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EXAMINATION : ENTREPRENEURSHIP (ENT001)

ENTREPRENEURSHIP (ENT)

DATE : 26 MAY 2015

TIME ALLOWED : 3 HOURS

TOTAL MARKS : 100
MATERIAL SUPPLIED : POWERED BY SUNCHAT

INSTRUCTIONS TO CANDIDATES

1. Please refer to the examination rules and regulations as found in the

examination answer book.

2. SECTION A is COMPULSORY and is worth 20 marks.

3. SECTION B is COMPULSORY and is worth 40 marks.

4. Answer ANY TWO (2) questions from SECTION C. Each question is worth
20 marks.

5. Read each question carefully to determine exactly what is required before

attempting the answer.

6. Set your answers out in a systematic way under appropriate headings and sub-
headings.

7. Number your answers clearly.

8. IMPORTANT: Indicate the questions attempted by drawing a circle around the

question number on the front cover of the answer book.

NOTE:

Examination answer books are the property of the IMM GSM and may not be
removed from the examination hall.

Answers to examination questions should not include appendices in the form of

personal notes to the examining panel.

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References are to the prescribed textbook Petty, J.W., Palich, L.E., Hoy, F. and
Longenecker, J.G., 2012. Managing Small Business: An Entrepreneurial Emphasis.
16th ed. South Western College CENGAGE Learning.

Nieuwenhuizen, C. & Oosthuizen, T.F.J., 2014. Business Management: A Functional

Focus. 2nd ed. Roodepoort: FDC.
Blanchard, K. & Peale, N.V., 1988. The Power of Ethical Management. William
Morrow.

SECTION A (20 MARKS)

COMPULSORY

QUESTION 1 (MULTIPLE CHOICE) [20]

Indicate your answer to each of the following questions in your answer book
provided. Each question is worth one (1) mark.

Select the MOST APPROPRIATE answer for each question from the choices given
below. Mark your answer with an X in the correct block in the ANSWER BOOK.

1.1 The possibility of losses associated with the assets and earnings potential of a
business can be described as ________ risk.

A. market
B. business
C. pure
D. real

1.2 ISO refers to ________ and focuses on the ________ management

programmes proposed for businesses.

A. Internal Objective for Standards; quality

B. International Organisation for Standardisation; quality
C. Integrated Operations for Specialisation; service
D. Interactive Objector for Sabbatarianism; marketing

1.3 When considering property risk, property in general can be classified into two
types of property, namely

A. asset and real property.

B. private and asset property.
C. private and real property.
D. asset and liability property.

1.4 An index that determines the quantity to purchase in order to minimise the
total inventory costs is better known as

A. inventory cost control – ICC.

B. economic order quantity – EOC.
C. ABC inventory classification.
D. just-in-time inventorying.

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1.5 Any organisation has liability for wrongful acts or omissions for which an
injured party can take legal action against the wrongdoer for monetary
damages. This liability is better known as ________ liability.

A. tort
B. statutory
C. contractual
D. punitive

1.6 Paul, the marketing manager, uses ________ when he uses a two-way
communication process to resolve differences with team members’ interests,
desires or demands.

A. time management
B. negotiation
C. education
D. voice tone

1.7 The different types of control that an entrepreneur can apply in his/her
business and their relation to the (transformation process) can be classified as

A. preventative control (inputs); concurrent control (process); corrective

control (output).
B. in-control (feedback); out-control (reply).
C. pro-control (goals); concurrent control (plans); steering control
(mission).
D. pre-control (standards); concurrent control (feedback).

1.8 A budget for your entrepreneurial venture’s production and operations is

normally classified as a

A. strategic plan.
B. long-term plan.
C. short-term plan.
D. mission statement.

1.9 A ________ leader in an entrepreneurial venture mobilises people towards a

shared dream or idea and a ________ leader demands immediate
compliance.

A. visionary; commanding
B. coaching; commanding
C. wealth-seeking; pacing
D. visionary; pace-keeper

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1.10 If an entrepreneur fulfils his/her leadership responsibility by giving employees

the authority to make decisions or take actions on their own, that entrepreneur
allows for

A. coordination.
B. planning.
C. empowerment.
D. favouritism.

1.11 There are various entrepreneurial incentives that are classified as rewards of
entrepreneurship. In order to escape from an undesirable situation refers to
which rewards?

A. independence
B. financial wealth
C. personal fulfilment
D. freedom

1.12 A/an ________ entrepreneur is a person with primarily technical skills and little
business knowledge who starts a business, for example, a mechanic, who
opens a garage for servicing vehicles.

