MICRO ENVIRONMENT CHAPTER I

BUSINESS STUDIES

GRADE 10
TERM ONE
CHAPTER 1
NOTES ON MICRO ENVIRONMENT
2020

TABLE OF CONTENTS

TOPICS PAGES
Content details for teaching, learning and assessment purposes 2
Meaning of micro environment: 2
Components/ features of the Micro Environment 2
Vision, Mission Statement, goal and objectives, 2-3
Organisational Culture 3
Organisational resources 4-5
Management and leadership 5
Organisational structure 5
Eight Business functions 6
General Management Function 6-11
Administration Function 11-12
Financial Function 11-15
Purchasing 15-21
Public Relations 21-22
Production 22
Marketing 23
Human Resources 23
Relationship between the business functions 23
This chapter consists of 23 pages

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CONTENT DETAILS FOR TEACHING, LEARNING AND ASSESSMENT

PURPOSES
Learners must be able to:
 Define/Explain the meaning of the micro environment
 Outline/Describe/Explain/Discuss the various components of the micro (internal
business environment.
 Identify a vision, mission statement, goals and objectives from given scenarios.
 Formulate/Evaluate a vision, mission statement, goals and objectives of any
business.
 Explain, Discuss the purpose of the organisational culture
 Outline/name/identify/Explain the organisational resources from given
statements/scenarios.
 Describe the purpose/importance of a business organisational with specific reference
to an organogram.
 Explain the differences between leadership and management.
 Briefly explain the purpose of the eight business functions
 Outline/Describe/Explain/Explain the importance of the eight business functions.

BUSINESS ENVIRONMENTS (refer to the 2018 exam guideline page 6)

1 Micro environment/Internal environment

Meaning of micro environment/Internal environment
 It is the environment within which a business operates and consists of the business
itself.
 It is the decision-making environment because management make decisions that help
the business achieve its goals.
 It can also be referred to as the immediate environment in which a business operates
and includes all the internal factors of the business.

2 Components/Features/ Elements of the Micro environment

The components of the micro environment include the following:
 Vision
 Mission
 Objectives
 Goals, strategy
 Organisational resources
 Leadership and management
 Business function
 Organisational structure
 Organisational culture.

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2.1 Explanation of the components/features/elements of the micro-

environment
Vision
 Refers to a statement that explains what a business aims to achieve.
 Answer to the question: ‘where are going from here?’
 Sets out where the business needs to go to be successful
 The dream of the business and what it wants to achieve in future.
 Gives businesses a clear idea of what they want to achieve.
 The inspiring statement about what a business wants the future to look like.
 Explains what a business aims to achieve taking into consideration its purpose.
 Example ‘To provide job opportunities for the local community

Mission statement
 A statement that that explains the reason for the business existence.
 Enables businesses to develop strategies to achieve their vision.
 The answer to the question such as what businesses do to make a profit?
 Explains what the business does to achieve it vision.
 Gives clear direction on how the business intend to achieve its vision.
 Describes the purpose and basic activities of the business.
 Example ‘To become a word-class communication company

Goals
 Can be defined as long term objectives of what the business want to achieve.
 Goals breakdown the business objective into specific and measurable statement.
Example Increase profit margin by 50% in 2020.
 Goals give the business a sense of direction.

Objectives
 Short- term tasks/steps to reach goals.
 Contain a deadline for achievement.
 Explains how the goals of the business will be reached.
 Explains targets and strategies that will help the business fulfil its mission.
 The purpose of the business, for example, a business may have a primary objective
of making a profit and a secondary objective of social upliftment.

Strategy
 The strategy outlines how the business will achieve its vision in line with its mission
statement and objectives.
 It is a plan of action taken by Top management to achieve their vision.

2.2 Purpose of the organisational culture

 It influences people’s actions and attitudes.
 The culture determines how things are done.
 It is the “personality” of the business.
 Shared understanding of how things are done in a business.

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 Every business has a culture that is influenced by everyone who is part of it.
 It is based on three key issues: values, beliefs and purposes e.g. dress code/office
décor/employee behaviour etc.
 Influences the way people in the organisation interact with each other and with
stakeholders.

