obs 114 – semester testRevision CLASS

14 March 2011

14 Maart 2011

17:30-18:25

Chapters 1, 2 & 5

Hoofstuk 1, 2 & 5

Value Chain / Waardeketting

business / besigheid

E n v ir o m e n t /o m g e w in g

Chapter 1 - Case Study 1:

Informal business in the rural areas of KwaZulu Natal

ZOZO’s Fruit & Vegetables

1.

Is Zozo’s a part of the economic life of the region?

Yes, Zozo’s is part of the economic life of the region, and so are its owners and all its

customers. They buy and sell produce and therefore they form part of the economic life. Although it was not stated in the case, it

may be deduced that this business forms part of the so-called informal sector.

2.

Are the principles of Business Management, as explained in this book, applicable to Zozo’s?

Yes, the principles of Business Management are always applicable. They are applicable to many types of human activity – not only to business activity. Even a small, informal business in a rural area can benefit if business and management principles are applied.

3.

What functional business areas will be necessary in this business (though various functions can be catered for by one person)?

Almost all functions are involved, although some only in the most elementary form. Although it is a family business (with the occasional relief worker employed on a temporary basis), the

basic principles of Human Resources Management should be in place. Although there is no manufacturing concern, it

may be necessary for the food to be prepared (cleaned, peeled, packaged, etc.) and thus the business touches on this functional

area as well. Other functional areas are quite clearly involved in the business.

Business = System (Systeem)

4 Functional Areas (Funksioneel)4 Generic FX

(Generies)

F u n c t io n a l a r e a s o f B u s in e s s

M a n a g e m e n t• Purchasing and materials management

• Production and operations management

• Marketing management

• Financial management

M o s t b u s in e s s e s h a v e v a r io u s d e p a r t me n t s , e a c h wit h a s p e c if ic j o b o r t a s k

= f u n c t io n s

Generic management functions

• General management

• Human resources management

• Corporate communication management

• E-management

A l l m a n a g e m e n t f u n c t io n s s h o u ld w o r k t o g e t h e r t o a c h ie v e t h e g o a ls

o f t h e b u s in e s s .

4.

What are the needs that initiated the establishment of this business?

The primary external needs arose because there was a lack of suppliers of fresh fruit and

vegetables in this community. Secondary, internal needs would be the need for Ephraim and Lahja to serve their community, to become financially more independent, and to afford

their children’s school fees.

The role of needs in the business cycle

s Want = a vague feeling of deficiency = “nice to have”a Need = an intense and definable drive to get

something = “must have”

5.

Can these needs change over time? If so, how will Ephraim and Lahja realise this, and what should they

do when this happens?

Yes, the external needs can and will change over time. In this case, the owners of the business are in direct contact with their customers and they should realise when and how consumer preferences have changed.

The owners should react by supplying what the customers want and by stopping product lines (or

attributes of products and services) that are no longer in demand.

B u s in e s s a c t iv i t ie s a r e d r iv e n b y t h e s a t i s f a c t io n

o f h u m a n n e e d s .

• Needs spiral• Unsatisfied needs

= opportunity• Driving force for

human actionBusiness Climate

6.

By supplying fresh fruits and vegetables daily, what needs (according to the theory of Maslow) does Zozo’s satisfy? What are the

implications of this?

The main needs that are satisfied are physiological needs, as Zozo’s supplies daily food. This is a need that recurs (as can be seen in

Zozo’s motto, “Come again”). Therefore, good products and services are necessary to ensure the continued existence of the business. The owners can touch on other, higher order needs of

the customers by ensuring safe surroundings (safety needs), where customers can interact pleasantly with the owners, and amongst

themselves (creating a place “where friends meet”, thereby fulfilling social needs), in a clean shopping and parking environment

(esteem needs). By satisfying these needs of which the customers themselves are perhaps unaware, they create an environment to

which the customers will indeed “come again”.

M a s lo w ’ s h ie r a r c h y o f n e e d s t h e o r y

= higher order needs (“nice to have”) =

Self-actualisation needs of fulfilling potentialEsteem needs of respectSocial needs of belongingSafety needs of security

Physiological needs of human existence

= basic needs (“must have”) =

W h e n a n e e d is s a t i s f ie d i t n o lo n g in f lu e n c e s b e h a v io r .

not mutually exclusive

7.

Is Zozo’s a part of the free market system? If not, of which economic system is it part?

Yes, Zozo’s is part of the free market system as it is found in South Africa. The Nuvenyas experience

various freedoms in deciding how to do business, what to supply, at what price, and so on. The customers also have various freedoms. In no

other economic system could Ephraim and Lahja operate a business under the conditions

described.

8.

Classify Zozo’s as one of the three need-satisfying institutions. Can it be

“transformed” into one of the other forms?

Zozo’s is a business organisation where private initiative does business on its own account.

