongingness and love, esteem Self- fulfilment: self-actualization Cognitive, aesthetic, transcendence How businesses & society depend + influence one another Economic problem ○ How to satisfy wants and needs with limited resources? Factors of production ○ Agriculture Natural resources Cannot be increased or reproduced ○ Labour Human resources  Talent and skill paid by wages High supply of unskilled labour and shortage of skilled labour Size of pop, level of education and training, proportion of wonder and retirement age ○ Capital Money and assets Used to further production of final products Long life span- used over again in production process Owners of capital are rewarded in form of interest “Human Capital” knowledge, experience, attitude, skill ○ Entrepreneurship Combining and co=ordinating the factors of production Collective capacity of entrepreneurs- individuals who accept the risks involved in providing products and services for society Sectors in industry ○ Primary sector: natural resources, raw/ unprocessed ○ Secondary sector: manufacturing sector, raw materials processed ○ Tertiary sector: service, distribution of products Types of organisations ○ private/ business organisations ○ Government organisations: national, provincial, local ○ Non-profit organisations Business management ○ Planning Starting point  Objectives are decided/planned in advance ○ Organising Goals and objectives are set Group resources ○ Leading Possess of motivating staff- influence and inspire ○ Controlling Ensure results are achieved Lecture 2 Economic systems - by which societies/governments organise and distribute available resources, services and goods Economic systems ○ Market economy Private businesses Freedom of starting businesses Supply and demand ○ Mix economy ○ Command economy Owned by government Government regulation Price control Market economy - capitalism ○ “Free market”/ “free enterprise” ○ Private organisations seeking profit ○ Individuals possess assets and earn profits ○ Allocation of resources is determined by the free markets ○ Freedom of choice ○ Limited state interference ○ Competition  ○ Inequality ○ Eg. US, Hong Kong, Singapore, New Zealand and Switzerland. Command economy - communism ○ Government controls production and distribution of products and services ○ Centrally directed economic system ○ State owns and controls resources of production ○ Individuals don’t own property with the exception of domestic assets ○ No land, factories or equipment owned by individuals ○ Limited choices of products and services ○ No profit motive and competition ○ Prices controlled by governments ○ Resources are rationed per individual ○ Government are able to quickly mobilise economic resources ○ Eg. China, Cuba, North Korea - closest to command economies Mixed economies- socialism ○ Compromise between pure Market Economy and a pure command economy, combines elements ○ Governments control certain sectors - principle industries and resources Roads, electricity, major manufacturing plants, health services, energy ○ Smaller sectors of trade and consumer goods to individuals ○ Value free enterprise, while providing state infrastructure and social welfare ○ Synthesis of socialism and capitalism that most modern economies follow ○ Private and public enterprises co-exist ○ Eg. China- employs private initiative to help grow state intervention in some industries South africa ○ Market and socialist system - controlled free market Lecture 3 Business Ownership types (pg 61-67) 1. Sole proprietorship 2. Partnership 3. Company Sole proprietorship ○ Sole trader - business is owned by one person ○ Uncomplicated ○ simple/ small business concept ○ Has no legal personality ○ All assets belong to owner ○ Owner has direct control and authority ○ Limited possibilities for acquiring capital ○ Transfer of ownership is simple ○ Limited continuity - Procedure for establishment Must be given a trade name - register with authorities Local authorities issue trading licence for certain businesses Not necessary for informal businesses - Advantages Simple to establish Doesn’t have to comply with particular legal formalities (Name and licence) Owner has complete control All income belongs to owner - entitled to 100% profits Owner has personal interest in business - reap benefits of hard work  Easy to close/end/transfer ownership - Limitations Owner responsible for all losses suffered “Unlimited liability “- can lose assets if liabilities are not covered Owner responsible to provide all required capital Limited knowledge Limited continuity Partnership ○ Group of people working together as partners sharing management responsibilities and profit ○ Between 2-20 partners ○ No legal personality - personally responsible for debts ○ Partners are jointly and severally liable for claims made against the business ○ Partners have joint control and authority ○ Easier to acquire capital ○ No continuity - if partners leave, partnership dissolves ○ Few legal requirements ○ Profits divided proportionally among partners - Procedures Must be given