2.2.1 Examples of the business culture

 Personality/ ethos of the business
 Norms, values and expectations.
 Business dress code
 Floor plan of the business.
 The working environment of the business.
 Respect for other employees’ values.
 The way managers are addressed

2.3 Organisational resources

 These are assets that the business uses to produce goods/services and to achieve
its goals.
 The following four groups of resources are controlled by management:

Physical Financial Human Information &

resources/operating resources resources Technological
resources (People) resources
 Natural  Capital  Employees  Technology the
resources  Own Capital  Contractors use of
 (raw material)  Cash computers
 Machinery  Bank over  Research
 Vehicles drafts  Production
 Buildings  Short and technology
 Infrastructure medium term
 Assets from loans
nature such as  Money invested
water, minerals in the business
and wood to acquire
production
goods such as
land, building
and machinery

2.3.1 Explanation of types of organisational resources

Human resource
 People with knowledge and skills such as employees/consultants/managers etc.
 The people needed to perform the work and keep the organisation functioning.
 People who contribute towards achieving the goals of the business.

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Natural resources
 Assets from nature that are used to offer services and products, such as minerals,
water and wood.

Physical resources
 Include raw materials/office furniture/equipment/machinery/plant necessary to
operate the business successfully.

Financial/Capital resources
 Money invested in the business to acquire production goods such as land, buildings
and machinery.
 Can be in the form of cash/bank overdrafts/short and medium term loan
.
Technological resources
 Resources that include computers/voice mail/emails/production technology that gives
the business an advantage over its competitors.

Entrepreneurial resources
 The person responsible for combining the factors of production in such a way that the
business will make a prof

2.4 Importance of business organisational structure

 It shows who report to whom and which department fall under which managers.
 The structure show the flow of instruction and feedback in the business.
 Every business must be organised into a structure that show each person’s task, the
level of authority and responsibility.
 It is the hierarchy to that shows the position of management, the departments and its
employees.

2.5 Differences between leadership and management

MANAGEMENT LEADERSHIP
Managers ensures that tasks given to Leaders inspires other people
subordinates are completed
Task orientated People orientated
Uses Instructional approach Uses motivational approach
Uses Instructional approach Uses motivational approach
Managers hold a managerial position in the A leader does not hold a managerial position
business
Management is the process of achieving Leadership is the process of inspiring and
business goals influencing other to achieve business goals
Guides human behaviour Influences human behaviour
Communicates through management Communicates by means of
functions, e.g. line function. interaction/behaviour/vision/value s/
charisma.
A person becomes a manager because Leaders are born with natural/ instinctive
he/she is appointed in the position leadership skills
Manage by planning/organising/leading and Lead by example/trust/respect
controlling

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2.6 Business functions

 General management
 Administration function
 Financial function
 Purchasing function
 Public function
 Human resources function
 Production function
 Marketing function

2.6.1 The purpose of the eight business functions

 The eight business functions work together to achieve the business goal.
 Each function carries out specific tasks which are closely linked in order to achieve
the same goal.
 Roles and tasks may change depending on the size/type/stage of growth of the
business.
 Business functions work together to ensure that the survival and sustainability of the
business.

2.6.2 Importance of business functions

(a) General management
 Sets the overall direction or strategy for the business.
 This function leads, organises and controls all the other functions.
 There are also decisions taken in each level.
 Management has three different levels, each with its own roles and responsibilities.
 Ensures that there is co-ordination among the seven different functions of the
business.

BUSINESS OPERATIONS (Refer to the 2018 exam guidelines page 13-16)

1 MANAGEMENT
Levels of management
 Levels of management means the degree of power and authority that
managers possess. The following three levels of management are explained
in detail:

Top management
 Reports to a board of directors/advisory board.
 Takes long term strategic decisions.
 Responsible for directing, controlling and managing risks.
 Determines the vision/mission/objectives/strategy of the business.
 Act of getting people together to accomplish certain goals.
 Oversees the activities of the other functions so that the business can achieve
its objectives.

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Middle management
 Responsible for specific departments within the business.
 Takes medium term tactical decisions.
 Responsible for achieving the goals and objectives set for the specific
department.
 Concerned with implementing plans made by top level management.
 Implements the vision and plans of the top management.
 Responsible for working with managers in other departments and for acquiring
resources needed in their departments.

