Business

Enterprise Skills
‘O’ Level Revision

ar y notes
• With summ
bus objectives
covering sylla
SEC questions
• Model ZIM
and answers
Business Enterprise
Skills
'O' Level Revision
ring
ar y notes cove
• With summ
ives
syllabus object
d el Z IM S E C questions and
• M o
answers
Published by:
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A Practical Approach to Business Enterprise Skills | ‘O’ Level Revision Book

ISBN: 978-0-7974-8512-9

First Published in January 2023

Copyright © Secondary Book Press

Editor in Chief: Munyaradzi Gunduza

Development Editor: Phineas T Bhidhi and Lloyd Mukusanya
Text and design layout: Blessed Mudzingwa and Ropafadzo Chikonamombe

Acknowledgements: The publisher would like to express heartfelt appreciation and thanks to the
following contributors; Mubaiwa T, Mandikuwaza D and Homela Lydia. Their contribution and
devotion are recognised in making this publication a success.
Every effort has been made to trace the copyright holders. In the event of unintentional omissions
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Contents
Topic 1: The business enterprise.......................................................................................................... 1
Topic 2: The enterprising environment................................................................................................ 8
Topic 3: Setting up a new enterprise.................................................................................................... 23
Topic 4: Business planning................................................................................................................... 45
Topic 5: Enterprise finance and securing investors.............................................................................. 53
Topic 6: People in business enterprises................................................................................................ 81
Topic 7: Markets and marketing........................................................................................................... 102
Topic 8: Operations management......................................................................................................... 106

EXAMINATIONS

Examination Practice 1
Paper 1................................................................................................................................................. 114
Paper 2................................................................................................................................................. 116
Examination Practice 2
Paper 1................................................................................................................................................. 118
Paper 2................................................................................................................................................. 120
Examination Practice 3
Paper 1................................................................................................................................................. 122
Paper 2................................................................................................................................................. 124
Examination Practice 4
Paper 1................................................................................................................................................. 126
Paper 2................................................................................................................................................. 127
Examination Practice 5
Paper 1................................................................................................................................................. 129
Paper 2................................................................................................................................................. 131
Examination Practice 6
Paper 1................................................................................................................................................. 133
Paper 2................................................................................................................................................. 136
Examination Practice 7
Paper 1................................................................................................................................................. 138
Paper 2................................................................................................................................................. 140
Examination Practice 8
Paper 1................................................................................................................................................. 142
Paper 2................................................................................................................................................. 144
Examination Practice 9
Paper 1................................................................................................................................................. 146
Paper 2................................................................................................................................................. 148
Examination Practice 10
Paper 1................................................................................................................................................. 150
Paper 2................................................................................................................................................. 151

ANSWERS........................................................................................................................................... 153
Introduction

Business Enterprise Skills is a subject that equips students with necessary skills needed to start and run a
business. It intends to develop in learners skills in enterprising, leadership, resource management, problem
solving and critical thinking. This learning area will enable learners to interact with and participate in
the changing enterprising environment, through the use of their learnt financial skills, competencies
and knowledge, thus enhancing enterprise success. The skills are crucial to the Zimbabwean economy
as the country is promoting indigenisation. Business Enterprise Skills O-level Revision Book covers
all the topics and concepts that are found in the ZIMSEC Syllabus and are structured according to
the New Curriculum expectations. It summarises the eight main topics that are in the Syllabus whilst
equipping students with relevant information in their preparation for the O-level Business Enterprise
Skills examinations. You must work your way through this study guide to improve your understanding,
identify your areas of weakness and correct your own mistakes. To ensure a high-quality pass, you should
also substantiate your knowledge from other textbooks and your class notes. We are confident that this
Business Enterprise study guide can help you prepare well so that you pass the ZIMSEC O-level exams.

Overview of the exam for Business Enterprise Skills O-level Study Guide

The exam questions have been arranged topically and in their respective order in which they are taught,
for example, the business enterprise, the enterprising environment and setting up a new enterprise. The
questions are structured typical of ZIMSEC exam standard.
Paper 1 has 6 structured questions which carry a total of 100 marks and the student is required to answer
all the questions.
Paper 2 carries 7 questions. It is divided into two sections which are section A and Section B. Section A
has one case study question which carries a total of 40 marks and Section B has 6 essay questions with
each question carrying 20 marks. The candidate is required to answer all the questions in Section A and
any three questions in Section B.

How to use this study guide

This study guide covers selected aspects of the different topics of O-level Business Enterprise Skills
curriculum in the order that it is usually taught during the year. The selected aspects of each topic are
presented in the following way:

• An explanation of terms and concepts

• Worked examples to explain and demonstrate
• Activities with questions for you to answer
• There are exercises on the notes section based on exam-type questions. Cover the answersand
do the exercises on your own. Then check your answers. Reward yourself for the things you
get right. If you get any incorrect answers, make sure you understand where you went wrong
before moving onto the next section.
• Answers for you to use to check your own work
• Typical ZIMSEC exam papers are included in the study guide for you to practice.

i
Top 10 study tips

Try these study tips to make learning easier

• Have all your materials ready before you begin studying – pencils, pens, highlighters, paper
and all the other necessary material.
• Be positive. Make sure your brain holds on to the information you are learning by reminding
yourself how important it is to remember the work and get the marks.
• Take a walk outside. A change of scenery will stimulate your learning. You’ll be surprised at
how much more you take in being outside in the fresh air.
• Break up your learning sections into manageable parts. Trying to learn too much at one time
will only result in a tired, unfocused and anxious brain.
• Keep your study sessions short but effective and reward yourself with short, constructive breaks.
• Teach your concepts to anyone who will listen. It might feel strange at first, but it is worth
reading your revision notes aloud.
• Your brain learns well with colours and pictures. Try to use them whenever you can.
• Be confident with the learning areas you know well and focus your brain energy on the sections
that you find more difficult to take in.
• Repetition is the key to retaining information you must learn. Keep going, don’t give up.
• Sleeping at least 8 hours every night, eating properly and drinking plenty of water are all
important things you need to do for your brain. Studying for exams is like strenuous exercise,
so you must be prepared physically.

Question words to help you answer questions

It is important to look for the question words (words that tell you what to do) to correctly understand
what the examiner is asking. Use the following table as a guide when answering questions.

State – express something definitely or clearly in writing.

Explain – give reasons for what is asked for. Provide causes.

Give – mention what you are asked.

List – make a numbered list.

Outline – make a numbered or well organised list.

Discuss – write as much as you can.

Define – give a concise and accurate definition of what is called for.

What is meant by – this is asking you to clearly show the examiner that you know what a term means.
A single sentence answer is nearly always sufficient.

Comment – express an opinion or reaction in writing.

Explain – give reasons for what is asked for. Provide causes.

Suggest – mention or introduce (idea, action or plan) for consideration or possible action.

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Justify – discuss the good and the bad points of the subject and discuss why it is good or bad.

Distinguish – discuss differences.

Evaluate/Criticise – discuss the good and the bad points of the subject and conclude whether it is
primarily good or bad.

Identify – means write down, without explanation or discussion, the required number of points.

Consider – as in ‘consider whether the car manufacturer should reduce prices to increase demand.’ This
is asking you to show advanced skills. The best approach to answer this type of question is to explain
the advantages and disadvantages of reducing car prices – using any material about the business to help
you. You should then weigh up these advantages and disadvantages applied to a car manufacturer and
compare them before making a final decision.

Study skills to boost your learning

This guide makes use of three study techniques you can use to help you

learn the material:

• Mobile notes
• Mnemonics

Mobile notes

Mobile notes are excellent tools for learning all the key concepts in the study guide. Mobile notes are
easy to make and you can take with them with you wherever you go:
1. Fold a blank piece of paper in half. Fold it in half again. Fold it again.
2. Open the paper. It will now be divided into 8 parts.
3. Cut or tear neatly along the folded lines.
4. On one side, write the basic concept.
5. On the other side, write the meaning or the explanation of the basic concept.
6. Use different colours and add pictures to help you remember.
7. Take these mobile notes with you wherever you go and look at them whenever you can.
8. As you learn, place the cards in three different piles:
• I know well
• Getting there
• I need more practice
9. The more you learn them, the better you will remember them.

Mnemonics

A mnemonic code is a useful technique for learning information that is difficult to remember. This is
an example of a word mnemonic using the word MAPPING where each letter of the word stands for
something else:
M – Make an effort
A – Apply yourself to your studies

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P – Practise, practise, practise your mapwork
P – Prepare well for the exams
I – Ignite your passion for Geography
N – Notice your subject around you
G – Go for it – the stars are the limit!

