2014
Divisional strategy analysis and evaluation report: Pick n Pay Stores Limited
BCom Honours (Strategic Management) Strategic Management (STM8X09 Group Assiggnment

Students (Authors): Name & Surname 1. Molefi Nyofane 2. Wayne Fisher 3. Wilson Nkunjana 4. Kamohelo Makhetha 5. Bulelani Mini Student numbers 200618193 201002263 201001767 201238497 201005015

About the report:
This report analyses and evaluates the Pick n Pay (PnP) Stores Limited strategy with reference to the company’s division which covers Gauteng, Free State and Northern Cape Province retail stores. However, we used Gauteng stores for the analysis of PnP’s strategies. This report critically evaluates the PnP vision, mission and values within context of their internal and external environment. A proper strategy of a company should have achievable, realistic, and measurable strategic objectives. Therefore, PnP strategic objectives are analyzed based on these factors. The strategy sustainable growth with reference to the social, ethical and environmental duties that PnP should consider in their strategic formation will be also be evaluated. Lastly the report critically evaluates the implementation of the strategy of PnP Stores Limited with reference to the division mentioned The region contributes 60% percent of the company turnover and there are about 170 stores in total across these three provinces.

5/12/2014

Strategic Analysis Report

Indemnity Declaration:
We, The Strategic Management BCom Honours students at the University of Johannesburg declare that this report will not be used for any publication whatsoever, and that all the information given to us by Pick n Pay’s managers and stores will be treated confidentially. We also confirm that this is an assignment that is to be marked by our Lecturer, Ms Anoosha Makka, once marked the original copy can be handed to Mr Chris Mawhinney who is the General Manger for Gauteng Supermarkets. Signatures: MP Nyofane B Mini W Fisher ……….. ……….. ……….. K Makhetha W Nkunjana ……….. ………..

Acknowledgements First of all we would like to profusely thank the faculty of management, for allowing us the opportunity to be lectured by such a dedicated and committed Lecturer Ms Anosha Makka, we wouldn’t have done this project if it wasn’t because of her mentoring, advice, and valuable strategic management knowledge. Secondly, our thanks go to Mr Chris Mawhinney, Pick n Pay General Manager Gauteng Supermarkets, for your time, and dedication for helping us. We had several interviews of which you hosted us very well. We really are thankful for your willingness in sharing your company’s information. Lastly, thanks to Cresta and Campus Square shopping mall. Every time we visited Pick n Pay at this malls we were received with gladness and everyone was very helpful. Thank you, Thank you, and Thank you. Yours Sincerely, MP Nyofane, W Fisher, K Makhetha, W Nkunjana, B Mini 12 May 2014

1

Strategic Analysis Report TABLE OF CONTENT INTRODUCTION.........................................................................................................................................................2 Pick n Pay Strategy ................................................................................................................................... 3 SECTION 1 ..................................................................................................................................................................6 ANALYSIS OF VISION, MISSION & VALUES ........................................................................................ 6 1.1 Vision Statement ..........................................................................................................................................7 1.2 Relevance to internal and external environment ..................................................................................10 1.3 Mission Statement .....................................................................................................................................12 1.4 Core Values ................................................................................................................................................15 SECTION 2 ................................................................................................................................................................17 STRATEGIC OBJECTIVES.................................................................................................................... 17 SECTION 3 ................................................................................................................................................................21 SUSTAINABLE GROWTH OF THE STRATEGY .................................................................................. 21 3.1 Ethical Consideration ................................................................................................................................21 3.2 Social Responsibility .................................................................................................................................25 3.3 Environmental Duties ................................................................................................................................28 SECTION 4 ................................................................................................................................................................31 CRITICAL EVALUATION OF THE IMPLEMENTATION OF THE STRATEGY .................................... 31 4.1 Implementing and executing the chosen strategy ................................................................................31 4.2 Components of Strategy execution/implementation .............................................................................32 4.2.1 Build an organisation capable of executing the strategy successfully ...........................................32 4.2.2 Allocation resources which will drive strategy execution ..................................................................33 4.2.3 Create a reward & incentives system .................................................................................................34 4.2.4 Exercising strong leadership to drive execution forward ..................................................................36 4.2.5 Instilling a corporate culture that promotes good strategy execution .............................................37 4.3 The Evaluation of the implementation ....................................................................................................39 4.3 Market Position ..........................................................................................................................................43 SECTION 5 ................................................................................................................................................................45 CONCLUSION ........................................................................................................................................ 45 6. REFERENCE ...............................................................................................................................................46 Appendix ..........................................................................................................................................................48

1

Strategic Analysis Report

INTRODUCTION
Pick n Pay is the second largest retail supermarket chain store that is listed on Johannesburg Stock Exchange (JSE) which was established in 1967. This retail store operates in South Africa and other parts of Southern African countries like Botswana, Mozambique, Zambia, Zimbabwe, Lesotho, Mauritius and Namibia. The Pick n Pay currently owns 49% share of a Zimbabwean supermarket business. The company had three chairmen since its establishment, of which the current chairman is the eldest son of the forerunner chairmen who retired in 2010. The founder of Pick n Pay, Mr Raymand Ackerman purchased the Pick n Pay supermarket group from its founder Mr Jack Goldin (who is a subsequent Founder of Clicks Group) (PnP Website, 2014). The Pick n Pay business operates concurrently as corporate (owned) and franchised, but major most in the corporate rather than franchise. The main business trading of the company to its customers focuses on groceries, clothing and general merchandise, in addition valuedadded services to satisfy the customers’ expectations and evolving need (PnP, 2014). They have 847 stores in South Africa across all formats, 94 stores outside South Africa, which set to contribute 7.7% of the sales. The company is expanding increasingly across Southern Africa. According to their Annual Report (2012:3), “In the next 12 months we will open at least 111 stores, across all formats, across South Africa and 3 stores outside South Africa, in Mozambique, Zambia, and Mauritius. This means by 2014 the company will have 1055 functional stores across the regions of Southern Africa. It has approximately 50 000 employees and makes about R54.7 Billion revenues with a net income of R1.19 billion according to 2009/2010 financial year (PnP, 2014). The Pick n Pay operates in the retail industry. In 2012 the company had R55.3 billion as turnover which increased from R51.9 billion in 2011. The Geographic spread of the Pick Pay as shown in figure, demonstrates and substantiate the 50 thousand employment capacity and footprint capability across Africa:

2

Strategic Analysis Report

Figure 1.1

Geographic Spread of Pick n PAY

Source: Annual report (2012)

Pick n Pay Strategy
According to the divisional manager Mr Chris Mawhinney, 2011 financial year was the toughest trading year in the history of the company. The company undertook a number of significant and challenging steps in pursuit of transformation of the business, while at the same time facing an exceeding difficult trading environment. One of those decisions made was to seek a new CEO, after an intense internal search, the company appointed Richard Brasher, the former Tesco board member (Fin24, 2014). The New CEO started effectively in February 2013. The chairperson of PnP, Mr Gareth Ackerman, mentioned
3

Strategic Analysis Report

that they were extremely fortunate to have secured Brasher, with 25 years of career experience, during which the company was leading expanded both domestically and internationally. When he entered Pick n Pay, he was faced with three major strategic moves, Pick n Pay’s smart shopper loyalty programme, which is having more 6 million subscribers now, PnP private label business and its online shopping facility. In response to tougher markets, inflation and intensity of rivals, the Pick n Pay’s focus has been to strengthen its strong South Africa retail business while adopting a systematic approach to expanding into other opportunity driven areas across the African continent. The emerging market opportunities and fight for space being the major challenges that retail industry is facing, the company reviewed their strategy 2011/2012 financial year in order to maintain their market position and competitive advantage. The guiding principles of the company’s strategy are:    Consumer sovereignty Doing good is good business, and Maximizing business efficiency (Annual Report, 2013:2)

The new CEO came with his philosophy of going back to basics. He looked at where the company is, where it was and where it ought to go. His philosophy was to be used to tackle three statements mentioned above The current report analyses and critically evaluates the Pick n Pay’s divisional strategy. The division to be analyzed contributes about 60% to the turnover of the total company; its footprint covers Gauteng, Free-State, and Northern Cape. There are about 170 stores in total across these three provinces. The strategy is driven from top all the time. Its stores have Managers, the Board members decide the strategy and a direction, the CEO is tasked to explore it with his Regional managers then, from there it will go to the store managers who will be briefed, then it goes to employees who include operations managers, brand managers etc. The hierarchical structure of the strategy is from

4

Strategic Analysis Report

corporate strategy – business strategy – Functional Area Strategy – and Operating strategy. Thus, the current report focuses on how Functional Area strategy is carried out, although the report will analyses from the corporate strategy, the essence is on the way a division which is called a region of Gauteng carry out their strategy. The current state of the company in all divisions of its operations is to fight for geographical space, operational and technical efficiency, supply of high-quality, affordable food, and provision of significant employment and economic opportunities across its value chain.

5

Strategic Analysis Report

SECTION 1
ANALYSIS OF VISION, MISSION & VALUES
This section of the report analyses and evaluates the Pick n Pay’s vision, mission, and values within the context of the company’s internal and external environment. A strategic vision describes “where are we going” - the course and direction management has charted and the company’s future product-customer-market-technology focuses. Gamble et al (2013:16), outlines that top management’s views about the company’s direction and future product-customer-market-technology focus constitute a strategic vision for the company. According to Lord (2011) a company’s vision mainly focuses on what the business or team will look like. Well-articulated and clear directional path from top managers makes it easy for all stakeholders to steer their energies in the right path of where the company is aspiring to go. The strategy of the company depends deeply upon the vision of where the company need to go, which is crafted from the top management. Furthermore, the mission of the company is a way to achieve the vision (future strategic course –“where we are headed and what our future product-customer-markettechnology focus will be” (Gamble et al, (2013:20). The mission statement meant to convey a company’s purpose (vision) in a language that is specific and clear enough to give the company its own identity. The ideal mission statement of the company should be descriptive enough to allow the company identify its products or service, specify the buyer needs it seeks to satisfy, customer groups or market is seeking to serve, clear approach to pleasing customers, and be able to give the company its own identity. Once the company has developed a clear vision and a mission, then they will need to be linked to the company values. These are beliefs, traits, and behavioural norms to display in conducting the company’s business, and pursuing its strategic vision and mission.

6

Strategic Analysis Report

1.1 Vision Statement There are characterises of effectively worded Vision statement and common shortcoming in Company Vision statement that were developed by gurus in the strategic management field. Table 1.1 and 1.2 explain what each component entail in critiquing the vision statement of the company.

Source: (John P. Koteer, 1996:72) adapted from Gamble et al, 2013) Based on this table, we found it relevant to analyse the Pick n Pay’s vision statement using these tools, this will help the executive management of the Pick n Pay to understand what components exists in their vision statement and the shortcomings that are apparent in this regard. The vision of the company is constructed in 6 statements that detail a vision for each stakeholder involved with Pick n Pay holdings. In table 1.2 we have tabled the vision and elements that we find relevant to the vision of the company.