a trade name - register with authority Written contract required between partners Contract must stipulate - Advantages Simple to establish Partners pay tax separately on profits they receive Division of income - lower tax Management determined by partners  Personal interest in company: more effort = greater success - Limitations Not a legal personality - unlimited liability on partners if something goes wrong No continuity - dissolve and register new partnership if someone pulls out More people involved = more opportunities for conflict Potential for irregularities - no audits necessary Collective liabilities - one wrong decision can affect whole partnership Company ○ An association of shareholders incorporated i.t.o Companies Act ○ More advanced and complicated ○ Has its own legal personality ○ Board of directors have authority and control ○ Not all shareholders/ members take 0art in management ○ Two forms: public vs private ○ Capital provided by shareholders (public) and members (private) ○ Public: shares transferred on JSE Private Public 1-50 members Minimum 7 shareholders At least 1 director At least 2 directors General public cannot buy shares General public invited to buy shares Limited transferability of shares Shares freely transferable Name ends in (Pty)/Ltd, proprietary Name ends in Ltd, limited limited] Have fewer legal requirements than Have more legal requirements public  - Advantages Legal personality -limited liability Can continue independently of its shareholders Shared transferable on JSE - possibilities for expansion Orderly structures in place More sources of finance - Limitations Very complicated to start Expensive to start Required to disclose financial statements Employees do not have a personal interest in the business shareholders have little contact with their investment- Board of directors runs company Limited personal contact - large size of company Lecture 4 Entrepreneurs Innovation = The ability to take something that is available to anybody, and create something new & desirable from it. Definition - the process of creating and building something of value, in the midst of uncertainty and risk Developing, organising and executing a new business ideas Characteristics ○ Creative + passionate  ○ Innovative ○ Committed & determined ○ Able to deal with risk & uncertainty ○ Opportunity oriented Risks ○ May sacrifice their quality of life to convert opportunity into a successful business ○ Makes necessary calculations + forecast to go ahead with plans, despite risk factors Types Intrapreneurs Corporate Employees of an already established business Has vision - set apart from other employees Apply skills to better the business Create new ideas Entrepreneur skills + tech skills Techtopreneurs Info/ engineering tech Biotech industries couples/partners combine expertise Co-preneurs Rely on each others strengths Start an entrepreneurial business to develop & Social Entrepreneurs benefit the community Qualitative = Organisational structure that is independent & privately owned and managed Quantitative = Defined in terms of turnover/income, the number of employees, the number of assets, the number of business units/branches Importance: ○ Economic Development  ○ Employment & Job Creation ○ Social Stability ○ Improving of Living Conditions Small business A separate & distinct entity, owned by one or more people, within any sector of the economy. USA = max 500 people SA = max 200 people Pros Cons ○ Being your own boss ○ Taking full responsibility ○ Maximise potential ○ No guaranteed income ○ Generale unlimited profits ○ Hard work ○ Contributing to society ○ Sacrifice quality of family life ○ Risk of losing invested capital Starting small business from scratch ○ Assess the different forms of ownership ○ Need to register with CIPC (Companies & Intellectual Properties Commission) Buy existing business ○ Good track record ○ Greater chance of success Buying into a franchise group ○ The privilege of using someone else’s idea ○ Pay the franchise owner (franchisor) for use of profile How to start ○ gathering information and resources needed ○ Planning & preparation ○ fill a gap in the market: Meet consumer needs What is a business idea ○ Identify problems with existing products/services ○ Talk to people ○ Check for advertised products  ○ Visit trade shows ○ Examine overseas products ○ Look for good ideas, and then investigate their viability Viability = can it be turned into a profitable business = is it possible Feasible = is it practical = can the idea work in reality Evaluating idea ○ Valuable to customers ○ Solve problems ○ Target market ○ Expertise needed ○ Feasibility and viability ○ Make money ○ Capital and skills needed Cons/ challenges ○ Lack of access to finances ○ Lack of access to markets & procurements ○ Laws & regulations not in favour of your idea ○ Low level of skills or managerial expertise ○ Lack of affordable business premises ○ Failure rate for small businesses = 50% - 80% In south africa ○ Developed & Developing Country High levels of industry, sophisticated