Mnemonics code information and make it easier

to remember. The more creative you are and the more you link your ‘codes’ to familiar things, the more
helpful your mnemonics will be. This guide provides several ideas for using mnemonics. Be sure to
make up your own

Top 10 exam tips

1. Make sure you have all the necessary stationery for your exam, that is, pens, pencils, eraser, as well
as your ID document and exam admission letter.
2. Arrive on time, at least one hour before the start of the exam.
3. Go to the toilet before entering the exam room. You do not want to waste valuable time going to the
toilet during the exam.
4. Use the 10 minutes reading time to read the instructions carefully. This helps to ‘open’ the information
in your brain. Start with the question you think is the easiest to get the flow going. In the mapwork
exam, use this time to look carefully at the whole map.
5. Break the questions down to make sure you understand what is being asked. If you do not answer the
question properly you will not get any marks for it. Look for the key words in the question to know
how to answer it. A list of these words is on page ix of this study guide.
6. Try all questions. Each question has some easy marks in it so make sure that you do all the questions
in the exam.
7. Never panic, even if the question seems difficult at first. It will be linked with something you have
covered. Find the connection.
8. Manage your time properly. Do not waste time on questions you are unsure of. Move on and come
back if time allows.
9. Check weighting – how many marks have been allocated for your answer? Take note of how marks
are allocated to the questions in this study guide. Do not give more or less information than is
required.
10. Write big and bold and clearly. You will get more marks if the marker can read your answer clearly.

Common errors

• Candidates deliberately ignore reading examination instructions.

• In paper 2, some candidates answer questions from one section or answer only two questions
instead of three questions.
• Improper numbering or failure to number their presentation properly.
• Candidates fail to comply with the demands of the question.
• Mostly in paper 2, candidates may be able to raise points but fail to explain or expand the points
appropriately.

iv
 TOPIC 1 The business enterprise

Topic objectives • An enterpriser is also called an

entrepreneur.
By the end of the topic, you should be
able to: Enterprise
• explain the concept of enterprising. • It is the business organisation that is
• identify skills and personal attributes involved in the provision of goods
needed to run an enterprise. and services which can be for profit
• explain skills and personal attributes making or non-profit making.
of a good enterpriser. • The main purpose of the business is
• apply leadership skills in a given the provision of goods and services
project. that satisfy consumer wants and
• identify the benefits and drawbacks of needs.
enterprising. • Examples of profit making enterprises
• explain the role of an enterpriser in an that can be found in local communities
enterprise. are poultry, cattle fattening, peanut
• list the drivers towards enterprising. butter making and market gardening.
• explain the different drivers towards • Examples of non-profit making
enterprising. enterprises that can be found in local
• evaluate drivers towards enterprising. communities are burial societies and
some football clubs.
Enterprising
• It is the preparedness to start a new
Entrepreneurship
business regardless of risks that • Entrepreneurship is the motion
could be experienced when running a of setting up a business by taking
business. financial risks with the aim to make
• It is the will and readiness to venture profit.
into a new project or business without • It is the process of organising and
the fear of possible risks associated managing all the factors of production
with starting a business. for profit maximisation.
• Factors of production are inputs
Enterpriser
required to start enterprising which
• Is an individual or group of people are enterprise, land, labour and
who takes risks and initiatives to capital.
start a business by organising all the
factors of production and manages the
business.

1
Skills of an enterpriser • A good leader takes necessary
measures to underperforming
• Skill is the knowledge, understanding workers, for example, through
and ability to do something well which training and retraining or disciplinary
can be obtained through training and procedure.
experience.
• Skills are vital in running an Risk taker
enterprise. • Risk means a situation involving
Personal attributes of an physical or financial harm, loss or
danger.
enterprise
• Risk taker is an individual or
• An attribute is a characteristic of a enterpriser that tends to behave in
person (enterpriser). a way that can potentially cause
• Personal attributes are character traits physical or financial loss. Successful
or personality traits. enterprisers are risk takers.
• Traits give distinction among • A risk taker evaluates potential risks
personalities. and tries to minimise risks.

Creativity
Leadership • This is the capability to make new
skills
Creativity Ambitious/ things (initiate) or to think of new
aiming ventures or ideas.
higher
Problem • Finding ways to increase market
Solving share, sales, profits, fight competition
SKILLS Innovative and finding new markets for the
ideas product are forms of creativity.
Risk
• Enterprisers should be creative.
taker
Team
Delegation building Innovative

• Innovation is a new way of doing

Fig. 1.1 Skills of an enterpriser things.
• Business can be innovative through
Leadership skills implementing new business ideas,
• Leadership means the capability to strategies, entering new markets
influence and guide others to behave (diversification), improving product
in a certain way. packaging and adding different
• Leadership skills include the ability to ingredients to a product (value
influence, motivate, delegate, persuade addition).
and communicate to employees • Entrepreneurs should try new or
towards achieving the organisational improved ways of doing business.
goals.

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Team building Ambitious/Aiming higher

• Team building involves organising • Ambitious refers to having a desire to

the right people with the right skills be successful.
to work. It helps the workforce to • It is a strong inner drive for success.
work together more successfully for • Good enterprisers should be able to
the common purpose of achieving aspire themselves to work towards set
organisational goal. enterprise goals.
• As an enterpriser, it is crucial to • They are positive thinkers, which
encourage or motivate workers to enables them to encourage other team
work together productively and to members to work in a positive way.
boost their morale. They are self-motivated even when
they face challenges.
Delegation
Benefits of enterprising
• Delegation is whereby a superior
assign duties, responsibilities, tasks Benefits to the society
and decisions to others.
• The enterprisers create employment to
• To delegate is to elect, send and
people in the society to work in their
empower to act for or on behalf of the
superior. ventures.
• Enterprisers can transfer power and • It reduces poverty in the society since
duties to employees but accountability people get income through earnings.
remains in their hands. • Provision of goods and services by the
• It lessens the work load of the enterpriser.
enterpriser to concentrate on other • High quality products are produced
crucial tasks. due to competition.
• Customer satisfaction which helps
Problem solving enterprisers to meet customer’s needs
• Problem solving is the process of and wants.
finding resolutions to challenging • Infrastructure development through
issues. construction of roads, bridges,
• An enterpriser should be able to solve buildings and electrification.
problems when they do arise in the
Benefits to the enterpriser
business enterprise.
• As an enterpriser, one should be able • Enjoy profits - enterprisers provide
to identify the problem, evaluate goods and service and in return they
possible causes and find out solutions earn profit and those enterprises that
to the problem. are in non-profit making business,
• Successful enterprisers focus on ways enjoy status.
to solve problems effectively. • Independence - an enterpriser will
be in total control of the business and
can make decisions without consulting
anyone.

3
 • The enterpriser is flexible, that is, able • The enterpriser may lack knowledge
to adapt to changes, for example, if on how to run a business.
there is a change in consumer taste
and preference, they can easily change Roles of an enterpriser
their products to meet customers’ An enterpriser performs a number of roles
needs and wants. which include, scanning the environment,
• Enterprisers get support from the identifying opportunities, mobilising
government such as offering aid to resources, allocating resources, setting up the
acquire loans, grants, subsidies and business, managing business operations and
place to market their products. in summation, the enterpriser act as the local
economy developer.
Drawbacks of enterprising
Scanning the environment
To the community
• Environmental scanning involves
• Some activities carried out by
identifying factors (internal and
enterprisers cause pollution to the
external environment) that affect a
community.
business.
• Some members of the community may
• The enterpriser collects information
be relocated to other areas in order to
regarding the political, economic,
create space for enterprisers.
social, technological and
• Land used for agricultural purposes
environmental factors.
may be taken and used to construct
• It assists the enterpriser to forecast the
buildings.
future of the business enterprise and
• Undertaking activities which involve
also assist in decision making.
extraction (mining) may cause
environmental hazards. Identifying business opportunities

To the enterpriser • An enterpriser should identify

unsatisfied needs of consumers.
• Starting a new business may be too
• The enterpriser can identify problems
risky because the outcome is not
in the community and create an
known.
enterprise to solve these problems
• The enterpriser may experience losses.
(business opportunity).
• Due to competition from bigger
• Enterprisers will go for opportunities
companies, an entrepreneur may lose
that generate high profits.
customers.
• Enterprisers may lack enough capital Mobilising necessary resources
to run the enterprise.
• It is the role of an enterpriser to bring
• The enterpriser has to work harder
together all necessary resources to
and for long hours in order to succeed.
produce goods or services.
• Scarcity of resources to run the
• Some resources needed include
business, for example, little capital, no
capital, plant, land or building, raw
warehouse to keep raw materials, no
materials and labour.
vehicle to transport goods.

