SCHOOL OF SOCIAL SCIENCE EDUCATION

(EDGEWOOD CAMPUS)

BACHELOR OF EDUCATION

FINAL EXAMINATION

JUNE

2015

MODULE TITLE: BUSINESS MANAGEMENT 210 CODE: EDBU210E1

DURATION: 3 HOURS MARKS: 150

EXAMINERS: MR. M. A MTSHALI MODERATOR: MRS. J.

MS. C. OGULU RAMDHANI

INSTRUCTIONS TO STUDENTS:

1. THIS PAPER CONSISTS OF THREE SECTIONS i.e. SECTIONS A, B & C.

2. SECTION A IS COMPULSORY AND MUST BE ANSWERED BY ALL CANDIDATES.

3. CHOOSE AND ANSWER TWO QUESTIONS FROM SECTION B.

4. CHOOSE AND ANSWER TWO QUESTIONS FROM SECTION C.

5. THIS PAPER CONSISTS OF (8) PAGES.

SECTION A: COMPULSORY MULTIPLE CHOICE [30]

QUESTION 1: Write numbers 1.1 to 1.15 in your answer book and indicate the correct

answer by writing down the letter of the alphabet next to each question number.

1.1. Which of the following represent an advantage of a sole proprietorship?

a. Limited liability of members

b. Owner has total decision-making authority

c. Simple to create

d. Ability to raise large amounts of capital

A b c

B a c

C c d

D a c

1.2. Which of the following represents similarities between a sole proprietorship and a

partnership?

a. Continuity of existence

b. Possibility of acquiring capital

c. Liability of the owners

d. Tax liability

A a b c

B a b d

C a c d

D b c d

1.3. Which of the following are characteristics of a private company?

a. Number of shareholders is limited to 50 people

b. Members of the general public may apply for shares in the company

c. Name of a private company has to end with the words (Pty) Ltd

d. Transferability of shares in the company is limited

A a b c

B a b d

C a c d

D b c d

E a b c d

1.4. Within the free-market economy the state or government keeps its interference in the

economic system to…

A a maximum.

B within reason.

C a minimum.

D the extreme.

1.5. Which of the following statements about the role of business in society is correct?

a. While businesses may own property, machines and money, all of these are managed by

people.

b. Transforming resources into goods and services is part of the production process of a business.

c. Businesses produce goods and services for their own usage.

d. In order to continue production, a business must make a profit.

A a b c

B a b d

C a c d

D a b c d

1.6. Match the correct description in Column B to the economic system it is describing in

Column A.

Column A Column B

a. Free-market

economy

i. The state owns and controls all the country’s industries.

b. Socialism ii. Even though there is freedom of choice, this choice is severely

limited.

c. Command

economy

iii. Private initiative is in the order of the day.

iv. The management environment comprises of state-owned and

private businesses.

A a(i); b(ii); c(iii)

B a(iii); b(iv); c(i)

C a(ii); b(iv); c(i)

D a(iii); b(i); c(ii)

1.7. Which of the following can be considered a source of a business opportunity?

A Fashion trends such as MP3 players

B Economic trends such as lower exchange rates

C High growth industries such as tourism

D All of the above

1.8. The main differences between an entrepreneur and a small business owner are:

a. the size of the business

b. the resources needed

c. the reason for pursuing a profit

d. the intention of growth

A a b c d

B a b c

C c d

D a c

1.9. Which one of the following factors is wholly influenced by the business itself?

A Inflation rate

B The new marketing campaign

C The new supplier marketing campaign

D Consumer habits

1.10. Which of the following can be considered characteristics of the business environment?

a. The variables function independently from each other.

b. There is increasing instability and chance in the environment

c. Environmental uncertainty is dependent on the amount of information available

d. The environment is becoming increasingly complex

e. The more variables in a business, the less environmental information is required to

make decisions

A a b c d e

B a b c e

C b c d

D a c d

1.11. The nature and intensity of competition is determined by five factors. Which one of the

factors would come into play when there are a limited amount of clients within the specific

industry?

A The possibility of new entrants

B The bargaining power of suppliers

C The availability of substitute goods

D The number of existing competitors

1.12. Demographic changes, such as the decision to have smaller families, occur in which

environment?

A Consumer

B Micro

C Social

D Technological

1.13. What explanation best describes “corporate social responsibility”.

A Companies have a responsibility for their impact on society and the natural environment.

B Companies do not have to carry responsibility for the behaviour of those they do business

with.

C Companies only have to focus on building relationship with their direct clients.

D Companies are social players by virtue of both their rights and responsibilities as citizens.

1.14. During which time period did corporate citizenship develop a coherent position?

A 1800-1900

B 1929-1945

C 1945-1970

D 1980-1990

1.15. Which of the following statements constitute a reason for implementing a CSR program?

a. Avoiding the reputation of being socially irresponsible and providing responsible products.

b. Trying to gain market share on the competition.

c. Complying with the legal systems of a country.

d. To avoid fines and legal fines.

