ENTREPRENEURSHIP

GR 12 CONSUMER STUDIES
CONTENT OVERVIEW
MOVING FROM AN IDEA & MARKETING
A PRODUCT

Identifying a profitable Specifications of the

Formulating the idea
business product
MOVING FROM AN IDEA & MARKETING A PRODUCT

1. IDENTIFYING A POTENTIALLY PROFITABLE BUSINESS OPPORTUNITY

► Nearly all profitable and successful business ideas are the result of intense research including:
❖ Research on the target market
❖ The type of industry your product will be part of
❖ The price consumers are willing to pay

WHY IS THE PURPOSE OF CONDUCTING MARKET RESEARCH?

Market research should be done from time to time, even after the launch of a business to
maintain a COMPETITIVE EDGE and keep track of CHANGING MARKETS.

You will already know you have a great business opportunity exists when you:

1. Have a product or service

2. It meets the needs of some people
3. These people are prepared to pay you for your product or service
 REQUIREMENTS YOU NEED TO HAVE A
PROFITABLE BUSINESS OPPORTUNITY

PASSION PRODUCT OR SERVICE

• Successful business owners are passionate about the • A successful business must have a product or service that
business as well as the product or service. meets the needs of the target market and customers willing to
pay for it.
• Their passion is clear in the way they treat their
customers, staff and promotion of the business. • Begin by looking at current events that could present a
business opportunity. E.g. Covid and face masks.

COMPETITIVE EDGE
TARGET MARKET
• It is important your business idea fills a gap in the market and
• It is important to identify a specific group of people
does not try compete with large, successful franchises.
who may want to purchase your product.
• A competitive edge means you have something special your
• The product or service must meet a need or solve a
competitors do no offer.
problem these people have.
• This can include having excellent service, better quality or
• You need to be specific about your target market.
value-for-money, better location or prices.
 REQUIREMENTS YOU NEED TO HAVE A
PROFITABLE BUSINESS OPPORTUNITY
LOCATION, ENVIRONMENT & ECONOMY TESTING THE BUSINESS IDEA

• The location of your business will definitely affect its success. • Test your business idea on a few people who fit into your
target market.
• Customers are also becoming more concerned with buying
products/services that are environmentally safe. • Ask for feedback on whether they would use or purchase
the product or service and whether the price is within
• The state of the economy will also affect how much their budget.
disposable money income consumers have.

CAPITAL AND START UP MONEY

• Your business idea must correspond with your ability to

Complete Activity 1,
raise the amount of money you need to start your business.
pg. 12 Oxford
• The best business idea will not survive if there is not
enough money to start and run the business until it can
cover it’s costs and make a profit.
2. THE FORMULATION OF THE
IDEA
Once you have a business idea, the next step is to do the research and draw up a BUSINESS PLAN.
A business plan forces you to arrange your thoughts in a logical order, to identify possible weak areas as well as your strengths.

A BUSINESS PLAN HAS THE FOLLOWING

COMPONENTS:
5.
1. MANAGEMENT
3. MARKET
INFORMATIO PLAN
RESEARCH
N ABOUT THE
BUSINESS The marketing plan
This will be fairly short if
you are starting a small
sets out how you will
sole-trader business
This includes the name 2. achieve the 5 P’s
(meaning the business
of the business, the (product, price, place,
location and names of
PRODUCTION people and promotion).
consists of just you).
all the owners and their PLAN 4. FINANCIAL The plan gives details about
PLAN how you will manage the
details.
business, how many people
This consists of a detailed are employed and their
description of the product, The finance plan details responsibilities.
it’s specifications, how it how much money is
will be made, what needed to start the
equipment will be used, business and keep it
which suppliers will be going until it begins to
used, the quantity of make a profit.
items that can be made.
2. THE FORMULATION OF THE
IDEA
6. SWOT ANALYSIS
STRENGTHS WEAKNESSES

• What your business does that is better than • This focusses on complaints or objections made
competitors. by your customers.
• Your personal strengths (what can you offer to • Use these comments made by your sample target
your business?) market during your market research phase.

OPPORTUNITIES THREATS

• What current events can you take advantage of? • This includes competitors, changes in customer Complete
• What changes are taking place that you could use needs and legislation. Activity 2,
to your advantage? E.g. social media and its role pg. 14
in advertising small businesses.
Oxford

7. PROTECT YOUR IDEA

Once you know there is a target market, you need to protect your idea from dishonest people and
businesses who may try to copy it.

