2

1 (a) Identify one technique Anaya used to come up with her business idea.
 Observation
 Consultation
 Creativity

1 mark for correct way

(b) (i) Explain the term market research.

Gathering of information (1) to find out about customer’s needs (1)

Full definition 2 marks

Weak definition 1 mark

(ii) Discuss two benefits to Anaya of using face to face interview to gather
information.

 Anaya has the opportunity to explain any question about her fruit drinks (1) so
potential customers are likely to understand the activities of Anaya Fruit Drinks
Enterprise (1) however Anaya could lead the interviewee into answering in a
certain way, resulting in inaccurate results (1)
 Anaya has the opportunity to make people test her fruit drinks as she will be in
contact with them (1) she can observe the reactions of potential customers
interviewed as a result she will know whether they like her fruit drinks or not (1)
however interviews are time consuming (1)
 Anaya can probe for explanations of responses (1) to get more detailed
information (1) however interview can deliver biased responses (1)
 Body languages and facial expressions (1) to quickly notice the response (1)
however facials explanation can mislead (1)
 Caters for literate and illiterate (1) a well representative sample (1) however too
costly (1)

2 benefits discussed 2x3= 6 marks

2 benefits listed 2x1= 2 marks

(c) Prepare a sample of Anaya’s production plan as one of the contents of

a business plan.

Anaya’s Production plan

Item Description
- production process fruit, oranges, guavas, mangoes
- raw materials
- costs
orchard, wholesalers, ice makers,
- suppliers
10 000 battles of drinks monthly
- production target
[4]
2 items applied 2x2 = 4 marks
2 items listed 2x1= 2 marks
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(d) Explain two possible reasons for the decline in sales in Anaya’s business.

 Poor customer service (1) as a result customers buy fruit drinks from the competitors (1)
 Increasing prices (1) customers no longer buy fruit drinks in large numbers (1)
 Neighbouring countries imposing quotas and customs duties/ trade restrictions (1)as a
result losing some international customers (1)
 Poor advertising strategies (1) as a result Anaya’s fruit drinks do not stay in the mind of her
customers (1)
 Competition from new fruit producers (1) so Anaya being left with few customers (1)
 Few new drinks/flavours introduced (1) so no longer appealing to customers (1)
 Lack of business expertise (1) so Anaya may fail to take quality decisions for her
business (1)

2 reasons applied 2x2=4 marks

2 reasons listed 2x1=2 marks

(e) Explain two reasons for the importance of transport to Anaya in her fruit drink
production business.

 Fruits/ raw materials will be transported from an orchard to the factory (1) so that
production of fruit drinks can take place (1)
 Workers can be transported from their homes (1) in order for production of fruit drinks
to be done on time (1)
 Drinks are carried from the factory (1) to the market place for sale (1)
 Transport enables Anaya to deliver drinks as soon as they are bought (1) to reduce
storage and handling costs (1)
 Anaya may advertise her fruit drinks on the business vehicle in the form of logo or
picture (1) making customers to be aware of her products (1)
 Transport can extend the market locally and internationally (1) increasing the sales of
fruit drinks in Anaya’s business (1).
 Makes exporting the drinks to other countries like South Africa easy (1) gaining foreign
currency (1)
 AORP

2 benefits applied 2x2=4 marks

2 benefits listed 2x1 =2 marks
[Total: 21]
 4
2. (a) (i) State one difference between home trade and foreign trade.

home trade foreign trade

 Buying and selling of goods and
 Buying and selling of goods and
services within one country (1)
services between countries (1)
 Consists of wholesale and retail trade
 Consists of export and import trade (1)
(1)
 There are trade barriers (1)
 No trade barriers
 Difficulties in communication because
 No difficulty in communication as one
of different languages (1)
language is used (1)
 Different currencies used (1)
 Same currency used
 AORP
 AORP

1 difference stated 1x2=2 marks

(ii) Analyse two problems Anaya might face when exporting her fruit drinks.
 Difficulty of obtaining information on foreign fruit drinks markets /import
regulations concerning fruit drinks (1) as a result has to engage foreign based
firms /agents (1) this will be costly to Anaya (1)
 Difficulty in communication (1) due to language differences (1) forcing Anaya to
translate advertising material, invoices into foreign languages which means
additional costs to Anaya (1)
 Additional transport costs (1) due to longer distances (1) increasing Anaya’s
operational costs (1)
 Difficulty of moving fruit drinks across national boundaries (1) because of
increased documentation (1) fruit drinks may not reach the international
customers on time (1)
 Increased insurance costs (1) because of high risks as fruit drinks are sent to
far places (1) this requires special packaging which is costly.
 AORP

2 problems analysed applied and analysed 2x3= 6 marks

2 problems explained applied and analysed 2x2=4 marks
2 problems listed 2x1=2 marks

(iii) Discuss whether or not Anaya should use bills of exchange in her business.

