Business T1 Control Test Notes

Topic 1: Influences on the business environments:

- Business environments and the extent of control:
o Micro-environment
▪ Internal business environment
▪ Full control
o Market-environment
▪ Immediate external environment
▪ Limited control
o Macro-environment
▪ Broad external environment
▪ No control

- Components of the micro, market, and macro environments:

o Micro-environment
▪ Vision, mission statement, goals, and objectives
▪ Organizational structure
▪ Organizational culture
▪ Organizational resources
▪ Leadership and management
▪ Eight business functions (General management, Production,
Public Relations, Purchasing, Marketing, Finance, Human
Resources and Administration)
o Market-environment
▪ Customers
▪ Suppliers
▪ Intermediaries
▪ Competitors
▪ Other organizations
• CBO’S
• NGO’S
• Regulators
• Strategic Allies
• Unions
o Macro-environment
▪ Political
• Government policies
• Political Stability
▪ Economic
• Inflation
• Prices of foreign currency
 ▪ Social
• Low-income levels of consumers
• Unemployment
▪ Technological
• Changes in new technology
• Internet Infrastructure
▪ Legal
• Recent Legislation
• Labor Laws
▪ Environmental
• Climate change
• Environmental stability

- Ways in which businesses can get in the macro environment:

o Create job opportunities for the people in their communities.
o Undertake social responsibility programs to improve the welfare of
people.
o Improve export markets by expanding into new African markets.
o Undertake scientific research to improve traditional medicines.

- Benefits of businesses that are involved in the macro environment:

o They will gain good publicity and so attract and retain loyal customers.
o They will attract and retain skillful employees in their communities.
o Businesses that support their communities normally get some tax
rebates.
o Government tenders and contracts are normally given to businesses that
are involved in the macro environment.

Topic 2: Challenges in the business environments:

- Name three challenges in all three environments:
o Micro
▪ Difficult employees
▪ Lack of vision and mission
▪ Lack of adequate management skills
▪ Unions
▪ Strikes and go-slows.
▪ Employee absenteeism
▪ High employee turnover
▪ Shortage of skills among employees
o Market
▪ Competition
▪ Shortage of suppliers
 ▪ Changes in consumer behavior
▪ Demographics and psychographics
▪ Socio-cultural factors
o Macro
▪ Changes in income levels
▪ Political changes
▪ Contemporary legal legislation
▪ Labor restrictions
▪ Micro lending
▪ Globalization / international challenges
▪ Social values and demographics
▪ Socio-economic values

- Challenges in the micro-environment:

o Difficult Employees
▪ Employees that always complain about work systems and
processes.
▪ Employees that are lazy and not committed to doing their work.
This may cause delays, so deadlines will not be met.
o Shortage of skilled employees
▪ Employees that are not well-trained will not meet the required
standards set by the business.
▪ The by-product of this is poor customer service, which has a
negative impact on the business. Businesses due to this lose
customers to their competitors.
o Lack of vision and mission
▪ Management and staff have different ideas about the goals of the
business.
▪ It may lead to conflict and negatively affect productivity.
o Lack of adequate management skills
▪ Inadequate management skills lead to objectives not being
achieved.
▪ Managers without the necessary management skills will not be
able to lead, direct and control personnel and resources in the
business.
o Unions
▪ Organizations established to protect the interests and rights of
employees in the workplace.
▪ Sometimes unions make demands that cannot be met by the
business, which creates tension between management and
employees.
o Strikes and Go-slows
▪ Industrial action that may be organized by a trade union and have a
negative impact on business operations.
 ▪ When managers cannot sort out their differences, employees may
engage in a strike or a go-slow.
▪ Types of strikes:
• Wild-Cat
• Work-to-rule
• Sympathy
• Slowdown