7

Strategic Analysis Report

Table 1.2

Source: Authors own table If one looks at the above table regarding the Pick n Pay’s vision statement, it is clear that their vision contain some effective elements, the first one identified is that it is focused, as it stipulates clearly where decisions must be made because they have outlined what must be achieved for various stakeholders. For an example, the vision for communities guides the managers of the divisions visibly when coming to the community development. The Pick n Pay only supports activities that foster education and literacy programme, housing, self-help schemes, child welfare, parent support groups to mention the few. This makes it simple for mangers in the store to understand to what extend does the company invest in the community where it operates.
8

Strategic Analysis Report

Another element seen in the vision is that it makes a good business sense, a company that serves customers on a daily basis should for an example desire to give its customers a variety and wide range of products and services to choose from with an outstanding quality, range, and affordable prices at all times. Another example of their vision that shows the element of desirability is the way they intend to develop small businesses and suppliers through various programmes that are geared in enhancing access to PnP's supply chain which will create jobs in the countries of operation.

The third effective element we discovered in the vision is the vision is feasible. When one look at the company vision for their stakeholders for an example, it is evident in the past 2 years that the Pick n Pay has been able to generate consistent profits in a sustainable manner which can be evidently marked with their 1055 stores victory in as of 2014, that are assumed to be operating according to trial and tested principles and innovative business practices. One of the most overwhelming innovations that can attest to this is the invention of customer loyalty programme smartshopper cards, which is the largest in the country with over five million cardholders. Not only did this invasion retained customers but also gave an insight to PnP executive management on the buying trends of their customers. The Pick n Pay turnover increased from 51.9 billion in 2011 to 55.3 billion in 2012.

Also though the vision statement has some effective elements, the researchers also pointed out some shortcomings in the Pick n Pay’s vision. Gamble et al, (2013:17) says that a surprising number of the vision statements found on company websites and in annual reports are vague and unrevealing, saying, very little about the company’s future product-market-customers-technology focus. Some company’s vision statement can apply to any company existing in any industry. The researchers found that Pick n pay’s vision is not forward looking, the vision speak more of how the company want to meet different stakeholders needs, and how they seek to ensure that various stakeholders benefit from the business. But it doesn’t indicate whether or how the management
9

Strategic Analysis Report

intends to alter the company’s current product-market-customer-technology focus. It can apply to any company in any of several industries. There is isn’t unique identity or picture that the management seek to create for the future.

What seemed to lack in the vision is how the Pick n Pay innovatively and trendily seek to alter the course of the industry. The vision statement does not provide an aspect that show how Pick n Pay management can be viewed as trend setters and trail blazers in the industry. The forward looking vision gives a specific picture of what the company intends to create with product-market-customer-technology.

Another shortcoming seen is that the vision is too broad, the vision has so many stakeholders in it, and it does depict one common direction of where the company is going. That’s the challenge of having more than one vision statement, the decision making and resources of the company will have to be directed in various spheres of what the company is aspiring to achieve. The vision is the direction management has charted and the company’s future product-service and technology focus. The fact that is too broad makes it not to be distinctive, it doesn’t give the Pick n Pay a unique identity, and it can be used for any other company including rivals operating in the same industry. What the vision brings is the unique identity, when people think about Pick n Pay what come to mind?, When customers and employee go to any pick n pay store what sort of difference or uniqueness do they see, can the Pick n Pay’s vision be differentiated with other rivals in the industry. All this aspects should be communicated clearly in the vision statement of the company. 1.2 Relevance to internal and external environment Although the shortcomings are apparent in the vision, the researchers found that to some extend the vision of the company is relevant to their internal environment. It is relevant for its internal and external environment as it considers all its stakeholders and sees its going forward in to the future with eye on its stakeholders and its environment.
10

Strategic Analysis Report

It contains directional and desirable visions through their employees and their consumers and becoming the choice of retail in South African and providing quality goods and services. Vision indicates the importance of equipping your employees and creating good working conditions to ensure quality products and services and it very much relevant in terms of the internal environment. It also puts great effort in having competitive and relevant remuneration terms with its employees. However the vision did not emphasize on the factors such as team development and weaknesses – lack of skilled employee in the retail industry of South Africa. There is no specific aspect that show how the Pick n Pay develop their employees and ensuring that they main the high skill. The researchers do not neglect the fact that it might be taking place in the company, but rather address this point of the written vision point of view.

In addition the vision also demonstrates relevance the Macro-environment; immediate industry and Competitive environment such as Customers and Suppliers. Through the interview with the divisional manager, the researchers found out that Pick n Pay is indeed responding positively to its external environment, which makes them to be relevant in the General economic conditions; Legislation and regulations; Population demographics; Societal values and lifestyles; and Technology.

In the past 3 years, Pick n Pay has achieved the following:   They have reduced their electricity kWh usage by 20% against their baseline – and achieved R130 million in savings In their new Western Cape distribution centre they have incorporated off-grid power generation, daylight harvesting, rain water collection and motion sensor lighting   Their plastic bags now contain 30% recycled material They are working with strategic partners on reducing their collective environmental impact.

11

Strategic Analysis Report

 

They have mentored more than 36 small enterprises that are supplying Pick n Pay with products, goods and services Pick n Pay has a dedicated programme that assists small suppliers with their compliance, a substantial challenge for businesses of this size. The programme covers water and soil testing, labelling, traceability journals and record keeping.