Lower management
 Responsible for a high level of productivity, technical assistance and
motivating employees.
 Takes short term routine/tactical decision.
 Carry out instructions given by middle management
 They are also called first management level as it is the first management level
to which subordinates can be promoted.

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Levels of management and the type of decision taken by each.

Level of Type of decision Examples Roles
management
Top management Make long- term CEOs, directors, -Plan the future of the
strategic decisions. Owner of sole business.
(Policy), which will trader, partners -Manage change in the
have long-term in partnership business environment.
outcomes/ -Plan the activities of the
Consequences. business.
-Gives direction to the
vision, mission, goals and
objectives.
Middle Make medium-term Departmental -Controls the people and
management tactical decisions. managers. e.g. processes in the business.
(Procedure) marketing -It is the link between top
manager. management and lower
financial level management.
manager etc. -Pass information from top
management to lower
management
-Focuses on how the
business will carry out the
strategic decisions
-Acquire.
resources needed in their
department
Lower level Make short-term Foreman, -Make routine activities.
operation decisions. supervisor, team Plan the daily activities
leaders. --Set individual objectives
for workers working under
him/her.
-Offer feedback and
suggestions to middle
management.
-Implement the objectives
of the middle
management.
-They motivate and guide
workers.
NOTE: You must be able to identify the levels of management from given
statements and scenarios

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Management Tasks
 There are five basic management tasks which include the following:
o Planning
o Organising
o Leadership
o Controlling
o Risk management
 The above mentioned management tasks should be carried out at different
levels of the business.
 These tasks are carried out to ensure that the vision, mission and goals of the
business are met.

Planning
 The process of setting goals and developing strategies.
 It includes getting all the information you need for planning.
 Top management formulates strategic plans.
 Middle management formulates tactical plans.
 Lower management formulates operational plans
 Analysing the information and set long term goals.
 Considering different plans to achieve the goals.
 Choosing the best plan and decide on the action to be taken.
 Management looks ahead at the future to determine business objectives.
 Planning is done in all departments by all employees with the objectives of the
company in mind.
 Process of setting goals and making plans to achieve these goals.
 Deciding on the backup plan to use if the chosen plan becomes impossible.
 Implementing the chosen plan.
 Follow up to make sure the plan is successful, adjust it or change to the backup plan.

Organising
 It is the mechanism used to execute the plan.
 Involves breaking a plan into action.
 The way in which people are grouped together.
 May also include training to ensure that the jobs are carried out successfully.
 Ensures successful execution of the plan by using relevant organisational structure.
 It looks at what needs to be done and organizing resources need to achieve goals
and objectives.
 Organising the jobs within specific functions or departments.
 People must understand what is expected from them in terms of tasks/ authority /
responsibility etc.
 Employees must know the organisational procedures for instructions and feedback
and which resources they can use.

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Leading/Directing/Activating /
 The process of leading is to guide, motivate and inspire others to achieve goals.
 Refers to inspiring employees to carry out their task to the best of their abilities.
 Establishing a productive working climate.
 Motivating employees to achieve the goals set.
 Guiding employees in the right direction so that the business can achieve its
goals.
 Activating workers to use their skills and resources to their best ability.
 Providing employees with directions on how things should be done.
 Respecting and treating employees so that they work willingly to achieve the
business goals.
 Leaders set up proper communication channels so that the workers are always
informed and there is clear transfer of information.

Controlling
 Ensures that the business achieve its goals.
 Ensures that standards are met
 Ensures activities are carried out as planned.
 Enables the business to take corrective measures if the objectives are not
achieved.
 Risk can be identified during control.
 Involves comparing actual results with goals set by management
 Corrective measures must be taken if there is a difference between actual
results and the goals the business set out to achieve.
 Continuous control ensures that the business runs smoothly. .

Risk Management
 Identifies possible risk by finding risk-bearing activities (i.e. activities which could go
wrong) within the organisation.
 Assists businesses to in analyse each possible risk to assess how likely it is that the
risk will happen.
 Evaluates the potential impact of risk in terms of financial liability.
 Controls/Monitors the risk by studying reports and trends in the environment so that
measures can be taken to prevent it from happening.
 Handles the risk by determining what actions to take should the event happen using
available resources and contingency plan and communication with stakeholders.

