IIE Module Guide ENTR112

ENTREPRENUERSHIP
MODULE GUIDE 2019
(First Edition: 2012)

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IIE Module Guide ENTR112

DID YOU KNOW?

Student Portal

The full-service Student Portal provides you with access to your academic
administrative information, including:
 an online calendar,
 timetable,
 academic results,
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Module Guides or Module Manuals

When you log into the Student Portal, the ‘Module Information’ page displays the
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‘Module Manuals’ and assignments for each module for which you are registered.

Supplementary Materials

For certain modules, electronic supplementary material is available to you via the
‘Supplementary Module Material’ link.

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The ‘Module Discussion Forum’ may be used by your lecturer to discuss any topics
with you related to any supplementary materials and activities such as ICE, etc.

To view, print and annotate these related PDF documents, download Adobe
Reader at following link below:
www.adobe.com/products/reader.html

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IIE Module Guide ENTR112

IIE Library Online Databases

The following Library Online Databases are available to you. Please contact your
librarian if you are unable to access any of these.

EBSCOhost
This database contains full text online articles.
http://search.ebscohost.com/
User name and password: Please ask the librarian

Library Website
This library website gives access to various online resources and
study support guides
http://www.iie.ac.za/IIE%20Library/Pages/default.aspx
Use the same username and password as for student portal

Inmagic
The Online Public Access Catalogue. Here you will be able to
search for books that are available in all the IIE campus libraries.
https://library.iie.ac.za/InmagicGenie/opac.aspx
No password required

SABINET
This database will provide you with books available in other
libraries across South Africa.
http://reference.sabinet.co.za/sacat
User name and password: Please ask the librarian

DOAJ
DOAJ is an online directory that indexes and provides access to
high quality, open access, peer-reviewed journals.
https://doaj.org/
No password required

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IIE Module Guide ENTR112

Table of Contents
Using this Guide ........................................................................................................ 7
Module Resources .................................................................................................... 8
Module Purpose: ....................................................................................................... 8
Module Outcomes ..................................................................................................... 8
Module Pacer ............................................................................................................ 9
Assessments ........................................................................................................... 14
Glossary of Key Terms for this Module .................................................................... 16
Learning Unit 1: Business Concept and the Business Environment......................... 20
1 Introduction ...................................................................................................... 20
2 The Different Sectors in which a Business Operates ........................................ 21
3 The Business Environment............................................................................... 21
4 Revision Exercises ........................................................................................... 22
5 Solutions to Revision Exercises ....................................................................... 23
Learning Unit 2: Entrepreneurship and Small, Medium and Micro Enterprises
(SMME’s) in Perspective ......................................................................................... 24
1 Introduction ...................................................................................................... 24
2 The Relationship between Entrepreneurship and Small Business Management ..
......................................................................................................................... 26
3 The Different Types of Entrepreneurial Formal Small Businesses .................... 26
4 Corporate Entrepreneurship (Intrapreneurship) ................................................ 26
5 Franchisors and Franchisees. .......................................................................... 27
6 Key Success Factors of Entrepreneurs ............................................................ 27
7 Dealing with External Factors that Affect Entrepreneurship .............................. 28
8 Recommended Digital Engagement Activities .................................................. 29
9 Activities ........................................................................................................... 29
10 Revision Exercises ....................................................................................... 29
11 Solutions to Revision Exercises .................................................................... 30
Learning Unit 3: Creativity and Innovation – Key Ingredients for Entrepreneurship . 31
1 Introduction ...................................................................................................... 31
2 Methods to Improve Creativity .......................................................................... 32
3 Generating Business Ideas – The Five Broad Approaches............................... 32
3.3 From Existing Problems ................................................................................ 34
4 Distinguish between a Viability Study and a Feasibility Study ........................... 35
5 The Feasibility of your Business Idea: .............................................................. 35
6 Revision Exercises ........................................................................................... 35
7 Solutions to Revision Exercises ....................................................................... 36
Learning Unit 4: The Viability of a Business Idea ..................................................... 37
1 Introduction ...................................................................................................... 37
1.1 The Planning Stages in Establishing a Business .......................................... 37
2 The Viability Study ........................................................................................... 38
3 The Needs Analysis and Characteristics of Customers .................................... 38
4 The Mission Statement and Objectives of the Business ................................... 38
5 Calculating the Expected Market Share............................................................ 39
6 Calculating the Income ..................................................................................... 41
7 Revision Exercises ........................................................................................... 42

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8 Solutions to Revision Exercises ....................................................................... 42

Learning Unit 5: Financial Management for Entrepreneurs ...................................... 44
1 Introduction ...................................................................................................... 44
2 The Managerial Functions of Financial Management ....................................... 45
3 Other Financial Activities in the Business ......................................................... 46
4 Important Concepts in Financial Management.................................................. 46
5 Name and Describe the Two Primary Sources of Capital (Finance) ................. 46
6 The Differences between the Two Primary Sources of Capital – Debt (Outside
Capital) versus Equity Financing (Own Capital) ....................................................... 48
7 Describe the Major Characteristics of Permanent Finance and its Sources ...... 50
8 Long- term, Medium-term and Short-term finance and its Sources’. ................. 50
9 Revision ........................................................................................................... 52
Learning Unit 6: Marketing Mix (Product, Price, Distribution/Place and Promotion
Decisions) ............................................................................................................... 53
1 Introduction ...................................................................................................... 54
2 Describe the Meaning of a Product or Service.................................................. 54
3 Classifications of a Product .............................................................................. 54
4 Factors Affecting The Optimal Product Mix ...................................................... 55
5 Product Decisions ............................................................................................ 55
6 Branding........................................................................................................... 55
7 The Role of Packaging ..................................................................................... 55
8 What is Pricing ................................................................................................. 56
9 Factors Affecting Price ..................................................................................... 56
10 Objectives of Pricing ..................................................................................... 56
11 Deciding on Basic Price Levels (Pricing Strategies) ...................................... 56
12 A Definition of Distribution (Place) ................................................................ 57
13 Choosing the Intensity of Distribution ............................................................ 57
14 Types of Intermediaries ................................................................................ 57
15 Channels of Distribution and Choosing Direct or Indirect Channels .............. 58
16 Promotion – Definition and Objectives .......................................................... 59
17 Promotional Mix Elements ............................................................................ 59
18 Revision Exercises ....................................................................................... 59
19 Solutions to Revision Exercises .................................................................... 60
Learning Unit: 7 Operations Management ............................................................... 61
1 Introduction ...................................................................................................... 61
2 Operations Management Functions.................................................................. 62
3 Operations Management as a Process............................................................. 62
4 Operations Management Principles.................................................................. 64
5 The Transformation Process ............................................................................ 65
6 Operations Management Performance Objectives ........................................... 65
7 Operations Management and Productivity ........................................................ 65
8 Distinguish between Lean and Agile Supply ..................................................... 65
9 Distinguish between the Three Main Categories of Operations Systems .......... 65
10 Revision Exercises ....................................................................................... 65
11 Solutions to Revision Exercises .................................................................... 66
Learning Unit 8: The Business Plan ........................................................................ 67
1 Introduction ...................................................................................................... 67
1.1 Purposes and Principles of a Business Plan ................................................. 67

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2 Other Users of the Business Plan..................................................................... 68

3 The Business Model ......................................................................................... 68
4 The Different Structures of a Business Plan ..................................................... 69
5 The Guidelines for Writing a Business Plan ...................................................... 69
6 Writing the Business Plan ................................................................................ 69
Refer to chapter 5 of the prescribed textbook, pp. 108-110 ..................................... 69
7 Revision Exercises ........................................................................................... 70
8 Solutions to Revision Exercises ....................................................................... 70
Bibliography ............................................................................................................ 71
Intellectual Property .............................................................................................. 74

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IIE Module Guide ENTR112

Using this Guide

This guide has been developed to support your use of the prescribed material for this
module. There may be occasions when the prescribed material does not provide
sufficient detail regarding a particular idea or principle. In such instances, additional
detail may be included in the guide. This guide should not, however, be used as a
stand-alone textbook, as the bulk of the information that you will need to engage with
will be covered in the prescribed material. You will not pass this module if you only
use the module guide to study from.

Various activities and revision questions are included in the learning units of this
guide. These are designed to help you to engage with the subject matter as well as
to help you prepare for your assessments.

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IIE Module Guide ENTR112

Module Resources
Prescribed Book for this Nieuwenhuizen, C. Basics of Entrepreneurship. 3rd
Module edition. Cape Town: Juta.
ISBN 978148510540

Please note that this module guide is intended to

support your learning – the content of this module
should be sourced from the prescribed material. You
will not succeed in this module if you focus on this
module guide only.

Module Purpose:
This module will provide students with the knowledge and understanding of
entrepreneurship in the business environment. The module will further provide students
with the opportunity to apply entrepreneurship practices that are required to establish a
small business and become an entrepreneur.

Module Outcomes
MO1 Demonstrate knowledge and understanding of the concepts, principles and
practices of entrepreneurship and entrepreneurial management in the
business environment.
MO2 Demonstrate the ability to identify and evaluate ideas and business
opportunities in the business environment.
MO3 Demonstrate knowledge and understanding of franchising in the business
environment.
MO4 Apply knowledge and understanding of the processes associated with
establishing and managing a small entrepreneurial business
MO5 Create a business plan for a business venture.

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Module Pacer
Code ENTR112 Hour Sessions 40 Credits 25
Learning Unit 1 Theme: Business Concepts and Notes on this LU
the Business Environment
ENTR112 Learning objectives:
Sessions: 1–4  Examine the relationship
Related Outcomes: between a business and an
MO1 establishment;
 Describe the different sectors
Chapter 1 of the in which a business operates;
prescribed textbook.  Describe the three
Pages 1-23 components of a business
environment;
 Discuss the micro
environment and its variables;
 Discuss the market
environment and its variables;
 Describe the macro
environment and its variables.
Learning Unit 2 Theme: Entrepreneurship and Notes on this LU
Small, Medium and Micro
Enterprises an Overview
ENTR112 Learning objectives:
Sessions: 5–7  Describe the terms
Related Outcomes: entrepreneur;
MO1  Distinguish between
entrepreneurship and small
Chapter 2 of the business management;
prescribed textbook.  Discuss the types of
Pages 24-43 entrepreneurial businesses
i.e. formal small businesses;
 Differentiate between
corporate entrepreneurship
(intrapreneurship) and
entrepreneurship;
 Distinguish between
franchisors and franchisees.
 Examine the key success
factors of entrepreneurs
focusing on:
o Skills, expertise and
aptitude;
o Personal
characteristics;
o Functional
management skills.
o Describe how one can
deal with external
factors that affect
entrepreneurship.

