mne3701_exam_prep_final

MNE3701 –Entrepreneurship & Small Business management Question 1&2 Overlaps Explain the five steps in the Risk Management process (5) 1. Identify risks  Analysis of financial statements and firms operations, policy checklists… 2. Evaluate risks in terms of size and probability  critical, important and unimportant 3. Select methods to manage risk  risk control: risk avoidance – choosing not to engage in activities risk reduction – lessening the severity of losses  risk financing: risk transfer – insurance or contractual agreements  risk retention – financing loss by itself 4. Implement decision  purchasing insurance or setting funds aside 5. Evaluate and review  new risks arise and old ones disappear Discuss the steps in the Marketing research process (10) 1. Identifying the information need  venture’s informational needs to be correct and in detail, then marketing research will produce meaningful results  ex. target market? Willing to pay? Disposable income? Geographic info? Quality? 2. Searching for secondary data  Secondary research is less expensive than primary research.  sources: Stats SA, Bureau for Marketing Research(Unisa), search engines  Shortcomings: outdated, may not fit requirements, credibility of sources. 3. Collecting primary data  Collected by means of observational and questioning methods.  important considerations: - differences between observational and questioning method  the high value of personal observation in small business  considerations in questionnaire design: o observation has 3 benefits – provides useful info, economical, avoids potential bias o surveys and experimentation are both examples of questioning methods o four types of surveys – mail, telephone, personal interview or e-mail o a questionnaire is the basic instrument for guiding the researcher and respondent 4. Interpreting the data gathered  data must be transformed into usable information to make sound business decisions  Specialised computer programs are designed to summarise large quantities of data. Describe the approach that serves as guidelines in determining a promotional budget (4) Allocating a percentage of sales o Allocating a percentage of sales to promotion (ex. 30% of turnover) o Disadvantage – when sales decline, less money is spent on promotion, which does not solve the problem. Deciding how much can be spared o Spending whatever is left over on promotion after paying all expenses. o Disadvantage – it ignores promotional goals, because different approaches to promotion are required. Spending as much as one’s competitors o Business hopes to reach same customers by duplicating competitors promotional efforts o Disadvantage – may result in copying of competitors mistakes Determining what it will take to do the job o Based on proper market analysis and all the alternatives available as promotional channels o Preferred approach to promotional expenditure. o Disadvantage – very time consuming and requires a greater understanding. Explain the five key factors that must be considered when choosing the location of a business (10) 1. Customer accessibility  Retail outlets and service firms are businesses that must be located to make access easy. 2. Business environment conditions  Weather, competition, crime, legal requirements and tax structures. 3. Resource availability  Proximity(nearness) to raw materials, suitability of labour supply, availability of transport 4. Entrepreneur’s personal preferences  Choice of local site or location offering unique lifestyle advantage 5. Site availability and costs  Either close to the customer (retail) or the supplier (supplier of intermediate goods)  leasing a site is advisable because a large cash outlay is avoided and thus reduces risk Discuss the eight psychological and sociological influences on consumers and their relevance on consumer behaviour (8) Four psychological influences: 1. Needs o Starting point for all behaviour o Basic needs  physiological(hunger), social(what you wear), psychological(what you think), spiritual(emotion) 2. Perceptions o Processes that give meaning to the stimuli confronting customers o Perceptual categorisation  grouping similar things, to manage huge quantities of incoming stimuli 3. Motivations o Intrinsic/extrinsic force that organises and give direction to the tension caused by unsatisfied needs o Unsatisfied needs create tension within an individual and is then motivated to reduce the tension