- Contemporary legislation impacting on businesses:

o LRA (Labor Relations Act)
▪ Regulates the relationship between the employer and the
employees when resolving conflict in the workplace.
o BCEA (Basic Conditions of Employment Act)
▪ Provides minimum acceptable standard for any employment. It
describes the conditions of employment.
o CPA (Consumer Protection Act)
▪ Promotes and advances social and economic welfare of
consumers in South Africa.
o NCA (National Credit Act)
▪ Protects both the business and consumers from negligent lending
practices that could result in over-indebtedness by consumers.
o EEA (Employment Equity Act)
▪ Eliminates unfair discrimination, such as discrimination against
race, color, age, gender, religion, or disability in the workplace.
o BBBEE (Broad Based Black Economic Empowerment)
▪ Ensures previously disadvantaged people fully participate in the
economy.
o COIDA (The compensation for Occupational Injuries and Diseases Act)
▪ Provides compensation for employees who sustain injuries or
conduct diseases while on duty. It also ensures employers provide
their employees with a safe and healthy working environment.
o SDA (Skill Development Act)
▪ Ensures that employers contribute towards the education and
training of their employees.

- Challenges in the macro-environment:

o Labor Restrictions
▪ Laws of restriction imposed by government on business relations.
▪ These laws create a legal framework that protects employees from
being exploited by their employers, and also restricts the practices
of employers.
Topic 3: Adapting to the challenges in the business environments:
- Organizational design and flexibility:
o Describes how a business is structured and how it communicates its
culture. It focuses on ensuring that the structure of the business is
aligned with its objectives.
o Involves the process of integrating the people/information/technology
within an organization to improve efficiency.
o The management structure of a business should reflect the
environmental conditions that the business experiences.

- Define/Identify mergers, acquisitions, alliances, and takeovers from a

scenario:
o Mergers
▪ Two companies that join, usually by agreement, to form one
company.
▪ Emerged businesses share their resources which could lead to
more growth and sustainability.
o Acquisitions
▪ When a business buys another business at an agreed price.
▪ Acquired company operates as a subsidiary of the acquiring
business.
o Takeovers
▪ One business takes over another business through majority
ownership of its shares.
▪ One business buys out the shares of another business until that
business has controlling interests.
o Alliances
▪ Agreement between businesses with common visions, work
together for the benefit of all.
▪ Organizations with similar goals choose to work together for
mutual benefit.

- Socio responsibility from the triple bottom line:

o Planet, People and Profit

- Projects that should be undertaken by businesses as part of social

responsibility
o Businesses must allow employees to get involved in social development
programs.
o Businesses must protect the environment and participate in community
upliftment programs.
o Engage in environmentally friendly campaigns such as recycling or re-
using scarce resources.
 o Support less fortunate people, by providing donations to charity
organizations.

- Benefits of social responsibility projects for businesses:

o The business enjoys support of customers.
o Promotes customer loyalty resulting in more sales.
o CSI helps attract investors because of increased productivity.
o CSI/CSR can be used as a marketing strategy to promote a product.

- Lobbying (Everything):
o Definition
▪ Organized process where individuals, businesses and
organizations use their influence to change government policy.
▪ Businesses try to influence legislation or the government decision-
making process.
o Reasons
▪ Advances what the business must deliver on and builds public
trust.
▪ Helps to find solutions to emerging generic challenges.
▪ Advances a cause and builds public trust.
o Types of Lobbying
▪ Hedging against inflation:
• The investing of surplus assets or money in investments with
intrinsic value to protect capital from the effects of inflation.
▪ Bargaining sessions between management and unions
• Negotiation between employers and employees (via unions)
order for employees to try to persuade management to accept
their demands, and for management to try to get unions to
accept its proposal. This is done to find a win-win situation for
all parties.
▪ Influencing supervisory bodies/regulators
• Businesses influence and negotiate with regulators to protect
their sustainability, and even though businesses should adhere
to the guidelines and restrictions of the regulators to stay in
business, they are involved in public discussions and debates
that shape public policies.