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Proper allocation of resources Improves standards of living
• An enterpriser decides on necessary • An enterpriser plays an important role
resources needed to start a business. in improving the standards of living in
• The resources are scarce so they a community.
should be used productively. • This is done through developing and
Setting up the business adopting innovations that lead to
improvements in the quality of life of
• This is where the enterpriser employees and customers.
implements his or her business plan.
• The enterpriser creates a business Drivers towards enterprising
with available resources. • Most business people are often
Managing business operations influenced by different factors when
starting an enterprise.
• The enterpriser is liable to the • These are called drivers. A drive
operations of the business. refers to a push or force that influences
• The business must be operated someone to do something.
efficiently, effectively and productively • It can be an inner or outside push that
so as to meet organisational goals and motivates one to achieve something.
the demands of customers. • Drivers towards enterprising include,
• Management of business operations is government policies, demographic
crucial to the business enterprise as it changes, economic changes, self-
guarantees customer satisfaction. actualisation and technological
• Enterpriser controls everything and changes.
makes final decisions on business
operations. Government policies
Create employment Government policy is a principle formulated by
the government which influences activities to be
• Enterprisers create employment which
carried out within an enterprise. A policy is a
reduces poverty within the society
plan intended to guide course of action in order
thereby improving the living standard
to achieve set goals.
of the people in the community.
Government formulates policies that promote
Community development
enterprising in the economy. Such policies
• An enterpriser develops the include subsidies, government grants and tax
community by building infrastructure holidays.
such as buildings (schools and
(a) Subsidies
hospitals) and roads.
• They provide services such • A subsidy is a form of aid offered
as education, healthcare and by the government to a business
telecommunication. enterprise to produce at a lower cost,
• Enterprisers may sponsor community thereby lowering prices of certain
sports, scholarship programs and other goods and services.
activities.

5
 • Subsidies may come in form of cash Different forms of trade policy
and other resources such as raw
(a) T ariffs – This is tax or duty to be paid on
materials needed for production.
certain types of imports or exports, for
• The main purpose of giving subsidies example motor vehicles, cooking oil, maize
is to lower day to day operations costs. and many more.
• The government can offer subsidies as (b) Quotas – The state limits the quantity
a way of creating employment. of a particular product to be imported or
• For example, if farmers are struggling exported.
to survive, the government can offer (c) Embargoes – This is a total ban on trading
inputs (seed, fertilisers and chemicals) certain types of goods such as harmful
to farmers. drugs or exportation of limited resources
in a country. Government can promote
(b) Government grants
enterprising by restricting number of
• A government grant is a sum of imports or completely ban some imports.
money or product given by the state to Thus, people will be encouraged to buy
individuals or business enterprises. local products rather than import products.
• Grants are not repayable and are used Reduction in imports promotes demand
for specific purposes, for instance, for local product; therefore, it increases
special research. production.
• They are usually given to non-profit Demographic changes
making enterprises such as Childline,
Population services International Demography relates to the structure of the
Zimbabwe. population in a certain area. Structure of the
population includes factors such as age, level of
(c) Tax holidays education, income, sex and many more. Changes
• Tax holiday refers to a temporary time in any of these variables can greatly influence
in which the government eliminates or enterprising. Population changes can affect
reduces tax to business enterprise to demand and supply of goods and services in
promote growth. the economy there by promoting enterprising.
• This means that the state may choose Demographic factors that can promote
not to charge tax on businesses so enterprising include age and sex.
as to promote enterprising in the (a) Age
economy, for example, the state may
Changes in the age structure of the population
not charge tax for the first two years of
can influence enterprising. Businesses will
starting a business.
be encouraged to produce goods that cater for
Trade policy different age groups. An example is producing
shoes for babies under the age of 5 years or
It is also known as international trade policy.
producing alcohol for people above the age of
It is a policy which governs trade between
18.
countries.

6
(b) Sex (c) Unemployment rate
It relates to whether one is a female or a male. It is the rate at which a person with desired
A company can produce goods targeting one qualification and skills who is searching for a
group, for example, women’s products. If there job is unable to find one. If the unemployment
are more women than men in a population, it rate in the economy is high, most people will be
will encourage enterprisers to produce goods encouraged to become entrepreneurs rather than
and services which meet women demands. seeking for employment elsewhere.
Economic changes (d) Income
It relates to changes in production and Consumers’ demand is based on their income.
consumption of goods and services in a country. An increase in the level of income can influence
Economic factors that can promote enterprising enterprising. Also if the people’s income
can be low interest rates, low inflation rate, increases, it will affect saving and investment
unemployment rate and income. positively. Saving and investment will in turn
influence enterprising.
(a) Low interest rates

Interest is the cost of borrowing funds from Self-actualisation

a financial institution. The Reserve Bank of Self-actualisation is the fulfilment of an
Zimbabwe can use the micro-financing act individual’s talent or full potential. Some people
which regulates interest rates (low interest rates) engage in enterprising because they want to
to encourage more borrowing from the banks. fulfil their dreams and desires. They are self-
Thus, more people will be keen to borrow funds motivated to start a business.
from a bank since the interest rate will be low.
Community enterprise heroes
(b) Low inflation rate
Others are inspired by successful enterprisers
Inflation refers to the general increase in the in their communities; hence, they are also
prices of goods and services in the economy. encouraged to start businesses, for example,
Inflation can cause a rise in the cost of Strive Masiyiwa.
production for a company. A low rate of inflation
will be more favourable as it will encourage To gain profits
enterprisers to operate at a lower cost.
Most people would prefer to be self-employed
and earn more income rather than working for
someone and earn less.

7
 The enterprising
TOPIC 2 environment

Topic objectives • identify risks associated with business

enterprises.
By the end of the topic, you should be
able to: Important insights
• distinguish between internal and The success of any enterprise is largely
external stakeholders. influenced by people that exist within the
• explain the role of each internal and enterprise and those outside the enterprise.
external stakeholder. These people are referred to as stakeholders.
• identify the internal and external As a business enterprise, there is need to
environmental factors. understand how these stakeholders affect your
• describe the internal and external business; this will contribute to the success of
environmental factors. the business enterprise.
• identify business constraints.
• explain the business constraints. Stakeholders
• differentiate resources and These are persons or group of people that
capabilities. have curiosity in the activities of a business
• explain the need for resources in an enterprise. Stakeholders include shareholders,
enterprise. customers, managers, workers. They can
• explain reasons for analysing influence or be influenced by the operations of
capabilities. an enterprise. Stakeholders are classified into
• identify different types of resources two groups, which are internal and external
required in an enterprise. stakeholders.
• identify different ways of acquiring
resources.
• analyse different forms of resources
ownership.
STAKEHOLDERS
• justify ownership of resources. Internal External
• explain various ways of sustainable
use of resources.
• explain the importance of using
resources sustainably. Fig. 2.1 Stakeholders of a business enterprise
• identify opportunities and risks for
Internal stakeholders
enterprise.
• investigate opportunities and risks They are also known as primary stakeholders.
associated with local business These are individuals that are within the
enterprises. business enterprise and they are directly

8
Risks associated with business 4. Compliance risk (Legal issues)
enterprise Failure to comply with legal policy requirements
1. Technological risk can cause business risks. Changes in
government policy may place additional burdens
Technological advancements shorten life cycles on business enterprises. Increasing payrolls and
of products. Business models change and taxes could raise operating costs which could
new competitors appear due to developments affect business enterprises' profitability and
in technology. Failure to copy up with growth plans. Success of the organisation comes
technological changes will result in business from proper management of legal issues such as
failure. corporate governance, health and safety issues,
2. Political risk ethical conduct and many more.

The government has extra ordinary powers to 5. Human resource risks

affect the economy. It may introduce legislation
High labour turnover is also another challenge
which affect investment. Change of governments
on the part of human resources. Staff turnover
can also cause change of business policy which
may increase due to poor working conditions.
affects some of business activities. Civil war and
Therefore, vital expertise could be lost as staff
political disorder or violence in a society are
leave. As a result of that, it becomes costly in
threats to business activities. Instability creates
terms of hiring and training new staff since it
too many shocks in the business environment
takes time as well as money.
by pushing risk to unacceptable levels. It results
in low predictability of strategic planning. 6. Market risk
Therefore, it becomes risky to operate in an
These are factors that cause decrease in
environment that is heavily associated with
market share which can be caused by customer
politics.
dissatisfaction. A drop in quality of products
3. Economic risk is one of the greatest risks to a business’
Volatile economic climate create business risks. market share. The quality of products could
It creates uncertainty and lack of confidence to drop; hence, causing an increase in customer
investors. It is crucial for the business enterprise grievances. Customer will therefore shift to
to watch the changes and trends to identify and other alternatives offered by competitors in the
plan for an economic downturn. Acquisition market. As business enterprises, there is need
of resources also becomes difficult when the to maintain or increase market share through
economy is not stable. provision of goods and services that satisfy
consumer wants and needs through knowing
their preference and taste.