Learning Unit 3 Theme: Creativity and Notes on this LU

Innovation – Key Ingredients for

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IIE Module Guide ENTR112

Entrepreneurship (Identifying
Feasible Business Ideas).
ENTR112 Learning objectives:
Sessions:8–11 • Explain the term creativity.
Related Outcomes: • Discuss the methods one can
MO1 use to improve creativity;
• Describe the five broad
Chapter 3 of the approaches (sources) for
the generation of business
prescribed textbook.
ideas;
Pages 46-71
• Distinguish between a
feasibility study and a viability
study.
• Determine the feasibility of an
idea by answering the four
broad question namely:
- Do you want to do what
the idea suggests,
- Is there a market for the
idea,
- Can you meet the needs
of your customers,
 Can you advertise your idea
to your customers?

Learning Unit 4 Theme: The Viability of a Notes on this LU

Business Idea
ENTR112 Learning objectives:
Sessions: 12–16  Identify the planning
Related Outcomes: phases/stages in
MO2 establishing a business;
 Describe the meaning of a
Chapter 4 of the viability study;
 Describe the mission and
prescribed textbook.
objectives of a business;
Pages 72-88
 Calculate the expected
market share of a product or
service i.e.
o calculating the potential
market (segmentation,
target marketing and
positioning);
o calculating the size of
the market;
 Calculate the potential
income of the business i.e.
o understand how fixed,
variable, direct and
indirect costs are used
to calculate the costs
of a product;
o understand how to

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IIE Module Guide ENTR112

calculate the selling

price;
o understand how net
profit is calculated.
Learning Unit 5 Theme: Financial Management Notes on this LU
for Entrepreneurs
ENTR112 Learning objectives:
Sessions: 17–23  Describe the financial
Related Outcomes: function in business;
MO1  Explain the managerial
functions of financial
Chapter 13 of the management.
 Name and describe the
prescribed textbook.
financial activities in
Pages 251-264 business.
 Examine the important
Chapter 14 concepts in financial
Pages 265-273 management.
 Name and describe in detail
the two primary sources of
capital;
 Describe the major
characteristics of permanent
finance and its sources;
 Describe the major
characteristics of long-term
finance and its sources;
 Describe the major
characteristics of medium-
term finance and its sources;
 Describe the major
characteristics of short-term
finance and its sources.
Learning Unit 6 Theme: Marketing Mix (Product, Notes on this LU
Price, Distribution and
Promotion Decisions)
ENTR112 Learning objectives:
Sessions: 24–31 Theme 1: Product Decisions for an
Related Outcomes: Entrepreneurial Business:
MO1  Describe the meaning of a
product;
Product - Chapter 6 of the  Identify and describe the
prescribed textbook. various classifications of a
Pages 112-124 product;
 Discuss product and service
mix;
 Explain the factors affecting
optimal product mix.
 Name and describe five
product decisions a small
Price - Chapter 7 business owner needs to
Pages 131-144 consider;

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IIE Module Guide ENTR112

 Describe branding;
 Explain the role and types of
packaging.
Theme 2: Price Decisions for an
Entrepreneurial Business:
 Explain what pricing is;
 Identify the factors affecting
pricing;
 Explain the objectives of
pricing;
 Describe the three basic
pricing strategies i.e. cost
Distribution (Place) - oriented, customer oriented
Chapter 8 and pricing relative to
Page 149-159 competition.
Theme 3: Distribution Decisions for
an Entrepreneurial Business:
 Explain what is meant by
distribution;
 Identify the choices of
distribution intensity;
 Name and describe the types
of intermediaries;
 Discuss the factors which
Promotion - Chapter 9 impact on the decision to use
Pages 161-164 direct or indirect distribution
channels.
Theme 4: Promotion Decisions of
an Entrepreneurial Business
 Explain the three main
objectives of promotion;
 Describe the various
promotion mix elements.
Learning Unit 7 Theme: Operations Management Notes on this LU
ENTR112 Learning objectives:
Sessions: 32–35  Define operations
Related Outcomes: management (OM).
MO1  List the five basic functions of
operations management;
Chapter 11 of the  Explain operations
management as a process;
prescribed textbook.
 Name the principles of OM
Pages 190-203
that promote value, time and
lean production;
 Describe and apply the
transformation process;

 Describe the typical OM

performance objectives;

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IIE Module Guide ENTR112

 Explain the concept of

productivity in the context of
operations management;
 Distinguish between lean and
agile supply;
 Distinguish between the three
main categories of operations
systems.
Learning Unit 8 Theme: The Business Plan Notes on this LU
ENTR112 Learning objectives:
Sessions: 36-40  Describe the purpose and
Related Outcomes: principles of a business plan;
MO3  Identify the other users of a
business plan;
Chapter 5 of the  Discuss the meaning of a
prescribed textbook. business model and highlight
Pages 97-110 the key elements that should
be included in a business
model;
 Comprehend the different
structures of a business plan;
 Examine the guidelines for
writing a business plan;
 Provide a brief summary of
the information that should
appear in a business plan.

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IIE Module Guide ENTR112

Assessments
Integrated Curriculum Engagement (ICE)
Minimum number of ICE activities to complete 4
Weighting towards the final module mark 10%

Assignments/ Assignment Test Examination

Projects
Weighting 25% 30% 35%
Duration 10 hours 1 hour 2 hours
Submit after LU4 LU5
Learning Units covered LU 1—4 LU 1-5 LU 1- 8
Resources required Web access, other Prescribed Prescribed
academic related textbook. textbook.
text books.
Assessment Preparation Guidelines
Format of the Assessment Preparation Hints
(The Focus/ Approach/ (How to Prepare, Resources to
Objectives) Use, etc.)
Assignment This assignment will challenge You will be required to conduct
you to do some independent further research on the
reading and research on the assignment topic. Consult
material covered in LU1–4. various sources such as:
 journal articles;
 government gazette;
 government publications;
 Books;
 Newspapers;
 articles and dissertations;
 Conference proceedings.
NOTE: please avoid plagiarism
by acknowledging sources
used.

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IIE Module Guide ENTR112

Test The focus of the test will be on Please note that extensive
LU 1-5. reading will be important
Format for tests will be especially for section B as you
composed of two sections. will be required to answer longer
section A will be short type questions.
questions ranging from 1 mark
to 5 marks and section B will be Please note the questions will be
longer type questions. similar to the learning objectives
for each LU as well as the
In section A you will be asked question posed as revision
more knowledge questions such exercise questions. So prepare
as multiple choice questions, list all the questions stated as
and name. learning objectives. Check if you
are confident that you can
Section B will consist of answer questions relating to all
comprehension, application and of the learning objectives for the
analysis with questions using LU’s covered.
verbs such as describe,
examine, explain, and discuss
amongst others.
Exam The focus of the exam will be on Please note that extensive
all learning units. reading will be important
Format for tests will be especially for section B as you
composed of two sections. will be required to answer longer
type questions.
Section A will be short
questions ranging from 1 mark Please note the questions will be
to 5 marks and section B will be similar to the learning objectives
longer type questions. for each LU as well as the
question posed as revision
In section A you will be asked exercise questions.
more knowledge questions such
as multiple choice questions, list To prepare effectively for the
and name. exam you can include the
following in your preparation:
Section B will consist of  ensure that you work
comprehension, application and through all the review
analysis with questions using questions in the LU’s
verbs such as describe, tested;
examine, explain, and discuss  check if you are confident
amongst others. Please note that you can answer
that more emphasis will be questions relating to all of
placed on All LUs the learning objectives for
the LU’s covered.

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IIE Module Guide ENTR112

Glossary of Key Terms for this Module

Fill in this table as you progress through this learning unit.

Term Definition My Notes

Break-even
analysis

Business failure

Business model

Capacity

Capital

Competitor
analysis

Corporate
entrepreneur
(intrapreneur)

Creativity

Distribution

Direct costs

Entrepreneur

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IIE Module Guide ENTR112

Term Definition My Notes

Factors of
production

Feasibility study

Financial
management

Financial
planning

Franchise

Fixed costs

Indirect costs

Innovation

Intrapreneur

Inventors
associations

Inventory

Liquidity

Lead-time

Macro
environment

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Term Definition My Notes

Market

Market
environment

Marketing mix

Market share

Market
segmentation

Micro
environment

Mission

Objectives

‘Nested–
process’
concept
Operations
management

Productivity

Profitability

Promotion

Retailers

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IIE Module Guide ENTR112

Term Definition My Notes

Small Business

Solvency

Target market

Trade shows

Transformation
Process

Variable costs

Value chain

Viability study

Vision

Wholesalers

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IE Module Guide ENTR112

Learning Unit 1: Business Concept and the Business

Environment
Learning Objectives: My notes
LO1: Examine the relationship between a business and an
establishment.
LO2: Name and describe the different sectors in which a
business operates.
LO3: Name and describe the three components of a
business environment.
LO4: Discuss the micro environment and its variables.
LO5: Discuss the market environment and its variables.
LO6: Describe the macro environment and its variables.
Material used for this Learning Unit:
 Prescribed textbook, chapter 1, pp.1–23.
 Manual Guide (MG)
How to prepare for this learning unit:
 Before the first class, familiarise yourself with the
business concepts and the environments in which the
business operates. At the end of this learning unit
(LU) be able to address all the learning objectives as
well as the self-evaluation questions posed in the MG
as well as at the end of chapter 1 in the prescribed
textbook.

1 Introduction
Understanding business concepts as well as the environment
in which businesses operate is vital for any entrepreneur. The
reasoning behind this is that businesses do not operate in
isolation and numerous forces affect the running of a business
from both the external and internal environment that an
entrepreneur needs to be aware of.

