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BUSINESS STUDIES
GRADE 12 IEB SYLLABUS
SASHTI NOTES
SUMMARIES OF ALL CHAPTERS
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Conflict Management
T E A M W O R K & C O N F L I C T M A N A G E M E NT
Conflict in teams often arise from the allocation of workload:
• Role Overload – Occurs when one member of the team (often willingly) takes on more
than they can cope with.
• Role Conflict – Occurs when more than one member wants to play a certain role, and
in instances like the role of the leader, it can lead to conflict.
• Role Ambiguity – Occurs when there is a lack of clarity between the roles that
members are expected to play.
SYNERGY
The interaction of two or more agents or forces so that their combined effect is greater
than the sum of their individual effects.
FUNCTIONAL & DYSFUNCTIONAL CONFLICT
Functional Conflict - Non-Aggressive, Stimulates Creativity, Brainstorming, Can Disagree
But Still Work Together, Higher Productivity, Willing To Compromise.
Dysfunctional Conflict - Aggressive Disagreement, Refuse To Work Towards A Common
Solution, No Compromise, Reduced Productivity.
A D V A NT A G E S O F C O N F L I C T
1.
2.
3.
4.
5.
Create awareness of a problem to be addressed
Stimulates creative thinking
Learn from each other/understand a probl em better
Leads to collaboration/working together/by-in
Motivate people to give input/participate/empathy
DISADVANTAGES OF CONFLICT
1. Hampers productivity
2. Lower morale
3. May lead to inappropriate behaviour such as violence due to frustration/confusion
R E A S O N S FO R C O N F L I C T
•
•
•
CHANGE – change brings uncertainty, most people are resistant to change
o e.g. New computer software to be used at all KFC franchises – staff don’t
know how to use the new software
INCLUSIVITY AND CULTURAL DIVERSITY - Many cultures in SA,
Ignorance/Stereotyping/Different Backgrounds, Values, Religions - Can Lead To
Conflict
o e.g. Worker wins KFC dispute
LACK OF, POOR COMMUNICATION – Uncertainty, not informed of
decisions/expectations, rumours, poorly defined job descriptions, inconsistencies
from management, poor listening skills, misunderstandings, role ambiguity can lead to
conflict
o e.g. Drive through operator at McDonalds multi-tasking and getting order
wrong ?
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•
•
•
RESOURCE ALLOCATION – insufficient resources or unequal distribution
o e.g. Short staffed during peak hours ?
PERSONALITIES AND EMOTIONS – different personality types, easy-going vs time
urgency
VALUES AND ETHICS – personal set of beliefs that guide actions, linked to culture
and religion
o e.g. “Worker wins KFC dispute”
INNER CONFLICT – Jealousy, feelings of inferiority, need for control, personal
beliefs/ethics, oversensitivity, low self-esteem
RESOLVING INNER CONFLICT
•
•
•
Identify inner conflict first
Refer the person to the correct department (HR → HR Department)
The Extent of the intervention will depend on the intensity of the problem, and the
effect it is having on their productivity.
S K I L L S A M A N A G E R NE E D S I N O R D E R T O M A N A G E C O N F L I C T
•
•
•
•
•
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ABILITY TO DEAL WITH CHANGE – communication to motivate the reason for the
change, reassurance and training
TOLERANCE REGARDING INCLUSIVITY AND CULTURAL DIVERSITY – education and
training
o e.g. “African time” be aware of stereotyping KFC dispute – Tolerance of
differences
COMMUNICATION SKILLS – Management must communicate clearly and in an
understandable manner, Regular meetings, Feedback and suggestions = staff buy-in,
Suggestion box, Notice boards, Newsletters, etc.
THE ABILITY TO THINK AND ACT STRATEGICALLY – Strategic planning,
Environmental scanning to base decisions on, Effective resource allocation.
EMOTIONAL INTELLIGENCE – a person’s ability to manage relationships in a mature
manner
o e.g. Dealing with difficult costumers who become emotional and abusive?
VALUES AND ETHICS – perceived or real – training, education, open communication,
create empathy
o e.g. What is the perception of KFC regarding the dispute article?
R E C O M M E ND A T IO N S FO R C O N F L I C T M A N A G E M E N T
•
•
•
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Stimulating Functional Conflict – Devil’s Advocate
o Question everything, different opinions, create a debate, prevent “group
think – team members don’t want to criticize others as to get along”,
encourage analytical thinking, test the proposed plan of action
Negotiation
o Two people trying to sort out their own differences without a third party
intervention
Smoothing
o Differences are “ignored” smoothed over and focus is placed on what they
have in common, short term solution only
Forcing
o Authority forces their solutions on subordi nates – no participation, leads to
resentment
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•
Avoidance
o Pretending the problem does not exist/ignoring it – does not work for serious
problems
Compromise
o Democratic, give and take, negotiation – both parties have equal power.
T H I R D - P A RT Y I N T E R V E NT I O N S T O M A N A G E C O N F L I C T
CONFLICT RESOLUTION STEPS:
Negotiation
1+1
compromise
Conciliation
1 + 1 + (1)
facilitation
Mediation
1 + 1 + (1)
advice
Arbitration
1+1+1
Makes the
decision
CON-ARB PROCESS: Conciliation – Arbitration, One-stop process for unfair labour
practice and unfair dismissals, both conciliation and arbitration takes place in one day.
Saves time and costs. This process is compulsory relating to PROBATION issues. Part of
the CCMA process.
CCMA: Commission for Conciliation, Mediation and Arbitration – independent organization
that acts as a dispute resolution body that promotes cooperation between employers and
employees. E.g. KFC dispute article
WORKPLACE FORUMS (WPF): The WPF will not take over the role of the trade union, but
enables workers at all levels to participate in consensus decision-making with senior
management.
EMPLOYERS ORGANISATIONS: Businesses (Employers) can outsource Labour/Industrial
Relations issues to these organisations/experts. Will assist employers on issues such as:
Employment contracts, Disciplinary and Grievance procedures, Dispute resolution,
Employment Equity plans, Representation at CCMA, Trade Union negotiations.
e.g. NAPE – National Association of Private Employers.
TRADE UNIONS: The main aim of trade unions are to engage in collective bargaining with
employers on behalf of their members (employees), advise and represent their members on
conditions of service, grievances, disciplinary issues, labour-relations issues. e.g. National
Union of Metalworkers of South Africa
CONFESA (CONFEDERATIONS OF EMPLOYERS IN SOUTH AFRICA): HR and Industrial
Relations services/consultation to employers in order to comply with labour legislation.
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Professionalism and ethics
DEFINITION/DESC RIPTION OF ET HICS:
Ethics are human morals or values which gove rn good behaviour or decisions.
The understanding of ethics will guide manage ment’s actions
Relate d to ethics = CSR, King Code, Conflict Management etc.
ETHICAL THEOR IES
Conseque nce-base d the ory – the c onsequence of your actions determi ne ri ght from w rong.
e.g. Robin Hood, Paying a bribe to get the de al.
Principle-based theory – according to pre determined rules/pri nciples/v alues will determine right
from wrong
e.g. It is ALWAYS unethical to cheat regardless of the consequences – losi ng the de al bec ause
on pri nciple you won’t pay a bribe.
Narrative-base d the ory – past stories/cases that are relevant/c omplime nt the situati on/issue are
used to determine ri ght from wrong.
e.g. Past c ourt c ases to support a curre nt point of view.
Utilitarian the ory – what is right f or the greatest number of people
e.g. BEE.
Virtue-base d theory – the characte r of a pe rson is judged inste ad of his acti ons e.g. He is a
good pe rson, so what he did must also be good, done with good i ntenti ons.
ETHICAL ISSUES IN THE WORKPL ACE
CONFLICT OF INTEREST - Moral conf licts
e.g. Medical staff must perf orm aborti ons when it is against their reli gion, nepotism, w orki ng on
Saturdays/Sundays when it is agai nst their re ligion in FFI
INAPPROPRIATE GIFTS – Bri bes, gifts linke d to sexual h arassment, kick-backs (compensation
for receiving a c ontract)
SEXU AL HARASSM ENT – Unwelc omed or uninvi ted sex ual advances/gifts, both physic al or v erbal,
normally from an authority figure to a subordinate
e.g. Social medi a, phone calls, sms etc.
UNAU THO RIZED USE OF FUNDS/PAYMENTS – fraudulent inv oices, forge d si gnatures,
unauth orize d payments, charging pe rsonal ite ms to busi ness account.
REVERSE DISCRIM INATIO N – Unethical affirmative acti on where well-qualified pe ople find i t
impossi ble to find jobs due to being white.
INTERNET, EMAIL, CELL PHONE, SOCIAL MEDIA ISSUES
e.g. Visiting porn sites, se ndi ng damaging or c onfide ntial inf ormation.
THEFT – Steali ng from the c ompany
e.g. Taking unsold food home after work without pe rmission
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FIRING AN EMPLOYEE FOR WHISTLE-BLOWING – Employees who report unethical behavi our to
management, especially about someone i n auth ority.
INSIDER TRADING – The illegal practice of buying or selling sh ares on the stock exchange with
the adv antage of having “insi der” access to c onfide ntial inf ormation.
PIRACY – The unauth orized and ille gal duplication of products protected by pate nts and
copyrights.
e.g. Selling a brand/logo merchandise
COUNTERFEITING AND BOOTLEGGING - Counterfeiting = c opying/imitati ng and trying to pass it
off as the origi nal
e.g. Street corner products. Bootle ggi ng = th e illegal distribution of an original product, “fell of
the truck”.
UNREALISTIC P RICING – High demand and few supplie rs – Consume r Protection Act and the
Competiti on Board protects c onsume rs against price fixing.
SELLING TRADE SECRETS
TERM INATING EMPLOYMENT WITHOU T PROP ER P ROCEDU RES
UNETHICAL ADVERTISING
TAX EVASIO N – Not disclosing all taxable i ncome (Tax av oidance = where one applies le gitimate
tax de ductions = ethical)
WHY SHOULD BUSINESSES ACT ETHICAL?
By acti ng ethically and looking afte r the i nterests and well-bei ng of their employees, employees
become more productive. Looking after the interests of all the stakeholders will be nefit th e
busi ness. Tri ple B ottom Line Re porting, no child labour etc.
Businesses should adhe re to the written (laws) and unwritte n rule s/le gislati on (harming the
environment) to be nefit the business and all their stakeholde rs. Fines, bad publicity if
caught/exposed.
Businesses should act ethically re garding the religions of their employees and other stakeholders.
e.g. Refusi ng religi ous h olidays could impact the business through bad publicity and morale.
Diversity issue s
Deregulati on (removing of restrictive laws) – busi nesses nee d to demonstrate that they can act
as re sponsi ble citizens without bei ng f orce d to do. B usinesses should i ntroduce e thical programs
to e nsure that they c an operate without exte rnal interfere nce. e.g. Skills Developme nt Act
Incre ased Globalisati on – differe nt ethical/moral/v alues ex pectati ons in different countries –
need a global set of ethical moral value s.
ETHICS IN DIFFERENT SPHE RES OF SOCIETY
PUBLIC SECTOR/GO VERNMENT
• Anti – c orruption legislation
• Acting in the best i nterest of society
• Conflict of intere st
• Code s of Conduct for public se rvants/P ublic office bearers
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o e.g. Fraudule nt trave l claims, bribes, ne potism, unethical use of f unds, G upta
fiasco etc.
PRIVATE SECTOR
• Financial issues
• Price fixing
• Child labour
• Pollution
o e.g. Pg. 25 “Fake F arming” and “Unileve r” vs FFI (F oreign Fi nanci al Instituti on)
LEVELS OF BUSINESS ETHICS
INDIVIDU AL LEVEL
The individual decide s on behavi our/choices:
• Cheating on an expense acc ount
• To call in sick when one is not sick
• Accepting a bribe
• Plagiarism
ORGANISATIONAL LEVEL
The busi ness i nflue nces the decision/action:
• To ask an employee to perf orm an unethical or ille gal act to earn profit.
• To pressure i ndividuals or groups to overlook wrongdoings to protect the busi ness’
reputati on or image.
PROFESSIO NAL LEVEL
The professi onal makes an unethical decision to benefit himself:
• An accountant advisi ng a clie nt to de duct que stionable items for tax purposes.
• A me dical doctor risking side effects for the patient when w riting a prescripti on to gain
favour f rom a pharmace utical company.
• A restaurant owner buying horse me at because it is cheaper to buy from suppliers.
SOCIETAL LEVEL
Society dictates what is expectable:
• Trading or sports on re ligious holi days,
• excepting bri bes vs cultural norms
• KFC dispute
INTERNATIO NAL L EVEL
• Human Rights Vi olations
• Pollution
• Economic Sancti ons
CODE OF ETHICS VS CODE OF CONDUCT
CODE OF ETHICS
An umbre lla concept defini ng the morals, principles and values under which an organization
operates.
CODE OF CO NDUCT
Regulati ng the expecte d behaviours for prope r busi ness practice. Based on the code of eth ics
e.g. Honouring contracts, Supplie rs Code of Conduct etc.
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PROFESSIONAL ISM
PROFESSIO NAL CODES: Aim to re gulate beh aviour of pe ople participating i n a particular
profession e.g. L aw, Educ ation, Medicine, Charted Accounting etc.
Professional behaviour is gui ded by professi onal codes.
If a pe rson (professi onally qualified) is re gistered with a professional body, they can be
suspe nde d, ex pelle d/fire d, disbarre d f rom the professi onal field.
Good B usiness Practice = standards of professionalism, accountability, e thics.
Unethical practices are not always illegal e.g. Selling poor quality goods at high prices (fre e
market ec onomy), but ille gal acts are always unethical.
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Csr and corporate governance
C S R V S CS I
CSR - Corporate Soci al Responsi bi li ty c an be def i ne d as manageme nt’s obli gati on to protec t and
promote the w elfare of all stake h olders, the c ommi tme nt to act i n an e thic al manne r.
CSI - Corporate Social Investment is the actual resources th at are invested in th ese
stak eh olde rs, i.e. mone y, manpowe r, produc ts etc.
B usi ne ss nee d to i nve st i n th ei r fi nanci al pe rf ormance as w ell as soci al pe rf ormanc e and look ing
af ter the environment. (Ki ng Code)
Stak eh olde rs = Ow ne rs, Employe es, Customers, Supplie rs, G ove rnme nt, L ocal c ommuni ti es,
Competitors
SU ST A IN AB IL ITY
T he ability to be maintained at a ce rtain rate or leve l.
• To mak e a difference in the long term
• Environmentally friendly alternatives – “there is no planet B”
• Import raw materials that are seasonal
• To e nable the c ommuni ty to bec ome self suf fic ie nt
• Te ac hi ng th em ski lls to e nable th em to get jobs to sustai n them i n the long term,
marketable skills
• Sustai nable projec ts c an c onti nue i nto the f uture – af te r CSI i nte rv e nti on
IM PL ICAT IONS O F C S R FO R BU S IN ES S A ND C OMM UN IT IE S
POSITIVES FOR THE BUSINESS:
• P romoti ng the i mage of the busi ne ss/M arke ting strate gy
• Compe ti tiv e adv antage bec ause of good publici ty/re putati on e .g., KF C Add HOP E
• M ay attract/retain good staff who believe in CSI
• M ay attract inve stors wh o are c onsci ous of CSI
• Assi sts gov e rnme nt i n provi di ng CSR re lie f with out the m h avi ng to e nf orc e it th rough
legislation
• M ay enjoy tax rebates from SARS
• A higher rating on the JSE SRI
• Assi sts i n the i mprove me nt of soc i o-ec onomic problems suc h as pove rty, the ft, c rime –
wh ich c ould h ave a ne gativ e eff ect on the busi ne ss
NEG ATIVES FO R THE BU SINESS:
• Th e c ommunity supporte d may not be able to support the busi ne ss – e. g. c an’t af f ord
thei r produc ts
• Smaller busi nesses fi nd i t diff ic ult to implement CSR programs
• CSR c an di strac t businesse s/employees from thei r c ore f uncti ons/re sponsi bilitie s
• CSI i s pai d f rom profi ts w hich c ould h av e used to low er se lli ng price s to be nefi t th e
c ustome rs or i nc re ase profit sh are of ow ne rs
• De taile d re ports nee d to be draw n up = time c onsuming
• Soci al spe ndi ng re duce s th e c ompany’s e c onomic ef fici e nc y = make s busi ness less
competitive
• Company di rec tors are acc ountable to th e shareh olders, not to the c ommuni ties
• It is di ffic ult to acc urate ly me asure the e ffe cti ve ne ss of soc i al i nve stme nt
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M anage rs/staf f may not be trai ne d/e x pe rie nc e d to run CSI programs
Ow ne rs c ontri bute c api tal tow ards the busi ness and ex pect a re turn on the ir inve stme nt
Some se e provi di ng goods and se rvic es alre ady mee t th e nee ds of c onsume rs = CSR
PO SITIVES FO R THE COMM U NITY:
• Supports the busi ness by purch asi ng i ts produc ts and doi ng so c ontri bute s to its
profi tabi li ty
• Th e c ommunity prov i de s employe es, c ustome rs and suppli e rs to th e busi ness
• P rov isi on of bursarie s may i nc re ase the standard of livi ng of the c ommuni ty
• Improv es the w elf are and quality of li fe of soc iety/c ommunity
• Inv olv es e mployee s i n c ommuni ty projec ts
• B ette r e ducati onal f aci li tie s are e stabli she d i n poor c ommuni tie s
• Community w ill be nefi t f rom programs such as: trai ning and de ve lopme nt programs such
as ABET (Adult Education) , AIDS prevention, Anti-drug abuse campaigns, sponsorships,
c re ati ng of i nf rastruc ture e tc.
• Sustai nable CSR = job c reati on and i mprove d standard of livi ng i n c ommuni tie s
NEG ATIVES FO R THE COMM U NITY:
• Distri buti on of sc arce CSR re source s to se lec te d be nefic i arie s may c ause proble ms such
as discrimination
• P rograms may not sati sf y all the nee ds of the c ommunity
• Communities bec ome dependent on the CSI program/ c reate ex pectati ons
• Sustai ne d proje cts are diff ic ult to c onti nue wi th out the ri ght ex pe rtise
• Spe ndi ng mone y on CSR me ans th at the busi ne ss nee d to rec ov er the spe nd some h ow –
leads to high er prices being ch arged and inflation with a negative impact on th e economy
T HE NEED F OR CS R IN SOUT H A FR IC A
•
Ine q ualities of the past – especi ally i n e duc ati on – resulte d i n a large numbe r of
i llite rate adults wi th out job-re late d sk ills to sec ure employment
•
Cycle of poverty – h ard to break th e c yc le (get e duc ate d to f i nd jobs)
•
Dualistic e conom y – large part of th e populati on sti ll li ves i n thi rd w orld ci rc umstance s
and c annot be cate re d f or i n fi rst w orld standards re gardi ng thi ngs such as h ousi ng,
me dic al and e duc ati on
•
Ye ars of aparthe id – resulte d i n f unds bei ng alloc ate d to poli tic al i ssues i nste ad of
e c onomic issue s. Ec onomic boyc otts also preve nte d f orei gn i nve stme nt. Human ri gh ts
issues.
•
A culture of crime and v iole nce – ne e ds to be brok e n so th at more pe ople c an
c ontri bute to the ec onomic we ll-bei ng of the c ountry
•
T he crippling e ffe ct of the HIV/AIDS e pide m ic – chi ld le d f amilie s whe re c hi ldre n give
up sch ooli ng to provi de f or th ei r si blings
•
Lim ite d water supplies in SA – le d to the conc entrati on of th e populati on i n smalle r
are as close to w ater resourc es wh ich put a strain on the li mite d resource
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Te chnological advanceme nts – me ni al jobs ge t automate d causi ng unquali fie d pe ople to
be lai d of f
•
T he “global v illage” phenome non – w he n importi ng produc ts bec ome che ape r th an
produci ng them at h ome, many jobs get lost.
o e .g. Proudly South Af ric an P roduc ts
•
Pov erty – m any CSR projec ts are li nk e d to pov erty. Th e poor h ave little acc ess to
e duc ati on, me dic al f acilitie s and battle to c ope w ith dai ly life w ith ve ry little buyi ng
powe r (mone y)
•
Cultural pollution – mi xture of c ulture s/loss of c ultural v alues
•
Ille gal dum ping of toxic w aste or oth e r waste mate rials
POVE RT Y
POVERTY LEVELS:
•
Ex treme P ove rty:
o Th e World B ank def ines thi s as liv i ng under R2 5 per person pe r day.
o Th ese are pe ople wh o c onstantly struggle f or surviv al.
o No acc ess to e duc ati on, me dic al f aci li tie s or othe r basic h uman ne e ds.
o P oorest of th e poor
•
M oderate or Subsi ste nce P ove rty:
o Th ese are pe ople wh o h ave some f orm of i ncome
o Th e y f ace ch roni c fi nanci al h ardsh ip and lack many basic nec essi tie s of he alth y
liv ing, suc h as c le an dri nki ng w ate r, me dic al f ac iliti es and sani tati on.
T RIPP LE BOTTOM L INE REPO RT ING
• People
• Profit
I n t e g r a t e d R e p o r ti n g
• Planet
a. Th e c orne rstone of good c orporate gove rnanc e
b. Inc lude s re porti ng on: ECO NOM IC P RO SP ERITY + SO CIAL RESPO NSIB IL ITY +
ENVIRO NM ENTAL SU STAINAB IL ITY
c. Me asuri ng pe rf ormanc e i n fi nanci al, e nvi ronme ntal and soci al aspec ts to me asure succ ess
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d. Li nke d to the King Code , Global Re porti ng Initi ative , Soc ial Re sponsi bi lity Investme nt
Index
e. “ SERVE THE COMMU NITY AND THE COMM U NITY WILL SERVE YO U ”
K IN G COD E & CO RPO R ATE GOVERNA NCE
Corporate gov ernanc e is the syste m of rules, prac tice s and proc esse s by whi ch a c ompany i s
di re cte d and c ontrolle d. Corporate gove rnanc e esse nti ally inv olve s balanc i ng the i nte rests of a
c ompany's many stakeh olders, such as sh areh olde rs, manage me nt, c ustome rs, supplie rs,
financiers, government and the community
•
Corporate G ov e rnance: to beh av e, ac t and manage e thic ally
•
Acc ountabi li ty, Transpare nc y
•
Ki ng Code IV – assessi ng h ow a c ompany h as both positi ve ly and negati ve ly affec te d the
c ommuni ty i n whi ch th e y c onduc t busi ness, and h ow the y i nte nd to sustain/addre ss the se
aspects in the future
o Th re e ke y e leme nts: Le ade rshi p, Sustai nabi lity and G CG
o “ apply or ex plain” approach – key stak eh olders are able to tak e acti ons on wh at
the y be li eve is i n the be st i nterest of the c ompany, and wh e n ex plai ne d, c ompli ance
wi ll be achi ev e d.
o Th e JSE h as made it c ompulsory f or all li ste d c ompani es to c omply wi th the Ki ng
Code
•
Li nk betwee n good gov ernanc e and the law – di re ctors must pe rf orm th ei r dutie s i n a
legal manner
Th e emph asi s of th e Ki ng Code has be e n to bri ng fi nanci al re porti ng in perspec ti ve by also
e xami ni ng a c ompany’s c ommitme nt to:
•
Assessi ng h ow a c ompany h ad both posi ti ve ly and ne gative ly aff ecte d th e c ommunity i n
wh ich the y c onduc t busi ne ss.
•
De te rmi ni ng h ow a c ompany is i nte nding to sustai n positive aspec ts and to elimi nate th ose
ne gativ e aspec ts i n the f uture.
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K IN G COD E S UMM A R IE S
P RIMA RY C HA RA CTE RIST IC S O F G OOD GOVE RNA NCE:
•
TRANSP ARENCY
o Openness related to transactions, facts and figures. M ore transparency leads to:
more c onfi de nt stake h olde rs i n manage me nt , more wi lli ng to i nve st, le ss f raud,
i nc rease d produc tiv ity
•
INDEPENDANCE
o Th e av oi dance of any undue i nf lue nce by intere ste d stakeh olde rs, and bei ng f re e
of any c onstrai nts th at may affec t the c orre ct c ourse of ac ti on ne e de d f or the
succe ss of th e c ompany
•
ACCO U NTAB IL ITY
o To take c omple te ac c ount of someth i ng th at h as h appe ne d or is h appe ni ng “th e
buck stops he re . Wi th a lack of acc ountabi lity c omes a lack of c onfi de nce by
stak eh olders.
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•
FAIRNESS
o To be tre ate d wi th e quali ty and av oi di ng bi as tow ards a partic ular group c ompare d
to oth e rs. A Corporate gov ernanc e rati ng system c ould be use d, w ith spec ific
criteria th at are ranked, to improve on their performance on fairness.
•
INTEG RITY
o Me asure s h ow th ose i nv olv e d i n c ompanie s are acc ountable to th ose th at are
aff ected by th ei r dec isi ons. B ei ng h onest and truthf ul.
•
DISCIPL INE
o Se lf -di sci pli ne : th e leve l of i nte gri ty and sound busi ne ss judge me nt a person h as,
especially top management wh o sets the tone for all activities in the business.
o M arket di sci pli ne: i nvestors are wi lli ng to pay a premi um (wi lli ng to i nvest) f or
companies that are perceived to be well governed and for markets where there is
good governance regime.
o Re gulatory di sci pli ne: re gulati ons (rule s, polici es, law s), wi th pe nalti es f or lack of
transpare nc y, f raud, malprac tice will be le vie d on gui lty partie s.
•
P ROM O TING ETHICAL AND RESP O NSIB LE BUSINESS DECISIO NS
o Th e board of Di re ctors sh ould e nsure th at ethic al and responsi ble dec isi ons are
made th at c omply wi th le gal obli gati ons and th e reasonable ex pectati ons of all
stak eh olders.
•
SOCIAL ISSUES
o Th e f ai r tre atment of soci ety, soci al e qui ty and sustai nable deve lopme nt – f ai r
i nc ome di stri buti on, f ai r acce ss to i nc ome and e duc ati on, f ai r distri buti on of c osts
and e nv ironme ntal protec ti on, f ai r trade, f air acce ss to price s be twe e n all soci al,
ge nde r and c ultural groups (no disc rimi nati on). P ov e rty i s due to a lack of soci al
e qui ty.
•
DU TIES AND RESP O NSIB ILITIES OF DIRECTORS
o Ac t wi th sk ill and c are wh en f ormulati ng polici es, ac t i n good f ai th and h one sty
(fi duc i ary duty = in the best i nte re st of the c ompany), not to abuse thei r pow er,
pre -e mpt ri sk s, e thic al le ade rshi p, se t up audi t c ommi ttee s, di sclose relev ant
information in integrated reporting.
•
SUSTAINAB IL ITY As P art O f The KING CODE
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o Sustai nable dev e lopme nt me ans th at once a company h as e ngage d i n a busi ness
ac tiv ity; pe ople ne e d to be bette r off , th e plane t must not h ave degrade d and th at
the c ompany’s ec onomic positi on has be e n stre ngthe ne d (3 x P s).
•
ENVIRO NM ENTAL SU STAINAB IL ITY P ILL AR
o Ref e rs to th ose busi ness acti vi tie s whi ch are c onc erne d wi th th e de gradati on of
the e nvi ronme nt; c arbon emi ssi ons, soil de pleti on, de f orestati on and polluti on. FF I
? As busi ne sse s go i n se arch f or more resourc es the y may impact negati ve ly on
the e nvi ronme nt. Companie s c an f oc us on prese rvi ng the e nvi ronme nt i n thei r
e ve ryday activi tie s by c onsi de ri ng the 4P ’s of sustai nable de si gn:
§
P roduc t/Servic e: Fi ndi ng le ss harmf ul w ays to produce the se. Consi de r the
use of rec ycle d mate ri als and c utti ng dow n on w aste .
§
P roc esse s: Assessi ng th e activi tie s that f orm part of th e c ompany’s v alue
ch ai n both i nte rnally and ex te rnally. e. g. P roduc ti on, transport,
warehousing, waste removal etc.
§
P rac tice : Includes dai ly ac tiv iti es, ope rati onal acti vi tie s, organiz ati onal
c ulture /attitude towards sustai nable design, w aste disposal (e thi cs) and
e ffec ti ve use of e nergy.