This can be done by taking out copyright (exclusive legal publishing rights) or patents (a license giving
someone the sole right to make, use or sell an invention).
3. SPECIFICATIONS OF THE PRODUCT
Comple
❖ te
A product specification is a written description of an item. Activity
❖ 3,
It must include everything about the product or service which includes: pg. 15
• What the product looks like Oxford
• The size
• Materials used in its manufacturing
• How it’s made
• Restrictions it must comply with to meet the needs and desires of the target market
• Information about the packaging that is used.
❖ A detailed product specification will ensure that the product has the same appearance and
quality every time it is made.

Product idea Description Specifications Equipment needed

Homemade biscuits 24 butter biscuits, cut into 400g cake flour Cookie cutters
heart and diamond shapes, 175g margarine Oven
decorated with a cherry in the 200g icing sugar Mixing bowl
middle, packaged in Electric mixer
cellophane paper and tied with Fridge
a red ribbon, with a printed Wooden spoon
label with the name, price and Flat baking tray
contact details on it. Wire cooling rack
scale
 CHOICE OF A SUITABLE PRODUCT FOR
SMALL SCALE PRODUCTION

Availability of human Available raw

Financial resource Available workspace Consumer appeal
skills materials
 CHOICE OF A SUITABLE PRODUCT FOR
SMALL SCALE PRODUCTION
1. AVAILABILITY OF HUMAN SKILLS

This means the availability of people who have the knowledge, skill and experience to help you in your business.

COST OF EMPLOYING
TYPES OF WORKERS WORKERS AVAILABILITY OF WORKERS

Once an entrepreneur has decided to employ a

UNSKILLED WORKERS: Are people with The more skilled the worker, the more the
worker or workers, they need to find the right
a low level of education and no training in entrepreneur will have to pay wages or a salary.
person for the job.
any specific industry.
Unskilled labor is cheap and often taken Some of the compulsory costs an employer must
Workers must have the necessary skills and
advantage of. pay are:
experience and be prepared to accept the salary
• The wage/salary that he or she is offering the entrepreneur can afford.
SEMI SKILLED WORKERS: Have some • 1% of the gross salary to the Unemployment
training in a specific area but not enough Employment agencies can check Cv’s of potential
Insurance Fund
to do a specialized job. • 1% of the total salary to the SETA that controls workers on behalf of the entrepreneur.
A semi-skilled worker has usually been their industry.
trained to do a specific part of a project.

SKILLED WORKERS: Have good Complete

education and expertise in their particular Activity 1,
field. They are able to work independently
SETA: The relevant pg. 18
Sector Education and Oxford
Training Authority
 CHOICE OF A SUITABLE PRODUCT FOR
SMALL SCALE PRODUCTION
2. AVAILABILITY OF FINANCIAL RESOURCES 3. AVAILABILITY OF WORK SPACE

Before you can find a person or financial institution to finance your business, you Before you can find a person or financial institution to finance your business,
need to know how much money you will need. you need to know how much money you will need.
You will need to calculate the startup costs and operating costs.

START UP COSTS
WORK SPACE
Start up costs include any costs that need to be paid in order to start the
business, such as: The size of the work space needed depends on the type of product being
Registration fees, business license, permits, initial stock, equipment etc. produced and the size of the business.
Some entrepreneurs start their businesses from their homes and progress into
business premises as the business grows.
OPERATING COSTS

This includes salaries, wages, stationary, telephone, petrol, electricity and

water etc. 4. AVAILABILITY OF RAW MATERIALS

The business must have enough capital to cover these costs for the first few You will need to calculate the startup costs and operating costs.
months before the business starts to make a profit.

AVAILABILITY OF FINANCE
It can be very difficult for an entrepreneur who doesn’t have business
experience or enough assets to get a loan from the bank. Other ways a new RAW MATERIALS
business can be financed includes:
When choosing a product, it’s important that the raw materials are easy to obtain.
Own money Local produce, raw materials and products stimulate the economy and are
Partners generally easy to obtain.
Investors
 CHOICE OF A SUITABLE PRODUCT FOR
SMALL SCALE PRODUCTION
5. CONSUMER APPEAL

Consumer appeal means that the service or product is attractive and interesting and commands attention of customers.
They look, feel, smell and taste what is on offer and know what they want to purchase or what service they want to use.