So, based on this premise, this learning unit will conceptualise

the meaning of a business as well as unravel the environment
in which businesses operate.

1.1 What is a Business

Refer to chapter 1, p. 3 of the prescribed textbook

1.2 What is the Relationship between a

Business and an Establishment?
Refer to Chapter 1, pp.3–5 of the prescribed textbook. Pay
attention to figure 1.1 on p. 4 and table 1.1 p. 5 of the textbook.

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IE Module Guide ENTR112

2 The Different Sectors in which a

Business Operates

Refer to Chapter 1, pp. 5-6 of the prescribed textbook. Note

figure 1.2 on p. 6 (the industrial column).

3 The Business Environment

According to Nieuwenhuizen, (2014), the business
environment is the sum total of all factors and variables that
influence the creation, growth and continued existence of a
business both positively and negatively. The business
environment is made up of the micro, market and macro
environments.

3.1 The Micro Environment

Make sure you are
able to explain the
This environment is made up of three variables, notably: major differences
that exist between
3.1.1 The, mission statement and objectives of the the business
business: environments.
o the mission statement answers ‘‘what is our
business?’’ (It describes the purpose of the
business.)
o objectives are derived from the mission statement
and they answer the question: ‘how are we going
to achieve the mission? Objectives are
measurable results to be achieved within a given
time frame. For example: ‘to achieve sales of
R250 000 by the end of November 2017’.

3.1.2 The functions of the business referring to its

management and different areas of management
such as:
o general management
o personnel management
o operations management
o purchasing management
o marketing management
o public relations management
o administrative management
o financial management.

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IE Module Guide ENTR112

3.1.3. The production factors of the business, notably:

 labour
 raw materials
 capital
 entrepreneurship.

3.2 The Market Environment

This environment is influenced by the macro environment

consisting of three variables. These are:

3.2.1 the market/customers inclusive of the consumer

market; industrial market; resale/retail market;
international market; and government market

3.2.2 the competition

3.2.3 suppliers of resources and services.

3.3 The Macro Environment

This environment consists of six variables and factors that are

outside/external to the business environment and which can
have a positive and negative effect on the continued growth
and existence of the business. These variables (also called
sub-environments) are:

3.3.1 economic environment

3.3.2 social environment
3.3.3 technological environment Do you think it is important
for a business owner to
3.3.4 physical/natural environment
understand the business
3.4.5 political and statutory environment environment? Give
3.4.6 international environment. reasons for you answer.

Refer to Chapter 1 pp.6–22 of the prescribed textbook.

4 Revision Exercises
4.1 Explain the meaning of the concept ‘business environment’
and identify the most important characteristics of this
environment.

4.2 Give reasons why a business cannot grow and continue to

exist in total isolation.

4.3 Discuss the micro environment and its variables.

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IE Module Guide ENTR112

4.4 What do you understand by the term ‘competition’ and how

does it affect ones business?

4.5 Identify and explain the variables in the market

environment.

4.6 Using a diagram, illustrate the relationship between the

enterprise and its establishment.
.
5 Solutions to Revision Exercises
5.1 Refer to pp.6-8.

5.2 Refer to p. 2.

5.3 Refer to pp.8–10.

5.4 Refer to p.13.

5.5 Refer to pp.10–14.

5.6 Refer to p..4.

Do the self-evaluation questions on p. 22, chapter 1 of the

prescribed textbook.

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IE Module Guide ENTR112

Learning Unit 2: Entrepreneurship and Small, Medium

and Micro Enterprises (SMME’s) in Perspective
Learning Objectives: My notes
LO1: Describe the term ‘entrepreneur’.
LO2: Distinguish between entrepreneurship and small
business management.
LO3: Be able to describe the different types of
entrepreneurial formal small businesses.
LO4: Describe the concept of corporate entrepreneurship
(intrapreneurship).
LO5: Understand the concept of franchisors and
franchisees.
LO6: Examine the key success factors of entrepreneurs
focusing on:
 skill, expertise and aptitude
 personal characteristics
 functional management skills.
LO7: Describe how one can deal with external factors that
affect entrepreneurship.
Material used for this Learning Unit:
 Prescribed textbook, chapter 2, pp.24-43.
 Manual Guide.
How to prepare for this Learning Unit:
Carefully read all the material provided, lecture notes and
be able to complete the revision exercises at the end of this
LU and chapter 2.

1 Introduction
Economies of countries are driven by entrepreneurship.
Research has proven that economic development is driven by
the rate of entrepreneurial activity in that country.
Entrepreneurship creates employment and increases the
country’s Gross Domestic Product. This learning unit will look
at the difference between an entrepreneur and intrapreneur;
discuss the types of entrepreneurial business, examine the
success factors of entrepreneurs and describe how one can
deal with external factors that affect entrepreneurship.

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1.2 What is an Entrepreneur

Entrepreneurship:

Entrepreneurship is the process of conceptualising, organising,

launching and — through innovation — nurturing a business
opportunity into a potentially high growth venture in a complex,
unstable environment.
(Source: Rwigema and Venter, 2005: p.6)

Entrepreneur:

Entrepreneurs are those individuals who discover market

needs and launch new firms to meet those needs. They are
risk takers who provide an impetus for change, innovation and
progress in economic life.
(Source: Longenecker et al; 2006: p.6)

An entrepreneur can therefore be described as someone who:

 starts his own business
 identifies new products or opportunities
 is creative and/or innovative
 organises and controls resources (such as capital,
labour, materials) to ensure a profit
 has the ability and insight to market, produce and finance
a service or product
 has the financial means or who can obtain financing so
as to realise the enterprise; and willing to take calculated
risks. (Strydom et al, 2009: p.2).

When we think of entrepreneurship, Mark Shuttleworth

immediately comes to mind. However, there are many other
examples of entrepreneurship in this country. Take for
example, Elon Musk, the Pretoria schoolboy (with a passion for
the Internet, space exploration and clean energy) who founded
three impressive start-ups: Zip2 (which he sold to Compaq for
$307 million); a little payment mechanism called PayPal (which
he sold to eBay for $1.5 billion in stock) and the slightly larger
rocket-building Space Exploration (SpaceX). In between
challenging NASA with more modern, cheaper rockets Elon
also started Tesla Cars, which is making news with its electric
and zooty sports cars.

Refer to chapter 2, pp.24–25 of the prescribed textbook.

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2 The Relationship between

Entrepreneurship and Small
Business Management
We have already seen that an entrepreneur is a business
owner who is creative and innovative and who has the ability to
create a high growth venture that generates substantial profits.
However not all small business owners are entrepreneurs.
Small businesses are independently owned and operated but
unlike entrepreneurs they are not dominant in their field. They
exist merely to make a profit and may never grow large.
Kuratko and Hodgetts (2001).

A small business may be an existing business or franchise; a

business that has been inherited; or it may be someone who is
appointed by the small business owner to manage the
business.

Refer to chapter 2, pp.26–27 of the prescribed textbook

3 The Different Types of

Entrepreneurial Formal Small
Businesses
Entrepreneurial businesses are categorised into informal,
formal, micro, very small, small, medium or large businesses.
This depends on the type of sector the business operates in,
the number of employees and the annual turnover (sales) of
the business.

Refer to chapter 2, pp. 27-28 and table 2.1 of the prescribed

textbook to gain an understanding of the different types of
businesses.

4 Corporate Entrepreneurship
(Intrapreneurship)

Corporate entrepreneurship, also called intrapreneurship, is a

form of entrepreneurship which takes place in businesses that
are already established. Intrapreneurship focusses on creating
new products, services or markets for existing businesses to
ensure that they retain an edge over their competitors by
continually improving what they do and offering added value to
customers. In a nutshell, it is the responsibility of intrapreneurs

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to bring in new ideas and profit streams into these businesses

to ensure long term sustainability.

Refer to chapter 2, of the prescribed textbook pp. 29-30 to be

able to describe the differences between entrepreneurship and
intrapreneurship.

5 Franchisors and Franchisees.

Franchise owners initially started off as entrepreneurs. As
their businesses grew and became successful, they used the
concept of franchises not only to facilitate the growth of their
businesses but also to provide opportunities to new business
owners, who are looking to invest in a concept that has a
proven track record.

Franchising provides the new business owner (franchisee)

with the opportunity to sell certain products and services within
the regulation and controls of the franchisor (the original owner
of the products and services). It is a binding legal agreement
between the franchisee and franchisor and the franchisee is
required to pay the franchisor a management service fee.
Examples of franchises in South Africa are Spur, Steers and
Mugg and Bean.

Refer to chapter 2 of the prescribed textbook, pp. 30-31. Note

how franchising relates to the concept of entrepreneurship.

6 Key Success Factors of

Entrepreneurs
It is clear from the description of an entrepreneur on page 25
of the prescribed textbook that entrepreneurs possess certain Define:
unique characteristics. Amongst these characteristics, there  Skills;
are four key success factors that usually contribute to  Aptitude;
successful entrepreneurship which are:  Expertise.
 skill, expertise and aptitude
 personal characteristics
 management skills
 external factors.

Refer to chapter 2, pp.31–41 of the prescribed textbook in

order to understand each one in detail.

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7 Dealing with External Factors that

Affect Entrepreneurship
According to Nieuwenhuizen, 2015, how one exploits or deals
with external factors is in itself a measure of one’s
entrepreneurship.

Economic It is important for an entrepreneur to

Conditions know how to adapt to the ever
changing interest rates and exchange
rates as they heavily affect customer
spending power.
Technological Technology is ever changing and it is
Changes important for an entrepreneur to know
how the changes affect his/ her
business and how to adapt for the
benefit of the business.
Social and Cultural Opportunities for growth and business
Forces start- up can be identified through
analysing aspects such as,
behavioural trends of consumers,
levels of education, religion and life
expectancy as this has an effect on
the choices made by a community.
Political and Political and legislative environments
Legislative shape how the business sector will
Variables operate, i.e. what businesses need to
register, how much tax do businesses
pay and many other legal
requirements that businesses need to
adhere to. Failure to follow such
legislation will result in the business
being de-registered.
Physical Variables It is vital for an entrepreneur to keep
abreast of the changes in the
ecological environment like the effect
of global warming on farming as the
weather patterns are greatly affected.
Depletion of natural resources and
emission of chemicals in the air affects
the environment, hence constant
changes of environmental legislation
laws.
International Forces Entrepreneurs do not operate in
isolation. Major changes around the
world can affect South Africa positively
or negatively. The major world

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economic power houses like America,

China and Japan will have a spiral
effect on virtually all the economies
and businesses of the world.