§
P re mi se s: Asse ssi ng th e way i n which the buildi ngs and surroundi ngs are
designed (eco-friendly)
BE NE F ITS O F GOO D CO RPO RATE G OVE RNA NCE
•
Investor confidence – easier to raise capital
•
Minimizes wastage, corruption, risk and mismanagement
•
Helps i n brand f ormati on/development
•
P rov i de s i nce ntiv es to ow ne rs and manage rs to achie ve objective s
•
Positive impact on th e sh are price and SRI rating
•
Ensures c orporate suc ce ss (manageme nt) and ec onomic grow th (prof it)
S OC IAL RESP ON S IB IL IT Y INVESTM ENT INDE X (FT SE /JS E S R I)
P urpose of the SRI:
•
Ide ntif y c ompanie s liste d on the JSE th at subsc ri be to TBL re porti ng and sound
governance
•
Assess th e c ompany’s ali gnment wi th global and loc al CSR
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•
To c ontri bute to the deve lopme nt and growth of sound business practi ce i n SA and be yond
•
Th e i ndex i s f ounded on the pri nci pals of TBL reporti ng and good c orporate governance.
•
Advantages:
o M oral obligati on to soc ie ty, Complyi ng w ith Compani es Act, Complyi ng wi th Ki ng
Code, G ood publicity, Easier to get contracts and tenders, Customers prefer to
support c ompani es th at c are f or c ommunitie s.
Criteri a to f orm part of FTSE / JSE All Sh are Index:
•
CO RE: The mi nimum elements c ompanies sh ould c omply wi th.
•
DESIRABL E: The se are e le me nts c ompanies sh ould aspi re to, th ese are gui di ng indic ators.
T HE JS E S R I C R ITE R IA
Th ese criteri a bre aks dow n the tri ple bottom li ne:
Companie s wi ll nee d to disclose i nf ormati on the y h ave gone about:
•
Envi ronme ntal sustai nabi lity
•
Social sustainability
•
Ec onomic sustai nabi lity
•
G ove rnance and relate d sustai nabi li ty c once rns.
Withi n e ach of the above c ri te ri a e ac h c ompany wi ll nee d to provi de de tai l on th e f ollow i ng:
•
Company polic y and strate gy
•
M anageme nt and pe rf ormanc e of the se i ndic ators
•
Reporti ng on thi s i ndic ator
G LOB A L REPO RT ING INIT IAT IVE ( G RI)
G RI i s an i nde pe nde nt i nsti tuti on th at h as made i t thei r missi on to dev elop an acce ptable
gui deli ne on sustai nable re porti ng: f oc usi ng on – ec onomic, e nvi ronme ntal and soci al activi ti es
th at busi ne ss is part of . The se gui de li nes assist c ompani es in reporti ng thei r ac tivi ti es to
dif fe re nt stakeh olders re thei r c ontri buti ons to a sustai nable e nv i ronme nt.
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CREATIVE THINKING and
PROBLEM SOLVING
•
Creative thinking is the ability to look at problems/challenges differently. Creative
thinking is a process of generating something new that is valuable and useful.
Problem solving techniques requires creative thinking.
•
Problems are challenges that have not yet been conquered. Problems can be
anticipated (Predictable Problems) or they can be unexpected. Problem solving is
the process of finding solutions to difficult or complex issues.
•
Pros and Cons Chart:
o Arguments both for and against each option, and base your decision on the
one that has the highest number or most convincing
o Weighting can be used to rank the importance of certain aspects
•
SWOT
o
o
o
o
•
PESTLE analysis
o Political
o Economic
o Social
o Technological
o Legislation
o Environmental
•
Decision Tree Technique:
o Used by management to graphically compare the different options available
when making a decision
o Its aim is to promote rational decision making and clarify available options
o Used especially for risk management or project management/planning
o Likely scenarios are brainstormed with possible decisions noted
o When a crisis arises – the decision tree is used to apply to that specific
situation (pre-planned response with options analysed under calm conditions)
•
Value Chain Analysis:
o All functions within a business need to be analysed
o Fast food company – processing function, etc.
•
Delphi Technique:
o A problem solving technique using electronic communication as opposed to
using the conventional meetings in boardrooms
o When input from a group of experts are required for complex problems, but
cannot physically get together – a question is then posed and through various
electronic formats the issue is then discussed/brainstormed or
analysis
Strengths
Weaknesses
Opportunities
Threats
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questionnaires are completed (participants could also be kept anonymous to
prevent halo effect or group think)
•
RIMS (Rational Interaction for Moral Sensitivity) Strategy
o Finding ethical solutions to problems, beneficial to society.
o All parties discussing a problem should be seen as equals (CEO – ground
staff), thus affording each participant a fair opportunity to state their
case.
o Only FACTS may be stated, no personal opinions, emotions and positions held
in the organisations may form part of the discussion. Common understanding
is important
o Possibly not realistic as manager might still be accountable for outcome of
decision, but good to get input from all involved.
•
Resource-based Approach
o The business should find out which resources are of strategic importance to
the business as these resources an assist the business in creating a
competitive advantage.
o Resources include tangible (raw materials, financial resources, land,
buildings – good location, equipment etc.) and intangible resources (patents,
established brand, skills and good reputation etc.)
•
Balance Score Card
o To describe the key outcomes that the business would like to
measure/evaluate in order to improve these outcomes. Issues that create
value in and for the business. A comprehensive understanding of the overall
performance of the business.
§ Financial perspective – focusses on maximum utilization of assets and
minimizing costs in order to create shareholder value. Profit,
profitability, liquidity and other financial indicators of financial
performance.
§ Customer perspective – focusses on how the customer sees the
business and their expectations and perceptions.
§ Internal business perspective – focusses on innovative products and
services, management of operations and CSI to improve the business.
Supplier relationships, distribution processes, ethical issues,
environmental issues.
§ Learning and growth perspective – focusses on how employees (human
capital) in the business can continue to improve and create value.
Intellectual property, Leadership, Organisational culture, Teamwork,
Knowledge – culture of lifelong learning.
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The Micro, Market and
Macro Environments
T h e e x t e r n a l e nv i r o n m e n t ( M A R K E T & M AC R O p r e s e n t s u n l i m i t e d a n d e v e r - c h a n g i n g d e m a n d s t h a t
a r e o u t o f m a n a g e m e n t ’s c o n t r o l.
T h e i nt e r n a l e n v i r o n m e n t ( MI C R O ) i s u s u a l l y w i t h i n m a n a g e m e n t ’s c o n t r o l b u t p r e s e n t s i t s ow n
p r o b l e m s i n t h e f o r m of l i m i t e d r e s o u r c e s . M a na g e m e n t m u s t u s e t h e i r l i m i t e d r e s o u rc e s t o b u i l d o n
t h e i r s t re n g t h s a n d s t r a t e g i z e a r o u n d t h e i r w e a k n e s s e s t o g ai n a c o m pe t i t i v e a dv a n t a g e .
I t i s v i t a l f o r a n o r g a n i z a t i o n t o i nv e s t i g a t e a nd a n a l y z e i nf o r m a t i o n f r o m t h e i r e nv i r o n m e n t s a n d
d e v e l o p s t r a t e gi e s t o g a i n a c o m p e t i t i v e a d v a nt a g e = e nv i r o n m e n t a l s c a n n i n g t e c h ni q u e s / t o o l s =
S W O T a n a l y s i s , P O R T E R ’ s S I X f o rc e s m o d e l , Ex t e n de d P E S TL E .
ENVIRONMENTAL SCANNING
B e ne f it s
•
•
•
•
of e n v i r o nm e nt a l s c a n n i n g :
I d e n t i f i e s t h r e a t s b e f o re t h e y a r e i m m i ne n t
Identifies possible opportunities and gaps in the market
K e e p s a f i n g e r o n t h e p u l s e o f c o m p e t i t o r s ( a na l y z e )
A l l o w s f o r s h o r t a n d l o n g - t e r m s t r a t e g i e s t o be p l a n n e d a n d i m p le m e n t e d
E n v i r o n m e n t a l s c a n n i n g i s a 3 6 0 - de g re e p r o ce s s a n d i n c l u d e s b o t h i n t e r n a l a n d e x t e r n a l a s p e c t s .
T y p e s o f e nv i r o n m e n t al s c a n n i n g:
• B e f o r e s t a rt i n g a b u s i ne s s – Vi a b i li t y o f t h e pr o d u c t , s t re n g t h o f c om p e t i t o r s , s i z e of
m a r k e t / p o s s i b l e m a rk e t s h a r e , a v ai l a b i li t y o f re s o u r c e s ( s u p p l i e r s , f i n a n c i e r s , s t af f ,
premises etc.)
• C o n t i n u o u s e n v i r o n m e n t a l s c a n ni n g – o n g o i n g a n a l y s i s o f e a c h e nv i r o n m e n t b y u s i n g t o o l s
s u c h a s S W O T a n d / o r v a l ue c h a i n o r R e s o u r c e b a s e d a n a l y s i s (M I C RO ) , S W O T a n d / o r
P O R T E R (M A R K E T ) , P 2 E2 S T L E ( M A C RO ). A l s o , t o a s s e s s t h e b u s i n e s s i n t e r m s of T r i p le
B o t t o m L i ne R e p o r t i n g .
HOW TO DEVELOP A MANAGEMENT STRATEGY
1. Define the business’ vision, mission and corporate objectives
2. Analyse the different environments in detail
a. Micro Environment – “SW” of the SWOT analysis
b . M a r k e t E n v i r o n m e n t – “ O T ” o f t h e S W O T a n a l ys i s a n d P o r t e r ’ s F i v e F o r c e s M o de l
c . M a c r o E n v i r o n m e n t – P ES T L E A n a l y s i s
3 . P o s s i b le i s s u e s t h a t t h e b u s i ne s s s h o u l d c o n s i d e r w h e n c h o o s i n g a s t r a t e g y :
a . R e t u r n o n I n v e s t m e n t ( RO I )
b . R i s k f ac t o r s
c. Potential for business growth
d. The image the business is trying to create / maintain
e . T h e e f f e c t o f de c i s i o n s o n o w n e r s h i p a n d c o n t r o l o f t h e b u s i n e s s
f. Political or social issues
4 . I d e n t i f y t h e v a ri o u s s t r a t e g i c o p t i o n s av a i l a b le
5 . E v a l u a t e a n d a n a l y s e t h e v i a b i li t y o f e ac h s t r at e g i c o p t i o n, p r i o r i t i s i n g t h e m i n o r d e r of
importance
6 . P l a n t h e i m p le m e nt a t i o n o f t h e c h o s e n s t r a t e gy
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7 . I m p l e m e n t t h e c h o s e n s t r at e g y
8 . M o n i t o r a n d c o n t r o l t h e c h o s e n s t r a t e g y w i t h s p e c i a l a t t e n t i o n gi v e n t o m a n a g i n g c h a n ge s
MICRO (INTERNAL) ENVIRONMENT
BUSINESS POLICY:
• V I S I O N = T h e “ d r e am ” o f t h e b u s i ne s s . B ri d g e t h e g a p b e t w e e n t h e p r e s e n t a n d t h e f u t u re
• M I S S IO N = S e t s t h e b u s i ne s s a p a r t f r o m t h e o t h e r s i m i l a r b u s i n e s s e s b y d e s c r i bi n g t h e i r
c u s t o m e r s , p r o d u c t /s e rv i c e , d i f f e r e n t i a t i n g q u a l i t i e s , 3 P s . T h e m i s s i o n i s t h e s t a r t i n g p o i nt
o f a n y s t r a t e gi c de c i s i o n .
• L O NG & S H O R T - T E R M O B J E C T I V E S = L T ( RO I , k e e pi n g c o s t s l o w , i nc r e as e d m a r k e t s h a re ,
i n c re a s e d i n t e g r a t e d r e p o r t i n g , c om p e t i t i v e a d v a n t a g e ) S T (c o u p l e o f m o n t h s e . g. O p e n a n e w
franchise)
• B U S I N E S S C U L T U R E = V a l ue s a n d a t t i t u d e s t h a t i s s h a r e d w i t h i n t h e b u s i ne s s
• R E S O U RC E S = P h y s i c a l r e s o u r c e s ( A s s e t s , F i n a n c e s , e t c . ) , H u m a n r e s o u rc e s (k n o w le d g e ,
p e r f o r m a nc e m a n a g e m e n t t o d e t e r m i n e e f f i c i e n c y )
• B U S I N E S S F U N C T IO N S :
o P U R C H A S I NG
§ G o o d s b o u g h t f o r o w n u s e e . g . F r i d ge s
§ G o o d s b o u g h t f o r r e s a l e e . g. C o o l d r i nk s
§ G o o d s b o u g h t f o r p r o c e s s i n g e . g . S a l a d i n g r e di e n t s
§ R e s a l e v s W h o l e s al e
§ L a r g e s c a le p u r c h a s i n g f o r a l l f r a nc h i s e s
o PRODUCTION
§ A u t o m a t i o n ( a d v a n t a g e s / d i s a dv a n t a g e s )
§ Q u a l i t y c o n t r o l ( H e a lt h i n s p e c t i o n s , e x pi r y d a t e s )
§ Speed vs Fast Food vs Quality
o FINANCIAL
§ F r a n c h i s e s t a rt u p c o s t e t c .
§ ROI
§ Maximize profits (Value chain analysis)
§ Credit vs cash
o HR / PERSONNEL
§ S k i l l l e v e ls o f s t af f v s av a i l a bi l i t y
§ Trade Unions
§ T r a i n i n g o f s t a f f ( e . g. M c D o n a l d s u n i v e r s i t y )
§ L a b o u r r e l a t i o n s Ac t
o MARKETING
§ T a r g e t m a rk e t ? Ki d s / A d u l t s e t c .
§ Marketing mix
§ M a r k e t r e s e a rc h
o PR
§ i s s u e s : KF C a n i m a l c r u e l t y, M c D o n a l d s k i d s m a rk e t i n g , B u r g e r K i n g – H o r s e m e a t
§ CSI projects
§ Image of the company
o ADMIN
§ Environmental scanning
§ D a t a m a n a g e m e n t s t r a t e gi e s
§ D a t a c a p t u ri n g e . g . S A R S
§ R e c o r d k e e pi n g – s t a t s / c om p a r i s o n s of a n n u a l r e s u l t s
o GENERAL MANAGEMENT
§ M a n a g e m e n t v s L e a d e r s h i p v s E n t re p r e ne u r s h i p
§ Major leaders in the industry
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W
S T RE N G T H S
WEAKNESSES
M I C R O E N VI R O N M E N T
S
INTERNAL ENVIRONMENT
ENVIRONMENT SCANNING = SWOT ANALYSIS
OPPORTUNITIES
T
M A R K E T a n d M A C R O E N VI R O N M E N T
T H R E AT S
EXTERNAL ENVIRONMENT
O
Business
can
MOSTLY
control
these
factors
(MICRO)
Business
cannot
control
these
factors,
but may
i n f l u e n ce
them to
the
b e n e f i t of
the
business
(MARKET)
Business
cannot
control
these
factors,
but has to
adapt to
them to
the
b e n e f i t of
the
business
(MACRO)
My strengths
threaten my
c o m p e t i t o rs
HELPFUL to
achieve the
organisation’
s objectives
E.g. Strong
brand,
strong
management
t e am , e t c .
My
w e a k ne s s e s
presents
opportunities
to my
c o m p e t i t o rs
HARMFUL to
the
a c h i e v e m e nt
o f t he
organisation’
s objectives
E.g.
Financial
r e s o u r ce s ,
lack of
e x p e r t is e i n
t h e b u s i ne s s
My
c o m p e t i t o r’ s
w e a k ne s s e s
provides me
with
opportunities
HELPFUL to
achieve the
organisation’
s objectives
E.g. Bad
publicity of
your
competitor,
RSA is
hosting the
Rugby
World Cup
My
c o m p e t i t o r’ s
strengths
threatens
me
HARMFUL to
the
a c h i e v e m e nt
o f t he
organisation’
s objectives
E.g.
C o m pe t i t o r
has better
technology,
more
s t r i n g e nt
legislation
MARKET (EXTERNAL) ENVIRONMENT
ELEMENTS OF THE MARKET ENVIRONMENT:
• M a n a g e m e n t c a n i nf l u e n c e b u t n o r c o n t r o l e le m e n t s f r om t h e M a r k e t e nv i r o nm e n t .
• I n c l u d e s : C u s t om e r s , S u p p l i e r s , C o m p e t it o r s , N G O ’ s ( N o n- G o v e r nm e nt O r g a n i z at i o n s ) ,
S t r a t e g i c A l l i a n c e s , I n t e r m e d i a r i e s , I n d u s t r y r e g u l at o r s , T r a d e u n i o ns a n d
G o v e r nm e nt D e p a rt m e n t s ( S A R S , S m a l l b u s i ne s s D e v e l o p m e n t , D e p t . o f
L a b o r / A g r i c u l t u re / E c o n o m i c de v e l o p m e nt , E n v i r o n m e n t a l a f f a i rs / H e a l t h ),
• E n v i r o n m e n t a l s c a n n i n g n e e d s t o t ak e p l ac e t o s t a y i n t o u c h w i t h t h e e l e m e n t s i n t h e M a rk e t
e n v i r o nm e n t t h a t c o u l d i n f l u e n c e /c h a l le n g e t h e b u s i n e s s s uc c e s s a n d e n a b l e t h e b u s i n e s s t o
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d e v e l o p s t r a t e gi e s t o d e a l w i t h t h e s e c h al l e n ge s . S W O T A n a l y s i s o r P O R T E R ’ s S i x F o rc e s
Model could be used as tools.
S W O T = O p p o r t u n i t i e s a n d T h re a t s
P O R T E R ’ S S I X F O RC E S M O D EL :
L e v e l o f r i v a lr y i n t he m ar k e t
• F i n d o u t a s m uc h a s p o s s i b le a b o u t c o m p e t i t o r s – C o m p e t i t o r P r of i le ( l oc a t i o n , f i n a n c i a l
p e r f o r m a nc e , t h e i r p r o d u c t s , c o n s u m e r b r a n d l o y a l t y , m a r k e t s h a r e , d i s t r i b u t i o n c h a n n e l s ,
etc.)
• C o n s u m e r s a r e f i c k le – e a s i l y s w a y e d b y c o m p e t i t o r ’ s m a r k e t i n g s t r a t e g i e s
• P o w e r o f t h e c o m p e t i t o r ’ s i nf l u e nc e ?
• M a r k e t s h a r e , t r a d i n g h o u r s c u s t o m e r l o y a l t y p r o g r a m s , s t r at e gi e s t o a t t r a c t c u s t om e r s
away from competitors
• C o m p e t i t i o n i n t h e F F I ? H i gh o r L ow ?
• HIGH
A v a i l a b i l i t y o f s u b s t i t u t e pr o d u c t s
• = a d i f f e re n t p r o d u c t t h a t s at i s f i e s t h e s a m e n e e d
• W H Y d o p e o p l e u s e s u b s t i t u t e p r o d u c t s ? C o s t ? H e a l t h i s s ue ? C o n v e ni e nc e ? Et c .
• M a r k e t r e s e a rc h i s e s s e n t i al t o d e t e r m i ne c u s t o m e r t a s t e
• S u b s t i t u t e p r o d u c t s c a n e a t aw a y a t t h e p o w e r o f y o u r p r o d u c t
• B u t t e r /M a r g a ri n e , G l a s s e s / c o n t ac t le n s e s , S ug a r / s w e e t e n e r, R e s t a u r a n t s / F a s t f o o d
• Substitute products in the FFI?
• McDonalds vs PNP
T h r e at of ne w e n t ra n t s
• > opportunity for profits
• < competition
• < enough suppliers
• < b r a n d l o y a l t y o f c u s t o m e rs
• < g o v e r n m e n t p o l i c i e s / re s t ri c t i o n s
• < h i gh c a p i t al l a y o u t
• < l i m i t e d d i s t ri b u t i o n c h a n n e l s
• S O U RC E S : S m a l l, e n t re p r e n e u ri a l s t a rt - u p s , L a r g e c o r p o r a t e s ( p g . 7 4 )
• Any new entrants to the SA FFI in the last two years?
• Starbucks
P o w e r of s u p pl i e r s
• T h e r e l a t i o n s h i p be t w e e n t h e b u s i ne s s a n d t h e i r s u p p l i e r s a re N B a s i t w i l l i nf l u e n c e
p e r f o r m a nc e
• S u p p l i e r s w a n t m o re m o n e y f o r d e l i v e ri n g l e s s p r o d u c t s / s e rv i c e s
• N e e d t h e r i gh t p r o d u c t a t t h e ri g h t t i m e i n t h e r i g h t q u a n t i t i e s a n d q u a l i t y a t a r e a s o n a b l e
p r i c e a n d p r o m p t d e li v e r y t o b e c o m pe t i t i v e
• C o n s e q u e nc e s o f s t oc k - o u t p g. 7 5
• W h o h a s t h e p o w e r i n t h e F F I ? Th e b r a n d o r t h e s u p p li e r ? W h y ?
• D e p e n d s o n h ow b i g t h e b r a n d i s
P o w e r of B u y e r s
• I n c l u d e s i nt e rm e d i a ri e s – a g e n t s , w h o le s a le r s , r e t a i le r s
• C o n s u m e r a n a l y s i s r e d e m o g r a p h i c s a n d g e o g r a p h i c a l p r o f i l e , a l s o t a r ge t m a rk e t a n d
l i f e s t y le i nf o ( p g . 7 6 f o r d e t ai l )
• C o n s u m e r s v o t e w i t h t h e i r m o ne y b y d e c i di n g t o b u y y o u r p r o d u c t o r y o u r c o m p e t i t o r ’ s
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•
•
B u s i ne s s e s m u s t e a r n a n i nc o m e f r o m t h e i r c u s t o m e r s o r t h e y w i ll f ai l
W h o h a s t h e p o w e r i n t h e F F I ? Th e b r a n d o r t h e c u s t o m e r ? W h y ?
• The customer has higher power – lots of choice
C o m p le m e n t o r s
• = C o m p l e m e n t a r y g o o d s - o f f e r m o re v a l u e t o t h e c u s t o m e r
• = w h e n o n e p r o d u c t /s e rv i c e c o m p le m e n t s a n o t h e r e . g . H o t d o g r o l l a n d V i e n n a, h o li d a y
a c c o m m o d a t i o n a n d f li g h t s .
• C a n h a r m o r b e n e f i t a b u s i ne s s – i f o n e i s d e pe n d e n t o n t h e o t h e r e . g . E le c t r i c i t y , ai r l i ne
travel problems vs hotel bookings
• C o m p l e m e n t o r s i n t h e F F I ? P ow e r c u t s ? S u p p l y o f c o m p le m e n t a r y g o o d s e . g. R o l l s f o r
hamburgers
MACRO (EXTERNAL) ENVIRONMENT
B u s i n e s s m u s t d e v e l o p s t r a t e g i e s ( M i c r o e nv i r o n m e n t ) t o de a l w i t h c h a l l e n ge s t h a t t h e y
h a v e n o c o n t r o l o r i n f l ue n c e ov e r t he M a c ro e n v i r o nm e n t
EXTENDED PESTLE FACTORS:
•
•
•
•
•
•
•
•
P O L I T I C A L – P o li t i c a l i s s u e s i n c o u n t r y o f o r i g i n a n d o t h e r c o u n t r i e s r e g a r d i n g l aw s ,
g o v e r n m e n t i n t e r f e r e nc e , r e g u l a t i o n s , u n re s t , c o r r u p t i o n , s a nc t i o n s , i n t e r n a t i o n a l r e l at i o n s ,
D o n a l d T r u m p , G u p t a s E S KO M (l o a d s h e d d i n g / t a r i f f s ), e t c .
ECONOMIC – Global recession, exchange rates, interest rates, taxation, inflation rates,
labour costs, etc.
S O C I A L – c o n s u m e r p re f e r e nc e s , c h a n ge s i n li f e s t y l e , l e v e l o f e d u c a t i o n , c r i m e , p o v e rt y ,
H I V / A I D S i s s u e s , s i n g l e / d o u b l e i n c o m e f am i li e s , c h a n gi n g r o l e o f w o m a n a t w o r k , c h i l d l e a d
f a m i l i e s , l e v e l s of l i t e r ac y / e d u c at i o n , e t c .
T E C H N O L O G I C A L – n e w v s d a t e d t e c h n o l o g i c al d e v e l o p m e n t s , o n l i ne s h o p p i n g , e t c .
L E G A L – L aw s , c u s t o m a n d t r a de r e g u l a t i o n s , l i c e n s i n g r e g u l a t i o n s , h e a l t h re g u l a t i o n s ,
i n t e l le c t u a l p r o p e r t y p r o t e c t i o n , l a b e li n g o f p ro d u c t s r e g a r d i n g i n g r e di e n t s , L a b o u r
l e g i s l a t i o n, B E E, e t c .
E N V I R O N M E N T A L – P o l l u t i o n , g l o b a l w a rm i n g, e n v i r o nm e n t a l l aw s a n d r e g u l a t i o n s , c a r b o n
f o o t p r i n t , s u s t ai n a b i li t y o f r e s o u r c e s , ‘G r e e n i s s u e s ’, e t c .
P H Y S I C A L – P h y s i c a l l o c at i o n , w e at h e r , r o a d n e t w o rk s , u r b a n / r u r a l a r e a s , e t c .
E T HI C A L – E t h i c a l b u s i n e s s p r a c t i c e , i n t e r c u lt u r a l i s s u e s , p ri v ac y i s s u e s o n i n t e r n e t , C S R,
F a i r t r a de , e t c .
STRATEGIES
T r e n d s i n t h e B u s i ne s s E nv i r o n m e n t :
T r e n d – T h e s e a r e p r e di c t a b l e c h a n ge s
C r i s i s i n t h e B u s i ne s s E nv i r o n m e n t :
C r i s i s – U ne x pe c t e d a n d u n p l a n n e d f o r h a p p e n i n g s t h a t c a n t h r o w a n e c o n o m y
ADVANTAGES OF STRATEGIES:
1 . G i v e s d i r e c t i o n t o t h e b u s i ne s s – d e f i n i n g a i m s a n d o b j e c t i v e s a n d u n d e r s t a n di n g t h e l o n g t e r m c o n s e q u e n c e s o f c u r r e n t de c i s i o n s
2. Ensures consistency in decision-making
3 . D i f f e re n t i a t e s m a n a g e m e n t r o le s a n d a r e a s of r e s p o n s i bi l i t y
4 . P u t s b u s i ne s s r o l e i n p e rs p e c t i v e re l a t e d t o b r o a d e r c o m m u n i t y a n d a l l s t a k e h o l d e r s
5 . A n t i c i p a t e s c h a n g e s i n t h e i n t e r n a l a n d e x t e r na l e n v i r o n m e n t s a n d a l l oc a t e s r e s o u rc e s
accordingly
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* I n d o i n g t h e a b o v e s u c c e s s f u l l y , i t w i l l h e l p t o c r e at e a c o m pe t i t iv e a d v a n t a g e w it h i n
t h e i n d u s t r y – t h e c h o s e n s t r a t e g y w i l l be b a s e d o n t h e c om p e t i t i v e a d v a n t a ge of t he
business.
C O R PO R AT E S TR AT EG I ES :
G r o w t h s t r a t e g y – re f e r s t o a p l a n o f ac t i o n i n t e n d e d t o i nc r e a s e t h e m a r k e t s h a r e (t a r g e t
m a r k e t ) o f t h e b u s i n e s s . Th i s c o u l d l e a d t o t h e b u s i n e s s h a v i n g t o r e de f i n e i t s b u s i ne s s o b j e c t i v e s ,
i n c re a s e i t s R & D i nv e s t m e nt s , re a l l o c at e i t s re s o u r c e s , f u r t h e r re c r ui t m e n t a n d t r ai n i n g o f
e m p l o y e e s , g re a t e r ri s k t o l e r a nc e a n d e m ph a s i s o n i n n o v a t i o n.
Growth strategy could happen through:
I n t e r n a l g r ow t h ( or g a n i c g r o w t h ) – e m p h as i z i n g e x i s t i n g p r o d u c t s / s e r v i c e s i n e x i s t i n g m a rk e t s
O R i nc r e a s e d c u s t om e r re t e n t i o n O R ne w p r o du c t d e v e l o p m e n t O R ne w m a r k e t d e v e l o p m e n t
E x t e r na l g r ow t h ( a l l i a n ce s , a c q u i s i t i o n s , m e r g e r s ) – a d j u s t i n g t h e b u s i ne s s e s c o re o b j e c t i v e s
a n d s u r r o u n d i n g s O R a d j u s t i n g t h e e x i s t i n g p r o d u c t s / s e r v i c e s / m a rk e t s / di s t ri b u t i o n c h a n n e ls
D e c li n e s t r a t e g y / D e f e n s i v e s t r at e g y – w h e n a b u s i n e s s de c i d e s t o s c a le d o w n o r r e d u c e i t s
operations or some of the products.
