L2 New Venture Creation Module 1

New Venture Creation: NCV Level 2 Downloaded from hlayiso.com New Venture Creation: Level 2 1

New Venture Creation: NCV Level 2 Module 1: The business environment Module 2: The markets & needs for a new venture Module 3: Financial requirements for a new venture Downloaded from hlayiso.com New Venture Creation: Level 2 2

Module 1 The business environment Downloaded from hlayiso.com New Venture Creation: Level 2 3

In Module 1 we shall be covering: the structure and roles of different organisations within their own industry in South Africa the concept of a market and how to market products and services what market positioning is the role of professional associations in the business sector Downloaded from hlayiso.com New Venture Creation: Level 2 4

The 3 types of organisations operating in South Africa Private Privatebusiness business Non-profit Non-profit organisations organisations Government organisations organisations Government organisations organisations Downloaded from hlayiso.com New Venture Creation: Level 2 5

Government (public) organisations • offer goods & services to the public • sometimes compete with private business • are fully or partly owned by the State (the government) Downloaded from hlayiso.com New Venture Creation: Level 2 6

One example of a government or public-owned organisation is ……… Downloaded from hlayiso.com New Venture Creation: Level 2 7

Another example is ……… Downloaded from hlayiso.com New Venture Creation: Level 2 8

The role of government organisations ● facilitating economic growth by providing finance to ‘would be’ entrepreneurs ● protecting the public against malpractice by private organisations (e.g. Public Protector) ● providing specialised services (e.g. National Lottery) Downloaded from hlayiso.com New Venture Creation: Level 2 9

The role of government organisations Electricity Electricity ?? Refuse Refuseremoval removal Providing ProvidingEssential EssentialServices Services ?? ?? ?? Downloaded from hlayiso.com New Venture Creation: Level 2 10

The role of government organisations Sanitation Sanitation(sewage) (sewage) ?? Providing ProvidingInfrastructure Infrastructure Rail Raillinks links ?? Downloaded from hlayiso.com New Venture Creation: Level 2 11

Non-profit organisations • aim to uplift & provide support to communities • do not seek profits • rely on financial support from the communities they serve • are privately managed by community groups e.g. churches Downloaded from hlayiso.com New Venture Creation: Level 2 12

One example of a non-profit organisation is ……… Downloaded from hlayiso.com New Venture Creation: Level 2 13

Another example is ……… Downloaded from hlayiso.com New Venture Creation: Level 2 14

The role of non-profit organisations ● providing specific medical support to people (e.g. Hospice) ● providing protection for animals (e.g. SPCA) ● protecting the environment (e.g. World Wildlife Fund – WWF) ● providing emergency relief in the case of natural disasters ● supporting the ‘arts’ in the country (e.g. Grahamstown Arts Festival) ● lobbying for specific causes (e.g. Treatment Action Campaign – TAG) Downloaded from hlayiso.com New Venture Creation: Level 2 15

Business organisations • are the driving force of any free-market economy • accept risks in pursuit of profits • offer products and/or services on the open market Downloaded from hlayiso.com New Venture Creation: Level 2 16

An example of a business organisation that sells goods on the open market is ……… Downloaded from hlayiso.com New Venture Creation: Level 2 17

An example of a business organisation that sells services on the open market is is ……… Downloaded from hlayiso.com New Venture Creation: Level 2 18

The role of business organisations ● staying in business ● helping to grow the economy ● creating wealth for the country ● creating employment opportunities ● paying taxes to the government ● providing important services Downloaded from hlayiso.com New Venture Creation: Level 2 19

The value chain of a business Downloaded from hlayiso.com New Venture Creation: Level 2 20

Inputs Inputs Outputs Outputs •• raw rawmaterials materials Transformation •• products Transformation products •• information information •• services services Downloaded from hlayiso.com New Venture Creation: Level 2 21

Core activities in the value chain Purchasing Purchasing Production Production Distribution Distribution Marketing Marketing Downloaded from hlayiso.com New Venture Creation: Level 2 22

Support activities in the value chain Procurement Procurement Technology Technologydevelopment development HR HRManagement Management Purchasing Purchasing Production Production Distribution Distribution Marketing Marketing Downloaded from hlayiso.com New Venture Creation: Level 2 23

Key stakeholders in a business Customers Customers Shareholders Shareholders Employees Employees Business Business Suppliers Suppliers Government Government Community Community Downloaded from hlayiso.com New Venture Creation: Level 2 24

