QUESTION 1 (31 marks)
The following are extracts from Tiger Brands Ltd. (“Tiger Brands”)’s 2022 Annual Integrated Report:
• Various new nutritious and affordable product innovations launched.
• Micronutrient enrichment across >30% of portfolio.
• 67 farmers supported under the aggregator model.
• 7% YoY(“Year-on-Year”) reduction in absolute energy use.
• 8% (YoY) reduction in absolute water use.
• 70% of plastic packaging is recyclable.
• Working through CGCSA on industry food-waste reduction framework
• 0,45 lost-time injury frequency rate (2021: 0,31).
• R97 million invested in employee training and development.
• 9% improvement in overall equipment effectiveness (“OEE”) across our focus sites over the past three years.
• Initiated Isondlo, a R42 million nutrition programme supporting 10 000 food- insecure children (five years of age and younger) and their families, with a monthly food hamper for nine months.
• 300+ schools reached through EduPlant.
• 65% of electrical energy at manufacturing sites from renewable sources.
• Create 4 000 new jobs.
The year under review can be characterised as a year of two halves. The first half was impacted by a lag in recovering unprecedented and unanticipated levels of cost inflation. This was compounded by certain supply constraints as a consequence of global and local supply chain challenges and industrial action at Snacks & Treats (segment/ department) and Bakeries (segment/ department). The second half performance, despite a continuation of the cost and supply challenges, exacerbated by prolonged periods of loadshedding, reflects the effective implementation of
category-specific margin recovery initiatives, as well as the execution of specific initiatives in Bakeries (segment/ department), Snacks & Treats (segment/ department) and Exports (segment / department). In addition, the Deciduous Fruit (segment/ department) business benefited from improved global fruit pricing and a weaker exchange rate.
…….. the company has faced various internal challenges, including prolonged strike action at the Snacks & Treats operation (segment/ department) … and the impact of a general skills shortage in some technical areas critical to our business.
Although slightly lower than previously guided, cost-saving initiatives and supply chain efficiencies continued to make a positive contribution to the results.
We (Tiger Brands) saw a pleasing turnaround in performance in Exports and International (segment/ department), driven primarily by an improved performance from the Deciduous Fruit (segment/ department) … Deciduous Fruit business, which benefited from higher international fruit prices and improved volumes, resulting in revenue increasing by 32%. In addition, this business recorded an operating income of R26 million, driven by higher volumes and favourable exchange rates due to the weaker rand, compared to an operating loss of R147 million incurred in the prior year. The Exports business grew revenue by 14% following improved sales of powdered soft drinks and seasoning into key export markets in the second half. Operating income increased significantly to R143 million (2021: R71 million) due to better realisations, increased factory efficiencies, improved stock management and a favourable product mix.
Elsewhere, Chococam’s (segment/ department) revenues increased by 10%….
comprising 7% volume growth and 7% price inflation, reduced by an unfavourable foreign currency translation movement of 4%. Volumes were driven by the implementation of optimal pricing strategies and packaging solutions, an improved distribution network in key markets and market share gains in chocolate. Operating income in rand terms increased by 5% to R181 million.
Home and Personal Care’s (HPC) (segment/ department) top line was unable to recover from a poor start to the year, with unfavourable weather conditions impacting category demand for pesticides, compounded by increased raw material and packaging costs. Personal Care’s revenue increased by 4% to R672 million as a result of price inflation of 12%, offset by volume declines of 8%. Despite improved profitability in the second half, significant increases in ingredients and packaging costs, as well as an adverse product mix, resulted in operating income declining by 66% to R16 million. Home Care was unable to recover… Revenue declined by 9% to R1,2 billion, due to 17% lower volumes, offset by price inflation of 8%. Lower volumes, together with higher raw material and packaging costs, resulted in operating income declining by 24% to R292 million.
Revenue in Milling & Baking (segment/ department) increased by 5% to R10,6 billion, influenced by price inflation of 16% and an overall volume decline of 11%. Bakeries benefited from the planned volume recovery initiatives in the second half, driven primarily by top-end retail, while the performance in the general trade gained encouraging momentum. Despite an improved volume performance in the second half, this was not enough to offset the poor start to the year. In addition, price increases and cost reduction initiatives were insufficient to counter the significant impact of higher fuel costs and raw material inflation. Maize’s performance was adversely impacted by continued volume pressure as well as volatile raw material prices. This was compounded by the effect of higher conversion costs driven by increased generator utilisation amid excessive loadshedding and power outages. The sorghum- based breakfast and beverages business delivered a muted performance, impacted by supply challenges and lower demand. Overall, Milling & Baking’s total operating income declined by 21% to R803 million.
Revenue in Other Grains (segment/ department) grew by 9% to R4,9 billion and operating income increased by 33% to R469 million, largely as a result of Rice’s significantly improved performance. Although the Oat-based breakfast (Jungle) and Pasta businesses delivered solid revenue growth, higher raw material and distribution costs, as well as sub-optimal factory performances, adversely impacted profitability. Volumes in Rice benefited from category deflation relative to other carbohydrates as well as successful brand and customer initiatives.