R e t r e n c h m e n t s t r at e g y – re d u c i n g t h e s i z e of t h e b u s i ne s s o r r e d uc i n g t h e di v e r s i t y o f
p r o d u c t s / s e rv i c e s i n o r d e r t o re d u c e e x pe n s e s a s t o i m p r o v e t h e f i n a nc i a l p o s i t i o n o f t h e
business.
D i v e s t i t u r e s t r a t e g y – i nv o l v e s t h e b u s i n e s s s e l li n g o f f s o m e of i t s o p e r a t i o n s b e c a u s e
a s s e t s u s e d i n t h e s e o p e r at i o n s a re u n d e r - u t i li z e d . e . g . N e s t le s e l li n g t h e i r c h oc o l a t e b r a n d s
to Cadburys.
H a r v e s t s t r at e g y – li m i t i n g i t s e x p o s u r e i n t h e m a r k e t b y w i t h d r a w i n g l a r g e am o u n t s o f
c a s h o r a s s e t s f r o m t h e i n d u s t r y i n w h i c h t h e d e m a n d i s d e c li n i n g.
L i q u i d a t i o n s t r at e g y – a s s e t s a re s o l d t o p a y f o r t h e d e b t o f t h e b u s i n e s s a n d t h e b u s i ne s s
ceases to exist or is sold.
Corporate Combination Strategies:
J o i n t v e n t u r e – w h e r e t w o m o r e b u s i n e s s e s e n t e r i n t o a n a g r e e m e n t f o r a p re d e t e r m i n e d
p e r i o d o f t i m e , t o c o m b i ne r e s o u r c e s i n o r d e r t o i m p r o v e t h e f u nc t i o ni n g o f b o t h b u s i n e s s e s .
E . g . E n ge n ( p e t r o l s t a t i o n ) a n d W i m p y (F a s t F oo d ) . E a c h b u s i n e s s m ai n t a i ns i t s o w n i d e n t i t y .
M e r g e r / Am a l g a m a t i o n s t r a t e g y – w h e n t w o or m o r e b u s i n e s s e s c o m bi n e b y m u t u a l c o n s e n t
t o f o r m a n e w e n t i t y. T h e y c o m b i ne r e s o u rc e s t o b e c o m e m o r e c o m p e t i t i v e , c o s t e f f e c t i v e
a n d i n c r e a s e t h e i r m a rk e t s h a re i n t h e i n d u s t ry . E . g. A B S A w a s f o rm e d b y c o m bi n i n g f o u r
i n d i v i d u a l b a n k s : V o l k s k a s , A l l i e d , T r u s t B a n k a n d U n i t e d.
T a k e ov e r – t h i s o c c u r s w h e n u s u a l l y a l a r g e r b u s i n e s s b u y s s u f f i c i e n t s h a re s (c o n t r o l l i n g
i n t e re s t ) i n a n o t h e r b u s i n e s s t o t ak e o v e r t h e c o n t r o l o f t h e m a n a g e m e n t o r d e c i s i o n - m ak i n g
o f t h a t b u s i n e s s . Th i s p r o c e s s c o u l d h a p p e n b y m u t u a l a g r e e m e n t (F r i e n d l y t a k e - o v e r) o r a
H o s t i l e t a k e o v e r w h e re n o a g r e e m e n t i s m a de a n d t h e c o m p a n y a c q ui r e s a m a j o r i t y o r
c o n t r o l l i n g ow n e r s h i p. T h i s s t r a t e g y i s u s e d t o d e c r e as e c o m p e t i t i o n a n d i m p r o v e i t s
c o m p e t i t i v e a d v a n t a ge .
I n t e g r a t i o n s t r at e gi e s :
F o r w a r d i n t e gr a t i o n – t h e b u s i n e s s t ak e s ov e r o n e o f i t s s u p p l i e r s i n o r d e r t o e l i m i n at e t h e
m i d d l e m a n i n t h e di s t ri b u t i o n p r o c e s s a n d t h e re f o r r e d uc e t h e u l t i m at e s e l li n g p r i c e t o t h e
consumer because there is no longer a middleman that adds profit.
B a c k w a r d i n t e g r at i o n – ( e li m i n a t e t h e P ow e r o f S u p p l i e rs ) b y b u y i n g o u t a s u p p l i e r o r
s t a r t i n g t h e i r ow n m a n u f ac t u r i n g p l a n t , m ak i n g s u r e t h at t h e b u s i ne s s w i ll a l w a y s be s u p p l i e d
( c h e a p e r a s n o o t h e r b u s i n e s s h a s t o m a k e a pr o f i t ). E. g . F a m o u s B r a n d s ( ow n e rs o f W i m p y ,
D e b o n a i r s , S t e e r s , e t c . ) s u p p l i e s t h e i r o w n c h e e s e , i c e c re a m , s a u c e s e t c .
H o r i z o n t a l i n t e g r at i o n – i t m e a n s t h a t t h e b u s i n e s s h as t a k e n o v e r o ne o f i t s c o m p e t i t o r s
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G EN ER I C S TR AT EG I ES :
L o w c o s t s t r at e g y – a i m e d a t g ai n i n g a c o m p e t i t i v e a d v a n t a ge b y h a v i n g t h e l ow e s t p o s s i b le c o s t .
H o w ? C o s t s c a n b e r e d u c e d t h r o u g h e f f i c i e n c y, u s i n g m as s p r o d u c t i o n , t e c h n o l o g y e t c . H o w
i m p le m e nt e d ? I n c re a s i n g p r o f i t s b y r e d u c i n g c os t s e . g. c h e a pe r r a w m a t e ri a l s w h i le c h a r gi n g
i n d u s t r y r e l a t e d p r i c e s , t h u s h av i n g m o r e c a p i t a l a v a i l a b le O R i n c re a s i n g t h e m a rk e t s h a re b y
o f f e ri n g l o w e r p r i c e s b e c a u s e o f t h e s a v i n g s m a d e i n c o s t .
B u s i ne s s e s t h a t i m p l e m e n t a l ow - c o s t s t r a t e g y e f f e c t i v e l y h av e s uf f i c i e nt c a pi t a l a v ai l a b l e
t o i n v e s t i n i n n o v a t i o n a n d t e c h n o l o g y w i t h t h e a i m t o r e d uc e c o s t s , e f f e c t i v e l o gi s t i c s a n d
t h e a bi l i t y t o l o w e r c o s t s o f a l l re s o u r c e s ( l a bo r , m a t e ri a l s , f ac i l i t i e s e t c . )
D i f f e re n t i a t i o n s t r a t e g y – i n v o l v e s m a k i n g y o u r p r o d u c t / s e r v i c e di f f e re n t a n d m o r e a t t r a c t i v e t h a n
t h o s e of y o u r c o m p e t i t o r s w h i c h w i l l e ns u r e c us t o m e r l o y a l t y a n d g i v e t h e b u s i n e s s t h e o p p o r t u n i t y
t o c h a r ge a p r e m i u m p ri c e . I t m u s t b e di f f i c u l t f o r c o m pe t i t o r s t o c o p y . E. g. K F C s e c r e t s p i c e ?
F o c u s s t r at e g y - u s e d t o f oc u s o n a p a r t i c u l ar s e g m e n t o f t h e m a r k e t ( ni c h e m a rk e t ). T h e s e
b u s i n e s s e s h a v e t h e a b i li t y t o c r e a t e a s t r o n g b r a n d , l o y a l c u s t o m e rs , e x pe r t k n ow l e d ge o f t h i s
n i c h e m a r k e t a n d m ak i n g t h a t s e g m e n t le s s a t t r a c t i v e t o c o m pe t i t o r s . e . g. F e r r a ri b u y e r s
I N T EN S I V E S T R AT EG I ES :
M a r k e t p e ne t r a t i o n – t h e e x i s t i n g m a rk e t a n d e x i s t i n g p r o d u c t s a re u s e d t o e x p a n d t h e b u s i ne s s e s
m a r k e t s h a r e t h r o u g h p ri c i n g , m a r k e t i n g o r o t h e r i n n o v a t i v e i d e as . e . g. N e w a d d f o r M c D o n a ld s
Happy Meal
P r o d u c t d e v e l o p m e n t – a t t e m pt s t o d e v e l o p n e w p r o d u c t / s e r v i c e f o r a n e x i s t i n g m a rk e t . e . g. T h e
first drive through
M a r k e t d e v e l o pm e n t – a t t e m p t s t o d e v e l o p a ne w m a r k e t o f a n e x i s t i n g p r o d u c t / s e r v i c e . e . g .
O r i gi n a l E n g e n / W i m p y j o i n t v e n t u re
D i v e r s i f i c at i o n – b u s i ne s s e n t e r s a ne w m a r k e t w i t h a n e w p r o d u c t /s e rv i c e . B u s i n e s s t ri e s t o
s p r e a d t h e i r of f e r t o r e d u c e t h e ri s k o f o p e r at i n g i n a n a r r o w p r o d u c t l i ne . e . g. E d g a r s o f f e r i n g
c r e di t c a r d s , P i c k n P a y o r J e e p of f e r i n g a c lo t h i n g li n e , M c D o n a l d s o f f e r i n g c h i c k e n p r o d u c t s t o
their menu
O T H ER S TR AT EG I ES :
R e v i s e b u s i n e s s m i s s i o n a n d o b j e c t i v e s – t h e b u s i n e s s ne e d s t o r e v i s e i t s m i s s i o n a n d o b j e c t i v e s t o
m e e t t h e n e e d s o f c o n s u m e rs .
A l l o c a t e re s o u r c e s e f f e c t i v e l y / di f f e re n t l y – m o r e s t r a t e gi c a l l o c a t i o n o f r e s o u r c e s t o c re a t e a
c o m p e t i t i v e a d v a n t a ge .
T o t a l Q u a l i t y M a n a g e m e n t ( T QM ) a n d T o t a l C us t o m e r S at i s f ac t i o n – t h e b u s i n e s s i s c o m m i t t e d t o
d e v e l o p a n d i m p r o v e o n a l l a s pe c t s a n d a c t i o n s t h a t i m p ac t t h e q u a l i t y o f a ll t a s k s a n d c u s t o m e r
s a t i s f a c t i o n. I n s p e c t i o n s , t e s t i n g , s am p l i n g, b e n c h m a r k i n g , f i n a nc i a l r at i o s , p e rf o r m a n c e a p pr a i s a l s
a n d c o n t i n u o u s s k i l l s de v e l o p m e n t .
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ENTREPRENEURSHIP, MANAGEMENT AND
LEADERSHIP
EN T R EP R EN E U R V S . I N T R E P R EN EU R
ENTREPREU NEU RAL QUAL ITIES:
• Passionate visionaries
• Creative thinkers
• Risk takers
• Good le ade rs
• Inte rnally motivate d
• Perseverance and commitme nt
• Opportunists – ide ntify opportunities
•
ENTREPRENEU RIAL SKILLS:
• Knowledge and skill to run a business successf ully
• Management skills – POLC
• Recognize their short c omings and outsource/delegate
•
PERSONAL ATTITUDES OF SUCCESSFUL ENTREPRENEURS:
• Results driven
• Formulation of a busi ness visi on that is flexi ble, realistic and relev ant
• Encourages teamw ork
• Strives f or achievement, improveme nt and is ambiti ous
• Influencing f ollowers through trust, motivation and respect, and i nstilli ng c onfi dence
• Possesses EQ (Emoti onal intelligence)
• Excellent communicati on and liste ning skills
• Self-motivation
• Follow-through
ENTREPRENEU R
Entre pre neur = the person who c ombi nes the three factors of producti on (capital, labour and raw
materials) i n order to start a new business ve nture. Sees an opportunity in the market, tak es a
risk of starting a new busine ss by investi ng th eir ow n capital in orde r to make a profit.
Types of entre preneurs:
Techno-entreprene ur – develop technology or use technology to grow their business
Social – e ntre pre neur – solve social problems in society, normally NGOs
Tourism- e ntre pre neur – ide ntifies gaps in th e tourism industry
Enviro/Ec o-e ntre pre neurs – solve environme ntal problems
Tender-pre neur – develops a business around a te nder they want to apply f or
INTREPRENEU R
Intrepre neurs h ave all the same qualities as Entreprene urs, with two differe nces:
1. They are more cauti ous, less likely to take RISKS that may inv olve personal assets or
income.
2. They often remain in a stable job, working f or an employe r
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Intrepre neurs are employees who work within a busi ness but use their skills and talents of
innovati on and leadership to improve their department or take the busi ness to new heights. The
origi nal entreprene ur can also be intreprene urial by i nnovati ng IN the business.
M AN AG E M EN T & L E A DER S H I P
Management involves, amongst others, the ac tivities of PLANNING, ORG ANISING, LEADING and
CONTROL. Leade rship is part of manageme nt.
The manager h as authority because of the position he was appointe d to, a le ade r h as f ollowers
because of his visi on, ex pertise and inspirati on of others. A manager sh ould also be a leade r in
the organizati on.
MANAGEMENT AND LEADERSHIP STYLES
• AUTOCRATIC – only the manage r makes decisions. Seldom allows for input from
subordinates. Crisis situations, to restore discipline, quick decision making. Demotiv ating
for employees ove r the long run.
•
DEMOCRATIC/P ARTICIPATIVE – more inv olve ment f or subordinate s in decisi on-making
which will improve their buy-in to the decision. In a fully democratic environment the le ade r
and follower will have equal decision-maki ng powers. In a f ully participative environment
the team members or f ollowers will be i n f ull control and be able to make the final decision.
Disadv antage might be slower decisi on making because the manage r allows more
participati on.
•
LAISSEZ FAIRE – Manage rs i nform workers WHAT must be achieved, but not HOW to
achieve the objectives. No interfere nce by the manage in the process of carryi ng out the
task. Nee ds a highly skilled and motivate d workforce.
•
TRANSACTIONAL – based on give-and-take transactions/negotiati ons where the leader
offers something of value (e.g. Remuneration) to their followers in return f or their
services. People are motivate d through what they can get.
•
TRANSFORMATIO NAL – Pe ople are motivate d through what they can achieve togethe r to
improve the company. Te amwork. Employees are enc ouraged to be cre ative and innov ative.
The transf ormational le ade r helps their followers to satisfy their higher order nee ds while
at the same time re aching the goals of the business. Ex pectati ons are shared in the group
rather than individual gain is followed. Also k nown as charismatic leaders.
•
SITU ATIONAL APPROACH – different le ade rship styles f or differe nt situations.
MANAGEMENT TASKS
• PLANNING
o Gather all appropriate informati on, look at alternative opti ons, choose the best
possi ble plan of acti on. The plan sh ould be adaptable, re alistic, cost-effective and
clearly c ommunicate d so th at ex pectati ons are clear.
• ORGANISING
o Ensuring that all resources are av ailable to e xecute the plan. Re porting structures
are f ormalized. Tasks are allocate d to those responsi ble f or them. Accountability
still remains with the manager.
• LEADING
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•
•
•
•
•
•
•
o The manager must enc ourage the employees to implement the plan and must ensure
things are going acc ordi ng to the plan.
CONTROL
o The manager must ensure the goals are re ached without w asting resources.
CO-ORDINATION
o All the factors of production (raw materi als, capital, labour and e ntre pre neurship)
and busi ness functions must be synchronized and foc use d on a common goal.
Syne rgy.
COMMUNICATIO N
o Conve ying ide as, i nstructi ons, and que ries as well as feedback effectively. Clear
communication channe ls. Prope r communication will improve overall perf ormance.
DELEGATIO N
o Giving and entrusting employees to complete tasks. Re duci ng w ork load of seni or
employees, more meaningful distributi on of tasks and responsibilities.
DISCIPLINE
o Maintaini ng orde r and optimum w orking c onditi ons. Punishme nt is the c onsequences
of not adhering to rules.
MOTIVATIO N
o Inte rnal and external motivati on.
DECISION MAKING
o The manager must make decisions i n order for the tasks to go forward.
* All the above tasks are i ntegrate d and i nterlinked.
MANAGERIAL COMPETENCIES
These are a combinati on of skills, attitudes, behaviours and knowledge th at a person nee ds to be
an effective manager.
•
•
•
•
•
Strate gic-Action Compete ncy
o Understandi ng the strategic directi on of the busi ness (mission and visi on) and
ensuring that all the goals and objectives are aligned. How do we create a
competitive adv antage?
o Understandi ng the environments and how they influence the business.
o Anticipate strategic trends and pre pare the business for the future.
Global Awareness Compete ncy
o Effective managers must be able to obtai n th e necessary resources f rom multiple
countries. Have the necessary k nowle dge and sensitivity to de al with cultural
differences i n the business world. An aware ne ss of the entire supply chai n is
crucial. Trade relati ons, Import/Export regulations, Exchange rates, P olitical issues
– that could affect the busi ness.
Teamwork Compete ncy
o Teams have become promine nt in the busine ss world. The effective manager must be
able to manage te am dynamics, create a support structure f or teams, empower
teams to w ork effectively and have conf lict management skills.
Organisati onal Awareness Compete ncy
o No organization ope rates in a v acuum and all departments/business functions are
interde pendent. The business functions within an inte rnal and exte rnal e nvironme nt
that impacts the busine ss on a daily basis. An effective manage r must have an
understanding of all the differe nt aspects th at has an i nflue nce on the busi ness to
enable him to make good decisi ons.
Analysis as a c ompete ncy
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•
•
•
•
•
o To analyse means to ex amine data, draw conclusions, fi nd tre nds with the aim to
solve problems.
Empowerment and Tale nt Development Competency
o To attract, extend, motivate and retain productive and engage d employee s. To
create a high-perf ormance, sustainable organization that meets its strategic and
operati onal goals. Empowere d and motivate d e mployees are more c onfide nt and have
a high morale which affects the business posi tively. HR departme nt plays a big role
in training and up-skilling staff.
Initiative as a Competenc y
o A manager shows initiative by ev aluati ng, sele cting and acting on strategies to solve
problem s and meet objectives. M anagers nee d to be pro-active, thi nk on their feet
and come up with c reative i deas to solve problems.
Judgeme nt as a Compe tency
o When a manager m akes a judgeme nt c all/decision it m ust be based on relevant
facts, decisive, sh ow le ade rship, objective, logical and be acc ountable.
Customer Service Orie ntati on
o The manager always thinks of the c ustomer first. Being custome r orie ntate d
provides unde rstandi ng of the custome r needs, what makes them choose your
busi ness or product/se rvice and allows the business to always look f or ways to
improve through their customer’s c onstructive comments and feedback.
Negotiati on
o Managers must be able to promote their own i nterests/ide as as well as cre ate a
win-win situation to c reate synergy and value for the te am or busine ss.
MOTIVATIO NAL F ACTORS
Monetary motivation:
Purpose is to reward employees for sound performance. Includes – profit sh aring, bonuses,
equity options, c ommissi on, additi onal pai d vac ation time. Problems: Encourages compliance to
tasks rather than risk-taki ng as rewards are based only on pe rformance. Employees are
discouraged from being cre ative in the workplace and bec ome only perf ormance or results driven
Non-m onetary Motivation:
Flexible working hours, sabbaticals, employee of the month awards etc. Gives employees
affirmation and recogniti on. Job enlargement = more tasks are adde d to the job descripti on =
more responsibility, Job enrichment = more re sponsibi lity and authority. Child care facilities. Must
be tailored to the needs of the employee. Consider M aslow’s Hierarchy of needs.
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Motivated employees – provide good c ustomer service = happy c ustomers, more productive = more
opportunities f or profit, less absenteeism/less staff turnover = more staff rete ntion, less
industri al action, positive word of mouth about the busi ness = improve d image of the busine ss
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MARKETING
DEFINITION:
Marketing is the manageme nt process/f uncti on that is responsible for the identifying (mark et
research), anticipati ng trends and satisf ying of custome rs’ (target market) needs and wants.
The marketing function is responsible for all the activities that enable the product/se rvice to get
from the produce r to the consume r. It is about the right product/service, at the right time,
place and price to optimize the business’ mark et position (compe titive advantage).
Without proper marketing, companies are not able to ge t close to its c ustomers, and unable to
understand them, their behavior, needs and w ants – and then matching or exceedi ng them with
sound delivery. How do you c ommunicate with your custome r? Today vs yeste rday? Social media?
Through marketing we want to i ncrease our market sh are and market position and c ompetiti ve
advantage.
Effective marketing – Retains custome rs, gai ns more customers, builds your brand, i ncreases
sales and profit.
THE 7P’S OF MARKETING:
PRODUCT:
The busi ness must provi de a product/service that the c ustomer is able and willing to buy. The
product must add value to the custome r (brand, warranty, quality, usef ulness, design,
technology). Tangi ble and i ntangi ble products – hamburger vs bank account. M arker rese arch and
environmental scanning is important to ge t to know your custome r. To customers the packaging is
part of the product and sometimes as desi rable as the product itself. Consumers recognize and
distinguish a product by its packaging. Influenced by tre nds e.g. Health conscious f ood items,
McDonalds faile d products e. g. Hotdog, etc.
Price charge d is i nfluenced by strategy:
• Market pe netration strategy – low price to attract new custome rs
• Leader pricing – draw customer into shop with discounted price on e.g. Hamburger patties,
hoping the y will also buy rolls, tomatoes, sauc e etc.
• Promotional pricing – discounts offered close to special events e.g. decrease in bubble
bath f or mother’s day, incre ase i n roses for Vale ntine ’s day
• Bulk discounts
• Prestige pricing (luxury products) – ex pectati on to pay more e.g. Engagement ri ng (R500
or R5000 ?)
Consume r/Essenti al goods – usually not ve ry brand loyal, e.g. B read/milk – speed and convenience
of purchase
Speciality goods – e.g. Cars – consume rs more caref ul and brand aware. Marketing more target
market f ocusse d.
Select/Luxury goods – customer will c onsider price, quality, brand names e.g. Clothing, jew ellery
P RI C E :
Products/services are only worth what customers are willi ng to pay for them (opportunity costs).
The price charge d by the business could also be their compe titive advantage (not only cheapest
price, but also best value for mone y). P RICE needs to provi de the business with PROFIT. It is the
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only element of the marketing mix that ge nerates revenue, all the other eleme nts are costs to
the business. Price helps positi on your busine ss in the market. The higher the price, the higher
the quality and value is expecte d by the customer. Price sensitivity – Existing custome rs are
usually less price sensitive as you have already gaine d their loyalty. New custome rs need to be
convince d of the v alue of your product bef ore paying a particular price. Essenti al goods are also
less price se nsitive. Targe t market/LSM affordability. Some c ustomers want to pay as little as
possi ble vs “snob v alue”, cheap = poor quality percepti on.
Psychological pricing – R1999 vs R2000
Supe rficial discounti ng – w as R10 000, now only R9000 (made up)
Price discrimination – Woman c ustomers get di scount
Time e.g. Summer sale
Area e.g. U pmarket = higher price
P L AC E :
This is where the custome r will buy the product – this include convenience and effective
distri buti on to this place. The product must be available in the right place, time, quality and
quantity while keeping storage, transport and other costs to a mi nimum. Choosing the c orre ct,
reliable supplier is c rucial to this process and a c ompetitive advantage. Franchising as a me ans of
distri buti on gives the custome r a se nse of quality and reassurance as a brand is known and
trusted. Place also includes the way your products are displaye d to your customer – shop
windows, web sites, promoti ons etc. Do you take your product/se rvice to the custome r O R do the
custome r c ome to you? Wimpy at petrol stati ons, FFI = c onve nience, Malls/Petrol stations where lots of pe ople go. Storage logistics = c osts. Close to supplie rs – raw material av ailability.
Franchising = popular me ans of di stri buti on in FFI.
Inte nsively distribute d – large variety and widely available e.g. B read and milk
Selectively distributed – only available at sele cted shops e.g. Jewellery, pe rfumes
Exclusively distri buted – Very ex pensive items e.g. Ferrari
P RO M O T I O N:
This is the way a busi ness c ommunicates with the customer about what it does and h as to offer
and includes: branding, advertisi ng, P R, c orporate i dentity, personal sales, special offers,
exhibitions etc. Includes communicati on with all stakeholde rs and must be appe aling, draw
attenti on, consiste nt, transpare nt. Getting th e correct level of attenti on from the target market
(LSM). Which medium is used? TV, Social medi a, Radi o etc .
PEOPLE:
All staff who c ome in contact with you c ustomer will h ave an effect on them – and on their view
and satisfacti on of the busi ness. The employe e is the face of the busi ness. Training and
motivati on is important as the brand and reputation of the business re sts i n the h ands of the
staff. Consumers do not se parate the produc t/service from the employee who provide d it. After
sales service adds additional value to the product and could become more important to the
custome r th an price. U niforms of staff creating/strengtheni ng a brand.
P RO C E SS:
The process of provi ding the product/se rvice is crucial to c ustomer satisf action – e.g. Waiting
time, informati on given, helpf ulness and that the systems are w orking. Consumer experie nce is
important and will add to the c ompetitive advantage.
P HY SI C AL E V I D E NC E :
The locati on and physical appearance of the business premises gives the c ustomer a sense of
quality. E.g. Banks look formal, re staurants look clean and inviti ng, i ntangi ble products bought
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over the inte rnet must provide security to lower the risk. Perceptions and assumptions cre ated
by the ph ysical appe arance. Includes packaging, pape rwork (Logos and stationary? Vehicle
signage, We b page, brochures, uniforms, awards won, Shop/Restaurant interiors – c olours,
friendly appearance, childre n f ocus (play are as) etc. – anything that cre ates a fav ourable
impression of the busine ss.
THE STRATEGIC ROLE OF MARKE TING:
A Marketing strategy is that which co-ordinates and considers all aspects neede d to reach the
custome r. Environme ntal scanni ng and doing a market audit to dete rmine their positi on in the
market and the resources available to inf lue nce the market space. The marketi ng plan and
strate gy must be i n li ne with the business’ ov erall corporate strategy, missi on and vision.
The Marketi ng f uncti on operates i nterdepe ndently with all the other business functions.
Formulating a marketing strategy:
Step 1 – Environmental scan,
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Step
Step
Step
Step
2
3
4
5
– Define the target market,
– Determine the marketing budget,
– Implement the marketing mix,
Ev aluate the effectiveness of the process and take c orrective measures
THE IMPACT OF THE CONSUMER PROTECTION ACT ON MARKETING:
Th e C P A L o ok s a t Th e F o l l ow i n g:
•
•
•
•
•
•
Promotion of a fair, accessi ble and sustainable marketplace for consumer products and
services.
Norms and standards to protect the consumer.
Prohibits the use of unf air marketing practices in the market place.
Promotes responsible consume r behaviour.
Lays down laws relating to transacti ons and agreements,
It bri ngs into being the National Consumers Commission and National Consume rs Tri bunal to
enforce the protection of consumers.
This act therefore applies to all transacti ons occurring within the Republic of South Af rica and
includes the promotion or supply of any goods and se rvices in the country,
Services unde r the act are define d as any undertaking perf orme d by a pe rson f or the dire ct
benefit or indirect benefit of another, this i ncludes: educati on, inf ormation advice and banking.
Th e F u n da m e n t al Ri g h ts o f th e C on s u m e r U n de r Th i s Ac t I n c l u d e :
•
•
•
•
•
•
•
•
•
Right
Right
Right
Right
Right
Right
Right
Right
Right
to
to
to
to
to
to
to
to
to
equality in the market place
privacy
ch oose
disclosure of i nformati on
f air and responsible marketing
f air and h onest deali ngs
f air, just and reasonable te rms and conditions
f air v alue, good quality and safety
h old suppliers acc ountable
Right to equality in the market place
All customers have the ri ght to be treate d the same, c onsumers may not be unfairly discri minate d
agai nst with regards to access of goods and services. Suppliers are not allowed to limit the
access of a consume r to goods and services, or a class of consume r. No busi ness may unfai rly
discriminate by prioritisi ng a consume r or group pf c onsumers with re gards to marketing, selling &
distri buti on of their goods and se rvices.
