Teacher’s Guide

Contents:

Chapter 1: Business Environments Page 2

Chapter 2: Organisational performance Page 14

Chapter 3: Conflict Management Page 19

Chapter 4: Human Capital Page 23

Chapter 5: General management and Corporate Governance Page 29

Chapter 6: Ethics, Professionalism and social responsibility Page 38

Chapter 7: Marketing Page 41

Chapter 8: Investment Page 50

Chapter 9: Insurance Page 55

# Please note: The questions are VERY open-ended and the students must be
allowed to apply their answers by incorporating personal opinion and varied insight.
The answers in this book only serve as a guide to the teacher and are not the only
possible answers.

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Chapter 1: Business Environments (Page 1)
Activity 1: Page 5
Each of these factors will have a greater or lesser impact on different businesses. Think about the business that
comprises your case study this year; discuss in class which of the above (or factors not listed) may impact on the
business and the appropriate responses required by the business. Once you have done the section on Corporate
Social Responsibility (Chapter 6), you should be able to add more detail to your assessment.

This exercise will depend on the theme company for the year, however, for the sake of this exercise we will
use a more generic approach, which you should be able to adapt to most businesses.

Factor Response required by the business

The average age of the These statistics may give them a greater knowledge of their target
population, life expectancy and market. The business needs to take its needs into account and possibly
people becoming more health identify a new market should these statics change over the years. The
conscious. statistics reveal so much more than initially meets the eye. For
example: Mr Price - with the population becoming more health
conscious, they have an Active clothing range as well as a whole sports
store promoting affordable kit.
The number of single parents Businesses must take this into account when employing staff. Single
providing for a family parents need to be at their children‟s school meetings: children become
sick and the single parent will possibly need to take time off work etc.
The business needs to be supportive.
HIV / Aids infection and The business must be aware of the effect these diseases have on the
diseases such as TB and performance of their workers. They should assist by educating the staff
malaria where possible. The business needs to take into account the rate of
absenteeism from work and have a contingency plan of recruiting and
training new staff.
Levels of literacy / education The business should take into account the struggle South Africa is
having with education or the lack thereof. The business should allocate
money for bursaries, particularly with the „fees must fall‟ campaign. The
business needs to embark on adult education within the business and
refer to the Skills Development Act and the SDA Levies Act.
Unemployment rates The levels of unemployment are very high in South Africa and therefore
the Government needs businesses to employ and empower the citizens
of our country. This includes sustainable outreach programmes.
Personal safety and crime The business needs to be aware of crime statistics and must make the
business a safe shopping and working environment for both employees
and customers. This secure environment comes with a cost to the
business and has to be budgeted for.
Awareness of the issue of Depending on the nature of the business, there is certain legislation put
pollution and recycling (also in place to protect the environment, for example, the disposal of
refer to Environmental factors) medical waste. Disposing of the waste, recycling and reducing pollution
sometimes requires the latest technology and a person / department to
drive the programmes, which are costly. Once again, the business
needs to budget for this.
Distribution of wealth / poverty There is an unequal distribution of wealth in our country / world,
consequently, the levels of poverty are extremely high.
The changing role of women in Many of the jobs lost over the last 20 years belonged to men who were
society in certain cultures displaced due to the restructuring of our workforce demographics
(EEA). With their husbands unemployed, women would now assume
the role of breadwinner. This is unlike before, where many women
would consider staying at home and raising children. Now, women are
more driven in their careers, and have embraced high-powered
positions in major corporations and government.

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Activity 2: Page 9
 Now that you have seen the example of the PESTLE analysis above, try to complete your own PESTLE analysis
for a business in a different sector.
 Remember to provide full strategies, to overcome challenges identified.

To use as a teaching tool, PESTLE has been divided into THREE columns to assist your students to
substantiate their ideas, and to help them recognise the link between the factor, the impact on the
business, and then their strategy.
Business used: MR Price
Factor Threat/challenge Impact on the business Strategies
Political instability: Jacob Zuma The Rand dropped to its lowest  Board members to meet and
fired the finance minister and in years and international publish an interim document
appointed an „unknown‟ (David investors are questioning the reassuring investors.
van Rooyen. He then quickly country‟s stability, and  Alternative countries need to
rectified this by employing therefore, questioning their be researched for substitute
Pravin Gordhan, all within a investments in South Africa. Mr suppliers.
matter of days. Price buys clothing and goods  Local production needs to be
from other countries and this explored.
Political has a financial implication for
them too.
Government corruption: Government will need to re-  Mr Price needs to abide by all
Investigations have shown that coup the expenditure so Mr the increases in taxes etc.,
between 20-25% (R180 billion) Price will need to abide by and not involve itself in any
of state money has been increases in taxes and its unethical business deals with
mismanaged yearly. obligation to support the Government. They need to
community because of the ensure CSR/CSI initiatives
misappropriation of funds. are sustainable.
Economic South Africa is close to being Many international investors  Mr Price must be open and
downgraded to a „junk status‟ will be forced not to invest in transparent about the
with regards to its our country (by international company‟s dealings,
creditworthiness credit agencies). This will result encouraging investors and
in a rise in inflation and retard making decisions that will
future growth for Mr Price. keep share prices as high as
possible.
Inflation is increasing: The People have less disposable Run specials like buy 2 and get
basic costs of living are income therefore don‟t have 1 free or introduce a loyalty
increasing rapidly. extra money for Mr Price card with points which equal
(Hyperinflation) clothing etc. free goods.
Social Crime in South Africa: Crime is Mr Price suffers financial loss Mr Price must ensure that all
on the rise and SA is ranked due to theft daily. Mr Price their security policies and
high according to world might lose customers who don‟t equipment are up to date.
standards. trust the area or who feel
unsafe.
Unemployment: High rates of Mr Price relies on the public to Mr Price can introduce a CSR
unemployment (26.7%) of buy products; with high programme which empowers
South Africans are without unemployment, fewer people South Africans with
income, this leads to other will be able to shop, Mr Price entrepreneurship initiatives
issues like crime, poverty, and will also struggle with crime,
lack of education. (5.2 million poverty and education issues.
people - one of the highest in
the world)
Technological Smartphone technology: The Mr Price is under pressure to Have a R&D team which is
world is moving faster and keep up with the technology, constantly looking for

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 mobile phones are being used and it comes with huge cost innovative apps that could
to purchase and pay for items. implications. assist Mr Price in being market
leaders.
On-line ordering: More and Mr Price is placed under Mr Price should benchmark
more people choose to make pressure to ensure in-store itself against online leaders to
their purchases on-line from products are available online. ensure the experience offered
home. Costs of delivery and return to customers is of international
policies need to be considered. standards.
Legal Legislation: BCEA Mr Price may face legal action Ensure that HR is well
Basic Conditions of if they violate employees‟ rights informed of laws and that they
Employment stipulates the and working conditions. are continually listening to
rights of employees. The law employee matters.
changes regularly with regards
to minimum wage.
Legislation: CPA Mr Price is compelled to abide Mr Price must ensure all
Consumer Protection Act is by the CPA when marketing employees know their
there to protect the consumer goods which could limit their „customer rights‟ and customer
against questionable business marketing strategy. rights should be clearly stated
practice. on their till slips e.g. return
policies etc.
Environmental Resource sustainability: South Mr Price is paying more money Mr Price needs to reduce their
Africa is experiencing major for electricity as Eskom are usage and find alternative
electricity and water shortages once again increasing their sources of electricity for
all over the country. tariffs. (9.6%) outages during load shedding.
Drought: South Africa is Mr Price‟s clothing is  Decrease the local
experiencing one of its worst dependent on cotton which is a manufacturers even more
droughts in many years. farmed product affected by the during this time and focus on
Farmers have been badly drought. cheap imports.
affected. Mr Price is paying more for  Mr Price can cut costs by
water and employees will start doing a Value Chain analysis
demanding higher wages for and use the savings on
higher food prices. increasing salaries.

Activity 3: Page 14
 Now that you have seen the example of the Porters Five Force analysis above, try to complete your own Porters
Five Force analysis for a business in a different sector.
 Remember to provide detailed strategies, to help your business maintain or create a sound competitive advantage
for itself.

This is an example of a Porters Five Force Model from INVESTOPEDIA by Renee Ann Butler
http://www.investopedia.com/articles/markets/120915/analyzing-porters-5-forces-cocacola.asp

‘Coca-Cola’

Level of rivalry in the market:

When you think of Coca-Cola and competitors, Pepsi is probably one of the first rivals to come to mind, and
rightfully so. The two companies have been in competition with each other since the late 19th century. They
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have very similar ingredients in their marquee products and some very similar offerings: Coke and Pepsi.
The two companies also have similar non-soda interests, such as orange juice and bottled water. Pepsi
also owns Doritos, Quaker Oats and Rice-A-Roni, which changes the way it competes. Most notably, if
trends go against soda and bottled drinks, Pepsi may be able to hedge its bets with its other lines. Coca-
Cola does not have the same opportunity.
Coca-Cola also competes directly against the Dr. Pepper Snapple Group. While Dr. Pepper Snapple does
not have a cola, it does feature some big brands in the soft drink and juice markets, including its
namesakes Dr. Pepper and Snapple as well as A&W Root Beer and Sunkist. In some ways, not having a
cola could work to the Dr. Pepper Snapple Group's advantage. As popular as Coca-Cola is, a trend towards
beverages with less caffeine could leave its sales in that product line depressed.
As consumer trends shift, Coca-Cola could be left vulnerable, but the beverage company does have a loyal
following. The risk in this area is moderate.

The Threat of new entrants into the market:

New entrants to the beverage industry are another possibility. While companies such as Coca-Cola and its
rivals do have special licensing deals, including having their products sold in fast food chains, and different
distribution deals, another company could gain a foothold if it hit into the trends at the right time. Granted, it
would have to have a very positive and very viral image or spend a fortune to create the type of brand
recognition Coca-Cola enjoys, but it is not impossible.
Moreover, as consumers move towards healthier options, it would not necessarily have to be a single new
entrant that causes a problem for the beverage behemoth. Several new entrants to the industry at once
could fragment it to the point that it affects Coca-Cola‟s bottom line. As smaller companies attempt to enter
the beverage market, this threat becomes more of a possibility. It may not be very likely, but anyone
investing in Coca-Cola should at least keep an eye on the competitive landscape.

Availability of substitute products

Similarly, Coca-Cola also has to contend with what buyers could purchase instead of its products. For
instance, customers could start drinking coffee instead of Coke. If the rise of Starbucks has shown
anything, it is that people really do love coffee in the right environment and with the right flavourings. Coca-
Cola does have a stake in Green Mountain Coffee Roasters, the maker of Keurig, possibly for just this
reason.
Buyers could also choose beverages such as freshly made smoothies or fresh-pressed juices instead of
Coca-Cola's bottled beverages. As more people become health-conscious, the threat of a trend forming in
which buyers substitute a different drink for Coca-Cola products becomes more of a possibility. Again,
Coca-Cola is popular the world over, but investors need to make sure they are aware of the competitive
landscape in which the company operates if they are going to make informed decisions about whether to
invest and how long to hold on to their investments if they do.

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Power of the buyer
When it comes to the bottled beverages market, buyers have a fair amount of bargaining power, and this
affects Coca-Cola's bottom line directly. Coca-Cola does not sell directly to its end users. Instead, it mostly
deals with distribution companies that service fast food chains for fountain services, vending machine
companies, college campuses and grocery stores. Demand leads the purchases, but Coca-Cola also has
to keep an eye on what that end price will be. Ultimately, Coca-Cola has to sell its products to distribution
networks and other customers at prices low enough that they can sell to the end user at a price that keeps
them coming back.
Moreover, Coca-Cola's pricing is also somewhat consistent with each outlet. After all, McDonald's does not
sell a Coke for 99 cents one day and $1.03 the next. As Coca-Cola's cost of goods sold (COGS) fluctuates
due to materials, transportation or manpower, either the beverage company or those companies to which it
distributes have to absorb the changes in price.

Power of the supplier:

This leads to the final competitive force: Coca-Cola‟s suppliers. As big as the beverage company is, and as
many contracts as it likely has with its suppliers securing pricing, suppliers still have some power, and
some of it may be out of their hands. After all, sugar is a commodity; like other commodities, its price varies
over time and with availability. A few natural disasters could affect sugar cane harvests and impact Coca-
Cola's raw materials costs. Thanks to contracts the company likely has in place, the effect would be
minimal unless those disasters occurred repeatedly over the course of several years.

Activity 4: Page 25
Walmart is an American retailer that recently acquired a share in Massmart. Massmart operates in the South African
retail market under brands such as Builders Warehouse, Makro, Game and Jumbo. Before Walmart decided to enter
the South African retail market, they probably performed a SWOT analysis.
 Put together a SWOT analysis that is applicable to these businesses‟ external environments.
 Describe possible strategies that Walmart could have implemented to overcome challenges.
Discuss how Walmart could have used internal strengths (in the eight business functions) to create or defend a
competitive advantage.

Students must be allowed to interpret the question; therefore, these answers are not set in stone, rather an
example of a possible answer!

SWOT analysis on Massmart in South Africa for Walmart

Strengths:
 Massmart is an established company which was founded in 1990. It has been operating for 26 years
with strong brands under its belt.
 There are many brands within the company, they include:

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 Massmart listed on the JSE Limited on 4 July 2000 at R12.50 per share and the share price has grown
to R128.54 (March 2016), which shows good growth.
 Massmart is currently a top 40 listed company (by turnover), showing that it is financially strong.
 Massmart is a participant in the JSE Limited‟s Socially Responsible Investment Index, which proves that
it is dedicated to incorporating sound governance principles within the group.
 Massmart employs over 37,500 permanent and flexi-time staff, and achieved annual sales of R72bn for
the year ending December 2013 which further emphasises their strength and stability within the market.

Weaknesses:
 Massmart is not as well-known as some of the other corporate groups, however, some of the
businesses within the group are well-known; for example, Game stores is well-known while Saverite
supermarkets are unknown.
 Due to the variation in the LSM groupings of the stores within Massmart, the interior branding is very
different and some of the stores could be perceived as „untidy‟ or not very well presented, when in fact it
is due to the nature of its business, for example, Dion Wired (very modern and branded) vs. Jumbo
(Cluttered and not well branded).

