N6 Entrepreneurship Business Management

Entrepreneurship & Business
Management N6
Chapter 1: Strategic planning in your business
INTRODUCTION
There are certain specific characteristics that high-performing companies
have which separate them from low-performing companies:
• There is a clear sense of direction;
• There is an abundance of skilled entrepreneurship;
• Managers are committed to having a good strategic action plan;
• Management is results-orientated and performance conscious; and
• Managers are strongly involved in implementing the chosen strategy.
www.futuremanagers.com
Chapter 1: Strategic planning in your business (continued)
DECISION-MAKING PROCESS
Management could take these
steps in their decision-making
process to assist in developing the
most effective strategic plan.
Chapter 1: Strategic planning in your business (continued)
DECISION-MAKING TECHNIQUES
Various techniques can be used to stimulate creativity and help to develop
alternative solutions during the decision-making process. There are a few
suggested techniques:
Chapter 2: Dynamic business environment
INTRODUCTION
There are more than 1 million small, medium and micro-enterprises in the
country, employing almost half of the labour force. These enterprises include:
• Survivalist enterprises;
• Micro-enterprises;
• Small enterprises; and
• Medium enterprises.
Chapter 2: Dynamic business environment (continued)
THE GROWTH IN ENTREPRENEURSHIP

There is a growing awareness that people have to create their own jobs to
become economically viable. This has led to a large increase in the creation
of various types of small businesses and a strong emphasis on the
development of Entrepreneurship. The growth in Entrepreneurship plays a
critical role in the economic development of the country.
ENTREPRENEURIAL PROFILES
There is a large variety of entrepreneurs who have made a success of their
specific enterprises. Broad categories of entrepreneurial profiles include:
• Women entrepreneurs; • Copreneurs; and
• Part-time entrepreneurs; • Intrapreneurs.
• Home-based entrepreneurs;
• Family business owners;
THE POWER OF SMALL BUSINESS

Small businesses are vitally important because:
• They constitute more than 90% of the businesses in South Africa;
• They create most of the new job opportunities;
• They take the initiative and create innovative ideas;
• They serve as a manifestation of the free market system;
• They are flexible and adaptable; and
• • They provide access to the business world for many people.
ENTREPRENEURIAL TRANSITION
Any new business, if it is

successful, will start to
grow. A new business is
likely to grow through
different stages.
CHANGE
Organisations are influenced by economic, political, technological, climatic
and various other changes. There are reasons for the benefits of change for
a business:
• Competition;
• Government;
• Employees; and
• Environment.
Chapter 3: Implementation of strategic planning
in your business
INTRODUCTION
A company’s mission is the vision a manager has of what his or her business
is trying to do and to become in the future. A mission statement indicates the
route the company is going to follow in future.
Chapter 3: Implementation of strategic planning in your business
(continued)
BUSINESS STRATEGY
Strategies guide companies on how to achieve long-term objectives and how
to strive towards the company’s mission. Strategies indicate how to reach
performance targets, how to compete successfully against rivals, and how to
obtain a competitive advantage. Implementing a strategy is the beginning of
an ongoing process in business management.
Chapter 3: Implementation of strategic planning in your business
(continued)
STRATEGY IMPLEMENTATION
There are several factors that will influence implementation of strategies:
• Buy-in from workforce;
• Sufficient resources;
• Existing structures, policies and procedures; and
• Incentives.
Chapter 4: Competitive analysis
INTRODUCTION
An industry competitive analysis refers to the external situational analysis of
a single-business company. It looks at the macro-environment of the
business; analyses the overall position of an industry and then makes
decisions whether the industry is an attractive option.
Chapter 4: Competitive analysis (continued)
DOMINANT ECONOMIC CHARACTERISTICS

There are certain basic factors to consider when you want to identify the
primary economic features of a specific industry, such as the:
• Size of the market; • Number of buyers;

• Scope of competition; • Capital requirements;
• Market growth rate; • Industry probability; and
• Number of competitors; • Rapid technology change.
DRIVING FORCES
There are forces in motion that create incentives or pressures for change.
These are the driving forces. They have the biggest influence on the kind of
changes that will take place in an industry and its environment.
COMPETITIVE FORCES
Porter’s five forces model
Porter’s five forces model
KEY SUCCESS FACTORS

Key success factors are those things that are critical for a business to
succeed. These are:
• Managing and developing people;
• Strategic focus;
• Effective operations;
• Physical resources; and
• Customer relations.
Chapter 5: Strategy and competitive advantage
INTRODUCTION
A company achieves a competitive advantage when its business strategy
succeeds in making its product or service more attractive than those of other
companies.
Chapter 5: Strategy and competitive advantage (continued)
GENERIC COMPETITIVE STRATEGIES