 

They have reduced their carbon footprint by 4.6% Pick n Pay won the Climate Change Leadership Award (in the retail category) in recognition of their development of eco-friendly stores and ongoing commitment to climate change education.



Pick n Pay became the first African retailer to commit to only selling sustainably sourced seafood by the end of 2015

1.3 Mission Statement Mission statement is a clear and concise expression of the basic purpose of the organization. It describes what the organization does, who are the target customers, its basic good or service, and its values. The mission describes the organization as it currently operates. The Pick n Pay’s mission is segmented in four portions, which are:     We serve With our hearts we create a greater place to be With our minds we create an excellent place to shop To serve all stakeholders and communities with a great heart, and create a great environment to be in. Pick n Pay is committed in providing goodness to Southern Africans and to make our states into a great beautiful place. When we look at the mission statement of the PnP it doesn’t convey exactly what PnP does and its basic products or service, and how the organization currently operates. This mission to some extent makes a person who has never heard of PnP to ‘take a
12

Strategic Analysis Report

stab in the dark’ in trying to determine what exactly PnP is or what it does. When it starts it says, we serve, the statement does not describe or necessities any action instead PnP mission evoke a person to use their imagination in trying to figure out what/who they are and this could play in the downfall of the company. PnP’s mission statements fall very short of what may be deemed as the “ideal mission statement”. It omits things like identifying the company’s products or services; specifying the buyer needs and customer groups it’s endeavouring to satisfy; and giving them their own identity. The mission statement doesn’t indicate the type of products and services that they provide to their consumers and also doesn’t provide information on what industry they competing in. It also doesn’t provide PnP with its own identity, which sets it apart from other organizations. However, the mission statement on the other hand does indicate how they plan to satisfy their buyer’s needs by providing goodness to South Africans and create a great environment for all South African countries. If the company’s annual report is anything to go by, one would agree that PnP is serving a large base of customers by taking a look at the financial indicators and their industry market-share. Since its establishment, PnP has been very successful in retaining the loyal customers as well as attracting new customers to their store by means of numerous “gimmicks” including things like specials and pamphlets being put up in printmedia; the introduction of the smart-shopper cards “Introducing Smart Shopper is one of the most significant initiatives implemented at Pick n Pay in the last 10 years. SmartShopper is a thank you for the customers by providing real cash savings for customers on all purchases. It provides PnP with a deeper understanding of the customer, enabling a more targeted offer. By better understanding our customers we are better able to tailor our ranges, make decisions about store locations and more meaningfully engage with them. It also broadens our supplier discussions leading to improved product development, pricing, promotions, private label and other innovations. We are delighted with how enthusiastically our suppliers have been to come on board with the Smart Shopper programme.” (Annual report, 2011)
13

Strategic Analysis Report

Furthermore, PnP stores are situated in “decent” environments making it a pleasure to shop at Pick n Pay, also, the store layouts themselves are in user-friendly, wellventilated, and clean states which makes it convenient for customers to do their groceries. Moreover, the food they serve is more often than not very fresh and always smelling good; the staff members are generally friendly and welcoming and always willing to assist and add to the customers shopping pleasures in any way they can, which correlates directly to PnP’s mission statements. “We’ve got thousands of customers walking into the store every day, so we will have certain issues, we will have a product out of stock, it’s how we go about dealing with those out-of-stocks and getting the stocks onto the shelves and making our customers’ shopping experience more pleasurable and managing the customers’ demands and needs and then walking out of the store satisfied”-Chris Mawhinney, Interview conversation, March 2014) Not only does Pick n Pay serve its customers that visit their stores, they also have initiatives within some of the communities its customers come from. They sponsor a number of sporting events such as the ‘Cape August’; they support numerous charity organizations; they offer bursaries to the community and their employees through the Raymond Ackerman foundation and so forth. Pick n Pay has an initiative called ‘Kids in Parks’ where they take kids from previously disadvantaged areas and take them to areas they’ve never been to, such as the Kalahari Park, the zoo’s etc. They do these initiatives to build loyalty. They teach them about things like ‘save our seas’ i.e. saving the environment, sustainability. Therefore this has a triple effect: take the kids where they’ve never been; educate them, and promote the brand. They support ‘harbour day’ where they go buy trees and plant them, they support ‘water week’; they’re a huge sponsor of ‘pink drive’ which is an initiative for creating awareness for women with breast cancer; and they sponsor ‘Arrive Alive’ and so forth.

14

Strategic Analysis Report

1.4 Core Values

The value, often called core values of a company prescribe its desired behaviour, character and culture (Kaplan & Norton, 2008). Operating standards and minimum criteria were put in place with the view of ensuring an acceptable level of service both internally and externally, according to the Pick n Pay integrated annual report 2012, the following 8 values are mentioned;         We are passionate about our customers and will fight for their rights; We care for, and respect each other; We foster personal growth and opportunity; We nurture leadership and vision, and reward innovation; We live by honesty and integrity; We support and participate in our communities; We take individual responsibility, and We are accountable.

The values cover a lot about their employees and how they foster growth and development for the employees which is very much relevant because the industry is often hampered with a lack of skills and development. It also fosters a culture which indicates a passion for consumer satisfaction and protecting the rights of the consumers, which can also be linked to providing accountability and responsibility for the employees in the different PnP outlets. To become relevant in shaping a better future for society, new values-based frameworks are needed to align behaviour in more productive and innovative ways according to (Deloitte, 2010). PnP believes in going back to basics, according to Chris Mawhinney, the General Manager Gauteng Supermarkets, employees goes through induction or training where they learn about the company values and the values have always been the same since the establishment of the company.

