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Summary Grade 12: Business Studies notes IEB
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,,Current Affairs For Business Report
Exchange rates: Rand Dollar – R15.47/ Rand Pound – R19.45 /Rand Euro – R16.62
Fuel price: Increased on 2 June due to Crude oil going to $117 per barrel due to shortages from
Ukraine/Russia turmoil: Diesel – R21.47 per liter
Inflation rate =5.7% in February 2022
Repo rate: The SARB's MPC has decided to increase the repurchase rate by 50 basis points to
4.75% per year
Prime lending rate from banks: 7.75%
National Poverty line in SA 2021: An individual living in South Africa with less than R890p/m
was considered poor.
Minimum wage: is R23.19 per hour, and minimum wage in the retail sector is R28. 25
Eskom: Load shedding from May – severe impact on business
COVID 19 Pandemic and Vaccination role out
-Total fully vaccinated adults 18799631 which is roughly 31.7% pf population.
-Key to employment in many companies.
-Alcohol industry estimates R36bn revenue losses, says 200 000 jobs at risk due to liquor bans.
19 weeks of bans.
Looting in KZN July 2021: Jacob Zuma's imprisonment, dramatic and violent scenes of unrest
and looting unfolded in KZN and Gauteng. More than 340 people lost their lives, and the
damage exceeded R50 billion. Most small businesses were looted to the ground and
vandalised. Some might never open again, as most do not seem to have insurance. It is
estimated that the impact could cost the KwaZulu-Natal economy somewhere in the region of
R20 billion and 150 000 jobs lost.
Floods January 2022: Unpredicted rain leading to flooding causing crop damage and adding to
concern that climate change is making weather cycles more erratic.
KZN Floods: Durban will lose around 1.8% of annual GDP and it will take around three months
to get the city and its businesses back to where the economy was operating before the flood
disaster struck last week. he economic impact of these floods has been severe as many
industries had to cease operations. Preliminary estimates indicate that the loss to the
eThekwini GDP since 14 April 2022 is R737m.
VAT: increased from 14% to 15% from 1 April 2018. There is a limited range of goods and
services which are exempt from VAT.
UIF – Unemployment Insurance Fund: Employer pays 1% and employee pays 1%. Maximum
deduction R177,12 p/m
,RAF – Road accident Fund Levy: R2.18 for every liter of both petrol and diesel sold. This
provides the RAF with an average annual income of around R43 billion.
Ukraine/Russia Turmoil – cost of commodities: They supply 30% of worlds wheat, 17% of the
world’s maize and 32% of the sunflower oil. Pushing up commodity prices in South Africa.
Increase in food insecurity in Africa. Led to higher oil and grain prices, which directly push up
prices of key goods within the CPI such as fuel and bread.
HOT Business conclusion:
Eg: Makro generates a large portion of their profit through the sale of electronics. With the
economic challenges caused by the Covid-19 pandemic, customers are experiencing lower
levels of disposable income and thus are spending less on luxuries as they are no longer
affordable. This poses a threat to the overall profitability of Makro.
Solution: Makro needs to consider other avenues that can be explored to improve their
profitability. Running specials on electronics could make them more affordable. The discounted
price could also attract customers that were not previously shopping at Makro. By discounting
the selling price, Makro will be shrinking their profit margin. To counteract this, they would need
to maximise the number of units sold.
Introduction format for BS report
,Key Concepts And Definitions:
Supply chain: range of suppliers business has and nature of the relationships with those
suppliers. Companies must have predictable and reliable suppliers.
Compliance costs: expenses associated with meeting requirements of legal regulations.
FTSE / JSE Responsible Investment Index - launched on 12th October 2015
intent and purpose
- continue the work of JSE SRI focussing on good corporate governance
- measure policies/procedures of companies against globally acceptable ESG standards
- serve companies as a tool of demonstration to stakeholders
- promote responsible business practice
- increase investment from shareholders
- better organisational culture due to compliance
- better financial performance of the business
Global Reporting Initiative
- non-profit initiative to promote reporting on sustainability
- sustainability framework is used worldwide to promote transparency when businesses
report on the three P's (people profit planet)
- provides guidelines to determine the impact of the the three P's
- it ensures a simple comparing between different countries worldwide
Environmental sustainability: business operations that are shaped around practices that
consume resources sustainably and ethically, whilst maintaining a healthy environment so as
not to disadvantage future generations.
- Awareness of harmful effects of business practices on the environment has led to an
increase in businesses adopting environmentally friendly practices.
- Involves sustainable use of renewable resources and reduction of the use of
non-renewable resources.
- Operations management is significantly affected by rise in climate change awareness
and the need to integrate a long-term, sustainable view of resource management into
business operations.
- Carbon footprint: the amount of carbon produced that enters the environment from
business operations.
Supply chain management (SCM): integrating and managing the flow of supplies throughout the
inputs, transformation processes, and outputs in order to best meet customer needs.
