Business Studies
Grade 12
IEB
Notes on the following content:
➢ Acquiring a business
➢ Forms of Ownership
➢ Business environments
➢ Business strategies
➢ Leadership and management
➢ Ethics
➢ Creative thinking
➢ Conflict management
➢ Performance management
➢ Corporate governance
➢ Corporate social responsibility
➢ Marketing
➢ Insurance
➢ Investment
➢ Labour relations
➢ Labour legislation
➢ Human resources
, Acquiring a Business
Options available to new entrepreneur:
Brand new business
▪ Market research
▪ SWOT analysis
▪ Requirements: Hard work, dedication, market demand, management competence, sufficient
capital investment
Franchise
▪ A franchise is a system or agreement. Distribute specific products on specific terms according to
existing business model.
▪ Franchisor: Supplier / owner
▪ Franchisee: Buyer / distributor
▪ Fees:
o Franchise fee: Initial cost to buy franchise and secure the name.
o Royalties: Monthly amount (% of turnover) for right to use trademark, techniques and
products.
o Levies: Fixed monthly payments for advertising, training and administrative support.
▪ Advantages to franchiser:
o Expand business quickly without large capital investment.
o Franchisees will succeed.
o No staff problems as franchisee is the owner.
▪ Disadvantages to franchiser:
o Training and support difficulties.
o No direct control.
o Administrative duties to collect royalties and control brand.
▪ Advantages to franchisee:
o Good chance of susses due to admin support, training, developed systems and goods
name of franchiser.
o Benefit with bulk purchases and supplier negotiates.
o Easier to raise funds from banks due to good reputation.
▪ Disadvantages to franchisee:
o High franchise fees and royalties.
o Strict prescriptions.
o May not receive required support.
Legal regulation of franchises – FASA (Franchise Association of South Africa)
,Buy an existing business
▪ Entrepreneurship: Person wants own business.
▪ Backward integration: Better control over supply.
▪ Forward integration: More control over distribution.
▪ Market consolidation: Brand stretching.
▪ Diversification: Split activities / target market.
▪ Factors:
o Available capital: Own or borrowed
o Correct opportunity: Ensure demand, location, expansion and competition.
o Acceptable price: Profitability, liquidity, solvency, creditability, debt.
o Staff competency: Skills, structure, staff turnover.
▪ Advantages:
o Market research had been done.
o Customer base and goodwill already established.
o Business already established.
▪ Disadvantages:
o Hidden issues, i.e. staff, facilities, etc.
o Support problems.
o Future expansion limitations.
Expanding existing business
Outsourcing
▪ Strategy of sub-contracting an activity to a 3rd party, i.e. accounting, payroll, HR, call centres, etc.
▪ Advantages:
o Focus on core activities.
o Fixed costs apply to outsourcing.
o Cut down on administration.
o Pay for service only when it is required.
▪ Disadvantages:
o Less control.
o Different values may cause conflict.
Leasing
▪ An agreement to use an asset against a monthly payment without transfer of ownership.
▪ Advantages:
o Lower capital investment required.
o No costs towards maintenance or repairs.
o Tax-deductible expense.
▪ Disadvantages:
o Expense incurred but no asset required.
o It is expensive if asset must be bought in future.
, Forms of Ownership
Options available:
➢ Sole trader: One person
➢ Partnership: Two to twenty people own the business according to an agreement.
➢ Close corporation: One to ten members. Informal.
➢ Private company: (PTY) Ltd: One to fifty shareholders and appointed directors.
➢ Public company: Ltd: Sell shares to the public and managed by directors.
➢ Co-operative: Combination to create improved business practise.
➢ Trust: Beneficiaries to receive allocations.
Factors that impact choice:
➢ Capital
▪ Amount needed
▪ Type: Own or borrowed.
➢ Formation procedure
▪ Registration process: Complex, expensive and time consuming.
▪ Documentation
➢ Liability
▪ Separation of protection.
▪ Owner’s liabilities.