Opportunities:
 Massmart can branch into many specialised fields like discount stationers or discount homeware. This
may be done by taking over other businesses within the market.
 Massmart should grow its brand leaders in other countries, such as Game in Botswana. Massmart‟s
other stores could open and expand internationally.
 Massmart could integrate backwards into the manufacturing industry as a form of growth potential in
order to ensure a continuous and cheap supply of certain goods. This will also have huge implications
for our country‟s low employment rates.

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Threats:
 Massmart sources many of its goods from the Far East, which is not good for local suppliers.
 Massmart has very active unions operating within the company and the idea of change is a catalyst for
industrial action.
 Massmart has many competitors for each of their stores, like Makro vs. Trade centre and Game vs.
Checkers etc.
 South Africa is going through tough economic times, which will affect the company‟s financial position.

Possible strategies to overcome challenges:

 Walmart needs to build a stronger brand image once it enters the market. This can be done by
diversifying certain stores or even improving current advertising methods.
 Walmart could investigate the possibility of utilising local suppliers for certain stores; this could win
the trust and respect of South Africans consumers, given that Walmart is an American company.
 Walmart could also use its international experience, both positive and negative, to review the
Massmart brand, thus possibly develop new ventures not previously considered.

(Students must be allowed to interpret the question, therefore these answers are not set in stone, and
rather, they are an example of a possible answer!)

How Walmart could use internal strengths to create or defend a competitive advantage:

 The fact that Walmart is the largest retailer in the world shows that they must be doing something
right!
 Each functional area is established in America and it can implement its current international
processes into Massmart/Walmart South Africa.
 Financially, Walmart is an American based company, which is trading in many other currencies.
This creates a competitive advantage for South African companies, trading in Rands only.
 Walmart has many different suppliers all over the world so the purchasing department will have a
competitive advantage because they are so well-networked. Walmart also buys in bulk, therefore,
there can be price negotiations.
 Walmart has been very successful with advertising internationally; it can use this strategy to enter
the South African market and assist the local marketing department.

Activity 5: Page 26

 Identify possible resources (tangible and intangible) that Famous Brands may possess. You may download
and read through the 2015 annual report of Famous Brands to help you.
 Discuss the ways in which you think Famous Brands is currently using these resources.
 Discuss ways in which you think Famous Brands could use these resources to optimise its potential to
increase an already strong competitive advantage. Remember also to look at the issues of viability and
feasibility in your discussion.

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(These are just a few out of many resources in the integrated report)

Tangible resources within Famous Brand:

R3.3 billion turnover
Brands and stores (Steers, Debonairs, Wimpy etc.)
Products they manufacture
Employees
Logistics infrastructure

Intangible resources within Famous Brands:

Staff knowledge and expertise
Company vision
Customer brand loyalty
Training and skills development

Ways in which Famous Brands are using the above resources:

R3.3 billion turnover - Turnover is used to pay expenses, fund new ventures, pay shareholders plus
many other uses.
Brands and stores (Steers, Debonairs, Wimpy etc.) - The stores are used to generate an income. It
provides food and drinks to customers for a fee.
Products they manufacture - This is in the form of cold meats etc. These products are manufactured and
distributed to retailers or restaurants to be sold.
Staff knowledge and expertise - The staff use their knowledge and expertise to work towards the
company‟s objectives, of which the primary objective is to make money.
Company vision - The Company‟s vision is for the entire organisation, to achieve the goals set by the
Company. It sets the tone within the business.
Customer brand loyalty - Brand loyalty is important as it results in repeat buying from customers. This is
important to grow sales and the market share within the organisation.
Training and skills development - Training and skills development is important to enhance the ability of
each employee within the business, which allows the goals of the organisation
to be reached.

Optimising their resources (considering viability and feasibility):

R3.3 billion turnover - Famous Brands needs to ensure there are proper budgets set up in each department
within the entire company. These budgets need to be adhered to. Cost savings and
financial efficiency need to be practised in order to ensure each cent of the turnover
is precisely allocated. Any funds remaining after these stringent methods of control
have been implemented may be used to grow the business, which in turn will add to
the growth of the company.

Brands and stores (Steers, Debonairs, Wimpy etc.) - There are so many ways that Famous Brands could
utilise their resources optimally to gain a competitive advantage - this may be
achieved through each individual brand exercising its own innovation. For example:
Tasha‟s looking at each component within the business, such as the employees and
what is required to keep them happy and working hard. This could be achieved by
promoting employee of the month competitions which allow the winner to receive
vouchers or paid time off or by facilitating staff discounts on food etc.

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Activity 6: Page 27

Draw a mind map, to illustrate the different tools which could be used during an environmental scan
(internal and external environments).

There are Business environments

Macro  Env. Scan, OT(SWOT) & PESTLE/P²E²STLE

Market Analysed using:  Env. Scan, OT(SWOT) & Porters Five Force
Micro  Env. Scan, SWOT, Resource-based approach, value chain analysis & Balance Scorecard

Business Environmental scan =

Environments Identifying factors that
may impact the business
and then adjust existing
plans or develop new plans
to deal with these factors.

P²E²STLE
P Includes local & international politics
Political which affect our country and other
countries we operate in.
P Factors pertaining to the physical
aspects of the environment
Physical
including weather, erosion, drought,
floods etc.
E All economic factors which affect
Economical the business like: Inflation, interest
and exchange rates etc.
E Principles and values that determine
if decisions and actions are
Ethical
acceptable in our country and other
countries.
S The impact socio-economic issues
Social have on all stakeholders in our
country.
T Advancement of technology locally
Technological and internationally and the impact it
has on different industries.
L All laws (legislation) in our country
Legal and other countries we operate in
that affect our business.
E Global awareness that needs to take
Environmental place regarding the environment
and the depletion of its resources. SWOT
Internal factors that make your
Strengths
business better than others.
Internal factors that are stopping
Weaknesses your business from being better than
competitors.
External plans that can be put into
Opportunities place to improve the weaknesses of
your business.
External issues that you can’t
change, you need to know them in
Threats
order to steer your business around
them.

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 Porters Five Force Model
Knowing what your competitors are doing in
Level of rivalry in the
order to better your business to outperform
market
them.
These are potentially new businesses that
The threat of new
see possible opportunities to enter the
entrants
market which will reduce your market share.
A substitute product is a different product
that satisfies the same need. Customers
Availability of
might move from your product to the
substitute products
substitute if they perceive it to be a better
option.
In order for businesses to be successful, they
Power of Suppliers
rely on their suppliers being efficient.
Without our customers, our business
wouldn’t exist. It is very important that we
Power of the buyers
know everything about them and meet their
needs.

Micro Environment

Tools to analyse
this internal
environment.

Resource-based approach (Covered in more detail later on)

Identify tangible and intangible resources in the

business with a view to creating more sustainable
value in the business.

Balance Scorecard: (Covered in more detail later on)

Value chain analysis: (Covered in more detail later on)
The BSC describes the key outcomes that the business would like
This involves the process of thinking about different to measure (Evaluate) in order to improve these outcomes.
ways in which the business creates value internally, Elements evaluated are finance, customers, internal business
which in turn will mean better value for the perspective, and a learning and growth standpoint.
customer.

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Additional activities: Page 27

1 Any change in terms of population growth would be a factor originating in the … environment.
A internal B international
C micro D external

2 If there is an economic crisis in a country from where goods are imported, it can be seen as a challenge from
the ... environment.
A micro B macro
C internal D local

3 The management team of the business is investigating the probability that new environmental legislation will
be passed and the potential impact that this may have on operations. Which one of the following techniques
would be a handy tool to use during the investigation?
A Balanced Scorecard B Benchmarking
C PESTLE D Porter's Five Forces model

4 Which one of the following techniques would be used to analyse the micro-environment?
A Porter's Five Forces Model B PESTLE
C Resource Based Approach D Benchmarking

5 When the retailer uses the ratio of Total assets: Total liabilities, it is a … financial tool
A gearing B liquidity
C profitability D solvency

6 A SWOT analysis was used and the retailer identified a threat. Which one of the following would be seen as a
threat?
A The appointment of an unqualified manager
B A decrease in liquidity
C A possible economic recession
D Low staff turnover

7 Changes in legislation relating to BBBEE form part of the … environment.

A micro B market
C macro D internal

8 Think of how technology may sometimes make it very difficult for a new business to enter a particular market
if the cost of obtaining the technology required is very expensive or the technology is not regularly available.
But, also think of how technology sometimes makes it very easy for new businesses to enter the market and
to start selling products or services.

12
 Identify different technological devices used in the business that you could use as a case study and discuss
whether technology makes it easier or more difficult (or costly) to enter this market as a new competitor.
This question is open ended; below is a guide to a possible answer. It is important to consider a student‟s own
interpretation.

Technological devices used in Mr Price:

EPOS - Their electronic point of sales in each store. Mr Price use a unique touch-screen till.
Online shopping - Mr Price have a wide range of products available on their online store, customers click, pay and it is
delivered.
Mr Price mobile - Mr Price‟s virtual network runs off the back of Cell C.

Because there are different companies in Mr Price Group Ltd, these companies utilise a variety of technology in their
respective businesses. Not many of the technological devices would seem to pose a barrier in any way to new
entrants in the clothing, home and sport stores. However, with Mr Price Mobile, it does play a part. The costs of
starting a communications network is extremely high and that‟s why Mr Price reduces the cost by running off the back
of Cell C.

9 What is the difference between a vision and a mission statement? Formulate a vision and mission statement
for a new fast food franchise.

The vision is a statement about what your organisation wants to become, while your mission statement is a
description of what an organisation does or the purpose of the business.

Example of a vision:
Burger King - „to be the most profitable quick-service restaurant business, through a strong franchise
system and great people, serving the best burgers in the world‟

Example of a mission statement:

Burger King - „to offer reasonably priced quality food, served quickly. There is a focus on the following:
realistic prices, quality food and quick service, attractive and clean surroundings.‟

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Chapter 2: Overall organisational performance (Page 30)

Activity 1: Page 36
Checkers operates in a competitive retail market, where they have had to 'take on' and 'see off' rivals. Checkers as an
organisation has had to decide for itself what best possible strategies to employ.

Checkers has contacted you as a TQM specialist to help them to create a consistently high level of quality across the
business functions in order to maintain their position in the market place.

 Discuss the importance of ensuring optimum quality throughout Checkers.

 Explain to Checkers how the different elements of the Balanced Scorecard could be used as critical drivers for
future organisational performance.

 Because TQM is the philosophy of improving the business as a whole, Checkers would
continuously need to look at improving their processes and products by enhancing the
efficiency of their staff, and other company resources. By ensuring quality throughout
Checkers, it would have the following importance / benefits:
- It could eliminate any unnecessary, repetitive work by the employees.
- It could minimise waste and all cost associated with it.
- It leads to increased productivity.
- Creates greater customer satisfaction which results in brand loyalty.

Inevitably, all of the above result in improved profits.

- Elements of Balance Scorecard to drive future success:

The financial perspective focuses on maximum utilisation of assets and minimising of costs in
order to create shareholder value.
- CHECKERS needs to make every effort to ensure efficient use of their financial resources in
the business. By using different ratios to evaluate an accurate assessment of Checkers'
financial position, they will be able to allocate finances in a constructive way to grow or develop
the organisation and improve performance.

The customer perspective focuses on how customers see the business and what their
expectations might be.
- CHECKERS should ensure all the customer needs and expectations are met; this will counter
customers leaving and it will promote brand loyalty and possibly increase market share.

The internal business perspective is focused on innovative products and services, the
management of operations and social investments work to improve the business.
- CHECKERS needs to ensure they not only watch what their competitors are accomplishing
but also encompass innovation of their own in the industry. The innovation needs to stretch
across the entire business. Checkers needs to consider all the social investments as this will
add to their level of compliance with regards to social sustainability.

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 The learning and growth perspective looks at how employees in the business can continue to
improve and create value. This is done through the intangible assets of the business such as
information capital (intellectual property) which is developed by the human capital (employees).
Leadership, accountability, culture and teamwork are important components when developing
a culture of lifelong learning and development.
- CHECKERS must continue to train employees on all levels. This may incorporate the Skills
Development Act, whereby the company ensures accredited programmes are run. If Checkers
ensures that they have a well-trained workforce, it will enhance the success of the business.
Investing in one‟s employees creates a competent, happy team that are willing to work towards
a common work-related purpose.

Activity 2: Page 44

One of the food retail groups is experiencing a very high absentee rate amongst employees. They would like to
improve the health and well-being of the workforce. Use TWO creative thinking or problem-solving techniques to help
the retail group to resolve this problem.

# PUPILS MAY USE ANY OF THE TECHNIQUES - EXAMPLE OF TWO:

Decision Tree

HR to follow up in
a mentor role

Justified
Absenteeism

HR to identify HR to formulate
reasons and address support to reduce
underlying issue rate of absenteeism
High
Employee
Absenteeism

Repeated offence - Dismissal of Proceed with HR

follow disciplinary employee after protocols to re-
procedures as per disciplinary hearing employ a staff
code of conduct member
Unjustified
Absenteeism

Once-off offence –
give a verbal
warning

RIMS
- RIMS strategy argues that the solution should be beneficial to society, instead of the focus primarily
being on “how do I benefit from this solution?”
- All participants discussing the problem should be seen as equals, thus affording each person fair
opportunities to state his/her case.
- Only facts may be stated; personal opinions, emotions and positions held in the organisation do not
form part of the discussion.

15
- As a result, arrange a meeting with the HR committee and the „offenders‟, investigate the real issue for
not attending work. The committee can look at ways to solve the problem even if there are financial
implications for the company.
Activity 3: Page 44
Complete the following table by giving real life examples of businesses applying these techniques

Explain what is being done and evaluate if you think it is successful.

