Exam (elaborations)
BSM1602 Exam May June 2018 Questions and Solutions
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- BSM1602 Business Management IB
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Business Management IBBSM1602
Department of Decision Sciences
Exam May/June 2018 (477485)
READ THROUGH THE CASE STUDY AND ANSWER ALL THE QUESTIONS THAT FOLLOW
CASE STUDY: ADVENTURE CYCLES
Alex Johnson is a cycling and extreme sports enthusiast from Johannesburg. Feeling trapped
in his nine-to-five desk job, Alex knew that he could not continue doing this for the rest of
his life, and needed a change. He always had a good eye for an opportunity in the market,
and endeavoured to make a success of every opportunity that came his way. Alex and his
,friend Graham always talked about opening up a bicycle shop, but the idea was never
realized. It was only until Alex felt trapped in his job, that this idea became more lucrative.
Alex and Graham put all of their expertise and ideas together in order to start this new
enterprise. After careful planning, months of saving, and Alex and Graham leaving their jobs,
they finally managed to open their own bicycle shop, and registered the enterprise as a
partnership under the name Adventure Cycles.
In order to finance the new enterprise, Adventure Cycles applied for a business loan from
the bank for R200 000, payable within five years. The bank did, however, require some form
of security on the money lent to Adventure Cycles. Alex and Graham also both invested R50
000 of their own personal savings, in order to get the enterprise going.
Situated in the heart of Randburg, Adventure Cycles specializes in the selling of mountain
bikes, bicycle parts and bicycle repair services. To differentiate themselves from their
competitors, looking for a different approach to ensure growth of the enterprise and save
customer costs, Alex and Graham also opened Adventure Cycles online, where they sell
bicycles and bicycle parts online. By doing so they spotted an opportunity to cut out the
traditional route to reach the target market. Alex and Graham firmly believed that, by also
selling bicycles and parts online, they could bring products to the marketplace at a fraction
of the price. To do so, however, they had to overcome the natural human inclination to
want to physically touch and appraise any potential purchase.
During the first few weeks of operation, Adventure Cycles experienced various problems. In
order to solve these problems, Alex and Graham had to first determine the root of the
problems. They then approached these problems by grouping all the possible causes into
certain categories, which then pointed out the root of their problems. This technique
proved to be successful, as they immediately solved complex problems without too much of
a disruption. The two also strongly believe that teamwork is of the highest importance in
order to reach their goals and objectives Alex and Graham ultimately strived to satisfy their
consumers' wants and needs, while simultaneously meeting the business objectives of the
enterprise.
Although Alex and Graham have the knowledge and expertise to repair and service bicycles,
they did not have the necessary tools or time to customise painting on bicycles. This is a
specialised skill, and only a few people require these customized bicycles. As a result, Alex
and Graham decided that this specific function will be done by George, who does not work
for Adventure Cycles, but does customised painting as a hobby. George will get paid for the
work done, and Adventure Cycles will only take a small percentage of the profit. The
handcrafted bicycles sold at Adventure Cycles are all imported from a supplier in Italy, and
sold at a premium price as these bicycles cannot be bought anywhere else in South Africa.
Adventure Cycles decided to divide the total market into smaller segments and to target
specifically middle-class customers between the ages of 20 and 35, who are mountain
bicycle enthusiasts and follow an active lifestyle. Adventure Cycles operates in a fairly
competitive market, and it is for this reason that Alex and Graham had to constantly think of
ways to attract new customers, and retain existing customers.
Due to the retail nature of the enterprise, Alex and Graham had to appoint more people in
order to successfully run Adventure Cycles, and satisfy the demand. They decided to appoint
a sales consultant, who will specialise in the sales of mountain bicycles. They also decided to
,appoint a cashier who will be responsible for receiving payments and answering the phone.
For the sales consultant position, Graham decided to advertise the position on the local
community forum's Facebook page, using the following advert:
SALES CONSULTANT NEEDED AT ADVENTURE CYCLES
Role and To sell and market premium mountain bicycles to new and existing
purpose clients
Responsibilities • Providing service to clients and brokers in time with the Group's
and work standard of service
outputs • Providing quotes, advice and relevant terms to clients · Developing
new business opportunities and growing relationships to ensure
new business and revenue
• Executing professional presentations
• Maintaining the necessary administration standards, monitoring
and following up on new and renewed business
• Establishing and maintaining a good working relationship and
integrity
• Assisting with marketing strategy and implementation
Competencies • Client orientated
required • Planning and organising skills
• Team player
• Communication skills
Experience & • Previous sales experience
Qualifications • Basic understanding of mountain bicycles
• Numeracy skills
Alex, however, recommended that they appoint his sister-in-law, Catharine, as the cashier.
Dineo, a sales consultant with experience in the mountain bicycle industry, immediately
applied for the sales consultant position on Facebook. Graham organised an interview with
Dineo, and they immediately decided to appoint Dineo.
As part of Adventure Cycle's public relations function, Alex and Graham decided to launch a
public relations campaign. This campaign involves continuously informing customers about
the importance of water and nature conservation, and ways to reduce your carbon
footprint.
Adventure Cycles has now been in operation for six years, and Alex and Graham are excited
to see what the future holds for this enterprise.
ANSWER ALL THE QUESTIONS ON THE MARK-READING SHEET AND CIRCLE THE CORRECT
ANSWER ON THE EXAMINATION QUESTION PAPER.
Chapter 1: Introduction to business management for the entrepreneur
, Question 1
Which of the following are reasons why Alex can be regarded as an entrepreneur?
a) Alex was willing to take a risk to start Adventure Cycles
b) Alex is only responsible for managing Adventure Cycles on a day-to-day basis
c) Alex manages change by introducing the online shop for selling bicycles and parts
d) Alex had the self-confidence and passion to start Adventure Cycles
Choose the correct combination
1) a, b, c
2) a, c, d
3) b, d
4) a, b, c, d
Answer:
Refer to page 2 of the prescribed textbook.
The entrepreneur’s role, however, differs from that of the small business manager in that
the entrepreneur manages change by, for example, introducing a new product, buying a
new business, deciding which risks to take, introducing new management systems and
moving into new markets. Small businesses tend to swing in and out of periods of
entrepreneurial change over time, after which periods of consolidation may take place.
Question 2
Due to the fact that bicycles are seen as luxury, nice to have items, Alex and Graham need
to take into consideration elements such as consumer behavior and purchasing power.
These elements can be found in the ___ environment of Adventure Cycles.
1) micro-
2) macro-
3) market
4) mega
Answer:
Refer to page 9 of the prescribed textbook.
The following are elements of the market environment:
• Consumer behaviour
• Needs
• Purchasing power
• Suppliers
• Intermediaries
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