Business Ventures

BUSINESS STUDIES

GRADE 10

PAPER 2

TERM 2

CHAPTER 10 (PART 1)

WEEK 6

FORMS OF OWNERSHIP

REVISED NOTES
2024
TABLE OF CONTENTS

TOPICS PAGES
Exam guidelines for forms of ownership 3
Terms and definitions 4
Factors that need to be considered when 5
choosing a form of ownership
List of forms of ownership 5
Definition/Characteristics/Advantages & 6
Disadvantages of a sole trader/proprietor
Definition/Characteristics/Advantages & 6-7
Disadvantages of a partnership
Differences between a sole trade & 8-9
partnership

This chapter consists of 9 pages

CONTENT DETAILS FOR TEACHING, LEARNING AND
ASSESSMENT PURPOSES

Learners must be able to:

 Define the meaning of different forms of ownership.
 Explain/Discuss/Describe the characteristics/ advantages/disadvantages of each form
of ownership.
 Distinguish/Differentiate/ between different forms of ownership.
 Identify forms of ownership from given case studies/scenarios/cartoons/pictures
 Select a best form of ownership and justify the reasons for selection.

TERMS AND DEFINITIONS

TERM DEFINITION
Form of ownership the legal position of the business and the way it is owned.
Continuity continue to exist even if a change of ownership takes place, e.g. a
member or shareholder dies or retires.
Surety if a person or business accepts liability for the debt of another
person or business.
Securities shares and bonds issued by a company.
Limited liability loses are limited to the amount that the owner invested in the business.

Unlimited liability the owner’s personal assets may be seized to pay for the debts of the
.business.
Memorandum of a document that sets out the rights, duties and responsibilities of
Incorporation shareholders, directors and other stakeholders within the business.
Sole Trader /Sole .a business is owned and controlled by one person who takes all the
proprietor decisions, responsibility, and profits from the business they run.
Partnership an agreement between two or more parties that have agreed to finance
and work together in the pursuit of common business goals.
Company a type of business structure that has a separate legal entity from
its owners.
Profit company a business entity whose aim is to generate profit from
the regular operations
Non – profit company a company incorporated for public benefit.
Private company a company whose shares may not be offered to the
public for sale.
State owned company a legal entity that is created by the government
to participate in commercial activities on its behalf.
Prospectus a document inviting the public to buy securities/shares.
Directors people elected to the board of a company by the shareholders
to represent the shareholders’ interests.
.a personal liability company is a voluntary association of 1 or more
Personal liability person.
company
Partnership .a document that contains exhaustive provisions with regards to
Article the matters concerning the business and the partners.
Proprietor the owner of a business.
Annual General a meeting held once a year where the shareholders receive a
Meeting (AGM) report stating how well the company has done.
Audit process where an organization’s accounts are checked to make
sure, its financial operations are honest
 1. INTRODCTION

 Forms of ownership refers to the legal position of the business and the way it is
owned.
 An entrepreneur may decide which of the forms of ownership will best suit their type
of business.

Factors that need to be considered when

choosing a form of ownership
 New business owners need to consider the following factors when they choose
 the form of ownership their business will take:
 the start-up cost and the future capital
 the size and nature of the business
 tax implications
 how the business will be controlled and managed/management structure
 the risk involved
 how capital will be contributed
 how profits and losses will be shared
 who is responsible for any debts made by the business/liability
 the life span of the business/continuity
 the vulnerability of the business in terms of lawsuits/legal persons.
1.1 Forms of ownership
 Sole trader
 Partnership
 Personal liability Company (PLC)
 Private company (Pty Ltd)
 Public company (Ltd)
 State Owned Company (SOC)
 Non- Profit Company (NPO)
 Co-operative

1.2 Characteristics/Advantages and Disadvantages of different forms of ownership

1.2.1 Sole trader/Proprietor

Definition
 A sole trader is a business that is owned and managed by one person.
 The business owner handles everything including the activities of the business, its
processes and decisions.
  It is most suitable for service businesses such as a doctor/hairdresser/electrician etc.

Characteristics of a sole proprietor

 Owner can sell the business to anyone at any time.
 There are no legal requirements regarding the name of the business
 It is easy to establish as there are no legal formalities in forming the business.
 Sole traders are not compelled by law to audit financial statements
 The owner has a personal interest in the management and the services that is
rendered.
 The owner has unlimited liability/The owner is personally liable for the debt of the
business.
 A sole trader has limited company for expansion and lacks continuity of existence.
 The business has no legal personality and therefore has no continuity/Continuity
depends on the life and health of the owner.
 The business dissolve when the owner dies.
 The owner provides capital from his/her saving/borrow money from the bank.
 The owner has a personal interest in the management and the services that is
delivered.
 Profit is added to the rest of the owner’s taxable income.
 There are no special requirements when the owners want to close the business.
Advantages of a Sole trader/proprietorship
 It is easy and quick to form a sole trade as there is less capital needed.
 The owner can take quick decisions as and when required and has full control.
 The owner can take steps to eliminate wastages of any kind.
 No legal process and requirements
 Can easily adapt to the needs of the client/customer
 The assets of the business belong to the owner personally
 A sole trader can close contracts and trade in his own name
 The owner takes all of the profits made by the business and are entitled the
ownership of assets.
 There is personal encouragement and personal contact between the owner and
customers.
 Sole traders are generally closer to their customers and offer a more personalised
approach and improved customer service.

Disadvantages of a Sole trader/proprietorship

 Since all decisions are taken by the owner, the area of the business will be limited to
the management abilities of the owner.
 It is not always possible to pay high salaries
 Unlimited liability which means that the owner is personally liable for all the debts and
losses suffered by the business.
 Growth of business can be restricted due to lack of capital.
 The owner is responsible for providing all the capital needed which may be difficult to
raise a big amount.
 If the owner does not have enough knowledge/experience the business may fail.
 A sole trader lacks continuity especially in the event of death or illness.
 It is not always possible to attract highly skilled workers because the capital is limited
to one person.
 The risk of unlimited liability forces many sole traders not to expand operations
beyond a certain point.
 Tax is calculated according to a progressive income system, which can be up to a
maximum of 40%.
1.2.2 Partnership
Definition
 An agreement between two or more people who combine labour, capital and
resources towards a common goal.
 Partners share the responsibility of the business and they share the financial and
management decision of the business.
 The partners may be individuals, businesses, or combinations.
  Partners share the responsibility of the business and they share the financial and
management decision of the business.

Characteristics of a partnership
 There should be at least a minimum of two people in a partnership.
 There are no legal requirements in starting a partnership except the drawing up of a
partnership agreement.
 The partnership agreement becomes the basis of the association between the
partners.
 Partners combine capital and may also borrow capital from financial institutions.
 Profit is shared according to the partnership agreement.
 Partners share responsibilities and they are all involved in decision making
 Partners have unlimited liability and are jointly and severally liable for the debts of the
business
 No legal requirements regarding the name of the business.
 No legal formalities to start, only a written partnership agreement is required.
 Partnership has no legal personality and therefore has no continuity.
 Partners share profits made and they are therefore motivated to work harder.
 The partnership does not pay income tax, only the partners in their personal capacities.
 Auditing of financial statements is optional.
 Partners share responsibilities and they are all involved in decision making.
 Diversity/Specialisation/Different skills of the partners can be used.
 There is no specific suffix to be reflected in the name of the partnership.
Advantages of a partnership
 Can bring in extra partners at any time.
 Each partner will bring their knowledge, skills, experience, and contacts to the
business thus giving the business a better chance to succeed.
 All partners have a personal interest in the business.
 The workload and responsibility are shared between partners and each partner can
focus on their strengths.
 Partners invest new capital into the business to finance expansion
 It is easy and inexpensive to establish even with a written agreement.
 Partners share any profits and are therefore motivated to work hard.
 Partners share responsibilities for decision making and managing the business.
 Attract prospective employees with the option or incentives of becoming a partner.
 Partnerships are not compelled by law to prepare audited financial statements.
 Each partner can focus on their own individual strengths when sharing the workload.
 Partners are taxed in their own capacities, which could lead to lower taxation,
depending on the level of income of the individual.
 Raising additional capital to finance further business expansion is easy, because there
is no limit on the number of partners allowed in each partnership.
 The partners able to put their knowledge and skills together to collectively make the
best decisions.
 Partnerships are relatively easy to establish. There are no formal requirements for the
creation and running of a partnership.