15

Strategic Analysis Report

It is then can be said that indeed the values of PnP are relevant to internal environment, as they have been successfully able to create and maintain the corporate culture and an environment where people have the opportunity and potential to possible grow and grain from and within the organisation. On the other hand, external relevance on the values, Deloitte (2010) says If businesses wish to thrive in this environment, they must make themselves active and accountable (Deloitte, 2010). During the interview with the General Manager of Gauteng Supermarkets (Interview conversation, March, 2014), it is very clear that, PnP embraces the environment that it surrounds itself with. He outlined that, PnP has a number of community engagement programmes and are highly involved with social responsibility in support of the one of their core values support and participate in communities. The main aim for Pick n Pay is to not only look out for the sustainability of the environment but to give back to the community to build a better way of life the nation. Activities that the company runs include The Ackerman equity plan, this plan is to assist with helping grow previously disadvantaged people. One example mentioned during one of the interviews, is the case of a previously disadvantaged woman who had a business idea for a pig farm. The farm has now grown exponentially and is now a main supplier of pork to PnP. Other activities that demonstrate their values in external environment are sporting events such as Cape Augus, educational tours to tourist attraction places such as kalahari park. The educational trips purpose is to empower knowledge for previously disadvantaged children. Other sponsorships are; arrive alive, water week and arbour day. It can be deduced that values such as; we foster personal growth and opportunity, We are passionate about our customers and will fight for their rights, We support and participate in our communities, We take individual responsibility and we are accountable are all values that are relevant with the external environment.

16

Strategic Analysis Report

SECTION 2

STRATEGIC OBJECTIVES
Objectives are an organisation’s performance targets- the results management want to achieve (Gamble et al, 2013:23). For company to yield the desired results, two measures are important, financial performance which has to relating to strategic performance. The financial measure gives an insight to management regarding revenue growth, profitability, and return on investment. One the other hand, Strategic objectives communicates company’s market and competitive standing. Table 2.1 shows that PnP Balanced Scorecard which combine their financial objectives with the financial objectives the company crafted to carry out their new strategy of transforming business. As mentioned earlier, a new strategy came into operation in 2011/2012. The three principles mentioned in the report served as the starting point, and the company was faced with a task of making smartshopper customer loyalty programme, private label business, and the online shopping facility. The new CEO came with an approach of going back to the basics. We derived the balanced scorecard looking as the financial indicators and strategic objectives of the PnP. With this scorecard, the company will see if their strategic objectives are achievable, realistic and measurable. This will give a clear illustration of where the company is going and whether the new strategic move is working or not.

17

Strategic Analysis Report

Table 2.1

There about seven strategic objectives derived by researchers that PnP is focusing at to fight for their market standing and competitive advantage. Since the current report looks at the strategy which came into effect around 2010/11, we carefully examined and evaluate the PnP performance highlights from 2011 till present. The PnP achieved immensely during these years, the company saw an increase of 7.5% in the annual turnover, and also a 6.4% increase employee’s retention and recruitment.

The Gauteng region improved the supply chain by refurbishing and opening Longmeadow distribution centre which helped a lot in improving stock delivery time for trading stores. 111 stores new stores were opened during this period, of which 70% of them are in the Gauteng region. An additional 3 stores are opened in Zambia, Mozambique and Mauritius. According to AMPS (2012), more than half of South Africa’s customers regularly shop at Pick n Pay.
18

Strategic Analysis Report

The Annual Report (2013), confirmed that 6.3 million South Africans have smartshopper cards, and through the observation done in some of the PnP stores by us, almost each customer shopping at PnP have a smartshopper card and they swipe every time they buy items. We made an estimate of about 6 cards being swiped per minutes during the pick hour (4PM – 5PM). The General Manager confirmed about 95% of PnP labels suppliers are being audited for compliance with food safety regulations. PnP now offers an online shopping access across South Africa.

The General Manager confirmed that it is Gauteng region that have most of online shoppers. The PnP outsource the delivery of grocery to Mr. Delivery, in this way customers select their items online pay online with an extra fee for delivery, then grocery get delivered in there by Mr. Delivery. Furthermore, numerous awards and nominations that PnP received can attest to the fact that their strategic objectives are achievable, realistic measurable. The Sunday Times Generation Next brand survey awarded PnP with the coolest grocery store in the country for the 8 th year running 2012, it was voted the most reputable retailer in SA according to the 2012 RepTrak Pulse Survey, PnP was the grand Prix winner for Green Awareness in the Sunday times Tops Brands Awards, this are just some of many awards and recognition PnP received in the last four years. See Appendix A, for other PnP awards

The PnP Strategic objectives are indeed achievable, realistic and measurable, however the rapid increase of costs of rentals and electricity, scarcity of space, fuel increase and volatility of the industry remain a big threat for measuring some of the PnP long term strategic objectives. The expansion into Africa, higher market share in the emerging market - supply to small supermarkets in the local townships are some objectives that seemed not be achievable, realistic, and measurable. The PnP expected to achieve these objectives by 2017, looking at the current situation, more time might be needed. On the other hand, the internal consideration seems to lack, PnP should have a

19

Strategic Analysis Report

strategic objective to improve teamwork through the number projects which involves more the one business unit. Most of the front staff doesn’t have a clear understanding of the new strategic objectives or vision of the company. The fact that the strategy is driven from the top, store managers, have targets that they have to meet, and there are told how to manage the employees. The strategy must be driven even to the cleaner of the store, in that way, everyone contributes towards the final picture of where the company is going.