22
 Setting up a new
TOPIC 3 enterprise

Topic objectives • identify ways of support given to new

business enterprises.
By the end of the topic, you should be • explain why some enterprises grow
able to: and others remain small.
• identify forms of unincorporated • discuss advantages and disadvantages
business enterprises. of business enterprises being small or
• describe the forms of unincorporated large.
business enterprises. • describe factors influencing business
• explain advantages and disadvantages growth.
of unincorporated business • discuss the reasons why some
enterprises. businesses fail.
• identify forms of incorporated • suggest solutions to causes of business
business enterprises. failure.
• explain the features of incorporated • identify risks associated with
business enterprises. formation of new business enterprise.
• analyse the benefits and limitations • explain the concepts of corporate
of different incorporated business legal personality and limited liability.
enterprises. • evaluate the importance of limited
• outline forms of business enterprises. liability.
• describe the features of different forms • identify legal formalities required in
of business enterprises. the formation of a business enterprise.
• analyse the advantages and • explain the contents of business
disadvantages of each form of documents required in the formation
business enterprise. of a business enterprise.
• compare and contrast different forms • identify ways of measuring business
of business enterprises. size.
• explain the purpose of business • evaluate the methods of measuring
enterprises. business size.
• identify the requirements of setting up • discuss the role of small to medium
a business enterprise. enterprises (SMEs) in the economy.
• explain issues concerning business • identify government assistance to
ethics. SMEs.
• evaluate the importance of being • identify methods of business growth.
ethical in business. • evaluate methods of business growth.
• justify reasons why new business • assess the effects of business growth.
enterprises need support.

23
Setting up a new enterprise The owner’s family can assist in running the
business, for instance, by providing labour,
The formation where the business activities finance and other resources. Examples of sole
are undertaken is called business enterprise. proprietors include tailor shops, bakery shops,
The business enterprise may be owned by one street hawkers, beauty salon and restaurant.
or more individuals. There are two types of
business enterprises which are incorporated and Features of the sole trader
unincorporated businesses. • The enterpriser is said to be self-
Incorporated business employed.
• The enterpriser provides capital to
enterprises start-up the business.
Incorporated businesses are enterprises • The owner has unlimited liability.
which have been registered formally with the • Decisions are made by the owner.
registrar of companies. Such businesses offer • The business can be inherited by
more benefits than unincorporated. Examples family members in case of death or ill
of incorporated businesses include limited health of the owner.
companies and non- profit making organisations.
Advantages of the sole trader
Unincorporated business • They are not required by law to
enterprises publish their final accounts.
• They have lower start-up costs.
It is an unregistered business enterprise that
• The enterpriser enjoys all the profits.
is owned privately by one or more people.
• The enterpriser has personal touch or
Unincorporated business enterprises are also
contact with customers.
known as informal traders. The owner(s) of
• The enterpriser has total control and
an unincorporated business have unlimited
makes all business decisions.
liability which means they are held responsible
• Sole traders have flexible opening
for paying business debts. In the event of failure
hours.
to pay business debts, the owner(s)’ property
• There are minimum legal
may be used to cover up for the debt. Examples
requirements in starting up the
of unincorporated enterprises are sole traders
business enterprise.
(tuckshops, vendors, hawkers, stall holder) and
partnership. Disadvantages of the sole trader

Forms of unincorporated business • Often faces stiff competition from

enterprises bigger firms.
• It may be a challenge to raise finance
Sole proprietor/trader to expand the business.
It is a business owned, controlled and managed • Too much work and pressure on the
by one person (owner) with the aim to make part of the owner in running the
profit. It is often referred to as sole trader company.
and it is the most common type of business • All everyday jobs and business final
organisation. decisions fall on the shoulders of the
owner.

24
Partnership Act Limited enterprises

It is endorsed by the government. It has set of Is a legal enterprise formed by two or more
guidelines (provisions) which states that: individuals. It is a separate legal entity meaning
that the enterprise exists own its own and is
• Partners contribute equal amount of
distinct from its owners. The main motive for
capital.
forming limited companies is to make profit. A
• Majority decision should settle
limited enterprise continues to exist even if one
disputes and any difference of opinion.
• Profits and losses should be shared of the owners dies or moves out of the business.
equally among partners regardless of The company can make legal agreements and
capital contributed. contracts on its own. Capital is in the form of
• No interest on drawings. shares and ownership is through buying shares.
• No interest on capital. Share
• Partners are entitled to 5% interest on
loan. A unit of account for various investments
and each unit represents a prescribed value of
Advantages of partnership money. Each share represents a voting right
• Partners help each other in raising and the owners are called shareholders. It is
start-up capital. a portion of capital, which resembles a stake
• It is flexible – A partnership is easy to (ownership) in a limited business. Shareholders
form and manage. enjoy limited liability, that is, they only lose
• Responsibility of running the business the amount of capital invested in the enterprise
is shared among the partners. when the company becomes insolvent. Limited
• All partners are involved in decision companies pay corporate tax to the government.
making. Limited company exist in two forms - private
• Absence of one partner due to social and public limited companies.
problem or holiday does not affect
business operation. LIMITED
• Loss is shared among partners. Companies

Disadvantages of partnership
PRIVATE PUBLIC
• Slow decision making due to Limied Companies Limited Companies

consultation.
• General partners have unlimited Fig. 3.2 Types of limited companies
liability for the debts of the firm. Private limited enterprise
• Death, disagreements and mental
illness of one partner can lead to It is formed by at least 2 to 50 shareholders
dissolution of partnership. under Zimbabwe Companies Act. The Company
• Less freedom with regards to the Act governs the formation and commencement
management of the business. of the company. Company name ends with “Pvt”
• Capital raised may not be adequate to and “Ltd.” Legal documents such as Articles
expand business activities. of Association, Memorandum of Association
and Statutory Declaration are submitted to the
registrar of companies.

30
 TOPIC 4 Business planning

Topic objectives It places out a written plan on how to source

finance, produce goods and distribute them.
By the end of the topic, you should be A business plan can also be called a business
able to: proposal.
• explain business planning and a
business plan.
Importance of business planning
• describe importance of business In the absence of planning all the business
planning. activities may become meaningless. The
• explain importance of a business plan. following are the importance of business
• design a mini-business plan. planning:
• identify different business objectives.
• Provides a focus on the business idea -
• describe business planning process.
is it really a good one, and why?
• discuss importance of each business
• Control finance to get a realistic
planning step.
idea of the financial implications of
• execute business planning process.
a business idea and future finance
• explain components of a business
needs.
plan.
• Establish objectives, especially
• explain the importance of a business
directions for the future.
plan.
• Set targets which can encourage
Business planning better-directed and purposeful work.
• Define actions, priorities and the
It is a procedure of formulating goals, strategies timetable for actions.
and actions for a business enterprise so that it • Enable analysis of performance, and
can get started, survive, grow and prosper. It is correct weaknesses.
a sequence of steps of action to achieve specific • Assess needs, in terms of human and
objectives set by an organisation. Business other resources.
planning mainly focus on two key aspects which • Increase efficiency since planning
are profit making and dealing with risks. helps to reduce wastage of valuable
resources.
A business plan • Reduce business risk since the
It is a written paper that gives full details on enterpriser will be able to identify
how a business enterprise is going to achieve its possible threats to the business and
goals. Business plans are usually drafted by new take necessary precautions, for
enterprisers and it acts as a guide or a map with example, change in technology.
details on how to achieve business set goals.

45
A mini-business plan • Advertising using radio and television
will enable the audience know the
Here is a simple sample for a business plan. existence of the Furniture Company
These are guidelines on how to come up with a and its location.
business plan for the supply of furniture.
Sales strategies
Executive summary
• We offer furniture at affordable prices.
• Our business purpose is to supply
• We offer good quality furniture.
furniture.
• Our company is flexible and open for
• It is located in down town area shop
24 hours and orders can be placed in
number 10, Rusape.
the comfort of your home through
• It will obtain capital from financial
e-business (virtual markets).
institutions.
• Excellent customer care.
• The target markets are schools in
Manicaland region and the business is Organisational management
going to use radio, television, social
• Training and retraining of the workers
media and e-business to market and
to keep them up to date with the new
sell the furniture.
ways of producing quality furniture.
• It will train and retrain its employees.
• Always using the modern styles of
• It has a forecast to obtain profit at the
chairs, desk, tables and many more.
end of the month or year.
• Researching on the schools’ needs all
Business name the time.