Suppliers are not allowed to vary the quality of goods and services i n a manner that is
discriminatory. U nfairly charged pricing f or the same goods and se rvices to a differe nt c onsumer
base will be c onsi dere d as grounds of discriminati on. Custome rs sh ould all be treate d as equals,
irrespective of their ge nde r, race, socio-economic standards or their geographical location.
Consume rs will have the right to take issue s to the Equality c ourt or the Commissi on.
Right to privacy
Consume rs have the ri ght to have di rect mark eting restricte d; this includes unwante d
correspondence and SMS’s, te lephone calls and emai ls. They also h ave the right to decline to be
part of marketing surve ys.
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Right to ch oose
Consume rs have the ri ght not to be obligated to purchase additional products and services from a
supplier or any third party. The supplier is allowed to show/demonstrate an ec onomic or
convenie nce be nefit, the y sh ould however be offered separately and the price needs to be
disclose d upfront to the c onsumer.
The consumer h as the right to request pre -authorisati on for re pai rs and mainte nance serv ices is
obtaine d.
The consumer h as the right to cancel advance d bookings or orde r.
Consume rs have the ri ght to exami ne goods, e ven afte r purchase or delive ry and then return
goods and seek an explanation f or unsatisf actory goods.
Right to disclosure of i nformati on
Consume rs have the ri ght to receive all inf ormation in plain and understandable language.
Consume rs have the ri ght to any disclosure by intermedi aries and ask f or the i dentificati on of
deliveries, i nstallers and other related partie s.
Right to f air and responsible marketing
Consume rs have the ri ght to be protected against bait and ne gative marketing, which is now
prohibited.
Right to f air and h onest deali ngs
Consume rs have the ri ght to unc onscionable c onduct, protecti on against false, misleading or
deceptive re prese ntation and agai nst fraudule nt offers and schemes.
The consumer h as the right to fair substituti on and changing of goods.
Right to f air, just and reasonable te rms & c onditi ons
The right to be protected against reasonable and unjust c ontract terms e.g. long-life contracts.
Consume rs have the ri ght to obtai n notice f or certai n T&Cs and the ri ght to obtain a free c opy of
agreeme nts and c ontracts. Consumers have the right to refuse prohi bited transactions,
agreeme nts and T&Cs. Consumers are able to approach the c ourt to ensure that fair and just
conduct of terms and conditi ons are applied.
Right to f air v alue, good quality and safety
All consume rs h ave the basic right to demand quality service and goods that are safe.
Consume rs have the ri ght of warranty and c onsume rs sh ould receive warni ngs on facts and
nature of risks associate d with purchases or contracts. Consume rs h ave the right to claim for
damages f or injuries by unsafe and/or defective goods.
Right to accountabi lity from suppliers
Consume rs have the ri ght to be protected in a case of lay-by agreements. They are grante d
protection with re gards to prepaid credits, v ouchers and access to prepaid services and se rvice
faculties.
BRANDING:
A brand is a unique characte r/name/te rm/logo/design or combination to form a set which is
intended to IDENTIFY the product/service/seller and to DIFFERENTIATE them from those of
competitors. It is CO NSISTENT and e asily RECOGNISED.
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Branding is like the i dentity, reputati on, pe rsonality, pe rcepti on and image of your business, and
that is what sells your product/se rvice.
Advantages of having a strong brand:
• Inspires c ustomer loyalty, repeated sale s, word-of -mouth recommendations
• Branded items c an normally c ommand higher prices, esp. market leaders
• Top se lling brands attract c ustomers to the shops that stock these items
• Helps with busi ness’ appearance and image
• Adds c redi bility and incre ased confide nce in the business, a guarantee of quality
Some retaile rs use their “ own brands” where they use their names on the products rather than
the manufacture rs. Eg. Pick n Pay’s “ No Name Brand” – these tend to be cheaper than the
normal brands and inc reases the profit than selling the normal brands. Some upmarket retai lers
such as Woolworths market goods under their own name as this gives a se nse of superi or quality,
even though they don’t manufacture the products themselve s.
Some brands ae so strong they become global brands – sold through out the w orld. E. g. Coca Cola,
McDonalds, KFC, Nike, Apple etc.
The logo on a product re prese nts the busi ness, is easy recogniz able, establishes brand loyalty
and cre ates a f avorable image of the product and business.
Brand elements:
• Memorable
• Meaningf ul
• Likable
• Transferable
• Adaptable
• Protectable
The following factors he lp build a successful brand:
•Represents the core benefit, the things the customer expects from the brand.
•Eg. Woolworths vs MRP clothing quality
QUALITY
•Position in the market that the brand occupies in the mind of the customer.
Positioning is achieved through: Brand name, Image, Service standards,
Product guarantees, Packaging, Delivery - normally a combination of these.
•When a brand tries to change its market position because the brand has
become less attractive to its customers, the brand has become old/tired, no
longer appeals to a particular market group, more modern/trendy/cool eg.
Healthier options on the menu of Fast Food Brands
•Critical for brand development, brand awareness and to reinforce positive
perceptions.
•Utilize all the elements of the Marketing Mix
POSITIONING
REPOSITIONING
COMMUNICATION
LONG TERM PERSPECTIVE
INTERNAL-MARKETING
CREDIBILITY
• Investment in the brand and develop AND maintain customer loyalty/brand
loyalty.
•Related to understanding the brand values, mission and vision relation. Getting
employees to live the brand and become brand ambassadors.
• This is the business’s promise to deliver what they said they would. Delivering at
the right time, quality, quantity, price and place – building a positive reputation
with customers.
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Brand Extensi on and Brand Stretching:
Brand exte nsion - The use of a successful brand to launch a new product in the same mark et.
E.g. Coca Cola i ntroducing a range of wate r products, McDonalds addi ng chicken products to its
menu etc.
Brand Stretching - The use of an established brand to launch unrelate d products i n a different
market. E. g. Jee p selling brande d clothing
Adv antages of Brand Exte nsion and Stretching:
• Reputati on of the brand is carried over to th e product
• Easier and quicker to gain c ustomer loyalty
• Customers are willi ng to try/sample new product because of brand reputation
• Lower promoti onal launch c osts
FACTORS INFLUENC ING A BUYER’S DECISION:
Psychological Factors:
• Motivation
o How is a consumer motivated by adve rts th at they watch? E.g. usi ng ce lebrities to
endorse products
• Perception
o One’s percepti on is i nflue nced by your beliefs
• Attitudes
o This refers to your expe riences regardi ng past experie nces
Socio-Cultural F actors:
• Cultural
o One’s c ultural prefere nces
• Family
o The size of the f amily impacts the buye r’s de cision
• Social class
o The LSM (Living Standards Measure) of a buyer will impact their purchasing
decisions significantly
• Personal factors
o One’s personal situations will impact their buying decisions
Economic Factors:
• Interest rates
o If the interest rate has incre ase d and a consumer is in de bt then the y will have less
disposable income to spend
• Exchange rates
o The import and export of goods is affected by the exchange rate and hence will
affect the price of the goods bei ng sold
STIMULUS-RESPONSE MODEL OF BUYER’S BEHAVIOUR
A c ustomer’s buying behaviour is inf lue nced by many factors; the stimulus-response model i s use d
to help us unde rstand the behaviour of customers.
In this model, marketing and othe r stimuli e nter the c ustomers “black box” and produce certain
responses.
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Marketing manageme nt must try to work out what goes on in the minds of the customer – the
“black box. ”
The Buyer’s characteristics influence h ow he /she perceives the stimuli; the decisi on-making
process determine s what buyi ng behavi our is undertaken.
The first stage of understanding buye r behav iour is to foc us on the factors that determine the
“buyer characte ristics” in the “black box. ”
STIMULUS-RESPONSE MODEL OF BUYER BEHAVIOUR
MARKETING AND OTHER
STIMULI
Marketing:
- Product
- Price
- Place
- Promotion
Other:
- Economic
- Technological
- Political
- Cultural
BUYERS "BLACK
BOX"
- Buyer characteristics
- Buyer Decision
Process
BUYER RESPONSES
- Product choice
-Brand choices
- Dealer choices
- Purchase timing
- Purchase amount
SERVICE MARKETING – PEOPLE, PROCESS & PHYSICA L EVIDENCE
People:
• It is important to remember that anybody who comes i nto contact with your consumer will
have an impact on them; this could have a profound effect on the consume r’s level of
satisfacti on received f rom the busi ness.
• The busi ness’ brand and reputation rests in the hands of pe ople.
• It is vital for busi ness success to ensure that all employees wh o have contact with
consumers are properly traine d f or the job.
• Consume rs do not separate the product or se rvice from the employee th at provides it.
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Process:
• The process of giving a se rvice is crucial to the level of custome r satisfacti on received.
• Customers are not inte reste d in the runni ng of the busine ss
Physical evide nce:
• Buyi ng something i ntangi ble
• Physical evide nce helps to demonstrate and c onfirm the assumpti ons of the custome r
• The locati on and physical appearance of the business premises also gives the c ustomer a
sense of quality.
ETHICAL VS. UNETHIC AL MA RKETING
Principals of Ethical Marketing:
• All marketing communicati on should be h one st ant truthful
• All customers sh ould be tre ated fairly based on the nature of the product – not pre y on
the potenti al v ulnerability of the customer e.g. Esse ntial products and affordability
• Should comply and adhere to the re gulati ons, codes, norms and standards set by
government and industry regulators – The Advertising Standard Authority of South Af rica
(ASASA) and The Indepe nde nt B roadcasting Authority Act (IBA)
• Should adhere to the inte rnational standards and best practice
• Privacy of c ustomers should not be compromised – to ensure th at all South African
instituti ons c onduct themselves i n a responsi ble manner when c ollecting, processing, stori ng
and sharing another e ntity’s personal inf ormation by h olding them responsi ble if they do
not do so (POPI Act)
• Adve rtising should be disti nguished f rom news or entertainme nt
There are advantages and disadv antages to ethical marketing:
Adv antages: Loyalty of customers will be lost if a busi ness is found to be unethical. Building a
positive brand image and long-te rm re lati onshi p requires ethical marketing policies.
Disadv antages: Often unethical marketing is just as effective, if not more effective than e thical
marketing as it is not illegal and ofte n use d by c ompanies as a short-te rm strate gy to gain
market share.
Types of Unethical marketing:
•
•
•
•
•
•
•
•
•
Exagge rati on – false claims about the products quality, feature s, pe rformance etc.
False brand c omparison – no comparative adve rtising is allowed in South Africa, you may
not even menti on a compe titor
Surrogate advertisi ng – where laws preve nt the marketing of certain products such as
cigarettes and alc ohol – the marketer finds w ays of reminding the c onsume r of the product
without directly referri ng to the product
Using subjective rathe r than objective claims (stateme nts that c annot be confirme d
objectively) e.g. 100% the best burgers in town
Children in adverts – exploiting the i nnocence of the youth
Materialism – creati ng f alse needs
Deceptive names which create confusi on or false expectations
Selling second hand goods as new – fraud
Unacceptable language or disc riminati on, noise or cultural pollution (the contami nati on of
information supplie d with irrelevant, redundant, unsolicited and low -value i n inf ormation to
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•
influe nce a mindset of c ustomers e.g. Beautif ul, sex y module s when adve rtising perfume )
e.g. Junk mail, sms messages, cold calling (direct marketing)
Bait advertisi ng – It occurs when an item is advertise d at a sale price but the seller does
not have sufficient stock to last unti l the e nd of the sale. Often c onsume rs may purchase
other more expensive items f rom the store instead. False advertisi ng.
FRAN CHISE MARKETIN G
The franchisor determine s the c omprehensive marketi ng plan. F ranchisees nee d approval for any
additional local marketing. M arketing must be aimed at the specific target market. Loyalty and
reward programs are used to keep a steady and consistent custome r base. Using the c orre ct
marketing mix will activate a competitive advantage, strong brand ide ntity for all the franc hise
outlets. F ranchisor = protect my brand, F ranchisee = protect my investme nt by maximising
profits.
Franchising means working f or yourself, but not by yourse lf.
Critical success factors:
• Do research into the franchise brand
• Manage your cash flow – put enough mone y back into the busi ness e ach month
• Good traini ng
• Transactions are the lifeblood of the quick se rvice restaurants
• Clear unde rstanding of the role and responsi bilities between franchisor (systems and
support) and franchisee (Daily running of the busi ness and giving the c ustomer the be st
experience possi ble so that they return)
• Open c ommunicati on between franchisees – sh aring of ide as, best practice, feedback
There are advantages and disadv antages to franchise marketing:
Franchisee
Advantages
Disadvantages
The franchisee has a good chance of
success because he will benefit from
the success of the franchisor.
• The franchisee has access to
advice from the franchisor.
• The franchise agreeme nt offers
the franchisee legal protection.
• It is easier to raise borrowed
capital from the bank because the
bank knows that the e ntre pre neur
will get management assistance
from the franchisor.
• Franchisees often work together to
solve problems or buy stock i n bulk
aa their busi nesses are so similar.
• The cost to establish the
franchise is usually very high and
the franchisee then still h as to
pay monthly royalties.
• The entreprene ur could find it
frustrati ng and limiting to stick to
the strict prescri ptions of the
franchisor.
• Some franchisors may not
continue to give the support
initially promised
• The entreprene ur who wants a
challenge may become bore d with
the franchise.
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Franchisor
• The franchisor can expand his
busi ness quickly without a large
capital outlay.
• Franchisees will be more c ommitte d
to making a success of the busi ness
– they are working for a profit, not
a ne t salary.
• There are no staff problems for
the franchisor because each
franchisee is responsible for their
own recruitment
• The franchisor can find it very
difficult to keep traini ng and
giving assistance to all
franchisees.
• The franchisor does not have
direct c ontrol over f ranchisees;
yet the success of the franchisor
is dependent on the f ranchisees
• Admi nistrative duties inv olved in
collecting royalties and c ontrolling
the brand
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HUMAN RESOURCES
DEFINITION:
Personnel Function OR Human Resource Management O R Human Capital Management include s all
the activities and decisi ons that are intended to improve the effectiveness of the human
resources (employees) and of the e nterprise as a wh ole.
IMPORTANCE & A IM:
Bridge the gap betwee n management goals and the needs of the w orkforce. The task of th e
personnel f uncti on is to manage human resources in order to maximize their potential, thereby
enabling the business to achieve its missi on. In order to do this, the following should be the focus
of the HR function:
ª Inte rpre tati on of employe r/employee needs
ª Coordi nati on of management and staff require ments
ª Impleme ntati on of the personnel manageme nt activities: (summary of chapter)
© Manpower planning
© Recruitme nt
© Selection
© Employme nt contracts
© Placement
© Remuneration and staff benefits
© Inducti on
© Trai ning and skills development
© Evaluati on, Rete ntion, Succession planning
HUMAN RESOURCE ACTIV ITIES:
MANPOWER / HUMAN RESOURCE PLANNING:
Manpower planning is an ongoing task, even if there are no current vac ancies, HR always ne eds
to have a Plan B in c ase of emergencies e. g. death, sudde n resignati on in ke y areas, rapi d
growth in the company.
The purpose of manpower planning is to dete rmine:
ª How many employees the business nee ds (Workload analysis),
ª What skills these employees must h ave (Job analysis),
ª When these employees will be neede d.
Work -Load Analysis
A work load analysis is done in order to dete rmine how many people are require d in terms of the
work that must be done
Job Analysis
System atic method of obtai ning all relevant i nfo about the tasks related to a specific job e .g.
What skills m ust an employee have to pe rform the req uirements of a specific job?
The job analysis require s that:
ª Ide ntify the job c omplete ly and accurate ly (B road descri ption)
ª All the tasks in the job must be c omplete ly and acc urately describe d e.g. A shift manager
at Wimpy must to this and this … de tail.
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ª The demands the job makes on the worker must be analyze d
*This i nformati on can be gathered by inte rviewing the w orker/superi or, observing the work er,
questionnaires.
Job
Analysis
Job Description:
About the job.
A summary of the info collected through the
Job Analysis that shows the duties,
responsibilities and level of authority of the
worker. What has to be done, How it is to be
done, Why, When, Where.
Job Specification:
About the worker.
Specifies the minimum ability the worker must
have, experience, education, physical
requirements, skills required by the job.
Forms the basis of the recruitment activity.
Manni ng Table
The results of the previous steps will enable the HR manage r to construct a Manni ng table
reflecting the number of people required and the skills the y must have. A manning table is always
part of a Workplace Skills Analysis.
Determining Employee Requireme nts – Recruitment Plan
The recruiting plan will be base d on the difference betwee n employees neede d and c urrent
employees.
RECRUITING:
Recruiti ng now seeks to attract job applicants with the necessary skills and motivati on to c over
these shortage s.
Sources of new employees:
Within the business (Internal recruiti ng) – transfers, promotions, upgrade. Job posting on notice
boards, i nternal email, searching file s, rec ommendations etc. Internal promotions can have a
positive effect on morale, whereas external recruitment brings new ide as and f resh skills into the
busi ness.
Outside the busi ness (External recruiti ng) – head h unting, schools, c olle ges, unive rsities etc.
Adve rtising in newspape rs, trade journals, radio, notice boards, schools, Colle ges, universities,
other tertiary instituti ons, employment agenci es, social me dia.
SELECTIO N:
Selection inv olves screeni ng the applicants and choosing the most suitable candidate. Se lection is
aimed at excludi ng the applicants whose skills and expe rience do not match th ose laid down bin the
job specification. A good selecti on process will result in lower staff turnove r, lower produc tion
costs, less trai ning, more qualified and expe ri enced staff and higher productivity.
Selection Procedure
ª Receipt of application f orms and CVs – check all requi red forms and i nfo received
ª Initial scree ning – check applicants meet mini mum requireme nts
ª CV/ job application ev aluati on – selection panel and draw up a short list
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ª Reference and background checks – verif y info on CV
ª Inte rviewing of sh ortlist – get more i nfo from candidates on sh ort list to assess suitability,
and to give more i nfo about company, the job, expectati ons and allow questions from
candi date
ª Different tests and exami nati ons – job specific, costly, no disc riminati on
ª Medical exami nati ons (if require d) – only if i nherent to requi rements of job, no
discrimination (Employment Equity Act)
ª Letter of appointme nt – most suitable candidate (if not except, go to next be st candidate
on ranking list), in writing, must be signed
ª Employme nt contract – Labor Re lati ons Act re quirements, must c omply with Basic
Conditions of Employment Act, etc.
Receipt of application f orms and CVs
ª The HR manager must be available to answe r any queries f rom applic ants.
ª After a closi ng date f or applicati ons has passed, a list of all applicati on f orms must be
draw n up.
ª Docume ntation received from applicants sh ould be checked agai nst this list to e nsure all
the relevant docume ntati on has bee n received.
Initial screening
ª The purpose of the i nitial screeni ng process is simply to ide ntify those applicants who
obvi ously do not meet the mi nimum requi rements of the job with respect to q ualificati ons,
experience, etc.
ª Those applicants who are not suitable for c onsideration for the job are referre d to the
next step.
CV/ job application ev aluati on
ª A se lection panel will now evaluate the CV / job applications of all applicants who meet the
minimum requi rements of the job.
ª The selecti on panel will rank the applicants accordi ng to the total score s (usually a 7-point
scoring system) achieved on the CV evaluation.
Reference and background checks
ª The applicants on the short list are the pote ntial new employees and the refore the HR
department will wish to verify as much information supplied in CV as possi ble.
ª Employme nt records and qualificati ons will be checked – the personnel manage r may
communicate with the referees provide d by th e applicant i n order to ask relev ant questions
about the applicant th at may not be include d i n the CV.
Inte rviewing candidates of the shortlist
ª The inte rview may be carrie d out by one person or by a panel
ª The purpose of the employme nt i nterview is two-fold, i.e.
© To get more i nformati on f rom the applicant t in order to asse ss his / her suitability
for the job
© To give more inf ormation about the business, the job and conditi ons of employment
to the applicant
Tests and examinations
ª There are different types of tests that can be used to disclose more i nformati on as to th e
applicant’s suitability f or the job.
ª It is important to note that the Employme nt Equity Act (Secti on 8) prohi bits the use of
tests if it discrimi nates against any person on the grounds of culture.
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ª The followi ng types of tests are available:
© Ability / Trade tests – indicate what task the applicant can curre ntly perf orm and
what tasks he might be able to perf orm in the future, given the opportunity through
training
© Psychometric tests – which include personality and interest tests, measure the
applicant’s motivation and inte llige nces
© Work sample te sts – are literally sample s of work to be f ound in a certai n job and
are designed to measure what the applicant c an do and at what skill level.
Medical exami nati ons
ª The Employme nt Equity Act (Section 7) states clearly that no me dical examination may be
require d unless it is an inhere nt to the job, e. g. an e ye test for a pilot.
ª The employer will usually give the prospective employee a health -related que stionnaire to
complete and if there is any doubt regardi ng the medical status of the employee relating to
the requi rements of the job, the employer m ay req uest a medical exami nati on that may
include drug & alcoh ol tests.
Letter of appointme nt
ª A writte n offer of employme nt will first be made to the best person and if he / she
accepts the offer, the other candidates will be informed in w riting that their applicati ons
were not successful.
ª If no-one accepts the offer, the whole recrui ting process must start again in writing
EMPLOYMENT CONTRACTS:
ª The LRA (L abour Relations Act) now requires the employe r and employee to agree, draw up
and sign an employment contract.
ª This contact is a le gally bindi ng docume nt and must c omply with the Basic Conditi ons of
Employme nt Act.
ª The contract sh ould include at least:
© Employe r detai ls – full name & addre ss
© Employee details – f ull name, ID numbe r, address, contact details, tax number, etc.
© Employme nt details – positi on held, outline of duty, appoi ntment date, probati on
period, h ours of w ork, permanent or contract employme nt.
© Salary issues
© Leave details
© Termination of se rvices
PLACEMENT OF STAFF:
Individuals are place d in the positi on where th ey are best suite d to the requireme nts of the job
and their abilities. It might also happen that a candidate applied for a specific positi on but i s
place d in another positi on where the business thinks their skills will be better utilize d.
REMUNERATION & EMPLOYEE B ENEFIT:
ª Comply with the BCEA (Basic Conditi ons of Employment Act). Usually amounts to a major %
of company budget. A main re ason wh y candi dates choose to work for a c ompany.
Remuneration is one of the c onditions of employme nt and keeps trade uni ons very busy
(high % of why pe ople strike in SA).
ª Job ev aluations – cre ates a job hierarchy, job grade/status, remuneration range/scale
ª Salaries = pe rmanent employees, professional skilled or manageri al f uncti on. Fixed amount
paid pe r month.
ª Commission = Salary + commission f or % sales made
ª Performance bonus = Salary + incentive
ª Wages = Less skille d labor, weekly/monthly
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ª Overtime = Additional h ours w orked outsi de of BCEA/contract h ours
ª Profit sh aring - % paid out to employee
ª Employee benefits:
© Compulsory be nefits = pension or provide nt fund, me dical ai d, UIF – both employee
and employer contri bute.
© Other e.g. = h ousing allowance, c ompany c ar, transport allowance, study allowance,
meals, discounts on products, loans at re duce d interest rates, clothing allowance,
13th cheque etc.
© Tax is paid on the be nefits.
Salary scales:
BASIC + BENEF ITS or COST TO COMPANY
INDUCTION OF STAFF:
ª The way things are done in the busi ness and general rules.
ª The same for all employees, irrespective of le vel. Introductions to fellow employees and
supe riors.
ª Reduce anxiety of new employees.
ª Explanation of company policies, expectations, knowle dge of products/services
ª Appoi ntment of a mentor and where to go to ask questi ons.
ª Orientati on
TRAINING OF STAFF & SKILLS DEVELOPMENT:
ª Trai ning is job specific, aimed at helping employees improve their performance and
efficiency, knowle dge, skills, productivity lev els, beh avior and attitude.
ª To address the shortage of skille d labor i n South Africa, P arli ament introduce d the Skills
Development Act and Skills Development Le vies Act.
ª Aim of the SDA:
© ensure the w orkplace is a place of le arning,
© invest more i n e duc ation and trai ning,
© ensure good quality trai ning programs are off ered,
© improve employment opportunities f or disadvantaged pe ople,
© encourage employees to ge t inv olve d in traini ng programmes.
© Narrowing the gap betwee n actual perf ormance and require d perf ormance levels.
ª Steps of a well-planne d trai ning process:
© Step 1 – The business operations must be analysed to ide ntify problems that may
exist as well as to dete rmine what kind of skills will be neede d i n the f uture.
© Step 2 – The job analysis th at h as been done for the purpose of recruiting will give
more i nformati on as to the skills that are required in specific jobs.
© Step 3 – The pe rson’s job perf orm ance m ust be analysed to see whether there are
certain areas i n which he / she needs trai ning or even retraini ng.
© Step 4 – Training needs are then de termine d base d on the above analyses
© Step 5 – Develop trai ning objectives
© Step 6 – A training programme is now developed. The programme consists of the
basic skills, knowle dge, attitude and beh avioural requirements the employee must
posse ss. The programme may be i n the form of lessons pri nte d in a training manual.
© Step 7 – Train staff using one of the f ollowing methods:
§ On-the- job training that takes place in the real work situation and takes a
hands-on approach
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§ Off-the-job training which usually takes the form of courses offered by
outsiders
§ Appre nticeship training which is a combinati on of on-the -job and off-thejob trai ning
§ Workshops to promote interacti on or update skills
§ Job rotation or m ulti-skilling which expands an employee’s experience of
the business
§ Self-study
§ Online Training companies such as Media Works supply onli ne traini ng
courses
§ Buddy system / mentorship where by workers work together to share their
skills with junior employees
§ Learnerships – A student is given an opportunity to work within a business
while studyi ng
© Step 8 – Ev aluate the traini ng results
EVALUATIO N, RETENTION AND SUCCESSIO N PLANNING:
ª Evaluati on
© Performance appraisals
§ Trai ning goals been met?
§ Assess skill levels, potenti al sh ort comi ngs, strengths and weaknesse s,
opportunity f or employee to v oice concerns, f eedback to employee, discuss
employment issues e. g. bonuses, promoti on opportunities etc.
ª Retenti on
© High employee turnover is not good f or the productivity levels, public image and
employee morale.
© Very costly and time consumi ng to re place esp. highly skilled and manage rial staff.
ª Succession Planning
© Succession planni ng is a process whereby ke y personnel are recruited, develope d
and traine d to fill ke y positi ons.
© Personnel are prepare d f or f uture advancement and promoti on.
© Succession planni ng steps:
§ Ide ntify c ritical positions
§ Determine the skills, know ledge and competencies neede d by the people i n
these positions
§ Ide ntify successi on manageme nt strategies e.g. internal development,
recruitme nt, headhunting, etc.
§ Impleme nt the chose succession plan / c ompile an acti on plan
§ Evaluate the effectiveness of the plan
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INDUSTRIAL RELATIONS AND
LEGISLATION
CONSTITUTION:
With the bi rth of Democrac y on 27 April 1994, it w as necessary to drastically amend the
Constituti on to e nsure equality for all citizens.
Democrac y implies th at all citizens, regardless of colour, race, gender or c ulture, h ave th e right
to v ote f or the government.
Both private citizens and businesses fall unde r the Constitution, and it also forms the basis of all
other laws within the c ountry.
The Constituti on of the Re public of South Africa (Act 108 of q996, as amended) was adopted by
the Constitutional Assembly on 8 May 1996 and amende d on 11 October 1996.
HUMAN RIG HTS:
ª Because of the history of Apartheid – Human Rights f orms an important part of the
Constituti on (Ch apte r 2).
ª The Bill of Rights spells out very detailed and specific rights and responsibilities of all
citizens of the country. No right comes without responsibilities – the Constituti on and the
laws of the c ountry will protect you, but you have the responsi bility to uph old th ose laws
and the v alues e ntre nched i n that Constituti on.
ª Human rights are those basic and fundamental things that you are e ntitle d to just
because you belong to the human race. No one has any more or any less such rights. They
are also i nalie nable – me aning that they are yours f orever and cannot be taken away.
ª Among those rights stipulate d in the Bill of Rights are: equality, f reedom of
expression and associati on (trade unions), poli tical and property rights, housing, health
care, education, access to inf ormation, access to courts, children’s ri ghts, w oman’s
rights, h uman dignity, discrimination, right to life, free from vi olence of any ki nd, right to
privacy, free dom of reli gion, free dom of trade – occupati on – profession, labour re lati ons,
environmental issue s.