20

Strategic Analysis Report

SECTION 3
SUSTAINABLE GROWTH OF THE STRATEGY
A good strategy is formulated for sustainable growth, meaning that it considers the organisational ethical, social and environmental duties. A business is considered not sustainable if its strategies violate the ethical standards, social affairs and if it doesn’t consider the environment of its operation. This section analysis and evaluate the PnP’s strategy based on its sustainable growth. 3.1 Ethical Consideration

A population group, religious group or societal group determines what is seen as correct and good in terms of ethical judgment. The rational of what is deemed acceptable or unacceptable rangers from person to person. The model that distinguishes right from wrong is the moral conscious of the society where the action takes place. According to (Bennett, Nieman, 2006), ethics is derived from the Greek word “ethos” which means character or custom. Ethics can be described as the science of morality. Management ethics consider stakeholders as a discipline that occupies itself with the rules and values of society. Business ethics is the moral principles and standards that a company follows in their business conduct, however business is an industry and therefore cannot have any morals. They are run and managed by individual humans who all have different morals and beliefs. Ethical Codes in Organisations are developed to guide and to govern employee behaviour and establish a socially responsible organisational culture, that abide by the acceptable ethics of the society of its operation (Erwin, 2011). The sustainability of a company within that society partly depends on its ethical practices and how the strategy creates sustainability. Today consumers are demanding evidence of ethical and corporate initiative from companies and greater support to the communities in which these companies operate. In PnP vision to customers, they have a strong commitment to ethical and informative marketing practices. PnP thinks about
21

Strategic Analysis Report

the ethical implications of decisions. Consumers need to be protected against products or services that are dangerous to their health. Perhaps, one may ask what is deemed as an ethical decision making process. A decision is ethical if a businessperson can say yes to the following questions:    Does my decision fall in the accepted standards in the organizations environment? Am I willing to communicate my decision to all stakeholders? Will people such as family members, friends and managers in other businesses approve of my decision? Gareth Ackerman states in the 2013 chairman’s report that even in the midst of the changes that Pick n Pay has embarked upon, they reflect on the elementary principles of ethical conduct, business practice and social responsibility that informed the establishment in 1967. These are the principles that have underscored the subsequent development of the company as the South Africa’s most respected retail brand. The Group’s governance philosophy seeks to protect and enhance the brand and reputation. PnP strives to maintain ethical business practices to achieve the highest levels of compliance and integrity. PnP ethical code of conduct discourages employees & management to act unethically and communicates to the stakeholders the intensions of the organization. Individuals with religious convictions are allowed by management to help with the “draw up” of the ethical code. In an ethical code an indication must be given of how disclosure should be affected. In PnP case, equal opportunities are given regarding different race, religion, colour & gender. The company is also a BEE compliant company. PnP shows and specifies their commitment to the environment. Honesty is always expected of employees at all times. The dishonest is taken very seriously in all level of employment. The code must not only serve the interests of the business and the employees, but also the suppliers, aliens, and most of all consumers. PnP treats
22

Strategic Analysis Report

employees with respect and rewards them fairly. While recognising the need for the highest possible standards of probity governance and accountability in both the public and private sectors and acknowledging the considerable value of the various codes of conduct and regulatory regimes that govern business, PnP is approaching a moment where the need to be consolidated and simplified is important if they are to retain their ethical and normative value and not become mere checklists demanding the appearance of compliance but only a resemblance of commitment. It is vital to work on making sure that these values and standards are appropriately applied by all stakeholders. Good business ethics is imperative and PnP believes it is vital to adhere to these expectations and is taking proactive measures to comply with any ethical standards that should be adhered to. PnP demonstrates socially responsible behaviour and they attend to the needs of the non-owner stakeholders. PnP respects the rights of people, they treat people with dignity and respect, and they act in a way that does not harm others or the environment. Senior employees consider it to be of utmost importance to demonstrate ethical leadership and be a steward of ethical behaviour. The company pursues business success within the laws and regulations. The way they publish their records substantiate their level of commitment towards ethical consideration:  Financial statements:

The Company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa. The directors must ensure that these financial statements are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.  Corporate governance:

The PnP Group is committed to uphold the highest standards of ethics, transparency and good governance, while pursuing profitable growth. In accordance with the
23

Strategic Analysis Report

provisions of the Companies Act 2008, the Group has established a social and ethics committee. The committee reports to the Board and conducts its affairs within its approved charter. The social and ethics committee provides ongoing governance and management review. It performs an oversight and monitoring role with the aim of further entrenching the culture of ethical behaviour within the Group. The Group’s principle of “doing good is good business” is the cornerstone of the work done by the committee. The committee meets quarterly and focus mainly on the following topics:  Best practice examples for social and ethics committees;  Ethics policies;  Whistle blowing structures;  BBBEE;  Employment equity;  Corporate social investment;  Ethical treatment of animals;  Local ethical procurement; and  Integrity of food products and ingredients. 