Also refer to chapter 2, p.42 of the prescribed textbook on how

one can deal with external factors that affect entrepreneurship.

8 Recommended Digital Engagement

Activities
Visit the following link and complete the online questionnaire
on the characteristics of successful entrepreneurs:

McGraw-Hill Higher Education. s.a. Management: Test Your

Knowledge – Characteristics of Successful Entrepreneurs.
[Online]. Available at:
http://www.mhhe.com/business/management/buildyourmanage
mentskills/updated_flash/topic23a/quiz.html [Accessed 20
September 2013].
.
9 Activities
9.1 Activity 1
Purpose:
The purpose of this activity is to explain how certain factors
may contribute to new business failures; to list the advantages For Activity 1 consult
pp.31–41 in the
and disadvantages of being an entrepreneur and to discuss
prescribed textbook.
how an entrepreneur can ensure that his/ her life is not
adversely affected by a new business venture.

9.2 Activity 2
Discuss in class the different risks you think an entrepreneur
could face when starting up and growing a business. Include
both internal and external risks in your answer.

10 Revision Exercises
10.1 Describe the difference between an entrepreneur and a
small business manager.
10.2 What is the contribution of entrepreneurship to the
economy of a country?

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10.3 List the seven personal characteristics that may

contribute to successful entrepreneurship.

10.4 Explain functional management skills as one of the key

success factors of entrepreneurs.

10.5 Describe how one can deal with external factors that
affect entrepreneurship.

11 Solutions to Revision Exercises

11.1 Refer to p.26.

11.2 Refer to p.25.

11.3 Refer to pp.33-36

11.4 Refer to p.36

11.5 Refer to pp.42.

Do the self-evaluation questions on p 45, chapter 2 of the

prescribed textbook.

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Learning Unit 3: Creativity and Innovation – Key

Ingredients for Entrepreneurship
Learning Objectives: My notes
LO1: Describe the term ‘creativity’ .
LO2: Discuss the methods one can use to improve
creativity.
LO3: Identify and describe the five broad approaches for
the generation of business ideas.
LO4: Distinguish between a feasibility study and a viability
study.
LO5: Determine the feasibility of an idea by answering the
four broad questions:
 do you want to do what the idea suggests?
 is there a market for the idea?
 can you meet the needs of your customers?
 can you advertise your idea to your customers?
Material used for this Learning Unit:
 Chapter 3 of the prescribed textbook, pp.46–71.
 Manual Guide
How to prepare for this Learning Unit:
Carefully read all the material provided, lecture notes and
be able to complete the revision exercises at the end of this
LU and chapter 3.

1 Introduction
Setting up a business can be divided into three main stages –
identification of an idea; investigating the profitability; and
implementing the idea. At all stages, creativity is needed, but it
is a vital requirement for the first stage.

Refer to chapter 3, pp. 47-48 and figure 3.1, p 48

1.1 What is Creativity?

Creativity is most valuable, particularly in an entrepreneurial
environment, since it is estimated that 80% of problems (or
opportunities to the entrepreneur) are solved by creative
thinking skills.

Being creative is seeing the same thing as everybody else but

thinking of something different.
(Source: Strydom et al: 2009, p.50)
Refer to chapter 3, p.49 of the prescribed textbook.

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Note the difference between divergent and convergent

thinking, p. 51 of the prescribed textbook.

2 Methods to Improve Creativity

Imagine what the inventors of the washing machine went
through in trying to convince the market that it’s better to wash
with a machine than hand washing especially when people
have gone centuries, from one generation to another doing
hand washing. It is not an easy task to establish a new
business and an innovative business idea. When you are the
first you need to convince people that there is a need for the
product/ services you are offering.

Refer to chapter 3, pp.51–52 of the prescribed textbook.

.
3 Generating Business Ideas – The
Five Broad Approaches
Where do creative business ideas generally come from? The
entrepreneur must constantly be aware of what is happening
around him. The following section will touch on sources for the
generation of ideas:

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Sources for the Generation of Ideas:

From Skills,
expertise and
aptitude

From common
needs

Sources for the

From existing
generation of
problems
ideas

From everyday
problems

From other
sources

(Adapted from: Nieuwenhuizen, 2015: p.55)

3.1 From Skills, Experience and Aptitude

The entrepreneur might have a very strong mechanical skill

which could lead to the generation of the idea to start a
business of going to people’s houses and servicing their
vehicles at their own premises. Or the entrepreneur might be
a very good cook that might inspire a business of offering a
home chef service where the entrepreneur goes to the clients’
home and cooks for functions or receptions or parties held at
private residences. Identifying what skills and experiences you
as an entrepreneur have can inspire ideas to start businesses
based on the above.

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3.2 From Common Needs

Common needs are easily identified when communicating with

people on a regular basis, but the entrepreneur has to be
actively listening for these needs. An example of this could be
where a community needs to have access to water and the
entrepreneur then uses this need to start a business where a
water truck is parked in the area and individuals and families
can purchase water from the truck or a home delivery service
of water.

3.3 From Existing Problems

Problems like traffic congestion – could lead to a taxi service
where people are picked up from their homes and shuttled to
work, possibly in a bus with work stations where the
passengers can connect to the internet and start working while
they are commuted to their workplace.

3.4 From Everyday Problems (Everyday

activities)

Getting the kids to school, not knowing what to serve the family
for breakfast or other routine problems like keeping kids
entertained in the car when driving on holiday can lead to
ideas, e.g. a shuttle to school, breakfast in a drink form or
portable DVD players for use in the car.

3.5 From Other Sources

Sources that we get in contact with on a daily basis can serve

as a source for business ideas. Newspapers, radio and
television can all be sources of new business ideas. An article
in the newspaper reporting on old people who are not capable
of driving anymore and being stuck at their place of living
without food, could be a source of an idea to start a shopping
service.

Refer to chapter 3, pp.55–63 of the prescribed textbook.

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4 Distinguish between a Viability

Study and a Feasibility Study
The terms ‘viability’ and ‘feasibility’ are often used
interchangeably. However there are differences between the
two. According to Nieuwenhuizen (2001), a feasibility study
considers whether the entrepreneur has the ability to convert
the business idea into a business enterprise (is it doable?);
whilst a viability study looks at the profitability of the idea (can
the entrepreneur make money from the idea?).

Refer to chapter 3, p. 64 of the prescribed textbook.

5 The Feasibility of your Business

Idea:
For you to determine whether your business is feasible, you
must be able to answer the following four questions:
 do you want to do what the idea suggests?
 is there a market for your idea?
 can you meet the needs of your customers?
 can you advertise the idea to your customers

Refer to chapter 3 of the prescribed textbook pp. 66-68 in

order to understand these concepts in detail.

6 Revision Exercises
6.1 In your own words, define the term ‘creativity’ and the
different views on creativity.

6.2 Differentiate between divergent and convergent thinking.

6.3 Explain the difference between a feasibility and viability

study .

6.4 Identify and explain the three stages of setting up a

business.

6.5 Discuss the methods one can use to improve creativity.

6.6 Identify and describe the five broad approaches for the
generation of business ideas.

6.7 Determine the feasibility of an idea by answering the four

broad questions namely: do you want to do what the idea

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suggests? is there a market for the idea? can you meet

the needs of your customers? and can you advertise
your idea to your customers?

7 Solutions to Revision Exercises

7.1 Refer to p.49.

7.2 Refer to p.51.

7.3 Refer to p.64

7.4 Refer to p.47-48.

7.5 Refer to p.51–52

7.6 Refer to pp. 55-63

7.7 Refer to pp. 66-68

Complete the self-evaluation exercises that relate to the

learning outcomes, chapter 3, p. 70 of the prescribed textbook.

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Learning Unit 4: The Viability of a Business Idea

Learning Objectives: My notes
LO1:Identify the planning stages in establishing a
business.LO2: Describe the meaning of viability study.
LO3: Conduct a market needs analysis and the
characteristics of customers.
LO4: Describe the mission statement and objectives of a
business.
LO5: Calculate the expected market share of a product or
service:
 calculating the potential market (segmentation, target
marketing and positioning)
 calculating the size of the market.
LO6: Calculate the potential income of the business:
 understand how fixed, variable, direct and indirect
costs are used to calculate the costs of a product
 understand how to calculate the selling price
 understand how net profit is calculated.
Material used for this Learning Unit:
 Chapter 4 of the prescribed textbook, pages 72-88.
 Manual guide.
How to prepare for this Learning Unit:
Carefully read all the material provided, lecture notes and
be able to complete the revision exercises at the end of this
LU and chapter 4.

1 Introduction
An idea is said to be viable if you can market it and manage a
business over time at a sustainable profit. Only if you find the
idea viable, then you continue to the next phase which is
drawing up the business plan. The business plan will be
discussed in the coming learning units.

1.1 The Planning Stages in Establishing a

Business
The planning stages involve the following:
 viability study
 business plan
 making the business plan known
 obtaining financing for the business plan

Refer to chapter 4, figure 4.1, p. 73 of the prescribed textbook.

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2 The Viability Study

The viability study was discussed in the previous section. It is
an in-depth investigation into whether the idea for a new
business will be profitable. It entails estimating the interest in
the business and its product or service, the expected sales in
units and at a certain price as well as the expected costs
associated with the generation of the sales.

The information that would have been received will guide the
entrepreneur to make informed decisions that will determine:
 quantity to be sold
 pricing
 cash flow requirements.

Refer to chapter 4, pp.73–74 of the prescribed textbook.

3 The Needs Analysis and

Characteristics of Customers
To establish if a business is viable, it is important to establish
who your potential customers are and whether you will be able
to meet their needs. This includes listing the features of your
product or service to see what segment of the market
(customers) you are able to satisfy. You will also need to
determine who the major competitors are as if there are too
many other firms selling similar products or services, it is less
likely that customers will support your business.