➢ Continuity
▪ Restrictions
➢ Tax implications
▪ Progressive tax vs. Corporate tax
➢ Management
▪ Owners / Managers / Directors
Grade 12
IEB
Notes on the following content:
➢ Acquiring a business
➢ Forms of Ownership
➢ Business environments
➢ Business strategies
➢ Leadership and management
➢ Ethics
➢ Creative thinking
➢ Conflict management
➢ Performance management
➢ Corporate governance
➢ Corporate social responsibility
➢ Marketing
➢ Insurance
➢ Investment
➢ Labour relations
➢ Labour legislation
➢ Human resources
, Acquiring a Business
Options available to new entrepreneur:
Brand new business
▪ Market research
▪ SWOT analysis
▪ Requirements: Hard work, dedication, market demand, management competence, sufficient
capital investment
Franchise
▪ A franchise is a system or agreement. Distribute specific products on specific terms according to
existing business model.
▪ Franchisor: Supplier / owner
▪ Franchisee: Buyer / distributor
▪ Fees:
o Franchise fee: Initial cost to buy franchise and secure the name.
o Royalties: Monthly amount (% of turnover) for right to use trademark, techniques and
products.
o Levies: Fixed monthly payments for advertising, training and administrative support.
▪ Advantages to franchiser:
o Expand business quickly without large capital investment.
o Franchisees will succeed.
o No staff problems as franchisee is the owner.
▪ Disadvantages to franchiser:
o Training and support difficulties.
o No direct control.
o Administrative duties to collect royalties and control brand.
▪ Advantages to franchisee:
o Good chance of susses due to admin support, training, developed systems and goods
name of franchiser.
o Benefit with bulk purchases and supplier negotiates.
o Easier to raise funds from banks due to good reputation.
▪ Disadvantages to franchisee:
o High franchise fees and royalties.
o Strict prescriptions.
o May not receive required support.
Legal regulation of franchises – FASA (Franchise Association of South Africa)
,Buy an existing business
▪ Entrepreneurship: Person wants own business.
▪ Backward integration: Better control over supply.
▪ Forward integration: More control over distribution.
▪ Market consolidation: Brand stretching.
▪ Diversification: Split activities / target market.
▪ Factors:
o Available capital: Own or borrowed
o Correct opportunity: Ensure demand, location, expansion and competition.
o Acceptable price: Profitability, liquidity, solvency, creditability, debt.
o Staff competency: Skills, structure, staff turnover.
▪ Advantages:
o Market research had been done.
o Customer base and goodwill already established.
o Business already established.
▪ Disadvantages:
o Hidden issues, i.e. staff, facilities, etc.
o Support problems.
o Future expansion limitations.
Expanding existing business
Outsourcing
▪ Strategy of sub-contracting an activity to a 3rd party, i.e. accounting, payroll, HR, call centres, etc.
▪ Advantages:
o Focus on core activities.
o Fixed costs apply to outsourcing.
o Cut down on administration.
o Pay for service only when it is required.
▪ Disadvantages:
o Less control.
o Different values may cause conflict.
Leasing
▪ An agreement to use an asset against a monthly payment without transfer of ownership.
▪ Advantages:
o Lower capital investment required.
o No costs towards maintenance or repairs.
o Tax-deductible expense.
▪ Disadvantages:
o Expense incurred but no asset required.
o It is expensive if asset must be bought in future.
, Forms of Ownership
Options available:
➢ Sole trader: One person
➢ Partnership: Two to twenty people own the business according to an agreement.
➢ Close corporation: One to ten members. Informal.
➢ Private company: (PTY) Ltd: One to fifty shareholders and appointed directors.
➢ Public company: Ltd: Sell shares to the public and managed by directors.
➢ Co-operative: Combination to create improved business practise.
➢ Trust: Beneficiaries to receive allocations.
Factors that impact choice:
➢ Capital
▪ Amount needed
▪ Type: Own or borrowed.
➢ Formation procedure
▪ Registration process: Complex, expensive and time consuming.
▪ Documentation
➢ Liability
▪ Separation of protection.
▪ Owner’s liabilities.
➢ Continuity
▪ Restrictions
➢ Tax implications
▪ Progressive tax vs. Corporate tax
➢ Management
▪ Owners / Managers / Directors