A SUCCESSFUL BUSINESS

Provides an entire shopping experience for its customers and can appeal to its consumers by targeting the five senses:

VISUAL: Food displays and products packaged beautifully

SMELL: for example, a bookshop selling coffee and biscuits creates an inviting atmosphere
SOUND: Soft and relaxing music encourages consumers to spend more time in the store
TOUCH: Using different textures, fabrics and colors on display Com
Acti plete
TASTE: Using samples in store that enhances a customer’s experience pg. vity 2
20 O ,
xfor
d
 FACTORS INFLUENCING THE EFFICIENT
PRODUCTION OF QUALITY PRODUCTS

Adhering to Hygiene of Careful finance

Planning Quality control Tidy workplace Stock control
specifications workers control
 FACTORS INFLUENCING THE EFFICIENT
PRODUCTION OF
1. PLANNING
QUALITY PRODUCTS
2. ADHERING TO 3. QUALITY CONTROL 4. TIDY WORKPLACE
Planning production goals: the
SPECIFICATIONS
sales and marketing team must
liaise with the production Process of inspecting Employers have a
Adhering to product
department to plan what products to ensure they
specifications ensures that responsibility to provide a
customers want, how many
products they can sell and when meet the required healthy and safe working
the product is always the
these products must be made. standards and can be
same in terms of environments.
Production planning: The order based on the following
appearance, quality, size,
in which work must be completed
criteria: Workers also need to have
to meet delivery dates. This must weight, color and style.
use businesses workers and responsibility to keep the
equipment so that no one is not
• Weight workplace tidy and neat so
working for any length of time.
• Size that accidents do not occur.
Planning production costs:
• Function
This includes calculating the
production costs accurately. • Appearance
These costs are the basis for the
deciding on a selling price.
 FACTORS INFLUENCING THE EFFICIENT
PRODUCTION OF C om
Acti plete
QUALITY PRODUCTS
vi t
pg. y 1,
2
O xf 3
ord
7. STOCK CONTROL
5. HYGIENE OF 6. CAREFUL FINANCE
WORKERS CONTROL Stock refers to:
● Raw materials (actual materials used to manufacture a
product).
Hygiene in the workplace is important Financial control is important for the
● Work in progress (products that are partially completed)
so that workers are safe and healthy efficient production of quality products
● Finished goods (products that are completed, packaged
while working. as the cost price of a product is
and labelled and ready to be distributed)
determined in the factory.

That the products they manufacture are

safe and healthy for consumers- this is If there is wastage, the cost price will THE MAIN PURPOSE OF STOCK CONTROL IS:
very important in the food industry. increase- this affects the selling price.

• To ensure production is not stopped because there is a

The personal hygiene of workers is also Budgets, stock management systems
shortage of raw materials.
important as body odor and bad breath and cost accounting are all methods
• Ensure that the right quality of raw materials are purchased
can affect colleagues. used to control finances and how
• Ensure wastage is reduced
money is spent in a business.
• Ensure money invested in stock is limited
 REQUIREMENTS YOU NEED TO ENSURE
YOU PRODUCE A GOOD QUALITY
PRODUCT

Good quality
Appropriate Good Good quality Good quality Good quality
packaging Labelling
target market presentation raw materials storage safety
design

Efficient use of Efficient use of Customer

Maintenance Staff training
time storage relations
REQUIREMENTS FOR QUALITY
PRODUCTS
Question: what requirements should you have to ensure good quality products?

► 1. APPROPRIATE TARGET MARKET

► The quality of must match the price of the products being sold to the intended target
group.
► For example: products that are aimed at lower-middle income target markets may be
made with cheaper materials compared to products made for a high income target
market.

► 2. PRESENTATION OF THE PRODUCT

► The quality of the presentation depends on the price level of the product or service.
► For example, Jet and PEP stores don’t use expensive store displays whereas Zara stores
do.

► 3. QUALITY OF RAW MATERIALS

► The quality of raw materials depends on the final product, the selling price and the target
market for that product.
► For example: cheap imported fabric is not made from the same quality fabric as local
brands sold in department stores such as EGG or Woolworths.
REQUIREMENTS FOR QUALITY
PRODUCTS
Question: what requirements should you have to ensure good quality products?

► 4. QUALITY OF DESIGN OF PACKAGING

► This depends on the target market for the product, the selling price and purpose of the packaging.
► For example: Expensive wines and craft gins are often use uniquely designed packaging when
compared to cheaper alternatives.

