MNE2601 Assignment 2 semester 2 2020 with explanation from textbooks

MNE2601 Assignment 2 semester 2 2020 with explanation from textbooks SMEs play an important role in the development of emerging countries (Fida, 2008). They contribute to economic development by creating employment for the growing labour force in rural and urban areas; they also generate income, thereby providing desirable sustainability and innovation for the economy as a whole and eventually, leading to the reduction of poverty. Maas and Herrington (2006) confirm this as they state that SMEs are seen as a significant component of the solution to South Africa's development issues, which include poverty, income inequality and unemployment. A recent study conducted by Abor and Quartey (2010) estimates that 91 per cent of formal business entities in South Africa are SMEs, and these SMES contribute between 51 and 57 per cent of the gross domestic product (GDP) and provide about 61 per cent of the country's employment; Van Scheers (2011) also confirms these statistics. The Banking Association of South Africa and member banks are committed to small-business development and offer support through stakeholder engagement, and involvement or ownership of several initiatives. Other initiatives described by Fatoki and Akinwumi (2010) that promote the development of small businesses include the current framework of smallbusiness support and development in South Africa, which comprises the following: The White Paper on National Strategy for the Development and Promotion of Small Business (DTI, 1995), which sets out the government's strategy in this regard The Centre for Small Business Promotion, which has also been established by the government with the goals of creating an enabling environment for the growth and expansion of SMEs and of developing and supporting the institutions involved in delivering support services to SMES Developing economies often have high numbers of low-capital businesses that manufacture or sell similar products that will decrease unemployment. Next ideas for small-business start-ups will be discussed. 2. Before small-business owners start doing research about the feasibility of business ideas and potential markets, they need to evaluate their own talents, desires and goals in a process known as 1 market research 2 self-analysis 3 risk assessment 4 risk management Answer: 1 3.2 PRODUCT/SERVICE FEASIBILITY ANALYSIS The aim of the product or service feasibility analysis includes: To determine whether the planned product or service is attractive to the envisaged market in the form and price intended To determine the ease of use, suitability for purpose, or challenges potential users might encounter when using the product for the first time To gather feedback from the consumer, which can be used to make the necessary adjustments to the product or service before releasing it to the market To determine whether forecasts can be made to reflect the expected demand for the product. The steps followed in this process are: to conduct market research to determine if there is a need for the product or service; to undertake a concept test (utilising a concept statement); to develop a prototype and conduct usability testing; and to use the feedback gathered to determine whether or not to proceed with a business idea. If the research or test indicates that there is no need or demand for the product or service, the budding entrepreneur might decide not to implement the rest of the steps listed above. 3. The business owner's ability to choose an appropriate course of action from two or more alternatives involves skills. 1 decision-making 2 analytical 3 technical 4 problem-solving Answer: 1 5.4.5 Decision-making skills Decision-making skills involve the small-business owner's ability to choose an appropriate course of action from two or more alternatives. Subordinates perform the task directly required for production, but the owner must still decide what strategy to implement, what resources are acquired and how they are to be allocated (Terblanche, Moeng & Macleod, 2011). Smallbusiness owners use these skills when they consider the overall objectives and strategy of the business, the interactions among different parts of business, and the role of the business in its external environment. The key to decision making is the ability to select the appropriate decision-making style for each decision faced. Successful small-business owners learn to match the appropriate decision-making style with the situation. 4. Small businesses can enter into partnership agreements to share knowledge, expertise and skills; share and reduce costs when dealing with suppliers; or reduce costs in terms of research and development, while they each remain independent and do not necessarily share ownership. These partnerships are known as 1 joint ventures 2 partnerships 3 strategic alliances 4 mergers and acquisitions Answer: 3 4.6.3 Formal collaborations More formal and/or strategic collaborations can be in the form of joint ventures or strategic alliances. They can be between small businesses themselves or the small business can try to partner with bigger businesses. Joint ventures: a joint venture is "a temporary partnership formed by two or more organisations for the purpose of capitalising on a particular opportunity" (Ehlers & Lazenby, 2010: 211). Joint ventures are especially attractive when the two businesses that are coming together have unique skills and/or competencies that complement one another. Usually businesses enter into joint ventures to learn unique skills that the partner has so they can improve their own skills, or take advantage of newer technologies, or increase their ability to penetrate newer markets that they would not have been able to access if they were operating on their own. The ultimate goal of entering into a joint venture is to enhance the competitiveness of both businesses (Ehlers & Lazenby, 2010; Haberberg & Rieple, 2008). According to Ehlers and Lazenby (2010: 212): "smaller organisations can increase their competitiveness by joining forces against larger organisations". In addition, small businesses in joint ventures can "... lower business risk by partnering with local entrepreneurs who have knowledge, contacts and experience of the domestic market" (Rwigema, 2006: 225). Strategic alliances: in strategic alliances, small businesses can enter into partnership agreements to share knowledge, expertise and skills; share and reduce costs when dealing with suppliers or reduce costs in terms of research and development; work together on the development of new products and technologies; and share the benefits of new businesses while they each remain independent and do not necessarily share ownership. Strategic alliances may be shorter term compared to joint ventures (Ehlers & Lazenby, 2010; Elmuti & Kathawala, 2001; Išoraite., 2009; Rwigema, 2006). Išoraite. (2009: 39) defines a strategic alliance as "an agreement between two or more organizations to cooperate in a specific business activity, so that each benefits from the strengths of the other, and gains competitive advantage". More and more companies are encouraged to enter into strategic alliances to enhance their ability to respond effectively to globalisation as well as the ever-increasing uncertainty and turbulence of the business environment. Strategic alliances are especially good when small businesses want to grow by venturing into new and unfamiliar markets while coping with the increasing costs that come with research, development and management of such growth (Ehlers & Lazenby, 2010; Rwigema, 2006).