Business world: a system of individuals & business organisations that produce products/ services to meet people’s needs.
Four elements: • Human activities • Transformation • Exchange • profit
Role of business in society • Social responsibility (employment, equity, empowerment, limiting malpractice) • Business ethics • Affirmative action or equity • Environmental protection • Consumerism (consumer protection)
Market (South Africa) Main characteristic Markets Driving force Management Factors or production privately owned. Freedom of choice. Free competition. Profit. Individual reward. Private businesses and management. Freedom of decision.
Socialism Basic industries state owned. Freedom of choice. Limited competition. Profit. State-owned and private enterprises. In state-owned, decisions restricted to government policy. Freedom to choose jobs and employers. Limited right to strike. Freedom of choice, except for products produced by state.
Command All state owned. No competition. No profit. All for the state. State = management environment. No freedom of decision.
Freedom to choose jobs and employers. Freedom to strike. Freedom of choice. Spending limited by income.
Limited choice of jobs. Unions are state controlled. Rationing of product. Limited choice. Prices of products and income levels set by state. State concentrates resources towards particular ends. Low productivity. Low standard of living. Planning difficult / impossible.
Private initiative. Economic freedom. Unstable environment. Cyclical fluctuations. High social costs.
Possibility of full employment. State stabilises economic fluctuations. Little incentive in state organisations. Unproductive state organisations.
An entrepreneur takes a RISK, to combine the FACTORS OF PRODUCTION, in order to produce a PRODUCT / SERVICE that will SATISFY A NEED
Traits / Characteristics of Entrepreneur • Risk taking • Internal locus of control • Innovation • Creativity • Achievement motivation
Every entrepreneur needs a cell phone You have a “RIICA” every cell phone
Business Entry Strategies: • Franchise • New Business • Buy existing
Advantages • • • • • • Customers familiar with business location. Established customer base. Planning can be done on historical data. Supplier relationships already in place. Inventory and equipment already in place. Possible financing from owner.
Disadvantages • • • • • • Business location may be or may become unstable. Image of business difficult to change. Employees are inherited rather than chosen. Difficulties in changing how the business is run. Inventory and equipment may be obsolete Financing costs could drain the cash flow and threaten the survival of the business.
Role of small business is economy: • Production of goods / services • Innovation • Aiding of big business • Job creation
Enter / do not enter the business world?
Do I have the necessary entrepreneurial skills and abilities?
Do I have the required resources or can I get it?
Is there an above-average chance that it will work?
Is it feasible? (Feasibility Analysis)
Did the BP convince investors, bank, suppliers etc.?
Sole Proprietorship Personality Liability Control Not a legal (juristic) person Unlimited liability Owner has direct control and authority
Partnership Not a legal...