The first one has been done to give you an example.
Technique / Which Explain what the business Do you Motivate your answer.
think it is
Strategy business does successful
uses this in
real life?
Low cost PEP stores Products (of a lower quality) are Yes South Africa has a large
sold at very low prices. The population that is very poor.
costs are kept low by importing PEPs cater for this segment of
from countries such as China. the target market.
Focus Typo They sell novelty designer Yes Stores are growing and it is
stationery and odds. It is a „trendy‟ to have Typo products.
particular style - at a high price.
Differentiation Rent-a-pet A team will bring you everything Yes People find it a problem to buy
you need to care for any type of all the equipment for a pet and
pet for a period of time. For an a few weeks they realise they
amount you can see if you want don‟t really want it. This model
to keep the pet, if not you can is working in different
return them. countries.
Joint venture Woolworths There are Woolworths food Yes Customers have 24hr access
and Engen stores at certain Engen garages. to Woolworths food, which is
renowned for its quality and
Engen is boosted by having
their loyal customers plus
Woollies customers.
Market penetration Cell C They have a new „buy out‟ your Yes Their market share is
old contract from other service increasing, plus they are
providers and then you take one portraying financial strength
of their existing contracts (perceived or real).
Market development Mr Price They have always been in the Yes Their sales figures for online
clothing market, however, now are growing and they are going
they have online clothing too. to expand Mr Price sport onto
online as well.
Product development Standard Bank You simply scan a code and the Yes It is available in more and
Snap Scan bank automatically transfers the more stores, however, the
funds. other banks will soon offer
something similar and then
Standard bank won‟t have the
competitive advantage.
Diversification Mr Price They entered a new market of Not sure In their annual integrated
mobile telecommunications with a new report it shows that they are
product like cell phones and not making a profit yet. They
contracts. are much smaller than the
other companies offering far

16
 less variety.
TQM BMW There is a huge emphasis on Yes The brand is prestigious and
customer satisfaction and quality well-renowned for quality and
excellence.
Benchmarking Pick n Pay / Pick n Pay have Richard Yes Pick n Pay is a market leader
Tesco‟s Brasher, an ex-Tesco‟s offering value to customers. It
employee. Richard (CEO Pick n has excellent processes which
Pay) now compares many of the add to pleasant customer
operations and successes of experiences. Much of which
Tesco‟s. was compared to Tesco‟s

Additional activities - Page 45

1 A tool used to improve the overall performance of the business by raising standards is …
A market research B TQM
C inspections D BSC

2 … will have a negative impact on the performance of the business.

A High staff turnover B High sales turnover
C An increase in the skills level D A decrease in staff numbers

3 ... measures how much profit was generated with the capital invested in the business.
A Return on investment B Liquidity
C Solvency D Gearing

4 ... is the process a business uses to scrutinise its own performance methods in comparison with methods
used elsewhere.
A Benchmarking B TQM
C Business Process Re-engineering D Subrogation

5 A process where the business analyses all operations and standards in order to improve overall customer
satisfaction is known as …
A market satisfaction B customer perfection
C total quality improvement D performance lobbying

6 An employee at your local food retailer has just had a bad performance appraisal, because she is not
performing well. She claims a performance appraisal is waste of company resources. Give TWO reasons why
you disagree with the statement.
It ensures open communication between employer and employee, whereby both parties can
express any concerns or give feedback on performance. Parties will always be on the same page
and understand expectations.

17
 It can be used as a base for incentives allowing performance to be measured against certain
criteria.

7 Would you say it is a good idea that the Marketing Manager and the Human Capital Manager use different
tools to evaluate the quality of performance in their respective departments? Motivate your answer.

(Pupils may answer either option, as long as it is substantiated)

Not a good idea, because it will be easier to measure apples with apples. And, the company should
use one performance measure across all departments to create a standard.

Yes, a good idea, because each department requires different inputs. There might be one
organisational goal, however, each functional area has different objectives and require special tools
to measure performance.

8 How can the personal goals of a manager possibly affect the performance of the department and therefore,
the overall business?

If either manager‟s personal goals don‟t align with that of the business there could be conflicting
views or expectations. It will help both parties if the manager‟s personal goals are supportive of the
company‟s objectives. There must, however, always be a balance between one‟s personal life and
place of employment.

9 How can a Value Chain Analysis be used to improve the performance of the business?

In a business environment, the concept of adding value for the customer should be the aim,
because a business needs satisfied customers to be successful. In a manufacturing environment it
is easy to see how and when value is added. Just follow the process of raw material (input) being
transformed into a valuable product (output). If one keeps in mind that there are internal customers
(co-workers or the boss) and external customers, it is important to look at the entire business
process to decide where value is added in a cost-effective manner to enhance the quality of the
product or service rendered. It has been recognised that if a business is involved in something that
is not its core-business strength, that particular activity will probably not add value to the business
process. In a case like this, it may be better to outsource the service.

10 Critically evaluate RIMS (Rational Interaction for Moral Sensitivity) strategy as a technique to solve problems
in a business.

The RIMS strategy argues that the solution should be beneficial to society, instead of the focus
primarily being on “how do I benefit from this solution?” In order to achieve this, it is suggested that
all participants discussing the problem should be seen as equals, thus affording each person fair
opportunities to state his/her case. Only facts may be stated; personal opinions, emotions and
positions held in the organisation do not form part of the discussion.

18
Chapter 3: Conflict Management (Page 46)

Activity 1: Page 47

Explain how the following factors could lead to conflict in a retail environment such as Pick n Pay.

 Change in management structure when the new CEO was appointed

 Insufficient products on the shelves
 Poor communication between Head Office and one of the Family Store franchisees
 Lack of manpower resources in the Marketing department

 Change in management structure: This could cause conflict because staff may be unsure as to how the
new CEO might change business processes. The staff may be unaware of the new CEO‟s expectations.
Change always brings a certain amount of insecurity, which causes doubt and conflict

 Insufficient products on shelves: If there is not enough stock on shelves, customers will complain to staff.
This causes frustration and staff may argue with other staff over the insufficient stock. This might cause
conflict between staff and also possibly conflict between staff and customers.

 Poor communication: This leads to misinterpretation of facts. It causes parties to make assumptions and
then react to them. Both parties may become frustrated and conflict could occur.

 Lack of manpower: Staff may be overworked due to being understaffed. Staff may then argue about their
roles, which might not be clearly defined. Conflict may occur amongst employees and with the employer.

Activity 2: Page 49

Complete the following table to explain how each factor may lead to conflict and how it should be dealt with.

Source of conflict Why it may lead to conflict How management should deal with the
situation
Tax avoidance If there is not a consensus on the legal Management needs ensure all role
shifting of expenses to minimise tax players are clear about the
deductions, or if tax avoidance is more organisational culture and the
like tax evasion. company‟s views on good corporate
citizenship to avoid any blurred lines.
Cultural diversity Due to the diverse cultures in South Management needs to ensure all staff
Africa, employees don‟t understand one know that the company has a zero
other‟s customs, and because of tolerance for any discrimination, racism,
ignorance and prejudices, arguments sexism etc. The business‟s policies on
are prevalent. inclusivity needs to be visible.
Limited resources When staff have to fight over limited Management must scrutinise each
resources in a business in order to department‟s budget and ensure that
reach their goals, it is unfair and leads resources are distributed proportionally
to conflict. throughout the business.
Change in legislation Legislation puts pressure on The company needs to operate in a
businesses to make certain decisions, transparent manner in applying
when management carry out steps to legislation. Management must have the
align with legislation, employees might right attitude towards transformation for
become frustrated, e.g. - BBBEE employees to see it as positive.
19
Sexual harassment An employee will be offended by sexual Management must demonstrate zero
harassment in an organisation and tolerance towards sexual harassment,
have a negative opinion of the as well as outline acceptable and
company. If legal proceedings are unacceptable behaviour in the code of
instituted there might be further conflict. conduct.
Different personality types There are so many different personality Management should take personality
types in any given organisation. Some types into account when employing
people are perfectionists, while others different staff in each department. Staff
might be very laid back. These also need to feel comfortable with
personalities don‟t always concur and talking to HR regarding frustration they
clashes do occur. might experience, working in teams.

Activity 3: Page 52

How Can the CCMA assist employers and employees to resolve conflict?

Conciliation: Facilitators listen to both sides, while acting as an independent party. Both sides discuss their
respective points of view. If no consensus could be reached between the two parties, the next step would
be mediation.
Mediation: The CCMA representative will make a recommendation on how the dispute should be settled;
the recommendation, however, is not binding.
Arbitration: This is the third step in the process. The arbitrator will issue an instruction on how the dispute
should be settled and this instruction is binding on both parties.
If one of the parties feels there was an oversight by the CCMA representative in dealing with the issue, it
may be referred to the Labour Court.

The aim of the CCMA is to prevent labour disputes from escalating into labour unrest. The CCMA is not
affiliated to any political party, employer organisation or Trade Union.

Activity 4: Page 52

Several employees employed at a big clothing retailer have requested to work shifts as they feel the working hours
from 8:30 am to 18:00 pm are longer than what is allowed by the BCEA. The Human Capital manager told them to be
grateful they have jobs. This has now led to conflict in the work environment.

 Do you think this will be functional or dysfunctional conflict? Motivate your answer.
 Evaluate the manager's response to the request .
 Make TWO suggestions how this conflict situation could be resolved.

 It could lead to dysfunctional conflict as the business is violating legislation and if the workers are
continually treated unfairly they may possibly embark on industrial action which is a refusal to work
unless conditions change.

 It was unfair. The manager should have considered their suggestion as he is violating legislation. His
response has contributed to a breakdown in relations. He has also shown a disregard for compromise,
and/or a willingness listen to the employees‟ concerns.

 The manager should sit with the employees and listen carefully to their suggestion before making his
decision.
The manager should look at giving the employees time off for overtime worked or to pay 1 ½ times the
usual rate.

20
Activity 5: Page 52

Conflict management at different levels:

 Why is it important for a manager to know how to solve conflict?
 Is there a need for a junior employee to have conflict management skills? Motivate your answer.
 How can a trade unions help in resolving conflict?

 A manager must be able to solve conflict as it ensures company resources are being used to achieve
the business objectives of making a profit. When there is conflict and it is not managed correctly, it is a
distraction and a waste of resources which could have been used to grow or develop the business.

 Yes, if conflict can be handled at every level it won‟t escalate to management. It is important for
everyone to know how to communicate even if there are differences and to understand that there is
more than one solution to problems.

 A Trade union may be defined as a group of workers organising themselves in a collective organisation
with the aim to engage in collective bargaining with the employer and/or employer organisations.
Ensure industrial peace by influencing policies and decisions regarding labour issues
Address issues such conditions of service, safety in the workplace, remuneration (wages) and workplace
restructuring (including possible retrenchments)
Ensure fair treatment of workers (setting realistic working standards and representing employees in
disciplinary issues)

Additional activities - Page 53

1 If a member of a team takes on more than he/she can cope with, the team member is experiencing...
A role conflict B role stress
C role overload D role compromise

2 When people in a conflict situation compromise on the outcome of the task, it is referred to as …. conflict.
A limiting B functional
C strategic D dysfunctional

3 The synergy in a team can best be described as...

A the process of creating value without interaction
B a situation where team members compete till there is a clear winner
C the impact of the management style on the team members
D the interaction of team members in a manner that ensures their combined effort is greater than their
individual efforts

4 The purpose of playing devil's advocate is to …

A increase productivity by playing dirty
B allocate duties to team members in a manner that will destroy the group
C criticise the proposed plan of action in order to encourage analytical thinking
D reason with the group until they accept his/her plan of action

21
5 Explain how each of the following tools may be used to resolve conflict in the workplace:
5.1 Accommodation

When an Accommodating approach is followed, the person will be cooperative and not assertive. He/she will
probably neglect his/her own interests and even sacrifice some of his/ her beliefs when yielding to the other‟s
point of view.

5.2 Avoidance

A person opting to avoid a conflict situation ignores the conflict by withdrawing from the situation or
postpones dealing with it till a later stage or avoids the situation by getting someone else to deal
with the conflict situation. If it is not an important issue, this approach may very well work - almost
like the saying “pick your battles carefully”.

5.3 Collaboration / cooperation

When Collaborating / cooperating, the parties try to work with each other in a situation that fully
satisfies everybody involved. When collaborating, the parties attempt to find a solution that fully
satisfies everyone‟s concerns. This will usually take time, as the underlying differences must be
uncovered and addressed.

5.4 Competing

Competing means an individual is not prepared to give in, instead he/she will do everything in
his/her power to win. People will follow this approach if the conflict is over a principle or value that
cannot be relinquished.

5.5 Compromising

Compromising means the parties are trying to find an acceptable solution to the mutual (although
sometimes only partial) satisfaction of both parties by seeking a common middle ground.

6 How does the CCMA assist the employer and employee to resolve conflict?

Conciliation: Both sides / parties are listened to; facilitators merely act as an independent party, while both
sides discuss their respective points of view. If no consensus can be reached between the two parties, the
next step will be mediation.
Mediation: The CCMA representative will make a recommendation on how the dispute should be settled;
the recommendation, however, is not binding.
Arbitration: This is the third step in the process. The arbitrator will issue an instruction on how the dispute
should be settled and this instruction is binding on both parties.
If one of the parties feels there was an oversight by the CCMA representative in dealing with the issue, it
may be referred to the Labour Court.

22
Chapter 4: Human Capital (Page 54)

Activity 1: Page 61

Stephen is a supervisor in the Gauteng warehouse of one of the national clothing retailers.
The following information appears on Stephen‟s payslip:

Employee: Stephen Jackson Employee code: SJ03

Gross salary: R15 000
Deductions: Contributions:
Medical aid fund: R800 Medical aid fund: R400
Pension fund: R1 500 Pension fund: R1 500
UIF: R150 UIF: R150
PAYE: R3 750

Net salary: Unknown

Answer the following questions, using the table above as reference:

 Is this a 'Cost to company' or a 'Cost plus benefit' package? Motivate your answer.
 What is Stephen‟s net salary?
 If Stephen resigns from the employer, what would be the cost savings for the business if he is not replaced?
 How do you know Stephen does not receive any other fringe benefits?
 Name FIVE other possible fringe benefits that an employee could earn.
 Explain the UIF deduction and contribution.

 The above is cost plus benefit package because there is a salary of R15 000 then there are additional
contributions added.

 Stephen‟s net salary is R10 850.

 The cost saving for the business if Stephen resigns is R17 050.

 All fringe benefits need to be showed on the payslip. There may be no hidden benefits as it would
classify as tax evasion.