A. opportunistic
B. artisan
C. attractive
D. gazelle

1.13 When establishing a harvesting plan, one potential option is to sell part of the
business or the whole organisation to its employees. This is better known as

A. ESOP.
B. Bust-up LBO.
C. Build-up LBO.
D. MBO.

1.14 Ervin is planning to sell the first shares of his company’s stock to the public.
This is better known as

A. initial share launch.

B. first stock sale.
C. first shareholding offering.
D. initial public offering.

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1.15 When projecting future growth it is important to consider what financing will be
required for this future growth. ________ measures the degree to which an
organisation has current assets available to meet maturing short-term debt.

A. Accounts payable
B. Liquidity
C. Spontaneous debt
D. Credibility

1.16 The ________ is one of the primary tools that a small business owner can use
to manage cash flows.

A. balance sheet
B. income statement
C. cash budget
D. cash ratios

1.17 Norma has various debt noted on her balance sheet including loans from
banks and other sources with repayment terms of more than 12 months. What
types of debt are these?

A. Short-term debt
B. Long-term debt
C. Trade credit
D. Current debt

1.18 The process where inventory is purchased or produced, and then sold for cash
or on credit, is known as ________.

A. accounts receivable
B. working capital cycle
C. accounts payable
D. manufacturing capitalisation

1.19 Private individuals who invest in early-stage entrepreneurial ventures are

better known as

A. capital vultures.
B. business angels.
C. money cherubs.
D. wealth providers.

1.20 According to Petty et al. (2012), a small business owner basically has three
sources of early financing:

A. Personal savings; friends & family; credit cards

B. Personal savings; ATMs; banks
C. Friends & family; loan sharks; banks
D. Overdrafts; long-term loans; family & friends

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Read the following case study in order to answer the questions in SECTION B
AND C.

Powered by SUNCHAT

Thebogo and Jane are two students at a local academic institution who decided to
continue with part-time studies after they have completed their full-time studies,
namely a degree in marketing and a diploma in management. They have established
their own business after full-time studies. Their entrepreneurial venture was based
on an idea formulated sometime after a frustrating experience one day when their cell
phones’ batteries eventually went dead. This was as a result of several power
outages over 48 hours, allowing for no battery charge, leaving them stranded.
Because their last lecture was delayed, they had to walk home in the rain missing the
last transport for the day, as well as their transport opportunity to Durban to go and
see their favourite rock band.

They therefore decided to start-up a business and launch a service across several
academic institutions offering a vital source of energy. The energy source they
decided to offer was solar energy for mobile phones.

With the persistent electricity supply problems experienced in a country such as

South Africa, solar powered cell phone chargers can play a key role in locations
where no or limited electricity is available. This allows for a power back-up for users
as they go about their normal daily business. A recent research study into cell phone
usage by a major African operator has reported increases in ARPU (average revenue
per user) of between 13% and 29%, with their customers now empowered to charge
their phones daily. Reliable access to power and cell phone charging creates an
increase in the usage of these phones.

The two entrepreneurs obtained a CELL-C franchise to operate solar-powered cell

phone charging kiosks on academic campuses and initially targeted three academic
institutions in Gauteng. This included the University of Johannesburg, the IMM GSM
and WITS University. Their long-term plan is to expand to three other provinces over
the next five years, including the Western-Cape, Kwazulu-Natal and Limpopo
province. Other potential markets exist in neighbouring countries, but they would
need to do market research and make sure they first have a better understanding of
the business environment in those markets before entering them.

Thebogo and Jane also knew very well that growing too fast could lead to problems
and that they need to make sure they have the necessary skills, resources and
manpower in order to handle the demand presented by a growing business.
Thebogo is taking on the marketing and human resources responsibilities of Sunchat
while Jane is responsible for the finances, operations and day-to-day management of
the business. They currently have four full-time staff members servicing the eight
mobile charging kiosks they have placed on three campuses across Johannesburg.
Some staff working on larger campuses are responsible for more than one kiosk.

Source: Nieuwenhuizen and Oosthuizen (2014)

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SECTION B (40 MARKS)

Answer ALL the questions

QUESTION 2 [20]

Consider the following information about Sunchat and provide the correct answer:
(Only write the question number and correct answer in your answer book.)

2.1 Thebogo and Jane could consider developing their business into a family
business, by having their children join the business one day. If they would
develop Sunchat as a family business both of them as the senior generation
and their children as the junior generation will have responsibilities. Indicate in
each of the following scenarios:
(a) what type of responsibility the following statements refer to and
(b) whether it is a senior or junior generation responsibility.

2.1.1 Engaging in the role as both parent and business owner, investing in
and supporting for the development of succeeding generations, refers
to a (a) _______ type of responsibility and is the responsibility of the
(b) _______ generation.

2.1.2 Building trust and conveying values, providing support and feedback
but not in a one way direction, refers to a (a) _______ type of
responsibility and is the responsibility of the (b) _______ generation.

2.1.3 Articulating the organisation’s vision, the family’s values as well as how
the estate of the senior generation will be settled, refers to a
(a) _______ type of responsibility and is the responsibility of the
(b) _______ generation.