technology and tech knowledge Infrastructure of a developing work (Privilege of the few) High unemployment rate ○ Department Of Small Business Development DSBD - governmental Facilitate provision of financial & non-financial support services Develop public & private partnerships Access to markets ○ Small Enterprise Development Agency  Seda - local business service centres Tender Advise Centres Manufacturing Advisory Centres Non-governmental Organisations ○ Small Enterprise Finance Agency Sefa - located in DSBS Contribute toward poverty alleviation Job creation ○ Private support structures Banks Incubator services Private investors Term 2 Lecture 1 - Business environment Business environment Always changing - external influences Managers and business leaders need to be aware of shifts in external context and how it can affect the business External Factors Global ○ Terror attacks ○ Natural disasters ○ Exchange rates Local ○ Load shedding ○ Labour strikes ○ Economic shifts Environment Micro environment ○ The business itself ○ Every internal process Market ○ Directly surrounding business ○ Consumers ○ Competitors ○ Regulator bodies ○ Labour market ex. CMT’s “Cut-Make and Trim”  Macro ○ Influences the business, but business does not influence environment ○ PESTLE Political, Economical, Social, Technological, Legal, Environmental Eg. Socio-cultural, Political, International Micro Environment 8 interdependent business functions Department Function General manager Manage and coordinate all functions (Plan, Organise, Lead, Control) Purchasing Sourcing and procurement of input materials Operations and Running the practical elements if the business Logistics Marketing Advertise products/services Finances Management of money and assets HR Staff matters, recruiting, salaries etc Public relations Communications internally and externally Admin Management of information and information systems Strength ○ Competencies - areas in which they excel and should exploit Weakness ○ Factors that need to be improved if company wants to remain competitive Vision ○ Aspirations for the future ○ Ex. not always immediately realistic Mission ○ Present time committed to what needs to be done now to achieve vision ○ Exact planning Goal ○ Long term target  Objective ○ Short term, specific targets Culture, Diversity and ethics ○ C - values and beliefs, collective identity ○ D - acceptance and respect, race, ethnicity etc. ○ E - govern the organisation Lecture 2 - market/macro environment Macro environment Factors that the organisation has no control over Management must monitor external environment and identify changes and trends to identify opportunities and avoid threats Market/Task environment Direct impact on organisation Unique market environment Sectors in market environment  ○ Customers Businesses need to understand wants and needs to be better than competitors Market share - potential number of consumers organisation can serve ○ Competitors Competing for same customers and obtain similar resources ○ Distributors (intermediaries) Supplies and deliveries of good and services Require skills and knowledge ○ Suppliers Provide input resources for production of goods and services Ex. Raw materials, HR, Component parts ○ Labour force Most important asset Biggest investment Has the capacity to combine all resources of organisation Types of workforce demands Improved working conditions Better pay, health, education and training, safety and welfare Macro environment (global) - Pestle All major external and uncontrollable factors Political ○ Frameworks set by government ○ eg. minimum wages, labour laws, B-BBEE (Broad-Based Black Economic Empowerment) regulations Economic ○ Affects health and vitality of economic system ○ Eg. exchange rate, wages, inflation, cost of raw materials Social ○ Demographics, culture Ecological ○ Environmental concerns that impact business processes Lecture 3 Research Primary: interviews, store visits, surveys Secondary: company websites, market research, macro research Lecture 4 - PESTLE Political Political policy and stability Corruption Trade, fiscal and taxation policies Economic Interest rates Employment/unemployment rates Raw material costs Social Changing family demographics Population growth rate Education levels Technological Advances in tech Developments in ai Legal Labour laws Consumer laws Health and safety Environment Climate change and weather patterns Carbon footprint Waste disposal Lecture 5 - Market Research Examines consumer behaviour and trends to develop and fine tune business idea and strategy Understand customer preferences, behaviours, trends Term 3 Lecture 1 - Brand identity Brand identity and key components Significance in fashion industry Simon Sinek’s golden circle Brand identity vs brand image Identify key considerations in building cohesive brand identity Simon Sinek’s Golden Circle Theory ○ Framework that helps businesses/brands identify their purpose and communicate it effectively Why - the reason the brand exists - the core belief How - process/values that set business