► 5. QUALITY OF STORING
► Incorrect storage methods affect the quality of a product especially for products that are specialized
such as medicines or fresh produce.

► 6. QUALITY OF SAFETY
► Nearly every aspect of the production of a product has the potential to affect the safety of the consumer
► For example: children’s toys being harmful or the use of nuts and seeds in a food factory which could be
harmful to consumers with nut allergies.

► 7. LABELING
► All products must carry the required labels that reflect the quality of the product.
► For example: toys must be labeled with the age group it is suitable for and food items must have an ingredients list
on the label.
 REQUIREMENTS FOR QUALITY
PRODUCTS
Question: CONT.
what requirements should you have to ensure good quality products?

► 8. EFFICIENT USE OF TIME (how can this be achieved?)

► Plan the use of all equipment so that it is used to full capacity
► Plan the use of all workers so that they work efficiently to produce the maximum number of products

► 9. EFFICIENT STORAGE PROCEDURES

► Minimum and maximum stock levels must be identified to reduce costs tied up in stored stock.
► How can efficient stock procedures be established?
► Allow enough space for stock storage- make sure the area is well lit so that stock can be organized and
managed efficiently.
► Stock should be stored and arranged so that goods that are used frequently can be obtained quickly.
► A good database will make reordering and managing stock levels easier.
► Develop procedures for checking in and checking out of stock.
► Have regular stock checks to ensure stock is not damaged, lost or stolen.
► Use correct temperatures when storing stick.
► Check that storage items do not have damp on them.
REQUIREMENTS FOR QUALITY
PRODUCTS
Question: what requirements CONT.
should you have to ensure good quality products?

► 10. CUSTOMER RELATIONS

► Since customers effectively pat the salary or wages of every employee, customer service should be part of
every worker’s job.
► It is essential to make sure your business meets the needs of its customers.
► It’s also important to get regular feedback from customers and use it to improve your business, product and
service.

► 11. MAINTENANCE
► Regular maintenance and service of all equipment is essential.
► This includes inspection, testing, replacement and adjustment of equipment.

► 12. TRAINING OF STAFF

► Better quality work
► Increased motivation / morale
► Increased work/job satisfaction
► Ability to work independently
► Increased productivity
SUSTAINABLE PRODUCTION AND
CONSUMPTION CONSUMERS PRODUCERS

REDUCE ●Use less, buy less and make wise ●Reduce the use of poisonous chemicals
purchasing decisions. and toxic materials.
●Reduce office waste.
●Cut down on the use of paper by using
electronic storage systems for
documents.

REUSE ●Reuse disposable cups, plates ●Purchase products that have recycled
and cutlery. content
●Reuse wrapping paper, gift bags ●Think of ways of reusing leftover materials
and shopping bags. and waste

RECYCLE ●Recycle cans, bottles, paper and ●Recycle waste

cardboard. ●Use recycled packaging
●Use vegetable peelings for
compost.
SUSTAINABLE PRODUCTION AND C om

CONSUMPTION
► STORAGE AND DELIVERY STRATEGIES
Acti plete
vi t y
2.

► Storage of raw materials and finished goods is critical to business success.

► Food products need to be stored correctly to ensure the produce does not go bad or pass the sell-by date
before being used.
► Goods that are used the most should be stored nearest to the door.
► Goods must be placed in containers or racks so that they are easy to identify and to find.
► Use computer programs to assist businesses in tracking and locating stock that has been stored.
► Hazardous materials and stock must be stored in a safe manner according to the instructions given by the
supplier.
 DEVELOPING A MARKETING PLAN ACCORDING
TO THE 5P MARKETING STRATEGY
PRODUCT
TRADEMARK OR NAME

• A trademark is used when a manufacturer wants to identify its products and distinguish itself
from its competitors.

IMAGE

• A product’s image is the perception a consumer has about a product.

• It can also refer to the set of beliefs consumers have regarding the product e.g.
Mercedes Benz is associated with prestige or wealth.

LABELS AND PACKAGING

• Good packaging is important to protect the product from damage during transport.
• It should also be eye catching to attract the consumer’s attention.
• It should stand out from similar products or brands on the same shelf.
• It should suit the product.
• It should be strong, well-designed and easy to handle.
• It must be easy to place on shelves and be airtight.
PROMOTION
There are different ways to promote, advertise and communicate information about a product to the consumer.

