Business Notes PDF

## Entrepreneur as Leader - **What:** Identify a gap in the market and take the risk to organize an independent business for profit. - **Intrapreneur:** Uses their creative skills to grow a business that they work for. Works for a company to have a secure monthly salary. ### Qualities of an Entrep...

## Entrepreneur as Leader - **What:** Identify a gap in the market and take the risk to organize an independent business for profit. - **Intrapreneur:** Uses their creative skills to grow a business that they work for. Works for a company to have a secure monthly salary. ### Qualities of an Entrepreneur: 1. Risk tolerance 2. Responsible 3. Creative 4. Determination 5. Strategic 6. Good leadership skills 7. Passionate ### Types of Entrepreneur: - **Social:** Wants to solve social issues, not interested in profit. - **Techno:** Uses tech to solve problems, e.g. Uber. - **Eco:** Save the environment, making a profit but does not harm the environment. - **Tender:** Obtains tenders from the government or private businesses in order to provide a specific service, e.g. build a road. ### Environmental Scanning - Identifies threats - Identifies gaps in the market and opportunities - Must know about competitors - Allows entrepreneurs to create long/short term strategies ### Environmental Scanning Before Starting a Business: - Size of potential market - Stability of resources - Viability of product or service - Strength of competitors ### Continuous Environmental Scanning - Micro-SWOT - Market - SWOT, Porters, Macro, PESTLE ## Management ### 4 Main Management Tasks: 1. Leading 2. Controlling 3. Organizing 4. Planning ### Controlling: - Objectives are achieved - Departments are running smoothly - Staff is motivated - Implementing Control - Inspections - Testing - Rules, regulations ### Leading: - **Autocratic:** 1 person makes the decision. - **Democratic:** Workers are involved. - **Laissez-faire:** Workers do as they please. ### Organizing: - Responsibility - Account for why they made a certain decision - Delegation: Transfer of authority ### Planning: - 5W + 1H method ### How: - Plans must be realistic and possible - Communication is important ### Steps: - Understand issue/task - Plan B - Gather information - Implement plan - What you are doing - Follow up/keep updated - Complete tasks - Make a profit - Responsible leadership ### Levels of Management: - **Top:** Strategic, long term, e.g. CEO - **Middle:** Tactical, decisions from the top are executed, e.g. Branch Manager - **Lower:** Operational, short term, day-to-day tasks, e.g. Supervisor ### Factors for Motivation: - Job security - Money - Human relations - Reasonable instructions ## Forms of Ownership ### Formation: - Legal requirements, expensive, time consuming ### Continuity: - Who takes over after retirement/death ### Tax Implications: - Higher income = Higher tax ### Management: - **Sole Trader:** Day-to-day management - **Shareholder:** Split ownership management ### Capital: - Machinery and equipment (more owners = more capital) ## Sole Trader: - One owner ### Advantages: - Quick decisions - Lower risk of lost opportunities - All profits means more motivation ### Disadvantages: - 1 person contributing capital - Relies on their own initiative - No one takes over if they are sick ### Sole Trader - Cannot Be Registered as a Business: - Personal items can be lost - Pays tax from personal capacity (higher income = higher tax) ### Money To Expand Business ## Formation Procedure: - Sole trading business is easy to start. No requirements or procedures. - This limits expenditure and may increase chances of success. ### Legal Personality and Liability: - Sole trader cannot be registered as a business. - The owner has unlimited liability for the debts of the business, i.e. personal items can be lost. ## Partnership: - 2-20 ### Advantages: - More people contribute capital - All partners involved in management - divide and conquer - Eliminates potential competition ### A+D: - More than 1 person makes decisions, which is better than 1 but is time consuming. ### Disadvantages: - All partners must agree - Unlimited liability - If one makes a mistake, they all are responsible. - Contracts and agreements - Death/retire, etc. form new contract and agreement - Higher tax = Less money to expand business ### Formation Procedure: - Only procedure is a partnership agreement. - The terms and conditions are agreed upon by partners. ### Legal Personality and Liability: - Partnership cannot be registered as a business. - They have unlimited liability, which could motivate them. - It could also make them scared. ## Close Corporation (CC): - 2-10 ### Advantages: - Multiple managers, divide and conquer. This increases productivity. - More than 1 person can make a decision on important issues. ### Disadvantages: - All or majority must agree - time consuming and maybe lost opportunities. - Possible conflict during decision making. ### Tax: - Fixed % which is 28% on all profits. ### Continuity: - Does not depend on the owners. - A change of members does not affect the CC. - Continuity only ends when members decide to discontinue the business. ### Legal Personality and Liability: - CC is registered as a separate legal entity from owners. - They have limited liability. - Member only loses investment if business lands in financial difficulty. - Personal items are not at risk, which may motivate them to take more risks. ## Companies: Public + Private: - 1 - no max ### Management: - Board of directors decided at AGM (Annual General Meeting) - Shareholders have voting rights - Shareholders vote for directors - More shares = More voting power ### Buying and Selling Shares: - **Public:** Shares are sold easily - no effort because of public access. More shares sold means more capital for business. - **Private:** Selling shares can be time consuming. Have to invite people. They are picking the best owners. This can add to success. ### Advantages: - Easier & faster decision making - More shareholder