A a b c

B a b d

C a c d

D a b c d 15 X 2 (30)

SECTION B: CHOOSE AND ANSWER ONE QUESTION FROM THIS SECTION

QUESTION 2

“A complex network of organisations evolve out of the interaction between needs and the

entrepreneurs who satisfy these needs” (Du Toit, Erasmus & Strydom, 2010).

Bearing this statement in mind, discuss the need satisfying institutions of the market economy

(30)

QUESTION 3

People decide to become entrepreneurs for a number of reasons. Discuss why entrepreneurs do

what they do. (30)

QUESTION 4

Write explanatory details on how the idea of Corporate Social Responsibility (CSR) has

evolved over time in history. (30)

SECTION C: CHOOSE AND ANSWER ONE QUESTION FROM THIS SECTION

QUESTION 5

“Many factors (considerations) may influence the entrepreneur’s choice of the form of

enterprise best suited to each entrepreneur’s specific circumstances” (Du Toit, Erasmus &

Strydom, 2010 p. 70). Discuss these considerations in choosing a form of enterprise. (30)

QUESTION 6

Discuss the partnership as a form of ownership with reference to its definition, characteristics,

advantages and disadvantages. (30)

QUESTION 7

“In order to understand clearly the interaction between the enterprise and its market environment,

it is necessary to examine the variables in the market environment more closely” (Du Toit,

Erasmus & Strydom, 2010 p. 110). Discuss these variables (30)

TOTAL [150]

Memorandum

Busman 210 Final Exam

Section A

Question 1

1.1. A

1.2. C

1.3. C

1.4. C

1.5. B

1.6. B

1.7. D

1.8. C

1.9. B

1.10. C

1.11. B

1.12. C

1.13. A

1.14. B

1.15. C

Section B

Question 2

Business organisations:

• are those private need-satisfying institutions that accept risks in pursuit of profits.

• They solve the fundamental economic problem of what (consumer demand), how and for

whom and earn profits in return

• To produce utilities, resources are needed hence the demand for the factors of production

• These are offered in the factor market at a price such as wages for labour

• Competition in the market determines the price (2 X 5) 10

Government organisations:

• are found in the mixed economy and offer goods and services that satisfy wants in return

for a profit.

• They are owned and controlled by the state and not by a private entrepreneur, e.g. Eskom.

• They create utilities considered to be of strategic importance to the community

• Low productivity (efficiency) levels render these organisations questionable

• Profit seeking government organisations fall within the scope of business mngt. (2 X 5)

10

Non-profit seeking organisations

Offer products & services not provided by private enterprises or government org.

Examples are sports clubs, cultural associations & welfare organisations

Their existence depends on financial support by community members

While they do not pursue profits, they are run according to strict business principles

They constitute a small sector of a country’s economy (2 X 5) 10

[30]

Question 3

Entrepreneurs’ traits and characteristics

• Achievement motivation: Entrepreneurs are inspired by the need to achieve, which

features actions of intense, prolonged and repeated effort to accomplish something

difficult.

• Internal locus of control: depicts a one’s need to be in charge of one’s own talent to earn

a living instead of employment

• Innovation and creativity: forming new ideas (recycling bones) leads to the development

of new & unique products: glass (innovation). Inventing a new business (rhino breeding)

based on new products that are developed (skin cancer powder)

• Risk taking: Entrepreneurial behaviour involves risk taking. The ability to determine the

size of the risk and devise ways to avoid or lower the risk is central to successful

entrepreneurship

• Other traits (including high levels of energy i.e., mental strength, confidence and

optimism, etc.) (2 X 5) 10

Entrepreneurs’ skills and industry experience

• Contributes to identifying an opportunity, establishing a business and managing it:

o Experience: in identifying opportunities & the pursuit of independence are some

of the reasons for people to become entrepreneurs

o Training & education: in a specific field (medicine) leads to success in identifying

an opportunity (township surgery)

o Job termination (retrenchments), job dissatisfaction & being unemployed can also

contribute to the emergence of necessity entrepreneurs who are often less

successful than opportunity entrepreneurs (2 X 3) 06

Opportunities arising owing to outsourcing

• Work done by people not employed by the company is known as outsourcing

• Organisations (SAB) are outsourcing many services (transport)/components they need

• Way of reducing labour costs

• Services most often outsourced: (2 x 4) 08

o Architectural design

o Trash & waste removal

o Housekeeping

o Landscape maintenance

o Property appraisals

o Major moves (1 x 6) 06

[30]

Question 4

Growing public concern (1800-1900

• During the industrial revolution, large scale production was linked to inhumane

workplaces

• Karl Marx objected in the mid-19th century

• Activities of mega-companies in response to increasing demand brought about pollution

