OTE2601 Assignment 2 (COMPLETE ANSWERS) 2025 - DUE 15 June 2025

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OTE2601 Assignment 2
(COMPLETE ANSWERS)
2025 - DUE 15 June 2025
NO PLAGIARISM




[Year]

, Exam (elaborations)
OTE2601 Assignment 2 (COMPLETE
ANSWERS) 2025 - DUE 15 June 2025
Course

 Orientation to teaching Economic (OTE2601)
 Institution
 University Of South Africa (Unisa)
 Book
 Teaching Economics

OTE2601 Assignment 2 (COMPLETE ANSWERS) 2025 - DUE 15 June 2025;
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QUESTION 1 A famous South African entrepreneur like Patrice Motsepe can
mentor young entrepreneurs in running a business. Discuss the reasons why
most businesses fail. [20]

Patrice Motsepe, a prominent South African billionaire mining magnate and entrepreneur,
embodies the spirit of overcoming challenges in the business world. His journey from a humble
background to immense success makes him an ideal mentor for young entrepreneurs.
Understanding why most businesses fail is crucial for aspiring entrepreneurs, as it allows them to
identify potential pitfalls and strategically plan to avoid them.

Here are the key reasons why most businesses fail, drawing from general business principles and
specific challenges often faced in a South African context:

I. Financial Mismanagement and Lack of Capital:

 Insufficient Funding (Under-capitalization): Many businesses start with insufficient
capital to cover initial operating costs, unexpected expenses, or to sustain operations until
profitability. This leads to premature cash flow crises.
 Poor Cash Flow Management: Even profitable businesses can fail due to poor
management of incoming and outgoing cash. This includes late invoicing, ineffective
collection of receivables, holding excessive inventory, or not managing payables
strategically.
 Lack of Financial Expertise and Budgeting: Many entrepreneurs lack basic financial
literacy, leading to poor budgeting, inability to track expenses, and failure to understand
crucial financial statements. This makes it impossible to make informed financial
decisions.

,  Failure to Differentiate Between Personal and Business Finances: Commingling
personal and business funds can obscure the true financial health of the business and lead
to unsustainable spending.

II. Ineffective Planning and Strategy:

 Absence of a Comprehensive Business Plan: Many businesses are launched without a
well-researched and realistic business plan that outlines achievable goals, market
analysis, operational strategies, and financial projections. Without a roadmap, businesses
often drift without direction.
 Lack of Market Research and Insufficient Demand: Entrepreneurs often fall in love
with their product or service idea without adequately researching if there is a genuine and
sufficient market demand for it. Launching a product or service nobody wants or needs is
a guaranteed path to failure.
 Poor Marketing and Sales Strategy: Even with a good product, if customers don't
know about it, or if the marketing message doesn't resonate, the business won't generate
sales. Ineffective marketing and sales often stem from not understanding the target
customer or how to reach them.
 Failure to Adapt to Market Changes: The business environment is constantly evolving.
Companies that fail to anticipate or react to competition, technological advancements, or
shifts in consumer behavior (e.g., Blockbuster vs. Netflix) risk becoming irrelevant.
 Over-reliance on a Single Customer/Client: Depending heavily on one large customer
can be disastrous if that customer withdraws their business, leading to a sudden and
significant loss of revenue.

III. Management and Leadership Deficiencies:

 Lack of Management Experience/Skills: Many new business owners are experts in
their craft (e.g., a great chef, a skilled technician) but lack fundamental business
management skills such as planning, organizing, leading, and controlling. This can lead
to poor decision-making across all functions.
 Poor Leadership: Ineffective leadership can lead to demotivated employees, high staff
turnover, lack of clear direction, and an inability to adapt. According to John Maxwell,
"everything rises and falls on leadership."
 Inability to Delegate: Entrepreneurs often try to do everything themselves, leading to
burnout, inefficiency, and a failure to leverage the strengths of others. A strong business
requires a team.
 Failure to Hire the Right People: Building a competent and motivated team is crucial.
Poor hiring decisions can lead to low productivity, internal conflicts, and an inability to
execute the business strategy effectively.
 Lack of Vision and Focus: Without a clear vision, a business can easily lose its way,
become distracted by non-core activities, and fail to innovate or achieve long-term
growth.

IV. External Factors and Environment (Specific to South Africa):