There are three generic approaches to competitive strategy that stand out:
• Striving to be the low-cost producer;
• Differentiation of your product from a rival’s products; and
• Focusing on a narrow portion of the market, rather than going for the
whole market.
STRATEGIES TO SECURE COMPETITIVE ADVANTAGE

The six basic offensive strategies used to gain a competitive advantage are:
• Attack competitor strengths;
• Attack competitor weaknesses;
• Grand offensives;
• End-run offensives;
• Guerrilla offensives;
• Pre-emptive strikes.
STRATEGIES TO PROTECT COMPETITIVE ADVANTAGE

Defensive strategies can strengthen a company’s competitive position.
Strategies include:
• Block competitors’ offensives;
• Block competitors’ offensives;
• Hide true profitability.
Chapter 6: Buying an existing business
INTRODUCTION
When an entrepreneur has decided to start his or her own business, /she can
decide to start a business from scratch, buy an existing business or buy into
a franchise operation. Many people may go for the option of buying
an existing business.
Chapter 6: Buying an existing business (continued)
ADVANTAGES WHEN BUYING AN EXISTING BUSINESS

The benefits of buying a business include:
• It saves time, money and effort to find a location.
• You take over the existing customers of the business.
• Sales to existing customers will supply an immediate income.
• It is possible to buy the business at a bargain price.
• Relationships with the bank, suppliers, etc. will already be established.
• The entrepreneur may inherit a trained staff with the business.
DISADVANTAGES WHEN BUYING AN EXISTING BUSINESS

The drawbacks of buying a business include:
• The location of the business may no longer be convenient for customers.
• The existing business may have a bad reputation in the community.
• The existing facilities may need to be repaired or may not work properly.
• The existing stock may be outdated, poorly selected and slow moving.
• The price of the business may be too high.
THE RIGHT WAY TO BUY A BUSINESS

There are a variety of things you must consider before buying an existing
business.
1. Analyse your own skills and interests;
2. List the potential businesses for sale;
3. Evaluate businesses and select the best one;
4. Explore financing options; and
5. Ensure a smooth transition.
EVALUATING AN EXISTING BUSINESS

There are five critical areas to analyse when evaluating a business:
•Why the owner wishes to sell;
•The physical condition of the business;
•What the potential is for the company’s products and services;
•What legal aspects need to be considered; and
•The financial position of the business.
DETERMINING THE VALUE OF A BUSINESS

When determining the value of a business, there are two aspects to
consider:
• Firstly one must determine the value of the physical or tangible assets of
the business.
• Secondly, one must determine a value for the goodwill, or intangible
assets, of the business.
Chapter 7: Franchising
INTRODUCTION
Franchising can be defined as the marketing system which revolves around
a mutual agreement whereby one party is granted the privilege of conducting
business as an individual business owner but is required to operate
according to certain methods and terms specified by the other party.
Chapter 7: Franchising (continued)
FRANCHISING AS BUSINESS OPTION

The franchise agreement works as follows:
A company which runs a successful business grants another person the right
to sell the same goods and services according to its guidelines.The goods
and services are already well known in the marketplace and the franchisee
can rely on the franchising company for advertising and promotion.
TYPES OF FRANCHISING
There are four basic types of franchising systems:
• Manufacturer – retailer;
• Manufacturer – wholesaler;
• Wholesaler – retailer; and
• Service/trademark holder – retailer.
ADVANTAGES OF FRANCHISING
The benefits of franchising include:
• Many franchise systems have developed good training programmes.
• The business will open with a well-established name.
• The franchisee will need less capital to start up than starting his/her own
business from scratch.
• The franchisee gets the benefits of the franchisor’s advertising and
promotional efforts on a national and/or regional scale.
DISADVANTAGES OF FRANCHISING
The drawbacks of franchising include:
• The franchisor will control the quality of the franchisee’s business.
• The franchisee must pay the franchisor for the services provided and for
the use of the company name.
• The franchisee will not be able to sell the franchised business to anybody
without the approval of the franchisor
• Certain policies may affect the profitability of the franchisee.
GETTING TO KNOW THE FRANCHISE BUSINESS

Before getting into a franchise business, get to know details on:
• The franchisor;
• The franchise concept;
• Operational details;
• Franchise fees;
• Franchise contract; and
• Franchise agreement.
FRANCHISE ASSOCIATION OF SOUTH AFRICA (FASA)

FASA is a voluntary body created in order to regulate the franchise industry
in South Africa.
Chapter 8: International Business Plan
INTRODUCTION
International trade can broadly be defined as the exchange of goods and
services between two countries or political entities.
The South African Government through its Department of Trade and Industry
encourages foreign trade through a variety of initiatives.
Chapter 8: International Business Plan (continued)
THE ROLE OF GOVERNMENT IN INTERNATIONAL TRADE