2 ORGANISATIONAL STRUCTURES
2.1 Factors influence the organisation structure
 The size of the company
 Technology
 Resources
 Strategic goals of the company.

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2.2 Types of organisational structures

Functional organisational structure
 Employees get instructions from more than one manager
 The plan to be carried out determines who will be giving instructions
 This structure confuses employees as they report to more than one manager.

Project Organisational structure

 This is structured around project teams
 It is a temporary structure because employees are drawn from different departments
 Employees are then grouped together to form a project team which will carry out a
particular project.
Matrix Organisational structure
 This structure is structured around projects but employees stay in their departments.
 A project must be completed up to a certain point
 The project is then passed on to the next team, which will carry out the next phase of
the project.

Line organisational structure

 Employees report to only one person
 Only the Director can give instructions to employees
 This structure eliminates confusion among employees as they report to one person
only

Line and staff organisational structure

 Experts act as advisors to top and middle management.
 Advisors don’t form part of the business, they merely give advice
 Advisors don’t have authority over the employees, which means they can’t give any
instruction to employees.

3 ADMNISTRATION FUNCTION
3.1 Meaning of the administration function
 Handling of information and data.
 Administration is responsible for collecting, processing and distributing information
which is used for decision by management.
 Stores/Records information by using recent technology.
 Making general office work such as filing and storing of information.

3.2 Activities of the administration function

Collection of information
 Information is collected from both outside and inside the business
 Correct and reliable information should be available for meaningful decision making
and to run the business successfully.
Handling of information
 It is important for the administrative staff to handle information correctly to avoid
making wrong decision based on wrong information.

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 The administration function is responsible for dealing with the following types of
information:
o Accounting Records-can be used to draw up financial statements and reports.
Keep an up-to date all business transactions
o Cost Accounting- determines whether the product can be sold at a competitive
price considering the manufacturing or production costs
o Budgets- a plan of estimated expenses and income for a specific period
o Statistics-the collected and classified numerical data

Information Technology
 IT is the use of electronic equipment to assist with various administrative tasks.
 Technology is used to both communicate and handle information and referred to as
ICT (information and communication technology).

Office Practice
 Office practice refers to how the administrative staff should handle their duties
 It covers matters such as the dress code for employees/ proper filing of documents/
telephone etiquette/internet usage by staff etc.
The differences between data and information

DATA INFORMATION
Refers to raw/unprocessed facts found Refers to processed/analysed data that
in statistics/ graphs/ tables. gives specific knowledge to managers to
make decisions
Data can be collected from other Information can be stored manually in
business functions within the business. files/boxes/shelves/computers etc.
Data needs to be processed before it It is important to have a backup for all
can be used as information. stored information on computers or other
electronic devices in case they are
damaged
Data can be processed manually or Most businesses use electronic devices
using technology such as computers such as memory sticks and CDs to store
information
NOTE: The action verb “Differentiate/Distinguish” means that the difference/
distinction does not have to link but they must be clear.

(4) Financial Function

4.1 Meaning of the financial function
 Financial function is responsible for planning and managing all the funds and assets
of the business.

4.2 Purpose of the financial function

 The financial function determines how much capital the business needs.
 Establishes the sources for acquiring the capital.
 Decides how to invest/allocate the capital funds in the business
 Ensures that the business can generate enough income to cover the cost of raising
capital
 Prepare financial statements to present to the bank/investors to convince them that
the business is financially healthy

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4.3 Reasons why businesses may need finance

 Businesses need to find the best investments
 Businesses need to source funding.
 Audit and control the spending of the finances
 Plan so that finances are spent in the most efficient way.
 Allocates the necessary funds to the different department.

4.4 Sources of financing

Bank loans
 This is money borrowed from the bank and will be repaid over a period of time.
 The money is repaid with an interest.
 The entrepreneur who borrowed the money will attach his/her fixed asset as surety
to the value of the loan.
 Bank loans are usually used for long-term financing.