apart from others What - products/services offered Brand identity ○ Visual aspects such as logo, design, colour scheme and emotional aspects like the brand’s personality and tone - how brand wants to be perceived and differentiated ○ WHY influence on a brand’s identity Defines core values and missions of brand Creates a cohesive and authentic brand story Influences design of key elements to ensure they align with core purpose Can create a loyal customer base and create emotional connections Key components of brand identity ○ Logo - symbol/design to distinguish brands from competitors Chief identifier Trademark conflicts, originality, pronunciation, spelling, url availability and semantics Strong names - short, memorable, easy to say and spell Abstract or evocative ○ Tagline - short, memorable slogan ○ Colour palette - set of colours used across brand materials ○ Typography - style and appearance of the text used in brand materials ○ Brand personality - human characteristics that are attributes to a brand name to make it relatable  Jennifer Aaker: Sincerity, excitement, competence, sophistication, ruggedness Why is Brand personality important ○ Differentiation - distinguishing brand from competitors ○ Emotional connection - builds a bond, fosters loyalty and trust ○ Consistency - consistent messaging ○ Memorability - makes brand memorable How to create a brand personality ○ Identify target audience - customer preferences via market research ○ Define core values and missions - establish purpose that aligns with target audience ○ Determine desired personality traits - Jennifer Aaker’s brand personality model ○ Develop a consistent brand voice - tone of voice that reflects brand personality ○ Create visual identity - reinforce brand personality ○ Tell your brand story - connect emotionally with audience ○ Engage with your audience - interactive and engaging content ○ Monitor and adapt - evolve your brand Brand identity vs brand image ○ Identity - the way you want your customers to perceive you ○ Image - the ways the customers actually perceive your brand Brand story ○ Start with WHY What drives business Why and how did you start ○ How the audience will remember your brand Purpose, core values, mission Activates emotion Communicates values ○ Tell a story Show - how product/service improves life Pack - and emotional punch Connect - with audience Tell the truth Vision and mission  Brand core values ○ Guiding principles ○ Core of brand ○ Dictates brand message, identity and personality ○ Main reason customers connect to brand ○ How Actionable Memorable Unique to brand Specific Meaningful Lecture 2 - Product and Price Marketing mix ○ Adapted according to target market needs ○ The plan balances profit, client satisfaction, brand recognition and product availability ○ 7P’s -> 7C’s (consumers perspective) Product - Customer value Price - Cost Place - Convenience Promotion - Communication People Process Physical evidence ○ Marketing strategy Right product, right place, right time at right place Define marketing objectives Set targets/goals Establish time frame Product ○ Refers to all tangible and intangible elements of a product Features and benefits/quality Design and style  Branding, packaging Warranties and guarantees Investments and returns ○ Two broad product categories Consumer products - bough to satisfy personal needs and wants Convenience - staple, impulse, emergency Shopping - uniform (vacuum), non uniform (clothing) Speciality - designer clothes, car Unsought - funeral or fire extinguisher Industrial products - business to business exchange Range plan ○ Product lines Groups of closely related products within the product mix with similar uses and physical attractions ○ Product types (length of the product line) Variety of products under each line Product mix ○ The entirety of all business product lines (width) ○ Product lines (length) ○ Product types (depth)  Product life cycle - 4 stage cycle ○ Length of time from a product first being introduced to consumer - removed from market ○ Introduction Low sales High cost/customer Innovative customers Financial losses Few competitors ○ Growth Increasing sales Cost/ customer falls Profit rise More competitors ○ Maturity - saturation Peak sales cost/customer lowest Profits high Mass market Stable no. of competitors ○ Decline Failing sales cost/customer low Profits fall Customer base contracts No of competitors fall How product links to price  Price ○ The amount the customer must pay to receive the offering which directly determines the organisations profits ○ Types Monetary cost Perceived cost Time cost Energy cost Psychic cost ○ Pricing strategies market/price skimming price - initial high price and lowering it to capture a more price-sensitive market Market penetration price - initial lower price to reach a larger portion of the market promptly Status quo (comentition-based) - either maintains current price levers or matches the price levels of the competition Setting right price ○ Amount customer is willing to pay: Benefits Perceived values