Disadvantages of a partnership
 Partners might not all contribute equally.
 There can be lack of capital and cash flow.
 Partners might still find it difficult to raise capital as not all partners contribute cash.
 Partners are jointly and severally liable for the actions of the other partners.
 Partnership lacks continuity, if one partner dies/retires, the remaining partners need to
draw up a new agreement.
  Partnership is not a separate legal entity and therefore partners are liable for the debts
in their own capacity.
 Different personalities and options of partners can lead to conflict it disagreements.
 Each business partner is legally responsible for the joint liability of the partnership.
 A partnership has unlimited liability which means that partners risk losing their
personal possessions.
 Discussion between partners can slow down decision making, and they may disagree
on important business decisions.
 In large partnership, the partners may struggle to agree on business issues.
 Changes or transfer of ownership can be difficult and generally require a new
partnership to be established.
 Loss in profits and stability of the business can occur if a partner resigns/dies/loses
interest in the business or is declared bankrupt.
 Profits are divided between partners according to the partnership agreement and not
according to the income distributed.

1.2.3 Differences between a sole trade and a partnership

Sole trader Partnership
- A sole trader is a business that is - An agreement between two or more people
owned and managed by one who combine labour, capital, and resources
person towards a common goal.
- Quick and easy decisions can be - Discussion between partners can slow down
made since it is being taken by decision making, and they may disagree on
one person important business decisions
- The profit goes to the owner. - Profit is shared amongst the partners
according to the partnership agreement.

BUSINESS STUDIES
GRADE 10
PAPER 2
TERM 2
CHAPTER 10 (PART 2)
FORMS OF OWNERSHIP
REVISED NOTES

2024
TABLE OF CONTENTS

TOPICS PAGES
Exam guidelines for forms of ownership 2
Terms and definitions 3
Differences between profit and non-profit 3
organisations/companies.
Classification of forms of ownership 4
according to profit & non-profit company
Definition/Characteristics/Advantages & 4-10
Disadvantages of a non-profit company
Definition and types of co-operatives 10-11
Characteristics/Advantages & 12-13
Disadvantages co-operatives
This chapter consists of 11 pages
CONTENT DETAILS FOR TEACHING, LEARNING AND ASSESSMENT
PURPOSES

Learners must be able to:

 Outline/Explain the differences between profit and non-profit organisations/companies.
 Outline the forms of ownership and classify them into profit and non-profit organisation.
 Define the meaning of different forms of ownership.
 Outline/Explain/Describe/Discuss the characteristics/ advantages/disadvantages of
each form of ownership.
 Distinguish/Differentiate between different forms of ownership.
 Identify forms of ownership from given case studies/scenarios/cartoons/pictures
 Name the different types of co-operatives
 Outline/Explain/Describe/ Discuss the advantages and disadvantages of co-operatives
 Select a best form of ownership and justify the reasons for selection.

TERMS AND DEFINITIONS

TERM DEFINITION
Form of ownership the legal position of the business and the way it is owned.
Continuity continue to exist even if a change of ownership takes place, e.g. a
member or shareholder dies or retires.
Surety if a person or business accepts liability for the debt of another
person or business.
Securities shares and bonds issued by a company.
Limited liability loses are limited to the amount that the owner invested in the business.

Unlimited liability the owner’s personal assets may be seized to pay for the debts of the
.business.
Memorandum of a document that sets out the rights, duties and responsibilities of
Incorporation shareholders, directors and other stakeholders within the business.
Sole Trader /Sole .a business is owned and controlled by one person who takes all the
proprietor decisions, responsibility, and profits from the business they run.
Partnership an agreement between two or more parties that have agreed to finance
and work together in the pursuit of common business goals.
Company a type of business structure that has a separate legal entity from
its owners.
Profit company a business entity whose aim is to generate profit from
the regular operations
Non – profit company a company incorporated for public benefit.
Private company a company whose shares may not be offered to the
public for sale.
State owned company a legal entity that is created by the government
to participate in commercial activities on its behalf.
Prospectus a document inviting the public to buy securities/shares.
Directors people elected to the board of a company by the shareholders
to represent the shareholders’ interests.
.a personal liability company is a voluntary association of 1 or more
Personal liability person.
company
Partnership .a document that contains exhaustive provisions with regards to
Article the matters concerning the business and the partners.
Proprietor the owner of a business.
Annual General a meeting held once a year where the shareholders receive a
Meeting (AGM) report stating how well the company has done.
Audit process where an organization’s accounts are checked to make
sure, its financial operations are honest

1.3 Differences between profit and non-profit companies

Profit making Companies Non-Profit-making Companies
 The company is established for only  The company is established for charity
one aim and that is to make profit. purposes or to promote social and cultural
 A company incorporated for financial activities
gain for its shareholders.  A non-profit company is an association
 The Memorandum of Incorporation incorporated not for gain.
sets out who the directors and  The Memorandum of Incorporation
shareholders are as well as their defines the purpose and its operations
rights, duties responsibilities.  The company have an independent legal
 It also sets out the number of shares entity, but the board of trustee is
that the company is authorised to protected unless found negligent or
issue. fraudulent.
 Profit organisations are responsible  Non-profit organisations are not required
for paying taxes based on their profit. to pay taxes on net income.

1.4
Classification of forms of ownership according to profit and non-
profit companies
Forms of ownership: Companies Classification according to non &
non-profit companies
 Private Companies: to be reflected as
Proprietary Limited or (Pty) Ltd Non-profit companies : are reflected as
 Personal Liability Companies: to be NPC
reflected as Incorporated or Inc
 Public Companies: to be reflected as
Limited or Ltd
 State-owned Companies: to be
reflected as SOC Ltd
 1.3 Non-profit Company
1.3.1 Definition
 A non-profit company is a legal entity organised and operated for a collective, public
or social benefit.
 They include churches, charity organisations, and cultural organisations.
 The primary objective of an NPC is to benefit the public, not to make a profit.

1.3.2 Characteristics of non-profit companies

 The main aim is to provide service and not to make a profit.
 They are funded by donations and foreign funding.
 The name of the company must end in NPC.
 All profits must be used for the primary objective of the non-profit company.
 It must prepare the Memorandum of Incorporation.
 Qualifying NPCs are granted tax-exempt status.
 The board of a non-profit company must comprise at least three directors (3 or more
directors).
 Non-profit companies do not have a share capital and cannot distribute shares or pay
dividend to their members.

1.3.3 Advantages of a non-profit company

 Profits are used solely for the primary objective of the organisation.
 They provide social services to various communities.
 The company does not pay tax, so all earnings can be cycled back into the
organisation to improve it.
 Donations made by donors are tax-deductible, therefore it motivates people to donate
to the organisation.
 The liability of the members is limited
 An NPCs existence can last long after the founders leave the business.
 Can receive grants grants/aid from the government.
 Surplus of income is retained to further the goals of the business
 Must prepare the financial statements at the end of the year and is not compelled to
audit the financial statements.
 Non-profit companies are not compelled to attend the general annual meeting (AGM).

1.3.4 Disadvantages of a non-profit company

 Need professional assistance to set up this organisation
 Does not generate enough capital to cover their expenses.
 Donations may not always be enough to finance the company’s expenses.
 Assets are not distributed to the members upon closing down.
 Creating a non-profit company takes time/effort/money.
 Obtaining grants can be a slow and tiring process.
 Incorporators cannot take along the assets accumulated by the NPC if they decide to
leave.
 They are not allowed to pay bonuses to members.
 They are compelled to prepare annual financial statements.
 1.4 Profit companies
 Profit Company is established with a primary aim of making a profit for its owners or
shareholders.