Quality Furniture Limited. Funding requirements

Ownership To secure a loan of $1 000 000.

Owned by three directors. Financial projections

Line of business • Annual revenue $12 000 000.

• Monthly revenue $1 000 000.
Manufacture of school furniture.
• Annual costs $6 000 000.
Products and services • Monthly costs $500 000.
• Annual net profit
Chairs, desks, roofing timber, doors, tables and
($12 000 000 − $6 000 000)
ceiling boards.
= $6 000 000.
Market analysis • Monthly net profit
($1 000 000 − $500 000) = $500 000.
Customers are made up of all schools in
Manicaland Province. Business objectives
Marketing strategies Objectives are targets, aims or goals set by
• Using flyers, catalogues, newspapers, a business enterprise, which they seek to
social media, radio and television achieve within a time frame and with available
showing what the company provides resources. They are specific outcomes that the
and its prices. business wants to achieve in the future.

47
They give the business a clearly defined aim, Types of business objectives
goal and target. Business objectives should be
SMART. Business enterprises can set the following types
of objectives: profit maximisation, growth,
survival, sales revenue, corporate social
S M A R T
responsibility and ethical.
Specific Measurable Achievable Realistic Time

possible tied have 1. Profit maximisation

not with
to to an
vague numbers
achieve goals end It is whereby the entrepreneur wants to increase
point revenue at the same time minimising expenses
so that profit is maximised.
Fig. 4.1 SMART objectives
2. Growth
Specific It is when the entrepreneur aims at expanding
They should be straight forward, clear and well its operation in terms of size by opening more
defined to anyone who has knowledge of the branches or outlets, for example, when an
project and they should answer questions like existing Quality Furniture Company in Rusape
“what exactly do you want to achieve?” good opens other branches in Mutare and Nyanga.
example for a specific objective is to increasing 3. Survival
sale by 45%.
Business enterprise operating in a recession
Measurable economy and those being set up for the first
time would want to stay in the market. This
An objective should be quantified, this means
is the reason why they aim for survival rather
they should be in meaningful figures and action
than anything else especially in a competitive
oriented, for instance, to produce 20 000 chairs
environment.
for schools in Manicaland province.
4. Sales revenue
Achievable/Attainable
It is when a business enterprise wants or intents
Goals set should be achieved to avoid to increase its sales volume which can be
demotivation of the workforce. achieved through marketing and advertising
quality goods and services.
Realistic
5. Corporate social responsibility (CSR)
The objectives should be achieved using the
resources available and at a certain time, that is, It is when a company aims at protecting the
they should be real. environment, providing good and safe working
conditions and also participating in community
Time life through ploughing back to the community
Objectives should have a time frame, that is, you are operating your business in. An example
time bound. There is need to specify when the of corporate social responsibility is that of
results can be achieved for example, to increase ‘Econet Wireless’ offering scholarships through
sales by 45% by 2023. Capernaum Trust.

48
 TOPIC 5 Enterprise finance and
securing investors

Topic objectives • calculate break-even point, output

and margin of safety for a business
By the end of the topic, you should be venture.
able to: • discuss importance of break-even
• explain the need for finance in an analysis.
enterprise. • explain the concepts of budgeting and
• explain investment and saving. budgets.
• identify sources of finance. • identify different types of budgets.
• differentiate between internal and • prepare a budget for an enterprise.
external sources of finance. • explain the importance of budgeting.
• explain advantages and disadvantages • explain different ways of attracting
of various sources of finance. investors.
identify factors to consider when
•
The need for finance
choosing sources of finance.
• explain importance of keeping • Finance is the main fuel of every
accurate financial records. business, no matter what size.
• prepare an income statement. • Businesses need finance to start-up a
• draw a statement of financial position. business or even for expansion.
• describe cash, purchases, sales and • They might want to pay for premises,
production budgets. new equipment and advertising and to
• prepare a simple cash budget. run the actual business. This includes
• explain the meaning of working paying wages and suppliers in time.
capital.
What is finance?
• identify components of working
capital cycle. • Finance is money.
• discuss importance of managing • We all need money to purchase goods
working capital. and services. These include everyday
• prepare an income statement and goods like food and also expensive
statement of financial position. goods like furniture or a house.
• identify different types of financial • Businesses also need finance. This
institutions. is called capital when starting a
• explain functions of different financial business.
institutions. • They need to pay wages, pay for assets
• classify costs. or buy materials to use.
• explain break-even analysis. • These are funds businesses use in
• construct a break-even chart. their operations.

53
Types of financial statements
• Income statement.
• Statement of financial position

1. Income statement
• It is also known as Statement of Comprehensive Income or a Trading, Profit and Loss
Account.
• It shows revenues and expenses of an enterprise over a given period of time.
• It is a summary of financial sales are converted to profits.
performances of a business over a • Income statement also shows
given accounting period. profitability at different levels, that is,
• It tells how much money the enterprise gross, operating and net.
generated and spent over a specified • The income statement is divided into
period, usually a month. two phases which are the trading
• It shows how well the enterprise account and the profit and loss
produced revenues and how efficiently account.

Table 5.1 A format of an income statement

Rutachiti Enterprises

Income statement for the year ended 31 December 2020

$ $ $
Sales/Revenue xxxx
less Sales returns (xxx)
Turnover xxxx
Less cost of goods sold
Opening stock (inventory) xxx
Purchases xxx
Add Carriage/Railage/Freight on purchases/Duty xxx
Less Purchases returns (xxx)
Less Goods taken for own use (xxx)

Net purchases xxxx

xxxx
Less Closing inventory (xxx)
Cost of sales (xxx)
Gross profit xxxx
Add Other income
Discount received xxx
Rent received xxx
Commission received xxx
Profit on disposal of non-current asset xxx

63
(-) Drawings (xxx)
xxxx
Current Liabilities
Trade payables xxxx
Accruals/Owings xxxx
Bank overdraft xxxx
xxxx
xxxx

Current assets Accrued expenses – This is an amount incurred

but not yet paid; for example, wages payable,
• It is cash or an asset that can be sold rent.
or converted into cash within a year.
• It is often used to pay off current Accrued interest – This includes amount of
liabilities. interest on loan that has accumulated since the
last payment.
Examples of current assets
Bank account overdrafts – This is money
Inventories – These are goods produced in the withdrawn from the bank that exceeds the
business and have not been sold. available balance, leaving the balance below
Cash in hand – It can be received from zero (negative balance).
payment of goods and services by cash rather
Note that:
than cheque.
Cash in bank – Sum of money held at a bank or • Assets − Liabilities = Capital
payments of goods by cheque. • Current Assets – Current Liabilities =
Working Capital
Raw materials – Materials used in production
• Non-current assets + Working Capital
of other goods.
= Capital Employed
Accounts receivables (debtors) – Debts owed • Total Assets – Current Liabilities =
by customers to an enterprise after selling goods Capital Employed.
and services on credit. • Profit or loss for the year is taken from
Prepaid expenses – Obligations that have the Income Statement.
already been paid for in advance which will Table 5.3 Summary on financial statements
enable the enterprise to use cash for other
Income Statement Statement of
activities.
Financial Position
Current liabilities Prepared for a period Prepared as at a
of time. certain point in time.
These are business obligations that have to be
Contains incomes and Contains assets,
paid within one year.
expenses. liabilities and capital.
Examples of current liabilities Measures profitability. Shows how the
Accounts payable (creditors) – This is money business is financed.
owed to suppliers.