Health, hygiene and safety:

PnP strives to deliver safe, quality products to their customers while ensuring the welfare of animals and the environment that supports the company. To ensure food safety, regular audits from private label suppliers are conducted along strict health and safety guidelines. The company is committed in ensuring that private label products deliver their promise of good quality and value for money. It is also noted that they work closely with many suppliers to develop a common vision and to expand ethical and sustainable product lines. PnP considers the health of employees as a high priority and therefore it is protected and endorsed by providing them with a clean and hygienic environment where they can work. They train their employees in safe work environments, ensuring they adhere to relevant standards, procedures and regulations. There is a diary and bakery Academy that runs throughout the year on a schedule
24

Strategic Analysis Report

based. This is where each employee who works with diary or bakery products gets to be intensively trained by specialists on how to cook cakes, bread, storing dairy products, the Turnaround time, etc. On the visit to one of the shores we asked a baker how did she get to know all that she is doing, she explained her story that she always love baking, but didn’t have a formal qualification, then PnP identified her and took her through the academy, now she is the most vital person in the bakery department of the PnP with certificates from the academy. 3.2 Social Responsibility

Sustainable competitive advantage is achieved when a large number of buyers or consumers develop a durable preference for an organizations products or services over the offering of competitors, despite the efforts of competitors to overcome or erode the advantage. One of the effective ways is to formulate your strategy in a manner that is socially responsible. This means intentionally being part of social development of the societies and communities where you are operating. The number one social issue in South Africa and the rest of Africa is the high levels of inequality of economic differences in the societies. The response of PnP has been really active in addressing these differences, as they have created number initiatives to produce and sustain jobs. The involvement of a number of small businesses within their supply chain has indicated a high level of social awareness from PnP. The company strategy implemented recognizes that the brand has to remain in the presence of the consumers and that enhancing the social issues will provide sustainable growth for their organization and the societies as a whole. The increased significance of consumer interest in “going green” and providing ethical products remains highly valued as a social duty for PnP, as they have continued to gain recognition for their continued support of such initiatives. Even though the consumers have continued to demand ethical and healthy products, the consumers have continued to expect fair prices in the product offerings which put immense pressure for PnP; they have to continue to provide high quality products that are expensive. An example
25

Strategic Analysis Report

mentioned during the interview with the General Manager Gauteng supermarkets, was the supply of lattice which has recently become so expansive to be supplied. They have to ensure freshness and keep as organic as possible for the customer but its cost the company lot of money to be supplied for. This is due to farms that supply the lattice; an instance was illustrated during that three weeks heavy rain early march 2014, whereby it was difficult for the farmers to get into the farms to get products due to heavy rain, many stores lack many fruit and vegetable products, which in turn slightly affected the consumer buyer patterns. To respond to this, the PnP look for alternative suppliers who are sometimes situated abroad with high price costing. As a way to gain a sustainable competitive advantage over its rivals PnP has continued to provide fair prices with consideration of the social conditions in South Africa and Africa. They were very quick to remove the image that PnP only offered individuals that are well-off, which is essence a way to cater for everyone in the country, as their social responsibility. In the past company has been involved in quite a few world-wide engagements that has received much attention and focus in South Africa, but they began to limit their involvements at some stage but with that being said they were still involved in engagements with their stakeholders through social initiatives. They engaged their consumers, suppliers through social initiatives and have continues to allow their stakeholders to provide feedback in terms of any issues that have risen which indicates a high respect for their consumers and the social well-being of the country. The PnP sustainable strategy is framed around six strategic focus areas, which are aligned with an intense commitment towards greater food security and a sustainable future for South Africans. All the PnP sustainability initiatives are directed at enhancing the resilience of the organization, through encouraging partnerships and the transformation of systems and processes in Africa. The company sustainable strategy focuses on the following:

26

Strategic Analysis Report



Empowering Our People

One of the major focuses of PnP is career development with immense emphasis on training and competence, which are two aspects that are very limited in the South African Retail industry as a whole. By putting great emphasis on this matter company develop a great sustainable growth. However, the big challenge for the required training has been management of the business units to achieve the required volume and quality of training due to other operational demands. In response to the rising challenge, the company continued to achieve sustainability by implementing the following:  Foundational Adult basic education and training literacy program: which is now being incorporated with retail-specific concepts  Trainee manager programme and assessments: to meet new standard procedures which continued to enhance the skills of local employees in societies which build the skills-set in many societies, but also can lead to sustainable growth for an organization. See Appendix B, where a cheque is awarded to one manger for the programme. 

Supporting communities in their contribution to change

The PnP great Mr. G. Ackermann introduced the PnP Ackermann Foundation which has a great influence in social affairs around South Africa through community based projects with a huge possibility of community self-reliance and facilitating market access for small businesses that are connected to PnP. The central values of the PnP Ackermann foundation are based on the following:  Support of ready-to-grow businesses.  Facilitate economic sustainability and self-reliance.  Whole community focus  Creating prosperous livelihood not jobs.
27

Strategic Analysis Report

The foundation has achieved a lot over the time of its existence by supporting and developing over 36 small local enterprises which provide PnP with products, goods, and services; this indicates their community involvement in other businesses and their brand building strategy through these smaller firms. Their involvement obviously provides them with recognition and provides an image of a caring organization. They also build the economy of the communities by building and mentoring the small local enterprises, and it also allows them to receive certain products at cheaper prices as they are in partnership with their suppliers which ultimately leads to sustainability. The major challenge of the foundation is measuring the impact of their initiatives on other communities and how it leads to their growth. In addition, PnP has in past been reluctant to provide initiatives to communities and advertising those initiatives as they have believed that they are doing it for the empowerment of the communities but not for their personal gains. They are in partnerships with a few organizations as a way that builds and provides its communities with growth. Here are the social initiatives in the public spectrum:  Cape Argus Pick n’ Pay: through this event it is reported that approximately R13 million worth of spending is generating and that about 1400 jobs are created depending on the year and the progress of the event. Through the event PnP get international recognition as the event doesn’t only have South African athletes but contains international athletes as well. The PnP receives a lot of airplay and advertisements as the brand is at the disposable of the participants and the clients. This social initiative provide PnP with a lot of recognition and contribute significantly to economic growth of the country. See Appendix C 3.3 Environmental Duties We continue to look for ways to reduce energy use in our supply chain, and run our warehouses and fleets in an efficient and environmentally responsible manner, this are

28

Strategic Analysis Report

the words of the .General Manager, Mr Chris Mawchinney during one of the interviews with him.