involvement - Better relationships ### Disadvantages: - Delay of decisions - discussion - Limited input ## Marketing ### What: - Identifying, anticipating, and satisfying our customers' requirements to make profit. - We deliver the right product/service at the right place, price, and time. ### Aims: 1. Satisfy needs + wants of consumers 2. Matching consumers' expectations 3. Identifying your target market 4. Retain customers, grow business, market share, build brand, generate profits, and sales 5. Assess the size of your market ### Marketing Activities: - Finance - Transport - Storage - Selling - Grading standardization - Collection + distribution - Insurance (cover risk taking) - Market research ### Purpose of Market Research: - Helps identify target market - Investigate the size of the market - Use SWOT to determine the sales potential of the product - Show how much consumers are willing to pay - Show the most effective method/place of distribution ### Methods of Market Research: 1. Telephonic - call 2. Questionnaires - online surveys 3. Personal interviews - door to door 4. Social media - promote on Instagram ## Marketing Manager Roles: ### What? - Marketing management involves all decisions regarding marketing activities that are aimed to achieve the enterprise's goals. ### Variables In Marketing System/Environment: 1. **Manageable variables:** The marketing mix and objectives that fall under the direct control of the marketing manager. 2. **Semi-manageable variables:** Can be influenced by marketing managers, e.g. decisions made by financial and production managers. 3. **Non-manageable variables:** Exist in the external environment, e.g. competition and political events ### CPA - Consumer Protection Act 63 of 2008: 1. Promotion of fair accessible market place for consumers. 2. Norms and standards to protect consumers. 3. Prohibits unfair marketing. 4. Promotes positive consumerism. 5. Lays down laws for agreements. ### Rights Under CPA: 1. Right to choose - they don't have to buy anything. 2. Right to responsible marketing - protected by negative marketing. 3. Right to equality - all consumers are treated the same. 4. Right to hold suppliers accountable. 5. Right to fair value, good quality, and safety. ## Risk Management Concepts: - **Consumerism:** The ability of consumers to influence the actions of a business when they put pressure on organizations to do what is ethical. ## Details of Companies Act: - **Non-profit companies (NPC):** Must be registered with an objective that's related to cultural or social activities, communal or group interests. Cannot merge with a profitable company. - **State-owned companies (SOC):** Registered in terms of CA and owned by government. - **Private companies (Pty Ltd):** Ownership is unlimited. Will restrict transferability of the shares. - **Public companies (Ltd):** Requires only one shareholder. ## Formation of a Company Under CA: - A profit company can be incorporated by one or more people. A non-profit needs at least 3. Inc involves filling a notice to incorporate and a memorandum of incorporation (MOI). MOI details company's governance and rights and responsibilities of shareholders and directors. ## Transparency, Accountability, And Integrity Of Companies: - Prescribed officers are bound by fiduciary duties: the duty to act with care and skill. Fiduciary duty includes acting in the company's best interest. The duty of care and skill requires maintaining a certain level of competence. ## Risk (P, R, HR): ## Risk Management Function: - For a business to perform and have a competitive advantage, attention must be given to all the various risks that the business may face. These risks can arise from any of the business environments and can be a threat to the success of the business. ### What Is Risk Management? - Risk management identifies, assesses, and controls threats as well as developing strategies on how to deal with different risks. Management needs to put processes, methods, and tools in place for managing risks, e.g. loss or damage from fire, floods, theft, loss of customers due to trends or more competitors. ## Risk Management Concepts: 1. **Identification of risk** 2. **Description of risk:** If it's a preventable, strategic, or external risk. 3. **Risk estimation:** This is where management of a business looks at the probability of certain risks occurring and its affect on the business. 4. **Risk profile:** Management has lists and makes what can go wrong with a strategy to solve it and a new product or program to fix it. ## Types of Risks: - **Strategic:** Where a business's strategy becomes less effective and the business struggles to reach its goal. - **Compliance:** Failing to comply with existing regulations or new laws as the business grows. - **Operational:** Refers to an unexpected failure in a business's day-to-day operations, e.g. tech failure, server outage. - **Financial:** Possibility of a sudden financial loss. Affects business finances. - **Reputational:** Anything that would affect the business's reputation. ## Risk Management Process: 1. **Risk identification:** Identify and define potential risks that may negatively impact the business. 2. **Risk analysis:** Gain insight into the possibility of the risk occurring as well as the risk is likely to have. 3. **Risk assessment and evaluation:** Further evaluation to determine if the risk is likely and if it's acceptable to the company to take on the risk in return of the potential reward. 4. **Risk mitigation:** The company assesses their biggest ranking risks and develops plans to prevent and solve them. 5. **Risk monitoring:** Follow up and review the risk process - track new and existing risks. ## Cost, Revenue, Break-even Analysis: - **Fixed costs:** Have to pay whether you make money or not, e.g. rent, insurance. - **Variable costs:** Price depends on your production, e.g. raw materials used. - **Controllable costs:** Whereby the business is able to influence the cost through decisions it makes, e.g. salaries.