 Travel allowance, Meals allowance, accommodation allowance, cell phone allowance, study allowance.

 Contributions are made by both the employee and employer. 1% of the gross salary is deducted from
the employee‟s salary and an equal amount is contributed by the employer who is responsible for paying
this amount to SARS. The ceiling amount (limit for the purposes of calculating contributions) is currently
(2015) R14 872 per month.

23
Activity 2: Page 70
John is a very loud and outgoing individual. He is the acting supervisor in the financial department. He says people in
the financial department are too serious and therefore he always jokes with everybody, but sometimes he does not
know when to stop. Mary is a new cashier at the shop where John works. She has asked John on several occasions
to stop whistling at her when she wears a mini skirt and to tell her he will organise her an increase if she has lunch
with him. John says he is just joking. Mary has now laid a charge of sexual harassment against John. The HCM has
listened to Mary and decided to fire John immediately. The reason that was given for the dismissal was Incapacity to
do the job (poor performance on the grounds of misconduct). Comment on the substantive and procedural fairness of
this case.
The three reasons that constitute substantive fairness when an employee is dismissed are:
- Dismissal due to Incapacity (inability to meet the required standards)
- Dismissal based on Misconduct (not adhering to the rules)
- Dismissal due to operational reasons (retrenching workers)

Procedural fairness for Incapacity:

- The complaint should be put in writing and fully investigated, with the investigation process recorded
in writing. This may include taking statements from the complainant and all witnesses.
- The accused should be advised of the full nature and details of the charge/s against him/her and
given full access to all written statements collected.
- The date, time and venue of the disciplinary hearing should be given to the accused in writing.
- The accused should be given reasonable time in which to prepare and to appoint his representative
for the disciplinary hearing, but it is important not to delay the disciplinary hearing unnecessarily.
- The accused is entitled to have an interpreter if he/she is not comfortable with the language in which
the disciplinary hearing will be held.
- The complainant presents his/her case first by giving evidence and calling witnesses to testify. The
accused is given an opportunity to cross-examine witnesses.
- The accused then presents his/her defence and calls his/her own witnesses. The complainant will
have the opportunity to cross-examine the accused's witnesses.
- The Chairperson of the Disciplinary Hearing decides on the guilt or innocence based on the
evidence presented by both sides. At this stage no aggravating or mitigating circumstances are
considered - only the facts relating to the disciplinary issue.
- The Chairperson decides on the verdict. If the accused is “not guilty”, this is confirmed in writing and
given to the accused, and the matter is closed. If the verdict is one of “guilty”, then the Chairperson
considers aggravating or mitigating circumstances and decides on a fair sanction (punishment).
o These aggravating or mitigating circumstances may include the age of the employee,
employee‟s state of health, length of service, level of education, position in the company,
remorse shown or any other valid point.
- The Chairperson will advise the accused of his/her rights to appeal and to take the matter to the
CCMA.

24
Activity 1(3): Page 76

The regional manager at XYZ-Bank has changed the conditions of the employees‟ contracts, without the necessary
consultations with trade unions and employees. The employees feel that this matter was unethical and that the
manager should have consulted with all necessary parties. Feeling disgruntled, employees have taken matters in their
own hands and have proceeded with a boycott and arranged a strike to demonstrate their dissatisfaction. Due to the
low staff attendance and productivity, the manager has decided to dismiss all employees not at work.
 Identify the role of trade unions with regards to the above case study.
 Address both parties on the implications of their decisions and suggest the necessary resolutions to move
forward to a mutually agreed situation.
 Discuss all Acts applicable to this dispute.
 Discuss ethics and team work within the work environment of XYZ Bank.

 The Labour Relations Act allows registered Trade Unions to be part of the collective bargaining process
and to fulfil the following roles and functions:
Ensure industrial peace by influencing policies and decisions regarding labour issues
Address issues such conditions of service, safety in the workplace, remuneration (wages) and workplace
restructuring (including possible retrenchments)
Ensure fair treatment of workers (setting realistic working standards and representing employees in
disciplinary issues).

 The manager dismissing all the employees not at work - The manager was not within his rights to
dismiss the workers for industrial action. Yes, it might have been an unprotected strike, however, there
are still certain procedures that need to be taken before employees may be dismissed. For example:
The employees needed a written warning which stated that should they did not return to work; they
would be dismissed.

The employees taking matters into their own hands and striking - The employees should have followed
due process with their union. First, they should have allowed collective bargaining to take place between
the employer and the union, then once these collective agreement procedures were met and there was
still no solution, the union should have referred it to the CCMA, a Bargaining or a Statutory council. The
CCMA or council has 30 days during which they must aim to resolve the issue. If it is not possible to
resolve the issue, a certificate must be issued stating this is the case. In the private sector there is a 48
hour notice period to inform the employer that workers are planning to strike. If the employer is the State,
the notice period is 7 days.

 According to The Labour Relations Act, employees have the Constitutional right to strike, provided they
follow the correct procedures. Employers on the other hand have the Constitutional right to implement a
lockout as a recourse to the strike.

 Ethics - The LRA has put systems in place like WPFs to avoid any unilateral changes. If XYZ Bank
doesn‟t follow these procedures and dismisses employees without due cause, it is not an example of
sound business ethics or good corporate citizenship.

Teamwork - The manager and employees need to be a team and not two separate entities engaged in
disputes. The goals of the organisation will be jeopardised.

25
Activity 4: Page 79

It is often said that the BBBEE Act has been introduced to address the shortcomings of the Employment Equity Act.
This is a misconception, because EE is one of the FIVE pillars of BBBEE. Discuss the other FOUR pillars of BBBEE.

The percentage of black owners in a business (as measured by their voting rights in the business) has to
be increased to a minimum of 40% black ownership to get maximum BBBEE points.
The aim is to empower more black people to become active at management level in the businesses.
This is achieved via Employment Equity targets.
Encourage the implementation of mentorships, learnerships and internships in order to promote human
capital development of black people and to keep emphasising skills development as part of BBBEE.
To ensure businesses use black-owned business as their suppliers, and in turn, to help these suppliers
to develop where possible.
To establish socio-economic development by ensuring black people have access to funds to become
economically empowered and to own their own businesses.

Additional activities - Page 82

1 Staff induction refers to the process whereby …

A employees that have been in the position for longer than a year have a performance
appraisal
B all new employees receive training to help them to become productive as soon as
possible
C recruitment takes place internally
D an existing employee is given preferential treatment when there is an opportunity for promotion

2 For a serious offence, such as theft, the employee will...

A receive a verbal warning
B be instantly dismissed
C approach the trade union to organise a strike to draw the attention away from the
offence
D be excused, if it is to support his/her family

3 If an employee refuses to carry out an instruction from his manager, it is known as …

A limited performance B constructive dismissal
C substantively irresponsible D misconduct

4 A salesperson has not met his sales targets despite previous warnings and additional training: This is refers to
a situation of …
A misconduct B incapacity
C a breach in the probation period D collective bargaining

5 If an employer refuses to let employees continue to work unless they accept certain conditions of
employment, it is known as a/an …
A unprotected strike B arbitration clause
C lockout D employer mandate

6 The right guaranteed in the Constitution that all people are entitled to equal opportunities and may not to be
discriminated against, is known as …
A inclusivity B the right to dignity
C collective citizenship D there is no such right

26
7 Human rights and inclusivity are entrenched in the South African Constitution. Outline how the Labour
Relations Act forces a business to consider these two issues.

The Labour Relations Act looks at unfair discrimination which is based on race, gender, language, religion,
culture, sexual orientation, age, disability, political orientation and family responsibilities. There are,
however, times when it would be fair to discriminate based on some of these factors (refer to the discussion
of the Limitation clause earlier). Examples may include:
o Affirmative Action to redress imbalances of the past; justifying discrimination when promotions are
made or for training purposes
o If the job requires a specific orientation such as a Christian church looking for a minister - it would be
bizarre to expect the church to employ a non-Christian person in this position.

8 One of the most important tasks of the new HCM would be to be part of a team of people engaging in the
process of collective bargaining. Explain what is understood by the term 'collective bargaining.

Collective bargaining refers to the process that takes place when the employer and trade unions
(representing the employees) negotiate the terms of employment. Issues that may be addressed during
these negotiations include:
 Employment and working conditions
 Salaries and wages, overtime pay and other benefits such as health care and retirement
 Working hours
 Issues relating to annual leave and sick leave

9 What is the purpose of an induction program?

Induction is not the same as training for a specific job. Induction is training (orientation), given to all new
employees to help them to become productive role players in the business as soon as possible.

10 Name FOUR points that should be covered by a good induction program.

 A written copy (hardcopy or electronic) of the business‟s policies and procedures.

 Some form of organogram / organisational chart to identify the various role players in the organisation
 A face-to-face introduction to the manager and other staff members in the department
 A tour of the facilities to show the new employee where the bathrooms, meeting rooms, canteen and
Human Capital offices are in case he/she has any questions. It may also be useful to show the new
employee how to log a call in the event of a problem with the technology.
 Precise instructions outlining how the new staff member should perform certain tasks must be issued.
Any unique / unusual requirements / tasks should also be clarified.
 Allocating the new employee a “buddy or mentor”, in case questions arise or there is uncertainty about
job-related issues; it allows the new recruit to settle in more quickly.

11 Explain the concept secondary industrial action.

Secondary (or sympathy) strike action takes place when employees strike in support of another strike. In
order for the secondary strike to be protected (see below), the original strike has to be protected, i.e. the
correct procedure has been followed.

27
12 If someone was unfairly dismissed, what are THREE possible remedies for the situation?

Re-employment, compensation (the maximum compensation will be the equivalent of 24 months' salary) or
combination of the two.

13 How can the CCMA assist employees who feel unhappy with issues in the workplace?

The aim of the CCMA is to settle disputes between employers and employees in order to prevent labour
unrest, e.g. strikes. The process followed by the CCMA is one of Conciliation, followed by Mediation and if
needed, Arbitration.
 Conciliation refers to the process where the commissioner meets with the employer and employee
in order to explore ways to settle the dispute by mutual agreement.
 If Conciliation fails, Mediation will follow. The commissioner then makes a recommendation on how
he/she thinks the dispute should be settled. If the parties are not willing to follow the
recommendation, the process proceeds to Arbitration.
 During Arbitration the commissioner will issue an award (make a decision) that is legally binding on
both parties.
 If one of the parties feels there is a flaw in the Arbitration process, the party has 6 weeks to refer the
matter to the Labour Court.

14 If a business‟ “financial performance” is not up to standard or the business decides to restructure then
retrenchments may be considered. Discuss operational causes as a possible reason for terminating an
employee‟s contract.

Section 189 of the LRA prescribes the procedures to be followed when retrenchments are implemented.
Retrenchments may be implemented for a number of reasons such as:
 The restructuring of the department or business
 If the business has economic reasons such as cost reduction or to increase profits
 Technological reasons such as new machines necessitating fewer employees, and making some
employees redundant
 The business is closing.

In order for retrenchments to be procedurally fair, the employer must provide evidence to justify:
 Possible steps that were taken in order to prevent or minimise the retrenchments
 The reasons for retrenchments and whether alternatives were considered
 How much consultation with the affected employees and their representatives took place
 Criteria used to identify employees for retrenchment
 Notice periods given to employees affected by the retrenchment process
 Offers of severance pay
 Whether offers of re-employment may occur at a later stage

28
Chapter 5: General management and Corporate Governance (Page 84)

Activity 1: Page 87

 Identify a business in the general retail sector.

 List two possible problems that the chosen business could face in each of the business environments.
 Assess the possible outcomes of these problems if the different leadership styles were used.

 Pick n Pay, Game, Checkers etc.

Business Possible
Possible outcome with different leadership styles
Environment problems
Staff Democratic: Staff could feel that management cares by listening to their concerns
absenteeism Autocratic: By management forcing them to adhere to conditions of employment, they will
know management is serious and will proceed with disciplinary procedures.
Laissez-faire: Staff may possibly continue to be absent frequently as they will not see the
manager as hands on.
Transactional: Staff could be incentivised by ‘employee of the month’ and might change
behaviour.
Transformational: Staff will want to change their behaviour as it will be bad for team work if
they are absent regularly.
Situational: Manager may decide on the best style, which would ideally entice the employee
Micro to alter their behaviour before disciplinary action.
environment Industrial Democratic: Collective bargaining with the unions would assist in reaching compromises that
action both parties were happy with.
Autocratic: This could upset the role players in negotiations and force industrial action.
Laissez-faire: This won’t be affective as it will require management to have a hands on
approach because results of industrial action will cause losses for the business.
Transactional: This could be the cause of industrial action and by offering financial
rewards/incentives could make the employees happy.
Transformational: The process would be handled in an innovative way and good
communication would take place.
Situational: Manager would decide on the best style, which would ideally entice the unions
not to embark on industrial action.
Suppliers Democratic: If the manager allows the supplier also to participate in the discussions, they will
delivering late be invested in the commitment to deliver on time in future.
Autocratic: The result might be the suppliers not allowing future discounts and a breaking off
of a good relationship.
Laissez-faire: This might give the supplier the idea that the manager is not that invested in
the process as constant follow-ups are not made.
Transactional: It might seem like the manager is on the point of being unethical because
payment has already been made for the goods and any additional monetary motivation
could imply a bribe.
Transformational: This would foster the relationship and promote innovation and
Market compromise, which could probably yield the positive result of punctual deliveries.
environment Situational: Manager would decide on the best style, which would ideally assist with the
deliveries being on time.
Competitors Democratic: manager will get all staff to give input on a way forward. This could lead to a
stealing brainstorming session on getting that market share back, filled with possible innovation.
market share Autocratic: Employees might not be invested in the strategies proposed as they have not
been part of the process. They might not see the importance and effectiveness of the plan as
they are simply ‘workers’.
Laissez-faire: If management passes this problem onto a department and asks them to come
up with a strategy, it might yield innovative responses as the employees have the freedom to
be creative.
Transactional: Employees might be tempted to work harder and longer hours in order to
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 increase the market share as it will mean more money or even other forms of remuneration.
Transformational: Management would inspire and motivate all parties to come up with a
suitable strategy, employees would feel empowered and experience a sense of
accomplishment when the task is done.
Situational: Manager would decide on the best style, which would ideally assist with
increasing the market share of the business.
Unethical Democratic: Manager needs to have open discussions allowing difference of opinion,
behaviour in however, ensuring all employees understand the Code of Ethics the business abides by.
government Autocratic: Employees know that the unethical behaviour is not tolerated and there will be
could give disciplinary action against employees acting dishonestly.
employees a Laissez-faire: Employees might see a gap to act unethical as there is no micro management
distorted view from the business.
of acceptable Transactional: Staff can be incentivised with ‘employee of the month’, who receives a
practices. financial reward. This might encourage all staff to act ethically to receive the financial
reward.
Transformational: Employees would see how the manager acts and would be shown by his
actions what is ethical or not. Employees would be led by example.
Situational: Manager would decide on the best style, which would ideally assist in ensuring
all parties understand the organisational culture and strong business ethics.
Technology of Democratic: manager would get all staff to give input on a way forward. This could lead to
Macro
EPOS is staff finding other ways to implement new technology into point of sales at a reasonable
environment
advancing and price. Employees would also see the challenges management have when making decisions.
costs to Autocratic: Employees might not be invested in the strategies proposed as they have not
upgrade are been part of the process to advance the technology in a more cost-effective way.
expensive. Laissez-faire: If management passes this problem onto a department and asks them to come
up with a strategy, it might yield innovative responses as the employees have freedom to be
creative.
Transactional: Employees might be tempted to work harder and longer hours in order to find
more cost effective ways of improving technology as it may mean more money or even other
forms of remuneration.
Transformational: This manager would promote innovation and creativity, which could
probably produce a number of options for the company. It would have been thought out by
the manager and employees.
Situational: Manager would decide on the best style, which would ideally assist with the
solution to the high costs of technology.

