Of all South African retailers, the expectation was that Woolworths, with its higher-earning consumer, should have been best-placed for the disruptive effects of the Covid pandemic to its operations, as consumers who were once lukewarm to online shopping quickly switched their habits.

But Woolies was found wanting as its rivals Shoprite and The Foschini Group — owner of Markhams — stole a march and were much better prepared to service demands from a customer base looking for the fastest delivery to their doorstep.

The Cape Town-based retailer under the leadership of Roy Bagattini — who came on board just before the pandemic struck — has sought to claw back some of the lost ground by following a host of mainstream players that have focussed on online retailing space.

Before the disruptive effects of the pandemic, there wasn’t much airplay given to the potential of online commerce in the South African context. Analysts, for the most part, were focussed on the performance of brick-and-mortar stores spread across the almost 2 000 malls in the country.

It’s fair to argue that South Africa’s dominant retailers had treated online shopping as a distant but acknowledged disruptor to their businesses, which were still largely geared towards malls.
Overnight, the pandemic flipped business models on their heads; models that now have to consider the imminent arrival of Amazon’s retail arm into the market.

Attracting the US giant that has acted as disruptor-in-chief in that country’s retailing space for almost 30 years is projections from Euromonitor that South Africa’s total e-commerce market could reach R100 billion in value by 2024.

This year, e-commerce penetration (including groceries) is forecast to reach 6.4%.

Amazon, which has already had a presence in the country through its web services business (AWS) for almost 20 years, was expected to start the rollout of its retailing operations this month, but this is now set for October.

In geographies with an established and a mature retail sector, such as Australia, in 2017, its arrival in the parking lot has had a significant impact. Unlike Walmart’s arrival through the purchase of Massmart in 2011, Amazon’s is expected to be noticeable in the parking lot on the strength of its logistics chain, as the company already owns warehouses.

Makwe Masilela of Makwe Fund Managers believes the brick-and-mortar businesses of South African retailers will not be threatened, but their online offerings will be vulnerable to Amazon’s arrival.

Egged on by the pandemic, South African retailers have been ramping up their online presence over the past three years. From 60 minute delivery for grocery retailers to one-day delivery or click and collect options for clothing and appliance retailers. The one-time laggard, Woolworths reported that for its annual results ended 26 June 2022 it grew online sales by 16.4%, contributing 12.4% to the group‘s total turnover. Mr Price, online sales grew 48.2% and contributed 2.9% to retail sales for the year ended March 2022.

The country’s second largest grocery retailer and clothing retailer, Pick n Pay said since it launched its online on-demand grocery offer in August 2021 as Pick n Pay asap! The service has delivered year-on-year growth of over 300%.

A more direct competitor to Amazon is the Naspers owned Takealot, which has established something closely resembling a monopoly in the ecommerce space, saw revenue grow 46% for the 2022 financial year.

Masilela said the Amazon threat is so big that the smaller online players might end up consolidating, depending on the offering, pricing and economies of scale.

He said in addition to smaller online marketplaces consolidating to survive, they can also be used by Amazon.

“It can also be advantageous for the small players because they can be used as the last leg, the last mile. You’ll have somebody at Bushbuckridge who will go and take stuff from Nelspruit and go to the rural areas of Mpumalanga on behalf of Amazon,” he said. Masilela made the example of car insurance companies, which subcontract to local companies should a client have a tyre puncture.

“They will not send someone from the national office in Joburg or Pretoria, they subcontract with the local guys. That is the role small online retailers can play with Amazon arriving. They can be used as a last mile.”

Masilela however noted that grocery retailers’ online offerings such as Woolworths Dash and Checkers Sixty 60 will not be affected much by the arrival of Amazon, because the likelihood of Amazon selling groceries is minimal.

“They [Woolworths Dash and Checkers Sixty 60] are safe especially because they are owned by those grocery shops.

“You might find that it’s quicker to use Sixty 60 from Checkers directly instead of using Amazon. They can frustrate Amazon on that part. They won’t allow Amazon to come eat their lunch,” he said.

Adapted from Madubela, A. 2023. Amazon to eat Woolworths, Shoprite and Takealot lunch? [Online]. Available at: https://mg.co.za/business/2023-02-27-amazon-to-eat-woolworths-shoprite- and-takealot-lunch/ Accessed 6 March 2023.

Questions:
With the aid of examples related to the case study above, discuss the primary activities of a value chain. (10)
Answer requires a word count: 200 words

Discuss inflation, the business cycle and interest rates as factors of the economic environment. Use examples related to the case study to substantiate your answer.
(15)
Answer requires a word count: 300 words

QUESTION TWO [25]
Discuss the contributions of each of the following theorists to management’s school of thought.
Henri Fayol (5)
Elton Mayo (5)
Word count: 250 words

Management theories have evolved from an emphasis on authority and structure to a focus on employees and the business environment. Discuss any five theorists’ contributions which is still relevant to business today. Include examples to substantiate your answer. (15)
Word count: 300 – 400 words

Guidelines
1. There are 2 questions in this assignment.
2. Make sure that you have carefully read and fully understood the questions before answering them. Answer the questions fully but concisely and as directly as possible. Follow all specific instructions for individual questions (e.g. “list”, “in point form”).
3. Answer all questions in your own words. Do not copy any text from the notes, readings, or other sources. The assignment must be your own work only.
4. Follow the word count at the end of each question.

Answers to above questions on Business Management

Answer 1: The value chain framework is an important framework that includes both the primary activities and supportive activities. The important primary activities include inbound operations, operations, outbound logistics, marketing and sales, and service. In the given case study on Amazon to eat Woolworths, Shoprite and Takealot lunch, the important primary activities include…