1.4.1 Private company

Definition
 A private company is a company whose shares may not be offered to the public for
sale.
 A private company has between one or more shareholders
 It can be a small or large company and has one or more directors.
Characteristics of a private company
 A private company can have an unlimited number of shareholders, however, a
minimum of one director and one shareholder is required.
 Raises capital by issuing shares to its shareholders.
 The name of a private company must end with the words ‘(Proprietary) Limited’ or
‘(Pty) Ltd’.
 Investors put capital in to earn profit from shares.
 The company has a legal personality as well as unlimited continuity
 A private company is not allowed to sell shares to the public.
 Shareholders have limited liability and a separate legal entity.
 Profits are shared in the form of dividends in proportion to the number of shares held.
 Register with the registrar of companies by drawing up Memorandum of Incorporation.
 Shareholders have a limited liability and will not lose their initial capital invested if the
business goes bankrupt.
 The Act imposes personal liability on directors who are knowingly part of the carrying
on of the business in a reckless or fraudulent manner.
 Private company must prepare annual financial statements..
 Annual financial statements need not be either audited or independently reviewed.

Advantages of a private company

 A company can continue to trade even if one shareholder dies/resigns.
 Managed at least by one competent highly skilled director.
 Information in a private company is only available to shareholders.
 Not required to file annual financial statements with the commission.
 The company has unlimited number of shareholders and its life span is perpetual.
 Shareholders can vote for/ appoint the most capable directors to manage their
company.
 Own legal identity and shareholders have no direct legal implications/ limited liability
 Large amount of capital can be raised since there is no limit on the number of
shareholders.
 Even though shares are not freely transferable, large private companies can raise
considerable amount of capital
 It is possible to sell a private company as it is a legal entity in its own right.
 The management of the company can improve since directors are accountable to
shareholders.
 The company can access long term capital and therefore has good long term growth
opportunities.
 The company is a separate legal person it can buy property in its own name.
Liabilities of the shareholders are limited.

Disadvantages of a private company

 Difficult and expensive to establish a private company compared to Close
Corporations and Sole Proprietorship
 Private companies are subject to many legal requirements and regulations which can
be onerous.
 Large management structures can result in decision-making taking time.
 The private company cannot be listed on the stock exchange, therefore, it cannot sell
shares to the public.
 Directors may sometimes act in their own interest, not in the company's best interest.
 Annual financial statements must be reviewed by a qualified person, which is an extra
expense to the company.
 Difficult and expensive to establish as the company is subjected to many legal
requirements.
 Pays tax on the profits of the business and on declared dividends/Subject to double
taxation.
 Financial statements must be reviewed by a qualified person, which is an extra
expense to the company.
 Directors will be held personally responsible for debts if it can be proven that that they
committed fraud.
 Some shareholders may not exercise their voting rights resulting in choosing the
wrong person as a director.
 A meeting may not begin, or a matter may not be debated unless at least three
shareholders are present.

1.4.2 Personal liability Company

Definition
 A personal liability company is very similar to a private company except that the
present and past directors are personally responsible for any debts of the business.
 The name of the personal liability company ends in INC and the name of the private
company ends in (PTY) Ltd.

Characteristics of a personal liability company

• They must at least have one director on their board of directors.
 The company name must end with letters INC
 Directors have unlimited liability and they are jointly liable for the debts of the
business even if they are long out of office.
 The memorandum of Incorporation should state that it is a personal liability company.
NOTE: Other characteristics of a personal liability company are the same as
the private company except the above mentioned two characteristics.
Advantages and disadvantages
 NOTE: The advantages of a personal liability company are the same as the private
company.
 The disadvantages are also the same as the private company except that the
directors of the personal liability company have unlimited liability.
 1.4.3 Public company
Definition
 A public company is a company that is registered to offer its stock/shares to the
general public. This is mostly done through the Johannesburg Securities/Stock
Exchange (JSE).
 The public company is designed for a large scale operation that require large capital
investments.
Characteristics on a public company
 A minimum of one person is required to start a public company.
 The company name ends with letters Ltd
 Shareholders have a limited liability and are not personally liable for the debts of the
business.
 A prospectus is issued to the public to raise capital.
 Has legal personality and therefore has unlimited continuity
 A public company has a separate legal personality.
 Requires three or more directors and three or more shareholders.
 Profits are shared in the form of dividends in proportion to the share held
 A public company is required to hold an AGM (Annual General Meeting).
 Register with the Registrar of Companies by drawing up Memorandum of
Incorporation.
 Raises capital by issuing shares to the public and borrowing capital by issuing a
debenture.
 Auditing of financial statements us compulsory and audited statements are available
to shareholders and the public
 The new Act forces personal liability on directors who knowingly participated in
carrying out business in a reckless/fraudulent manner.

Advantages of a public company

 The business has its own legal identity and can own assets/property.
 Public companies enjoy the ability to raise funds through the sale of the company’s
stock to the public.
 Managed by at least three competent highly skilled director.
 Directors bring creative ideas which encourage innovation/high productivity
 Shareholders can sell/transfer their shares freely.
 Attracts small investors as shares can be transferred freely/ easily
 Strict regulatory requirements protect shareholders.
 Easy to raise funds for growth through the sale of shares.
 Additional shares can be raised by issuing more shares or debentures.
 No limitation on the number of shareholders, so growth/ expansion is not limited
 Shareholders have a limited liability for the debt of the company/Shareholders may
only loose the amount which they invested.
 The management of the company can improve since directors are accountable to
shareholders.
 The public has access to the information, and this could motivate them to buy shares
from a company
 Disadvantages of a public company
 Difficult and expensive to establish as the company is subjected to many legal
requirements
 Public companies are vulnerable to increased scrutiny from the government and the
public.
 Must disclose all financial information which can be used by its competitors
 Directors may not be motivated to work very hard because shareholders decide on
the directors' remuneration.
 Directors may not have a direct interest in the company, which can hamper growth
and profit maximisation
 Directors' fees increase the company's expenses which reduces net profit.
 Some shareholders may not exercise their voting rights resulting in choosing the
wrong person as a director
 A full report must be submitted to the major shareholders each year
 Large management structure can result in decision making taking time
 Large amount of funds are spent on financial audits.
 Auditing of financial statements are compulsory.
 They must prepare their financial reports in accordance with the Generally Accepted
Accounting Principles (GAAP).
 Management may be open to legal challenges if their reports do not comply with King
Code III.
 Public companies are subject to more disclosure and transparency requirements.

Differences between the private company and public company

PRIVATE COMPANY PUBLIC COMPANY
- May no offer shares to the - Trades its shares publicly on the
general public. Johannesburg Securities Exchange.
- Shares are not freely transferable - Shares are freely transferable.
- Minimum of one director. - Minimum of three directors.
- Name must end with Proprietary - Name must end with Limited/Ltd.
Limited/(Pty) Ltd.
- Annual financial statements need - Annual financial statements need to be audited
not be audited and published. and published.
- Does not need to publish a - Have to register and publish a prospectus with
prospectus as it cannot trade its the Companies and Intellectual Property
shares publicly. Commission/CIPC.
- The company is not required to - Must raise a minimum subscription prior to
raise the minimum subscription/ commencement of the company.
issue minimum shares.

Differences between the private and a personal liability company

PRIVATE COMPANY PERSONAL LIABILITY COMPANY
The name ends with (PTY) Ltd The name ends with INC
The directors are not personally liable The directors are personally liable for the
for the debts of the business. debts of the business.
 1.4.4 State owned company
Definition
 A state-owned company has the government as its major shareholder and falls under
the department of Public Enterprise.
 These companies take on the role of commercial enterprise on behalf of the
government.
 Examples of state-owned companies in South Africa include Armscor, Alexkor, SAA,
Eskom, Transnet.
Characteristics of a state-owned company
 The name ends with letters SOC.
 The state-owned company is financed by the government.
 SOC is listed as a public company.
 It is owned by the government and operated for profit.
 One or more persons may incorporate and there is no limit on number of
shareholders.
 Requires three or more directors and one or more shareholders.
 Register with the Registrar of Companies by drawing up Memorandum of
Incorporation.
 State-owned companies support private businesses by providing infrastructure such
as communication service /Post office and supply of electricity/Eskom.
 A state-owned company enjoys financial autonomy because they are to depend on
the government for initial investment.
 The Act imposes personal liability on directors who are knowingly part of the carrying
on of the business in a reckless or fraudulent manner.
 State-owned company is compelled to have its financial statement audited.
 A state-owned company is compelled to attend an annual general meeting (AGM).
 A state-owned company has a separate legal personality and have limited liability.
Shareholders have limited liability