Business categories Primary Primary Secondary Secondary Tertiary Tertiary Industries Industries Industries Industries Industries Industries Downloaded from hlayiso.com New Venture Creation: Level 2 25

An example of a business sector in the primary category is ………… Downloaded from hlayiso.com New Venture Creation: Level 2 26

An example of a business sector in the secondary category is ………… Downloaded from hlayiso.com New Venture Creation: Level 2 27

An example of a business sector in the tertiary category is ………… Downloaded from hlayiso.com New Venture Creation: Level 2 28

The contribution of these categories to the GDP of South Africa Primary, 11% Secondary, 24% Tertiary, 65% Downloaded from hlayiso.com New Venture Creation: Level 2 29

The contribution of the major business sectors to SA’s GDP Financial Services 20.1% Manufacturing 19.5% Govt Services 14.7% W/sal/retail 13.9% Transport 9.7% Mining 7.4% Personal Services 6.2% Agriculture 3.7% Construction 2.4% Electricity/water 2.4% Downloaded from hlayiso.com New Venture Creation: Level 2 30

Principles of business marketing Business marketing is the decision and effort by a business to develop a need-satisfying product or service and sell it successfully to customers. Key principles are: ● A product is manufactured ● A service is delivered ● Success will only happen if there is a need for the product or service e.g. a need for food, clothing, security or social contact ● Success is measured by making a profit while meeting the identified need Downloaded from hlayiso.com New Venture Creation: Level 2 31

A product: • is tangible – it can be seen, felt, held, tasted, smelt and owned • is bought in exchange for something of value (e.g. money) • normally comes in some kind of packaging • is owned by the customer Downloaded from hlayiso.com New Venture Creation: Level 2 32

A service: • cannot be held, seen or touched – this is called service intangibility • cannot be separated from the person providing it – this is called service inseparability • will depend on how professional the person providing it is – this is called service variability • Cannot be ‘stored’ for later use like a product – this is called service perishability Downloaded from hlayiso.com New Venture Creation: Level 2 33

The principles of trade that define marketing Needs, Needs,wants, wants,demands demands Value Value Exchange Exchange Downloaded from hlayiso.com New Venture Creation: Level 2 34

The difference between needs, wants & demands Needs Needs Wants Wants Demands Demands Downloaded from hlayiso.com New Venture Creation: Level 2 35

The 4 P’s of marketing Product Product Price Price Place Place Promotion Promotion Downloaded from hlayiso.com New Venture Creation: Level 2 36

Promotion Advertising Advertising In-store In-storepromotion promotion PR PR(sponsorship) (sponsorship) •• inform inform •• persuade persuade •• remind remind Direct DirectMarketing Marketing PR PR(brochures) (brochures) Personal PersonalSelling Selling Downloaded from hlayiso.com New Venture Creation: Level 2 37

Market positioning is based on the competitive advantage of a business – for example a superior ………………. …………………. is the competitive advantage of Coca- Downloaded from hlayiso.com New Venture Creation: Level 2 38

The internal strengths & weaknesses of a business Strengths Strengths Weaknesses Weaknesses •• quality qualityproducts •• limited products limitedcapital capital •• cost costeffective effectivemanufacturing •• insufficient manufacturing insufficientstaff staff •• skilled skilled&&motivated motivatedemployees •• limited employees limiteddistribution distributioncapacity capacity •• strong strongbrand brandidentity identityininmarketplace •• too marketplace toofew fewproducts products •• good goodbusiness businesslocation location Downloaded from hlayiso.com New Venture Creation: Level 2 39

The external opportunities & threats for a business Opportunities Opportunities Threats Threats •• growth growthininchosen chosenmarket •• new market newcompetitors competitorsentering enteringmarket market •• increase increaseininmiddle middleclass classincome •• customer income customerneeds needs&&wants wantschanging changing •• new newdistribution distributionmethods •• labour methods labourunrest unrestinincountry country •• export exportmarket marketopening openingup •• economic up economicrecession recession Downloaded from hlayiso.com New Venture Creation: Level 2 40

Professional associations • organisations to which professional people such as accountants, engineers, lawyers and teachers belong • ensure standards of professional ethics & integrity are maintained amongst members • provide professional training & accreditation for members • provide access to networking opportunities and job information Downloaded from hlayiso.com New Venture Creation: Level 2 41