ª Human Rights Comm ission will assist citizens that h ave their rights violate d to approach
the Constitutional Court. The Commissi on also works at developing h uman ri ghts aware ness
amongst citizens and also advises government agencies and officials.
ª Lim itation Clause – sometimes it is necessary to limit certain rights as pe ople’s rights
might conflict e.g. I may have the right to freedom of expressi on, but if I exercise that
right in a way that thre atens your di gnity, th en it is alienati ng one of YOU R ri ghts. Secti on
36 of the Constitution lays down the strict conditi ons for these limitati ons.
INCLUSIV ITY:
ª Inclusivity is one of the basic rights in the Constitution – the right to have equal
opportunities and i nclusion in all aspects of lif e within South Afric a, and not to be
discriminated against.
ª Specific laws and actions were nee ded to re dress the problems of the past (Aparthei d) –
e.g. Skills Deve lopment Act that aims to provide traini ng and opportunities for all to
improve their skills and e arning capacity, EE Act, BBBEE Act, affirmative acti on etc.
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ª No disc riminati on or stere otyping agai nst race , disabilities or other me dical conditi ons (e.g.
AIDS) = same opportunities as eve ryone else.
ENVIRONMENTAL ISSUES:
ª Incre asing technology, growing populations, urbanizati on, incre ased polluti on etc. have led
to i ncreasi ng strains on our natural resources. Governme nt, businesse s and individuals all
need to work together to address these issue s and contri bute towards e nvironme ntal
management.
ª Section 24 of Ch apte r 2 of Constitution
© Everyone has the ri ght:
§ To an e nvironment that is not harmful to their health and wellbeing
§ To have the environme nt protecte d for the be nefit of present and future
generations, through reasonable legislative and other measures
§ Prevent pollution and ecological degradation
§ Promote conse rvati on
§ Secure ec ologically sustai nable developme nt and use of natural re sources
while promoti ng justifiable ec onomic and social development
ª Three principals relating to the environment are: (World Economic Forum)
© Supporting a precautionary approach to e nvironme ntal challenge s
© Undertaking initi atives to promote greate r e nvironme ntal aware ness
© Encouragi ng the development and diffusion of environmentally friendly technologies
ª This is i n li ne with the King Reports, JSE SRI and Triple B ottom Line Reporting.
LABOUR RELATIONS ACT:
The Labour Relati ons Act (LRA) provi des the basic legal framework for the South African labour
relati ons system.
Purpose of the LRA
ª The main objectives of the LRA:
© to e nforce the f undame ntal ri ghts grante d by section 23 of the Constitution
© to e nforce SA’s international obli gati ons as a member of the Internati onal L abour
Organisati on
© to provide a f ramework f or c ollective bargaini ng between trade unions and
employers
© to promote effective resolution of labour disputes through employee participation i n
decision making i n the w orkforce
ª The LRA applies to eve ry employer and employee in every business in SA, e xcept members
of the National Defence Force, the National Intelligence Agency and the South
African Secret Serv ice.
ª The LRA governs or re gulate s the process of collective bargai ning.
ª The act also covers issues such as free dom of association, Trade Uni ons, strikes, lock
outs, dispute resolution to unf air labour prac tices including unf air dismissal.
Functions of Trade Unions and Em ployer Organisations
ª A trade union is any number of employees i n a partic ular undertaking, industry, trade or
occupation associate d togethe r for the purpose of regulating re lati ons in that
undertaking, industry, trade or occupati on be tween themselves or some of them and their
employers or some of their employe rs.
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ª Employers Organisations serves the same purpose as th at of a Trade U nion but e nables
employers to w ork toge ther to negotiate with trade uni ons in a specific industry.
ª The Constituti on guarantees the pri nciple of Freedom of Association – this affords
employees the right to joi n a trade uni on of their choice, and employe rs the right to joi n
an employe rs’ organization.
ª Trade unions and Employer organisations must be registered. In orde r to obtai n
registration ce rtai n requireme nts must be me t:
© A proper constitution
© The constitution must be consiste nt with the LRA
© The Uni on should not be formed to evade any law, nor should it be affiliate d to any
political party
ª Registrati on allows them to be party to the B argaining or Statutory council – this means
that wages and c onditions of employme nt c an be negotiate d th at may be made binding in
law.
ª No employer may make it a c ondition of employment that an employee may not join a trade
uni on, or ref use the employee’s right to engage in union action and to h old meetings at the
workplace
ª The mai n aim or purpose of a trade union is to engage in c ollective bargaining with
employers on behalf of the members of the union.
ª Functi ons of trade unions:
© Protecting the rights of workers and e nsuring fair treatment of membe rs
© Improving c onditions of se rvice regarding:
§ Salaries,
§ Employee be nefits,
§ Job sec urity,
§ safe ph ysical work environme nt,
§ represe nting members in negoti ations with employers,
§ represe nting employees in discipli nary issues,
§ advising employees on labour relati ons issues and striving to achieve industri al
peace while influe ncing policies and decisions regarding labour issue s.
Colle ctive Bargaining
Includes contract negotiations between employe rs and trade uni ons and the handling of
grievances. It aims to prevent industrial acti on such as strikes and lock-outs.
ª A Strike is a temporary, c ollective refusal of employees to w ork i n order to put pressure
on the employer to agree to the demands of the workers, e.g. Hi gher wages or improve d
working conditi ons etc.
ª A Go-slow is when w orkers continue to w ork but slow dow n to reduce productivity.
ª Work-to-rule is when workers stick to the letter of their contracts, often also re ducing
productivity. E.g. Don’t arrive at work early or leaving late, taking f ull lunch hours, not
doi ng anything extra that is not specified i n your job descri ption. etc.
ª Picketing – a group of employees demonstrating outside their place of work to sh ow their
dissatisf action with certain issues at work. Work is not disrupted. (e.g. Duri ng lunch hour
of before /after work)
ª A Lock- out is the ref usal on the part of the employer to allow employees to continue to
work unle ss the y except certai n c onditions of the employe r.
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NEDLAC (National E conom ic Development and Labour Council)
ª NEDL AC = to e nsure gove rnme nt, organised labour and employers are in agreement prior to
labour policies that will impact on social and e conomic levels, are submitte d to government.
ª NEDL AC is a vehicle that trade unions i n SA c an use to impleme nt change s on the labour
front.
ª At National level, NEDLAC employers, employe es and governme nt together, and playe d an
important role in the formulati on of the Labour Re lati ons Act.
ª Collective bargaining between trade unions (representing employees) and
employers/employers organisations – determi ne wages, terms and conditi ons of employment
and other matte rs of mutual inte rest, as well as the formulati on of industrial polic y.
ª There are 3 collective bargaini ng structures that re solve disputes: Bargaining Councils,
Statutory Councils and Workplace Forums. All 3 are aime d at PREVENTATIVE actions to
resolve labour disputes and grievance procedures amic ably.
© The most important f uncti on of a bargaining council is to help establish c ollective
agreeme nts f or a certai n sector or i ndustry e.g. Motor i ndustry
© Statutory councils may be established i n sec tors where there are no bargaini ng
councils – to solve dispute s within their area of jurisdicti on, to establish training
and e ducation schemes, to e stablish and admi nister pe nsi on funds, provide nt funds,
medical aid and unemployment schemes.
© Workplace forums help with grass root level labour relations regarding problem
solving and decision maki ng within the workplace.
Griev ance Proce dure
ª Employee has a problem with the Employer
ª A grievance proce dure is the route of communication th at must be followe d by a worke r
who wishes to lodge a f ormal c omplaint.
ª The Labour Relati ons Act provi des f or a basic two step procedure to e nsure th at disputes
are resolved as quickly as possible:
© Step 1 - Conciliati on (if this is unsuccessful – move to step 2)
© Step 2 - Me diati on, Arbitrati on, Adjudication (Labour Court and Labour Appe al
Court), Industrial acti on (strikes and Lock-outs)
Employee
Grievance
Supervisor
Department
Manager
CCMA
Private Agency /
Bargraining /
Statuary Council
HR Manager
Labour Court
Labour
Appeal Court
DIAGRAM OF
A GRIEVANCE
PROCEDURE
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Industrial Action
ª Strikes: when tw o or more employees participate in the strike acti on. Theses striking
employees mi ght work f or the same or differe nt employers, but they must act with a
common work-relate d purposes.
ª The re ason f or the strike acti on must be to resolve a grievance or dispute about a matte r
of mutual intere st th at c oncerns employees and employers.
ª Strike acti on can be a parti al or complete ref usal to w ork e.g. Go-slow, work -to-rule,
intermittent strikes (where employees stop and start the same strike over a peri od of
time), ove rtime bans.
ª Prote cted strikes = employees i nvolve d i n protected strikes enjoy ce rtai n benefits which
employees wh o e ngage i n unprotected strikes do not h ave.
© Certain proce dures need to be f ollowed for a strike to be protected
§ Any c ollective agreement regarding dispute re solution procedures must be
followed
§ If there is no agreed dispute re soluti on proce dure then the procedures of
the LRA must be f ollowed:
¨ The issue in dispute must be referre d i n writi ng to the CCM A, a
bargai ning council or a statuary council
¨ The CCMA or c ouncil must try to settle the di spute through c onciliati on
within 30 days
¨ If this fai ls, the CCMA or c ouncil must issue a certificate sayi ng that
the dispute has been resolve d
¨ At least 48 h ours’ notice in writing of the proposed strike must be
given to a private employer or seve n days’ notice if the state is the
employer
© A strike will not be protected if:
§ A c ollective agreeme nt specifically states that worke rs may not strike over
the issue at hand
§ The correct procedures have not been follow ed or if the arbitrati on decision
is ignore d
§ The parties are engaged in an essential servic e
© Actions during a protected strike:
§ Employees may not be dismisse d f or goi ng on a strike, h owever they may be
dismissed for misc onduct duri ng the strike (vi olence)
§ The employer cannot apply for a court i nterdict to stop the strike, but may
apply for a court interdict to prevent unlawful acti on
§ The ref usal to w ork is not seen as a breach of contract and the employer
cannot claim damages for loss of production f rom striking workers
§ An employer does not have to pay employees participating in a protecte d
strike
ª Employe rs c an lock-out employees, which means that they physically exclude employees
from the work place in order to f orce employe es to accept a demand or offer of the
employer that relates to the strike. No w ork no pay.
ª Reasons for strikes/lock-outs
© Wage increases
© A demand to rec ognize a trade union
© Unhappiness regarding unilateral change s the employer made to w orking c onditions
© In sympath y with a protected strike by anoth er party
© Issue s of common nati onal i nterest e.g. COSATU strike ove r labour policies, service
delivery, unemployme nt leve ls etc.
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ª Other forms of industri al action:
© Picketing: Held at any place to which the public has access and the picket is
peaceful
© Secondary acti on: employees striking i n support of another strike (7 day’s notice)
Unfair Tre atment in the Workplace
ª Unfair discrimination will not be tolerated in the workplace, but disc riminati on is not unf air
if it is on the grounds of affirmative acti on or the i nherent requirements of the particular
job e. g. Bus driver = no blind pe ople
ª The LRA defines 4 ki nds of tre atment which amount to an unf air labour practice:
© Unfair discrim ination – race, ge nde r, sex ual orientation, age, disability, re ligion,
culture, language, marital status. E.g. An employer advertises for a man to do a job
that a woman could also do.
© Unfair conduct of the employer - relating to the promotion, demoti on or trai ning
of an employee or the provision of benefits. E.g. All employees pass a test and all
except one is.
© Unfair suspe nsion of an employee or any other disciplinary action short of
dism issal – E.g. reasons f or the suspe nsi on/disciplinary acti ons is uncle ar.
© Failure or refusal of an employer to reinstate or re-employ a former
employee in terms of any agreements – E.g. Retre nchment agreements
ª Under
©
©
©
©
©
©
©
the LRA an employee is regarded as unfairly dism issed when:
An employer e nds a contract of employme nt w ithout notice to the employee
An employer refuse s to allow an employee to return to work afte r maternity leave
Constructive dismissal takes place ; employer makes the working environment
impossi ble f or the employee to tolerate, which forces the employee to resign
Dismissal because an employee took part in ac tivities of a trade uni on or w orkplace
forum
Dismissal because an employee took part in a protected strike or prote st action
Dismissal because of pre gnanc y or any reason related to her pre gnanc y
Dismissal on arbitrary grounds such as: race, age (except retireme nt age), reli gion,
gende r, sex ual orientati on or family responsibility
ª Remedies f or unfair dismissal –
© Reinstatement: giving the dismisse d w orker their old job back, unless; the dismisse d
worker does not want to return to w ork, the dismissal was only procedurally unf air, the
working relati onship betwee n the parties has become i ntolerable, it is not practical to
do so e.g. Dismissed for inc apacity – wheelchair – too expe nsive to adapt to the
workspace.
© Compensation: the employe r is required to pay the employee a set amount or a
specified number of months’ salary.
© Combination: rei nstatement and compensation ordered by the CCM A.
Discipline
Control me asures such as discipli nary and grie vance procedures ensure that staff members are
performing to their potential because they know what is expected of them and what the
consequences will be if goals are not met.
The purpose of disci pline at work is to:
© Maintain order and e nsure c o-operation so th at employees know what is acceptable and
unacceptable behavi our
© Motivate employees to change their behaviour where necessary
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Dismissal should always be the last resort after all other disciplinary action have been
exhausted
Disciplinary procedures – dismissi ng a work er is a very cumbersome process and has to meet
the requi rements of:
1. Substantive fai rness (a rule was broke n)
2. Procedural f airne ss (the correct procedure was f ollowed)
Dismissal f or Misconduct
ª Misconduct refers to a situati on where transgressi ons of a rule took place. E.g. Theft,
insubordi nati on, absenteeism, substance abuse etc.
ª Only seri ous first offe nces will lead to dismissal.
ª Dismissal for misconduct is the last resort of an employe r, when all other me asures to
correct misconduct have faile d.
ª All cases of misconduct sh ould be judge d on merit and the circ umstances i nvolve d.
ª Dismissal for misconduct must be substantively and procedurally fai r.
ª Substantively f air:
o The employee broke the rule of conduct i n th e workplace,
o The rule was v alid/re asonable,
o The employee know of the rule/sh ould have known of the rule,
o The employer applie d the rule c onsiste ntly,
o Dismissal is the appropriate step to take agai nst the employee for bre aking the rule
(instead of a lesser sanction such as a final w arni ng or suspensi on).
ª Procedural fairness = the correct procedure was f ollowed when the employee was
disciplined.
o The employee must be notified of the reason for the disciplinary acti on
o The disciplinary procedure needs to take plac e ASAP
o The employee has the right to state his case at the he aring or he can be
represe nted by a fellow employee, trade uni on re prese ntative or a lawye r
o If require d, the employee has the right to an interpreter
o Any witne sses may be cross examine d
o The employee has the right to be informed of the outcome of the disci plinary
hearing and to appe al should he wish to do so
ª Employe rs must keep rec ords of discipli nary action f or each employee stati ng the nature
of the misc onduct, the disciplinary action tak en and the reason for the action. These
should be based on the Discipli nary Polic y which the business should h ave in place, and
should comply with the LRA.
Dismissal f or Incapacity
ª Incapacity can be defined as the result of poor health (bei ng i ncapable to perf orm their
duties) or due to unsatisf actory work pe rformance (not misc onduct, but not meeti ng
performance/work standards).
ª In the case of poor health – the employer should aim to acc ommodate the employee through
sick leave, adjust duties, or offer alte rnativ e position.
ª Before disciplinary action regardi ng poor performance can be taken it must be e stablished
that the employee was aware of: expectations and how failure to meet these will be
dealt with. The law requi res the business to consult with Trade Uni ons who will e nsure
work standards are realistic and reasonable.
ª Probation refers to a peri od where the new recruit works in the busi ness and only afte r
this peri od has bee n complete d is the appointment c onfirme d. The reason f or a peri od of
probation is to allow the employer the opportunity to assess the pe rformance of the
employee before finalising the appointme nt. (usually about 3 months) During this time the
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employer must ev aluate the employee’s perf ormance and provide gui dance and traini ng
should it not be satisfactory.
ª If the employer has assisted the employee to improve on perf ormance th at is below
standard, but the employee still f ails to meet the requi red pre -de termine d and cle arly
communicated standards, the employee will be given a he aring and may then be dismisse d
due to poor perf ormance. The employee can appeal the decision.
ª Disciplinary acti on due to poor perf ormance must meet the requi rements of substantive and
procedurally fai r:
©
Substantive
§ Show that the employee f ailed to meet a perf ormance standard
§ Show that the employee w as aware of the required standards
§ Show that the employee w as given an opportunity to improve perf ormance
§ Show that the reason for faili ng to meet the standard was investigate d and
that there is no other appropri ate sancti on for faili ng to meet this standard
©
In order to be procedurally fai r
§ The employee must be notified of the reason for the disciplinary acti on
§ The disciplinary procedure needs to take plac e ASAP
§ The employee has the right to state his case at the he aring or he can be
represe nted by a fellow employee, trade uni on re prese ntative or a lawye r
§ If require d, the employee has the right to an interpreter
§ Any witne sses may be cross examine d
§ The employee has the right to be informed of the outcome of the disci plinary
hearing and to appe al should he wish to do so
Dismissal f or Operational Reasons (Retrenchment)
ª This must be avoi ded as far as possi ble and must i nclude c onsultati on and ne goti ations with
affected employees and their re prese ntatives (Trade U nions).
ª As soon as an employe r consi ders retre nchment, the y must start the consultati on process
and must notify the employees and/or trade unions in writing of:
©
the reasons f or the proposed retre nchment
©
the alternatives consi dered
©
the number of employees likely to be affected
©
the propose d meth ods of selecti on of jobs inv olved
©
the timing of the proposed retre nchment
©
offers of seve rance pay
©
assistance offered/prospects of re-employme nt in the f uture
ª The employer must re spond to any suggesti ons from the other consulting party and explain
reasons for disagreeing with that party.
ª Businesses might offer training e.g. Entrepre neurship or skills to make the retrenched
workers bec ome more employable.
BASIC COND ITIONS OF EMPLOYM ENT ACT:
ª Aimed primarily at improving the w orking condi tions of vulnerable w orkers.
ª The purpose is to advance economic development and social justice by e nsuring the right to
fair labour practice for all worke rs.
ª The BCEA applies to all employees except me mbers of the Nati onal Services, Nati onal
Intelligence Agency, SA Secre t Se rvices and unpai d v olunteers working for charity.
ª The BCEA addresses problems of:
©
Inadequate protecti on for v ulne rable workers such as part-time, farm and
domestic workers.
©
The lack of mechanisms to set mi nimum wage s for farm and domestic workers.
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©
©
ª
ª
ª
ª
ª
ª
ª
ª
ª
ª
ª
ª
ª
Child labour
Exclusively long w orking h ours, especially i n areas such as transport and sec urity
industries.
©
Working h ours.
A maximum of 45 h ours per week may be w orked.
The maximum hours per day are 9 h ours f or a 5 day week and 8 hours f or a 6 day week,
with a lunch bre ak/meal break after 5 h ours of work.
Overtime should be organised by agreement wi th a maximum of 3 hours per day or 10 hours
per week. Payment for overtime is at east
1 ½ times the normal rate OR by givi ng pai d leave equal to the time
worked.
Leave – 21 consecutive days paid leave afte r every 12 months continuous employment is
consi dered normal. Le ave may not be c onverted to cash.
Maternity leave – F our c onsec utive months.
Family responsibility leave – 3 days per ye ar f or reasons such as f amily de ath, illness
or birth of a child leave f or farthe r (pate rnity le ave).
Sick le ave – 30 w orking days per 36 month cycle is allowed.
Public holidays – Employees must be pai d f or any public holi days that f all on a w orking
day. If employees are requi red to work, they must be pai d overtime at double rate or given
time off.
Notice of termination of employment – 1 w eeks’ notice must be given to the employer if
less than a month has bee n w orked, 2 weeks i f less th an a ye ar and a month’s notice if a
year has bee n c omple ted.
Deductions – Employers must deduct unemployment insurance, i ncome tax, uni on fees and
other amounts agreed upon by the employee.
Remuneration – Workers must be pai d f or any accrue d annual leave.
Positive Impact of the BCEA
ª Promotes equal opportunity in the w orkplace
ª Promotes f air treatme nt i n employme nt
ª Prevents unf air discriminati on
ª Creates a framew ork f or acceptable employment practices
ª Encourages consultation between employe r and employee
Negative Impact of the BCEA
ª Drafting legal c ontracts is time c onsumi ng and costly
ª Businesses may regard employme nt c ontracts as re strictive / ne gative and may refrai n
from implementi ng it , which will result i n non-compliance
ª Non-c ompliance results in penalties which affect profit negatively
ª Hiring cheap labour is no longe r possible, so businesse s may not ex ploit workers
ª Incre ase i n labour costs
EMPLOYMENT EQUITY ACT:
ª This act seeks to e lim inate unfair discrim ination in employment and provides for
affirmative action to c orrect the imbalances of the past with respect to access to
employment, traini ng, promotions, and equitable remune rati on, especially for blacks,
woman and the disable d.
ª A business is obliged to display the EE Act in all re levant languages in the workplace.
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ª Employe rs wh o employ more than 50 worke rs are f orced to develop specific affirmative
action plans i n consultation with w orkers or th eir representatives. These are monitored by
the gove rnme nt th rough the Employment Equity Plans submitte d by employers.
ª Employe rs must progressively reduce the diff erence in salaries, promoti on opportunities
etc.
ª Businesses wishing to tender for gove rnme nt contracts must comply with EE requi rements.
ª The Act also establishes an advisory Commission for Employment Equity to assist and
advise businesse s on the formulati on of Codes of G ood practice.
Purpose of the Employment Equity Act
ª Introduce d to force businesses to employ more people from disadvantage d groups
ª Aims to e liminate unfai r discrimination in employme nt
ª Provides for Affirmative Acti on
Positive Implications of the Em ployment Eq uity Act
ª Fair distri bution of employment
ª Equal opportunity
ª A more diverse workforce
ª Developme nt of a w ork e nvironme nt
ª Contributi ng to creati ng a respectful work environme nt
ª Attracting and re taini ng the skills and expertise required to se rve new markets
Negative Implications of the Employment E quity Act
ª Enforcement procedures are c omplicated
ª Hefty fines up to R1 000 000 may be impose d f or non-compliance
ª Small busine sses do not have the expertise to implement all aspects of the Act
ª The development of Employment Equity plan c an be time c onsumi ng
ª Businesses have to de al with unhappy employe es from non-designate d groups
BLACK ECONOMIC EMPOWERMENT ACT (BEE):
ª Supports the development and economic empowerment of historically disadv antage d black
people.
ª Industry specific BEE score cards assess th e degree of compli ance.
ª The Act aims to ensure the prom otion of black people to se nior positions (which often
leads to tokenism and not true employment)
ª Applies to blacks O NLY.
BROAD BASED BLACK ECONOMIC EMPOWERMENT (BBBEE) ACT:
Purpose of the BBBEE
ª Address the sh ort comi ngs of the EEA, AA and BEE acts
ª It sh ould lead to wealth being spre ad mire broadly
ª Empowerment goes be yond ow nership – it must encourage black inv olveme nt i n the
development of the economy
ª It allows for the developme nt of Code s of Good Practice
Pillars of the BBBEE
ª Direct empowerment – share ownership
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ª Skills development – promotion & higher salari es for blacks
ª Indirect empowerme nt – prefere ntial tre atme nt into the granting of government c ontracts
to BBBEE c ompli ant busi nesses.
There
ª
ª
ª
ª
ª
are elements to the BBBEE scorecard
Ownership
Management Control
Skills Developme nt
Enterprise & Supplie r Developme nt
Socio-Economic Empowerme nt
BBBEE Sc ore c ard (f or Government contracts):
• Ownership 20%
• Management 10%
• EE 15%
• Skills development 15%
• Preferential proc ureme nt 20%
• Enterprise development 15%
• Socio-economic developme nt 5%
Companies are classified under three different categories acc ording to annual turnovers:
ª Exempted: Micro enterprises (EME) (under R1 0 million per annum)
ª Qualifyi ng: Small Enterprises (QSE) (between R10 & R50 million pe r annum)
ª Generic Enterprises (more th an R50 mi llion per annum)
ª Three of the five pillars are conside red priority pillars
ª A minimum of 40% compliance is mandatory for these pri ority pillars
Companies that cannot achieve this minimum requirement will drop at le ast 1 BBBEE level:
ª The 3 Pri ority Pillars are:
©
Ownership
©
Skills Developme nt
©
Enterprise & Supplie r Developme nt (ESD)
Two of the above menti one d P riority Pillars are compulsory for QSEs
ª Ownership
ª ESD / Skills Developme nt
A generic c ompany requi res all three.
Positive Implications of the BBBEE
ª A good BBBEE rating will improve the image of the busine ss
ª It boosts staff morale
ª BBBEE can be use d as a tool f or marketi ng
ª Improves the inc ome distri buti on and as a result, also improves the standard of living
Negative Implications of the BBBEE
ª It can lead to c orruption and nepotism (family) and cronyism (f riends)
ª Many employees get jobs base d on the act rather than their qualifications or proficienc y
ª Impleme ntati on of the act has bee n poor and the intended objective of uplifting the m asses
has not bee n achieved.
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EE
BEE
BBBEE
• Emphasis on creating jobs for previously disadvantaged groups
• Includes: Blacks, Coloured, Indian, Chinese, females, Disabled
• The Act aims to ensure the promotion of black people to senior
positions
• Emphasis on empowering blacks to get into management and/or
become shareholders (ownership
SKILLS DEVELOPMENT ACT AND SKILLS DEVELOPMENT LEVIES ACT:
The South Af rican Qualificati ons Auth ority (SAQA) Act was a result of a joint effort by the
minister of e duc ation and the minister of labour in 1995. The act aims to improve the quality of,
and access to, le arning at school or in the w orkplace. SAQA is responsi ble to deve lop the National
Qualifications F ramew ork (NQF). This inv olves formulating policies and criteria for the
registration of e ducational institutions and se rvice provide rs.
The aim of the NQF is to ensure that people h ave access to traini ng or educati on of an academic
and / or v ocati onal nature and that the y rece ive credit f or learni ng that h as taken place.
Skills Development Act
ª The skills shortage in our c ountry relates to only 20% of our EP A (Economically Active
Populati on, 15-6 4 ye ars) = skilled or highly skilled, while about 80% = semi-skilled,
unskille d or unemploye d.
ª This low skill base is one of the reasons f or the low levels of i nvestment in our economy.
In order to strengthen the li nk be tween e duc ation, training, economic growth and employme nt
opportunities, nati onal governme nt interve ntion is neede d., hence the introduction of the Sk ills
Developme nt Act and Skills Development Levies Act by parliame nt.
Purpose of Skills Development Act
ª Assists workers to improve their skill levels and qualifications whilst earni ng an inc ome and
thus raise the ave rage standard of living
ª Use the workplace as a place of le arning
ª Improve the level of i nvestment in educati on and training
ª Ensures that quality trai ning is offered
ª Improves employme nt opportunities
ª Encourages workers to get inv olved in training programmes and le arne rships
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ª Encourages entreprene urship by providi ng training where necessary
Positive Implications of the Skills Development Act
ª Promotes a motivate d and well-traine d w orkf orce
ª Businesses can c ontribute to reversi ng the educati onal imbalances of the apartheid regime
ª With well traine d w orkers, the business can become more successful and profitable
ª Workers can le arn while w orking
ª As w orkers get more skilled, they c an be promoted and improve their inc ome and lifestyle
Negative Implications of the Skills Development Act
ª Relevant SETA accredite d trai ning programme s are hard to come by
ª The 1% SDL is an additional cost to the busi ness
ª Labour costs i ncrease because more admi nistrative staff will be neede d to administer the
process
ª The application procedure c an be complicate d
SETA (Sector Education and Training Authority)
ª Each busi ness sector has formed a SETA to prepare traini ng programme s, promote
learnerships and control funds in that sector, e.g. Bankseta.
ª E.g. FoodBev SETA’s function is to promote, facilitate and i ncentive skills development in
the food and beverages manuf acturing sector. FoodBev SETA is one of 21 sector e duc ation
and traini ng authorities (SETAs) across the e conomy mandated to put the Nati onal Skills
Developme nt Strategy (NSDS) into practice.