Advantages of a state-owned company

 Shareholders have limited liability.
 SOCs help eliminate economic exploitation and oppression.
 Profits may be used to finance other state departments.
 Offer essential services which may not be offered by the private sector
 Wasteful duplication of services is eliminated.
 Jobs are created for all skills levels.
 Generates income to finance social programmes.
 Prices are kept reasonable/Create sound competition with the private sector to make
services affordable to more citizens.
 Planning can be coordinated through central control
 Provides a healthy competition to private sectors because of government
contributions.
 Most of the government companies run on sound business lines as they have their
surpluses to run their projects.
 State-owned company can be expanded by means of selling its shares to the public.
 A state-owned company has a separate legal personality.
 Disadvantages of a state-owned company
 Inefficiency due to the size of the business.
 Financial statements must be audited.
 Losses must be met by the taxpayer.
 Government can lose money through the business.
 Shares are not freely tradable making it difficult to raise capital.
 A lack of incentive for employees to perform if there is no absence of other motivator
such as productivity bonuses.
 A lack of incentive for employees to perform if there is no share in the profit.
 May result to poor management as government is not always as efficient as the
private sector.
 Often rely on government subsidies which may not cover all the company’s
expenses.
 SOC must follow strict regulations for operations to raise capital.
 The management of the SOCs must attend an AGM.
 State-owned company is compelled to have its Financial statement audited

1.5 Co-operatives
 A cooperative is a traditional way of a group of interested parties getting together and
sharing resources/infrastructures and costs to achieve a better outcome.
 A co-operative society is a voluntary association that is established with the
aim of service to its members.

Types of Co-operatives
 Housing co-operative.
 Worker co-operative.
 Social co-operative.
 Agricultural co-operative.
 Co-operative burial society.
 Financial services co-operative.
 Consumer co-operative.
 Transport co-operative

Characteristics of Co-operatives
 Minimum of five members is required to start a cooperative.
 The word ‘Cooperative Limited’ must appear at the end of its name.
 They are motivated by service rather than profit.
 They are managed by a minimum of three directors.
 They have a democratic structure, with each member having one vote.
 Members own and run the business together and share equally in its profits
 Legal entity and can own land and open bank accounts.
 Must register with the Registrar of Cooperatives Societies.
 The objective of a co-operative is to create mutual benefit for the members.

Advantages of Co-operatives
 Access to resources and funding.
 Decision making is by a group
 Members have limited liability
 The decisions are democratic and fair
 Co-operatives have continuity of existence
 Profits are shared equally amongst members
 Each member has an equal share in the business.
 A co-operative can appoint its own management
 Members are motivated because they are working for themselves
 Can gain extra capital by asking its members to buy shares.
 Resources of many people are pooled together to achieve common objectives.
 Disadvantages of Co-operatives
 Difficult to grow a co-operative.
 Shares are not freely transferable
 Very few promotion positions for staff.
 Decisions are often difficult to reach and time consuming.
 It can be difficult to get a loan because their main objective is not always to make a
profit.
 The success of cooperatives depends on the support of the members.\
 All members have one vote regardless of the number of shares.

BUSINESS STUDIES NOTESChapter 11

BUSINESS STUDIES
GRADE 10
TERM 3
CHAPTER 12
NOTES ON BUSINESS OPPORTUNITY
AND RELATED FACTORS
REVISED NOTED
2024
TABLE OF CONTENTS

TOPICS PAGES
Exam guidelines for business opportunities 3
Terms and definitions 3
The meaning of a business opportunity 4
The importance of assessing needs and desires in identifying a 4
business opportunity
Design a research instrument to assess needs & desires 4-5
Protocol for conducting research. 5-6
Conduct market research and identify a business opportunity. 6
Difference between internal & external market research. 7
Using a SWOT analysis to to determine a viable business 7
venture
Meaning of a SWOT analysis 7-8
Benefits of a SWOT analysis 8
The importance of conducting a SWOT analysis 8
Limitations of a SWOT analysis 9
This chapter consists of 9 pages.

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BUSINESS STUDIES NOTES Chapter 11

CONTENT DETAILS FOR TEACHING, LEARNING AND

ASSESSMENT PURPOSES
Learners must be able to:
● Elaborate the meaning of a business opportunity and give practical examples.
● Explain the importance of assessing needs and desires in identifying a business
opportunity.
● Design a research instrument to assess needs & desires e.g. questionnaires, interview
structure/schedule.
● Outline/Explain/Describe protocol for conducting research.
● Conduct market research and identify a business opportunity.
● Outline/Explain the difference between internal & external market research.
● Compile a SWOT analysis to determine a viable business venture.
● Identify a business opportunity based on the findings from compiling a SWOT analysis.
● Apply a SWOT analysis from given scenarios/case studies.

TERMS AND DEFINITIONS

TERMS DEFINITIONS

Business opportunity The potential of a business idea to succeed based on the researched
needs and desires of the potential market

Research A systematic investigation to find facts or to collect information.

Potential market Customers who will want to buy a product/service and who have the
cash or credit facilities to do so

Risks Possibilities of loss or damage

Research instrument A device/tool that can be used to gather information or to form a set of
guidelines for observation
Respondents People to whom the investigation is carried out/person who completes a
questionnaire
Feasible Being possible and practical to achieve something easily/conveniently

Viable Capable of working successfully

Strengths Particular skills and circumstances that exist in the business and its staff
that contribute to its success.

Weaknesses Circumstances that work against the business and its success

Opportunities Circumstances that make something possible to the advantage of the

business
Threats Things that can cause the business to fail

Target market A specific group of customers at which a company aims its products and
services.
SWOT analysis A technique/tool that is used to evaluate a situation from different angles
in order to make strategic decisions.

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BUSINESS STUDIES NOTES Chapter 11

1 The meaning of a business opportunity

● A business opportunity is an idea for a person to start a business so that
they can generate an income.
● It is a chance of improving the current operations of a business which can
contribute to greater profitability.
● A business opportunity is an idea for a product /service that will meet
needs/desires, and that can be sold or leased to earn an income.
● Entrepreneurs should be constantly on the lookout for new business
opportunities to be competitive.
● It is an idea that can be converted into viable, income-producing business.
● Each need and desire are a possible business opportunity.
● It is a gap in the market when peoples’ needs and desires are unfulfilled.

Examples of business opportunities:

o Home care services for senior citizens online education programmes catering
and ready-made meals.

2 The importance of assessing needs and desires in

identifying a business opportunity
● Needs and desires are keys to successful business opportunities.
● The success of a business opportunity depends on the awareness and
fulfilment of target market.
● Every need and every desire are a possible business opportunity.
● Business should create a desire for the product through a well- designed
advertising and marketing campaign.
● Needs and desires form guarantee a possible market.
● When people have needs or desires that are not fulfilled, then a business
opportunity is presented to fulfill those needs and desires.
● It is easier to find something that people want and to create a business
around that since desires are unlimited.
● Sometimes an entrepreneur will invent a new product for which there is no
existing desire or market.
● In such a case the entrepreneur would have to create a desire for the
product through clever advertising and a good marketing campaign.

3 Designing a research instrument to assess needs and desires

● A well-designed research instrument informs a business about the needs and
desires of potential customers.
● Businesses can use this research data to reduce risk and make informed
business decisions.
● Entrepreneurs usually develop a research instrument to find out about
people’s needs and desires.

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BUSINESS STUDIES NOTES Chapter 11

4 Different research instruments

● A research instrument is a tool used to collect, measure and analyse data
related to a business opportunity.
● A good research instrument will provide information about a target market,
which is meaningful, that is, the respondents actively participated in the research.

5 Design a good research instrument

A good research instrument will give you complete and accurate information.
The following steps must be followed:
● Decide what information you need
● Be clear about what you want to know about potential customers.
● Use a table to analyse data from the research. Ask simple and clear questions
● Have a variety of questions.
● Include some multiple choice, tick box questions, questions where things must be
● ranked according to scale.
● Test the questions.

FOR ENRICHMENT NOT EXAMINABLE

6 Types of research instruments for data collection

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BUSINESS STUDIES NOTES Chapter 11

Questionnaires
● Questionnaires are designed to collect information from people about their
attitudes/preference/level of knowledge/personalities/beliefs etc.
● A questionnaire consists of a series of questions that are
developed to gain information from respondents.
● Respondents give answers in writing.
● Responses may be immediate/direct or need to be emailed.