Refer to chapter 4, pp.74–76 of the prescribed textbook.

4 The Mission Statement and

Objectives of the Business
These concepts were discussed in learning unit one, when we
considered the importance of the micro environment.

Refer to chapter 4, pp.76–78 of the prescribed textbook.

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5 Calculating the Expected Market

Share
Refer to chapter 4, pp. 78-82 of the prescribed textbook for a
detailed explanation on calculating expected market share.
Refer to the explanations below to assist with understanding.

Market Share:

The market share is the number of people from the total

market that actually use your product or service.

Here is an example of market share. Your company sells fruit

juice. The pie chart depicted below represents all the people
in South Africa that purchase fruit juice (total potential market).
You can now determine in relation to the rest of the market
how much you sell.

Example of Market Share

Your fruit
True Fruit Juice
Juice

Snapple Natures Best

Juice fruit Juice

Kids Joy Jungle Juice

From the above you can see that your fruit juice makes up
about a 1/6 of the fruit juice market you can therefore assume
the following:

If the fruit juice market in South Africa sells R300 000 worth of
juice per month, then you sell approximately R50 000 worth of
fruit juice. And if there are 54 000 people purchasing and

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drinking fruit juice you sell to around 9 000 of these customers

or 9 000 of them drink your juice.

The example above shows that to calculate the expected

market share you need to:
 estimate the total potential market for your product or
service (also refer to section 5.1 below)
 estimate what portion of the market is occupied by your
competitors
 estimate what portion you can expect to sell to (target
market) - section 4.6 p. 79 of the prescribed textbook.

5.1 Calculating the Potential Market

To recap: your potential market is any customer who has an

interest in buying your product or service; or whose needs who
are able to satisfy with your product or service. However, you
need to take into account that there will be competitors who
offer the same or similar products as you and who will be
targeting the same customers.

Your expected market share will be the percentage of the

potential market who you predict will buy your product and
services – this will be who you target your marketing efforts to.

It is important to estimate your market share for the products

you are selling and the following is considered when
calculating it: (The three steps to calculating your target
market, p. 79 of the prescribed textbook.)
 estimate your market segmentation – dividing your total
market into sub-groups with similar needs. (note the
different ways to segment the market on p 79)
 evaluation and target market decision – selecting which
segments, you will be focussing your marketing efforts
 market positioning – designing different marketing
campaigns for each market segment.

5.2 Calculating the Size of the Market

Refer to chapter 4, pp.80–81 of the prescribed text to gain an

understanding of how to calculate market share.

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6 Calculating the Income

Refer to chapter 4, pp.83–88 of the prescribed text

Potential gross income (turnover) is calculated by working out

the total selling price of your product/ service and then
estimating how much you will sell. (Selling price per unit x
number of units to be sold.)

Note the example on page 83 of the textbook which shows

how to add a mark up to your cost price to calculate the selling
price of your product or service.
NB: Selling price must at least cover all the costs.

6.1 Understand how Fixed, Variable, Indirect

and Direct Costs are used to Calculate
the Costs of a Product.
Cost is the monetary value sacrificed in the production of
goods/ services produced for the purpose of resale. (These
are all the costs involved in creating your product or service.)
Before determining your selling price you need to work out
your costs.

The following are costs that need to be considered:

Describe each of the
 variable costs (VC) following costs and give
 fixed costs (FC) examples of each of the
 direct costs following costs:
 indirect costs  Fixed;
 Direct;
Read section 4.7.1 pp. 84-86 of the prescribed textbook to help  Indirect;
 Variable.
you understand the different types of costs and to ensure you
are able to do simple calculations.

6.2 Calculating the Selling Price

Section 4.7, p 83 of the textbook, explains how to calculate
your selling price by adding a mark up to the cost price of the
product. Section 4.7.2, p 87 explains how you also need to
establish how much your competitors are charging before
deciding on a final price. If your product or service is much
more expensive than your competitors, it is unlikely that
customers will buy from you, unless you are offering far more
benefits. Customers must perceive they are getting value for
money.

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6.3 Understand how Net Profit is Calculated

Expected net profit (gross profit/income less expenses) is

calculated by:
 multiplying the expected unit sales by the expected unit
price (this is the gross income/total sales turnover
 all expected costs (direct, indirect, variable and fixed) are
then deducted from the expected gross income
 the difference is the net profit

Read section 4.7.3, p. 88 of the textbook and note the example

of an income statement to help give you a basic
understanding.

7 Revision Exercises
7.1 Explain what a viable business idea is.

7.2 Explain to a new entrepreneur how they can gather

information about the kind of products/ services that
customers want.

7.3 What kind of information will be found in a customer

profile?

7.4 Explain the purpose of a mission statement.

7.5 What are the questions that need to be answered when

formulating a mission statement?

7.6 Why is it important to calculate the expected market

share?

8 Solutions to Revision Exercises

8.1 Refer to pp.73–74.

8.2 Refer to pp.74–76.

8.3 Refer to p.75.

8.4 Refer to p.77.

8.5 Refer to p.77.

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8.6 Refer to p. 78.

Do the self-evaluation questions that relate to the learning

outcomes on p. 94 of the textbook.

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Learning Unit 5: Financial Management for

Entrepreneurs
Learning Objectives: My notes
Theme 1: Financial Management for Entrepreneurs
LO1: Describe the financial function in business.
LO2: Explain the managerial functions of financial
management.
LO3: Name and describe the financial activities in
business.
LO4: Examine the important concepts in financial
management.
Theme 2: Financing the Capital Requirements of a
Small Business
LO5: Name and describe, in detail, the two primary sources
of capital (finance).
LO7: Describe the major characteristics of permanent
finance and its sources.
LO8: Describe the major characteristics of long-term,
medium-term and short-term finance and its sources.
Material used for this Learning Unit:
 Chapter 13 and 14 of the prescribed textbook; pages
251-264 and 265-273
 MG.
How to prepare for this Learning Unit:
Carefully read all the material provided, lecture notes and
be able to complete the revision exercises at the end of this
LU and chapters 13 and 14.

Theme 1: Financial Management for

Entrepreneurs
Chapter 13 of the prescribed textbook, pp. 251-264

1 Introduction
According to research, existing and potential small businesses
are always asking the questions, such as:
 is this a fair price to ask (or pay) for a specific business?
 how much should my monthly sales be in order for me to
survive in my new business?
 how can I know for sure if I am running my business at a
profit or at a loss?
 is the profit I am making satisfactory?
 is it better to use only my own capital or is it better to
borrow additional capital?

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 when I use my own and borrowed capital, what should

the balance be between these two sources?
 how important is effective financial administration to
business success?

This learning unit will introduce you to the financial

management for entrepreneurs and it will enable you to
answer the above questions.

1.1 The Financial Function in Business

The financial management function is distinguished from the
other managerial and business functions and activities, but
should never be treated separately from other business
functions.

1.1.1 What is Financial Management?

Financial management is the responsibility for timeously

acquiring the needed financial resources and ensuring the best
use of these resources over the short and long term.

Examples of financial management:

 arranging in time with the bank manager for an overdraft
facility on the best conditions possible
 ensuring that cash received from daily sales is
safeguarded and banked as quickly and as efficiently as
possible.

Refer to chapter 13, pp.253–255 of the prescribed textbook.

2 The Managerial Functions of

Financial Management
How do the generic functions of management apply to financial
management?
 financial planning
 financial activating
 financial controlling
 financial organising.

Refer to chapter 13, pp. 255–257 of the prescribed textbook for

a deeper understanding of the financial functions.

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3 Other Financial Activities in the Business

Some of these include:
 collecting external information on financial matters;
 preparing financial budgets
 recording all financial transactions
 analysing financial performance
 financial reporting
 safeguarding cash resources
 formulating credit policy
 debt collection
 salary administration
 negotiating with supplies of capital.

Refer to chapter 13, pp.257-258 of the prescribed textbook.

4 Important Concepts in Financial

Management
Refer to chapter 13, pp.258–262 of the prescribed textbook to
ensure a deep understanding of these key concepts. Note the
calculations on profitability (pp. 261-262).

Theme 2:
Financing the Capital Requirements of a
Small Business
(Chapter 14 of the prescribed textbook, pp 265-273)

5 Name and Describe the Two Primary

Sources of Capital (Finance)
The entrepreneur requires capital to finance the activities of
the business from rentals, salaries, telephone expenses,
purchase of raw materials, insurance and any other expenses
incurred in order to make profit.

There are two types of financing, each of which we will look at

separately and then compare them:
 own capital (owners’ capital, equity financing,
shareholders’ funds or owners’ interest)
 debt financing (outside, foreign, borrowed or external
capital)

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5.1 Own Capital (Equity Financing)

Own capital is the money invested by the owner/owners. It is
one of the most important sources of finance as without this, it
is unlikely that anyone else would be willing to put money into
the business.

5.2 Debt Financing (Outside, Foreign,

Borrowed or External Capital)

Debt financing:

This refers to money that an entrepreneur obtains in the form

of a loan that must be repaid with interest – one of the most
common forms of financing for start-ups.

It might be preferred over equity financing because it does not

require any relinquishing of ownership in exchange for
investment. However, interest charged for loans on start-ups
can be high, simply because of the high failure rate of new
businesses.

One of the most significant challenges for the entrepreneur is

the capacity to raise finance in this form. The finance industry
has developed various forms of finance and loans especially
suited for businesses that differ with regard to size, methods of
repayment and collateral required.

Collateral

This is any asset that you pledge to hand over to someone

from whom you borrow money (the lender) to provide security
in the event you are unable to, or fail to pay back the loan. It
reduces the risk of the loan for the lender.
(Terrreblanche, et al: 2008)

Examples of collateral include:

• buildings
• investments
• insurance policies
• other goods such as jewellery or a car

The above explanation is to assist with understanding. Note

though that collateral is referred to in the textbook under the
section ‘long-term finance and its sources’ p. 269.

Refer to chapter 14 of the prescribed textbook, pp. 266-268 for

an explanation on equity and debt financing.

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6 The Differences between the Two

Primary Sources of Capital – Debt
(Outside Capital) versus Equity
Financing (Own Capital)
Here we evaluate the advantages and disadvantages of debt
and equity financing.