Activity 2: Page 98
Look at a SWOT analysis you have previously completed. Discuss how the different management competencies could
be used to ensure success.

(SWOT completed in Activity 4: Page 25)

SWOT analysis on Massmart in South Africa for Walmart

Strengths:
 Massmart is an established company which was founded in 1990. It has been operating for 26 years with strong brands under
its belt.
 There are many brands within the company, they include:

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 Massmart listed on the JSE Limited on 4 July 2000 at R12.50 per share and the share price has grown to R128.54 (March
2016), which shows good growth.
 Massmart is currently a top 40 listed company (by turnover), showing that it is financially strong.
 Massmart is a participant in the JSE Limited‟s Socially Responsible Investment Index, which proves that it is dedicated to
incorporating sound governance principles within the group.
 Massmart employs over 37,500 permanent and flexi-time staff, and achieved annual sales of R72bn for the year ending
December 2013 which further emphasises their strength and stability within the market.

Weaknesses:
 Massmart is not as well-known as some of the other corporate groups, however, some of the businesses within the group are
well-known. For example: Game stores is well-known while Saverite supermarkets are unknown.
 Due to the variation in the LSM groupings of the stores within Massmart, the interior branding is very different and some of the
stores could be perceived as „untidy‟ or not very well presented, when in fact it is due to the nature of its business e.g. Dion
Wired (very modern and branded) VS. Jumbo (Cluttered and not well branded).

Opportunities:
 Massmart could branch into many specialised fields like discount stationers or discount homeware. This can be done by taking
over other businesses within the market.
 Massmart could grow its brand leaders in other countries, like Game is in Botswana, so could the other stores open and
expand internationally.
 Massmart could integrate backwards into the manufacturing industry as a form of growth potential in order to ensure
continuous, cheap supply of certain goods. This will also have huge implications for our countries low employment rates.

Threats:
 Massmart sources many of its goods from the Far East, which is not good for local suppliers.
 Massmart has very active unions operating within the company and the idea of change is a catalyst for industrial action.
 Massmart has many competitors for each of their stores, like Makro vs. Trade centre and Game vs. Checkers etc.
 South Africa is experiencing tough economic times, which will affect the company‟s financial position.

Management competencies used to ensure success:

Global Awareness

Even though Massmart is in South Africa, management at Massmart needs to be fully aware of everything
that is happening internationally. It will be easier for management to analyse this external environment
because Walmart is a very large international organisation and has many resources, Massmart can utilise
these resources.

Organisational awareness

Organisational awareness requires management to be aware of internal, as well as external factors that
may have an impact on the success of the business.
Internally, the manager should know his employees and the general strengths and weaknesses of
Massmart. Management needs to ensure all functional areas are working in cohesion. It is also important
for management constantly to focus on the vision of Massmart and continually ensure that everyone in the
organisation is working towards achieving it.
Externally, Management should be analysing the effects the external environment has on Massmart. The
possible impact on the business needs to be investigated and plans put in place to combat the effects.

Analysis

Management must have the ability to gather the relevant information and then act on it in the most efficient
way. Every decision made in reaction to environmental factors can alter the direction of the business and
thus alter the success. Therefore calculated, concise solutions or strategies need to be established from
the sound analysis.

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Strategic thinking leading to strategic action

Based on the results of the analysis performed by the business, Massmart management need to put
strategies in place to achieve the business‟s vision and objectives. These may be long or short term
objectives, which, as the environment changes, need to be adapted and changed as well. To be able to
assess and interpret trends will assist Massmart in predicting changes that might occur; this will assist the
business in being proactive.

Teamwork

So much more can be accomplished by a team, but the team has to be functional, which requires the team
to work together. Due to possible conflicts occurring within the work place, management needs to be able
to work skilfully with the staff to get them to perform at their best.

Empowerment & talent development

When Massmart staff are empowered, they produce more than they were originally capable of, this
translates into growth and development. A resource Massmart could use to empower them is possibly to
send them overseas to Walmart‟s head office for training - the business should utilise its international
resources.

Initiative

Using initiative implies proactive behaviour by management. If Massmart wants to be industry leaders, they
need to lead from the front. This requires resourcefulness by management. Coming up with new ideas,
better methods and processes etc. will assist them in being innovative in their approach.

Judgement / decision making

With the aid of logical reasoning, accountability and transparency, Massmart could ensure that all decisions
made are in the best interest of the company. The decisions must be in line with their vision and
organisational culture. They must be calculated, but possible repercussions need to be considered.

Negotiation

In order for management to guarantee a win-win situation, negotiation is essential. Negotiation expertise is
an essential skill management at Massmart needs to employ, to ensure every situation is handled
cautiously but efficiently. Foresight is required by management, to understand the implications of each
possible outcome, as it will assist them in the negotiation process.

Customer service orientation

Without the customer Massmart may not be successful. Massmart management, therefore, should place
the customer first. This emphasis and focus on the customer should ensure Massmart knows what
customers want and must react accordingly. Customers will also feel as if they have a voice and this would
add to their sense of satisfaction. All this would help to increase Massmart‟s market share and brand
loyalty.

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Activity 3: Page 101
 Chose a business in the fast food sector.
 Critically assess the business‟s level of corporate governance by looking at the principles of good governance.

 Steers (Famous Brands)

 Level of corporate governance:

This corporate governance and sustainability report is presented to illustrate to shareholders how the
company: applies the principles of good corporate governance; manages risk; considers its ongoing
sustainability; and invests in the well-being of its people and society.
The board of directors of Famous Brands is fully committed to business integrity, fairness,
transparency and accountability in all of its activities. In support of this commitment, the board
subscribes to sound corporate governance in all aspects of the business and to the ongoing
development and implementation of best practices. In addition, a code of ethics, which seeks to raise
the ethical awareness of conducting business, is in place. The company complies with the Listings
Requirements of the JSE Limited (JSE Listings Requirements). Famous Brands generally embraces
the principles incorporated in the Code of Corporate Practices and Conduct outlined in the third King
Report (King III), hence, the company‟s conduct is usually based on those principles. The board, which
includes founding shareholders and long-serving directors, does not meet the independence criteria of
King III. We believe the individual members apply their minds independently, comply with the
Companies Act of South Africa, and act in the interests of all shareholders, motivated also by their
personal shareholdings in the company. Their leadership, wise counsel and in depth knowledge are all
attributes that add value to the deliberations of the board. Our Integrated Annual Report deals with
most of the requirements of an integrated report as required by King III but there is limited detailed
reporting on our impact on the environment. This is because the board believes that our activities do
not severely impact on the environment nor threaten the sustainability of either the company‟s existing
operations or the environment which future generations will inherit.

Additional activities - Page 102

1 A factor/s over which management does not have direct control:

A economic climate B competitors
C customers D all of these

2 If a manager tells employees what must be done, but not how to do it, he/she uses a/an ... management style.
A transformational B laissez-faire
C autocratic D democratic

3 Which one of the following concepts is NOT a management task?

A Leading employees in the department
B Controlling resources
C Motivating employees to achieve goals
D Attending all meetings in the department

4 Which one of the following is NOT a principle of decision making?

A. The decision maker should be objective
B Considering all relevant facts
C Facts should be seen in relation to each other
D The manager should never regard money as a limiting factor when making decisions
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5 Sam is the manager at a food and clothing retailer. He actively encourages employees to give input and
suggestions. Sam follows a … leadership style.
A transactional B situational
C laissez-faire D democratic

6 Which one of the following is a requirement for effective planning?

A Plans should be flexible
B The more complex the plan, the better the chances of achieving goals
C It is best to communicate plans verbally so that there is no risk of the plan being “stolen” by a
competitor
D A good plan eliminates the need for a contingency plan

7 Which one of the following is NOT used as a control measure?

A delegating B sampling
C budgeting D inspection

8 When a manager gives a task to a subordinate (lower level employee), it is known as...
A coordination B delegation
C motivation D bullying

9 Pam has just bought a fast food franchise. She has never owned her own business, but had been a manager
in a similar fast food business for ten years.

9.1 Choose FIVE management competencies and explain how and when Pam will use them in the running of a
successful fast food franchise.

(See Activity 2 - Page 98 marking guidelines for more details)

Global Awareness - Pam should be aware of international trends and international current affairs as this
could directly affect the fast food industry locally.

Organisational awareness - Pam needs to know what is happening internally and externally in her franchise
in order to ensure the success of the business.
Analysis - Pam needs to use all tools available to analyse each environment. This must be done accurately
because important decisions and strategies are made depending on the analysis results.

Strategic thinking leading to strategic action - Pam needs to think and act strategically by making calculated
objectives in order to achieve the franchises vision.

Teamwork - Pam should get all the staff in her franchise to work together in order to reach their objectives.
Open communication will assist Pam in getting this done.

Empowerment & talent development - Pam should aim to develop the employees within the business. This
should ensure that progress within her franchise takes place. Harnessing the employee‟s full potential
through training may ensure higher levels of attainment for the franchise.

Initiative - Pam needs to be proactive, even though she relies on the franchisor, she must demonstrate
initiative to ensure she is successful in achieving her goals.

Judgement / decision-making - Pam needs to make many important decisions regarding her franchise.
Some are not going to be easy, however, she requires the foresight to recognise the implications of her
decisions and to be fully accountable for them.

Negotiation - Pam must be able to negotiate with many people, suppliers, customers, competitors,
government officials etc. She has to be mindful of all the needs around her and she should act in the best
interest of the franchise at all times.

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Customer service orientation - Pam deals directly with her customers on a daily basis. She needs to ensure
she has their best interests at heart. Customer satisfaction should be her first priority. She must strive to
train all her staff to think in the same way.

9.2 It is often said that a small business does not need to concern itself with Corporate Governance.
Refer to any FOUR characteristics of good Corporate Governance as outlined in the King report and explain
how Pam can use them to make her business successful.

 Transparency – It is often thought that transparency refers to the fact that everybody has to know what
decisions are taken and why they are taken. This is not correct. Some decisions may always be kept
confidential. Transparency refers to decisions being taken in accordance with a set of rules and with
which everybody is familiar and that these rules are understood by everybody. Transparency is of
course a precondition for accountability, because if there is no transparency, how will it be possible to
hold someone accountable for decisions taken?

 Accountability refers to the person taking responsibility for his/her actions. In a business environment
where Corporate Governance is accepted as the norm, accountability increases the level of confidence
that stakeholders have in the business decisions taken. Integrity or honestly or truthfulness will be part of
decision-making if the person or organisation knows they will be held accountable for decisions taken.

 Independence means there is no conflict of interest and that there are no unfair influences from any
stakeholder that will result in a biased or unethical decision being taken in favour of a particular person
or organisation. Although networking is a critical component of a person‟s and the business‟s success, it
may reduce the independence of decisions taken in the business if the decision maker feels he/she has
an obligation towards someone they have networked with.

 Discipline: When one looks at discipline, the starting point is always self-discipline. In a business
environment, this relates to the integrity shown by management, when important decisions are taken.

 Social responsibility: It has already been mentioned that good governance refers to the way in which
decisions are made and policies are implemented. A business that follows a process of good
governance, will be publicly accountable, because they will act responsibly when it comes to social
issues such as exploitation of natural resources, child labour, paying fair salaries that will enable
employees to maintain a decent standard of living, support of employees suffering from diseases such
as TB or HIV/AIDs or any other debilitating disease.

 Fairness in dealing with stakeholders: It implies that the business will be considerate when evaluating all
relevant parties‟ interests when decisions are taken. Of course it should be acknowledged that life is not
always fair and that it is not always feasible or realistic to act in a manner that will promote the interests
of all concerned. Sometimes it is necessary to make a trade-off between benefiting one group of people
over another. For example: The business has to decide whether products will be manufactured locally at
a higher cost while simultaneously creating employment vs. importing the product at a lower price, which
may benefit some consumers but may disadvantage local employment. When this type of decision is
made, it is impossible for all stakeholders to be treated equally (what fairness implies). Management
decisions should always aim to serve the best interests of the business and employees and not because
there is the lure of a “kick back” when a particular decision is taken.

 Responsibility (of directors): The King reports promote responsible management and King III elaborates
further on this issue when special reference is made to the duties and responsibility of directors:
The Board of Directors is a key performance driver of the success of the company. The directors
represent the shareholders and as such, shareholders hold high expectations of those directors to “do
the right thing” as they are in a position of trust. In the past when a director‟s main function was strategic
planning for the company, a change in policy to hold directors accountable for incompetence or
wrongdoing occurred; this change was necessary because positions of trust had often been abused.
Enron is a striking example: A number of the directors had to pay heavy fines and were even jailed for
not acting in the best interest of the business, and for selfishly promoting their own interests.