ª FoodBev SETA is subdivide d into 5 chambers:
• Baking, Ce reals, Confecti onary & Snacks (BCCS)
• Beverage M anufacturing
• Dairy Manuf acturing
• Manuf acture of F ood Pre parati on Products
• Processed and Prese rved Me at, Fish, Fruit and Vege tables
ª SETAs c onsist of represe ntatives from trade uni ons, employer’s organisations, governme nt
departments and i ntereste d professi onal bodi es.
ª SETAs obtai n f unding from the skills development levies paid by all employers in businesse s
with a payroll more than R250 000 p/a. This levy is c urre ntly 1 % of the total payroll and
is collecte d by SARS.
ª Each SETA must control and approve learnerships and Workplace Skills Programmes
(WSP), provide f unds to employers and traine rs and ensure e duc ation and trai ning is
happe ning in their sector.
ª Employe rs are entitled to claim part of the Sk ills Developme nt Lev y back when provi ding
skills development programmes.
ª WSP helps to ide ntify areas within the busine ss where specific skills are neede d and to
formulate a plan to address the sh ortage of skills. The business must submit an Annual
Trai ning Report (ATR) and the WSP i n order to claim their refund (20% of what was paid
as a skills lev y). In orde r to claim f urther funds the business must provide essential
traini ng with meani ngf ul skills developme nt.
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OCCUPATIONAL HEALTH A ND SAFETY ACT:
ª The Act was establishe d to provide for all issues regardi ng the provisi on of safe and
healthy w orking c onditions and e nvironme nt f or workers.
ª Acceptable levels of c leanliness, the provision of safety equipment where applicable,
regular health checks, the appointme nt of a Health and Safety Officer i n any organiz ation
with more than 20 employees and a Health and Safety Committee to e nsure c ompliance,
putti ng in place emergency proce dures such as fire drills, firefighting equipme nt, first ai d
resources etc.
ª Negli gence of employees could le ad to the employer not being held responsi ble f or problems
arising.
ª Employees have recourse to CO IDA (Compensation for Occupati onal Injuries and Diseases
Act) f or compensation claims
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Investment opportunities
and insurance
INVESTMENT:
INTRODUCTION:
INVES TM EN T t ak e s plac e w h e n m one y i s s av e d i n orde r t o m ak e i t grow . Th e am ount i nv e s t e d i s know n
as t h e C AP ITAL C O NTRIB U TIO N.
Inv e s t i ng i s t h e c re at i on of w e alt h t h rough t he us e of c api t al.
D e c i di ng on t h e ri gh t as s e t s t o i nv es t i n, k now i ng you r ri s k prof i le and u nde rs t andi ng t h e v ari ous as s e t
c las s e s i s vi t al t o m ak e s uc c e s sf ul i nv e s t me nt de c i s i ons . E. g. P layi ng Roule t t e – h ow m uc h c an I af f ord
t o be t /los e
Any i nv e s t or s h oul d h av e a bas i c k now le dge of t h e F O U R M AJO R AS S ET C L AS S ES and t h e RIS K i nh e re nt
i n e ac h.
“ Th e bi gge r t h e ri sk you t ak e , t h e gre at e r t h e pos s i ble re w ard (grow t h i n c api t al)”
As an i nv e s t or y ou ne e d t o k now y our RIS K P RO F IL E, i .e . How m uc h ri s k you c an af f ord O R are w i lli ng
t o t ak e .
Inv e s t m e nt s m ay be c las s i f ie d as L O W RIS K, M OD ERATE RIS K and HIG H RIS K
Th e F O U R AS S ET C L AS S ES are : C AS H, P RO P ERTY , B O ND S and EQU I TIES .
INVESTMENT OPTIONS WILL BE EVALUATED ACCORDING TO: RISK, ROI,
TIMELINE:
R I S K = a h i gh ri s k i n v e s t m e n t i s e x pe c t e d t o de l i v e r a h i gh e r re t u r n o n i n v e s t m e n t ( R O I ) I F t h e
i n v e s t m e n t s uc c e e d s . A h i gh r i s k i n v e s t m e n t c o u l d a l s o r e s u l t i n a b i g l o s s i f t h e i n v e s t m e n t f a i l s .
D i v e r s i f i c at i o n c a n l ow e r t h e r i s k a s ri s k i s s p re a d o v e r a c om b i n a t i o n o f a s s e t o p t i o n s .
R E T U R N O N I N V E S T M E N T = a t o o l t o m e a s u r e t h e e f f i c i e nc y o f t h e i n v e s t m e n t of w h a t t h e i n v e s t o r
w i ll g e t b ac k o v e r a n d a b o v e t h e o ri g i n a l i n v e s t m e n t ( p r o f i t ).
T I M E L I N E = t h e l o n ge r t h e p e ri o d o f i nv e s t m e nt a v a i l a b le t o t h e i n v e s t o r , t h e g r e a t e r t h e ri s k s a r e
t h a t t h e i n v e s t o r c a n a f f o r d t o t a k e , b e c a u s e t h e l o n ge r t h e t i m e o f r e c o v e r y a v ai l a b l e i f t h e
i n v e s t m e n t f a i l s . E. g . A 2 0 ye a r o l d c a n t ak e m o r e r i s k w h e n i nv e s t i n g f o r r e t i r e m e n t (+ 4 5 y e a r s )
c o m p a r e d t o a 5 0 y e a r o l d s t a r t i n g a r e t i re m e n t i n v e s t m e n t (+ 1 5 y e a r s ).
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THE MAJOR ASSET CLASSES AND RISK:
CASH – LOW RISK, LOW REWARD:
• E . g . B a n k de p o s i t s , M o n e y M a rk e t A c c o u n t s – o f f e rs i nv e s t o r s t h e a s s u r a nc e o f a re g u l a r
i n t e re s t a n d t h e k n o w le d g e t h a t t h e i r c a p i t al w i l l n o t b e s u b j e c t t o h u ge e x t e r n a l
fluctuations.
• T h e r e i s n o g u a r a n t e e t h at t h e c a p i t a l s u m w i l l b e p r o t e c t e d a g a i n s t I N F L A T I O N . ( I nf l a t i o n =
5,26%)
• I n v e s t m e n t i n C A S H i s e s s e n t i a l l y a n i nc o m e ge n e r a t i n g i n v e s t m e n t a n d i f y o u w a n t t h e i n i t i a l
i n v e s t m e n t t o g r o w , t h e n t h e i nc o m e ge n e r a t e d m u s t b e r e i n v e s t e d .
P R O P E R T Y – M O D E R A T E T O H IG H R I S K :
• P r o p e r t y i s o f t e n t h e b i g ge s t a s s e t i n a p e r s on ’ s i n v e s t m e n t p o r t f o l i o e . g. O w ni n g a h o u s e .
• P r o p e r t y c a n k e e p u p w i t h I N F L A T IO N a n c a n b e a v e r y e f f e c t i v e w a y o f G E A R I N G ( t h e
r a t i o b e t w e e n b o r r o w e d t o o w n c a p i t al ) y o u r i n v e s t m e nt . U s i n g s o m e o n e e l s e ’ s m o ne y t o
i n c re a s e t h e r e t u r n o n y o u r i n v e s t m e n t – m ak i n g a p r o f i t o u t o f b o r r o w e d m o n e y . U s i n g t h e
b a n k s m o n e y t o b u y y o u r h o u s e a n d w h e n t h e h o u s e i n c re a s e s i n v a l u e o v e r t i m e , y o u
b e n e f i t . T h i s i s k n ow n a s a P O S I T I V E L E V E R AG E E F F E C T.
• D E B T i n t h e f o r m o f a M O R T G AG E B O N D c a n h e l p i nv e s t o rs a c q ui r e a n a s s e t , a n d a R E T U R N
o n t h e i n v e s t m e n t , t h at t h e y w o u l d n o t o t h e rw i s e b e a b l e t o af f o r d.
• R I S K d e p e n d s o n t h e l o c a t i o n o f t h e p r o p e rt y , t h e p o li t i c a l a n d e c o n o m i c e n v i r o n m e n t .
• A d r a w b a c k of t h i s i n v e s t m e n t c l a s s i s i t s l ac k o f L I Q U ID I T Y ( c a n n o t s e l l p r o p e r t y a s q u i c k l y
a s o t h e r as s e t c l a s s e s – t u r n i n g a s s e t t o c a s h )
BONDS – MODERATE RISK:
• B o n d s o r G i lt s = i n t e re s t - b e a ri n g s e c u ri t i e s i s s u e d b y g o v e r n m e nt o r c o m p a n i e s i n o r d e r t o
b o r r o w m o n e y f r o m i n v e s t o r s . “ IO U ” i n w h i c h t h e y p r o m i s e t o p a y t h e le n d e r I N T E R E S T
( k n o w n a s a c o u p o n ) a n d p a y b a c k t h e l e n de r ’ s C A P I T A L S U M o n a s p e c i f i c d a t e ( r e de m p t i o n
date).
• B o n d s a r e i s s u e d b y c o m p a ni e s a n d G i lt s b y t h e g o v e r n m e nt t o r a i s e m o n e y.
• R I S K - T h e c a pi t a l s u m i n v e s t e d c a n f l u c t u a t e , w h i l e t h e i n t e r e s t p a y m e n t c a n b e h i gh e r
than on cash.
EQUITIES – HIGH RISK:
• E q u i t i e s (S h a re s o r S t oc k s ) = t h e i n v e s t o r h a s o b t a i n e d p a r t - o w n e rs h i p i n t h e c o m p a n y a n d
b e c o m e a s h a re h o l de r .
• S h a r e s = S t oc k s ( a “ s t o c k ” i s a ge n e r a l t e r m t o d e s c ri b e t h e ow n e r s h i p c e rt i f i c a t e s o f a n y
c o m p a n y , w h e r e “ s h a r e s ” re f e r s t o a n o w n e rs h i p c e rt i f i c a t e i n a p a r t i c u l a r c o m p a n y –
“shares in what company?”
• S o m e c om p a n i e s a r e li s t e d o n a s t o c k e x c h a n g e w h i c h m e a n s t h a t s h a re s c a n be t r a d e d
f r e e l y o n t h a t s t o c k e x c h a n g e e . g . J S E L t d.
• H i g h ri s k , b u t b e s t c h a n c e o f b e at i n g I N F L A T I O N o v e r t h e l o n g t e r m . ( RO I )
• B L U E C H I P S H A R E S = m a j o r , s t a b le c om p a n i e s . T h e R I S K i n t h e s e s h a r e s a r e l o w e r t h a n
h a v i n g s h a re s i n o t h e r c om p a n i e s . Th e RO I i s al s o h i gh e r t h a n i n o t h e r c om p a n i e s .
• A s h a r e h o l d e r m a y s h a r e i n t h e p r o f i t of a c om p a n y b y r e c e i v i n g a D I V I D E N D .
• H i g h - ri s k P r o f i le s /P o r t f o li o s s h o u l d k e e p a s i gn i f i c a n t p o r t i o n o f t h e i r p o r t f o li o i n e q u i t i e s .
T h e l o n g e r b e f o r e re t i r e m e n t – t h e m o r e y o u s h o u l d i n v e s t i n e q ui t i e s ( y o u h av e m o r e t i m e t o
r e c o v e r f r om h i g h ri s k i nv e s t m e n t s a n d e q u i t i e s n o r m a l l y t a k e s l o n g e r t o g r ow )
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•
W h a t d e t e r m i n e s t h e s u p p l y a n d d e m a n d o f a pa r t i c u l a r s h a re / s h a r e p ri c e o n t h e J S E ?
o T h e le v e l o f c o n f i de n c e i n t h e s t a t e o f t h e e c on o m y – w h e n t h e e c o n o m y i s d oi n g w e l l ,
i n v e s t o r s w i l l f e e l c o n f i d e n t a b o u t i n v e s t i n g o n t h e JS E ( B u l l m a r k e t ) v s i nv e s t o r s
a n t i c i p a t i n g l o s s e s , t h e y w i l l s e l l t h e i r s h a r e s (B e a r m a rk e t ).
o G o v e r nm e n t p o li c i e s o r n e w l e gi s l a t i o n – w i l l i m pa c t o n t h e c o nf i de n c e i n t h e e c o n o m y
a n t t h e re f o r t h e s h a r e p r i c e s . E . g. “ j u n k s t a t u s ” i n v e s t o r s w i l l s e l l t h e i r s h a r e s .
o I n d u s t r y p e r f o r m a n c e – s o m e i n d u s t ri e s m a y be m o r e a t t r a c t i v e t o i nv e s t o r s t h a n
o t h e r s . E. g . G o o d o r b a d p u b l i c i t y i n a n i n d u s t ry m a y c a u s e s h a r e p ri c e s t o f a l l o r
i n c re a s e .
o F i n a n c i a l pe r f o r m a nc e of t h e b u s i ne s s – t h e b e t t e r t h e f i n a nc i al p e rf o r m a n c e o f a
b u s i n e s s , t h e m o re l i k e l y t h e c om p a n y i s t o d e c l a r e g o o d d i v i de n d s a n d a s a r e s u l t t h e
s h a r e p ri c e s i s li k e l y t o i nc r e as e .
o M a n a g e m e n t a n d t h e p u b l i c ’ s c o n f i d e nc e i n t h e m a n a g e m e n t t e am – t h e h i gh e r t h e
c o n f i de n c e , t h e h i gh e r t h e de m a n d i n s h a re s , t h e h i gh e r t h e s h a r e p ri c e s w i ll
i n c re a s e . E. g . M e di a a r t i c le s o f t h e c u r re n t C E O , C F O e . g. E S KO M .
o S o c i a l i s s ue s s u r r o u n d i n g t h e c o m p a n y – m a y h a v e a p o s i t i v e o r n e g a t i v e i m p a c t o n
s h a r e p ri c e s . E. g . E nv i r o n m e n t a l l y f ri e n d l y m an u f a c t u r i n g p r oc e s s e s , C S R
involvement.
o L e g a l i s s ue s – p e n di n g l a w s ui t s o r a l le g a t i o n s o f p r i c e f i x i n g m a y n e g a t i v e l y i m p ac t
t h e s h a re p r i c e s .
o M e di a c o v e r a g e – i n c re a s e s t h e p u b l i c aw a r e n e s s o f t h e c o m p a n y / i n d u s t r y /c o u n t r y ,
c r e a t i n g p e rc e pt i o n s t h e re o f , t h a t m a y i m p a c t t h e s h a re p r i c e s .
o T i m e f r a m e – L o n g t e r m w h e n p u r c h a s i n g b l u e -c h i p s h a r e s w h e re t h e r e i s c a p i t a l
g r o w t h a n d w h e r e di v i d e n d s a r e u s e d t o p u r c h as e m o r e b l u e -c h i p s h a r e s .
P e o p l e t h at s pe c u l a t e b u y i n g s h a r e s i n c o m p an i e s t h a t w i l l h av e a q u i c k a n d s i g n i f i c a n t i n c re a s e i n
t h e s h a re p r i c e , w i l l t h e n s e ll t h e s h a r e s w h e n t h e re i s a n o p p o r t u n i t y t o m a k e a p r o f i t b a s e d o n a
h i gh e r s h a re p r i c e . T h e s pe c u l a t o r i s n o t r e a l ly c o n c e r ne d w i t h d i v i d e n d s . ( s h o r t e r t e rm i nv e s t m e nt
i n s h a re s )
R i s k : J S E L t d h av e s t r i c t r u l e s t o p r o t e c t i nv e s t o r s , b u t e q u i t i e s a r e s t i l l s e e n a s h i gh - r i s k
i n v e s t m e n t s . T h e r i s k i n B l ue - c h i p s h a re s a r e lo w e r.
R O I : I n c re a s e i n s h a r e p ri c e o r g o o d d i v i d e n d s g e n e r a t e d o r a c o m b i n a t i o n o f b o t h . W a n t t o
outperform inflation.
Time frame: Long term
DIVERSIFICATION:
D i v e r s i f i c at i o n m e a n s s p r e a di n g t h e i n v e s t m e n t r i s k be t w e e n t h e v a ri o u s a s s e t c l as s e s . “ N o t p u t t i n g
all your eggs in one basket”
M o s t i n v e s t m e n t p l a n s s h o u l d i nc l u d e a c o m bi n at i o n o f t h e f o u r a s s e t c l a s s e s be c a u s e o f t h e
b e n e f i t s of d i v e r s i f i c a t i o n. B a l a nc i n g t h e r i s k a n d r e w a r d s w i t h i n t h e p o r t f o li o .
RISK PROFILING:
P o t e n t i a l i nv e s t o r s s h o u l d c o m p le t e a n I N V E S TM E N T R I S K P R O F I L E t o d e t e rm i ne t h e t y p e of
i n v e s t m e n t o p t i o n s b e s t s ui t e d t o t h e i nv e s t o r a n d h i s /h e r pe r s o n a l c i rc u m s t a nc e s . ( H ow m u c h r i s k
can they tolerate? How much money are they prepared to lose? Why do they want to invest?
C r e a t e m o n t h l y i n c om e O R g r o w t h e i r c a p i t a l i nv e s t m e nt – i nv e s t m e nt o b j e c t i v e s ? T h e i r a ge – h o w
l o n g c a n t h e i nv e s t f o r ? H o w m u c h m o n e y d o t h e y h a v e t o i nv e s t – t h e i r f i n a n c i a l p o s i t i o n ? )
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CRITERIA used to choose an investment option/combination:
1 . I n v e s t m e nt t im e f r a m e – t h e l o n g e r t h e i n v e s t m e nt t i m e h o r i z o n , t h e m o r e t h e c u s t o m e r
c a n a f f o r d t o h a v e h i gh e r ri s k i nv e s t m e nt s a s t h e re i s t i m e t o r e c ov e r f r o m l o s s e s o r p r i c e
f l u c t u a t i o n s i n t h e m a rk e t .
2 . F i n a n c i a l p o s i t i o n – t h e g r e a t e r t h e n e e d f o r i n c o m e f r o m t h e i nv e s t m e n t , t h e m o r e
b a l a n c e s o r c o n s e r v at i v e t h e c h o i c e o f i n v e s t m e n t s h o u l d b e .
3 . R i s k a n d r e t u r n o n i nv e s t m e nt – i f t h e i n v e s t o r i s l o o k i n g f o r a h i gh r e t u r n t h e n m o r e ri s k
w i ll n e e d t o b e t a k e n – a n a g g r e s s i v e i nv e s t m e n t s t r a t e g y.
C l a s s if i c a t i o n o f R i s k P r o f i le s : L O W – R i s k A v e rs e - C o n s e r v at i v e - M o d e r a t e - M o d e r at e l y
A g g r e s s i v e - A g gr e s s i v e - V e r y A gg r e s s i v e - H I G H
INVESTMENT STATEGIES:
1 . C O N S E R V AT I V E I N V E S T ME N T S T R A T E G Y
T h e i nv e s t o r i s l o o k i n g f o r a H I G H d e g r e e o f I N C O M E , w h i l e m a i n t ai ni n g a c a p i t a l i nv e s t m e n t
w i t h a N O o r VE R Y L O W le v e l o f RI S K. L o o k i ng f o r m o n t h l y i n c o m e w h i l e p re f e r a b l y
m a i n t ai n i n g t h e c a p i t a l a m o u n t o f t h e i n v e s t m e n t .
M o r e i nv e s t m e n t i n B O N D S , P R O P E R T Y a n d C A S H , le s s i n E Q U I T I E S .
2 . D E F E N S I V E I N V E S T M E NT S T R AT E GY
T h e i nv e s t o r i s l o o k i n g f o r S T A B L E I N C O ME bu t a l s o G R O W T H i n C A P I T A L w i t h a L O W
level of RISK.
M a j o r i t y o f i n v e s t m e n t w i ll b e i n B O N D S , P R O P E R T Y a n d C AS H , w i t h a L O W w e i g h t i n g i n
EQUITIES.
3 . B A L A N C E D I N V E S T ME N T S T R A T E G Y
T h e i nv e s t o r i s l o o k i n g f o r a C O M B I N AT I O N of b o t h C A P I T A L G R O WT H a n d I N C O M E w i t h
a M O D E R A T E le v e l of R I S K o v e r t h e m e d i u m t o l o n g t e rm .
I n v e s t m e n t i n E QU I T I E S a n d B O N D S .
4 . G R O W T H I N V E S T ME N T S T R AT E G Y
T h e i nv e s t o r i s l o o k i n g f o r L O N G T E R M C A P I T A L G R O W T H w i t h n o c o nc e r n f o r e a r n i n g
c u r r e n t i n c o m e f r om t h e i nv e s t m e n t . H I G H le v e l of R I S K o v e r t h e L O N G T E R M .
I n v e s t m e n t w i l l b e h e av i l y i n E QU I T I E S ( S h a r e s o n t he J S E ) .
INVESTMENT PYRAMID:
COLLECTIBLES
RISK
SHARES
RETURN
PROPERTY
BONDS
CASH
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STRATEGIES TO LIMIT LOSSES:
•
•
S t o p - l o s s s t r a t e g y – a p r e d e t e r m i n e d p ri c e a t w h i c h y o u w i l l s e l l a p a r t i c u l a r s h a r e i n o r d e r
t o s t o p a l o s s . Y o u d e c i de o n a % l o s s y o u a r e p r e p a r e d t o a c c e pt o n y o u r i n v e s t m e n t , a n d
s e l l t h e s h a re s w h e n t h e l o s s re a c h e s t h a t % . T h i s i s a g o o d s t r a t e g y t o p r o t e c t y o u a g a i n s t
l a r g e c a pi t a l l o s s e s .
R e b a l a n c i n g – y o u a d j u s t y o u r p o r t f o l i o e l e m e nt s t o g e t b ac k t o a p o i nt w h e re t h e % i n v e s t e d
i n c e r t a i n a s s e t c l a s s e s a re t h e s am e . T h i s s t ra t e g y k e e p s y o u r p o r t f o li o d i v e r s i f i e d a n d i n
l i n e w i t h y o u r t i m e h o r i z o n , r i s k a p pe t i t e a n d i n v e s t m e n t o b j e c t i v e s .
STOCK MARKET TERMINOLOGY:
B u l l / B e a r M a rk e t :
T h e t e r m s ‘ b u l li s h ’ a n d ‘ b e a r i s h ’ a r e u s e d t o de s c ri b e t h e m a rk e t m o o d s .
B u l l s a r e o p t i m i s t i c i n v e s t o r s w h o b e l i e v e t h e s h a r e p ri c e s w i l l g o u p.
B e a r s h a v e a n e g a t i v e o u t l o o k a n d b e l i e v e p r i c e s w i l l g o d o w n.
P r e f e re n c e S h a r e s :
H o l d e r s o f p r e f e re n c e s h a r e s c a n p a r t i c i p a t e i n t h e p r of i t s o f a c om p a n y b e f o r e t h e d i v i d e n ds a r e
d e c l a re d t o t h e o r d i n a r y a n d o t h e r s h a re h o l d e r s .
Spread:
T h e d i f f e r e nc e be t w e e n t h e a s k i n g p ri c e a n d t h e b i d p ri c e .
M a r k e t C a pi t a li s a t i o n :
T h e s h a r e p ri c e o f a c o m p a n y m u l t i p l i e d b y t h e n u m b e r o f s h a r e s i n i s s u e .
Rights Offer:
T h e o f f e r t o e x i s t i n g s h a r e h o l d e r s t o h a v e t h e f i r s t o p t i o n t o b u y n e w s h a r e s t h a t a r e of f e re d f o r
s a l e w h e n t h e c om p a n y w a n t s t o r ai s e m o r e c ap i t a l.
B l u e - c h i p S h a re s :
M o s t s o li d c o m p a ni e s o n t h e s t o c k e x c h a n ge .
G r e e n - c h i p S h a re s :
R e q u i re m e n t s o f e n v i r o n m e n t al i s s u e s a r e m e t
Black-chip Shares:
B E E C o m p li a n t
Dividends:
T h e p o r t i o n o f t h e c om p a n y ’ s p r o f i t t h a t i s d i s t r i b u t e d t o s h a r e h o l d e r s
R e a d i n g t h e s h a r e p ri c e t a b le s :
S h a r e p ri c e t a b le s i n t h e n e w s p a p e r h a v e t h e f o l l o w i n g i nf o r m a t i o n :
• B u y : T h e p r i c e t h at b u y e r s a r e o f f e ri n g f o r a s h a re
• S e l l : T h e p r i c e t h at s e ll e r s a re a s k i n g f o r a s h a re
• L a s t : T h e l a s t p r i c e a t w h i c h t h e s h a r e t r a de d
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•
•
•
•
•
•
•
PE:
DY:
H:
L:
DM:
YM%:
DV:
The
The
The
The
The
The
The
p r i c e - e a r n i n gs r a t i o o f t h e s h a r e
d i v i de n d y i e l d of t h e s h a r e
h i gh e s t p r i c e t h e s h a r e t r a de d i n t h e d a y
l o w e s t p ri c e t h e s h a re t r a d e d i n t h e d a y
d a i l y m o v e m e n t of t h e s h a r e
p e rc e nt a g e m ov e o f t h e s h a r e p ri c e i n t h e l a s t 1 2 y e a r s
v o l u m e o f s h a re s t r a d e d i n t h e d a y
E v a l u a t i o n o f Eq u i t i e s :
P r o d u c e s a yi e l d w h i c h i s a h i gh e r re t u r n t h a n m o s t o t h e r i nv e s t m e n t o p t i o n s .
The returns normally beat inflation.
T h e v a l ue o f t h e s h a re s g r o w as t h e c o m p a n y e x p a n d s .
S h a r e h o l d e r s re c e i v e d i v i d e n d s .
INVESTMENT OPPORTUNITIES:
1 . R e t i r e m e n t A n n u i t ie s ( R A )
A type of savings plan to provide money for retirement.
A m o n t h l y p r e m i u m i s p l a y e d i n r e t u r n f o r a l u m p s u m a n d m o n t h l y p e n s i o n af t e r y o u r e t i r e at
a n a g e o f b e t w e e n 5 5 a n d 6 5 , f o r a s p e c i f i e d t e r m o r u n t i l de a t h .
T h e a m o u n t r e c e i v e d d e pe n d s o n t h e s i z e of t h e c o n t ri b u t i o n ( p r e m i u m ) a n d h o w l o n g t h e
c o n t r i b u t i o n s w e r e m a de .
T h e g o v e r n m e nt g i v e s a t a x re l i e f o n p r e m i um s p a i d t o w a r d s a R A t o e nc o u r a g e p e o p l e t o
s a v e f o r t h e i r re t i r e m e n t . W h y ? T h e g ov e r n m e n t c a n n o t p r o v i de f o r a l l c i t i z e n s t o m a i n t ai n a
d e c e nt s t a n d a r d o f li v i n g o n o l d a g e p e n s i o n s .
Benefits of having a RA:
• R A i s a t a x b e ne f i t
• I t ’ s a d i s c i p li n e d w a y t o s a v e
• E v e n i f y o u b e c o m e i n s o lv e nt t h e m o n e y i n y o u r R A s t a y s s a f e
• I t c a n b e u s e d t o b u i l d u p a p o s t - r e t i re m e n t m e d i c a l s a v i n g s f u n d t h a t h a s t ax
benefits
2. Pension Fund
A l s o a f o r m o f r e t i re m e n t s a v i n g.
T h i s f u n d i s c o n t r i b u t e d t o b y t h e e m p l o y e r a nd e m p l o y e e i n v a r y c o m b i n a t i o n s .
T h e p e n s i o n f u n d i s a c o m m o n a s s e t p o o l m e a n t t o g e n e r a t e s t a b l e g r ow t h o v e r t h e l o n g
term.
P e n s i o n c o n t ri b u t i o n s a r e de d u c t e d b e f o r e c a lc u l a t i n g t ax a b l e i nc o m e .
B o t h R A s a n d P e n s i o n F u n d s a r e t o o l s t o m ak e p r o v i s i o n f o r a n i nc o m e w h e n p e o p le s t o p
w o r k i n g a n d g o e s o n p e n s i o n. M a n y p e o p l e d o n o t m a k e s u f f i c i e n t p r o v i s i o n f o r t h e i r p e n s i o n
a n d a s a r e s u l t c a n n o t m ai n t ai n t h e i r s t a n d a r d o f l i v i n g.
