Question 1 (Marks: 20)
The choice facing companies today is simple: innovate or perish. Those that will survive today’s economic environment and succeed in tomorrow’s are those willing to continually reinvent themselves, their products, their brands, their processes-in short, the way they do business. Many organizations are even looking for innovative ways to innovate, replacing traditional brainstorming techniques with new, more inventive processes like SmartStorming and 3-D Ideation. Introduce the world to the new “new thing”, the bleeding edge technology, the better mousetrap, the reinvented paradigm and there’s a good bet you’ll remain ahead of the curve and be around to reap the rewards in the future.
Smart Storming. 2018. Innovate or Perish: The new Darwinism. Smart Storming, n.d. [Online]. Available at: https://www.smartstorming.com/innovate-or-perish-the-new- darwinism/#:~:text=The%20choice%20facing%20companies%20today,the%20way%20they%20do
%20business [Accessed 19 March 2022].
Q.1.1 Discuss dominant design theory and provide an original example to support your discussion.
Q.1.2 Outline the bottom of the pyramid (BOP) process for developing business specifications.
Q.1.3 Describe Schumpeter’s theory of creative destruction and provide an example.
Q.1.4 Using your own words, explain the key principles behind applied design thinking.
Question 2 (Marks: 20)
South Africa’s low price leader puts R330m into consumers’ pockets in one month
In the past month (October 2020), Shoprite and Checkers, which are well entrenched as South Africa’s low price leaders, have saved consumers R333 million.
Ten million customers have joined the Shoprite and Checkers Xtra Savings rewards programme to receive instant cash savings and other benefits, and Checkers has put more than R1 billion back in the pockets of consumers since its rewards programme launched just over a year ago.
The instant savings offered via the Xtra Savings programme are in addition to the low prices the Shoprite Group offers its customers every day. This is in line with its long term strategy to provide affordable products and evident in its continued market share gains during the coronavirus pandemic when customers were under unprecedented financial pressure.
The Group’s scale, and operational efficiency, is critical to its low price leadership strategy, and its ability to retain its competitive position on affordability. It also continues to innovate to bring the lowest prices to customers. This has included the launch of the Usave eKasi mobile trucks to ensure customers in hard to reach areas were able to get access to food, and virtual food vouchers to enable customers to make sure family, employees and friends had access to food during the national lockdown.
All innovation is aimed at putting customers first and making sure the Group can continue to provide the best value at the lowest price. Through Shoprite, Checkers and Usave stores, the Group brings low prices to consumers from all walks of life, serving 24 million customers through over 1 billion transactions annually. In addition the Group has subsidised over 150 million R5 deli meals since 2017 and sold 63 million loaves of R4.99 bread in the past financial year as it continues to make sure that someone with just R5 in their pocket can afford to eat.
The R5 meals were introduced to ensure that customers could get a hot meal from a Shoprite deli for R5 or less. The Group also subsidises its 600g in-house bakery bread, which has remained at R4.99 since April 2016, when the retailer first started its bread subsidy.
The Group’s focus on its customer was built on the back of affordability and addressing customer needs, and this remains a key differentiator of its business model.
Shoprite Holdings. 2020. South Africa’s low price leader puts R330m into consumers’ pockets in one month. [Online]. Available at: https://www.shopriteholdings.co.za/articles/Newsroom/2020/south-africa-s-low-price-leader-
puts-over-r330m-into-consumers–.html [Accessed 19 March 2022].
Q.2.1 There are various considerations that organisations can use when evaluating strategies to determine which are the most suitable. Using the information from the above case study, evaluate the consistency, desirability and validity of the low- cost strategy that Shoprite is pursuing.
Note: Ensure that you draw on examples from the case study to support your answer.
Q.2.2 Differentiate between the three levels of strategy and provide suitable and original examples for each.
Q.2.3 Elaborate on the disadvantages of integrated strategies.
Question 3 (Marks: 20)
David Munro hangs up his boots as Liberty CEO and returns to Standard Bank
Liberty has a new CEO. On Friday, the Standard Bank-owned insurer announced that its financial director Yuresh Maharaj had replaced David Munro on 10 March. Munro had been the CEO of Liberty for just under five years. He was brought in from Standard Bank to stabilise the insurer after Thabo Dloti resigned with immediate effect following a difference of opinion with the board. Liberty said he is now going back to the bank to oversee the integration of Liberty into the Standard Bank Group. He will remain on the Liberty board as a non-executive director.
Munro’s tenure at Liberty
When Munro came to Liberty, the company wasn’t making losses, but its earnings were on a downward trend, and the company was not running a very profitable operation either. Its new business margin stood at just 0.5% in the 2017 financial year. Munro implemented a turnaround strategy, which saw the company sell its majority stake in some of its health businesses in the continent and exited several African markets. It also sold its short-term insurance platform to Standard Bank.
By the end of 2018, Liberty’s operating earnings before investment income were up 42%. Its South African insurance and asset management businesses were growing by double digits. By the end of 2019, Munro was no longer talking about turning around Liberty. He said the group was firmly in the growth phase again.
But the pandemic put harsh brakes on that growth. The Covid-19 claims plunged the insurer into a R2.2 billion loss in the first half of 2020. And although it bounced back to profit a year later, it was writing new business with a margin of just 0.2%, worse than during the trying times in 2017. Standard Bank swooped in and offered to buy out minority shareholders in order to make Liberty its wholly owned subsidiary. The intention is to delist the insurer from the JSE.
In October, Liberty shareholders voted overwhelmingly in favour of Standard Bank’s buyout offer. The insurer delisted from the exchange on 1 March. The insurer’s 2021 financial results were published as one of Standard Bank’s subsidiaries on Friday. Its headline earnings tanked 36% in the 12 months to December to a R419-million loss.
Standard Bank said Liberty showed progress operationally but was negatively impacted by excess claims and a pandemic provision top-up. The bank said death claims exceeded Liberty’s expectations resulting in excess claims of R1.2 billion. The insurer also raised an additional Covid- 19 pandemic reserve of R1.8 billion. When excluding the Covid-19 pandemic impact, Liberty’s normalised operating earnings grew to R1.33 billion from R724 million in 2020.
Q.3.1 The article above makes reference to a turnaround strategy based on a defensive corporate strategy.
Q.3.1.1 Discuss in detail the various options that Liberty may have chosen as part of a defensive turnaround strategy. (10)
Q.3.1.2 Provide evidence from the case study that supports the turnaround strategy actions taken by Liberty. (10)
Answers to Above Questions on Business Management
Answer 1: 1.1: Dominant design theory is defined as the technology management concept and it is also known as the de facto standard. This theory was first introduced by James M Utterback and it mainly identifies the key technological features that become a de facto standard. Dominant design is generally the one that is effective enough in achieving the allegiance of the marketplace. One example that supports the dominant design theory concept is ……..
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