65
1. Cash budget • Administrative expense.
• Plant and equipment expenditures.
• It is a financial budget with an
estimate of the cash inflows and Table 5.5 Format of a cash budget
outflows for an enterprise over a Cash budget for the
specific period of time. period ending .....
• Cash inflows are funds which a Month Month Month
business receives from its operations. 1 2 3
• Cash outflow is the money paid out $ $ $
by an enterprise as a result of its Receipts
financing, operating and investment Cash sales xxx xxx xxx
activities. Collection from
credit sales xxx xxx xxx
Importance of cash budgets Collection from
• It forecasts the firm’s future in terms sales of non-
current assets xxx xxx xxx
of financial needs.
Receipts from
• It is a tool for cash planning and
loans xxx xxx xxx
control.
Other receipts xxx xxx xxx
• It allows making management
Total receipts (a) xxx xxx xxx
decisions regarding cash position in a
Payments
business.
Payments for
Preparation of cash budgets cash and credit
Purchases xxx xxx xxx
In preparing a cash budget, the following
Payments for
information is required: receipts, expected cash expenses xxx xxx xxx
expenses and other direct expenses. Cash drawings xxx xxx xxx
Receipts Purchase of non-
current assets xxx xxx xxx
• Cash balance. Repayment
• Expected cash receipts. of loans or
• Cash sales. debentures xxx xxx xxx
• Collections of accounts receivable. Other payments xxx xxx xxx
• Other income. Total payments
(b) xxx xxx xxx
Expected cash expenses
Net receipts
• Raw materials. (payments) (a-b) xxx xxx xxx
• Inventory (stock). Bank balance at
• Payroll. the start xxx xxx xxx
Bank balance at
Other direct expenses the end xxx xxx xxx
• Advertising.
• Selling expenses.

74
EXAMINATION PRACTICES

SPECIMEN EXAMINATION 1
PAPER 1
TIME: 1 hour 45 minutes
Answer all questions.
No additional materials required.
The number of marks is given in brackets [ ] at the end of each question or part question.

1. (a) (i) Identify any three personal attributes of a good entrepreneur. [3]
(ii) Explain two advantages of unincorporated business enterprises. [2]
(b) (i) Identify any two types of markets. [2]
(ii) Analyse the advantages of crowd funding as a source of finance for small
enterprises. [8]
(c) (i) Discuss stages of production. [6]
(ii) Explain leadership. [2]
2. (a) (i) Identify any two ways of business support. [2]
(ii) Explain two advantages and two disadvantages of a partnership. [8]
(b) (i) Outline functions of managers. [4]
(ii) Explain two advantages and two disadvantages of sourcing finance from
family and friends. [8]
3. (a) Explain the following ICT tools
(i) Barcode.
(ii) Online billing. [4]
(b) (i) List any three types of warehouses. [3]
(ii) Identify two reasons why a government might increase taxes. [2]
(c) Describe the following terms:
(i) Working capital. [2]
(ii) Business communication. [2]
4. (a) (i) Identify any two methods of business growth. [2]
(ii) Distinguish between a Partnership Deed and a Partnership Act. [4]
(b) (i) Define the following terms:
– Market. [1]
– Demand. [1]
– Product. [1]
(ii) From the information given calculate working capital:
Non-current assets $20 500
Current assets $15 600
Capital $35 000
Current liabilities $9 500
Net profit $1 500 [2]

114
 EXAMINATION PRACTICES
(iii) Identify two examples of businesses that would be classified as being in the
tertiary sector. [2]
5. (a) (i) Briefly explain why a business might choose flow production as a method of
operation. [3]
(ii) Identify two possible methods of primary market research. [2]
(b) (i) Explain any three ways an enterprise can use to increase employee motivation. [6]
(ii) Describe two advantages and two disadvantages of being in partnership business.[8]
6. (a) (i) Identify two ways to measure the size of a business. [2]
(ii) Give two benefits of acting in an ethical way. [2]
(iii) State two advantages of being a private limited company. [4]
(iv) Identify any two ways in which break-even charts can be used. [2]

115
EXAMINATION PRACTICES

SPECIMEN EXAMINATION 2
PAPER 2 Case study
TIME: 2 hours 15 minutes.
Section A answer all questions.
Section B answer any three questions

SECTION A [40 marks]

Answer all questions

1. Read the passage below and answer all questions that follow.
The following organisational chart is for TMT Ltd. It is a private limited company which
runs a chain of stores. The organisational chart shows the hierarchical structure of the business.
Organisational Chart for TMT Limited

DIRECTOR
GENERAL

FINANCE MARKETING HUMAN

OPERATIONS
DIRECTOR DIRECTOR RESOURCES
DIRECTOR
MANAGER

2 DEPARTMENTAL 5 STORES
2 DEPARTMENTAL 2 DEPARTMENTAL
MANAGERS MANAGERS
MANAGERS MANAGERS
(ONE FOR EACH STORE)

150 ASSISTANTS
5 ASSISTANTS 10 ASSISTANTS 3 ASSISTANTS
(30 FOR EACH
STORE)

(a) What is meant by hierarchical structure of a business? [2]

(b) Identify the number of people in a span of control for
(i) Operations director.
(ii) Marketing director. [2]
(c) Explain the functional role of the two functional departments listed above.
(i) Operations director.
(ii) Marketing director. [4]
(d) Explain three disadvantages to this business of having a tall organisational structure. [6]
(e) Discuss if more delegation would be a good idea for this business. [6]
(f) Explain any two functions of a building society. [4]
(g) (i) Outline any two characteristics of a successful enterpriser. [2]
(ii) Identify two human survival needs. [2]
(h) (i) Explain any two factors to consider when locating a warehouse. [4]
(ii) Discuss any two advantages and any two disadvantages of a vertical business
growth. [8]

120
 SECTION B [60 Marks]

EXAMINATION PRACTICES
Answer any three questions from this section.

2. (a) Explain how a business might use financial rewards to motivate workers. [8]
(b) Discuss ways of measuring business size. [12]
3. (a) Describe the means of production. [8]
(b) Discuss factors to consider when segmenting a market. [12]
4. Evaluate the following methods of communication: written, oral and electronic. [20]
5. (a) Explain investment and savings. [8]
(b) Discuss the importance of business communication. [12]
6. Evaluate benefits and challenges encountered in foreign markets. [20]
7. (a) Describe SWOT Analysis. [8]
(b) From the following information prepare a Statement of financial position of W.
Waters for the year ended 31 December 2020. [12]
Cash $46 000
Capital $50 000
Purchases $35 000
Sales $85 000
Advertising $4 000
Rates $1 000
Debtors $5 000
Transport expenses $4 000
Rent $3 500
Stationery $800

121
 EXAMINATION SOLUTIONS
SOLUTIONS

EXAMINATION PRACTICE 1 • It is an opportunity for crowd

SOLUTIONS sourced brainstorming to
refine your idea.
PAPER 1 • It gains you early adopters
1. (a) (i) Identify any three personal and loyal advocates.
attributes of a goodentrepreneur. • It doubles as marketing and
• They are innovative. media exposure.
• They are not afraid to take (c) (i) Discuss stages of production. [6]
chances. • Primary production
• They are willing to work (extractive industries)
hard. • Secondary production
• They know how to mange (manufacturing industries).
money and people. • Tertiary production (service
• They are passionate about industries).
what they do. [3] (ii) Explain leadership. [2]
(ii) Explain two advantages of It is the act of motivating other
unincorporated business people towards a common goal.
enterprises. [2] Leadership is also an act of
• You do not have to pay guiding a group of people or
costs associated with an organisation to a desired goal,
incorporation. result or higher level.
• You do not have to comply 2. (a) (i) Identify any two ways of
with many of the legal or business support. [2]
financial requirements of the • Partner with another local
corporation or associations. business for an event or
(b) (i) Identify any two types of promotion.
markets. [2] • Recognise a different small
• Virtual business on social media each
• Physical week.
(ii) Analyse the advantages of crowd • Include more small
funding as a source of finance for businesses as vendors in your
small enterprises. [8] supply chain.
• It is more efficient than • Purchase from local
traditional fundraising. businesses before large scale
• It is a place to build grip, corporation.
social, proof and validation. (ii) Explain two advantages and two
disadvantages of a partnership.[8]

153
EXAMINATION SOLUTIONS

• Zoning and desired customer (b) Discuss ways of measuring business

base. size. [12]
• Material handling capacity. • Market share.
• Size of the warehouse. • Profit.
• Regulations. • Number of employees.
(ii) Discuss any two advantages • Capital employed.
and any two disadvantages of a • Market capitalisation.
vertical business growth. [8] • Sales turnover.
• Combination of the above.
• Reduce risk in the
3. (a) Describe the means of production. [8]
business.
• Land.
• Reduce costs.
• Labour.
• Better quality control.
• Capital.
• Lower prices for
Advantages • Entrepreneurship.
customers.
• A direct link to the (b) Discuss factors to consider when
market. segmenting a market. [12]
• Advantage over the • Demographic segmentation.
competition. • Psychographic segmentation.
• High capital • Behavioural segmentation.
requirements. • Geographic segmentation.
• Risk of increased 4. Evaluate the following methods of
organisational communication: written, oral and
Disadvantages inefficiency. electronic. [20]
• No easy exits. Advantages of oral or verbal
• Lack of familiarity. communication
• Reduced flexibility in
•  ery effective method of
V
the business.
communication since the recipient can
be persuaded or convinced.
Section B (60 marks)
• It is relatively a faster method of
2. (a) Explain how a business might use communication.
financial rewards to motivate workers. • The sender can get immediate feedback.
[8] • It indicates some sense of regard hence
• Give pay for performance. more appealing.
• Give commission for sales.
Disadvantages of oral or verbal
• Give bonuses.
communication
• Give pay raises.
• Give paid vacation time. •  as no records for future reference.
H
• Give extras like trips, gift cards or • Is an expensive method especially if the
tickets. two parties are far apart.