R E A S O N S : P e o p l e w ai t t o o l o n g b e f o r e s t a r t i ng t o m a k e p r ov i s i o n f o r p e ns i o n , pe o p l e
g e n e r a l l y li v e l o n g e r b e c a u s e o f g o o d m e d i c a l c a r e a n d n e e d t o p r o v i de f o r a l o n g e r pe r i o d
p a s t 6 5 , a d d i t i o n a l m e di c a l e x pe n s e s a n d h e a l t h c a re a r e n e e d e d, a d d i t i o n a l f u n d s a r e
n e e d e d t o c o v e r c o m p a n y b e n e f i t s t h a t a r e l o s t a f t e r re t i r e m e n t e . g. C o m p a n y c a r .
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3. Endowments
A n e n d o w m e n t p o li c y i s a s av i n g s p l a n i n w h i c h a m o n t h l y a m o u n t i s i nv e s t e d f o r a s pe c i f i c
period of time, usually five to ten years. Long term.
T h e a s s u re r a g r e e s t o p a y o u t o n m a t u r i t y o f t h e p o li c y.
M o s t e n d ow m e nt s o f f e r c h o i c e s re l a t e d t o t h e r i s k t h e y a r e p r e p a re d t o a c c e pt i n w h a t
a s s e t c l a s s e s t h e i n v e s t m e n t i s p l ac e d.
Life assurance can also be added to the endowment.
Advantages:
• Y o u c a n m a k e l u m p s u m c o n t r i b u t i o n s o r r e c u r r i n g c o n t ri b u t i o n s
• V a r i o u s t i m e f r am e s o ne c a n r ak e a n e n d ow m e n t o u t f o r
D i s a d v a n t a ge s :
• A p u r e e n d o w m e nt p o l i c y w i l l c a r r y n o d e a t h b e n e f i t a n d o n l y p a y s o u t a t t h e e n d
of the specified term
4. Equities on the Stock Market
C A P I T A L G RO W T H
I n v e s t o r s c a n h o l d s h a r e s i n c o m p a n i e s t h a t a re l i s t e d o n t h e s t oc k m a r k e t o r i n u n li s t e d
c o m p a n i e s . C o m p a n i e s li s t o n t h e s t o c k m a rk e t i n o r d e r t o g a i n m o re c a pi t a l , b u t t h e y m u s t
c o m p l y w i t h s t ri c t c ri t e r i a.
I n c o m e b y m e a ns o f d i v i de n d p a y m e n t s .
S t o c k m a rk e t s p r o v i de a m a rk e t f o r d e a li n g i n l i s t e d s h a re s a n d s e c u r i t i e s . P ri c e s f o r t h e s e
f i n a nc i a l i n s t r u m e n t s a re b a s e d o n s u p p l y a n d d e m a n d .
M o r g a n S t a n l e y C a pi t a l I n t e r n a t i o n a l (M S C I ) I nd e x – b i g ge s t s h a re s i n t h e w o r l d b a s e d o n
m a r k e t c a pi t a li s a t i o n
J S E A l l S h a r e I n de x ( AL S I ) c o n s i s t s o f t h e b i gg e s t S o u t h A f ri c a n s h a r e s b a s e d o n m a r k e t
c a p i t a li s at i o n , i n c l u di n g , i n t e r a li a , A n g l o A m e ri c a n, B i l li t o n , R i c h e m o n t , A m p l a t s a n d S a s o l .
T h r e e m a i n s u b - i n di c e s : J S E M i ni n g a n d R e s o u r c e s , J S E F i n a n c i a l s (F I N D I ) a n d J S E
Industrials (INDI)
T h e A l t X w a s s t a rt e d a s a n a l t e r n a t i v e b o a r d o n t h e J S E L t d t o a c c o m m o d a t e m e d i u m -s i z e d
p u b l i c c om p a n i e s t h a t d i d n o t m e e t t h e s t ri c t an d d e m a n d i n g r e q ui r e m e n t s f o r li s t i n g o n t h e
main board
C o s t o f B u y i n g e q ui t e s :
• A s t o c k b r ok e r ’ s f e e ( b r o k e r a g e ):
o A s t o c k b r ok e r c o u l d c h a r ge y o u a p e r c e n t a g e o f t h e v a l u e of y o u r t r a d e
( b e t w e e n 0 , 4 % t o 1 , 5 %, d e p e n di n g o n t h e s i z e o f t h e t r a d e a n d n a t u r e o f
t h e s e rv i c e re q u i re d )
• T h e b u y e r w i l l p a y m a rk e t a b l e s e c u ri t i e s t ax (M S T )
o M S T i s c u r r e nt l y 0 , 2 5 % o f t h e t r a de d a m o u n t
• VAT
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•
o 1 5 % o n a l l b r o k e r a ge a n d o t h e r f e e s c h a r ge d
S T R A T E l e v y ( S h a re T r a n s a c t i o n s T o t a l l y E l e c t r o n i c ) i s c h a r ge d :
o T h e a d m i n i s t r a t i v e c o s t s o f t h i s s y s t e m a r e f un d e d b y a l e v y o f R 1 2 , 4 5
i n c l. V A T p e r t r a d e .
Evaluation of equities:
• P r o d u c e s a yi e l d w h i c h i s a h i gh e r re t u r n t h a n m o s t o t h e r i nv e s t m e n t o p t i o n s
• The returns normally beat inflation
• T h e v a l ue o f t h e s h a re s g r o w as t h e c o m p a n y e x p a n d s
• S h a r e h o l d e r ’s r e c e i v e d i v i d e n d s
R i s k of i nv e s t i n g e q u i t i e s :
• Volatile markets mean that one may lose your investment
• S h a r e p ri c e s a re l i nk e d t o f a c t o r s b e y o n d o n e ’ s c o n t r o l
• I t t a k e s a l o n g t i m e t o ge t t h e b e s t r e s u l t s
A d m i n i s t r a t i v e c o s t s : B r ok e rs c h a r g e a q u a r t e r l y o r a n n u a l a m o u n t f o r a d m i n s e r v i c e s
5. Unit Trusts
A g r o u p o f i n v e s t o r s w h o p o o l t h e i r c a p i t al t o i n v e s t i n t h e f i n a nc i a l m a r k e t s . I n s t e a d o f
b u y i n g a n d o w n i n g s h a re s o r b o n d s y o u r s e l f , yo u b u y u n i t s i n a p o r t f o li o o f s h a r e s / b o n d s .
T h e r e a re t h r e e p a r t i e s t o a u n i t t r u s t i nv e s t m e n t :
1 . T h e u n i t t r u s t M a n a g e m e n t C o m p a n y t h a t m a n a g e s t h e i n v e s t m e n t o n b e h a lf o f t h e
investors.
2 . Th e t r u s t e e c o m p a n y , u s u a l l y a b a n k or i n s u r a n c e c o m p a n y , w h i c h i s re s p o n s i b le f o r
t h e s a f e k e e pi n g o f t h e p o r t f o l i o o f as s e t s .
3 . Th e u n i t h o l de r.
“ R a n d c o s t a v e r a g i n g ” = a f i x e d a m o u n t o f m o n e y i s i nv e s t e d i n t h e s a m e i nv e s t m e n t a t
r e g u l a r i n t e r v a l s , r e g a r d le s s of m a rk e t c o n d i t i o n s . E g . W h e n t h e p r i c e of t h e f i n a nc i a l
i n s t r u m e n t i s l o w , m o r e u n i t s c a n b e b o u g h t , an d w h e n h i g h , l e s s u n i t s a r e b o u g h t .
T h r e e b r o a d c at e g o r ie s of u n i t t r u s t s :
1 . D o m e s t i c f u n d s – w h i c h i n v e s t a m ax i m u m o f 1 5 % o f t h e i r a s s e t s o u t s i de o f S o u t h
Africa.
2 . W o r l d w i de f u n d s – w h i c h i n v e s t s b e t w e e n 1 5 % - 8 5 % o f t h e i r a s s e t s o u t s i d e of S o u t h
Africa.
3 . F o r e i g n f u n d s – w h i c h i nv e s t s m o re t h a n 8 5 % o f t h e i r a s s e t s o u t s i de o f S o u t h A f r i c a.
Advantages:
• I t b e a t s i nf l a t i o n - h i g h e r r e t u r n
• O n e c a n c a s h i n y o u r u n i t t r u s t s a t a n y t i m e an d w i t h o u t i nc u r r i n g a n y p e n a l t i e s
• N o t a s v o l a t i le a s e q u i t e s
• S m a l l a m o u n t s c a n b e i nv e s t e d
• U n i t t r u s t h o l de r s r e c e i v e d i v i de n d s a n d t h e y a r e r e i nv e s t e d t o g r ow y o u r u n i t t r u s t
portfolio
• L o n g e r i nv e s t m e n t t i m e f r a m e
• P o r t f o li o i s m a n a g e d b y a t e a m of i nv e s t m e nt e x pe r t s
• R i s k i s i n v o lv e d i n t h a t t h e f u n d s a r e i n v e s t e d i n s h a r e s o n t h e s t o c k m a rk e t w h e r e
v o l a t i li t y o c c u r s a n d t h a t t h e i n v e s t o r r e li e s o n t h e j u d g e m e n t o f t h e f u n d m a n a g e r s
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A g o o d u n i t t r u s t w i ll o u t p e r f o rm i nf l a t i o n o v e r t h e m e di u m t e rm o f 3 - 5 y e a rs . U n i t t r u s t s
a r e u s u a l l y a m e d i um t o l o n g t e r m i n v e s t m e n t .
6 . T h e C a s h o pt i o n
A M o n e y m a r k e t f u n d a t y p e o f u n i t t r u s t t h at i n v e s t s i n i nt e re s t - b e a ri n g i n s t r u m e n t s
i s s u e d b y b a n k s , t h e g o v e r n m e n t a n d c o m p a ni e s ( B o n d s a n d G i l t s ) w h e n t h e y w a n t t o b o r r o w
money.
T h e s e s h o r t - t e rm i n s t r u m e n t s a r e t r a d e d o n t h e m o n e y m a r k e t a n d h av e a m a t u r i t y of l e s s
than 12 months.
A d v a n t a g e s o f M o n e y m a rk e t f u n d s :
• Y o u o n l y h a v e t o i nv e s t a s m a l l am o u n t t o g e t a c c e s s t o m o n e y m a rk e t i n s t r u m e n t s .
• T h e i nt e re s t r a t e i s h i g h e r t h a n f o r a b a n k d e p o s i t .
• Y o u c a n w i t h d r aw y o u r m o n e y a t a n y t i m e .
• I n t e r e s t r a t e ri s k i s e li m i n a t e d b e c a u s e of t h e s h o r t - t e r m i nv e s t m e n t i n m o n e y
m a r k e t i n s t r u m e nt s .
7 . N o t i c e D e p os i t s
N o t i c e de p o s i t s a r e t y pe s o f s av i n gs a c c o u n t s w h i c h re q u i re t h e ac c o u n t h o l d e r t o gi v e
N O T I C E o f W I T H D R A W A L o f t h e i r C A S H.
T y p e s o f n o t i c e d e p o s i t ac c o u n t s :
• C a l l a c c o u n t – a b a n k a c c o u n t w i t h t h e c a s h be i n g a v a i l a b l e w i t h a c e r t ai n n o t i c e
p e r i o d e g. 3 2 - d a y c a l l ac c o u n t r e q u i r e s t h e h ol d e r t o g i v e t h e b a nk 3 2 d a y s n o t i c e of
t h e i n t e n t i o n t o w i t h d r aw t h e c a s h . Th e i n t e re s t r a t e i s h i gh e r t h a n t h a t o f a n o r m al
s a v i n g s ac c o u n t .
• F i x e d d e p o s i t s – t h e i nv e s t o r d e p o s i t s t h e m o ne y f o r a f i x e d p e ri o d o f t i m e e g . 9 0
d a y s , 2 y e a r s e t c . a n d m a y n o t w i t h d r aw t h e m o n e y b e f o r e t h e m a t u ri t y d a t e . T h e
i n t e re s t r a t e i s h i gh e r t h a n a C a l l ac c o u n t a n d v a r i e s a c c o r d i n g t o t h e t e r m ( t h e
l o n g e r , t h e b e t t e r t h e i n t e r e s t o f f e re d )
• M o n e y M a rk e t – a n i n t e r e s t - b e a r i n g ac c o u n t t h a t p a y s h i gh e r i n t e re s t r a t e s t h a n a
s a v i n g s ac c o u n t ( d e p e n d i n g o n t h e c u r r e n t i n t e r e s t r a t e s i n t h e m o n e y m a rk e t ). E g .
3 2 - d a y c al l a c c o u n t .
M o n e y i nv e s t e d a t b a n k s n o r m a l l y h a s v e r y l ow r i s k .
R O I – i n t e r e s t r a t e s o f f e r e d o n a f i x e d d e p o s i t w i l l d i f f e r f r om b a n k t o b a n k a n d w i l l de p e n d
o n t h e a m o u n t o f m o n e y i nv e s t e d a n d t h e t i m e f r a m e . Th e l o n g e r t h e t i m e f r a m e t h e h i gh e r
t h e i n t e r e s t r a t e of f e r e d.
8 . C o l l e c t a b le s – L o n g t e r m i n v e s t m e n t
I n v e s t m e n t i n c o l le c t a b l e s s u c h a s c oi n s , di a m on d s , s t a m ps , a r t a n d a n t i q u e s h av e t h e
p o t e n t i a l of c a pi t a l g ai n s o v e r t h e m e d i u m t o l on g t e r m .
A n o t h e r a t t r ac t i o n i s t h e l a r g e a n d a c t i v e i n t e r n a t i o n a l m a r k e t f o r c o l le c t a b l e s .
D i s a d v a n t a ge s :
• I n v e s t o r s e a r n n o m o n t h l y i n c o m e f r om c o l le c t a b l e s .
• A h i gh l e v e l of e x p e r t i s e i s re q ui r e d.
• C o l l e c t a b l e s a re o f t e n v e r y e x pe n s i v e ( l i m i t e d m a r k e t i n S o u t h A f ri c a ) a n d h a v e
v o l a t i le c a pi t a l v a l u e s .
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•
•
•
•
G o l d c o i ns s u c h a s t h e K r u g e r R a n d s h a s t h e i r v a l u e r e s t i n g i n t h e g o l d p r i c e at t h e
time.
A r t a n d a n t i q u e s a re f r a gi l e a n d d i f f i c u l t t o v al u e a n d t r a n s p o r t s a f e l y .
R O I : i t e m M U S T i nc r e as e i n v a l u e ov e r t i m e .
N o m o n t h l y i nc o m e .
9. Off-shore investments
T h e le v e l o f r i s k i n c r e a s e s i f y o u h a v e a l l y o u r i n v e s t m e n t s i n o n l y o n e c o u n t r y ( e g. V o l a t i le
f i n a nc i a l m a r k e t s , E c o n o m i c a n d p o l i t i c a l i n s t a bi l i t y ) . Y o u s h o u l d h a v e a f o r e i g n c o m p o n e n t i n
y o u r i n v e s t m e n t p o r t f o l i o.
L o n g - o r s h o r t - t e rm i nv e s t m e n t s t r at e g y .
G o v e r nm e n t m a y l i m i t t h e a m o u n t o f m o n e y t h at m a y b e t a k e n o u t o f t h e c o u n t r y e v e r y y e a r
o w i n g t o e x c h a n ge c o n t r o l.
R e a s o n s t o i n v e s t of f -s h o r e :
• D i v e r s i f i c at i o n a d v a n t a ge s .
• F o r e i g n f i n a nc i a l m a r k e t s m a y o f f e r b e t t e r v a lu e t h a n S A m a rk e t s .
• R e t u r n o n f o r e i g n i n v e s t m e n t s a re d e t e r m i n e d b y p r i c e m o v e m e n t s a n d e x c h a n g e r a t e
f l u c t u a t i o n s – s o i f t h e S a R a n d d e p r e c i a t e s , m o r e i nv e s t m e nt s i n f o r e i g n c o u n t r i e s w o u l d
be wise.
• I n t e r n a t i o n a l m a rk e t s m a y o f f e r i n v e s t m e n t o pp o r t u n i t i e s t h a t a r e n o t av a i l a b le i n S A e g.
Bio-technology companies.
• I f y o u a r e p l a n n i n g t o e m i g r a t e y o u c a n s t a r t i n v e s t i n g , e s p e c i a l l y i n p r o p e rt y , i n t h e
c o u n t r y y o u w i l l b e li v i n g i n.
1 0 . D e b e nt u r e s
A D e b e n t u r e i s a l o a n t o a c o m p a n y a n d e a r n s a c e r t ai n i n t e r e s t r a t e a t a m a t u ri t y d a t e .
C a p i t a l i n v e s t e d + i n t e re s t b a c k a t a p re - d e t e r m i n e d d a t e .
T h e c o m p a n y h a s a le g a l o b l i g a t i o n t o r e p a y t h e c a pi t a l a m o u n t a n d i n t e r e s t , e x c e pt w h e n
l i q u i d at e d .
A d e b e n t u r e h o l de r d o e s n o t b e c o m e a s h a r e h ol d e r i n t h e c o m p a n y , r a t h e r a c r e di t o r.
I f t h e c om p a n y t h a t i s s ue s t h e d e be n t u r e s a re s e e n a s h i gh ri s k , t h e n a h i gh e r i n t e r e s t r a t e
w i ll n e e d t o b e of f e r e d t o c o n v i nc e pe o p l e t o bu y d e b e n t u r e s .
D e b e n t u r e s m a y b e t r a d e d o n t h e J S E L t d.
T y p e s o f d e b e n t u re s :
• A r e d e e m a b le d e b e n t u re i s re p a y a b l e o n a p r e d e t e r m i n e d d a t e .
• A n i r r e d e e m a b l e de b e n t u r e i s n e v e r p ai d b a c k b y t h e c o m p a n y , b u t w i l l l a s t i n d e f i n i t e l y
w i t h t h e d e b e n t u r e h o l d e r ge t t i n g i n t e r e s t .
• A c o n v e r t i b l e de b e n t u r e w i l l b e c o nv e r t e d i n t o s h a r e s a t a p r e d e t e rm i n e d f u t u r e d a t e .
R i s k : D e be n t u r e s a re o f t e n s o l d a t f i x e d i n t e re s t r a t e s (c o u l d b e a d v a n t a g e o r
d i s a d v a n t a ge ) e . g . I n t e r e s t r a t e g o e s u p , i n v e s t o r l o s e s o u t . B a nk r u p t c y o r l i q u i d a t i o n o f
c o m p a n y . Hi g h e r r i s k t h a n b a n k i n v e s t m e n t s , bu t l o w e r t h a n e q u i t i e s .
R O I : C o m p a n i e s a re o b l i g e d t o p a y , a s t e a d y s t r e a m o f i n t e r e s t , h i gh e r ri s k i nv e s t m e n t =
h i gh e r i n t e r e s t p a i d , i n t e r e s t = t ax a b l e v s a f t e r t a x be a t i n g i n f l at i o n ?
T i m e f r a m e : L o n g t e r m – u n t i l d e b e n t u re i s re d e e m e d .
11. Fixed Property
F i x e d p r o p e r t y re f e r s t o “ l a n d a n d b u i l d i n g s ” .
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I t c a n e i t h e r b e re s i d e n t i a l p r o p e r t y ( a h o u s e o r f l a t ) o r c o m m e rc i al p r o p e r t y ( o f f i c e s , a
s h o p p i n g c e n t e r / m a u l o r a n o f f i c e p a rk ).
RISK:
R i s k i n i nv e s t i n g i n f i x e d p r o p e r t y d e pe n d s o n – t h e a re a t h e p r o p e r t y i s l oc a t e d i n , t h e
s t a t e of t h e e c o n o m y ( i n t e r e s t r a t e s r e l at e d t o a f f o r d a m o r t g a g e b o n d a n d i n s t a lm e n t s ) ,
C a p i t a l G a i n s T ax i n c a s e s w h e r e p r o p e r t y i s bo u g h t a s a n i n v e s t m e n t a n d s o l d a t a l a t e r
stage.
ROI:
T h e o w ne r o f t h e p r o pe r t y c a n c h a r ge r e n t (s o m e o n e e ls e p a y s f o r y o u r p r o p e r t y ) ,
p r o p e r t y p r i c e s n o r m a l l y i n c re a s e s o v e r t i m e .
Timeline:
Investment in property is a long-term investment.
INVESTMENTS AND TAX:
•
•
•
T a x r e d u c e s t h e RO I ( R e t u r n o n I n v e s t m e n t ).
C a p i t a l G a i n s T ax c a n e r o d e t h e i n v e s t m e n t . C G T c o m e s i n t o e f f e c t w h e n y o u s e l l, d o n a t e d
o r s c r a p s a n a s s e t . C G T = t h e d i f f e r e nc e be t w e e n t h e o r i gi n a l c o s t o f t h e a s s e t a n d t h e
s e l li n g p r i c e e g . If y o u p u r c h a s d a n i nv e s t m e n t f o r R 1 0 0 0 0 0 0 a n d s o l d i t f o r R1 8 0 0 0 0 0 ,
t h e n y o u w o u l d b e li a b l e f o r C G T o n t h e R 8 0 0 0 0 0 p r o f i t g ai n e d f r o m t h e s a le .
I n c o m e o n i n t e r e s t ( t ax e d a s p a r t of y o u r i n d i v i d u a l t a x r a t e ) a n d d i v i d e n d s (t a x e d a t a r a t e
o f 1 5 % ) a re t a x a b le .
INTEREST BEARING INVESTMENTS:
•
•
•
T h e p u r p o s e i s n o t t o i nc r e as e t h e C A P I T A L i nv e s t e d , b u t r a t h e r t o p r o v i d e a s t e a d y s t re a m
o f I N T E R E S T I N C O M E.
Offers lower risk and lower returns compared to shares.
I s n o t s a f e f r o m I N F L A T I O N a n d i n t e re s t i nc o m e i s T A X A B L E.
CRYPTOCURRENCY
INSURANCE:
INTRODUCTION:
•
•
•
•
U n c e r t a i nt y a n d r i s k s – s i g n i f i c a n t f i n a n c i a l l o s s e s – i n s u r a n c e – c o v e r p o t e n t i a l l o s s e s
C o n t r a c t o f u p m o s t f ai t h – i n s u r a nc e c o m p a n y a n d i n s u r e d – c o m pe n s a t i o n v s i n s u r a n c e
p r e m i um v s v a l u e & ri s k
A s s u r a n c e – ri s k t h at i s c e rt a i n e . g. D e a t h
Types of assurance:
o L i f e a s s u r a n c e – c o v e r s t h e l o s s o f a li f e
o T e r m a s s u r a n c e – li f e c ov e r t h a t i s v a li d f o r a s p e c i f i c p e ri o d / t e r m .
o E n d o w m e n t – i n v e s t m e n t p o li c y t h a t p a y s o u t af t e r a s pe c i f i e d t e rm
o R A – p o l i c y t a k e n o u t t o p r o v i de a n i nc o m e af t e r r e t i r e m e n t
o D i s a b i l i t y c o v e r – i n s u r e d w i l l b e p a i d o u t a c e rt a i n p r e d e t e rm i ne d a m o u n t o n t h e
d i s a b i li t y e . g. l o s s o f a li m b
o T r a u m a c o v e r /D r e a d d i s e a s e – p o l i c y t h at c o v e r s a l i s t of s e ri o u s i ll n e s s e s
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•
•
o F u n e r a l c ov e r – u s e d t o p a y f o r f u n e r a l c o s t s
I N s u r a n c e I N - c a s e s o m e t h i n g h a p pe n s ( s h o r t t e r m r i s k s ) ,
A S s u r a n c e A S - s u r e a s w e l i v e w e w i l l r e t i re o r d i e ( l o n g t e rm r i s k s ) – p r o v i d e s e c u ri t y t o t h e
insured or his family
NON-COMPULSORY INSUR ANCE:
INSURABLE RISKS:
1 . F i r e i ns u r a n c e – c o v e r s d a m a ge r e s u lt i n g f r o m a f i re t o a b u i l d i n g, s t oc k , e q u i pm e n t e t c .
I n c l u d e d i n t h e c o n t r a c t = d a m a ge c a u s e d b y s m o k e a n d / o r w at e r u s e d i n t h e p r oc e s s o f
e x t i n g u i s h i n g t h e f i re . Ex c l u d e d = f i r e d am a g e c a u s e d b y v o l c a n oe s , e a r t h q u a k e o r
r i o t s /w a r . Th e p re m i u m c h a r g e d w i l l d e p e n d o n t h e ri s k a n d v a l u e of t h e i t e m s i ns u r e d
( f l a m m a b l e o r n o t , av a i l a bi l i t y o f f i r e f i gh t i n g e q u i p m e n t , n a t u re o f a d j a c e nt b u i l d i n g s e g ,
t h a t c h r o of , c h e m i c a l f ac t o r y e t c . Th e i n s u r an c e c o m p a n y h a s t o b e i n f o rm e d i m m e d i a t e l y i f
t h e re h as b e e n a f i re . T h e i n s u r e d h a s t o p r o v e t h e l o s s e s i nc u r r e d a s a re s u l t o f t h e f i r e .
“ i r o n s af e c l a u s e ” v s c l o u d s t o r a g e of i nf o r m at i o n ( s t oc k li s t s )
2 . V e h i c l e i n s u r a n ce – T w o o p t i o n s : ( a ) T h i r d p ar t y , f i r e a n d t h e f t , ( b ) F u l l y C o m p re h e n s i v e
i n s u r a n c e . ( a ) Th e i n s u r e d ’ s v e h i c le i s c o v e r e d a g a i n s t t h e f t o r f i r e , b u t s h o u l d t h e i n s u r e d
b e r e s p o n s i b le f o r a n ac c i d e n t , h i s v e h i c le i s no t c o v e re d , o n l y t h e o t h e r p a r t y ’s v e h i c le .
( b ) C o v e r s a l l d am a g e s t o t h e c a r, b e i t a n a c c i d e n t o r a n y t h i n g e ls e . W i t h re f e r e nc e t o
t h e f t , s o m e i t e m s s u c h a s e x p e ns i v e c a r r a d i o m u s t b e li s t e d s e p a r a t e l y i n t h e p o li c y i n o r d e r
t o b e c o v e r e d. P re m i u m s p ai d w i l l b e d e t e r m i n e d b y t h e v a l ue o f t h e v e h i c le a n d r i s k ( c l a i m s
h i s t o r y o f t h e d r i v e r, a g e of t h e d r i v e r, p u r p o s e o f u s e of t h e v e h i c le , t r ac k i n g d e v i c e
i n s t a l le d )
3 . A l l w e at h e r i n s u r a n c e a n d d am a g e a n d t he f t i n s u r a n c e – T h e s e a re u s u a l l y c o v e r e d b y
h o m e ow n e r ’s a n d h o u s e h o l d p o l i c i e s . A ll - w e at h e r i n s u r a n ce c o v e r s d a m a g e c a u s e d b y
s t o r m s , h ai l , f l o o d s , li g h t n i n g, e a r t h q u ak e s a nd b u r s t w a t e r pi p e s . T h e f t i ns u r a n c e c o v e r s
f o r c e d e n t r y w h e n t h e b u s i n e s s i s c l o s e d t o t h e p u b l i c ( b u r g l a r y ). S t o c k a n d e q u i p m e n t
l o s s e s . T h e p r e m i u m c h a r g e d w i l l de p e n d o n t h e v a l u e o f t h e g o o d s i n s u r e d a n d r i s k i nv o l v e d
( e . g. A r e a c r i m e r a t e e t c . )
4 . I n s u r a n c e o f m o ne y i n t r a n s i t – t r a n s p o r t i n g c a s h t o b a n k s . T h e m ax i m u m a m o u n t c ov e re d
w i ll b e s p e c i f i e d i n t h e p o l i c y .
5 . F i d e l i t y i n s u r a n c e – c o v e r s l o s s e s s u s t a i n e d d u e t o d i s h o n e s t y o f e m p l o y e e s , e g . Th e f t o r
f r a u d . T h e p o l i c y c o u l d c ov e r i n d i v i d u a l e m pl o y e e s o r a l l s t a f f m e m b e rs i n s pe c i f i c p o s i t i o n s
e . g. A l l s t af f w o rk i n g w i t h c a s h , f o r a n o v e r a l l a m o u n t .
6 . L i a b i l i t y i n s u r a n c e – c ov e r s pe o p l e w h o b e c om e li a b l e f o r l o s s e s c a u s e d b y t h e i r n e g li g e nc e
o r b y d e f e c t s o n t h e i r p r o p e rt y . E g. D o c t o r s , t r a i n e r s e t c . A p u b l i c li a b i li t y i n s u r a nc e p o li c y
i n d e m ni f i e s t h e i ns u r e d f o r a n a m o u n t i f t h e y ge t s u e d f o r n e g l i ge n c e (i n c l u d e s l e g a l c o s t s ) .
