MNE2601/201/3/2012

Tutorial Letter 201/3/2012

INTRODUCTION TO ENTREPRENEURSHIP AND SMALL BUSINESS

MNE2601 Semesters 1 and 2

Department of Business Management
This tutorial letter contains important information about this module.

Bar code

MNE2601/201

CONTENTS
1 2 3 4 5 6 INTRODUCTION ......................................................................................................................... 3 CONTACT DETAILS FOR YOUR LECTURER .......................................................................... 3 EXAMINATION GUIDELINES ..................................................................................................... 3 FEEDBACK ON ASSIGNMENT 01 ............................................................................................. 5 FEEDBACK ON ASSIGNMENT 02 ...........................................................................................11 CONCLUDING REMARKS .........................................................................................................16

MNE2601/201

INTRODUCTION

Dear Student The purpose of this tutorial letter is to provide you with feedback on Assignments 01 and 02 as well as with information on the examination.

CONTACT DETAILS FOR YOUR LECTURER

If you have any questions on the academic content of this module, please discuss them with the primary lecturer, namely:

Lecturer Primary lecturer Mr S Rapidere Secondary lecturer Prof Chiloane - Tsoka

Email address radipns@unisa.ac.za

chiloge@unisa.ac.za

Refer to Tutorial Letter 101 for all other contact details.

EXAMINATION GUIDELINES

Please note the following important information:

3.1

Year mark

In order to pass this module you require a final mark of 50%. Refer to Tutorial Letter 101. The assignment will contribute a maximum of 20%, while the examination mark will contribute 80%. Irrespective of the year mark obtained, a subminimum of 40% must be obtained in the examination. You will therefore not pass the examination if your examination mark is less than 40%. Please refer to Tutorial Letter 101, which you received when you registered for the module. It

MNE2601/201

contains a further explanation of how the term mark is calculated. calculation of your final mark, see Tutorial Letter 101.

For more details on the

Please study the following example to see how the assignment mark (the higher of the marks you received for the two assignments) will contribute to the final assessment mark:
Example:

Say you obtain 50% in assignment 01. This mark is then multiplied by 0.1 to give you 5% towards your year mark. If you obtain 60% in assignment 02, this mark is multiplied by 0.9 to give you 54% towards your year mark. The total mark you receive for assignments 01 and 02 (5% plus 54%) will make up your final year mark of 59%. This figure is then calculated to give you a weighted year mark of 11.8% (59 x 0.2%). If you obtain 50% in the examination, this figure would be multiplied by 0.8 to give you a weighted examination mark of 40%. The two results are then combined to make up a final assessment mark of 51.8% (11.8% + 40%) for the module.

3.2

Examination paper

The following valuable information on the examination paper should be studied carefully: The following chapters/study units will be covered in the examination papers: Chapters 1 12 of The South African perspective (Nieman & Nieuwenhuizen 2009). The examination paper may include some of the questions that appeared in the assignments. Short direct and indirect case studies will be included in the examination. You have to be able to define and describe concepts, give examples and explain what is meant by certain concepts. Please read each question carefully before answering it. Take note of key words such as list or discuss and do what the question asks you to do. If you merely list things when you were asked to discuss them as well, you will only get part of the marks. The examination paper is set in English (and Afrikaans where applicable). The examination paper counts 70 marks and consists of two sections (Sections A and B). Section A (30 marks) is compulsory and comprises multiple-choice questions. Section B contains three questions worth 20 marks each, of which you may choose any two questions.

MNE2601/201 Previous examination papers are available on myUnisa and will not be supplied to students by the lecturer. The Examination Department will notify you of the examination date and time. You are advised to study the model answers to Assignments 01 and 02, which are included in this Tutorial Letter, as part of your examination preparation. Comprehensive details of the administration of examinations, including the criteria and dates of supplementary examinations, are available on myUnisa under Examinations. Several resources and tips are also available on myUnisa to assist your with stress management and other related issues during examination periods.

FEEDBACK ON ASSIGNMENT 01
Feedback on Assignment 01: Question 1 The correct answer is 3. See page 9 in the prescribed book. An entrepreneur is a person who sees an opportunity in the market, gathers resources and creates and grows a business venture to meet the perceived needs. He or she takes the risks of the venture and is rewarded with a profit if it succeeds. Question 2 The correct answer is 3. See page 9 of the prescribed book. Timmons believes entrepreneurship is the process of creating or seizing an opportunity and pursuing it, regardless of the resources currently controlled.

Question 3 The correct answer is 3. See page 15 of the prescribed book. Entrepreneurial success factors include the following: creativity and innovation, risk orientation, leadership, human relations, a positive attitude, perseverance and commitment. Knowledge of competitors and work of a high quality are managerial success factors.