166
 EXAMINATION SOLUTIONS
• I s not good for confidential messages. • Undelivered data.
• It is not suitable for confidential • Dependency.
messages. 5. (a) Explain investments and savings. [8]
• It may be time wasting especially where Investments
one needs to be convinced.
• I nvesting is when you use your
Advantages of written communication money (or capital) to buy an asset
• I t can be retained for future reference. that you expect to generate an
• Some like letters are relatively cheap acceptable return, making you
can produce many copies. richer over time.
• It is suitable for confidential messages. • People who own businesses,
• Allows for inclusion of fine details. put their personal money into
• It is not prone to distortion of messages. these businesses to increase their
• Can be used as evidence. wealth. This is investment.
• Can be addressed to many people. • One can use part of his or her
income to buy investments such as
Disadvantages of written communication
shares in companies, units in unit
• It lacks personal appeal. trusts, bonds or property.
• It takes time to prepare and reach the • They put their hard-earned money
recipient. to work for them to earn even
• Suitable for the literate only. more money.
• Immediate feedback may not be • All investments involve taking on
possible. risk.
• Does not offer room for persuasion and
Savings
convincing.
•  aving involves simply setting
S
• It may be expensive because it involves
money aside for future spending.
a lot of paperwork and time.
• It is usually put in a safe place,
• Not suitable if the sender and the
whether it is under your mattress
receiver do not share a common
or in a savings account at a
language.
commercial bank, which allow
Electronic communication you to access your money at any
Advantages time.
• Speedy transmission. • Savings typically are low risk for
• Wide coverage. the return of the amount that one
• Low cost. has set aside.
• Exchange of feedback. • However savings can also attract
• Managing global operation. low interest rates.
(b) Discuss the importance of business
Disadvantages
communication. [12]
• The volume of data. It brings about the following benefits:
• The cost of development. • Clarity of direction.
• Legal status. • Preventing and resolving
problems.

167
EXAMINATION SOLUTIONS

• Positive reputation. STATEMENT OF FINANCIAL POSITION

• Stable turnover. OF W. WATERS FOR THE YEAR ENDED 31
• Ability to reach targets. DECEMBER 2019 [1]
• Growth. $ $ $
• Increased employee productivity. Sales 85 000 [1]
• Positive workplace atmosphere. Turnover 85 000 [1]
• Greater innovation.
• New business opportunities. Cost of goods
• Enhance loyalty to company.
sold
• Customer satisfaction.
Opening stock 0
6. Evaluate benefits and challenges
Add purchases 35 000 [1]
encountered in foreign markets. [20]
Less closing
Assessment of the pros and cons 0
Stock
Advantages 35 000
• Access to new markets. Gross profit 50 000 [1]
• Access to local talents.
• Increase business growth. Less expenses
• Staying ahead of the competition. Advertising 4 000 [1]
• Provide a reliable service to the Rates 1 000 [1]
international clients. Transport
4 000 [1]
Disadvantages Expenses
Rent 3 500 [1]
•  ost of establishing and termination of
C
Stationery 800 [1]
an entity.
13 300 [1]
• Compliance risk.
Net profit 36 700 [1]
• Business practices and cultural barriers.
• Managing international employees –
HR and payroll obligations. EXAMINATION PRACTICE 3
7. (a) Describe SWOT Analysis. [8] SOLUTIONS
• Strengths.
• Weaknesses.
PAPER 1
• Opportunities. 1. (a) (i) Identify the importance of
• Threats. Business plan. [4]
(b) From the following information • It focuses attention on
prepare a Statement of Financial objectives and results.
Position of W. Waters for the year • Risk and uncertainty is
ended 31 December 2019. [12] reduced.
• Innovation and creativity is
encouraged.
• It provides a sense of
direction in the business.

168
EXAMINATION SOLUTIONS

Section B (60 marks) •  o eliminate specific labour-

T
related situations.
2. (a) With the aid of a diagram, explain a
• To be closer to similar-type
break-even chart. [8]
companies (clustering).
Break-even Point. • To improve quality of life.
sales revenue 3. (a) Explain four sources of finance for a
($ 16000)
15 000 start-up business. [8]
Cost and revenue ($)

fit profit
break even a of
Pro
total cost
•  ank loan would have time to
B
10 000 are
point
($1100) repay but would have to pay
of los
s variable
cost
interest on amount borrowed.
area
5 000 fixed cost • Own savings no need to repay but
might not have sufficient funds.
0 • Leasing or hire purchase as have
1000 000
Unit of production no business experience could
return equipment in case of need.
 reak-even is the point at which
B • • Microfinance as new start up.
revenue and total costs are • Government grants or subsidies.
the same. This means that the • Ask family or friends for finance.
enterprise is making neither a Do not accept issue shares,
profit nor a loss. debentures, retained profits or
• It informs an enterprise of how selling existing assets as not
many products it needs to sell appropriate for start-up business.
to reach to the break-even point
(b) Evaluate the importance of small
(BEP).
business enterprise. [12]
• Break-even = Fixed Costs divided
• Contribute to employment
by (Selling Price minus Variable
creation.
Costs).
• Wealth creation.
(b) Discuss factors that lead to relocation • Poverty alleviation.
of a business. [12] • Income generation.
• To acquire more room. • Independence and autonomy.
• To lower operating costs. • Vital parts of local economies.
• To modernise equipment and
4. (a) Identify and explain two advantages
facilities.
and two disadvantages of being a
• To move closer to large segment
private limited company instead of a
of their market, or to establish its partnership. [8]
presence in a new market.
• To consolidate fewer facilities. Advantages and disadvantages must
• To be closer to certain suppliers or relate to the difference between
natural resources. a private limited company and a
• To access a better or larger labour partnership.
pool.

180
 EXAMINATION SOLUTIONS
Advantages 5. (a) 
State the difference between internal
•  ore ideas which could make
M and external stakeholders. [8]
business more competitive. Differences between internal and external
• More capital which may help stakeholders
solve cash flow problems so less
Internal stakeholders External
borrowing.
stakeholders
• Share responsibilities so have time
The individual or These are individuals
to focus on what they are good at.
group that works or group that is not
• Raise capital by selling shares.
for the organisation employed by the
• Continuity.
and they actively organisation but they
• Easier to get bank loan.
participate in the get affected by its
• Separate legal identity.
management of the activities.
• Limited liability.
company are known as
Disadvantages internal stakeholders.
•  ifferent objectives leading to
D Serves the Deals with company
misunderstandings. organisation. externally.
• Slow decision making as they They are directly They are indirectly
have to consult one another. influenced by the influenced by the
• Have unlimited liability they company’s activities company’s activities
could lose their personal because they are because they are
belongings. the part of the the part of the
• Have to share profits so each organisation. organisation.
person makes less than if it is a They are employed by They are not
sole trader. the company. employed by the
• Shareholders expect dividends. company.
• Accounts not totally private. Internal matters of the External stakeholders
• More complex legal process. company are known to do not know about
(b) Analyse the importance of a working internal stakeholders. such matters.
plan. [12] Internal stakeholders External stakeholders
• Communicate strategies to are the primary are secondary
employees. stakeholders. stakeholders.
• Define goals and objectives. (b) Discuss the functions of a Commercial
• Organise teams and leadership. Bank. [12]
• Establish project timeline. • They offer current accounts and
• Set project budget. savings accounts to business
• Quality assurance and control. enterprises and individuals.