35
10 If an entrepreneur wants to start a Spaza shop in his community, what are FIVE entrepreneurial qualities /
characteristics that he must have? Give an example to motivate each point.

 The ability to identify an opportunity with potential and to then pursue the opportunity, even if it may be
risky. An entrepreneur needs to take risks to reap rewards.
 In order to identify an opportunity in a particular market, the entrepreneur has to understand the target
market and he/she continuously needs to scan the internal and external environment to be proactive in
identifying opportunities and/or threats.
 The entrepreneur has to know who the customers (LSM) are, including their needs, and then be willing
to develop or change the business plan to satisfy the customers‟ needs.
 An entrepreneur is an opportunist. The market / business environment may not always be favourable or
fit in with his/her initial plan. The entrepreneur, therefore, must be able to anticipate market trends,
identify the positives and use these to the advantage of the business.
 Starting a new business is hard work and takes commitment and perseverance.
 Creativity and innovation are often requirements to get a new business off the ground. Being different to
that of a competitor (differentiation strategy) may lead to a successful business.
 The ability to prepare and to implement a plan to achieve goals is very important. But the entrepreneur
must be realistic and proactive by developing a contingency plan to manage potential risks.
 In order to execute the plan, the entrepreneur must have the ability to obtain and coordinate the required
resources in the optimal manner.
 Without leadership qualities the entrepreneur is not likely to achieve success. He/she must have the
ability to convince and motivate others to buy into the plan and follow him/her to achieve the desired
goals.
 The ability to evaluate achievements and progress is crucial in order to initiate corrective measures if
needed.
 The entrepreneur should be able to make quick decisions about opportunities as they arise.
 The ability to communicate clearly and accurately is critical in order to implement strategies to overcome
challenges and thus capitalise on opportunities.
 An entrepreneur is personally motivated and often prefers to work on his/her own or at the very least be
in charge of what is going on. It is very important that an entrepreneur is insightful enough to know what
his/her shortcomings are and wisely to surround him/her with a supportive team.

11 Name the three levels at which management operates and give a description of the activities that takes place
at each level.

 Top management is responsible for the overall, long-term strategic business plan, including the vision,
mission, objectives and strategies for the overall business.
 Middle management formulates tactical plans, which involve the acquisition of resources needed by the
departments that they control namely, the financial department, Marketing department, Production
department, Human Capital department, etc. Middle management is responsible for medium-term
planning and has to ensure that lower levels of management are guided to align their daily planning with
that of Middle management.
 Lower management is in charge of planning work schedules and programmes on a daily basis.

36
12 Which principles are to be kept in mind when planning is done? Explain FOUR.

 All managers, who are in a position where they are responsible for development and implementation of
plans, will be held accountable for these two elements. However, it is important that managers receive
support and guidance from middle / top managers during the planning and implementation phases.
 Planning is aimed at the future. It has to be done in advance to give guidance to employees to
implement changes timeously, while still ensuring the plans are within the budget (realistic).
 Clear communication is crucial to inform employees of desired goals. It is always a good idea to
communicate plans in writing in case someone needs to refer to the plan to confirm the original goal.
 The KISS-principle: Keep it straight and simple so that the plan is easy to understand and to implement.
 Planning is a management tool and should be used to guide employees towards the end goal. Planning
is the crucial first step, but no plan will yield results without it being implemented.

13 Explain FOUR criteria of good leadership

 Workers should always be helped to understand what goals are to be achieved.

 A good leader will allow (and also encourage) subordinates to provide input and voice opinions.
 Employee morale improves if employees know that management respects them and will support them
where possible.
 Good work should always (or where possible) be recognised openly, while cautioning employees and/or
addressing work-related problems which should be conducted in private. It is important that criticism
should never be personal, but constructive to guide the employee to avoid repeating the mistake.
 Explain to employees why there are changes or why certain procedures are a requirement; this will
facilitate their acceptance and cooperation.

37
Chapter 6: Ethics, Professionalism and social responsibility (Page 104)

Activity 1: Page 104

Discuss the importance of a Code of Ethics in a business environment such as Famous Brands. Ensure practical
examples are given with your discussion to illustrate your answer.

The Code of Ethics at Famous Brands: (As per their Annual Integrated Report)

The Group‟s code of ethics requires all directors and employees to act with honesty and integrity, and to
maintain the highest ethical standards. The code deals with compliance with laws and regulations, conflicts
of interest, relationships with customers and suppliers, remuneration, outside employment and
confidentiality.

Activity 2: Page 105

Use different Ethical theories to justify why the following may be seen as both ethical AND unethical. An example has
been done to help you to understand the question:

Incident Ethical Unethical

A business uses “smoothing According to the Consequence- If the Principle-based theory is used
payments” (bribes) to get business based theory: The outcome of the and being dishonest is not
deals action is ethical if people benefit acceptable according to my values
from it. In this case paying a bribe and morals, bribing is unethical
ensures that the business gets the regardless of creating jobs.
deal and therefore jobs are created.
1. Managers know the As per the Consequence-based As per the Principle-based
passwords for employees‟ theory: Doing checks might be a theory: People should have high
computers and do random violation of privacy; however, the morals and values and it is wrong
outcome will ensure that staff to look through employees‟
checks to see what is on the
don‟t misuse their computers and computers, as it is an invasion of
computers. worktime. their privacy.

2. All employees have to According to the Principle-based As per the Consequence-based

undergo a polygraph test (lie theory: People should have high theory: The result will be that of
detector test) once a month to morals and values and telling lies management exhibiting distrust
can‟t be tolerated in the in their employees, which is
see how many lies they have
organisation unethical.
told their supervisors.

3. Employee of the month As per the Consequence-based As per the Principle-based

rewards are given to theory: The way they get to theory: It is unethical not to give
employees that have more getting more money in the till customers the right change or for
would be to give the customers employees to have more than
money in their tills (cash
the wrong change; however, the necessary in their tills.
registers) at the end of the end result would mean more
day than what they are income for the business and the
supposed to have. employees.

38
Activity 3: Page 112

 What does the term Corporate Social Responsibility (CSR) mean?

 With reference to CSR: explain the concept of sustainability.
 Explain THREE possible reasons why a retailer may decide against becoming involved in CSR projects.

 Corporate Social Responsibility can be described as an ongoing commitment by businesses to behave

in an ethical manner by contributing to the economic and social development of employees and the
community at large. In short, it is about developing and showing people the “human side of your
business”.

 Sustainability is a business approach to CSR that creates long-term value out of the programmes it runs
by creating a "green" strategy aimed at the natural environment and taking into consideration every
dimension of how a business operates in the social, cultural, and economic environment.

 1. Staff are always pushed for time and committing to do CSR work will draw them away from their
actual job.
2. Shareholders might become frustrated as CSR costs money and this will be cutting into possible
dividends.
3. As much as companies talk about donations and doing good works, the money has to come from
somewhere and inevitably the customer will pay as all costs are ultimately factored into the final selling
price.

Additional activities - Page 114

1 If an employee gives confidential information to a family in order for the family member to make a profit on the
JSE using the information, it is known as …
A whistle-blowing B avoidance of responsibility
C insider trading D information inflation

2 A/an … describes the expected behaviour for employees

A code of conduct B legal act
C behavioural D employment contract

3 An unethical practice could be when the business...

A sells, second-hand products (as new)
B requires employees to undergo medical exams as part of the induction program
C employs people who do not live in the immediate community
D puts certain brands on sale

4 John is the manager at one of the local retailers. He basis his decisions on the “principle-based theory” of
ethics. This means that…
A John will judge the character of the other person before deciding what the correct action is to take
B John consults his wife before making a decision, because she is a principal at a school
C John thinks about the consequences of the action before he decides what to do
D John always follows his own set of moral rules before making a decision

5 An example of Corporate Social Investment would be…

A to transfer money to a government official that helped the business to close a deal
B if a retailer sells products at a lower price than its competitors
C to spend money on installing a better computer system in the business
D to give money to train teachers in order to provide better education to the local school

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6 Which one of the following is an example of Corporate Social Responsibility?
A The franchiser, fulfils his responsibility to train the franchisee‟s employees
B The Human Capital Manager stays up to date with changes in Social Legislation
C Spending money on a crèche for employees‟ children
D A business prepared to lower its prices, because a competitor requested this from the
Business

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Chapter 7: Marketing (Page 115)

Activity 1: Page 121

The following retailers focus on LSM sectors:

 Woolworths LSM 8 – 10
 Pick n Pay LSM 4 – 10
 Shoprite LSM 4 – 7

When we look at the retailers and their LSMs above, it becomes clear that Pick n Pay is trying to maintain a broad
position within the market, while other retailers are focussing on a more defined segment of the market.

Questions:

1 The role of marketing within the business should not be underestimated. Discuss the strategic role of
marketing and then refer to the concept of LSM as part of the strategic importance of marketing.

2 Select a business and complete a SWOT analysis that will help one of the above-mentioned businesses
when they develop a marketing strategy. Regardless of any elements that you choose to include, make
sure your analysis refers to the following:

External Analysis
 Industry Analysis
 Competitor Analysis
 Customer Analysis

Internal Analysis
 Your chosen business‟s USP (Unique selling proposition)
 Value Chain Analysis

3 Once you have completed the above on your own, form groups with other people that have chosen the
same business as you and use the information you have gathered to evaluate your chosen business‟s
current marketing strategy.

1. This strategic role of marketing can be summarised as follows: creating and supporting a strong and
positive brand identity in the market through a well-planned and well-implemented marketing strategy.
Analysing the customer base, will help the business to identify the potential market segmentations
(LSM-groupings).The LSM tool is one of the most widely-used marketing research methods in South
Africa. It allows for segmentation of the general public based on 29 variables.

2. Pick n Pay

Strengths:
 PnP ran a Stikeez promotion which increased their market share and turnover.
 PnP has a wide range of customers (LSM) and a large market share.
 PnP is well-known and many South Africans associate its stores with value for money.
 Looking at its „no name‟ brand, there is evidence of a sound Value Chain analysis, which ensures the
products are sold at really low prices.

Weaknesses:
 Not all products are sold at low prices therefore one would have to check their promotions in order
to benefit.
 Smartshopper loyalty card is…

41
Opportunities:
 To introduce a bigger benefit to customers who use SMART shopper‟s cards.
 To expand further into international markets
 To expand into homeware and furniture

Threats:
 Other stores have a more specific focus on LSMs, therefore they can concentrate their efforts on
meeting their needs. PnP, however, has a wide focus and will struggle to please both ends of the
scale, which would create a gap for customers to consider other competitors.
 PnP will struggle to maintain their low prices in this tough economic climate. Price increases are
inevitable and it might not be perceived as a value for money store.

3. Students need to get into groups and evaluate their current market strategy - each response will vary
due to the different analyses and perceptions / knowledge of the business.

Activity 2: Page 138

 Choose one of the brands below and then answer the questions that follow.
 Refer to the section above on BRANDING, to assist you in answering the questions.
 If you do not have sufficient background knowledge of the brand, you may first have to do some research.

Questions:

1 Does your chosen brand have a strong market presence? Motivate your answer by referring to the
strength of your chosen brand within the market overall.

2 What would you change about the way in which your chosen brand interacts with the current target
market? Refer to the section where the topic - What differentiates a good brand from a GREAT brand? -
is discussed.

3 Identify a competitor for your chosen brand. If you were offered a position by this competitor to “attack”
your original brand choice, how would you go about achieving this? What would you do / say?
Remember to use the theory as a guideline. You need however to APPLY this knowledge when you
motivate your actions.

4 Once you have completed the above questions, it would be a useful activity to discuss your answers
with other members of the class who have chosen the same brand. Elect a person in the group to
present a brief account of your discussions to the class.

1. McDonalds has a very strong market presence. It is well-known by all and has a certain value for money
associated with it. It has visible adverts on TV and billboards. It has great in-store promotions and
consumers rely on the fact that it is a strong international brand.

2. The brand is strongly associated with junk food. McDonalds has made every effort to show the public
that there is a healthier option, like salads and juice / water etc. McDonalds needs to look at a more
wholesome brand by using whole-wheat burger rolls, more salad on the burgers as well as to change
the perception of the burgers being very „synthetic or plastic‟.

42
3. Competitor is Burger King - They are already a step ahead by offering bottomless drinks, when eating at
certain stores. This has created the perception of better value for money. Burger King burgers are
perceived to contain better quality meat. They are popping up next to McDonald stores, which
demonstrates confidence in their brand over McDonalds.

4. Students to engage in group discussions.

Activity 3: Page 141

Look at the following advertisement.

Questions:

1 Evaluate the above advert by looking at the principles below to determine if it is a sound marketing
communication tool. If you are not sure what each entails, refer to the theoretical discussion above. DO NOT
simply rewrite the theory. APPLY the theory to evaluate this advertisement.
 Engaging
 Credible
 Impression
 Action
 Relevant
 Integrated
 Brand attributes

2 Once you have completed your analysis, do a short 3 minute presentation in class. If time allows have a short
discussion on each other‟s evaluations as there is always so much to learn from other people‟s opinions

1. Evaluation of the Vodacom advert using the following:

 Engaging – does the advertisement stop the reader and engage them to continue spending their time to
learn more about your offer?
- Yes, you are led to believe the change from blue to red will be to your advantage.

 Credibility - are your claims believable? Can they be backed up?

- Yes, Vodacom has a backing of quality and good customer service.

 Impression – will the ad be remembered? Does it create a lasting impression? How likely is this ad to be
recalled in a future survey?

43
 - Yes, it makes an impression because it also addresses a key issue in the country regarding inclusivity
and race relations.

 Action-Oriented – does the ad provide a powerful and clear call-to-action?

- Yes, It is very convincing about the change in colour, which is a strong reassurance of the brand.

 Significance - does the ad promote features & benefits the audience will care about? Is there any way to
make the message more relevant?
- It is a clever way to signify the change in the brand; it associates well-known aspects of the brand and
combines it with the new colours. It is reassuring.

 Integration - is this advertisement part of an integrated, multi-channel campaign that accurately reflects
your brand & core messaging?
- Yes, there is a common theme in the Vodacom adverts and it spans different formats. The core of the
brand is being advertised.