Note that the table below aims to supplement the prescribed

reading material - refer to chapter 14, table 14.1, p. 268.

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Advantages and Disadvantages of Debt and Equity

Financing

Advantages Disadvantages
 Debt financing can be  Interest must be paid
either short (less than monthly.
one year) or long term  Interest rates may
(more than one year). fluctuate – high
 The lender does not interest rate costs
gain an ownership during difficult
interest in the financial periods can
business. increase the risk of
 The lender has no insolvency.
Debt

direct claim on the  In small businesses

profits of the business. personal guarantees/
 Obligations are limited security are likely to
to paying the interest be required.
and loan.
 Interest on loans is tax
deductible.
 Raising debt capital is
less complicated.
 Allows the  The shareholders gain
entrepreneur to obtain a share of the
funds without incurring business – dilution of
debt. ownership.
Equity

 Dividends are paid to  Possible loss of

the control.
owners/shareholders
at the discretion of the
directors.

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7 Describe the Major Characteristics

of Permanent Finance and its
Sources
Generally, the only source of permanent finance is own capital
(owners’ capital) – the initial investment by the owner/owners
into the business. Once the business is up and running,
another source of permanent capital is net profit, if it is
reinvested into the business.

Refer to chapter 14 of the prescribed textbook, p. 269.

8 Long- term, Medium-term and Short-

term finance and its Sources’.
In addition to permanent finance, the other forms of finance
include:
 long-term finance.(credit given for 5 or more years and
not normally longer than 20 years)
 medium term finance (credit given between 1 –5 years,
sometimes up to 7 years years)
 short term finance(credit given for 12 months or less)

Refer to chapter 14 of the prescribed textbook pp. 269-273 to

understand the differences between the forms of finance and
its sources.

Terreblanche, et al. (2008) provides a useful summary of the

forms of financing available to the entrepreneur:

Note that the table below is to assist with understanding and is

not for assessment purposes.

Summary of the Forms of Financing Available to the

Entrepreneur.

Type Description
Means that your current (cheque) account may
go into debit to an agreed limit. This facility
helps to finance the fluctuations in a business’
normal sales e.g. slowdown in the off peak
Overdraft
periods. It is not good practice to use this
facility to purchase assets. Remember that the
bank can withdraw an overdraft facility at any
time.
Ordinary Also known as a medium-term loan (two to

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Type Description
business seven years) and required for a major capital
loan expenditure such as plant and equipment. The
fixed payment allows the entrepreneur to plan
his or her cash flow. The bank may not call in
the entire loan as with the overdraft.
Asset finance is the same as ordinary car
finance and can be used to buy items of
equipment. The collateral is usually the asset
Asset being purchased e.g. car. There are many
finance ways of structuring asset finance (e.g. hire
purchase and leasing). The options are
weighed up depending on the needs of the
business and the tax implications.
This is like an ordinary bank loan, but as soon
as the lender has paid off a certain amount, he
or she may borrow up to the original amount
Revolving
again without having to reapply for another
credit
loan all over again. It is similar to an access
bond and is a hybrid between an overdraft and
an ordinary loan. Payments are fixed.
This is a method of reducing capital funding
requirements. Instead of borrowing money to
buy fixed assets, the small business owner
arranges to use, but not own, the required
asset in return for a regular lease payment.

The advantages are:

 Cash resources may be released for
more profitable trading and to provide
working capital.
 Plant and equipment are financed over a
Leasing
period directly related to the productive
capacity.
 Maintenance costs are reduced to a
minimum (before leased equipment gives
trouble it should, in theory, be replaced
by new equipment).
 Budgeting is simplified (the small
business owner knows what his/ her
monthly expense is, as well as the date
at which the equipment should be
replaced).
Small businesses such as builders often work
Bridging on projects and find themselves endangered if
finance they win contracts or tenders because they
may need cash to buy raw materials and pay

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Type Description
wages before receiving their first payment from
the client. Bridging finance provides a short-
term loan designed to assist the small business
owner through this stage. Most builders will
ensure pre-arranged finance as far as possible
before concluding a contract.
Debtor finance is also known as factoring,
which involves borrowing money against the
debtors’ book (the total amount owed by
debtors to the business). By selling the
Debtor
invoices to the factoring agent, who provides
finance
the entrepreneur with immediate cash, minus a
percentage the business owner frees up this
cash for immediate use. The agent then
collects the debt as and when it falls due.

9 Revision
Refer to chapter 13, p. 263 and chapter 14, p. 279 of the
prescribed textbook to complete the self-evaluation questions
that relate to the learning outcomes.

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Learning Unit 6: Marketing Mix (Product, Price,

Distribution/Place and Promotion Decisions)
Learning Objectives: My notes
Theme 1: Product Decisions for an Entrepreneurial
Business:
LO1: Describe the meaning of a product.
LO2: Identify and describe the various classifications of a
product.
LO3: Understand the factors affecting an optimal product
mix.
LO4: Name and describe five product decisions a small
business owner needs to consider.
LO5: Describe what branding is.
LO6: Describe the role of packaging.
Theme 2: Price Decisions for an Entrepreneurial
Business:
LO7: Explain what is meant by price.
LO8: Identify the factors affecting price.
LO9: Explain the objectives of pricing.
LO10: Describe the three basic pricing strategies:
 cost-orientated (be able to do basic calculations)
 customer-oriented
 pricing relative to competition.
Theme 3: Distribution Decisions for an Entrepreneurial
Business:
LO11: Explain what is meant by distribution.
LO12: Identify the choices of distribution intensity.
LO13: Name and describe the types of intermediaries.
LO14: Explain the factors which impact on the decision to
use direct or indirect distribution channels.
Theme 4: Promotion Decisions for an Entrepreneurial
Business:
LO15: Explain the three main objectives of promotion.
LO16: Describe the various promotion mix elements.
Material used for this Learning Unit:
 Chapters 6, 7, 8, and 9 of the prescribed textbook.
 Manual guide.
How to prepare for this Learning Unit:
Carefully read all the material provided. Be able to
complete the revision exercises at the end of this LU and
each of the prescribed chapters.

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1 Introduction
This section aims to provide background information to assist
with understanding and is not examinable.

According to the Agricultural Innovation and Commercialisation

Centre, marketing your business is about how you position it to
satisfy your market’s needs. This is specifically done by
focusing on the four critical elements in marketing, called the
marketing mix (4Ps): product, price, place (distribution) and
promotion. According to Barringer and Ireland (2008), the
marketing mix can be defined as a set of controllable, tactical
marketing tools that the entrepreneur uses to produce the
responses he or she wants in the target market. This learning
unit will look at the 4 Ps in detail.

Theme 1: Product Decisions for an

Entrepreneurial Business
Refer to chapter 6 of the prescribed textbook, pp. 112-124

2 Describe the Meaning of a Product

or Service
This is the goods or service a company offers to its target
market, often thought of as something having physical form.
(Barringer and Ireland, 2008, p.529)

A business’ product or service is designed to meet the needs

of the target market so that the business achieves its profit
objectives through sales. (Nieuwenhuizen, 2014)

Refer to chapter 6 of the prescribed textbook, p 112.

3 Classifications of a Product
Refer to chapter 6 of the prescribed textbook, pp.113–116.

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4 Factors Affecting The Optimal

Product Mix
A product mix is the full list of products and services a
business offers to its customers. Factors affecting the mix that
an entrepreneur chooses are:

 overall business objectives;

 changes in the market place;
 competitors’ actions;
 production considerations.

Refer to chapter 6 of the prescribed textbook, pp.118–119.

5 Product Decisions
After considering the factors above that impact on the product
mix, the entrepreneur needs to make decisions regarding the
optimal product mix for his business. The options available
include:

 product diversification;
 product specialisation;
 product simplification;
 product differentiation;
 product obsolescence.

Refer to chapter 6 of the prescribed textbook, pp.119-120.

6 Branding
Refer to chapter 6 of the prescribed textbook, pp.120–123

7 The Role of Packaging

Refer to chapter 6 of the prescribed textbook, pp.123-124.
Note figure 6.1 (the functions of packaging).

Theme 2: Price Decisions for an

Entrepreneurial Business
Refer to chapter 7 of the prescribed textbook, pp. 131-144

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8 What is Pricing
The amount of money consumers pay to buy a product.
(Barringer and Ireland, 2008, p.529).

According to Nieuwenhuizen (2014), pricing has two major

roles. It influences:
 how much a consumer purchases;
 whether or not selling the product will be profitable.

Refer to chapter 7 of the prescribed textbook, p 131.

9 Factors Affecting Price

Refer to Chapter 7 of the prescribed textbook, pp.132–135.

10 Objectives of Pricing
Refer to Chapter 7 of the prescribed textbook pp.136–138.

11 Deciding on Basic Price Levels

(Pricing Strategies)
The three approaches to setting price levels are:
 cost-oriented – prices must be high enough to cover
costs;
 customer-oriented – setting prices according to what
customers perceive to be of value (what they are
prepared to pay);
 pricing relative to competitors –determining your prices
based on what the competition is charging.

Ensure that you are able to understand and apply the basic
calculations relating to cost-oriented pricing. Refer to Chapter
7 of the prescribed textbook, pp.138–144.

Theme 3: Distribution (Place) Decisions

for an Entrepreneurial Business
Refer to chapter 8 of the prescribed textbook, pp. 149-159

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12 A Definition of Distribution (Place)

Distribution (or place) includes all activities that take the
entrepreneur’s product from its place of origin to the customer.
A distribution channel (middleman) must be used to get the
product to the end user if the entrepreneur does not intend
selling the product directly. The place element of the
marketing mix is often confused with location; it has to do with
distribution not location.

Refer to chapter 8 of the prescribed textbook, pp. 149-150

13 Choosing the Intensity of

Distribution
There are three important options:
 intensive distribution
 selective distribution
 exclusive distribution.

Refer to chapter 8, pp.151–152 of the prescribed textbook.

14 Types of Intermediaries
It is important for small businesses to be aware of the different
types of intermediaries that exist. These range from sales
intermediaries to wholesalers to retailers.

 Sales intermediaries, e.g. brokers and agents.