Groceries (segment/ department) also recorded strong revenue growth and benefited from new product innovations. Groceries delivered a strong top-line performance, growing revenue by 15% to R6,4 billion, driven primarily by price inflation of 11%, while total volumes increased by 4%. Despite significantly higher selling prices, volumes benefited from innovation and support from top-end retailers, as well as growth in the wholesale channel. Core offerings benefited from cost-competitive value packs and price-pack solutions for value-seeking consumers, resulting in market share gains across most segments. Volumes were further supported by distribution gains on product innovations such as canned fish. The improved top line, together with ongoing efficiency improvements, logistics savings, optimal promotional activity and revenue management benefits, resulted in operating income increasing by 51% to R597 million.
Snacks & Treats (segment/ department) produced a strong second-half recovery following supply challenges in the first half due to labour disruptions and low opening stock levels. Revenue at Snacks & Treats increased by 4% to R2,4 billion, supported by price inflation of 8% less an overall volume decline of 4%. Revenue in the second half increased by 24% following industrial action in the first quarter of the financial year which adversely impacted sales and inventory levels going into the peak Easter season. A particularly strong performance was delivered in the second half across the portfolio with distribution gains in the general trade supporting recovery. Operating income increased by 12% to R263 million due to a favourable product mix, while the factory benefited from increased throughput as inventory levels were restored in the second half.
Revenue growth of 4% to R1,1 billion in the Baby segment (segment/ department) was driven by price inflation of 11%, offset by volume declines of 7%. Volumes are reflective of lower demand across the jar and pouch segments within the nutrition portfolio, particularly in the second half of the year. Operating income increased by 3% to R147 million, with the benefit of improved factory efficiencies being partially offset by an unfavourable product mix. Once-off costs related to the precautionary recall of certain baby powder products amounted to R16 million, and largely comprise the cost of the affected stock that has been written off, as well as the logistics costs of the recall.
The year ahead is likely to remain challenging. Persistently high unemployment and inflation levels together with higher interest rates, will place further pressure on overextended consumers. In addition to local and global supply chains remaining volatile, our cost base is sensitive to rand weakness as well as higher commodity prices whilst the cost of mitigating the regular occurrence of loadshedding is significant. This will require ongoing agility and judicious price/volume management in the face of a challenged consumer. To this end, the progress made over the last three years in terms of stabilising the core and building a solid foundation for growth will help facilitate the agility required. Significant investments were made in technology and digital capabilities, which will help drive operational efficiencies, increase automation, improve data analytics, and drive revenue management initiatives. Increased effort is now being put into harnessing digital technologies and information solutions to drive operational efficiencies, increase automation, and improve customer and consumer data and analytics.
We (Tiger Brands) have completed the development and approval of a comprehensive digital strategy, including cyber security, that defines the key areas of focus for the business and serves as a comprehensive framework and roadmap for our business initiatives over the coming years.
With consumer spending remaining depressed and competition high, this challenge remains material and threatens our market share.
Board committees’ composition and responsibilities
The board has delegated certain of its functions to committees to assist it in meeting its oversight responsibilities in line with the board charter. The board charter and board committee terms of reference are reviewed annually to ensure they remain relevant and aligned with the requirements of King IV, the Companies Act and governance best practice.
Kindly note that it is not necessary or required of students to pursue the source. The information in the scenario above, an understanding of the textbook material and general logic are sufficient.
Strategic management and decision-making can take place at three levels: the corporate level, the business level and the functional level.
Specially to Tiger Brands’ case, explain what will be considered the corporate level, the business level and the functional level respectively. (3 marks)
At corporate level, an organisation can have one or a combination of the following strategies: internal growth strategies; external growth strategies; co-operative or corporate combination strategies and, lastly, turnaround and exit strategies.
Explain the internal growth strategies and external growth strategies to Tiger Brands’ board of directors. Advise them which one or combination of internal and external growth strategies will be best suited for Tiger Brands’ business. (15 marks)
Explain to Tiger Brands’ board of directors the available strategies from which the organisation can choose at a business level.
Supplement your answer by advising Tiger Brands which business level strategy will suit Tiger Brands’ business the best. (13 marks)
QUESTION 2 (69 marks)
Refer to the scenario provided in question 1 and answer the following questions.
Once the strategy of an entity has been formulated, the strategy must be implemented. List the three (3) important elements which the strategy implementation stage consists of. (3 marks)
In question 1’s answers, a strategy was planned for Tiger Brands.
Explain to Tiger Brands the five (5) principles to successfully implement a strategy. (17 marks)
Explain to Tiger Brands the ten (10) mechanisms that can be followed to enable learning in the organisation.
Supplement your answer by applying each mechanism to Tiger Brands’ context and thus advising the entity. (28 marks)
Describe to Tiger Brands the three (3) key elements in resource allocation. Supplement your answer by applying each key element to Tiger Brands’ context. (12 marks)
Explain to Tiger Brands the three (3) important enablers for resource allocation. (9 marks)
Answers to Above Questions on Tiger Brand Case Study
Answer 1: Strategic management and decision making are important in any type of organisation across any levels. In the given case study on tiger brand, the role and implication of strategic management and decision making is crucial across all the three levels such as the corporate level, the business level and the functional level. At the corporate level, it is important to make decisions in terms of managing the overall portfolio of businesses at Tiger brand.
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