What costumes are willing to pay What marketer wants from customer Factors to consider when setting price ○ Pricing objectives What the business wants to achieve through pricing Survival - prices set at/blow cost for short periods to address specific problem at specific time - special discounts Profit - achieve maximum profits cost based, not maintained long term Return on investment - price of product/service value based - price increases of years becoming more valuable Market share - to capture certain share of market incr/decr prices ○ Determine demand Demand high = high price  Supply higher than demand = price drop ○ Estimating cost Price of product must be above cost - mark up Mark-up should cover selling + administrative expenses of business = profit Variable costs + fixed cost = total cost ○ Pricing and competition Blow market If target audience is low-income company sets low prices Market Commodity products (soap/sugar) at market price Above market Higher than average for suitable brand image related products Lecture 3 - Place: Distribution strategies and channels Place ○ Includes all the channels, distribution, and intermediaries that are used to move the product form the manufacturer to the consumer. ○ Logistics of a company ○ Territorial coverage and management ○ Market location ○ Inventory Types ○ Physical location Semi permanent commitment of resources  Affect store growth and profitability May generate better sales of located next to other businesses ○ Retailers Commercial transaction The last point in value chain that directly interacts with the customer to deliver the value Interaction point for the brand - becomes a part of the brand itself Ambiance product assortment ○ Shopper behaviour varies across types of retailers Different factors that determine the difference among them Serves as the foundation for creating marketing strategies that will have a rock-solid distribution Food retailers General merchandise ○ Multichannel One brand that sells online and instore through different channels Different customers ○ Omnichannel All channels work together/intertwined to sell their product Distribution ○ Distribution - The process of making a product or service available for the consumer or business user who needs it ○ Distributor - a business involved in the distribution stage of the value chain ○ Distribution strategies Intensive Penetrate the market As many outlets as possible - max accessibility No cap on stores or locations Cater to a broad audience E.g. Mr Price, PnP clothing Selective Brand partnerships and standalone stores  Specific locations Limites number of stores Target specific customers Allows brands to maintain a degree of exclusivity Eg. Levi’s, Steve Madden Exclusive High-end Franchise opportunities, allowing individuals to own and operate their own locations under the franchise name Eg. Gucci, LV Franchising individuals own and operate their own locations under established brand names E.g. Sorbet Distribution channel ○ A one-link chain Direct: producer - consumer ○ Two-link chain Retail: producer - retailer - consumer ○ Three-link chain Wholesale: producer - wholesaler/distributor - retailer - consumers ○ Four- link chain Agent: producer - agent/broker - wholesaler/distributor - retailer - consumer Distribution profiles ○ Distributors Sales and marketing Builds relationships with manufacturers Beyond fulfilling and delivering orders Study market actively ○ Wholesalers Fulfil retail orders Resells goods in bulk  Only storage and delivery goods Buy from distributors/manufacturers ○ Retailers Outlets to purchase products Sell in store/online Buy from distributors/wholesalers ○ Agents Handle special shipments and contracts Work on marketing Specialise in customer relationship management “Own” products by representing producers Lecture 4 - Promotion The marketing mix: Promotion ○ Includes all promotional tools used to inform, persuade and remind the customers about the product offering The marketing communication mix Integrated marketing communications ○ Marketing product ○ Promotional strategy ○ Explains: What it is How to use it Why they should buy it ○ Objectives Inform Persuade Remind Communication/ promotional mix ○ Combination of promotional, methods/tools used for product to communicate to customers Types of promotions ○ Advertising  Paid form of communication traditional/online ○ Sales promotions Short-term used to stimulate immediate demand Various incentives given to consumer to encourage them to buy the product E.g. coupons ○ Visual merchandising Simplicity Clear labelling POS materials ○ Personal selling Face-to-face communication between business and consumer Sale reps help customers analyse how the product meets their needs Sellers promote the product ○ Publicity Free non-personal form of communicating information about the product/service offering (external) Mass media usually, but can also take the form of customer reviews Eg. news releases, feature article ○ Public relations (internal ) Managing how others see and feel about a brand, or