Lesson Notes By Weeks and Term v5 - Grade 8

Lesson Video

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Performance objectives

• Explain the three methods of production with SA examples.
• Develop a basic marketing plan using the 4Ps.
• Calculate the cost of production and determine a selling price.
• Identify and analyze a target market for a product.

Lesson summary

This week, we delve deeper into the exciting world of entrepreneurship, focusing specifically on the practical aspects of producing and marketing a product or service. This isn't just theoretical; it's about equipping you with the skills to identify opportunities in your community and turn them into viable businesses. Understanding production and marketing is vital because it empowers you to create value, generate income, and contribute to South Africa's economy. In a country with high unemployment, entrepreneurship offers a pathway to independence and prosperity.

Lesson notes

2.1 Methods of Production Production is the process of creating goods or services to satisfy customer needs and wants. There are three main methods of production: Job Production: This involves creating one-off, customized products or services to meet the specific requirements of a customer. Each job is unique and requires specialized skills and resources.

Example: A local tailor who makes a bespoke suit for a client is using job production. A graphic designer creating a unique logo for a company is also using job production. A construction company building a custom house is a further example.

Advantages: High quality, meets specific customer needs, potentially higher prices.

Disadvantages: High costs, time-consuming, requires skilled labour.

Batch Production: This involves producing a limited number of identical products or services in batches. Each batch goes through the production process together before the next batch begins.

Example: A bakery making a batch of 50 samoosas for a local market. A clothing factory producing 200 school uniforms in a particular size. A local brewery creating a limited-edition craft beer.

Advantages: More efficient than job production, caters to some variety, reduces costs.

Disadvantages: Requires careful planning and coordination, risk of producing unsaleable batches, requires storage space.

Mass Production: This involves producing large quantities of standardized products using automated machinery and assembly lines. The focus is on efficiency and low costs.

Example: A factory producing Simba chips on a large scale. A car manufacturer producing hundreds of identical vehicles per day. A company bottling Coca-Cola.

Advantages: Very efficient, low costs per unit, large-scale production.

Disadvantages: Requires significant investment in machinery, limited variety, can be inflexible. 2.2 The Marketing Mix (The 4Ps) The marketing mix, often referred to as the 4Ps, are the key elements that a business uses to market its products or services effectively: Product: This refers to what you are offering to customers, whether it's a tangible good (like a vetkoek) or an intangible service (like tutoring). Considerations include the product's features, quality, branding, packaging, and any after-sales service.

Example: Let's say you're selling homemade atchar. The product aspect includes the ingredients (mangoes, spices, oil), the recipe, the jar it's sold in, and the label design. Is it mild, medium, or hot? Is it traditionally made?

Price: This refers to the amount of money customers pay for your product or service. Pricing strategies can include cost-plus pricing (adding a markup to the cost of production), competitive pricing (matching competitors' prices), or value-based pricing (setting prices based on perceived value).

Example: For your atchar, consider the cost of the mangoes, spices, jars, and your time. Then decide how much profit you want to make per jar. Research what similar atchar brands are selling for in your area.

Place (Distribution): This refers to where and how you make your product or service available to your target market. This includes distribution channels, such as selling directly to customers at a market, distributing through retailers (like a local shop), or selling online.

Example: Will you sell your atchar at local markets, to friends and family, or try to get it stocked in a nearby spaza shop? Will you deliver directly to customers?

Promotion: This refers to how you communicate with your target market to inform them about your product or service and persuade them to buy it. This includes advertising, public relations, sales promotions, and personal selling.

Example: How will you let people know about your atchar? Will you create posters for your community, use social media, offer free samples, or ask satisfied customers to spread the word? 2.3 Cost of Production and Pricing To make a profit, you need to understand your costs and price your product or service accordingly.

Key concepts include: Fixed Costs: Costs that do not change with the level of production (e.g., rent, insurance).

Variable Costs: Costs that vary directly with the level of production (e.g., raw materials, direct labor).

Total Cost: Fixed Costs + Variable Costs Cost per Unit: Total Cost / Number of Units Produced Selling Price: The price at which you sell your product or service.

Profit: Revenue (Selling Price x Quantity Sold) - Total Cost

Example: Let's calculate the cost of producing 10 jars of atchar.

Fixed Costs: Jar labels: R20 Variable Costs: Mangoes: R50, Spices: R30, Oil: R20, Jars: R50 Total Variable Costs: R50 + R30 + R20 + R50 = R150 Total Cost: R20 (Fixed) + R150 (Variable) = R170 Cost per Jar: R170 / 10 = R17 To make a profit, you need to sell each jar for more than R

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7. Let's say you want to make a profit of R10 per jar.

Selling Price: R17 (Cost per Jar) + R10 (Desired Profit) = R27 Therefore, you should sell each jar of atchar for R27.