Just-in-time (JIT): an inventory management approach that ensures the exact amount of
material inputs will arrive only as needed in operations processes.
,Quality management: processes business undertakes to ensure consistency, reliability, safety
and fitness of purpose of the product
The main approaches include:
- Quality control: inspection, measurement and intervention.
- Quality assurance: application of international quality standards.
- Quality improvement: total quality management and continuous improvement
Total Quality Management (TQM) = TQM approach:
- managing total business to deliver quality to customers.
- Emphasis on employee involvement in the prevention of quality problems.
Industrial market: industries and businesses that purchase products to use in the production of
other products or in their daily operations.
Secondary or tertiary businesses e.g. Tip Top Bakery buys flour to make bread, and Sony buys
plastics and metals to produce televisions.
Intermediate market: consists of wholesalers and retailers who purchase finished products and
sell them again to make a profit. The vast majority of goods sold to consumer markets are first
sold to an intermediate market. Resellers are an intermediate market.
Influences on marketing = Customer choice (buyer behaviour): decisions and actions of
consumers when they search for, evaluate, select and purchase goods and services. Factors
influencing customer choice (PEGS)
- Psychological influences/factors: influences within the individual affecting buyer behavior,
including:
- 1. Perception 2. Motives 3. Attitudes 4. Personality and self-image 5. Learning
- Socio-cultural influences
- 1. Religion 2. Nationality 3. Family roles
- Economic influences
- 1. A boom in the economy vs a recession 2. Inflation 3. Disposable income
- Government influences
- Influence level of economic activity; regulations influence marketing plans; Laws
,Marketing strategies: actions undertaken to achieve business marketing objectives through
marketing mix (4 P’s).
- Product; The business needs to determine such features as the product quality,
packaging/labelling, design, brand name and guarantee.
- Price; Must consider costs as well as competitor’s prices. Promotion
- Promotion: methods to be used by businesses to inform, persuade and remind
customers about its products; main forms include advertising, personal selling and
relationship marketing, sales promotion, publicity and public relations (PR).
- Place; Methods through which business gets products to customers.
Product/service differentiation: in its broadest sense, is the process of developing and
promoting differences between the business’s products or services and those of its competitors.
Points of differentiation
1. Customer service; Pre-sales and after-sales service are very important to consumers
purchasing expensive items such as cars or electrical appliances. Customer service may
also include the presentation of the premises, the atmosphere, or the range of products
that set a business apart and capture the consumer’s interest.
2. Environmental concerns; Businesses that create pollution may risk losing customers;
whereas businesses that adopt a ‘green’ philosophy and produce environmentally
friendly products may see their sales increase.
3. Convenience E.g. In response to busier lifestyles, many businesses now develop
convenient food packaging.
4. Ethical consumerism provides businesses an opportunity to satisfy demands of
growing numbers of consumers e.g. in response to dislike of genetically modified (GM)
foods by some consumers, various producers label products ‘GM-free’.
Profitability: ability of business to maximise profits. (Maximise sales, minimise costs)
- To ensure profit maximisation, business must carefully monitor revenue and pricing
policies, costs and expenses, inventory levels and levels of assets
Growth: ability of business to increase its size in the longer term.
- Growth of business depends on ability to develop and use its asset structure to increase
sales, profits and market share. Also ensures future business sustainability.
Efficiency: ability of business to minimise costs and manage assets so that maximum profit is
achieved with lowest possible level of assets.
- Business that aims for efficiency must monitor levels of inventories and cash, and
collection of receivables (accounts receivable).
Liquidity: extent to which business can meet financial commitments in the short-term (≤ 12
months).
- A business must have sufficient cash flow to meet financial obligations or be able to
convert current assets into cash quickly e.g. by selling inventory.
- Liquidity – current ratio (current assets ÷ current liabilities)
, - Current assets and current liabilities determine short-term financial stability of a business.
- Generally accepted that a ratio of 2:1
Solvency: extent to which business can meet financial commitments in the long-term (> 12
months).
- Solvency is particularly important to owners, shareholders and creditors of a business,
because it is an indication of the risks to their investment.
Balance sheet: represents business assets and liabilities at a particular point in time and
represents net worth (equity) of the business.
- Shows financial stability of the business. Balance sheet shows level of
current/non-current assets/liabilities, including investments and OE.
Working capital: funds available for the short-term financial commitments of a business
- Working capital often major asset of business, current assets make up appr. 40%
business’ assets.
- The current (working capital) ratio Current assets ÷ current liabilities: indicates amount of
risk taken by business in relation to profitability and liquidity and can help determine
whether business’ financial structure is acceptable
Net working capital: difference between current assets and current liabilities; represents funds
needed for daily operations of business to produce profits and provide cash for short-term
liquidity.
Producing pricing strategies and methods
Methods:
Strategies:
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