 Wholesalers, e.g. cash-and-carry, rack-jobber, truck

jobbers and mail order wholesalers.

 Retailers, e.g. general dealers, department stores,

speciality stores, chain stores, supermarkets,
hypermarkets, spaza shops and internet retailers.

Refer to chapter 8, pp.152–154 of the prescribed textbook

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15 Channels of Distribution and

Choosing Direct or Indirect
Channels
A distribution channel can either be:
 Direct- meaning that the goods are manufactured and
sold to the customers direct.
 Indirect meaning that goods are manufactured and are
sold to an intermediary (agent/wholesaler/retailer etc.)
who then sells to the customers.

The table below highlights the possible channels for consumer

and industrial products.

Marketing Channels for Consumer and Industrial Products

Manufacturing channels for Manufacturing channels for
consumer products industrial products
 producer to customer  producer to industrial
 producer to retailer to user
customer  producer to agent to
 producer to wholesaler industrial user
to retailer to customer  producer to industrial
 producer to agent to distributor to industrial
retailer to customer user
 producer to agent to  producer to agent to
wholesaler to retailer to industrial distributor to
customer. industrial user.

An entrepreneur is faced with a decision to make considering

the pro and cons of each channel of distribution.

Refer to chapter 8 pp.155–158 of the prescribed textbook to

gain a basic understanding of the above table. Pay particular
attention to the factors to consider when choosing between
direct and indirect channels (p 158).

Theme 4: Promotion Decisions for an

Entrepreneurial Business
Refer to chapter 9 of the prescribed textbook, pp 161-164

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16 Promotion – Definition and

Objectives
Promotion refers to activities planned by a company to
communicate the merits of its product to its target market with
the goal of persuading people to buy the product.

Refer to chapter 9 of the prescribed textbook.pp.161-162

16.1 The Main Objectives of Promotion

Refer to chapter 9 of the prescribed textbook, pp.162

17 Promotional Mix Elements

Promotion refers to the selection of activities that the
entrepreneur can best use to persuade customers to buy the
product. Since most start-ups have limited resources, careful
consideration should be given to these activities, which may
include one or more of the following and is called the
promotions mix:
 advertising;
 public relations;
 publicity;
 sales promotion;
 personal Selling;
 direct marketing;
 Sponsorship;
 e-communication.

Refer to chapter 9, pp.163 -164 of the prescribed textbook.

18 Revision Exercises
18.1 Explain the following terms:
 place
 price
 product
 promotion mix
 reseller
 indirect channel
 direct channel
 wholesaler
 distribution channel
 retailer

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 target audience

18.2 Differentiate between a direct and indirect channel.

18.3 Identify and explain the possible channels for marketing

consumer and industrial products.

18.4 What are the factors that affect the selection of a

distribution channel?

19 Solutions to Revision Exercises

19.1 Refer to chapters 6, 7, 8, and 9 of the prescribed
textbook

19.2 Refer to pp.155–156.

19.3 Refer to p.156–159.

19.4 Refer to p.158.

Refer to the self-evaluation questions that relate to the learning

outcomes, chapters 6-9 of the prescribed textbook.

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Learning Unit: 7 Operations Management

Learning Objectives: My notes
LO1: Provide a definition of operations management (OM).
LO2: List the five basic function of operations management.
LO3: Be able to explain operations management as a
process.
LO4: Name the principles of OM that promote value, time
and lean production.
LO5: Be able to describe and apply the transformation
process.
LO6: Describe the typical OM performance objectives.
LO7: Explain the concept of productivity in the context of
operations management.
LO8: Distinguish between lean and agile supply.
LO9: Distinguish between the three main categories of
operations systems.
Material used for this Learning Unit:
 Chapter 11 of the prescribed textbook, pp. 190-203.
 Manual guide.
How to prepare for this Learning Unit:
Carefully read all the material provided, lecture notes and
be able to complete the revision exercises at the end of this
LU.

1 Introduction
Operations Management is an area of management concerned
with overseeing, designing, and controlling the process of
producing goods or services. It involves the responsibility of
ensuring that business operations are efficient in terms of
using as few resources as needed and are effective in terms of
meeting customer requirements.

In the context of entrepreneurship, effective operations

management refers to, among others, innovation, improved
design of products, services, improved processes used to
create these product and services, and quick responses to
customers. Understanding how the operations process
contributes to creating value-added for customers is crucial.

1.1 What is Operations Management?

Refer to chapter 11, pp.192-193 of the prescribed textbook –
basic concepts

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2 Operations Management Functions

OM involves the following five primary functions:
2.1 product and services design (demand creativity)
2.2 demand and capacity planning
2.3 operations systems design
2.4 production planning and control
2.5 improvement, problem-solving and maintenance (demand
creativity).

Refer to chapter 11, p.194 of the prescribed textbook.

3 Operations Management as a
Process
Process management is central to managing a business.
Process is not just confined to the main manufacturing
process. It cuts across departmental boundaries. It is
everything the company is doing to get the product or service
to the customer.

The ‘nested- process’ concept aids in understanding the

interconnectivity of all the processes and operations within the
business and how all elements of the business contribute to
the whole operating value chain.

See below for an explanation of the value chain to assist with

understanding:

The Value Chain

The value chain (diagram depicted below) consists of all the
processes needed to transform inputs into outputs to create
value. These processes consist of a chain of activities which
are categorised into primary activities and secondary activities.
Primary activities are those involved in the actual production
and delivery of the product or service. Secondary activities are
those that provide the infrastructure to assist and support the
primary activities, to ensure they take place.

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Smit PJ and Cronje GJ. (2011)

Operations management needs to consider the total time it

takes to create a product or service, from initiation to
completion. This is called lead times. There are a number of
lead-time elements which need to be considered in order to
save time and costs. These include:
 queue time;
 processing time;
 set-up time;
 waiting times;
 inspection time;
 transportation time.

Refer to chapter 11, p. 195 of the prescribed textbook.

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4 Operations Management Principles

The following OM principles promote value and save time:
 know and team up with the next and final customer;
 involvement of everyone in continual and rapid
improvement in quality, cost response time, flexibility
variability and service;
 having a unified purpose via shared information and
team involvement in the planning and implementation of
change;
 reduce the number of product/ service components and
operations and the number of suppliers to a few good
ones;
 organising resources into multiple chains of customers,
each focused on a product or service, create workflow
teams, cells and ‘plants’ in a plant;
 capacity involves utilising human resources potential and
creativity by investing in human capital;
 capacity involves maintaining and refining existing
equipment and human capital before considering new
resources and automating incrementally when process
variability cannot be reduced by other means;
 process management entails aiming for streamlining and
simplicity by making it easy to provide goods/ services
without error or any process variation;
 cutting flow time, distance and inventory along the chains
of customers;
 cutting set-up, changeover, get–ready and start-up lead-
times;
 just-in-time production, or at the customer’s rate of use,
decrease cycle intervals and lot size;
 recording and processing one’s own data at the
workplace and ensuring that frontline improvement
teams have the first chance at problem-solving before
experts are bought in;
 cutting administration and reporting, regulatory causes,
not symptoms.

Refer to chapter 11, pp. 196-197 of the prescribed textbook

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5 The Transformation Process

Refer to chapter 11 of the prescribed textbook, pp. 197-198.

Note tables 11.1 and 11.2.

6 Operations Management
Performance Objectives
Refer to chapter 11, pp.198-199 of the prescribed textbook.

7 Operations Management and

Productivity

Refer to chapter 11 pp. 199-200. It is not necessary to know

the formula on page 200. You merely need to understand
what productivity is, including the difference between macro
and micro productivity.

8 Distinguish between Lean and Agile

Supply

Entrepreneurs need to consider which operations design would

be the most appropriate to use for their products or services.

Refer to chapter 11 of the prescribed textbook, p. 201. Note

Table 11.3

9 Distinguish between the Three Main

Categories of Operations Systems

Refer to chapter 11 of the prescribed textbook, p. 203. Note

table 11.4

10 Revision Exercises
10.1 Explain the concept of operations management.
10.2 List the five basic functions of operations management.
10.3 Name the principles of OM that promote value, time and
lean production.
10.4 Describe the typical OM performance objectives.

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11 Solutions to Revision Exercises

11.1 p. 193
11.2 p. 194
11.3 pp. 196-197
11.4 pp. 198

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Learning Unit 8: The Business Plan

Learning Objectives: My notes
LO1: Describe the purpose and principles of a business
plan.
LO2: Explain the other users of a business plan.
LO3: Discuss the meaning of a business model and
highlight the key elements that should be included in a
business model.
LO4: Comprehend the different structures of a business
plan.
LO5: Examine the guidelines for writing a business plan.
LO6: Provide a brief summary of the information that
should appear in the business plan.
Material Used for this Learning Unit:
 Chapter 5 of the prescribed textbook, pp. 97-111.
 Manual guide.
How to Prepare for this Learning Unit:
Carefully read all the material provided, lecture notes and
be able to complete the revision exercises at the end of this
LU and chapter

1 Introduction
The only way to understand your business properly is to
develop your own business plan. This is the best way to end
up with a unique plan that suits you and your business. Whilst
it is possible to use the services of an external consultant, this
may not be as effective and you may end up with an “off-the-
shelf”, generic product.

1.1 Purposes and Principles of a Business

Plan
The primary objective of a business plan is to develop a blue
print (or road map) of the business. The business plan defines
the business, its purpose and outlines the activities it will

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undertake to become a successful enterprise.

Business plan

A flexible
The blueprint of Developed by
planning
your business the entrepreneur
document

Refer to chapter 5, pp.98–99 of the prescribed textbook.

2 Other Users of the Business Plan

A business plan can be used by the following:
 financiers and investors;
 employees;
 suppliers.

Refer to chapter 5, p.100 of the prescribed textbook.

3 The Business Model

The business model provides the basis for the business plan.
It is an indication of how you will structure your business so
that it will create value for customers. The two key
components to be considered are:
 value creation for customers (unique selling proposition);
 efficiency of operations.

Refer to Chapter 5 of the prescribed textbook, pp.100-102

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4 The Different Structures of a

Business Plan
The structure of a business plan is extremely important. This
will vary from one situation to the next — the size and
complexity of the venture determines the requisite depth and
detail.