MNE2601/201

Question 4 The correct answer is 2. See pages 11 and 12 of the prescribed book. Factors that encourage entrepreneurial orientation include culture, education, work experience, personal orientation and family and role models. Question 5 The correct answer is 4. See page 34 of the prescribed book. Push factors are those that encourage entrepreneurship when traditional jobs are less attractive because an individual does not have any other career. You were told in the question that Mr Smith had disagreed with his line manager. This led him to start his own business. He was motivated by frustration and inability to get on with his manager. Therefore, option (B) was supposed to be the correct answer. Many students felt, however, that frustration was not one of the factors. We therefore decided to give a free mark. Culture is one of the reasons that causes people to resign. If as an employee you find that you are not comfortable and do not fit into that culture you might decide to resign. The only reason why we gave a free mark is that culture is a broad concept. The question should have specified organisational culture. A free mark was therefore allocated. Question 6 The correct answer is 3. See page 12 of your prescribed book. Personal orientation refers to traits that are dimensional, such as creativity and innovation, autonomy, risk taking, proactiveness and anticipation as well as competitiveness and aggressiveness.

Question 7 The correct answer is 2. See page 32 of the prescribed book. When a person has a high need for achievement, he or she is highly motivated to excel. Question 8 The correct answer is 2. See page 30 of the prescribed book.

MNE2601/201

Entrepreneurial activities refer to self-employment, independent income generation, temporary market stalls or stands. These entrepreneurs could be seen as inexperienced, and still needing support and training in technical and managerial skills. Question 9 The correct answer is 2. See page 85 of the prescribed book. When opening the window of opportunity an entrepreneur is required to take the following actions: Start the business activity. Obtain the commitment of the ventures stakeholders.

Question 10 The correct answer is 3. See page 21 of the prescribed book. Successful entrepreneurs make use of experts inside and outside their enterprise to carry out their business function and attend seminars and training. Question 11 The correct answer is 3. See page 114 of the prescribed book. When developing a business plan to attract shareholders, the emphasis should be on the strategy to achieve profit and growth projections. Question 12 The correct answer is 3. See page 39 of the prescribed book. The correct answer is C and D. A free mark was awarded for this question because options 1 and 4 were repeated. Students were therefore given a free mark. Question 13 The correct answer is 3. See page 105 of the prescribed book. A business plan has the potential to provide the business with a focus, an objective, a road map, an evaluation tool and a method of determining the risks facing the entrepreneur.

MNE2601/201

Question 14 The correct answer is 3. See page 85 of the prescribed book. Option 3 is incorrect. The competitive advantages for Amy, the owner of a gift shop in a neighbourhood shopping centre, are a unique service feature, value for money, customer experience, customer convenience and notable product attributes.

Question 15 The correct answer is 2. See page 57 of the prescribed book. Creativity is the result of a thought process. Question 16 The correct answer is 3. See page 96 of the prescribed book. Measuring the window involves ensuring that the opportunity is feasible and viable. This is done by means of a feasibility and viability study. Question 17 The correct answer is 5. See page 161 of the prescribed book. Customer risks include to bad debts, product liability and on-premises injury. Question 18 The correct answer is 4.See page 161 of the prescribed book. Property risks include fire, shoplifting, burglary and natural disasters. Question 19 The correct answer is 1. See page 161 of the prescribed book. Personnel risks include to employee dishonesty, loss of key executives and competition from former employees.

MNE2601/201

Question 20 The correct answer is 3.See page 43 of the prescribed book. Social entrepreneurs play a vital role as change agents in the social sector by recognising and relentlessly pursuing new opportunities to serve as change agents. Skills audits, SMMs

development and development programmes are part of the technology that assists entrepreneurs. Question 21 The correct answer is 3. See page 106 of the prescribed book. In the operation plan of your business plan you would focus on controlling the quality of your proposed products. Question 22 The correct answer is 4. See page 182 of the prescribed book. The feasible business opportunity concept is correct but the entry options are wrong; competitive venture and small margins are wrong. Therefore (A) and (C) are the options that are not correct while (B) and (D) refer to other venture capitalisation. Question 23 The correct answer is 3. See page 101. The error in this question is that an amount of R5 000 000 is given instead of R500 000. Free marks was allocated.

Question 24 The correct answer is 3. See page 117 of the prescribed book. All options except 4 are correct regarding the drawing up of a business plan and avoidance issues. You are given 16 problems in the textbook. These should be taken into consideration when drawing up a business plan and considering avoidance issues.

MNE2601/201

Question 25 The correct answer is 2. See page 181 of the prescribed book. Venture capital is the funding that is supplied to firms during the earliest stage of development.

10

MNE2601/201

FEEDBACK ON ASSIGNMENT 02
Feedback on Assignment 02: Question 1 The correct answer is 4. See page 179 of the textbook on ordinary shares and company shares.

Question 2 The correct answer is 3. See page 179 of the prescribed book. Ordinary shares are the most critical and central role players in the life of a company because they constitute the first source of funding for a new company. Debentures are regarded as negotiable instruments.