- Ways businesses can form power relations:

o Strategic Alliances
▪ Form partnership agreements to benefit from each other’s
involvement.
▪ Help parties involved in infrastructure development and scarce
skills.
 o Persuasion of large investors
▪ If a business has a powerful investor, it can often benefit from the
relationship by gaining credit more easily and negotiating better
deals from suppliers.
▪ Businesses invite influential people to sit on their board of
directors and gain valuable advice from these people.
o Company representatives influence
▪ This representative fulfills an important function in trying to
persuade investors to invest in business practices.
▪ Businesses must invest time and energy to recruit the right person
for this job.

Topic 4: Contemporary socio-economic issues and businesses

- Lack of skills:
o Unskilled employees could spend considerable time seeking assistance
to perform their work.
o They may perform tasks without the appropriate knowledge and expertise
which could lead to poor performance.
o This could lead to errors and having to repeat or correct a work task.

- Ethical Misconduct:
o Occurs inside the business and poses various threats and challenges.
o Any behavior by employees that is not consistent with the values of the
business.
▪ Types:
• Sexual Harassment
o Unwanted conduct of sexual nature from someone
at work.
o This causes discomfort for the victim and causes
them to be embarrassed.
• Corruption
o Any act of dishonesty such as
bribery/theft/collusion/kickbacks and so on.
o It occurs when two parties enter into an illegal
agreement and both parties benefit.
• Mismanagement of funds
o Wrongful use of funds that do not belong to the
person or employee.
o Involves a person using their position of trust for
personal gain, via dishonest activities.
 ▪ Impact:
• An employee may abuse his/her position of trust for
monetary gain.
• Stringent and strict policies need to be implemented by the
business to prevent these crimes from happening.
• Implementing these policies and procedures may be costly
when it is rolled out for the employees.

- Unavailability of natural resources:

o Businesses will not be able to produce goods due to shortages of natural
resources that are used as raw materials.
o Oil and coal are examples of natural resources that are not renewable.
o Businesses need to find alternative sources of natural resources to
sustain production of goods. This may lead to additional operational
costs.

- Definition of piracy:
o Piracy is the illegal use of imitation of another person’s work.

- Industrial Relations:
o Industrial Actions (Strikes / Go-slows)
▪ Strikes
• A joint action organized by employees or union
representatives to stop working and to try and force the
employers to accept their demands.
• It’s a result of unresolved disputes.
▪ Types:
• Sympathy strike – Members of other unions join the strike
out of support for workers who are involved in dispute.
• Wildcat Cancellation – Illegal, occurs without warning.
• Work-to-rule – Workers cause a decrease in production by
just doing the minimum.
▪ Go-Slows
• A form of industrial action in which work, or progress is
deliberately delayed or slowed down as a form of protest.
• The goal is to reduce business productivity.
• Often used by essential service industries where strikes
aren’t allowed.
 o Labor Relation Act (Purpose of the act)
▪ Provides the structure for governing the relations between an
employer and their employees.
▪ Encourages collective bargaining processes to take place in the
workplace.
▪ Encourages the establishment of workplace forums to support
employees in decision-making.
▪ Encourages labor practices between the employer and employee.

o Functions of trade unions

▪ Represent and protect their members against unfair labor
practices in the workplace.
▪ Empower employees about their rights in the workplace and how
to apply these rights.
▪ Employees are protected from unfair dismissals and labor
practices.
▪ They may take legal action on behalf of their members when
necessary.

Topic 5: Business Sectors

- THREE Business sectors and examples:
o Primary sector
▪ Extraction of raw materials and natural resources
• Mining
• Agriculture
• Fishing
• Forestry
o Secondary sector
▪ Transformation of raw materials into finished or semi-finished
products.
• Manufacturing
• Construction
• Electricity generation
• Factories

o Tertiary sector
▪ Industries that offer services to other businesses and consumers.
▪ Known as the “Service industry”
• Financing
• Hospitality
• Retailers
 • Wholesalers
• Storage
• Tourism
• Transportation

- Backwards and forward linking:

o Forward Link:
▪ Primary to secondary to tertiary
• Example:
o Trees are planted, grown, and harvested in the
primary sector because they are going to be used in
the secondary sector to manufacture furniture,
paper or timber for a construction company. The
furniture, paper or timber are manufactured
because there are retailers in the tertiary sector who
are prepared to sell it the products to consumers.
Finished goods are transported to retailers who in
turn sell the final product to consumers.
o Backward Link:
▪ Tertiary to Secondary to Primary
• Example:
o A manufacturing company (secondary sector) may
provide a mining company (primary sector) with
machinery and equipment it needs to operate its
business.
o The mining company (primary sector) may outsource
the management of their Information Systems to a
specialist IT company (tertiary sector).