2.2 Thebogo and Jane believe in leading with integrity and therefore want to
develop an ethical organisational culture at Sunchat. If they want to develop
an ethical policy for Sunchat based on the five fundamental principles
proposed by Blanchard and Peale (1988), it should include the following five
principles: P_______; P_______; P_______; P_______ and P_______.

2.3 The leadership styles applied by the two entrepreneurs differ slightly.
Thebogo promotes emotional bonds and organisational harmony and
therefore can be classified as a/an (a) _______ leader, whereas, Jane builds
consensus through participation, which can be seen as typical of a/an
(b) _______ leader.

2.4 Jane plans to service the solar-powered cell phone charging kiosks at the IMM
GSM and WITS University campuses with the next two months. This can be
classified as a (a) _______ type of plan. She also wants to obtain the rights to
place two solar-powered cell phone charging kiosks at the University of Cape
Town at the beginning of 2017. This can be classified as a (b) _______ type
of plan.

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2.5 To ensure optimal functioning of their equipment and solar-powered cell phone
charging kiosks, Thebogo and Jane need to make sure that their suppliers
perform optimally. During their studies they have learned that the SCOR
model presents a list of five critical factors to consider when assessing a
supplier’s performance, namely: _______; _______; _______; _______; and
_______.

QUESTION 3 [20]

Jane is considering placing solar-powered cell phone charging kiosks at UCT

(University of Cape Town). There are key factors to consider when selecting a good
location. In this case Jane needs to establish if UCT is a good location and where a
suitable place on campus will be for the kiosk once they have obtained approval.

Identify five (5) key factors in determining a good business location and explain in
context how each of the five factors should be considered by Jane and her team.

(Structure your answer clearly by addressing each factor independently.)

SECTION C (40 marks)

Answer ANY TWO (2) questions

QUESTION 4 [20]

4.1 Thebogo and Jane are considering a partnership, based on the advantages
offered by this business format. Some of their friends warn them that as their
business will be growing this could become problematic. Present a table with
five (5) advantages and five (5) disadvantages of partnerships. (10)

4.2 Jane needs to have the relevant staff for the new kiosks which are being
placed on the different campuses. She asks Thebogo to assists with the
interviewing process. Identify the five (5) steps and discuss each of the steps
in order to evaluate prospective employees and to select appropriate
candidates to work for Sunchat. (10)

QUESTION 5 [20]

5.1 In Kwazulu-Natal, Thebogo and Jane realise that another person has already
obtained the franchising rights from Cell-C for the solar-power kiosks at the
University of Zululand campus. They decide to make him an offer and after
considering the various quantitative factors in order to value his business, they
remember that they should also consider non-quantitative factors.

Name and explain any five (5) of the possible non-quantitative factors that
they should consider in valuing this business which they want to buy. (10)

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5.2 Assist Thebogo and Jane with franchise terminology. As they need to write a
franchising examination before qualifying for extending their licence, they need
to establish a clear understanding of the different types of franchises, role
players and so forth. Consider the following descriptions and assist them to
classify each according to the appropriate franchising terminology.

(Only provide the question number and the correct answer.)

Description Franchising
terminology
Sunchat provides its retail franchise services within the 5.2.1
physical facilities of the SPAR on the UCT campus.
Sunchat has a franchise arrangement whereby the 5.2.2
franchisee obtains an entire marketing and management
system geared to entrepreneurs.
Cell-C is the party in the franchise contract that specifies 5.2.3
the methods to be followed and the terms to be met by
the other party.
Thebogo and Jane and their organisation Sunchat that 5.2.4
obtain the legal right to open several franchised outlets
in a given area e.g. the Limpopo province.
The privileges conveyed in a franchise contract resulting 5.2.5
in a business format.
An independent organisation, e.g. Sunchat acting as a 5.2.6
middle or sales agent with the responsibility of finding
new franchisees within a specified territory, e.g.
Zimbabwe.
A franchise agreement granting the right to use a widely 5.2.7
recognised product or name, e.g. Cell-C solar charged
kiosks.
Thebogo and Jane owning more than one franchise 5.2.8
from the same company (Cell-C).
Thebogo and Jane, as the entrepreneurs whose power 5.2.9
is limited by a contractual relationship with a franchising
organisation such as Cell-C.
Cell-C and ‘Solarpower sun-panels’ bringing together 5.2.10
two franchise brands under one roof.
(10)

QUESTION 6 [20]

You need to assist the management team with the business plan required to obtain
finance for the other available franchise opportunities at other universities which form
part of their expansion plan to other provinces. Thebogo and Jane need your
assistance in identifying the sub-sections of a business plan as proposed by Petty et
al. (2012) and also to briefly apply each of these sections to their expansion plan as
mentioned.
(Clearly identify and apply/explain each sub-section separately.)

EXAM TOTAL: 100

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May 2015 Examination ENT001/ENT