Interviews
● Business situations provide opportunities for interviews with employers,
customers, analysts etc.
● The interviewer leads the interview by asking questions and the
interviewee responds to the questions.
● Responses are collected from an individual or a group and may be recorded.
● Questions should be carefully prepared and selected to avoid any biasness.
● Questions should be carefully prepared to avoid anything that might be
sensitive and offensive.
● Helps businesses to collect the same type of information from many people.
● Businesses do not require processing assistants as they are able to
analyse responses/data.

7 The protocol for conducting research

The meaning of research protocol

● A research protocol is a plan with detailed guidelines that explain the
rules of the research.
● It will describe the objectives, design, methodology and statistical
considerations of the research depending on the type of information required.

8 Ethical issues and protocols to be adhered to when doing research:

● The research should be conducted with the willing cooperation of participants.
● If research is taking place within an organisation, it must be approved first.
● The person conducting the research should not try to influence the
opinions of the participants.

9 When pursuing a business opportunity, ensure

that: ● It does not break any law or infringe on any
copyright. ● It does not harm the environment.
● The product or service should be safe.
● The product or service should not be bad for people’s health.

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BUSINESS STUDIES NOTES Chapter 11

10 The research protocol also addresses the integrity of research

● The research protocol must cover the ethics of the process. Ethics in research has
three elements:
o Research may not disadvantage anyone.
o Research may not be inhumane.
o Research may not exploit anyone.
● The research should be conducted with the willing cooperation of participants.
● The research must be approved first if it is taking place within an organisation.
● Research must comply with ethical standard of the organisation by
obtaining clearance from the authorised bodies or persons.
● The person conducting the research should not try to influence the opinions of
the participants.
● The research protocol should address the integrity of the research.
● The research should obtain consent from the respondents to carry out the research.

11 Conduct market research and identify a business opportunity

● Market research is the systematic gathering, recording, and analysing of data
about the marketing of goods and services.
● Market research to assess needs and desires.

12The importance of market research for a business

● Market research assess the needs and desires of customers
● Entrepreneurs gain information about industry trends and the actions of
their competitors.
● Helps the business in developing and enhancing the product
● Guides business to minimise risks and identify gaps in customer expectation.
● Can be used to identify a business opportunity.
● Can guide a business to minimise risks
● To identify gaps in customer expectations.
● People’s taste, habits, behaviors, and desires change constantly.
● Regular market research will inform the business about the changes

13 The differences between internal and external market research

INTERNAL MARKET RESEARCH EXTERNAL MARKET RESEARCH

● Internal market research usually ● External market research is market
conducted from within the business. research usually conducted by an
outside specialist.
● Employees together with general ● Businesses use data from market
employers indicate taste, type of research that has been conducted in the
products/services of the business. past by other organisation/ statistics
published by the government.
● Different resources are used for ● Useful information about the target
gathering business information for market, environment and about
helping management to make customers’ needs and desires can be
informed decisions. obtained.

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BUSINESS STUDIES NOTES Chapter 11

● Employees are familiar with both ● The feedback is obtained by customers,

customers and products which means potential customers, and suppliers
they are uniquely capable of
generating new ideas and how to
market it

● Internal market research focuses on ● External market research focuses on the

the factors within the business interaction between the business and
the customers.

14 Compile a SWOT analysis to determine a viable business

venture The meaning of a SWOT analysis
● A SWOT analysis is strategic tool.
● It summarises a large amount of data into a user-friendly diagram.
● SWOT stands for Strengths, Weaknesses, Opportunities and Threats.
o Strengths and Weaknesses relate to internal factors, which are under the control of the
business (micro environment).
o Opportunities and Threats relate to external factors over which the business has little
(market environment) or no control (macro environment).
● It is used to help businesses make decisions by setting out information
clearly in order to only focus on important information.
● Entrepreneurs use a SWOT analysis to decide if their business idea is
indeed a viable business opportunity.

An example of a SWOT analysis

Imagine that you have decided to sell cakes at the school market day.
STRENGTHS WEAKNESSES
INTERNAL List all the strengths of your List all the areas where the business
idea/product/business e.g.: idea/product falls short e.g.
● Easily available ● Perishable
● Can be made by learners. ● Need careful handling.
● Cheap to make. ● Need to be hygienically stored.

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BUSINESS STUDIES NOTES Chapter 11

● Strong customer base ● Have to be hygienically displayed

● Well-trained staff ● Bad reputation
● Adequate resources ● Financial problems
● Strong financial strength ● Lack of trained staff
● Lack of capabilities
● Lack of resources

OPPORTUNITIES THREATS
EXTERNAL List all opportunities that could List everything that threatens the
assist the business idea/improve success of the business idea/product
the product e.g. e.g.
● Strategic partnerships ● Economic factors- e.g. high
● Possibility of obtaining tenders inflation rate.
and contracts. ● Political factors like strikes and
● New product and market protest
development ● Environmental factors like climate
● Appeals to most learners. change and pollution.
● Not gender specific (boys and ● Legal for example Acts that can
girls like cakes.) have an impact on businesses,
● Cheap compared to other for example EEA, SDA, BBBEE
products ● High competition
● Low profit margin

Another example of a SWOT analysis

STRENGTHS WEAKNESSES
INTERNAL List all the strengths of your List all the areas where the business
idea/product/business e.g.: idea/product falls short e.g.
● Capabilities ● Special registration
● Good employees ● Bad reputation
● Sufficient resources ● Lack of finances/resources
● Quality products/services ● Lack of leadership
● Lack of capabilities

OPPORTUNITIES THREATS
EXTERNAL List all opportunities that could List everything that threatens the
assist the business idea/improve success of the business idea/product
the product e.g. e.g.
● Partnership with other ● Economic factors
businesses ● Political factors
● Fashion and trends ● Environmental factors
● Tenders ● Technological factors
● Product development ● Legal factors
● Physical factors
● Competitors

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BUSINESS STUDIES NOTES Chapter 11

15 Benefits of SWOT analysis

● It is not expensive to perform a SWOT analysis.
● It is a planning tool that can help a business to make decisions.
● It gives a big picture of a business opportunity.
● It can help a business to focus on what is important.
● Do not take a lot of time to perform a SWOT analysis. It can be done quickly, and
you have the analysis immediately available.
● Useful to find possible challenges in all three business environments.

16 The importance of conducting a SWOT analysis

● It is a useful planning tool and helps people to make decisions by setting out
information clearly.
● Businesses use this tool when making important decisions.
● Entrepreneurs use when making decisions about the viability of a business opportunity.
● It is useful to assess business opportunities because it assesses businesses
strengths and weaknesses.
● Helps business owners to identify ways in which their business can grow and
identify potential threats.
● Businesses can use this tool during any stage of development.
● Helps a business to determine its position to fulfil the needs and wants of
their prospective customers.
● It is useful if there are changes in the market environment or when considering starting a
new business venture.

17 Limitations of SWOT analysis

● When you are conducting a SWOT analysis, you should keep in mind that it is only
one stage of the business planning process.
● For complex issues, you will usually need to conduct more in-depth research. A SWOT
analysis may be limited because it:
o does not prioritize issues
o does not provide solutions or offer alternative decisions
o can generate too many ideas but not help you choose which one is best o
can produce a lot of information, but not all of it is useful.
o may cause businesses to overlook certain aspects in the business.
BUSINESS STUDIES NOTES Chapter 13

BUSINESS STUDIES

GRADE 10

TERM THREE

PAPER 2

CHAPTER 13

PRESENTATION OF BUSINESS INFORMATION

REVISED NOTES

2024

TABLE OF CONTENTS

TOPICS PAGES
Exam guidelines for presentation of business information 2
Terms and definitions 2
Importance of business reports 3
Guidelines on writing an effective business report. 3
The importance, advantages and disadvantages of 3-4
graphs/diagrams, symbols/pictures
factors that must be considered when preparing for a verbal 4
presentation.
Types of visual aids 5
Definition of the different visual aids 5
Purpose of visual aids 6
Factors to consider when designing/preparing a presentation 6

This chapter consists of 6 pages.