Topic 6: Forms ownership

- Public Companies:
o Benefits
▪ Strict regulatory requirements protect shareholders.
▪ Additional capital can be raised by issuing debentures to the
public.
▪ Competent and knowledgeable directors may be appointed by
shareholders.
▪ The business has its own legal identity and can own assets and
property.
 o Examples
▪ MTN Group
▪ FirstRand Limited
▪ FNB
▪ Shoprite
▪ Absa Group

- Prospectus of a public company:

o Meaning
▪ A written invitation to convince the public to buy shares.
▪ Gives information about the business.
o Initial Public Offering
▪ The company issues shares to the public for the first time.
o Secondary Offering
▪ Sale of new or closely held shares by a company that has already
made an IPO.
o Aspects that must be included in the prospectus:
▪ Name of the company
▪ Product or service portfolio
▪ Management team
▪ Cash Flow
▪ Shares issued.

- State-owned company:
o Definition
▪ Government is the major shareholder and the business falls under
the department of public enterprise.
o Examples:
▪ Eskom
▪ South African Airways (SAA)
▪ SABC (South African Broadcasting Corporation)
▪ South African Express

- Benefits of establishing a company versus other forms of ownership:

o Legal status and liability
▪ A company has its own legal status, trading name, and owns its
assets.
▪ Shareholders have no direct legal responsibility.

o Profit-Sharing
▪ Shareholders share profits of the company in the form of
dividends.
▪ Other forms will share profit according to their contribution or
internal agreement.
 o Ownership and management
▪ Shareholders can buy and sell shares freely in a public company.
▪ The company is managed by a qualified and competent board of
directors.

o Capital and cash flow:

▪ Companies have a better cash flow than sole traders.
▪ Directors do not have to take out personal loans to grow the
businesses.

o Life span and continuity

▪ A company has continuity of existence.
▪ The lifespan of a sole proprietor and partnership is limited.

o Taxation
▪ Companies have tax benefits that other forms of ownership don’t
have. They can obtain tax rebates if they are involved in social
responsibility projects.

- Challenges of establishing a company versus other forms of ownership:

o Politics can get in the way and directors are appointed for the wrong
reasons.
o A company may cease to exist if it is deregistered by CIPC.
o Companies have more taxation requirements.
o The more shares there are the less profit per share.

Essays
- Industrial Actions
o Industrial Actions (Strikes / Go-slows)
▪ Strikes
• A joint action organized by employees or union
representatives to stop working and to try and force the
employers to accept their demands.
• It’s a result of unresolved disputes.
▪ Types:
• Sympathy strike – Members of other unions join the strike
out of support for workers who are involved in dispute.
• Wildcat Cancellation – Illegal, occurs without warning.
(Numsa members embarked on the crippling, weeklong
wildcat strike in October 2022 that halted operations across
Gauteng and stranded more than 150,000 commuters. The
 employees were demanding that the company implement a
6% wage increase agreement it had reached with unions in
2020)
• Work-to-rule – Workers cause a decrease in production by
just doing the minimum.
▪ Go-Slows
• A form of industrial action in which work, or progress is
deliberately delayed or slowed down as a form of protest.
• The goal is to reduce business productivity.

- Labor Relations Act:

o What it is
▪ Regulates the relationship between the employer and employees
when resolving conflict in the workplace.
o Reasons for it
▪ Provides the structure for governing the relations between an
employer and their employees.
▪ Encourages collective bargaining processes to take place in the
workplace.
▪ Encourages the establishment of workplace forums to support
employees in decision-making.
▪ Encourages labor practices between the employer and employee.
▪ Transfer of employment contracts between the existing and new
employers is explained.