7 . C r o p i n s u r a n ce – t ak e n o u t b y f a rm e r s t o c ov e r l o s s e s o r d a m a g e t o t h e i r c r o p s a s t h e i r
main source of income.
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8 . G r o u p L i f e C o v e r – w h e n a b u s i ne s s i n s u r e s i t s w o rk e r s f o r a n a m o u n t e q u a l t o t h e i r a n n u a l
s a l a r y m u l t i p li e d b y a f ac t o r – s o , i f a w o r k e r p a s s e s aw a y , h i s f a m i l y w o u l d r e c e i v e a
p a y o u t . P r e m i u m s o n g r o u p c o v e r i s l o w e r t h a n o n i n d i v i d u a l p o l i c i e s b e c a u s e l a r g e r n um b e r
o f p e o p l e a r e i n s u r e d. ( le s s ri s k f o r t h e i n s u r an c e c o m p a n y )
9 . L o s s o f i n c o m e i n s u r a n c e – s h o u l d a p e r s o n b e u n a b l e t o w o r k f o r a p e ri o d o f t i m e a n d
t h e re f o r l o s e i nc o m e , t h e p o li c y w i l l p a y o u t t o c o v e r t h e l o s s o f i n c om e , e . g . A t e n n i s c o a c h
becomes injured and is unable to coach.
1 0 . G e n e r a l B us i n e s s I n s u r a n ce / C o m m e r c i a l i ns u r a n c e – I n c l u d e s r i s k s s u c h a s t h e f t /s h o p
l i f t i n g, b u r g l a r y ( f o r c e d e n t r y ) , p u b li c li a b i li t y e . g. W h e n a c u s t o m e r s u e s t h e b u s i n e s s f o r
s l i p p i n g o n a w e t f l o o r a n d s u s t a i ni n g a n i n j u r y w h i l e i n t h e s h o p , f i r e o r e le m e n t s o f n a t u re ,
i n v e nt o r y ( “ I r o n s a f e c l a u s e ” ) .
1 1 . H o u s e h o l d i n s u r a n ce – i n c l u d e s a l l t y p e s of as s e t s t h at f o r m p a r t of t h e h o u s e h o l d t h a t
a r e a t r i s k f r o m b u r g l a r y , a c c i d e n t s , f i r e , li g h t n i n g , f l o o d i n g e t c . A s s e t s s uc h a s f u r n i t u re ,
e l e c t ri c a l i t e m s , c l o t h i n g , t o y s , j e w e l r y , t o o l s e t c .
NON-INSURABLE RISKS:
1 . N o r m a l o pe r a t i o n a l r i s k s :
I n f l a t i o n a r y f ac t o r s – p ri c e f l u c t u a t i o n s i n f o r e i g n t r a d e w h e re e x c h a n g e r at e f l u c t u a t i o n s
can lead to major price fluctuations.
C h a n g e s i n f a s h i o n – i f s t oc k be c o m e s o u t d a t e d a n d i t c a n n o t b e s o l d , t h e r i s k i s n o t c ov e re d
by insurance.
I m p r o v e m e n t s i n m ac h i n e r y, p r o d u c t i o n p r o c e s s e s a n d t e c h n o l o g y – n o t c o v e re d b y i n s u r a n c e .
L o s s e s f r o m b a d d e b t s – c a n b e i n s u r e d a g a i ns t , b u t p r e m i u m s a re v e r y h i g h . ;
2 . L o s s e s c a u s e d b y w a r , n u c l e a r w e a p o ns a n d r a d i a t i o n – s e e n a s t h e re s p o n s i b i li t y o f t h e
government and generally not insured against.
3 . I l l e g a l a c t i v i t ie s o r a c t i v i t ie s t h a t a re a ga i n s t p u b l i c i n t e r e s t – e . g . T ak i n g o u t
i n s u r a n c e a g ai n s t be i n g f i ne d f o r a n i l le g a l ac t s u c h a s p a rk i n g t i c k e t s .
COMPULSORY INSURANCE:
1 . U n e m p l o y m e n t i ns u r a n c e ( U I F )
The fund is administered by the Department of Labour.
U I F c o v e rs e m p l o y e e s o v e r t h e s h o r t t e r m a g ai n s t l o s s o f i n c o m e i f t h e y d o n o t h av e a j o b
( u n e m p l o y e d ) , m a t e r ni t y l e av e o r i l l n e s s . A ls o t o d e p e n d e n t s of d e c e a s e d e m p l o ye e s w h o
contributed to the fund.
A w o r k e r m a y n o t c l ai m i f h e q u i t s h i s j o b .
A w o r k e r m a y c l ai m U I F b e ne f i t s i f h e i s f i re d o r h i s c o n t r a c t w a s t e rm i n a t e d / r e t re n c h e d .
U I F c o n t r i b u t i o n s a re m a d e b y b o t h t h e e m p l o y e r a n d e m p l o y e e . Th e U I F A c t s p e c i f i e s t h e
a m o u n t d e d u c t e d f r o m t h e e m p l o y e e ’ s s a l a r y (c u r r e n t l y 2 % o r a c e i li n g o f R 1 7 7 1 2 p e r m o n t h
= 1 % f r o m t h e e m p l o y e e ’s g r o s s s a l a r y a n d a n e q u a l 1 % p ai d b y t h e e m p l o y e r t o t h e U IF f u n d )
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P u b l i c s e rv a n t s , f o r e i g n e rs o n c o n t r a c t a n d p e o p l e e m p l o y e d f o r l e s s t h a n 2 4 h o u r s pe r
month are excluded from paying UIF.
P r e g n a n t w o m a n c a n c l ai m f o r b e n e f i t s f o r a m a x i m u m o f 1 7 w e e k s .
2 . C o m pe n s a t i o n f o r O c c u p a t i o n a l I n j u r i e s a n d D i s e as e A c t ( C O I D A )
T h e A c t r e q ui r e s e m p l o y e rs t o t ak e o u t c om p e n s a t i o n o n b e h a lf o f t h e i r e m p l o y e e s t o
p r o t e c t e m p l o y e e s a g a i ns t i n j u r i e s o r d e a t h a t w o r k .
C O I D A p r o t e c t s t h e e m p l o y e r a g ai n s t c l a i m s m a d e a g a i n s t h i m b y t h e e m pl o y e e .
C o m p e n s a t i o n i s p r o v i d e d t o t h e e m p l o y e e o r h i s f a m i l y ( i n c a s e s o f d e at h ) i n c as e o f t h e
e m p l o y e e be i n g u n a b l e t o w o r k d u e t o a n ac c i de n t w h i l s t a t w o r k . M e di c a l e x pe n s e s a n d l o s s
o f i n c om e a r e al s o c o v e r e d.
C O I D A d o e s n o t a p p l y t o m i l i t a r y s t a f f , p o li c e , d o m e s t i c w o r k e r s o r c as u a l w o r k e r s .
T h e f e e i s p ai d t o t h e C o m pe n s a t i o n C o m m i s s i on a n n u a l l y a n d i s b a s e d o n t h e e m p l o y e e
e a r n i n g s a n d t h e ri s k a s s o c i a t e d t o t h e i r p r of e s s i o n .
3. Road Accident Fund (RAF)
T h e R A F i s a c om p u l s o r y i n s u r a n c e t h a t a p p l i e s t o m o t o r v e h i c le s .
I n n o c e n t d r i v e r s a n d p a s s e n g e rs a r e c o v e re d a g a i n s t f i n a nc i a l l o s s e s d u e t o i n j u r i e s a s a
r e s u l t o f a n ac c i d e n t o n t h e r o a d .
T h e c o n t r i b u t i o n t ow a r d s t h i s f u n d i s m a d e i n t h e f o r m o f a le v y o n p e t r o l a n d d i e s e l ( e . g .
1 6 3 c pe r l i t e r i n 2 0 1 7 ).
C o m p e n s a t i o n i nc l u d e s :
• H o s p i t a l a n d m e di c a l e x p e n s e s c om p e n s a t e d a t a p r i v a t e h o s pi t a l
• F u t u r e h o s pi t a l a n d m e d i c a l e x p e ns e s a n t i c i p a t e d
• F u t u r e l o s s o f i nc o m e a n t i c i p a t e d
• G e ne r a l c o m pe n s a t i o n f o r p a i n a n d s u f f e ri n g w i l l o n l y b e p a i d f o r s e ri o u s i n j u r i e s
• A s f r o m 1 A u g u s t 2 0 0 8 t h e m ax i m u m c l a i m li m i t o f R 2 5 0 0 0 pe r p a s s e n g e r i n t h e
o f f e n di n g c a r n o l o n ge r a p p l ie s
REQUIREMENTS OF A VAL ID INSURANCE CONTRACT:
1 . I n s u r a b le i n t e r e s t = t h e i n s u r e d m u s t b e a b l e t o p r o v e t h a t h e w i l l l o s e f i n a n c i a l l y i f t h e
o b j e c t i n s u re d i s d e s t r o y e d o r d a m a g e d. T h e pe r s o n o r o b j e c t a t r i s k f o r m s t h e b a s i s o f t h e
contract.
2 . G o o d f a i t h / A b s o l u t e h o n e s t y = t h e i n s u re d m u s t d i s c l o s e t o t h e i n s u r e r a ll r e le v a n t
i n f o r m a t i o n t h a t m a y a f f e c t t h e r i s k . A l l q ue s t i o n s a s k e d b y t h e i n s u r e r m u s t b e a n s w e r e d
h o n e s t l y a n d a c c u r a t e l y , o t h e rw i s e t h e p o li c y w i ll b e d e c l a r e d n u l l a n d v o i d. T h e p r e m i u m p ai d
a n d t h e d e c i s i o n t o ac c e p t t h e ri s k i s b a s e d o n t h e i n f o rm a t i o n gi v e n .
3 . A d d i t i o n a l r e q u i re m e n t s of a v a l i d c o n t r a ct :
C o n t r a c t u a l C a p ac i t y = 1 8 y e a r s o r o l d e r, o f s o u n d m i n d
Intention to bind
Must be serious about what they doing
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Executable
Obligation
Legally binding
C o m m u n i c a t i o n of
intent
R e a s o n a b l e c o n d i t i o n s t h a t c a n b e c om p l i e d w i t h
B o t h p a r t i e s m u s t be c le a r a b o u t w h at i s
e x pe c t e d o f t h e m
M u s t b e le g a l p u r p o s e t o c o n t r a c t
M u s t b e s pe c i f i c a n d m a d e c l e a r t o b o t h p a r t i e s
CONCEPTS RELATING TO INSUR A NCE AND ASSUR ANCE:
•
•
•
•
•
•
•
•
•
•
R i s k = t h e li k e l i h o o d o f a n u n c e rt a i n e v e nt o c c u r r i n g – h e h i g h e r t h e ri s k , t h e h i g h e r t h e
p r e m i um
P e r i l = t h e p o t e n t i al c a u s e o f t h e l o s s a n d w h a t i s c o v e re d b y t h e i n s u r a nc e p o l i c y e . g. F i r e ,
f l o o d , t h e f t , de a t h e t c .
H a z a r d = t h e c i r c um s t a nc e t h a t i n c re a s e s t h e r i s k of t h e pe r i l oc c u r ri n g e . g . S k y d i v i n g
( p e r i l ) i nc r e a s e t h e ( ri s k ) o f d e at h .
I n d e m n i f i c a t i o n = as f a r a s p o s s i b l e , t h e i n s ur e r u n d e r t a k e s t o i n d e m ni f y t h e i n s u r e d, t o
t h e s a m e f i n a n c i a l p o s i t i o n a s b e f o r e t h e e v e n t t h a t c a u s e d t h e l o s s . Th e i n s u r e d c a n n o t
c l a i m m o r e t h a n w h at h a s be e n l o s s . If n o l o s s a f t e r a n ac c i d e n t , t h e n n o c l ai m .
S e c u r i t y = i n s u r a n c e g i v e s t h e i ns u r e d ’ s d e pe n d e n t s s e c u r i t y i n t h e e v e n t o f d y i n g o r
r e t i ri n g t o d e a l w i t h f i n a nc i al d i f f i c u l t i e s .
A v e r a ge c l a u s e = i f t h e p r o p e r t y i s n o t i n s u r e d f o r i t s f u l l v a l u e , t h e f u ll v a l u e of t h e l o s s
w i ll n o t b e p a i d o u t .
U n de r - i n s u r a n c e = t h e p r o p e rt y i s n o t i n s u re d f o r t h e f u l l v a l ue .
O v e r - i n s u r a n c e = g o o d s a r e i ns u r e d f o r m o r e t h a n t h e i r v a l ue .
E x c e s s = t h e am o u n t o n e a c h c l ai m t h a t i s n o t c o v e re d b y t h e p o l i c y . T h i s re d u c e s s m a ll o r
u n n e c e s s a r y c l ai m s as t h e i ns u r e d i s re s p o n s i b le f o r t h e f i rs t p o r t i o n o f t h e c l ai m .
P r o x i m a t e c l a u s e = t h e i ns u r e r i s o n l y r e s p o ns i b l e f o r l o s s e s t h a t a r e t h e di r e c t re s u l t o f
t h e e v e n t t h a t w a s i ns u r e d . e . g. F i re i n s u r a nc e c o v e r s ri s k s d i re c t l y r e l a t e d t o f i r e . I f
s o m e o n e s li p s o n a w e t f l o o r w h e re w a t e r w a s u s e d t o e x t i n g u i s h t h e f i r e , a n d b r e a k s h i s
R o l e x w a t c h , h e c a n n o t c l a i m f o r a n e w w a t c h b e c a u s e i t w a s n o t b r o k e n i n t h e f i re .
S u b r o g a t i o n = t h e i n s u r e d m a y o n l y c l a i m f o r lo s s e s O N C E . Th e i n s u r e d m a y c l a i m f r o m h i s
i n s u r a n c e c o m p a n y o r t h e g u i lt y p a r t y , b u t n o t b o t h . Th e i n s u r e d c a n n o t m a k e a p r o f i t f r o m
t h e c l ai m – s am e p o s i t i o n a s b e f o r e t h e l o s s .
C e s s i o n o r As s i g n m e n t = a n y r i gh t s t h a t t h e i n s u r e d h a s i n a p o l i c y c a n b e t r a n s f e r re d
( s i g n e d o v e r /c e d e d ) t o a n o t h e r p a r t y. e . g. L i f e i n s u r a n c e a s s e c u ri t y f o r a b a n k l o a n.
CONCEPTS RELATING TO INSUR A NCE AND ASSUR ANCE:
A d v a n t a g e s o f I n s u r a nc e :
•
•
Insurance protects a business as well as individuals against different kinds of losses
T h r o u g h i n d e m n i f i c a t i o n , i n s u r a n c e e n a b l e s b u s i n e s s e s o r i n di v i d u a l s t o b e p u t b a c k i n t h e
s a m e f i n a nc i a l p o s i t i o n a s p r i o r t o t h e e v e n t
D i s a d v a n t a ge s o f I n s u r a nc e :
•
•
•
Insurance premiums are costly
Money paid on premiums could be used in investments
I t e m s t h a t a re n o r m a l l y s t o le n , s uc h as c e l l ph o n e s , l a p t o p s , e t c . a r e e x c l u d e d f r om t h e
p o l i c y.
A d v a n t a g e s o f A s s u r a nc e :
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•
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L i f e a s s u r a n c e p r ov i de s s e c u r i t y t o f a m i li e s be c a u s e b r e a dw i n ne r s c a n m a k e p r o v i s i o n f o r
t h e i r d e pe n d e n t s b y t ak i n g o u t li f e a s s u r a n c e
L i f e a s s u r a n c e p o li c i e s c a n be c e d e d t o a b a n k o r o t h e r f i n a n c i a l i n s t i t u t i o n s as s e c u r i t y f o r
a loan
L i f e a s s u r a n c e p r o t e c t s c r e di t o r s
A s s u r a n c e p r o v i d e s s e c u r i t y b y m ak i n g p r o v i s i o n f o r t h e p a y m e n t of m e di c a l a n d h o s p i t a l
e x pe n s e s a n d c o m p e n s at i o n i n t h e e v e n t of a c c i d e n t s a n d u n e m pl o y m e n t
D i s a d v a n t a ge s o f A s s u r a n c e :
•
•
•
T h e p o l i c y m a y n o t b e s uf f i c i e nt e n o u g h t o p r ov i d e f o r r e m a i ni n g f a m i l y m e m b e rs
A s s u r a n c e i s c o s t l y a n d a f f e c t s c u r r e n t c a s h f l o w f o r t h e s ak e o f l o n g t e r m be n e f i t
T h e t y p e of a s s u r a n c e p o l i c y t o i nv e s t i n i s a c o m p l e x de c i s i o n a s e ac h i n d i v i d u a l p e rs o n h a s
d i f f e re n t n e e d s
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PERFORMANCE MANAGEMENT
INTRODUCTION:
Must be able to analyze the quality of performance in all
8 business functions and the overall business
(including the impact of technology, IT developments and logistics
management) as well as addressing risk factors and risk management.
In order to perform the above mentioned, the following may be used, focusing on the
definition, application as a strategy to improve the quality of performance of the
business:
• Total Quality Management (TQM) and Total Customer Satisfaction
• Benchmarking
• Calculating and interpreting financial ratios and self-evaluation
• Balance scorecard
• Sampling and inspection
• Continuous Skills Development
The internal performance (Micro env), or lack thereof, in the business will impact on the
overall competitive advantage (performance) of the business in both the Market and
Macro environments.
The chain is only as strong as the weakest link or function or internal process.
A culture of continuous quality monitoring and improvement should be encouraged in the
business.
Advantages of quality control:
• Improved profitability – less time and money is wasted on correcting something that
should have been done correctly in the first place.
• Will encourage workers to deliver quality products and services that serve as the
basis for remuneration for good performance. Improved staff morale and reduce
staff turnover.
• Distributors/Wholesalers and Retailers will have fewer complaints relating into
higher turnover.
• Problems relating to quality should be seen as an opportunity for improvement.
Service: A customer’s first impression of quality of the service is often based on their
experience with the frontline staff (responsiveness, willing ness to help, reliability,
making good on promises, attitude, empathy, attention to detail) – creating a positive
quality perception in the mind of the customer.
PERFORMANCE GAP = DESIRED GAP – ACTUAL PERFORMANCE
The performance of the business (internal environment) should be managed to ensure
that the quality of the goods and services offered will contribute to the success of the
business.
Poor strategic planning (top management) and implementation will lead to poor
performance in the business.
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GENERAL MA NAGEMENT:
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Poor strategic planning at top management will fail to provide the business with
direction.
Ensuring that the plan is in writing and there is a common understanding of what is
to be achieved will improve the implementation of the plan by lower level
management. Effective communication.
The plan should be aimed at setting up future objectives but should be flexible and
adaptable enough to deal with current realities and challenges.
Plans should be accurate and objective – incorrect information could impact areas
such as incorrect market analysis, environmental scanning decisions etc.
Plans should be realistic and economical.
Contingency plans should be available.
Implementation of the plan in every business function is vital regarding the interrelatedness of the 8 functions.
HUMAN RESOURCES / HUMAN CA PITAL:
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Through continuous training and coaching, quality improvement can be created
within staff.
Every employee should prioritize improving quality in performance.
The Skills Development Act ensures that businesses continuously develop and
upgrade their workforce’s skills and learning.
HR must ensure that there are efficient feedback mechanisms like performance
appraisals in place to evaluate and improve the quality of performance of
employees. Feedback provides people with information on how well goals were
achieved and to correct errors.
360-degree feedback to measure performance from peers, subordinates,
customers and self-evaluation.
The HR function and functional managers must create a climate where employees
are motivated and able to perform at a desired level.
FIN ANCE:
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The owners invest capital in the business and expect a return on this investment.
The Financial department must through prudent financial management ensure that
these expectations are met.
The financial function uses tools such as drafting various financial statements of
the business, budgeting and looking at certain performance ratios to see how well
the business is performing.
RATIOS:
Liquidity Ratios:
• Current capital ratio (Current Ratio)
CURRENT ASSETS∶CURRENT LIABILITIES
o Acceptable ratio is 2:1
o Too high à Too much cash in the bank, credit given too easily
o Too low à Current liabilities cannot be paid from current assets
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Acid test ratio
CURRENT ASSETS - INVENTORY∶CURRENT LIABILITIES
o Acceptable ratio is 1:1
o Inventory is eliminated because it is the least liquid of the current assets
(difficult to turn into cash)
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Return on Investment (ROI on profitability)
NET PROFIT
× 100
OWN CAPITAL
o Measures the ability of the business to generate a profit with the capital
that was invested
o Own capital in a company = Ordinary share capital + preference share
capital + share premium + retained income
o Compare to other forms of investment when deciding on the success of
the investment
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Solvency ratio:
TOTAL ASSETS∶TOTAL LIABILITIES
o Insolvent – business has more debt than the assets it owns
PURCHASING:
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The purchasing department buys goods and services needed by all the
departments/functions in the business. These are bought from different suppliers
and the purchasing department has to negotiate with the suppliers the best
possible prices whilst still keeping the quality required in mind.
Keeping the purchasing cost low will help to ensure the best possible ROI.
The supply chain elements need to be cost effective within the distribution
channels. The supply chain consists of four essential elements: (1) Purchasing the
required resources, (2) Production of the goods and services from the resources
acquired, (3) Managing the inventory of materials and finished goods, (4)
Transportation and distribution to wholesalers, retailers, and customers.
PRODUCTION:
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Product specification determines good quality and improved performance in
production.
Material and methods need to be standardized to reach performance targets.
Suppliers need to know exactly what quality materials are required.
The quality of the raw material determines the quality of the finished product.
Factors affecting the quality in a production environment may include:
1. There has to be a system to record where deviations/problems occur.
2. Job tolerance (acceptable problems) must be defined.
3. How many inspection points are required.
4. How many samples will be inspected at each inspection point.
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The workers need to be trained, have good working conditions and be motivated to
positively impact the production process.
Sampling = testing a few products from the batch. More samples will reduce the
risk but increase the cost of quality control.
Inspections = each product (normally expensive products) is tested, time consuming
and increased cost of quality control – when safety is paramount e.g. Motor
vehicles.
MARKETING:
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Results
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from a successful marketing campaign:
Protect or increase revenue streams
Creating or improving brand value
Maintaining or expanding customer base
Building customer loyalty
Thus, the performance of the marketing department will impact on the overall
performance of the business.
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The marketing manager must consider all variables that will impact the marketing
strategy:
o Manageable variables – the marketing mix and marketing objectives that
fall under direct control of the marketing manager
o Semi-manageable variables – can be influenced by the marketing manager
o Non-manageable variables – exists in the external environment
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Market research is very important to gather information from customers and
suppliers to be used by management for decisions related to marketing strategies
to improve the overall performance of the business.
PUBLIC RELATIONS (PR):
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PR is responsible for maintaining communication between the business and its
stakeholders.
The PR department can be judged on the way they handled crisis situations,
positive events that have occurred, customer complaints, etc.
ADMINISTRATIVE (ADMIN) / INFO RMATION MA NAGEMENT:
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Can be assessed on the level of compliance to the processes and systems that are
essential to the functioning of the entire business.
Data capturing, answering telephones correctly and speedily, making accurate data
available for processing and decision making at the right time etc.
RISK MANAGEMENT ASSESSMENT STRATEGIES:
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Risk management is a core issue in the King Code.
Large companies should appoint Risk Committees to manage risk policies and
strategies according to the companies’ risk tolerance.
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Companies should try quantify risk, do scenario planning and put contingency plans
in place “in case something happens”.
The OHS Act (Occupational Health and Safety Act) requires employers to take
precautions and make provision for possible risk.
Insurance companies also assesses your risk profile in order to work out your
insurance premiums. This assessment is done by an actuary, who mathematically
calculates the statistical chances of the risk occurring.
Risk Assessments – who is in charge during an emergency, emergency equipment,
escape routes, etc.
TECHNIQUES THAT CA N BE APPLIED THROUGHOUT THE
ORGANIZATION TO IMPROVE PERFORMANCE:
1. RISK MANAGEMENT – This involves the identification, analysis, assessment,
control and avoidance/minimization/avoidance of unacceptable risk that poses a
threat to capital or income of a business.
Organizations can use:
Risk reduction = by adjusting processes to reduce risk
Risk avoidance = by deflecting risks?
Risk retention = by keeping the risk as the profit motive/strategy out ways the
risk
Risk transfer = by taking out insurance or a combination of the above
Risk management strategies/plans follow the following basic steps to make up
the Risk Management Process:
• Risk identification – identify and define potential risks that may negatively
impact the business
• Risk analysis – gain insight into the possibility of the risk occurring as well as
the impact it may have
• Risk assessment and evaluation – further evaluation to determine if the risk is
likely and if it is acceptable to the company to take on the risk for the
potential reward
• Risk mitigation – the company assesses their highest ranking risks and develops
plans to alleviate them
• Risk monitoring – follow up and review of the risk process. Track new and
existing risks.
2. LOGISTICS MANAGEMENT – is the improved efficiency of each department within
the business by streamlining (= minimizing wastage in terms of time, labour,
resources and money) its operations and costs and thereby increasing its profits.
This is part of the supply chain management that plans, implements and controls
the efficient and effective flow and storage of goods and services, related
information between the point of origin and the point of consumption, to meet the
requirements of the customer.
Logistical departments/centers and networks may include:
• Procurement – ensuring the correct materials/products are available
• Distribution – transportation
• Disposal of waste
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Reverse/Re-use and sale of products – e.g. packaging can be used for other
uses or sold as products by them selves
Green/Eco-friendly logistics
Asset control logistics
Business logistics – the right quality product in the right quantity, at the right
place, at the right time and at the right price.
3. IT DEVELOPMENT – The overall performance of a business can improves if the
technology systems are used that are user friendly and can handle a lot of traffic.
Enough budget needs to be allocated for IT upgrading to keep the IT
resources relevant and current.
Problems with firewalls, network servers and general maintenance
issues prevent businesses from operating at their maximum.
Technology has taken over many tasks that were previously done
manually.
It is essential that there are back-up storage and retrieval solutions
in order to streamline the working of the organization, as well as
effective storage of information and documentation.
4. TOTAL QUALITY MANAGEMENT (TQM) AND TOTAL CUSTOMER SATISFACTION
This refers to the implementation throughout the entire business (TOTAL), to plan
and control (MANAGE), the standards (QUALITY), of all operations in order to
deliver the best product or service to the customer.
The focus is on continuous process development. The idea is to make all processes
in the business visible and measurable in order to build on and repeat the
successes.
Total Client Satisfaction forms part of TQM. Organizations rely on their customers
for success and should therefor understand current and future customer needs.
Customers will only be satisfied if they receive:
• Value for money
• Products or services that are delivered on time
• Good quality goods are received
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In the service industry the customer’s perception of quality is important. The
customer’s first impressions, the frontline staff’s friendliness, willing to help and
keeping their promises ensures a positive quality perception and experience in the
mind of customers.
Companies must adhere to the Consumer Protection Act.
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5. BENCHMARKING
A process where the business compares its own processes with those of other
companies and implement better ways of doing things to improve their own
performance. Looking at what is “best practice” in the industry. Measuring the
company’s current performance to with the standard it should be and if
underperforming – implementing steps to improve.
6. BUSINESS PROCESS RE-ENGINEERING (BPR)
This involves a radical rather than a gradual improvement of processes to improve
quality and performance.
7. QUALITY CIRCLES
A small group of employees from the same department meet to identify and discuss
any issue that will impact on the quality of performance. The involvement of
employees in quality control will increase their motivation when given the
opportunity to make recommendations to management.
8. BALANCED SCORECARD –a strategic management tool used to assess the
performance of a business by getting a quick but comprehensive understanding of
the overall performance of the business by looking at the inter-related variables
that have an impact on the business performance:
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Financial perspective
Customer perspective
Internal process perspective
Learning and growth perspective
9. CONTINUOUS SKILLS DEVELOPMENT – creating a culture where staff are
constantly growing and improving. Providing learning opportunities for staff to
improve their skills and keep-up with new technology, changes in legislation, new
products from competitors and changes in customer demand.
Also look at the sections on Environmental scanning, SWOT, PORTERS, PESTEL, all
the PROBLEM-SOLVING TECHNIQUES and STRATEGIES that can be applied to improve
the overall performance of the business.
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