Refer to chapter 5, pp.103–107 of the prescribed textbook.

5 The Guidelines for Writing a

Business Plan
A business plan should be well researched; look professional
in appearance and the information should be accurate. There
are no guidelines for the length as long as the content is
relevant to the reader.

Refer to chapter 5, pp.107-108 of the prescribed textbook for

guidelines on writing the business plan.

6 Writing the Business Plan

The following is a summary of the information that should be in
included in the business plan:
 the cover page;
 confidentiality agreement;
 table of contents;
 executive summary;
 business description;
 marketing plan;
 location;
 management;
 financial plan;
 critical risks;
 Appendices.

Refer to chapter 5 of the prescribed textbook, pp. 108-110

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7 Revision Exercises
7.1 What is a business plan, for whom is it prepared and
why?

7.2 What should a completed business plan include?

7.3 Provide a list of guidelines for an entrepreneur who is

busy writing his business plan

8 Solutions to Revision Exercises

8.1 Refer to pp.98–100.

82 Refer to pp.103–107.

8.3 Refer to p.107

Refer to the self-evaluation questions on p. 111, chapter 5 of

the prescribed textbook.

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Bibliography
Barringer, B.R. and Ireland, R.D. (2008). Entrepreneurship – Successfully launching
new ventures. 2nd edition. New Jersey (NJ): Pearson International.

Bezos, J. 2009. Discussion on the vision behind the Kindle. [Online]. Available at:
http://www.amazon.com/Kindle-Amazons-Wireless-Reading-
Device/dp/B000FI73MA/pd_vsm_27 [Accessed 25 October 2015].

Businessday. 2009. BDFM Publishers. [Online]. Available at:

http://www.businessday.co.za [Accessed 28 October 2015].

Business Owner. s.a. [Online]. Available at: http://www.businessowner.co.za

[Accessed 15 October 2015].

Business Partners. 2007. National Finalists, Entrepreneur of the Year. [Online].

Available at: http://www.eoy.co.za/ [Accessed 26 October 2015].

CIPRO. 2008. Intellectual Property. [Online]. Available at:

http://www.cipro.co.za/products_services [Accessed 16 October 2015].

Companies and Intellectual Property Registration Office. 2008, Department of Trade

and Industry. [Online]. Available at: http://www.cipro.gov.za [Accessed 16 October
2015].

Daft, R.L. and Marcic, D. 1998. Understanding Management. 2nd edition. Fort Worth:
The Dryden Press.

Development Corporation. 2008. Industrial. The Importance of Entrepreneurship for

South Africa’s Economic Development. [Online]. Available at:
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October 2015].

Hisrich, R.D. and Peters, M.P. 2002. Entrepreneurship. 5th edition. New York (NY):
McGraw-Hill.

Katz, J.A., and Green, R.P. 2009. Entrepreneurial Small Business. New York (NY):
McGraw-Hill.

Kramer, I. 2009. The Multichannel E-Commerce Path out of the Recession. [Online].
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[Accessed 20 November 2015].

Kuratko, D.F and Hodgetts, R.M. 2007. Entrepreneurship: Theory process practice.
7th edition. Canada: Thomson.

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Kuratko, D.F and Hodgetts, R.M. 2001. Effective Small Business Management 7th
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October 2015].

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October 2015].

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African perspective. 2nd edition. Pretoria: Van Schaik.

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Cape Town.

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IIE Module Guide ENTR112

The South African Department of Trade and Industry. 2006. The DTI. [Online].
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Timm, S. 2007. Joining an incubator eases worries and frees up business owners.
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Timmons, J.A. and Spinelli, S. 2009. New Venture creation entrepreneurship for the
21st Century. 8th edition. New York (NY): McGraw-Hill Education.

Van Aardt, I, van Aardt, C, Bezuidenhout, S and Mumba, M. (2008) Entrepreneurship

and New Venture Management. Cape Town: Oxford University Press Southern
Africa.

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Intellectual Property
Plagiarism occurs in a variety of forms. Ultimately though, it refers to the use of the
words, ideas or images of another person without acknowledging the source using
the required conventions. The IIE publishes a Quick Reference Guide that provides
more detailed guidance, but a brief description of plagiarism and referencing is
included below for your reference. It is vital that you are familiar with this information
and the Intellectual Integrity Policy before attempting any assignments.

Introduction to Referencing and Plagiarism

What is ‘Plagiarism’?

‘Plagiarism’ is the act of taking someone’s words or ideas and presenting them as
your own.

What is ‘Referencing’?

‘Referencing’ is the act of citing or giving credit to the authors of any work that you
have referred to or consulted. A ‘reference’ then refers to a citation (a credit) or the
actual information from a publication that is referred to.

Referencing is the acknowledgment of any work that is not your own, but is used by
you in an academic document. It is simply a way of giving credit to and
acknowledging the ideas and words of others.

When writing assignments, students are required to acknowledge the work, words or
ideas of others through the technique of referencing. Referencing occurs in the text
at the place where the work of others is being cited, and at the end of the document,
in the bibliography.

The bibliography is a list of all the work (published and unpublished) that a writer has
read in the course of preparing a piece of writing. This includes items that are not
directly cited in the work.

A reference is required when you:

 Quote directly: when you use the exact words as they appear in the source;
 Copy directly: when you copy data, figures, tables, images, music, videos or
frameworks;
 Summarise: when you write a short account of what is in the source;
 Paraphrase: when you state the work, words and ideas of someone else in
your own words.

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It is standard practice in the academic world to recognise and respect the ownership
of ideas, known as intellectual property, through good referencing techniques.
However, there are other reasons why referencing is useful.

Good Reasons for Referencing

It is good academic practice to reference because:

 It enhances the quality of your writing;
 It demonstrates the scope, depth and breadth of your research;
 It gives structure and strength to the aims of your article or paper;
 It endorses your arguments;
 It allows readers to access source documents relating to your work, quickly and
easily.

Sources

The following would count as ‘sources’:

 Books,
 Chapters from books,
 Encyclopaedia,
 Articles,
 Journals,
 Magazines,
 Periodicals,
 Newspaper articles,
 Items from the Internet (images, videos, etc.),
 Pictures,
 Unpublished notes, articles, papers, books, manuscripts, dissertations, theses,
etc.,
 Diagrams,
 Videos,
 Films,
 Music,
 Works of fiction (novels, short stories or poetry).

What You Need to Document from the Hard Copy Source You
are Using
(Not every detail will be applicable in every case. However, the following lists provide
a guide to what information is needed.)

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IIE Module Guide ENTR112

You need to acknowledge:

 The words or work of the author(s),
 The author(s)’s or editor(s)’s full names,
 If your source is a group/ organisation/ body, you need all the details,
 Name of the journal, periodical, magazine, book, etc.,
 Edition,
 Publisher’s name,
 Place of publication (i.e. the city of publication),
 Year of publication,
 Volume number,
 Issue number,
 Page numbers.

What You Need to Document if you are Citing Electronic

Sources

 Author(s)’s/ editor(s)’s name,

 Title of the page,
 Title of the site,
 Copyright date, or the date that the page was last updated,
 Full Internet address of page(s),
 Date you accessed/ viewed the source,
 Any other relevant information pertaining to the web page or website.

Referencing Systems
There are a number of referencing systems in use and each has its own consistent
rules. While these may differ from system-to-system, the referencing system followed
needs to be used consistently, throughout the text. Different referencing systems
cannot be mixed in the same piece of work!

A detailed guide to referencing, entitled Referencing and Plagiarism Guide is

available from your library. Please refer to it if you require further assistance.

When is Referencing Not Necessary?

This is a difficult question to answer – usually when something is ‘common

knowledge’. However, it is not always clear what ‘common knowledge’ is.

Examples of ‘common knowledge’ are:

 Nelson Mandela was released from prison in 1990;
 The world’s largest diamond was found in South Africa;
 South Africa is divided into nine (9) provinces;
 The lion is also known as ‘The King of the Jungle’.
 𝐸 = 𝑚𝑐 2
 The sky is blue.

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Usually, all of the above examples would not be referenced. The equation 𝐸 = 𝑚𝑐 2
is Einstein’s famous equation for calculations of total energy and has become so
familiar that it is not referenced to Einstein.

Sometimes what we think is ‘common knowledge’, is not. For example, the above
statement about the sky being blue is only partly true. The light from the sun looks
white, but it is actually made up of all the colours of the rainbow. Sunlight reaches the
Earth's atmosphere and is scattered in all directions by all the gases and particles in
the air. The smallest particles are by coincidence the same length as the wavelength
of blue light. Blue is scattered more than the other colours because it travels as
shorter, smaller waves. It is not entirely accurate then to claim that the sky is blue. It
is thus generally safer to always check your facts and try to find a reputable source
for your claim.

Important Plagiarism Reminders

The IIE respects the intellectual property of other people and requires its students to
be familiar with the necessary referencing conventions. Please ensure that you seek
assistance in this regard before submitting work if you are uncertain.

If you fail to acknowledge the work or ideas of others or do so inadequately this will
be handled in terms of the Intellectual Integrity Policy (available in the library) and/ or
the Student Code of Conduct – depending on whether or not plagiarism and/ or
cheating (passing off the work of other people as your own by copying the work of
other students or copying off the Internet or from another source) is suspected.

Your campus offers individual and group training on referencing conventions –

please speak to your librarian or ADC/ Campus Co-Navigator in this regard.

Reiteration of the Declaration you have signed:

1. I have been informed about the seriousness of acts of plagiarism.
2. I understand what plagiarism is.
3. I am aware that The Independent Institute of Education (IIE) has a policy
regarding plagiarism and that it does not accept acts of plagiarism.
4. I am aware that the Intellectual Integrity Policy and the Student Code of
Conduct prescribe the consequences of plagiarism.
5. I am aware that referencing guides are available in my student handbook or
equivalent and in the library and that following them is a requirement for
successful completion of my programme.
6. I am aware that should I require support or assistance in using referencing
guides to avoid plagiarism I may speak to the lecturers, the librarian or the
campus ADC/ Campus Co-Navigator.
7. I am aware of the consequences of plagiarism.

Please ask for assistance prior to submitting work if you are at all unsure.

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