Bank overdraft
 It is the short -term loan added onto the account of the entrepreneur. It is also repaid
with an interest over a set period of time.

Asset-based loan
 The money lent to successful businesses that want to expand further.
 The loan is used to purchase an asset and that asset belongs to the lender until it is
fully paid off.
 If the money is not paid back, then the lender will take that asset.

Grants
 This is money provided by government to small businesses that are developing.
 The money does not have to be paid back if it benefits the community.
 The government want to see small developing businesses benefiting the community
and the environment in some way.

Receivable finance
 This is a loan provided to businesses while waiting for payment of the goods /service
provided to avoid a cash flow shortage.
 The loan is equal to the outstanding invoices that are due.

Angel funding
 This is money offered by wealthy entrepreneurs to other businesses for a share in
that business.
 This is usually used at the start of a business and carries a high risk for the investor.

Venture Capital
 This is money offered by individuals or organisations to start up or expand the
business.

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 This is done in exchange of a share in the business.

 The investor usually requires for a management position or to be a board member in
the business
NOTE: You must be able to identify the sources of financing from given
scenarios.

4.5 Budgeting
 It is a planning tool to estimate the money that will be received (income) and how it
will be used. (expenditure)
 Once the budget is drawn, it should be compared to the actual income and
expenditure.
 Assists businesses to keep track of its finances and ensure better profitability.
 Each department within the business should have its own budget.

Types of budgets
Capital budget  It estimates the fixed capital
 It is drawn up every-five to ten years and revised
annually.
 It plans the purchasing, upgrading and changing of
the fixed asset such as building, machinery,
equipment etc.
Cash budget  It estimates the working capital
 It is drawn up at the end of the financial year for the
start of the new year and revised monthly
 It assesses whether the business will be able to
purchase all the needs for its operation.

4.6 Investments
 Businesses invest some money from its profit to generate wealth and income.
 Invested money increases without labour effort.
 Businesses can choose to invest in financial institutions, government bonds or public
companies.
 Investments options are available include property investment/ unit trust
investments/ Government Retail Saving bonds/fixed deposits etc.

4.7 Types of capital

Fixed capital
 Money pays fixed assets, e.g. land and buildings etc.
 Finance long term capital needs of the business.
 Examples: capital market, selling shares, mortgage bonds etc.

Working capital/operating capital

 Money pays for day to day activity, e.g. trading stock, raw materials, etc.
 Finance the short term capital of the business.
 Examples: money market, credit allowed by suppliers, short terms loans etc.

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Own capital
 It is money provided by the owners of the business. It could come from their own
savings or the sale of their assets or investors e.g. personal savings and venture
capital

Borrowed capital
 It is money borrowed from financial institutions like banks or person. The money
should be paid back with interest. E.g. bank loan, bank overdraft

4.8 Differences between a fixed and working capital

FIXED CAPITAL WORKING CAPITAL
- Money pays fixed assets, e.g. land and - Money pays for day to day activity,
buildings etc. e.g. trading stock, raw materials, etc.
- Finance long term capital needs of the - Finance the short term capital of the
business. business
- Examples: capital market, selling shares, - Examples: money market, credit
mortgage bonds etc. allowed by suppliers, short terms
loans etc.

4.9 Differences between owned and borrowed capital

OWNED CAPITAL BORROWED CAPITAL

- Owner provides capital - Obtained from financial institutions

- Permanent capital as company is not - Temporary capital as it is to be repaid

under obligation to repay the amount. after a fixed period.

- It is not a liability for a business. - It is a liability for a company.

- Return on capital .is on profits. - Return on capital is paid in the form of

interest.

5 PURCHASING FUNCTION
5.1 Meaning of the purchasing Function
 The purchasing function plays an important role in buying quality raw materials and
services for the business
 It should continuously look for suitable, new and better suppliers
 It should place orders with suppliers and follow up on them to ensure that the ordered
products are delivered on time.
 It ensures that ordered goods are delivered at the agreed price, right quantities and
right quality.

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5.2 Purpose of the purchasing function

 Manage stock to ensure sufficient levels of stock to carry out business operations.
 Continuously looking for the best/reputable suppliers.
 Regular make contact with other business departments to determine their needs.
 Send damaged goods back to the supplier and see to it that it is replaced.
 Receive confirmation that all goods were according to specifications and the price
invoiced as the quoted price.
 Negotiate the best possible term of payment with suppliers.