181
EXAMINATION SOLUTIONS

• I t allows account holders to • Security usually required for

receive and make payments loan.
through cheques, direct debit and (b) (i) Identify four methods of
credit transfers. secondary market research. [4]
• Offer credit and debit cards for the • Government statistics.
convenience of its customers. • Newspapers or magazine
• Provide automated teller machines articles.
(ATM) for quick and easy cash • Internet or online sources.
withdrawal. • Paying for market research
• They offer loans for general agencies.
purpose. • Trade associations reports.
• They give financial advice to • Company records.
customers on how to invest their (ii) Describe the following business
money. objectives. [8]
• Offer foreign currency through
Increase market share:
traveller’s cheques.
• Allows international traders to • Businesses often want to
make payments (bill of exchange). build a larger market share.
• Provide overdraft facilities to They may be able to do this if
current account holders. they can win customers from
6. (a) Differentiate a bank overdraft and a competitors. Businesses with
bank loan. [8] a large market share may be
able to dominate the market.
Overdraft
They may be able to charge
• Only interest payable on amount higher prices, for example.
overdrawn. Sales revenue
• Quick and easy to arrange. • Revenue refers to income
• No security but repayable on from all sources while
demand so more appropriate for sales are money made from
short term finance such as cash selling goods and services.
flow problems. The aim is to raise the total
• Can be expensive as interest rates sales number in each period
tend to be high. which can be a week, month,
Bank loan quarter or a year. Profit
maximisation.
• Have a set period of time to
• Profit maximisation is
repay.
making as much profit as
• Fixed interest rate.
possible in a given period of
• Relatively quick to arrange.
time.
• Appropriate for a vehicle as it
• The business is operated with
is a long term asset.
the aim of making a profit.
• But can be expensive as
interest payable.

182
 EXAMINATION SOLUTIONS
This happens in the case 7. (a) E
 xplain two advantages and two
when a business is not owned disadvantages of a franchise. [8]
by the government but a Advantages Disadvantages
private owner. (a) Franchisees (a) Franchisors earn
• Most businesses aim to make may be more royalties from
a profit because their owners talented at sales.
want a financial gain. Some growing the (b) Franchisees earn
businesses try to maximise business and money from
profit. This means they turning a profit profits.
than employees
make as much profit as they
would do.
possibly can.
(b) The franchisee (c) Achieving
Survival: invests capital. growth in both
 ll businesses will consider
A (c) The franchisee is not always
survival as important. has a stake in possible,
the success of potentially
However, from time to time
the franchise causing conflict.
survival may be the most business. (d) Loss of control.
important objective. For (d) The franchisee (e) Training and
example, when a business is responsible support of
first starts trading it may be for the day to franchisees.
vulnerable. The owners may day operation of (f) Poorly
lack experience and there may the franchise. performing
(e) Greater buying franchisees.
be a shortage of resources.
power. (g) Compliance
Therefore, an objective for costs and risk.
a new business may be to (h) Managing
survive in the first 12 months. growth.
New competitors can make
(b) D
 iscuss the importance of a business
a firm feel less secure. The
plan. [12]
survival of a business might
• Helps with critical decisions.
also be threatened when
• Iron out things which are not in
trading conditions become this
order.
difficult. It can be seen that
• Avoid big mistakes.
managers may decide to lower
• Prove the viability of the business.
prices in order to survive. This
• Set better objectives and
may be done even if there will
standards.
be lower profit on each item
• Communicate objectives and
sold.
targets.

183
EXAMINATION SOLUTIONS

•  rovide a guide for service

P (c) Outline any two challenges associated
providers. with enterprising. [2]
• Secure financing. • Inadequate financial resources.
• Better understand the broader • They risk losing their investment
environment. due to losses in business.
• Reduce risk. • The business may not grow due to
small amounts of capital.
• Entrepreneurs may need to work
EXAMINATION PRACTICE 5 over-time to succeed.
SOLUTIONS • They may suffer from intense
competition from bigger
PAPER 1
businesses.
1. (a) (i) 
Using relevant examples, explain (d) Explain any two external
the meaning of the following environmental factors that affect the
terms operations of a business [2]
Enterprising. [2] • Political factors.
• Economic factors.
 nterprising is the organising
E
• Social factors.
and combining of resources,
• Technological factors.
that is, land, labour and capital
(e) Briefly explain the meaning of
to produce goods and services.
the acronym SWOT as used in
The enterpriser is responsible
environmental analysis.
for managing the business,
S-Strength – Explains the areas that
bringing creative ideas and
the business has a great advantage in,
taking responsibility for a loss
for example, qualified personnel or a
if it happens. The reward for
strong marketing base.
enterprising is profit.
W-Weaknesses – Areas in which
Stakeholder. [2] the business lacks, for example, an
(ii) A stakeholder is anyone with inefficient financial manager.
an interest in the business O-Opportunity – What the market is
and is affected either directly offering, for example, opportunity for
or indirectly by the business market expansion or growth.
activities, whereas a shareholder T-Threats – Challenges posed by the
is one of the stakeholders who market or the environment, for which
is a part owner of the company the business has no control over,
and is affected directly by the for example, changes in taste and
business activities. preferences.
(b) 
Explain any two attributes of an (f) Outline any two causes of business
enterpriser. [2] failure. [2]
• Determined. • Intense competition.
• Good leader. • Inefficient management.
• Multi-tasking. • Inadequate financial resources.
• Risk taker.

184
 EXAMINATION SOLUTIONS
2. (a) Outline any two ways in which (ii) Horizontal growth. [1]
an enterpriser identifies business Horizontal growth is growth
opportunities. [2] across the production chain by
• The ability to meet the businesses at the same stage of
demand. production, for example, a wheat
• New technology. farmer merging with another
• Research and development. wheat farmer to enjoy economies
• Recognising areas for expansion. of scale.
• Changes in taste and fashion. (iii) Merger. [1]
• Changes in the size and structure A merger or integration occurs
of population. when two or more firms agree to
• Changes in real income. join their operations into a single
• Opportunities offered by entity.
globalisation. (iv) Takeover. [1]
• Government policies.
A takeover occurs when one
(b) Describe two roles of Small to
company acquires another
Medium Enterprises (SMEs) to the
company. The acquired company
Zimbabwean economy. [2]
will lose its identity completely.
• They contribute to economic
(d) Describe the importance of the
growth.
following stakeholders in an
• They create employment.
enterprise.
• They contribute to community
(i) Employees. [1]
development.
• Employees provide manual
• They contribute to new product
and other labour services
development through innovation.
to the business to allow
• Improve standards of living for the
production of goods and
people.
provision of services to
• Increase competition and boosts
consumers.
quality of goods.
• They provide services
• Improves production processes
and meet the conditions
through innovation.
and requirements of the
(c) Using appropriate examples, explain
the following ways of business employment contract which
growth. enable the business to grow.
• They cooperate with
(i) Vertical growth. [1]
management in all reasonable
Vertical growth is growth
requests.
upwards or downwards along the
• They observe the ethical
chain of production, for example,
code of conduct which
a wheat farmer partnering or
helps maintain the business’
merging with a bread producer or
reputation.
a bread producer merging with a
wholesale or retail distributor.

185
EXAMINATION SOLUTIONS

(ii) Competitors. [1] • To be treated fairly by the

• They push the business to purchasing firm, for example,
perform well in order to not to be forced to charge low
survive competition. prices.
• They force the business to • Supply goods and services
charge competitive prices. ordered by the business as in
• They push businesses to the purchase contract.
produce quality goods to (e) Distinguish between a sole
remain competitive and proprietorship and a partnership. [4]
survive.
Sole
(iii) Government. [1] Partnership
proprietorship
• Passes laws that restrain
Formed, owned
many aspects of business Formed and owned
and controlled by
activities. by 2-20 people.
one person.
• Ensure law and order to allow Decisions are
legal business activities to Decision making is
made without
consultative.
take place. consultation.
• Ensures the attainment Quick decision Decision making
of economic stability to making. takes longer.
encourage business activities. Profits are
Profits are shared
• To prevent unfair competition enjoyed by one
among partners.
person.
that could damage business
survival. Losses are not Losses are shared
shared. among partners.
• To establish good trading
links with other countries to 3. (a) Identify any two forms of ethical
allow international trade. behaviour in a business. [2]
(iv) Suppliers. [1] • Displaying correct sizes and
• Supply goods and services contents of a product, for example,
to allow the business to offer putting on the label of 10 kg maize
products to customers. seed on a 10 kg packet.
• To be treated fairly by the • Fair treatment of stakeholders like
purchasing firm, for example, employees, customers or even
not to be forced to charge low suppliers of goods and services.
prices. • Correct advertisements for
• Supply goods and services products and jobs.
ordered by the business as in • Non-discriminating employees in
the purchase contract. terms of race, age, colour, creed or
• Supply goods and services religion.
to allow the business to offer • safely disposing toxic waste to
products to customers. avoid pollution.
• Selling alcoholic beverages and
cigarettes to adults only.

186