company Focusing on maintaining positive corporate image ○ Event and experiences Company-sponsored activities and programmes Designed to create daily/special brand interactions ○ Interactive marketing Online activities/programmes designed to engage customers ore prospect directly/indirectly raise awareness, improve image Types of advertising ○ Traditional marketing channels Outdoors - billboards, bus/taxi wraps Broadcasting  Print ○ Pros Impactful - tells a story Permanent Memorable ○ Cons Hard to measure - not guaranteed who will see it Expensive No direct interaction ○ Digital marketing channels Social media Website Content marketing Affiliate marketing ○ Pros Engagement Measurable Targeted ○ Cons Potentially annoying Less permanent Constantly evolving - hard to keep up Other promotional tools ○ Word of mouth/mouse Reviews between consumers, brand ambassadors, companies ○ Packaging Post sales - tissue paper/stickers/ ribbons/ bags ○ Corporate identity Logos, trademarks, colour identities Corporate communication ○ Exhibitions textiles/accessories/brands Promotional plan ○ Outline of marketing tools, strategies, and resources company intends to use to promote product/service Lecture 5 - People, process and physical evidence Service marketing mix ○ Service offering is the process (of service assembly), physical evidence (physical environment) and people (participant) People ○ Business depend on people and their interaction with clients and customers for successful transactions ○ Central to the success of a business, whether directly/indirectly involved in running of organisation ○ E.g. Suppliers The employees Knowledge workers - accountants, lawyers Management - planning, organising The customer/consumer Customer service representatives ○ Directly/indirectly involved in delivery of a service ○ Employees of the company Processing enquiries, orders, complaints, online chats ○ Subcontractors Direct interaction with customers to provide expertise ○ Customer service Provides expertise and coordinator the consumer interface ○ Training Customer facing personnel needs to be trained and developed to maintain high quality of standards Process ○ The flow of activities and routines by which a product or service is delivered to the customer ○ The sequential order in which employees complete their tasks ○ Flow of activities that occur when the customer and businesses interact with each other Procedures Tasks Schedules  Mechanisms All systems used to assist in delivering the service ○ Multiple events that make up the total of services ○ Smooth, efficient and customer-friendly journey Standardisation Customisation Quality control ○ Supply chain efficiency is also part of the process that businesses consider Physical environment/evidence ○ The element helps to prove that the seller provided (or not) what the buyer is paying for ○ Material part of a service that make it more tangible, any lasting proof that the service has happened The physical facilities, building and furniture where the service is offered Interior design, layout, and aesthetics Signs and equipment Brochures, service menu, pricelists, letterheads, ○ Place - where your products and services are seen, made, sold or distributed ○ Everything customers see when interacting with business ○ Physical environment - where you proved the product or service Layout or interior design Packaging Branding Restaurant: surroundings, staff uniform, menus, online reviews ○ Tangible cues of the quality/experience that a company is offering Lecture 6 - Consumers and competition Customer ○ Purchases the product ○ Can resell product for profit ○ Individual, company or mass ○ Monetary transaction takes place to buy product Consumer ○ may/may not purchase - is end-user ○ Cannot resell products for profits ○ Single entity/a company as a whole ○ Monetary transaction optional Reaching right customer ○ Segmentation, targeting and positioning Segment potential/current market Target individual segments Position business in minds of consumers ○ 4 Types of segmentation factors Geographic Region, town, suburb Density and needs (urban, suburban, rural) Distribution of wealth per residential are Demographic Specific products that cater to obvious individuals E.g. age, gender, education level etc Psychographic Intrinsic traits of target customers E.g values, personalities, interests etc Behavioural Decision making process of customers Attitudes toward brand Way they use/interact with brand Consumer behaviour ○ Innovators Risk takers ○ Early adopters Accepts and embraces change ○ Early majority Main bulk of population ○ Late majority Buy once trend is already well established  ○ Laggards Does not take fashion risks Last to catch onto trends Brand positioning ○ Components of positioning Competitive alternatives Unique attributes Value Target market characteristics Market category Relevance Brand claim ○ Competitive analysis Positioning and differentiation Competitive advantage Direct - same product/service Indirect - solving same problem, same target market, diff prod/service