OTE2601 ASSIGNMEMT 2 0RIENTATION TO TEACHING ECONOMIC AND MANAGEMENT SCIENCE WITH COMPLETE SOLUTIONS

OTE2601 ASSIGNMEMT 2 0RIENTATION TO TEACHING ECONOMIC AND MANAGEMENT SCIENCE WITH COMPLETE SOLUTIONS Assignment 2 Student nr lOM oA R c P S D| QUESTION 1 The marketing plan includes everything that has to be done to convey the product or service to the consumer or target market. Show how the following “4 Ps” instruments or steppingstones become a necessity in making the plan work (function): 1.1 The product We can define a product as a combination of utilities, which satisfy needs offering by the business to the customers. When an entrepreneur start a new business the entrepreneur should, in his/her choice of product, concentrate on consumer products. These products are immediately available for use. There are certain aspects, which customers consider when deciding on a product, like trademarks and packaging. The entrepreneur has to decide what product he/she wants to sell and how. 1.2 The price We can define the price as the amount of money the customer pays for a product. The price of a product is closely related to the value and use the customer gains in exchange for the money sacrificed. The price of a product is determined by taking into account, among others, the following factors • The running costs of the business. • The cost price of the product. • A realistic profit • The competitors prices • Demand/supply 1.3 The place The place where the business is situated plays an important role. Customers prefer to purchase the things they need at businesses situated close to their homes. Other reasons that contribute towards the popularity of a business are the following:  Reasonable prices  Enough parking area.  Sufficient security  Good quality products  Cleanness and neatness in and around the shop.  Is there credit facilities available?  Big variety of products. lOM oA R c P S D| 1.4 Promotion We can define promotion as all the techniques used to create a demand for new products, or to increase or maintain an established demand for known products. The main purpose of promotion is to remind, informed or persuade customers to buy the products/services of the business. lOM oA R c P S D| QUESTION 2 Every entrepreneur has certain expectations and goals when choosing a business. 2.1 What is a close corporation in business? Give one examples. Close corporation is held by a limited number of shareholders (a shareholder is an individual or an institution that owns one or more shares of stock in a public or a private corporation and therefore, are legal owners of the company) and is not publicly traded. The company is run by the shareholders and is generally exempt from many requirements of other corporations, including having a board of directors and holding annual meetings. A closed corporation is a company which does not raise funds from the public but instead operates with a small number of shareholders to ensure supreme control over its functioning. Unlike a publiclytraded company, closely held corporations do not have to observe strict corporate regulatory norms regarding business operations and data reporting. There are special rules that are set to govern such corporations. Close corporations are state-specific statutory entities usually created to relax corporate formalities in operation and to be less focused on taxation. There is some states that has no provisions for allowing close corporations. This form of business came into being as a result of the Act on Close Corporations Act 69 of 1984. The basic objective of this Act is to enable one person or a small group of entrepreneurs to form a business at little cost. Under the new Companies Act of 2008, close corporations can no longer be registered and they will be phased out over time. An example of a close corporation is FACT BUSINESS CORPORATION CC. 2.2 You are a Grade 7 teacher leading a discussion on the different kinds of franchising. 2.2.1 What are the issues to consider when discussing about capital requirement for a franchise • Money to commence. This is a predetermined single amount of money paid to the person giving the right to do the business by the person wishing to do the business. It is usually handed over at the signing of the agreement and covers the following: - Use of the name, trademark and business knowledge - Assistance with the location and establishment - Initial training • Money for establishing. This money covers the cost of the building, alterations and improvements, and the purchase of equipment. • Money for management and advertising. This money is usually paid weekly or monthly and is usually a percentage of the turnover. If the management service money forms a relatively small percentage of the turnover, it could lead to poor services by the person giving the right. Part of the service money is used for combined advertisements. • Money for additional services. This money is requested by some branch managers for, for example, centralised bookkeeping systems or professional taxation services. lOM oA R c P S D| 2.2.2 Do you agree with the assertion that businesses fail for a number of reasons? Substantiate on your answer by discussing the following; Yes I do agree that businesses fail for a number of reasons 2.2.2.1 Incompetent management Inadequate planning, for example poor choice of location, inability to manage staff efficiently, and poor or no marketing strategy are some of the reasons for failure. Things often go wrong because many small business managers do not have the necessary knowledge and managerial skills. 2.2.2.2 Lack of experience The rising entrepreneur is not experienced in running a business. Many entrepreneurs start a business without knowing the specific industry. The entrepreneurial move is a huge shock to many prospective entrepreneurs who were previously employed as workers or as technical staff. Suddenly, they are managers who are not used to managerial activities. 2.2.2.3 Poor financial control Financial control is very important, especially in a new business. The new entrepreneur cannot afford a lack of control over cash, poor recordkeeping and giving credit to customers. Fixed cash flow lead to business owner not saving surplus profit to enhance either growth of the business or save for personal benefits. The golden rule is that strict control over cash must be exercised. 2.2.3.4 Inflexibility Lack of business skills training, unwillingness to work long hours and unwillingness to apply new ideas is symptomatic of incompetence and inflexibility ill-suited to a new business. 2.2.3.5 Unrealistic time frames Entrepreneurs are usually in a hurry. They want to achieve their goals very quickly. Unfortunately, in their eagerness, they often underestimate the time and resources required to reach their goals. This is associated with business plan problems, having a good plan with clearly outlined goals and objective is the basis of successful business. Limited time and short term plan within unspecified time leads to business failure. Yes businesses do fail. lOM oA R c P S D| QUESTION 3 3.1 Profit is the compensation that someone is entitled to when delivering a service. In other words, when an article is sold at a higher price than what it was bought for, the difference is the profit. When, however, the expenses exceed the income, we have a loss. Sometimes this is the case, but when a business makes too much profit because of too high prices, clients will go and buy from other businesses in the vicinity. This will force the retailer to lower the prices. Elaborate on any five factors which influence profit. 1. Kind of business