REQUIREMENTS FOR A GOOD ADVERTISEMENT

• A good advertisement must comply with the AIDA principles:

• It must attract attention (including the design, wording, form and color)
• It must create interest in the product (consumers need to be interested and convinced that they need the product)
• It must create a desire in consumers to obtain the product.
• It must lead to action (consumers must be so convinced that they actually go and purchase the product).

TYPES OF MEDIA

• Print media: newspapers, magazines, packaging, labels etc.

• Electronic media: TV, radio, internet, social media.
• Outdoor media: billboards or advertising on various modes of transport.
• Direct mail: any advertisement sent by post (flyers etc.)
PRICE

WHAT IS THE OBJECTIVE OF PRICING STRATEGIES?

• To make a profit
• To create a long term brand loyalty
• To increase sales in the short term
• To keep the business in operation

TYPES OF PRICING STRATEGIES

Cost-based pricing: entrepreneur calculates the selling price of a product by adding up all the costs
involved in making the product and adding a mark-up.

Demand-based pricing: the entrepreneur begins by establishing the price that the target market is prepared
to pay for the product. They then work backwards and make sure the costs are kept as low as possible so
profit can still be made.

Competition-based pricing: The selling price that the competitors are charging is the basis for this strategy-
the entrepreneur must decide whether to set the selling price higher than, the same or lower than the
competitor’s price.
PLACE
FACTORS THAT INFLUENCE WHERE THE PRODUCT WILL BE MANUFACTURED

Availability of workers: How many workers do you have available? Where do they live? How long does it take them to get to work?

Costs: The cost of land, building construction or rental of an existing factory, rates, water and electricity all need to be taken into
consideration when choosing an area to establish a factory.

Raw materials: It is important to consider whether raw materials are easily available locally or the costs involved in importing them from
elsewhere and transporting them to your factory. For example: a fruit jam factory should be situated close to fruit farms.

Infrastructure: The entrepreneur must think about whether the area is easily accessible by transport such as trucks or trains.

Concessions: The entrepreneur should investigate whether there any concessions available to businesses from municipalities, provinces
or national governments for establishing factories and providing employment in specific areas.

Where will the point of sale be?: This is where the consumer will purchase the product and can be done through direct selling (the
manufacturer sells its own products in its own stores such as Woolworths) or through using a middleman (wholesalers that purchase in
bulk and sell on the manufacturer's behalf)
PEOPLE
TARGET MARKET

• The target market refers to a group of people who want to purchase your product or
service and who are willing to pay the price you are charging for it. Activity 1,
pg. 33
• The marketing department of a company will do market research to find out which
consumers belong to this group- once the business knows this information, they can
focus on meeting the needs of this specific group and plan its marketing campaigns
around them.
 FINANCIAL FEASIBILITY TO DETERMINE THE
SUSTAINABLE PROFITABILITY OF THE BUSINESS
SUSTAINABLE = capable of being maintained SUSTAINABLE PROFITABILITY = The ability
at a steady level without exhausting natural & to maintain its profit at a steady level without
PROFITABILITY = Being able to make a profit.
human resources, the environment and exhausting or misusing
equipment.

● A profitable business is one that can pay the monthly expenses and still make the amount of profit the owners would like.

● A business that has sustainable profitability is one that has a plan in place to ensure that it can grow and still produce a
profit in the long term.

The keyword when talking about sustainable profitability is LONG TERM.

Some small businesses focus on immediate profit- this is not necessarily a bad thing but if the
business does not have a long term plan, important opportunities and potential threats may not be
picked up in time.
 FINANCIAL FEASIBILITY TO DETERMINE THE
SUSTAINABLE PROFITABILITY OF THE BUSINESS
WHAT IS IT? An evaluation of a proposed project (new business idea) to decide if it is possible to achieve or complete it
successfully.

WHAT IS THE PURPOSE? To discover the strengths and weaknesses of an existing business or new business idea.

STEPS TO DRAW UP A FINANCIAL FEASIBILITY STUDY:

A feasibility study gives the business • List all the Costs involved in the project or new business (this
owner a clear picture of whether a
particular business has the potential
includes fixed and variable costs and overheads)
for SUCCESS.
• Estimate the Potential sales (how much money you will receive
A feasibility study should be done from the sales of your product or service)
BEFORE starting a new business or
spending any money on a business • Calculate how much Profit you will make each month.
idea.
• Calculate how long it will take to make back the initial
If you find out early on that a business
will not work, you will save money Investment
later on.
• Make a Decision (about whether your business is actually
sustainable)