5.3 Activities of the purchasing function

 Purchasers should have expert knowledge of the product they need to buy and about
the market in which they operate.
 Find out the needs other business department
 Look for suitable, new and better suppliers.
 Ensure that there is enough stock available for continuous production and sales.
 Place orders with suppliers and follow up on them.
 Ensure that ordered products are delivered on time.
 Send damaged products back to the suppliers and see to it that they are replaces.
 Buy the right amount of stock/quantity so that the business does not run out of stock.
 Buy goods from the best supplier, who supply the goods at the right time and place
 Get the best price for the quality that the purchasing function requires
 Keep the correct stock levels of stock on hand
 Record the cost prices and selling prises of stock

5.4 Purchasing procedure

Determine the need for the product/Requisition
 Liase with the financial department to establish the budget for the purchasing of
goods and services.
 Determine the product/material/ resource needs of the businesses.
 Find the right quality/ quantity of goods and services at the right price and at the right
time.
Determine the price of the product
 Find the best price by obtaining quotes/tenders or making enquiries.

Select/Choose a suitable supplier

 The purchasing department should choose reliable suppliers for its raw
materials/products.
 Evaluation criteria based on quality of raw material/prices/delivery time, should be
used to select the best suitable supplier.
 The purchasing department should conduct a thorough investigation about potential
suppliers /their reputation and reliability.
Place an order
 The purchasing function should place an order in writing so that goods delivered can
be compared with the order.
 Confirm the prices of the products on order to avoid unexpected surprises when
payments are made.

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Collect or receive the order

 The purchasing department should ensure that the right orders are received and
recorded.
 The quality and quantity of stock received should be checked against the order.
 The purchasing department should keep a copy of a delivery note for records
keeping purposes.

Pay the supplier

 Purchasing department instructs the financial department to pay the supplier after
delivery of the order.
 The supplier must provide copies of the requisition form to the purchasing
department.
 Purchasing department must provide a delivery note to the financial department.
 The supplier sends the invoice to the financial department for final payment after
satisfactory delivery.

Distribute stock
 The purchasing department should ensure proper distribution of stock/raw materials
to all relevant departments.
 Distribution of stock should be in line with pre-requisite orders from each department
to avoid stock loss.

Complete the order

 Ensure that all the correct documentation is in place and filed for future reference.

5.5 Differences cash and credit purchasing

CASH PAYMENT CREDIT PAYMENT

 Cash payment refers to all  Credit payment refers to all

payments made by cash/ cheque payments made by means of credit
for business purchases cards/on future date for business
purchases.
 Cash payment enable businesses  Credit payment allows businesses to
to budget for stock purchases and buy stock and pay on a future date. .
avoid unnecessary delays
 Cash payers can qualify for cash  The credit payer can pay more for
discounts. goods due to interest added on
credit purchases.

5.6 Advantages of credit purchasing

 There is no discrimination based on age/ race/age/religion on granting credit.
 If interest rates decrease consumers will have more cash to pay off debts.
 Consumers will be having disposable income to purchase products if interest rates
are low.
 Low income consumers can buy products on an affordable re-payment as per credit
agreement.

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 Consumers can access more than one credit from different creditors if the creditor
made a personal assessment and is satisfied with the credit evaluation.
 Credit goods bought by the consumer have extended warrantee per the credit
agreement.
 If any of the goods/products is damaged it can be easily repairable or replaced.

AND/OR
Disadvantages of Credit Purchasing
 There is always the risk of unsettled debts.
 Accounts should be send out to debtors.
 There will be less money to invest for consumers
 The credit provider can refuse credit based on credit risk evaluation.
 A consumers’ income and expenses can be declared reckless and can be
suspended if a credit agreement is not adhered to.
 Consumers will have less money to spend so they would not buy as much
 The consumer pay more than the original price due to high interest rates on credit
purchases.