Under normal circumstances, such a business cannot be transformed into either a

government or a not-for-profit business

Need satisfaction institutions in the free market system

• Business organisations

• Government organisations

• Non-profit-seeking organisations

9.

What are the production factors that you distinguish in this business?

All four “traditional” production factors are required in this

business. The owners buy “natural resources” in the form of fresh farm products. They supply “human resources” by

working in the business themselves. They provided the “capital resources” from their own savings, as there is no indication that they received external financing. They also

supply the managerial (and entrepreneurial) resources themselves as they were the initiators of Zozo’s and they manage the business themselves. They are, apparently,

reasonably successful in doing so, because they have been in business for five years already.

10.

Do you see Zozo’s as primarily a production or service organisation?

Zozo’s is primarily a service enterprise. They simply buy fruit and vegetables from

neighbouring farms and resell the produce. There is no manufacturing in the sense that

raw materials are not changed into a different end product.

11.

What is the “Invisible Hand” driving Ephraim and Lahja in their business?

The “Invisible Hand” in business is always the opportunity for profit. Profit opportunities bring out the best of the

owners’ abilities and efforts, since the owners themselves will benefit from the success of the business. However, an uncontrolled drive for profit for the sake of profit only, can

alienate a business from its support base. In the case of Zozo’s, the owners are also driven by the fact that the

business gives them independence, as well as their desire to be able to afford schooling for their children. The

“Invisible Hand” is seldom only one force – it is usually a combination of various motivational forces.

12.

Can you identify the economic principle in this business?

The economic principle implies that output is maximised (need satisfaction) for a given input (offer of need-

satisfying means). On the one hand, the owners offer the community maximum satisfaction by supplying

fresh fruit and vegetables at reasonable prices. On the other hand, the owners do their best to retain and

expand their customer base and try to avoid inviting competition. The community is also offered maximum satisfaction of their need for affordable fresh fruit and

vegetables.

Problem with needs = means

• Various needs exists at one point in time

• Prioritise

• Priorities is subjective (eye of the beholder)

• Order can change within broader categories of hierarchy

ECONOMIC PRINCIPLE• to gain maximum satisfaction with minimum

effort– satisfy maximum needs with min need satisfying

resources

– the fundamental basis for economic activity

• the basis of productivity issues

– max output ( R E S U L T S ) with min input ( R E S O U R C E S )

ALL BUSINESS CONSIDERATIONS SHOULD BE BASED ON THIS ECONOMIC

PRINCIPLE.

13.

How can Ephraim and Lahja improve the productivity of their business activities?

Productivity is calculated as output per input. If they can sell more units of product in the same time, using the same premises and

equipment, and with the same number of staff, productivity (and hence profit) will also increase. For example, if Ephraim were to

collect units of product from the various farmers on a daily basis, and if the quantities of product increased, he might find himself limited by time and space. He could, under these circumstances, consider dividing his suppliers into two groups so that he collects

products from each group on alternate days. By so doing, he could reduce both his travelling time and the distance he travels daily,

saving inputs and thus improving productivity.

14.

Can they expand their business? Should expansion only be in fruit and vegetables, or should they include other products as well?

It is always good to investigate the possibility of expansion. • The first consideration must be whether the market demand justifies

expansion. • Ephraim and Lahja must keep in mind the fact that their own capabilities

are limited. Expansion would mean bringing more people into the business. The same aspects are also applicable when considering the inclusion of other products.

• If Ephraim and Lahja do expand their business to include other products, they should primarily consider “supporting” and “supplementary” products (products that are different from, but related to, their current products). In other words, they would sell more products to their existing customers.

• Expansion should be introduced as organic growth and they must avoid a quick and uncontrolled expansion.

15.

Identify the supply chain of Zozo’s.

The basic supply chain is the various farmers who sell their products to Zozo’s, and Zozo’s which sells the products to its customers. The supply chain can be

expanded on the inflow side by considering the suppliers of trees, seeds, fertilisers, insecticides etc. to

the farmers. The chain can also be extended at the other end (the outflow side), by considering what the customers do with the products. For example, some

customers may use the tomatoes, lettuce and cucumbers that they have bought from Zozo’s to make

hamburgers that they sell in their own businesses

Suppliers ClientsFocal Company

SUPPLY CHAIN – MARKET ENVIROMENT

Chapter 2 – Case Study 1

1. Do you agree that Peter does not need to do any environmental analysis? Give reasons for

your answer.

Peter needs to do an environmental analysis. This type of fast-changing, technologically driven

environment demands continuous analysis and forecasting to stay on the edge. Innovations can

change the product and the process of manufacturing.

2.

Would you say, with reference to the exceptional net income, that Peter is a good

manager? Explain.

A 16% return after tax in this high-tech environment is not substantial. There are too many factors that contribute to the success of

a business.

3.