1
 BUSINESS STUDIES NOTES Chapter 13

CONTENT DETAILS FOR TEACHING, LEARNING AND

ASSESSMENT PURPOSES

Learners must be able to:

● Outline/Explain/Discuss the importance of business reports.

● Outline/Explain guidelines on writing an effective business report.
● Outline/Explain/Discuss the importance, advantages and disadvantages of
graphs/diagrams, symbols/pictures
● Outline/Explain/Discuss factors that must be considered when preparing for a verbal
presentation.
● Explain/Discuss/ Describe the different visual aids
PowerPoint/Data projector/Slides
o Hand-outs/flyers/brochures
o Flip charts
o Interactive white boards/Smartboards
o Posters/signs/banners/portable advertising stands/flags
● Explain the purpose of visual aids
● Identify visual aids from given scenarios/case studies/pictures/cartoons. Support
your answer by quoting from given scenarios/case studies/pictures/cartoons.
1 Outline/Explain/Discuss factors that must be considered when designing a presentation.

TERMS AND DEFINITIONS

TERMS DEFINITIONS
Business It is a written document that communicates information to assist business decision
report making.
a key communication tool that provides an evaluation of a particular issue relating to
the performance of the business.

Graphs Two-dimensional drawing showing a relationship between two set of variables by

means of a line/curve/bars.
Presentation The act of communicating information/data to an audience/stakeholder in an
organization.

Verbal The presentation is delivered through word of mouth or in words.

Presentation
Non-verbal Presentation is delivered through writing or supporting material.
Presentation the transfer of information through the use of business reports, handouts, charts,
and posters with the support of visual aids.

Visual Aid Refers to charts/pictures/images that help to clarify a point/enhance a presentation.

Audio Visual It is material or tool directed to both sense of hearing and sight, e.g., projector
Aid
Data Projector Is a devise that projects images from a computer onto a screen.
Interactive It’s a devise that has a data projector attached to it. It also has special pens that a
whiteboard presenter can write on it.

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 BUSINESS STUDIES NOTES Chapter 13

Overhead It is a devise that shines light through a glass on which a translucent slide is places
Projector on it.
Handout Printed information provided to the audience to accompany a presentation.
a written summary of information dealt with in a presentation.
Diagrams A drawing showing the appearance/structure/workings of data in a schematic
representation.
Flip Chart A large pad of paper, bound so that each page can be turned over at the top to
reveal the next page, used on a stand.

Tables a data structure that organises information into rows and columns.

1. The importance of business reports

o A business report aims to provide a critical analysis of how the business is
performing in all business functions of the organization.
o Business reports are used to guide decision making in the business.
o Business reports enable management to keep track of every activity done in
each department.
o It allows business owners and senior management the opportunity to investigate
and solve any identified issues.
o It enables senior management with information on how each department is doing.
o Business reports provide information for management that is timely and factual.

2. Presentations may be done verbally or non-verbally

● Verbal presentation means a presentation is delivered through speech or
● orally. Delivering effective verbal presentations involves what you say (verbal), how
you say it with your voice (vocal), and everything the audience can see about you
(visual). One could say that it is the verbal and visual equivalent of a written report.
● Non-verbal presentation is the transfer of information through the use of
business reports, handouts, charts, and posters with the support of visual aids.
● A business report is a key communication tool that provides an evaluation of
a particular issue relating to the performance of the business.
● A handout is a written summary of information dealt with in a presentation.
● Charts (referred to as newsprint) are used to record and visually display
● information that will engage and stimulate audience participation.
● Posters are usually large, printed sheets that contain pictures and posted in a
● public place.
● Guidelines on writing an effective business report.
• Determine the scope of the report.
• Determine the target audience of the report.
• Determine how the report should be presented.
• Collect the necessary information.
• Prepare an overview of what the audience to know and details that should be
included in the report.
• Write concisely/briefly and only include important information.
• Use regular/basic language/simple grammar and clear short sentences.

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 BUSINESS STUDIES NOTES Chapter 13

 Use accurate/meaningful visual aids such as tables, graphs, drawings etc.

 Spend time revising the report and correct spelling mistakes and grammatical errors.
 Get someone to look at the report and to make suggestions for improvement.

● The importance, advantages and disadvantages of graphs, diagrams,

symbols, pictures
 Graphs, diagrams and symbols/pictures are visual aids that help a reader, audience
see what you are talking about in a business report or when giving a presentation
 Graphs are more likely to be used to present date in a form that is easy for the
reader/audience to understand.
 Images and diagrams are typically used to explain concepts or theories.

4.1 The importance of graphs/diagrams, symbols, pictures (visual aids)

● Diagrammatic data presentation allows understanding of data more easily.

● It helps illustrate points to the reader/audience more easily and effectively.
● It also helps maintain the audience’s interest during the presentation.
● It engages the audiences with the presentation, making them remember it afterward.
● Diagrams are interesting, relevant, and support the presentation.
● Visual aids will effectively help convey the message.
● It helps to clarify the message and provides a point of reference for the mind.

4.2 Advantages and disadvantages of graphs, diagrams, symbols/pictures

(visual aids)
Advantages

 Graphical representation of information helps with understanding and identifying

patterns and trends in data.
 It enables quick analysis of large amounts of data at one time and assists in
making predictions and informed decisions.
 A lot of information can be displayed in an easy-to-understand format.
 Graphs do not require much explanation.
 Visual aids simplify the presentation when using complex information.

Disadvantages

 Too many diagrams and graphs can be confusing to the audience.

 Information can easily be manipulated, causing false interpretations.
 It may distract the audience from the speech as they pay more attention to the visual
aids.
 Preparation of graphs and diagrams is time-consuming.

● Factors that must be considered when preparing for a

verbal presentation

Several aspects need to be considered when preparing for a verbal

presentation.

These are:
● Write down the purpose and main points of the presentation
● capturing the main aim in the introduction of the presentation
● Relevant and accurate presentation of the information
● Being fully conversant with the content of the presentation
● knowing the background of the audience to determine the appropriate visual aids

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BUSINESS STUDIES NOTES Chapter 13

 Preparing a structure of the presentation with an introduction, body, and conclusion

 Summarizing the key facts in the conclusion, and showing that all aspects have been
addressed.
 Creating visual aids that will assist in getting the point across effectively
 Visiting the venue and ensuring that the equipment provided is working and suitable
 Considering the time frame for the presentation
 Practicing the presentation and note how long it takes
 Practicing in front of a person who will give an honest opinion of the presentation
 Preparing for the feedback session by anticipating possible questions.
 Information to be presented should be relevant and accurate.
 Prepare your support material to enhance your presentation.
 Prepare for the feedback session by anticipating possible questions/comments.

Types of visual aids

 Handouts/flyers/brochures.
 Interactive Whiteboard/ Smart board
 Posters/Signs/ Banners/ Flags
 Overhead projector.
 Flip Charts.
 Graphs.

7. Definition of visual aids

Visual aid Definition

Power Point/Data It is usually used for large groups
-Projects images from a computer to a screen
projector/Slides
-Shows summaries/ graphs/relationships/diagrams /process
steps etc.
-Can be used to create a mood through showing images and
videos
-Slides summarises information to increase understanding
Handouts -Use for small or large groups
-Used to give summary of the presentation and provides
follow-up activities
-Contains summary of the most important points
-They are given to the audience when they leave after the
presentation
-Provide details that cannot be included in the presentation
such as financial statement
-They provide structure and focus for the presentation
Interactive whiteboard -Can be used for small or large groups
-Can be used in brainstorming sessions to capture feedback
and ideas
-Can be linked to other whiteboards in other venues.
Use coded pens to write new information and feedback
Flyers/Brochures -Can be used for as effective marketing tool.
-Can be used for attracting people to an advert
Posters/signs/banners/Flags -Are used to communicate with potential customers
5
BUSINESS STUDIES NOTES Chapter 13

-Can be used as a marketing strategy

-They summarise information and discussions to stakeholders
-It can be decorated to attract attention to the information on it.
Charts/Flip Charts -A flip chart is a board with a paper attached at the top and
can be flipped over to present information sequentially
Charts can be used for a small group.
-Used to summarise discussions
-Record ideas and feedback given by the group
--it does not need electricity and therefore cheaper visual aid.
-Management may show the organisation’ s structure in the
form of an organisational chart.