5.7 Importance of stock

 Enables businesses to determine the amount/value of stock.
 Businesses can check the cost and selling price of products
 Ensure that there is enough stock to meet the normal demand of customers.
 Keep the correct levels of stock on hand.
 Record the cost prices and selling prices of stock.
 Identify theft in the business when physical stock count is compared with the
electronic stock control system.

5.8 National Credit Act/NCA and Consumer Protection Act/CPA

5.8.1 Definition of the NCA
 The NCA was introduced to provide both credit provides and credit applicants with
clear guidelines regarding their rights and responsibilities.
 This Acts applies to all businesses that sell on credit.

5.8.2 Purpose of the NCA

 Promotes the development of a credit market that is accessible to all South Africans
 Encourage responsible buying
 Avoidance of over-indebtedness and fulfilment of credit providers and consumers
 Address and correct imbalances in negotiating power between consumers and credit
providers
 Discourage reckless credit granting by credit providers
 Educate consumers on making the right choice when applying for credit
 It gives guidelines within which the different kinds of credit transactions must take
place in South Africa

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5.8.3 Consumer rights outlined in the NCA

Consumers have a right to…
 apply for credit.
 information in one’s official language.
 be protected unfair discrimination in granting credit.
 be given reasons why an application for credit is refused.
 be informed about the interest rate and any other costs of the proposed credit
transaction.
 receive a copy of a credit contract and a replacement copy when the consumer asks
for one.
 apply for debt counselling if a customer has too much debt.

5.8.4 Responsibilities of credit providers

 Credit providers should conduct a credit assessment on the consumers’ affordability.
 Check the most recent pay slip or bank statement to ensure the consumer has an
income.
 Check the consumer’s monthly debt-repayment obligations in terms of credit
agreements.
 Take into account other expenses of the consumers.
 Consider the consumer’s debt-repayment history

5.8.5 Remedies of the NCA

The Consumer Tribunal
 The Consumer Tribunal is responsible for reviewing decisions made by the National
Credit Regulator (NCR), the National Consumer Commission (NCC).
National Consumer Commission
 The National Consumer Commission is responsible for promoting compliance with
the NCA and CPA through advocacy and enforcement.
 Protects the economic welfare of consumers.

Ombudsman
An ombudsman is an independent person with authority and responsibility to
receive/investigate/formally address complaints from consumers.

5.8.6 The impact of the National Credit Act on businesses

Positives/Advantages
 Lower bad debts resulting in better cash flow.
 Protects business against non-paying consumers.
 Increases cash sales as credit can only be granted to qualifying customers.
 Prevents reckless lending by financial institutions.
 Ensures that businesses settle their debts on time so that they can obtain good credit
scores.
 Ensures that credit process is transparent e.g. both businesses and customers know
their responsibilities.

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AND/OR
Negatives/Disadvantages
 Businesses are forced to budget to keep more cash/have enough cash on hand for
stock purchases.
 Businesses can no longer take the risk of selling poor quality goods at high prices.
 Businesses can no longer carry out credit marketing.
 Leads to loss of sales as many businesses may no longer qualify to buy on credit.
 Businesses can only buy limited stock as credit is not available resulting loss of
customers.
 The Act complicates the purchasing process due to too much administration work in
the credit providing process.
 The purchasing department must know the terms and conditions of credit granting
and the National Credit Act.
 It may take longer to purchase goods and this could influence the overall efficiency of
the business.
 The Act compels businesses to sell quality products or businesses may be forced to
reimburse the consumer.

5.9 The Consumer Protection Act/CPA

5.9.1 Definition
 The consumer Protection Act was introduced to prevent consumers from
exploitation.by businesses.
 This Acts ensures the full participation of previously disadvantaged individuals in the
economy.
 It applies to all businesses which sell goods and services to consumers.

5.9.2 Purpose of the Consumer Protection Act

 Promotes responsible consumer behaviour.
 Strengthens a culture of consumer rights and responsibilities
 Establishes national standards to protect consumers.
 Establishes a National Consumer Commission (NCC).
 Ensures that consumers have access to information they need to make informed
choices.
 Provides guidelines for better consumer information and to prohibit unfair business
practices.
 Empowers consumers to take legal action if their rights are not upheld.
 Promotes consumer safety by protecting them from hazardous products/ services.
 Promotes fair/accessible and sustainable places for people to sell their products.
 Promotes consistent laws relating to consumer transaction and agreement.
 Promotes the rights and full participation of historically disadvantaged individuals as
consumers.
 Protects consumers against contracts that include unfair terms which limit the liability
of suppliers.

