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OTE2601 Assignment 2 DUE 5 JULY 2024 R53,10
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  3. University Of South Africa
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  5. Orientation to teaching Economic and Management

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OTE2601 Assignment 2 DUE 5 JULY 2024
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  • June 27, 2024
  • 5
  • 2023/2024
  • Exam (elaborations)
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  • ote2601 assignment 2 due 5 july 2024

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OTE2601
Assignment 02
Unique no.: 809145
Due date: 05 JULY 2024

, QUESTION 1
1.1 A close corporation in business is a type of business entity that is limited to a
certain number of shareholders and has restricted transferability of shares. An
example of a close corporation is a family-owned small business like a local bakery
or a small construction company.
1.2 When discussing the capital requirement for a franchise, it is important to
consider the following issues: - Initial franchise fee: the upfront cost of purchasing a
franchise license. - Royalty fees: the ongoing payments that the franchisee must
make to the franchisor. - Marketing and advertising fees: additional costs for
promotional activities. - Equipment and inventory costs: the expenses for purchasing
necessary equipment and products. - Working capital: the funds needed to cover the
day-to-day operational expenses of the franchise.
1.2.2 Yes, businesses fail for a number of reasons, and these reasons include:
1.2.2.1 Incompetent management: A business may fail due to poor decision -
making, lack of leadership skills, or ineffective management of resources.
1.2.2.2 Lack of experience: Inexperienced business owners may struggle to
navigate the challenges of running a successful franchise, leading to failure.
1.2.2.3 Poor financial control: Mismanagement of finances, failure to budget
effectively, and inability to control costs can lead to the downfall of a business.
1.2.3.4 Inflexibility: Businesses that are unable to adapt to changes in the
market, consumer demands, or industry trends may struggle to survive.
1.2.3.5 Unrealistic time frames: Setting unattainable goals or expecting
immediate success without putting in the necessary effort and time can lead
to failure in business.


QUESTION 2
2.1
1) Cost of goods: The cost of acquiring the goods or materials to produce a product
directly impacts the profit margin. Lower costs of goods can lead to higher profits,
while high costs can eat into the profit margin.
2) Pricing strategy: Setting the right price for a product or service is crucial for
maximizing profit. Pricing too high can deter customers, while pricing too low can
result in lower profit margins.
3) Operating expenses: Managing and reducing operating expenses such as rent,
utilities, and wages can directly impact the overall profit. Finding ways to lower these
costs can increase profitability.

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