For
 Fixation of terms and conditions (1) Anaya knows the time when she will receive
the money and the importer is fully aware of the date by which he has to pay the
money (1) however there is a risk of non-payment unless the bill is guaranteed
by the bank (1)
 Provides Anaya with assurance of payment (1) by drawing up a bill of exchange
with her bank and submitting it to the importer’s bank, (1) However the bill of
exchange may be dishonoured by the importer (1)
 Convenient means of credit (1) the bill of exchange enables the buyer to buy
the goods on credit and pay after the period of credit / this provide good
customer service hence customer loyalty (1) however if Anaya discounts the bill
of exchange it reduces her profit (1)
 Easily transferable (1) through endorsement (1) however there is a risk of non-
payment by the importer (1)
 Can be discounted at the bank (1) so Anaya will have working capital(1)
however not all bills can be discounted (1) however not all bills can be
discounted (1)
 5
 It is a legal evidence of credit transaction (1) therefore the importer is liable to
pay Anaya (1) however if the bills of exchange are not accepted it is an
additional burden on Anaya (1)
 Can use it for collateral security to obtain a loan from the bank (1) improving
working capital (1) however the bills of exchange are for short term service, this
is not a good option for banking services (1)

Against
 Risk of non-payment unless the bill is guaranteed by the bank (1) leading to
losses (1) however it enables the buyer to buy goods on credit improving
customer service (1)
 If Anaya discounts the bill of exchange she gets less of the value (1) this leads
to reduction in profits (1) however it can easily be transferred to a third party by
endorsing it (1)
 Not all bills can be discounted (1) so Anaya will have a shortage of working
capital (1)however if the importer refuses to pay the amount the law will
interfere and take relevant actions (2)

2 points discussed 2x3= 6 marks

2 points explained 2x2= 4 marks
2 points listed 2x1= 2 marks

(b) Explain two advantages to Anaya of using wholesalers to distribute her fruit
drinks.

 Buy fruit drinks in bulk (1) relieving Anaya of storage costs (1)
 Finance Anaya (1) as they buy fruit juice cash
 Marketing (1) fruit drinks as soon as they are produced and market them on behalf of
Anaya (10)
 Information (1) informs Anaya wherever there is any change in demand of fruit drinks
so as to come up with better quality fruit drinks (1)
 Risk bearing (1) buys fruit drink in bulk and bears the risk of change in demand, avoid
loss to Anaya (1)

2 advantages applied 2x2 = 4 marks

2 advantages listed 2x1 = 2 marks

(c) (i) State two types of insurance cover Anaya is likely to buy.
 Accident insurance
 Property insurance
 Fire insurance
 Employers’ liability
 Fidelity guarantee / bond
 Product liability
 Motor vehicle insurance
 Goods in transit

2 types stated 2x1= 2 marks

(ii) Outline the process Anaya will follow when buying insurance.
 Approach an insurance broker or company directly
 Complete the proposal form with utmost good faith
 The broker will interview her, so that the broker assesses the risk being covered
as well as calculate the premium to be charged.
 6
 Anaya pays her first premium once the proposal form has been approved and
she will be given a cover note.
 She receives an insurance policy within a month
 She renews the insurance contract when it expires

3 steps in logical order 3x1=3 marks

[Total: 23]

3 (a) (i) State three factors that the bank manager will consider before granting
Anaya a loan.

 The ability of Anaya to pay back the loan

 Security against the loan
 Credit worthiness of Anaya
 Amount of finance required
 Purpose of the loan

3 factors stated 3x1= 3 marks

(ii) Evaluate whether or not a bank loan is an appropriate source of finance

for the expansion of the business.

For
 A large amount of capital can be obtained (1) so Anaya can acquire expensive
items (1) however failure to pay the loan instalment may lead to the bank
repossessing Anaya’s property (1)
 Long repayment period (1) Anaya may save the money for other business
activities (1) however banks charge high interest (1)
 May negotiate for a repayment holiday (1) allowing Anaya to have sufficient
working capital (1) however this increases the repayment period (1)
 Interest may be fixed for the term (1) Anaya knows the level of repayment
throughout the life of the loan (1) however banks may require collateral
security (1)

Against

 Banks charge high interests (1) which makes the loan expensive (1) however a
large amount of capital may be obtained (1)
 Failure to pay the loan instalment may lead to the bank repossessing Anaya’s
business and even personal assets (1) production may stop (1) however Anaya
pays the loan over a long period of time (1)
 Some banks needs collateral security (1) so Anaya may not qualify for a loan if
the value of her assets are lower than the amount required (1) however Anaya
may negotiate for a repayment holiday (1)
 Too many formalities / paperwork (1) which is time consuming (1) / costly (1)
however a large amount can be obtained (1)