• This gave rise to a growing public concern about large corporations (2 x 5) 10

Government intervention & the beginning of CSR programs (1890-1914

• Econ globalisation & colonisation with overwhelming international corporate behaviour

between 1890 & 1914

• Formation of trust, use of child labour & safety concerns led to govt. legislation

• Social transformation was demanded to supplement insufficient legislation

• In response, large corporations developed industrial welfare programs e.g.education

(2 x 5) 10

CSR develops as a coherent position (1929-1945)

• The 1929 world economic meltdown and the Great Depression had global effects

• World trade, personal incomes, tax revenue, prices & profits dopped

• The WW II in 1939 added to the disaster, with the emergence of labour protection,

banking reforms & public utility controls

• Increased public participation on these issues & on corporation-society relationship

created the concept “CSR” (2 x 5) 10

[30]

Section C

Question 5

• Considerations in choosing a form of enterprise:

o Legal / juristic personality: ability to exist independent of its members. Legal

personality status alongside natural persons. Sole responsibility over assets and

liabilities. Existence not dependent on membership changes. Continuity of

existence

o Limited Liability: ability to protect its members from debts as juristic person.

Claims made against company, not against members/shareholders.

o Degree of control or management authority: No distinct between ownership

and management in sole traders. Quick decisions can be made by a sole owner as

s/he manages the business. Division between ownership and management in

companies complicates decision making.

o Potential for capital acquisition: Public companies require large amounts of

capital than sole proprietorships and partnerships. Capital is less significant in

other forms of enterprises than financial position.

o Compliance with legal formalities and regulations: Companies must comply

with extended legal formalities for their establishments. Sole proprietorships and

partnerships have fewer formalities to comply with. The latter can easily dissolve

as compared to the former.

o Taxation: Income tax rates, capital-gains tax and transfer duties vary from one

taxpayer to another. While companies and close corporations are taxed at a fixed

rate, small businesses are taxed at a sliding scale depending on their income.

o Transferability of interests: Shares in a public company are freely transferable

whereas the same cannot be said with shares in a private company. A partnership

and close corporation require mutual agreement among members before transfers

can be effected. (1 mark for listing each consideration and 2 marks for every

explanation of the considerations) maximum [30 marks]

Question 6

The partnership

Definition: A contractual relationship between two but not more than twenty to operate a

lawful business with the object of making a profit /2 marks

Characteristics

o Each partner contributes something and run it for the benefit of all and divide

profits according to some proportion

o Has no legal personality as members are legal persons with contractual capacity

o Companies Act changed this number to unlimited number of members

o Each partner is an agent of the partnership (institute legal proceedings on behalf

of the business

o Partners are jointly and severally liable for the debts of the partnership

o When a partner dies, is declared insolvent or insane, the partnership dissolves and

a new one has to be formed in the names of existing , solvent or sane partners

o Partners have joint control over the business

o Less or no legal formalities required for its establishment

o Has a greater potential for capital acquisition

o The partnership is not a taxpayer, only partners are registered taxpayers Greater

number of partners could hold greater risk of personal liability (Any 10 x 2) 20

Advantages

• Ease of formation

• Diversification of skills and abilities of partners

• Increased opportunity for accumulation of capital

• Minimal legal formalities and regulation (4 x 1) 04

Disadvantages

• Personal liability of partners

• Relative difficulty in disposing an interest in the partnership

• Potential for conflict between partners

• Lack of continuity (4 x 1) 04

Question 7

The market

• “Market” consists of people who have needs to satisfy and the financial means to do so

• To be successful, management must be informed regarding consumer needs, purchasing

power and buying behaviour

• Directly influenced by variables in the macro-environment

• Purchasing power is represented by the consumer’s personal disposable income

Types of markets

• The consumer market

o Durable products

o Semi-durable products

o Services

• Industrial markets

• Government markets

• International markets

Suppliers

• Business organisation is a system that receives inputs from the environment and converts

them into outputs in the form of products and services

• Inputs include materials, equipment, energy, capital and labour

• Suppliers provide these inputs to businesses

• Without the correct suppliers a business can not achieve success in a competitive market

environment

Intermediaries

• Intermediaries play an vital role in bridging the gap between the manufacturer and the

consumer

• Includes wholesalers, retailers, agents, brokers and representatives

• Decision making in respect of intermediaries is complicated by:

o The dynamic and ever-changing nature of intermediaries

o Relationships with intermediaries

Competitors

• Businesses compete for a share of the market and a share of the scarce input resources

• Competition is defined as the situation in the market environment in which several

businesses, offering more or less the same kind of product or service, compete for the

same customers (2 marks for each variable mentioned and 1 mark for every discussion)

maximum [30]