To what must Peter pay attention in the different environments in order to be successful?

Peter must pay attention to the macro-environment (economic, technological, social and

political) which has forces in industry, and therefore plays an important role. The learner

can indicate specific aspects that he/she relates to.

MACRO / MAKRO

Market / Mark

Micro / Mikro

Chapter 2 – Case Study 2

1. Explain what changing environmental conditions could have caused the shutdown

of the power station.

Technology was the main driving force in the environment that caused the power station to close. The cost of maintaining the facility was too high as a result of newer technology and

the economics of scale in new facilities.

2.

Explain how, in turn, environmental conditions caused the town to be closed. Take the

viewpoint of a retailer in the town.

The town was developed in order to house the employees of the power station. As a result of

the power station, a community with infrastructure developed. When the power

station shut down, most people in town lost their jobs. As a result, buying power has been lost and

there is no longer a need for retailers in the town.

3.

Suppose you were a farmer who sold vegetables to the retailer. How have changes

in the environment affected your operations?

The immediate market has been lost. The farmer needs to develop a new market for his produce. This will have a cost implication for

the farmer (economic environment).

Chapter 5 – Case Study 1

1. Did Mavis establish the cause of the problem to try and improve the decreasing turnover or is it

only a symptom? Motivate your answer.

Less traffic in the shopping centre is a symptom and not the cause for the decline in turn over. A

variety of factors are contributing to the decline in their sales e.g. competition entering the

market, competitive pricing, the change in the retail environment etc.

Types of decisions:107

2.

What external factors are influencing the success and survival of the Pro-golf shop in the Rand

shopping centre?

Market factors – competition and customers (their market)

Macro factors – economic and social (pricing; the shift to new shopping centres and the influx of

non-retail business to the suburb; safety of shop owners and customers etc.)

3.

In doing strategic planning, what factors should Mavis and Martin have considered? (Turn back to the section on the

strategic planning process, 5.4 p. 89)

Factors to consider in order to turn the business declining character around:

Set clear objectives Establish their internal strengths and weaknessesEstablish their external opportunities and threats

Evaluate and select an appropriate strategy for the business to turnaround the current trend and to establish future

growth

The Process of Planning:

4.

Formulate new objectives for the Pro-golf shop for the short, medium and long term.

• Short term: To establish which factors

influence the success of their business by the end of the month e.g. March 2004

• Medium term: To relocate the business by the end of the year e.g. December 2004

• Long term: To be the market leader in supplying golf clothing and equipment in Johannesburg by the end of December 2007

Objectives

Rational Decision-Making Process

108

Chapter 5 – Case Study 2

1. What type of departmentalisation would you suggest for “Beauty for men”? Substantiate your

answer.

Functional departmentalisation. The suggestion that senior people are appointed as functional managers indicate that each function will take

the responsibility for all branches throughout the country. This will allow a standardisation of

service and ensure quality.

3.

How do you suggest Precious and Fly can create or maintain a competitive advantage

for “Beauty for men”?

Consider the alternatives discussed in the text in creating a competitive advantage: cost,

leadership, speed, quality and innovation

4.

Identify which management skills and tasks will be relevant to Fly in her position as CEO and which to

Precious as Marketing Manager.

Fly, as the CEO, needs conceptual and human skills and will be mostly involved in planning, organising and

leading

Precious, as the Marketing Manager, needs conceptual, technical and human skills and will be

mostly involved in all four primary management tasks.

5.

Do you think informational leadership power is important for Fly as CEO, when making

decisions about the new branches? Explain your answer.

Yes, information about the new markets and competition is of great importance to

establish whether a new branch will be viable in each city.

Test BREAKDOWN:

• TIME/TYD: 1 Hour• MARKS/PUNTE: 50• Breakdown:• Section A / Afdeling A: Multiple choice questions

(25 marks) / Meervoudigekeusevrae (25 punte)• Section B: Knowledge questions (13 marks) /

Afdeling B: Kennisvrae (13 punte)• Section C: Interpretative (12 marks) / Afdeling C:

Toepassing (12 punte)

Venues:

Surname starts with: VenueA AE du Toit Aud

B North Hall

C South Hall

D EB4-150

E EB4-151

F IT4-1

G IT4-1

H IT4-5I AE AnnexJ Van der Bijl HallK EB4-152L AE Annex

Ma - Malepe Centenary 1 Maletswa - Mathatho Centenary 2

Mathe - Mnguni Centenary 3Mnisi - Motileng Centenary 4

Motitswe - Mzimkulu Centenary 5

N Centenary 6O IT4-1P IT4-4Q IT4-5R EB2-151S AE du Toit AudT Van der Bijl HallU IT4-5V ChemistryW Chemistry

X Chemistry

Y Chemistry

Z Chemistry

Special arrangements EB3-47 (10)

Groenkloof L5 & L6 (180)