2 points discussed 2x3=6 marks

2 points explained 2x2=4 marks
2 points listed 2x1=2 marks
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(b) Use Fig. 1 to calculate the;

(i) Net profit 80 000 – P40 000 = P40 000

(ii) Mark-up 80 000/120 000 x 100 (1) = 66.6 % =1: 1.5 (1)

(c) Discuss whether or not introducing a new type of flavoured drink would improve
revenue in Anaya’s business.
For
 Better quality fruit drinks (1) through better ingredients / flavours so attracting
customers (1) however a lot of resources are needed to carry out market research (1)
 Provides a variety of choice (1) satisfying the needs of customers (1) customer loyalty
(1) however customers may be reluctant to try a new fruit drink so having few
customers (1)
 Unique fruit drinks can be developed (1) making it attractive to customers (1)
customer satisfaction (1) however Anaya may need to borrow money to buy
machinery like blending machine, equipment , new premises (1)
 Consumers may be anxious to test the new fruit drink (1) increasing sales (1)
however most customers remain loyal to well known brands of fruit drinks in the
market (1)
 Target new markets (1) increasing market share (1) however if Anaya increase the
output of fruit drinks it may lead to decline in quality leading to loss of customers (1)
 AORP

Against
 Lot of resources needed to carry out market research to know the needs of customers
(1) this may cause the business to charge high prices for the fruit drink chasing
customers away (1) however it increases market share (1)
 Most customers remain loyal to the well known brands (1) so Anaya may not gain
new customers or existing ones may not buy the new fruit drink (1) however unique
fruit drinks may be developed (1)
 Anaya may compromise quality by increasing the output of fruit drinks (1) which can
lead to loss of customers or sales (1) however Anaya can get more sales through
wider distribution (1)
 The new product may not perform as expected (1) therefore sales not improving (1)
however Anaya will provide variety of fruit drinks which leads to customer
satisfaction (1)

3 points discussed and applied 3x3= 9 marks

3 points explained and applied 3x2= 6 marks
3 points listed 3x1=3 marks
[Total: 22]
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4 (a) (i) Explain two ways in which Anaya Fruit Enterprise might exploit consumers.

 Overcharging (1) Anaya Fruit Enterprises may charge high prices for the fruit
drinks in order to maximise her profits (1)
 Misleading price reductions (1) tempting consumers to buy the fruit drinks on
impulse believing they got a bargain (1)
 Underweight goods (1) consumers might not receive the correct weight of fruit
drinks (1)
 False advertisement (1) Anaya Fruit Drinks Enterprise’s advertisements might
make false and misleading claims about the fruit drinks e.g. describing the drinks
incorrectly on packaging (1)
 Poor quality raw materials (1)Anaya might try to cut down production costs by
using dangerous ingredients in the fruit drinks (1)

2 ways applied 2x2 = 4 marks

2 ways listed 2x1 = 2 marks

(ii) Explain two rights Anaya’s customers have.

 The right to be informed (1) to be given information on drinks available and their
prices when buying (1)
 The right to choose (1) to have access to a variety of drinks at competitive prices
(1)
 The right to redress (1) to return the drinks if not satisfied / be compensated for
mispresentation.
 The right to be heard (1) when expressing their views or dissatisfaction (1)
 The right to safety (1) to be protected against product / production processes
which are hazardous to life (1)
 The right to consumer education (1) to acquire knowledge and skills to be an
informed consumer throughout life (1)

2 points described 2x2 = 4 marks

2 points listed 2x1 = 2 marks

(b) Analyse two ways by which Anaya Fruit Enterprise may damage the environment.

 Land pollution/ Littering (1) the packages of fruit drinks may be thrown everywhere
(1) making the environment dirty (1)
 Soil erosion (1) caused by delivery trucks (1) leaving the soil bare and the soil losing
nutrients (1)
 Air pollution (1) machines used in the processing of fruit drinks might emit some
gases (1) destroying the ozone layer/leading to global warming (1)
 Noise pollution (1) caused by machines used in the processing of fruit drinks (1) this
can lead to disturbance of peace in the community (1)
 Deforestation (1) as Anaya cut down trees to pave way for the factory (1) the
environment lose its beauty (1)
 Carbon emissions (1) from delivery trucks (1)
 AORP

2 ways analysed and applied 2x3 = 6 marks

2 ways explained and applied 2x2 = 4 marks
2 ways listed 2x1 = 2 marks [Total: 14]