 Branding – how well does this ad promote your key brand attributes?
- The ad emphasises that Vodacom is there for all South Africans; it is light-hearted, humorous and tries
to encompass the essence of the brand.

Activity 4: Page 144

Questions:

1 Discuss the interdependence of Marketing and the other business functions.

2 How does the CPA impact on marketing in South Africa? In order to answer this question, select a retailer of
your choice and evaluate the marketing efforts of the chosen retailer by comparing it to what is allowed / not
allowed under the CPA.
3 Explain how Kotler‟s Stimulus-Response model would influence your decision regarding one of the following:
See a movie / buy a book / go to a particular club / buy a new DVD or purchase any product / service of your
choice.
4 Why would a retailer decide to sell apples loose, in a pocket, or as a pack of four?
5 Why do even small retailers implement an EPPOSE “bar-coding” system? Give TWO possible reasons.
6 Do you think the consumer should also bear a degree of responsibility for some of the negative elements of
packaging? (HINT: plastic, CFCs in aerosol). Motivate your answer.

1. To improve the chances of the business succeeding, the different business functions must operate
efficiently and as interdependent contributors to the same goal and not as independent components.
Recognising the interdependency, means the different business functions cooperate and collaborate
to create synergy in the business.

2. Spar
The right against discriminatory marketing practices: Spar gives no preferential treatment to any
group and their stores are located all over the country in different geographical areas.

The right to privacy: Spar give you an opt-out option on SMSs and you are able to uncheck the block
online, not to receive advertising as a result of the Spar loyalty card system.

The consumer has the right to choose: Spar allows you to return any item if you are not happy with
the product.

44
 The right to disclosure of information: Spar clearly display all their prices for customers.

The right to fair and responsible marketing: Spar always has many products on sale and has not been
seen to practise bait pricing.

The right to fair and honest dealing: Spar has not used misleading advertising, and does not allow
customers to buy on credit. Products are taken off the shelf and then paid for by the customer
immediately, to obviate overselling of any items.

The right to fair value, good quality and safety: Spar allows customers to return products. Their
electronic products like irons and kettles, come with the necessary warranties.

3.
Stage 1 Stage 2 Stage 3
Look online at different cinemas Depending on the experience,
You see adverts on TV of trailers and shopping centres for the you will go to that cinema again
See movie for movies and friends talk about movie you want to watch. Then or even decide to consider
the newest movies purchase ticket online or decide alternative entertainment
to purchase at the cinema later. options.
You read the book and decide
You look at the difference in
You buy the book after looking at whether you should stick to
Buy a book costs between ibook, kindle and
different stores and prices online. paperback books or you move on
paperback
to an electronic device.
You are influenced by your Depending on your experience,
Go to a You check out the safety of the
friends’ experiences of the club you will return to the club or
club by looking at ratings and
particular club and want to go because they say search for a different venue to
asking other people, then you go.
it’s good meet your needs.
Once you’ve watched the DVD,
You want to watch a movie but
You compare prices against you need to weigh up if the cost
know that cinema tickets will be
downloading the same movie on- of having the movie to keep and
Buy a new expensive for you and your
line or even watching the new watch again, is worth what you
DVD friends; it will be cheaper if you
option of Netflix or DSTV Box paid, or whether you should
all club together and buy a DVD
Office. rather have watched the movie
to watch many times.
at a cinema.
Post-purchase behaviour will be
based on the consumer’s
experience when the product is
The buyer processes these stimuli
used. If the consumer’s
by going through different
expectations are not satisfied, it
You receive a stimulus or are phases:
Purchase any may lead to a negative
influenced by external factors  Problem recognition
product / experience and dissatisfaction,
when making the buying  Search for information
service of your and possibly contribute to
decision.  Evaluate different alternatives
choice alternatives being considered
 The consumer then makes a
instead. If the consumer’s
purchasing decision regarding
expectations are met or
what to buy
exceeded, it may result in future
purchases.

45
Additional activities - Page 144

1 If the business conducts research to find out about the demand for the product, it is known as …
A collecting secondary data B market research
C demand stimulation D unethical advertising

2 When the business receives favourable reports in the media that was not paid for, it is called …
A sales promotion B advertising
C publicity D personal selling

3 The … buys goods from the manufacturer and sells it to the final consumer.
A retailer B wholesaler
C commission agent D none of these

4 The last link in the distribution process is the …

A consumer B manufacturer
C retailer D wholesaler

5 A design that the manufacturer places on goods to inform the buyer who manufactured the goods, is known
as …
A logo B trade mark
C brand name D identifier

6 When the new media creates a certain image of the business and it is not paid for, it is …
A free advertising B publicity
C image building D a combination of the above

7 A business that organises the market by distributing the products to the retailer is the …
A distribution agent B wholesaler
C producer D intermediary

8 Products such as food, where the consumer makes the purchasing decision without thinking too much about
it, are known as …
A consumer goods B select goods
C convenience goods D speciality goods

9 Why would a retailer decide to sell apples loose, in a pocket or in a pack of four?

It helps to target different market segments. For example: Someone might want to buy a loose apple for
lunch or a family wants a pocket for the children‟s school lunches or retired folks might only want four not a
whole pocket because they might spoil.

10 Why do even small retailers implement an EPPOSE “bar-coding” system? Give TWO possible reasons.

The benefits of EPPOSE include:

The EPOS system allows a business to identify which products are selling well and which products are
making profit. Through this identification, a business can increase the order of profitable products and
reduce unmarketable inventory.

46
The checkout is likely to progress more quickly, which will no doubt leave a business with happy
customers. Happy customers are more likely to return to the shop and generate bigger profit.

Information from sales is automatically placed into storage. No longer will a business need to panic
because they have misplaced a sheet of paper containing important information; the system will
automatically archive it. A reduction in misplacement and an increase is accurate storage will leave a
business more reliable in the eyes of its customers and suppliers and could even result in further
generation of profit.

The system is that it may be linked to a business's website and provide customers with a real-time update
regarding stock. This automatic stock control may result in a larger generation of profit as customers will
feel a sense of involvement by having automatic updates and purchase from the business again.

11 Draw the product-life cycle for the following products and motivate why you have placed the product in its
particular position on the diagram:

11.1 Coca-Cola

Dev Intro Growth Maturity Decline

Coca-Cola has been in the maturity phase for many years, however; it is not in the decline
stage as Coke has a huge market share.

11.2 A cell phone that is not a smart phone as well

Dev Intro Growth Maturity Decline

Technology has progressed in such a way that it is very rare that customers still need a normal
phone without „Smart‟ capabilities.

11.3 Hybrid cars

Dev Intro Growth Maturity Decline

Hybrids are in the early stages, with some of the big manufacturers having already launched their
hybrids. The demand for Hybrid cars will increase drastically as it offers an alternative option to
petrol vehicles which are less sustainable.

47
 11.4 Birthday candles

Dev Intro Growth Maturity Decline

Candles are in the mature stage as they will always be in demand; the target market is potentially
everyone due to the fact that we all have birthdays - People are born and people die.

12 How does advertising affect the price of a product?

Advertising the product creates a perception of the brand and the quality of the product. If there is a snob-
value, the business can charge more for the same item.

13 Discuss the strategic importance of marketing in a retail environment.

 “A brand for a company is like a reputation for a person. You earn your reputation by trying to do hard things well.”
(Jeff Bezos - founder of Amazon.com). Marketing enables the business to build a brand in the minds of the
consumer and then uses this brand continuously to remind the consumers about the business.
 Marketing will help to remind consumers about the business‟s products / services so that when they need to buy
that particular product or service, it instantly comes to mind. In short: marketing is used to gain and retain
customers.
 One of the most powerful tools of marketing communication is to create a “marketing buzz” around the
product/service. This means the business wants consumers to talk about its product / service. The stronger the
awareness of the product / service in the mind of the consumer, the more likely it is that the brand name will be
used for future reference and hopefully this will translate into more sales.
 Engaging with customers via marketing gives the business the opportunity to listen to customers‟ feedback (both
good and bad) and helps the business to build a stronger brand (product / service).

14 Explain how Kotler‟s Stimulus-Response model may influence your decision to see a movie / buy a book / go
to a particular club / buy the latest DVD or purchase any product/service of your choice.

Stage 1 Stage 2 Stage 3

Look online at different cinemas Depending on the experience,
You see adverts on TV of trailers and shopping centres for the you will go to that cinema again
See movie for movies and friends talk about movie you want to watch. Then or even decide to go with
the newest movies purchase ticket online or decide alternative options for
to purchase at the cinema later. entertainment.
You read the book and decide
You look at the costs between You buy the book after looking at whether to stick with paperback
Buy a book
ibook, kindle and paperback different stores and prices online. books or move on to an
electronic device.
You are influenced by your Depending on your experience,
Go to a You check out the safety of the
friends’ experiences of the club you will go back or search for a
club by looking at ratings and
particular club and want to go because they say different club to meet your
asking other people. You then go.
it’s good needs.
When you’ve watched DVD you
You want to watch a movie but
You compare prices with need to weigh up whether the
know that going to a cinema is
Buy a new downloading the same movie on- cost of having the movie to keep
expensive for you and your
line or even with using the new and watch again, is worth what
DVD friends; it will be cheaper if you
option of Netflix or DSTV Box you paid, or whether you should
all club together and buy a DVD
Office. rather have watched the movie
that you can watch repeatedly
at a cinema.
48
 Post-purchase behaviour will be
based on the consumer’s
experience when the product is
The buyer processes these stimuli
used. If the consumer’s
by going through different
expectations are not satisfied, it
You receive a stimulus or are phases:
Purchase any may lead to a negative
influenced by external factors  Problem recognition
product / experience and dissatisfaction,
when making the buying  Search for information
service of your and possibly contribute to
decision.  Evaluate different alternatives
choice alternatives being considered
 The consumer then makes a
instead. If the consumer’s
purchasing decision regarding
expectations are met or
what to buy
exceeded, it may result in future
purchases.

49
Chapter 8: Investment (Page 146)
Activity 1: Page 156

Congratulations, you have won R5 Million in the South African lotto. You have decided to invest the money.
Complete the necessary research and present your investment strategy to the class.
• You are required to discuss all your investment options (use real practical options) and motivate the ones you
have chosen.
• Refer to financial instruments, business media and breaking news in order to motivate investments
• The financial aspects & graphical representations of your portfolios ROI (Return on Investment) need to be
displayed.
It is also important to use visuals in this presentation. Use the skills that you have developed over the past 3 years in
Business Studies.

Students are able to investigate any relevant investment opportunity - teacher must allow room for
creativity.

This activity may be marked using the following rubric:

0-2 3-5 6-8 9-10 Total

QUALITY OF DELIVERY
Good to very good meeting
Superbly meeting the criteria
Presentation - (0) Not. (1&2) Partially (3)Adhering to presentation the criteria of public speaking
of public speaking, good
Communication meeting the standard of criteria of public speaking (4) (6), good posture and eye
posture and eye contact (9),
correct articulation, proper in a business environment (5) contact (7), The use of visual
The use of visual aids and
[LOT] preparation, eye contact etc. and dynamic aids and correct language use
correct language use (10).
(8).

QUALITY OF PRESENTATION - VISUAL AIDS

Presentation – Visual (0) Not. (1&2) Partially Displaying some of the Displaying the portfolio
aids Displaying the portfolio
meeting the requirements of portfolio financially & financially & graphically in a
financially & graphically in an
displaying the portfolio graphically (3 &4) fair satisfactory (6 &7)
[LOT] outstanding manner (9 &10)
financially & graphically amount displayed (5) Adequately (8) manner.

QUALITY OF CONTENT

(0) None (1&2) limited detail (3) Adequate to (4 &5) good (6) Satisfactory to (7 &8) Excellent detail in the
Investment options good detail in the Research
in the Research of detail in the Research of the Research of investment
[LOT] investment options. investment options.
of the investment options.
options. (9&10)

TOTAL: (30MARKS)

50
Activity 2: Page 157

Bring the financial section of the newspaper to class, form pairs and study the financial index, showing the shares
listed on the JSE.
Choose two shares in unrelated sectors. Monitor and identify any event during the course of a week that could
influence the price of your shares positively and/or negatively. Motivate your reasoning.

This activity will vary between students, however, you may use this table for the students to record the
above information:

JSE share analysis

Company 1: Company 2:
Share Explanation Share Explanation
price price

Day 1 Day 1

Day 2 Day 2

Day 3 Day 3

Day 4 Day 4

Day 5 Day 5

Final comment Final comment

Additional activities - Page 158

1 When the business compensates its shareholders for taking a risk by buying shares. … is declared.
A interest B a dividends
C debentures D profit

2 If Mike invests funds in a fixed deposit, he will get … in return.

A interest B dividends
C debentures D profit

3 A written acknowledgment of debt, which a company issues to a person from whom it has borrowed money,
and wherein the company pledges to repay this amount with interest and at a specific date, is known as a …
A mortgage B promissory note
C debenture D documentary bill of exchange

51
4 Barbara has just inherited R300 000. She would like to retire in ten years‟ time. Suggest an investment option
to Barbara to maximise her returns, avoiding unnecessary risks.

Risk - Avoid unnecessary risk

Time frame - over 10 years
ROI - Want maximum return, no mention of interest income needed.

Therefore, any options can be suggested to Barbara: (here are some ideas)

Property - may be bought and rent could be reinvested. There is generally good growth in property and the
risk is lower than equities.
Endowments - Could be a good option as level of risk may be dictated.
Unit trusts - Level of risk may be stipulated and could outperform inflation.
Debenture - Yields high return than notice deposits, yet the risk is lower than equities.
Offshore may also be discussed, however, the student needs to be specific on the type of offshore option.

5 Explain the concept of offshore investments and discuss TWO benefits of this type of investment.

 When one decides to invest locally, the decision has to be made about which investment vehicle (as
discussed in this chapter and numerous other options available) is most suitable.
 The same choices have to be made when investing in a different country (offshore).
 Offshore investments are, therefore, quite challenging, but worthwhile investment options, if prudent
choices are made.