It is in a government’s interest to support and encourage trade with other
countries. There are several reasons why:
• It leads to an expansion of the economy;
• Money comes into the country, which means better balances of payments;
• It creates employment;
• New technology and knowledge are imported;
• Additional taxes are generated through tariffs that are levied on imports.
INTERNATIONAL MARKETING
Marketing consists of activities that are aimed at offering products and
services to satisfy the needs of customers. International marketing involves
the same process but takes place across national boundaries.
THE INTERNATIONAL MARKETING ENVIRONMENT

A company needs to do a lot of research specific country before deciding on
an export destination. It is important to understand:
• A country’s economic situation;
• The culture of the country; and
• Any political and legal issues in the country.
MARKETING INFORMATION
It is important for a company to research marketing information regarding a
country which might be an export potential. There are three basic sources of
information for the exporter:
• Secondary or published information;
• Knowledgeable individuals within the market; and
• Personal investigation.
Chapter 9: Consultancy
INTRODUCTION
Consultancies can mean two things to a prospective entrepreneur or small
business owner:
• Firstly, consulting can be a possible business option for the person who
has skills and knowledge;
• Secondly, if a person has started a business already, consultancies can
help him to run the business effectively
Chapter 9: Consultancy (continued)
FUNCTIONS OF A CONSULTANT
• The consultant analyses the problems in the small business.
• The consultant advises the client on alternative ways to solve a problem.
• The consultant is a teacher and instructor who uses his knowledge and
experience to open up a new field of systems, methods and thoughts for
the entrepreneur.
• The consultant is also an initiator and innovator. He initiates change and
renewal in a business to find solutions for specific problems.
CONSULTANCY OPPORTUNITIES
The four main categories of consultancy types which offer consultancy
opportunities are:
• Personal consultants;
• Business consultants;
• Technical consultants; and
• Executive consultants.
MERITS OF CONSULTANCIES
There are benefits in consulting:
Advantages:
• Challenging career; • The satisfaction of helping others;
• Varied work assignments; • It can be very rewarding financially;
• You can employ your skills, talents and
and abilities to the fullest; • Exciting opportunities may open up
• You don’t have to follow an 8-to-5; for the consultant.
MERITS OF CONSULTANCIES
There are also drawbacks in consulting:
Disadvantages:
• Irregular living conditions on certain • Stress in finding clients; and
occasions (long work days and days • No long-term job security.
away from home);
• Tremendous job stress and
pressures in certain situations
CONTRACTORS AND SUB-CONTRACTORS

A contractor takes responsibility for a specific job and has control over the
job contract.
The sub-contractor is a person or company who does a specific part or
aspect of a job for the main contractor. His contract is therefore with the
contractor and not with the final consumer.
Chapter 10: Overview of a Business Plan
MARKETING PLAN
There are main components of marketing:
• Identify the target market;
• Determine the needs and wants of this market;
• Develop a suitable product range;
• Promote and sell the product/service;
• Distribute the product; and
• Provide after-sales service.
Chapter 10: Overview of a Business Plan (continued)
FINANCIAL PLAN
Performing a financial feasibility study helps determine whether or not a
business idea is a good one. Important questions that one should be able to
answer are:
• What are the costs involved in my business and how can I finance them?
• What is profit, how is it calculated, and will I make a profit?
• How much are my products actually costing?
• How much are my competitors charging for the same product?
Chapter 10: Overview of a Business Plan (continued)
FUNDING OPTIONS TO START YOUR BUSINESS

A business owner could find funding from:
• Personal funds;
• Friends and relatives;
• Equity shares; and
• Loans.

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N6 Entrepreneurship Business Management

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Entrepreneurship & Business

THE GROWTH IN ENTREPRENEURSHIP

THE POWER OF SMALL BUSINESS

Any new business, if it is

DOMINANT ECONOMIC CHARACTERISTICS

• Size of the market; • Number of buyers;

Porter’s five forces model

Porter’s five forces model

KEY SUCCESS FACTORS

GENERIC COMPETITIVE STRATEGIES

STRATEGIES TO SECURE COMPETITIVE ADVANTAGE

STRATEGIES TO PROTECT COMPETITIVE ADVANTAGE

ADVANTAGES WHEN BUYING AN EXISTING BUSINESS

DISADVANTAGES WHEN BUYING AN EXISTING BUSINESS

THE RIGHT WAY TO BUY A BUSINESS

EVALUATING AN EXISTING BUSINESS

DETERMINING THE VALUE OF A BUSINESS

FRANCHISING AS BUSINESS OPTION

GETTING TO KNOW THE FRANCHISE BUSINESS

FRANCHISE ASSOCIATION OF SOUTH AFRICA (FASA)

THE ROLE OF GOVERNMENT IN INTERNATIONAL TRADE

THE INTERNATIONAL MARKETING ENVIRONMENT

CONTRACTORS AND SUB-CONTRACTORS

FUNDING OPTIONS TO START YOUR BUSINESS

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