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5.9.3 The impact of Consumer Protection Act on businesses

Positives/Advantages
 Businesses may be safeguarded from dishonest competitors.
 Businesses may be protected if they are regarded as consumers.
 Prevents larger businesses from undermining smaller ones.
 May gain consumer loyalty, if they comply with CPA.
 Enables businesses to resolve disputes fairly through the National Consumer
Commission/Consumer Court/Industrial ombudsmen
 Businesses may build a good image if they ensure that they do not violate consumer
rights.
AND/OR

Negatives/Disadvantages
 Confidential business information may become available to competitors.
 Penalties for non-compliance may be very high.
 Businesses may feel unnecessarily burdened by legal processes.
 They have to disclose more information about their products and processes/services
 Staff need to be trained /Legal experts need to be consulted, which can increase
costs

6 PUPLIC RELATIONS
6.1 Meaning of the public relations
 The public relations is responsible for keeping all stakeholders of the business
happy.
 It ensures that there is good communication between the business and all its
stakeholders

6.2 Importance of public relations

 Businesses get publicity for promotional events and information through media.
 News conferences may be called to release information which will ensure the survival
of the business.
 Employees may volunteer to spend time with people in need at
orphanage/hospitals/schools etc.
 Businesses can sponsor community events.
 Produce annual reports that review business activities and achievements.
 Brochures van be used to distribute information.
 Networking a popular form of public relations direct contact with employees or
telephonic communication.
 Attend network events and talk about the business product.
 Use corporate social responsibility as a public relations activity involving communities
to get positive exposure.

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6.3 Differences between external and internal public relations

EXTERNAL PUBLIC RELATIONS EXTERNAL PUBLIC RELATIONS
-Creates a good company image and -Creates a good company image and
awareness to those outside of the awareness to employees in the company.
company.

6.4 Methods of public relations

Media
 Businesses get publicity for promotional events and information through media.
 Includes advertising and the distribution of about the business

Direct contact
 Information about the business is passed on to the members of the public who have
dealt with the business previously.
 Direct contact with employees or telephonic communication is a popular form of
public relations.

Brochures
 Excellent way of distributing information in a cost effective way.

Exhibitions
 The business is introduced to the public and meet existing customers in shopping
centres

Social responsibility
 The business uplifts the community as the community support the business by buying
their product.

Transit advertising
 Advertising on vehicles such as taxis, busses, vans etc.

Use of the telephone

 A potential customer phones the business to enquire about something, the person
answering the phone is perceived as the business.
 If the potential customer is pleased with when information that was required, then that
person can r to be the important customer

7 Production Function.
 Ensures that enough production takes place to meet the demand.
 Produce quality products.
 Buys quality raw materials
 Ensures the safety of all factory workers by adhering to all safety procedures and
regulations.
 Selects a suitable production system for its product
 Performing quality control through regular inspections of products.
 Maintain the equipment to avoid breakages and waste of production time.

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8 Marketing Function
Meaning of the marketing function
 The marketing function is responsible for identifying the customers need.
 Locates the customer and transport the products
 Provides suitable storage for the products
 Ensures that the produced product is sold.

9 Human resource function

Meaning of the human resources function
 The human resources is responsible for finding the correct qualified employees
 Ensures that a fair selection procedure is conducted.
 Ensures are trained and remunerated

10 The relationship between the business functions

 The eight business functions depend on each other and are interrelated.
 These functions work together as a team for the business to be successful
 The general management is directly linked to all seven business functions
 The financial and administration functions are responsible for gathering, storing and
processing information and financial records.
 The purchasing, production and marketing functions are responsible for the delivery
of goods.
 the purchasing function buy raw material for the production function to process raw
material into finished goods. the marketing function sells the product which the
production function has produced
 The marketing function promote the product while public relations function promotes
the business and ensures that there is a good relationship between the business and
the public.
 All the staff with the right skill and qualifications is appointed by the human resources
function.

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