- Functions of trade unions:

o Trade unions represent and protect their members against unfair labor
practices in the workplace.
o They empower employees about their rights in the workplace and how to
apply these rights.
o Trade unions negotiate for better working conditions, salary or wages and
other benefits to improve the standards of living for workers.
o Employees are protected from unfair dismissals and labor practices.
o They may take legal action on behalf of their members when necessary.
[congress of South African trade unions (COSATU) goal is to improve the
circumstances of working people in South Africa. They currently have 2
193 965 members currently.]

- Challenges related to unions and difficult employees:

- Contemporary legislation impacting on business:
o LRA (Labor Relations Act)
▪ Regulates the relationship between the employer and the
employees when resolving conflict in the workplace.
o BCEA (Basic Conditions of Employment Act)
▪ Provides minimum acceptable standard for any employment. It
describes the conditions of employment.
o CPA (Consumer Protection Act)
▪ Promotes and advances social and economic welfare of
consumers in South Africa.
o NCA (National Credit Act)
▪ Protects both the business and consumers from negligent lending
practices that could result in over-indebtedness by consumers.
o EEA (Employment Equity Act)
▪ Eliminates unfair discrimination, such as discrimination against
race, color, age, gender, religion, or disability in the workplace.
o BBBEE (Broad Based Black Economic Empowerment)
▪ Ensures previously disadvantaged people fully participate in the
economy.
o COIDA (The compensation for Occupational Injuries and Diseases Act)
▪ Provides compensation for employees who sustain injuries or
conduct diseases while on duty. It also ensures employers provide
their employees with a safe and healthy working environment.
o SDA (Skill Development Act)
▪ Ensures that employers contribute towards the education and
training of their employees.

- Labor Restrictions:
o The government has passed several laws that impose restrictions on
business operations.
o These laws create a legal framework that protects employees from being
exploited by their employers and restricts the practices of employers.
o Some employers find this legal framework restrictive while others see it
as an important part of protecting the rights of employees and ensuring
democracy in the workplace.

- Macro Environment components:

▪ Political
• Government policies
• Political Stability
▪ Economic
• Inflation
• Prices of foreign currency
▪ Social
 • Low-income levels of consumers
• Unemployment
▪ Technological
• Changes in new technology
• Internet Infrastructure
▪ Legal
• Recent Legislation
• Labor Laws
▪ Environmental
• Climate change
• Environmental stability

- Overcoming competitors
o Businesses must ensure that they produce unique goods or services for
the target market.
o Goods/services must be priced lower than competitors’ goods/services
in the market.
o Businesses need to provide more personalized services by being
responsive to their customers’ needs/wants.
o Businesses must produce high quality goods/services that the
customers must be interested in.
o Businesses must improve on customer services and keep customers
happy.

- Ways of getting involved in the macro environment:

o Create job opportunities for the people in their communities.
o Undertake social responsibility programs to improve the welfare of
people.
o Improve export markets by expanding into new African markets.
o Undertake scientific research to improve traditional medicines.
o Enter into a private-public partnership to provide infrastructure in the
country.

- Types of lobbying:
▪ Hedging against inflation:
• The investing of surplus assets or money in investments with
intrinsic value to protect capital from the effects of inflation.
▪ Bargaining sessions between management and unions
• Negotiation between employers and employees (via unions)
order for employees to try to persuade management to accept
their demands, and for management to try to get unions to
accept its proposal. This is done to find a win-win situation for
all parties.
 ▪ Influencing supervisory bodies/regulators
• Businesses influence and negotiate with regulators to protect
their sustainability, and even though businesses should adhere
to the guidelines and restrictions of the regulators to stay in
business, they are involved in public discussions and debates
that shape public policies.

- Benefits of social responsibility:

o The business enjoys support of customers.
o Promotes customer loyalty resulting in more sales.
o CSI helps attract investors because of increased productivity.
o CSI/CSR can be used as a marketing strategy to promote a product.
o Positive image as the business looks after employees/responsibly
conducts itself.