Benefits include:
 Diversification (when referring to offshore investments) means that risks are spread over different
countries. Some countries are considered to have more stable markets (developed countries) than
others (emerging markets).
 Changes in exchange rates may make it more attractive to invest in another country. The Rand has
shown a tendency to depreciate against the major currencies of the world – US Dollar, British Pound and
the Euro. If the currency depreciates (gets weaker) it is favourable for someone with an investment in a
foreign country.
 There may be investment opportunities in other countries that do not exist in South Africa. South Africa
does not have oil and if an investor feels oil is a good investment to make, he/she will have to buy
shares in an oil company listed in another country.
 Someone may consider the option of emigration to a different country. Because of the exchange control
mechanisms in place in South Africa, it is only possible to take a limited amount of money out of the
country each year. It may then be a good idea to begin to an investment portfolio in the foreign country.

6 Why is investment diversification an important concept?

Diversification means all eggs are not kept in one basket. Consequently, not ONE of the investment
vehicles (options) below is used to hold all reserves, but rather that a COMBINATION of these investment
options is used to spread risks over different assets.

52
7 Provide a description and then evaluate each of the following options in terms of risk and return on
investment:
Investment Description Risk ROI
option
Equities Equities are also known as shares in a  The JSE have strict rules for  The share price will increase over a
company. Some companies are listed on companies to list on the stock period of time (capital growth)
the JSE Ltd (hereafter just called JSE), but exchange to protect investors. Despite  Good dividends will be generated.
other companies are unlisted. this, equities are still seen as a Dividends are the profits of the
moderate to high risk investment. company that are divided among the
 Blue-chip shares are shares in high- shareholders, and are not taxed in
end companies on the stock exchange the hands of the shareholder in
and the risk is smaller than having South Africa.
shares in another company.  A combination of the above occurs,
 Investors usually take smaller risks as this usually helps to outperform
than people speculating with shares. inflation

Debentures  Debentures are also sometimes called  When the debenture is sold, it is often  The company that issues the
bonds (not to be confused with a sold at a fixed interest rate, which has debenture is legally obliged to pay
mortgage bond, which is a loan to buy benefits and risks. interest. This increases the potential
fixed property).  Because debentures are usually for a return on investment.
 A debenture is a letter of credit (an unsecured financial instruments, there  There is no capital growth associated
“IOU”) that a business sells in order to are always risks of the business going with debentures, just a steady stream
raise borrowed capital for large projects. bankrupt. of interest.
 It carries a higher risk than  Because debentures are unsecured
investments at banks, but a lower risk debt, the business has to offer a
than an investment in shares, higher interest rate to potential
because creditors rank higher than investors to compensate them for the
owners to recoup their money in the higher risks.
event of liquidation.  Interest income is taxable.

Unit trusts  A “basket of shares” that is trading on the The options available to choose from  A good Unit trust investment will
stock exchange. may vary from a high risk Equity fund outperform inflation over the medium
where all funds are invested in shares, term of 3 to 5 years.
to a Stable fund where risks are reduced  The rate of return will depend on the
by diversifying investments between risk option that was chosen, but will
equities, international markets and even ultimately depend on how well the fund
investing in some low-risk money market manager has invested the money.
instruments.
Fixed A fixed deposit is opened with the bank Money invested with the bank generally  The interest rate offered on a fixed
deposit when a fixed amount of money is invested has a very low risk. The investment can deposit will differ from bank to bank.
for a fix period of time at an interest rate only be “lost” if the bank is liquidated.  The only capital growth achieved
that can either be fixed or changes as the with a fixed deposit is, if interest on
prime rate changes. the fixed deposit is capitalised (re-
invested)
 The return on investment with a fixed
deposit is usually low.
Money  A Money market account is a form of Money market accounts have a low risk, The interest rate on money market
market short-term investment and it is becoming but offer a lower interest rate than accounts usually outperforms normal
account increasingly popular. longer-term investments. savings accounts. This makes them
 An example of a money market account attractive options for short-term
is a call account, where money is investors.
invested “indefinitely”. The investor only
has to give notice that he/she wants to
withdraw funds in the future. A 32-day
call account has a notice period of 32
days.
Retirement A retirement annuity (RA) is a policy that The risk associated with both a RA and  The ROI will be determined by the
annuity aims to provide an income to the person a pension fund will depend on how and prudent decisions of the investment
when he/she reaches the age of 55. A where the administrators have invested manager that handled and invested the
monthly premium is paid and when the RA the contributions of members. contributions. There are no guarantees
pays out, it will be in a lump sum, and even if a specific ROI is
combined with a monthly income. The We can also look at risk from a different guaranteed by the RA fund/Pension
amount of money paid out when the RA perspective. Think how pension funds or fund, it is important to compare this to
matures, will depend on the period the RAs can help individuals to manage inflation. Note: The figures regarding
premiums were paid and/or how high the their risk of not having sufficient income ROI given by the funds usually sound
premiums were. to survive once they have retired (when better than what they really are,
they no longer earn a salary). because the funds make “predictions”
of what they are hoping to achieve.

53
  Also be aware that most financial
instruments (pension funds and RA
included) will have administrative costs
and management fees which will
reduce the ROI.
Collectables  Examples of collectables may include  To deal in collectables requires a high  If the article is truly a collectable, the
antiques, coins, artwork, stamps, level of knowledge and expertise. value of the article will increase over
jewellery and Kruger Rands.  Any damage to something like a time (provided there is no damage).
 When collectables are chosen, it is stamp collection, artwork or antiques  The disadvantage of this type of
important to have a good understanding will drastically diminish the value. investment is that there is no monthly
of the market where these items are source of income for the investor.
bought and sold.
 The market for collectables in South
Africa is limited when compared to the
rest of the world, but with technology this
is becoming less of a problem.

54
Chapter 9: Insurance (Page 159)

Activity 1: Page 161

Discuss how the different compulsory insurances would apply to a business like Debonairs.

Debonairs:
Unemployment Insurance Fund (UIF)
The following people are excluded from UIF insurance:
o Employees who work less than 24 hours a month
o Employees who earn commission only
Some of the waiters will not qualify for UIF; all the permanent employees will pay UIF.
The maximum amount that will be paid to the unemployed worker is 58% of the monthly salary, provided
he/she has already contributed for at least 4 years to UIF. The claim will not be paid for more than 238
days. In the case of maternity leave the maximum number of days that the mother can claim for is 121
days.

Compensation for Occupational Injuries and Diseases Act (COIDA)

 If an employee is injured at work or becomes sick or disabled as a result of his/her job, the person is
entitled to claim compensation from the COIDA. It is also possible for families or dependants of a
breadwinner to claim, if he/she has died as a result of a work-related accident or disease.
 Every employer registers with the Compensation Fund and pays an annual fee based on the employee‟s
earnings and the risks associated with that particular job.
 The amount of compensation paid to an employee is calculated as a percentage of the salary that the
employee was earning at the time.

Therefore, Debonairs employees will all be covered.

Road Accident Fund (RAF)

Debonairs employees are naturally covered, regardless of whether they work at the company or not.
The Road Accident Fund (RAF) is compulsory insurance that covers all users of South African roads.
The RAF assists people injured in a motor vehicle accident and will pay for rehabilitation and medical
claims.
The RAF provides indemnity to the person guilty of causing the accident; this prevents the person injured,
or his/her family, from lodging a claim against the guilty party.
The RAF will pay in the following instances:
o Any person injured in a motor vehicle accident, whether it is the driver, a passenger or a
pedestrian
o The family of a deceased victim may also claim
Contributions to the fund are in included in the petrol/diesel price.

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Activity 2: Page 163

As an insurance consultant complete the following:

 Chose a business in your local community.

 Visit this business and assess the type of insurance that will be needed. Provide a list of possible insurance
policies needed. Justify the need for the insurance policies you have listed.
 For each type of insurance policy, consider the business‟s level of risk. Motivate your response.

Discuss your finding in the class.

The students may go to any business.

Included are some of the insurance policies for businesses from „OUTsurance‟:

 Business car / fleet insurance

 Contents and office equipment insurance
 „Out of the office‟ insurance will cover items you take outside the office for loss or damage.
 Stock cover
 Money cover
 Business interruption

The level of risk would be determined by the company the student chose.

Activity 3: Page

Discuss the following scenario in groups:

If there is a fire at the flea market and the owner slips in the water used to put out the fire and he breaks his arm, can
he claim for his medical expenses via his Fire Insurance policy? Motivate your answer by explaining the concept of
proximate cause.

Proximate cause: If a person claims from the insurance company for a loss suffered, the insurance
company will make sure that the loss suffered was as a result of the event that was insured (the proximate
cause of the loss) and not a secondary event.

Therefore, the broken arm isn‟t a direct cause of the fire, and therefore, would need to be a separate claim
against the man‟s medical insurance.

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Activity 4: Page 166

You have just been appointed as the Financial Manager at a local stationery retailer. To your shock you have
discovered the business does not have insurance.

Explain to the General Manager how the following concepts relate to the given scenario.
• Indemnification
• Absolute good faith
• Excess clause
• Fidelity insurance
• Subrogation

• Indemnification: Indemnification provides the insured with the peace of mind of knowing, that should
the insured asset be damaged or destroyed, the insured will be adequately compensated for any loss.
Adequately in this case means the insured will be put in the same financial position as before the event
took place. The insured will not suffer a loss, nor will (or may) the insured make a profit out of
insurance. Indemnification refers to short-term INsurance.

• Absolute good faith: This is also known as utmost honesty and requires the insured to disclose all
relevant information that may affect the risk. If all questions are not answered honestly and accurately,
the risk will not be covered and the policy will be declared null and void. All premiums paid to cover the
risk will be lost and no compensation will be received.

• Excess clause: Excess is the Rand amount or % of the loss / claim specified by the policy that is the
responsibility of the insured to pay. This is the amount on each claim that is not covered by the policy.
The excess amount can be low, but then monthly premiums will be higher. Or, if the insured is
prepared to pay a high excess, the monthly premiums may be lower.

• Fidelity insurance : Fidelity insurance is taken out to protect the business against financial losses
caused by dishonest employees. Theft of money or fraud may be covered. If there are only one or two
people in the business handling money or working with finances, the policy may be taken out to cover
individual employees (their names are specified on the policy). If a large number of staff members need
to be covered, a floating policy may be taken out where specific positions (jobs), rather than individual
people are covered.

• Subrogation: Subrogation relates to the principle of indemnity. This means the person is put in the
same financial position when the insurance pays out (cannot make a profit and should preferably not
suffer a loss either). The fact that the insured is not allowed to make a profit from insurance, means
every loss may only be claimed for once. If the insured has claimed from the insurance company to
cover the loss, he/she cannot claim from the guilty party that caused the loss as well. The right to claim
from the guilty party is signed over to the insurance company that has paid out to cover the loss.

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Additional activities - Page 168

1 ... insurance covers losses that the business has sustained due to the dishonesty of an employee:
A Indemnity B Fidelity
C Liability D Responsible employee

2 The … requires that employers should take out insurance on behalf of their employees in order to protect
employees against injury at the workplace?
A Labour Relations Act
B Workmen‟s Compensation Act
C Basic Conditions of Employment Act
D Compensation for Occupational Injuries and Diseases Act

3 A building with a market value of R750 000 is insured for R600 000. A fire causes damage to the value of
R150 000. What amount will be paid out by the insurance company?
A R145 890 B R120 000
C R128 571 D R187 500

4 Which one of the following is NOT an example of insurable interest?

A A creditor in the life of a debtor
B A partner in the life of his co-partners
C A person in his own life
D An employee in the lifespan of his employer

5 The insurance principle that specifies a person may only claim for compensation due to a specific event once:
A Cession B Subrogation
C Excess D Proximate cause

6 The loss resulting from ... is an example of a risk that a business can insure against:
A fire
B a new production technique
C a price increase between the time of placing the order and the time of getting the goods
D war

7 If a business vehicle sustains damage to the value of R25 000 due to hail and the insurance is only prepared
to pay R20 000, because the business should pay the first R5 000 of every claim, it is known as …
A unethical insurance conduct B proximate cause
C excess D subrogation

8 Which one is NOT a concept relating to insurance?

A Cession B Endowment
C Indemnification D Security

9 An insurance where the premiums are included in the price of fuel sold to drivers:
A Road Accident Fund B Fuel Compensation
C COIDA D Driver incapacity Insurance

10 Which one of the following insurance policies is compulsory?

A Life Assurance B Endowment policy
C Motor Vehicle Insurance D Road Accident Fund

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11 If a vendor at the flea market wants to take out an insurance contract, there are THREE requirements that
must be met before the contract will be regarded as valid. Explain these three requirements in detail.

Absolute good faith

This is also known as utmost honesty and requires the insured to disclose all relevant information that may
affect the risk. If all questions are not answered honestly and accurately, the risk will not be covered and
the policy will be declared null and void. All premiums paid to cover the risk will be lost and no
compensation will be received.

Insurable interest
A person has insurable interest if it can be proved that he/she will sustain a financial loss if a certain event
takes place. The following are examples of insurable interest:
 A person has insurable interest in his own assets (belongings).
 A person has an insurable interest in his/her own health (if he/she becomes permanently or
temporarily disabled) or in his/her life (in the case of death, the family members should be looked
after).
 A married person has insurable interest in the life of the spouse (husband/wife).
 Business partners have an insurable interest in the lives of co-partners, because they are jointly and
separately liable for the debts of the business.
 A creditor has an insurable interest in the life of his debtor (a person that owes him/her money).

Contractual capacity means the person entering into the insurance contract is of legal age and sound
mind. Legal age in South Africa is 18 years of age.

12 Name THREE compulsory insurance types.

Unemployment Insurance Fund (UIF)

Compensation for Occupational Injuries and Diseases Act (COIDA)
Road Accident Fund (RAF)

13 Discuss the importance of UIF from an employee‟s point of view.

UIF will give an employee peace of mind and relief to workers when they are unemployed, or if they are
unable to work because of maternity leave or illness. It also provides relief to the dependants of a deceased
employee who has contributed to the fund.

14 Explain why Insurance is important from a business point of view.

UIF will allow the business to employ a replacement in the event of pregnancy and know the employee will
be taken care of.
Business pays 1% and the employee pays 1% - the costs are shared between the two, easing the financial
burden for the business.

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