Question 3 The correct answer is 3. See page 179 of the prescribed book. Preference shares take priority over ordinary shares when it comes to the payment of dividends or the return of capital in the event of liquidation. Mr Robert will therefore be given priority when the company is liquidated, before with the holders of ordinary shares are paid. Question 4 The correct answer is 2. See page 162 of the prescribed book. Samuel adopts a reduction strategy in implementing strict safety programmes. Retention is about the strategy of bearing the risk or accepting it as part of the business. Avoidance refers to avoidance of risk-taking. Question 5 The correct answer is 2. See pages 129131 of the prescribed book. A sole trader is personally liable for the debts; a partnership contributes skills or assets that form part of its assets and a private company has at least one director.

11

MNE2601/201

Question 6 The correct answer is 4. See page 205 of the prescribed book. Umsobomvu Youth Funds main objective is to create job opportunities, to assist in the development of business plans and to create opportunities for young people. Option 4 is correct. Question 7 The correct answer is 3. See page 192 of the prescribed book. All except statement (D) are correct. By networking we mean that the entrepreneur networks to meet people and builds relationships. It is the art of making and using contacts, also a tool of know and know who. The fourth statement is wrong in the sense that the entrepreneur does not learn the art of maintaining broken relationships. Question 8 The correct answer is 4. See page 192 of the prescribed book. The statements (A), (B) and (D) are correct. What makes statement (C) wrong is that an entrepreneur does not give advice but rather asks for advice. Question 9 The correct answer is 3. See page 192 of the prescribed book. Option 3 is correct. Statements 1, 2 and 4 are incorrect because the networking principles are: Reciprocity Networking relationships Networking sustainability

Question 10 The correct answer is 3. See page 202 of the prescribed book. Option 3 is correct. Statement (B) is incorrect. Khula does not offer limited support; their main function as an enterprise is: to provide credit indemnity guarantees to provide direct services to SMMEs
12

MNE2601/201

to provides loans of up to R3000 00 Question 11 The correct answer is 4. See page 203 of the prescribed book. All the statements are correct except statement (D), which is incorrect. The functions of the Enterprise Information Centre are: Increase access of local people to SMME support services. Increase opportunities for participation. Provide a focal point for expansion and development. Increase the flow of resources to local communities.

Question 12 The correct answer is 1. See page 204 of the prescribed book. Option 1 is incorrect. The other three statements are correct.

Question 13 The correct answer is 2. See page 218 of the prescribed book. Option 2 is incorrect. The words less than is incorrect because in a family business the family is actively involved in the business. family members make a definite input into the strategic direction of the business. the intention is to continue the family business over time.

Question 14 The correct answer is 4. See page 226 of the prescribed book. The students were allocated a free mark because the question did not read well. Statement 3 is also wrong because meetings are held annually, not necessarily when profits are declared.

13

MNE2601/201

Question 15 The correct answer is 1. See page 227 of the prescribed book. Option 1 is correct. The error in the other options lies in statement (C). Liquidation is not discussed as representing management philosophy. Question 16 The correct answer is 3. See page 228 of the prescribed book. Option 3 is correct. The biggest challenge facing South Africa and family businesses is the lack of managerial skills. Question 17 The correct answer 4. See page 228 of the prescribed book. The following is the correct sequence of steps in succession in a family business: Define what the family and owners want. Evaluate and test. Develop a preliminary succession plan. Communicate and adapt the plan. Implement the plan. Question 18 The correct answer is 3. See page 262 of the prescribed book. The market-based method uses the prices for which similar businesses were sold as a guideline in determining the value of a business. Question 19 The correct answer is 2. See page 162 of the prescribed book. Personal risk is the loss of status and income that the entrepreneur faces should the business fail. In South Africa bankruptcy carries a heavy stigma from which the entrepreneur may not recover.

14

MNE2601/201

Question 20 The correct answer is 2. See page 184 of the prescribed book. The marketing costs of raising finance for a new and growing business venture are advertising, travel, brochures, prospectus and lost time. Question 21 The correct answer is 4. See page 264 of the prescribed book. Capitalised earnings refer to the net earnings for the coming year by using the previous years income statement. Question 22 The correct answer is 1.See page 262 of the prescribed book. The discounted future earnings method refers to basing the value of the business on the present value of its future earnings. Question 23 The correct is 5. See page 262 of the prescribed book. The excess earnings method is based on the method that uses a combination of the value of the businesss existing assets and an estimation of future earnings. Question 24 The correct answer is 3. See page 239 of the prescribed book. Option 3 is correct. The combination of (B) and (C) refers to advantages from the franchisees point of view. Question 25 The correct answer is 3. See page 241 of the prescribed book. The correct option is 3. Ethical requirements for a franchise are: To promote the concept of franchising To issue guidelines according to sound franchising schemes.

15

MNE2601/201

To represent the industry vis--vis the government, the media and the general public as the need arises.

CONCLUDING REMARKS

We trust that you found the feedback and information we provided valuable. Do not hesitate to contact us if you have any questions regarding the assignments, the feedback given or the examination.

With best wishes for your examinations

The Department of Business Management (MNE2601 Introduction to Entrepreneurship and Small Business)

16