8. The purpose of audio-visual aids

● They add value and clarity of the presentation.
● They make the presentation more interesting and memorable.
● Visual aids reinforce what the presenter has said.
● They create an atmosphere such as showing videos.
● Helps get the message across more easily.
● Keeps the audience engaged during the presentation.
● They add power and punch to the presentation.
● Enhance presentation.
● Create excitement.
● Help the audience to remember the presentation

Factors to consider when preparing/designing a presentation

The following factors must be considered when designing a presentation:

 Start with the text and heading

 Use large, clear fonts that are easy to read.
 Selecting a suitable background that would not distract from the content
 choosing images that may help to communicate the message
 Including graphics and images related to the content
 Adding special effects to support the message
 Creating hyperlinks to allow quick access to other files
 Keeping images and graphics simple
 Use outlines on slides and keep detailed explanations for the verbal presentation.
 Limit each slide to five or six lines.
 Make sure the grammar is correct.
 Proof read carefully.
 End with a closing message that the audience will remember.
 Be colourful and grab attention.
 Be meaningful and appropriate.
 Select a suitable background.
 Structuring information in a logical sequence.
 Limiting the information on each slide.
 Avoid long sentences and keep it simple.
 Avoid fancy decorations.
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BUSINESS STUDIES NOTES CHAPTER 14

BUSINESS STUDIES
GRADE 10
PAPER 2
TERM 13
CHAPTER 14
NOTES ON BUSINESS PLAN
REVISED NOTES
2024

TABLE OF CONTENTS
TOPICS PAGES
Terms and definitions 2
Exam guidelines for a business plan 2
Importance of a business plan 4
Challenges of the macro environment using PESTLE analysis 4
The components of a business plan 4-6
Purpose of the executive summary 6
Aspects that must be included in the executive summary 6
The vision, mission statements, goals, and objectives 6
The relationship between the structure of the business and 7
forms of ownership
Types of legal requirements of a business 7
Importance of a marketing plan and market research 7
Meaning of marketing mix with specific reference to the 7p’s 8-10
Strategies to overcome competition in the market 10
Financial plan including a balance sheet 11-12

This chapter consists of 12 pages.

1
CONTENT DETAILS FOR TEACHING, LEARNING AND ASSESSMENT PURPOSES
Learners must be able to:
● Explain the importance of a business plan.
● Explain the challenges of the macro environment on a business using
PESTLE analysis.
● Name/State the components of a business plan.
● Explain the purpose of the executive summary
● Name/State aspects that must be included in the executive summary.
● Formulate the vision/mission statements and objectives of the envisaged business.
● Explain the relationship between the structure of the business and forms of
ownership.
● Name/State different types of legal requirements of a business.
● Compile a SWOT analysis for the envisaged business.
● Outline/Explain/Describe/Discuss the importance of a marketing plan and
market research.
● Explain the meaning of a marketing mix with specific reference to the 7p’s.
● Identify the 7p’s from given case studies/scenarios/statements/cartoon.
● Identify competitors by doing market research and explain the strategies that you will
use to overcome competition in the market.
● Formulate a financial plan for the envisaged business (including projected income
statement and balance sheet)

TERMS AND DEFINITIONS

TERMS DEFINITIONS
Business Plan A document that outlines all the important facts, processes,
and procedure of the business.
a document setting out a business’s future objectives and
strategies for achieving them.
Cover Page Indicates the name of the entrepreneur, name of the business,
the logo, address, and contact details of the business.
Index page The list of all sections of the business plan and page numbers
of each section.
Executive Summary The summary of the entire business plan.
short document or section of a document produced for
business purposes that is, summarises the entire business
plan.
Description of the The description of the product/service and the unique features
business of the business
Vision The long -term future goal of the business
Mission Statement The activities the business will do in order to achieve its goal
Legal Requirements Legal documentation such as licenses, permits and tax
regulations that must be complied with before the business
can start operating.

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SWOT Analysis The analysis of the strengths, weaknesses, opportunities and

threats of the business.
Marketing Plan A strategy /plan of how the business is going to sell its
product/service
Market Research The action of gathering information about consumers’ needs
and preferences.
Financial analysis refers to the assessment of the viability and the profitability of
the business.
Environmental factors refers to external influences on the business that it has limited
no control over.
Marketing mix: a set of actions that the business uses to promote its brand.
Price the amount of money required as payment for goods.
Product an object that is manufactured for sale.
Promotion a method used to advertise the product.
Place location of the business.
People refers to employees as well as the target market.
Physical environment is the environment around the business.
Process the system used to deliver the product or service

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1 The importance of a business plan
o A business plan helps entrepreneurs to set goals and objectives.
o It can be used to attract investors and prospective employees.
o Helps stakeholders to understand the role they play in the business
and encourages them to contribute effectively.
o Guides the entrepreneur on the viability of his/her business idea.
o It also helps the entrepreneur to identify problems that may arise
and helps management to take steps to avoid these problems.
o Helps the entrepreneur to identify problems that may arise and
helps management to take steps to avoid these problems.
o Improves business operations processes and practices.
o It evaluates the success of the business.
o It is essential when applying for financial assistance from investors or
lenders.
o Compels an entrepreneur to arrange his/her thoughts in a logical order.
o It gives direction once the business is operating.
o Helps the entrepreneur to face threats head-on and deal with them.

● Challenges of the macro environment using PESTLE analysis

● Entrepreneurs should look at the factors that could have a negative impact
on their businesses.
● Businesses do not have control over the elements/features of the
macro-environment.
● Businesses can use PESTLE analysis scan the macro environment.
● A PESTLE analysis enables business to identify challenges that are
posed by the following external factors: physical, economic, social,
technological, legal and environmental factors.

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2. Components of a business plan

4 Cover page
4 Contents page/Index
4 Executive summary
4 Description of the business/Overview
4 SWOT analysis
4 Legal requirements of business
4 Marketing plan
4 Operational plan
4 Financial plan
4 Management plan
4 Competitor analysis
● Explanation of the components of a business plan

COMPONENT CONTENTS AND FEATURES

Cover page • It contains the following information:
o The name of the business
o Contact details of the owner(s)and address
o The logo of the business
• A copyright disclaimer to protect the contents of the plan
Contents • This page gives a title and page number of each subsection of the
page/Index plan.
• Allows the reader to find the information in the document
Executive • Detailed summary of the entire business plan
summary • It is written after the business plan has been completed, but
appears at the front to provide users with a brief overview before
reading the details
• The following aspects that must be included in the executive
summary:
o the form of business enterprise
o the main business activity
o information about the owner of the businesses
o how capital will be obtained.
Description of the • It is usually a short description of the product/service that the
business/Overview business will offer.
• It also describes the long-term objectives/mission/vision of the
business.
• It indicates whether the business is a sole trader partnership.
• Indicates the form of ownership.
• Description of the product /service which the business offer
• It also includes the legal requirements of the business
Legal • Provides legal requirements that the business need to comply
Requirements with before it can start operating.
NOTE: Refer to types of legal requirements below
SWOT analysis • An entrepreneur needs to carry out a SWOT analysis when
starting a business.

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 • It helps the entrepreneur build on what he/she does well to
address what is lacking, to minimize risks, and to take the
greatest possible advantage of chances for success.
• A SWOT analysis is a strategic plan used to help an
• organisations identify major strengths and weaknesses of the
business.
• It also makes the business aware of opportunities and threats
in its external environment.
• A SWOT analysis is an indication that research was
conducted to support the establishment of a business.
• A SWOT analysis is an indication that research was
conducted to support the establishment of a business.
Marketing plan • This is the most important component of the business plan.
• It gives details of the 7Ps of marketing
• This plan also describes the target market, customers, and
competition.
Operational plan • Includes where the business will be located.
• Describes the daily operation of the business.
• Includes a description of a product, how and where it will be
manufactured.
• Provides details of the equipment and suppliers
Financial plan • Records details of how much capital is required and how it
will be raised.
• Contains projected statements of profit, loss and cash flow
Management plan • Considers the short and long-term business strategies.
• Outlines who will oversee running the business as well as
skills of the entrepreneur and other in the business.
• Discusses the hierarchy and roles of the employees
Competitor • Description of competitors in the market and their products
analysis • Details of competitors’ marketing strategy and its effect on a
proposed business

6 Executive summary
6 Purpose of the executive summary
● It is included to satisfy those who do not have time to go through the entire
plan in detail.
● Most lenders and investors read it first before the entire business plan.
● It gives readers an idea of what is contained in the business plan.

● Aspects that must be included in the executive summary

8 The form of business enterprise
8 The main business activity
8 Information about the owner of the businesses
8 They way in which capital will be obtained
The vision/mission statements/goals and objectives The vision
statement
● A statement, which describes how the business will achieve its
purpose. 6
BUSINESS STUDIES NOTES CHAPTER 14

9 The vision statement is the long-term goal of how entrepreneurs see their
business in future and how they want to grow.
9 It addresses profit, growth, purpose and stability

The mission statement

● A statement, which describes the purpose of the business and explains
why the business exists.
● The mission statement addresses how entrepreneurs hope to achieve their
vision.
● It focuses on a business operation and it also specific and measurable
● The short-term objectives are more specific stepping-stones to reach short-
term goals in order to achieve the long-term goals.

Goals and objectives

● The long-term objectives are formulated to provide direction for the company
to achieve the vision.
● It is also specific and measurable just like the mission statement.

● The relationship between the structure of the business and forms of

ownership
The business structure should have a description of the following aspects:
● How many people the business intends to employ.
● Management and staff e.g. their qualifications, experience, job
description and remuneration
● Administration and record keeping
● Staff policies regarding working hours, fringe benefits, overtime, sick
leave and medical aid.
● The structure of the business should include the type of ownership such as
sole trader/partnership/close corporation/ private company/public company.
● The form of ownership will determine the following:
15 The reason for the form of ownership
o Legal requirements of the business o
Products and services offered.
o Size of the business
o Number of owners required.
o How much control the owners want. o Legal
protection

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 ● Different types of legal requirements of a business
● A business needs to be registered before it can obtain finance or start
doing transactions.
● A business needs to comply with the following types of legal requirements:
● Trading Licenses and permits to operate
legally. o Taxation regulations
o International trading /Exporting & Importing requirements/ Exchange rates.
o Registration fees. o
Registration.
o The Basic conditions of Employment Act. (BCEA)(No.75 of 1997) o The
Labour Relations Act (LRA) (No. 66 of 1995)
o The National Credit Act (NCA) (No. 34 of 2005)
o The Environmental Conservation Act (No. 73 of 1989) o
Patents and copyrights

9. Importance of a marketing plan and market research

Importance of a marketing plan
• It is a description of the market analysis including the target market.
• It includes the analysis of the target market, customer, and competition.
• Explains the marketing mix and provides the marketing strategy of the
business.
• Guides businesses on how to advertise their products/services.
• Describes the proposed prices of goods and services.

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10. Importance of a market research

• It is a process to understand more about customers’ needs.
• A marketing plan helps businesses to promote products and services.
• The target market refers to the people who are likely to buy the product or
service offered by the business.
• The business must conduct market research to know about the following
factors of the target market: age group, gender, personality, income, and
education.
• The methods of conducting market research include surveys, interview,
and questionnaires.
• The results of the market research are important as it will indicate whether
the target market shows interest in the goods and services the proposed
business aims to offer.

11 The Meaning of marketing mix with specific reference to the 7Ps

• The marketing plan can be explained by using seven elements.
• There are four main elements and three additional elements.
• A marketing mix is a combination of product, price, place, people, promotion, process,
and physical environment.
• The above-mentioned aspects are usually referred to as 7ps.
• The reason for extending the 4ps to the 7ps is the growth of the service industry.
• Once the target market has been identified, the business must work out the
marketing mix that best satisfies the needs of the target market.

Product/Service
• It is a description of the product, appearance, and usage that is available to
customers.
• It can be a picture, drawing or photograph of what the products look like
• The manufacturing process used to make the product.
• The appearance of the product/services must be different from competitors’
products.
• The packaging of the product should project and preserve the product.

Price
• The price of a product refers to the amount of money that must be paid by the
consumer to obtain the product.
• The proposed business must include its pricing policy in the business plan.
• The pricing policy describes the way in which the price is used to
attract customers.
• The price needs to cover all costs and must appeal to the target market.
• It must be affordable for the consumers.
• Good access to the product/service will increase sales.

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 • Cash or credit facilities may affect the customer’s attitude to the price.
• Customers may be aware of other sellers who are selling the same
products for less.

Place/Distribution
• The location where goods and services are sold.
• Place where consumers can access the goods or service.
• The business can sell the product directly to customers itself or can market
the product through other businesses.
• Businesses may use the following channels of distribution:
• Direct selling: manufacturer sell directly to consumers.
• Door to door selling businesses employ salespeople to sell door to door and
they carry few stocks with them.
o Mail Order: Large businesses print catalogues that can be used by
consumers to order of their choice. Small businesses advertise in local paper
inviting consumers to buy direct from the business.
o Telephone sales: the business employ people who phone members of the
public and try to persuade them to buy their goods.
o Internet/online shopping: businesses use systems on the internet to allow
customers to order their shopping online and have it delivered to the door
Promotion
• Refers to how the business is going to make its target market aware of its
product or service.
• A promotion should communicate the benefits of the product to customers.
• The proposed business must include detail about its promotion policy.
• The promotion policy must describe how sales of products will be promoted.

• Outlines the following methods of advertisements:

o Advertising through the radio, magazines, press, television etc.
o Special offers
o Trial products such as free sample for testing
o Free gifts
o Direct mailing
o Online marketing
o Social media
o Public relations
o Brand awareness

• Refer to employees, management, directors, and shareholder/All people

involved in selling the products.
• The business plan must include detailed information of people that will be
involved in the proposed business and in making a business.
• They can affect the business with their knowledge, skills, and attitudes.

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Process
• Refers to processes that are designed and implemented to ensure a pleasant
shopping experience.
• Describes the way in which the marketing and sales processes are carried
out.
• The process of giving a service and the behavior of those delivering the
service are important for customer approval of staff to customers keep
customers happy.
• Examples of systems and processes that will ensure a good customer
experience:

o Systems and processes to ensure that consumers do not wait long in queues/for
goods to be delivered.
o Systems and processes to make sure telephonic messages are dealt with and
delivered to the right person.
o Systems and processes to ensure that e-mailed messages are read.

Physical environment
• Refers to the environment where goods and services are
sold/service rendered.
• It includes the appearance of the building and the uniforms of employees.
• The physical environment must be appropriate and make the customer feel
comfortable.
• Clean and functional facilities attract and retain customers.
• Well-decorated reception also helps to reassure customers that the business
offers best services and values their customers.

Strategies to overcome competition in the market

• The business should use the following strategies to overcome competition in
the market:
o Sell quality products and services.
o Offer after-sales services.
o Charge reasonable prices.
o Conduct intensive marketing campaigns.
o Make use of clever advertising slogans
o Make your product unique.
o Provide attractive product displays.
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Financial plan including a balance sheet
• It is a detailed description of the entrepreneur’s financial contribution, the
funding requirements, and projected cash flow statements for a three-
year period.
• The purpose of financial analysis is to project/predict the profitability of
the proposed business and to project how long it will take before the
business starts to show a profit.
• A Financial plan includes the following elements.
ELEMENTS DESCRIPTION
Budget • A budget is an estimation of revenue and expenses over
specified future period.
• Monthly indication of projected flow of cash in and out of the
business
• Helps the owner to control the spending money by
comparing the actual income and expenditure.
Cash flow • Cash flows are the net amount of cash and cash
statements over a equivalents being transferred into and out of a business's
three-year period accounts.
• Helps the owner to identify operational difficulties the
business might experience and any need for more finance
Income statement • A monthly account of sales and expense
• It shows actual profits and/or losses.
Break-even point • A point at which profits are equal to expenses/ A business
does not show profit nor loss.
• Shows how much the business sold to cover all expenses
before making a profit
Balance sheet • Includes assets on one side and liabilities on the other.
• A list of all business assets, liabilities, and owners ‘Equity at
a specific point in time
• Assets include land, buildings, equipment, vehicles, money
in bank account.
• Liabilities are monies owed to other people or businesses
such as bank loans, buying on credit, bank overdrafts etc.
• Owners’ equity-is the difference between the total liabilities
and total assets.

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