The PnP Green range, with representation in Kitchen, Household, Bathroom and Personal Care categories, provides customers with more sustainable product choices. All packaging in this range conforms to environmentally sound principles and is 100% recyclable; while the active ingredients are made from sustainable and natural ingredients. The product biodegrades within six days in customary environments, the range is endorsed by the Department of Environment and Tourism’s IndaloYethu initiative and is the first Green range to be indorsed by the South African government. The focus areas of consumer sovereignty, business efficiency and the conviction that doing good is good business, have for many years enabled a company to demonstrate to their stakeholders a commitment to environmental, social and economic sustainability.

An integrated energy-efficiency strategy has been adopted in order to balance aesthetics with sustainability. The use of heat-dissipating glass, covered with timber louvers to allow for thermal control, as well as a skylight which diffuses natural light during the day, reduces the demand on the energy grid for up to 80% of the day. In addition a 100-kilowatt solar-powered system which provides electricity to the store, leads to savings on energy requirements of up to 20%.

PnP on Nicol has become the third new store of the company chain where natural gas has been used for the refrigeration plant. The choice to use only natural refrigerants over synthetic gases will have a dramatic impact on reducing greenhouse – emitting gases; therefore greatly reducing the global warming impact of the store (Annual Report, 2011; Interview with General Manager, 2014).

The internal considerations of environmental duties are considered during the induction of new employees at all time, when new employees are made aware of the company’s
29

Strategic Analysis Report

commitment to the environment. The massage is clearly stated how the company respect and honour their environment of operation. This ensures that employees at all levels throughout the company see environmental responsibility as an intrinsic element of their work and not as an additional function. Employee awareness initiatives include energy usage and saving initiatives such as the use of natural refrigerants over synthetic substances to reduce green-house emitting gases. Levels of customer expectations on green/ethical issues are tracked via the smart-shopper survey. The company consistently retains a leading position in respect of “green retail” and is committed to addressing sustainability issues. Customers’ interest in green and ethical products remains strong. It is seen in modern times that the consumer demand for green and ethical products is continually increasing. Along with this, customers continue to expect price parity in the product offerings. This results in attention to therefore be focused on meeting those dual requirements.  Waste management

Pick n Pay recycled 13 611 tons of waste in the 2011/2012 financial year, which would otherwise have gone to landfills. In PnP vision to its franchises, it highlights a key issue regarding resource efficiency to operate as a sustainable franchisor of choice for retail entrepreneurs. The company has a recycling initiative called ‘Bin It’. Bin It is an in store collection point for batteries, CFLs, plastic bags and printer cartridges in order to be recycled in an eco-friendly sustainable way. Therefore indeed most to the aspect of their company strategy are formulated for sustainable growth with reference t the ethical, social, and environmental duties of the organisation.

30

Strategic Analysis Report

SECTION 4

CRITICAL EVALUATION OF THE IMPLEMENTATION OF THE STRATEGY
4.1 Implementing and executing the chosen strategy

The purpose of the plan should be to ensure controlled, planned and co-ordinated implementation. It is therefore essential to ensure that there is a seamless transition from the planning process to implementation. In Good strategy execution managers should pay careful attention to how key internal business processes are performed and see to it that employees’ efforts are directed towards the accomplishment of desired operational outcome (Gamble, et al 2013). The implementation and execution of a chosen strategy necessitates an ongoing analysis of the efficiency and effectiveness of the company’s internal activities and managerial awareness of new technology that improves business processes (Gamble, et al, 2013). One of the most important aspects in the implementation process is to have designated personnel responsible for the implementation. Pick n Pay need to appoint a person or have business unit that is directly responsible for the implementation of strategy. So far we have determined that the executive board of directors collectively, takes up this role. This is essential during the initial stages or years of implementation which tend to be the most crucial to the entire implementation plan. Sometimes you find that the strategy start one well, and then tend to lose direction due to lack of constant monitoring and evaluation. In our critical analysis of the Pick n Pay strategies, we have identified crucial points that should be noted when attempting to implement strategies in a way that allows them to come to life. We have included eight components of strategy execution below in order to

31

Strategic Analysis Report

illustrate the best ways of implementing strategies which are found in (Gamble, et al, 2013). 4.2 Components of Strategy execution/implementation

4.2.1 Build an organisation capable of executing the strategy successfully

Gamble, et al, (2013:208) says building a capable organization is thus always a top priority in strategy execution and three types of organization building actions are paramount. PnP seems to be excelling at this stage of implementation. This is due to the fact that they have been staffing the organisation as shown in the strategic vision that have an increase of 6.4% in staff retention and recruitment, this worked well to supply personnel who is very vital and will be key member for the drive of the implementation. The intense search, even to international market of the new CEO also bears a testament of an excellent building process. Furthermore, Capacity building also involves skills transfer, staffing of departments and training of personnel. All of this PnP is doing perfectly well and correctly. The Academy, managers trainee programme are some of the evidence we can pint to. According to their Annual Report (2012:14) the company have also employed the qualified and experienced directors. They have a robust career development framework in place that emphasises training and competence. This meets business needs while empowering employees to grow their potential (Integrated Annual report (2012:38). Gamble et al, (2013:215) outlines that a company can hope to perform the activities required for successful strategy execution without attracting talented managers and employees with suitable skill and intellectual capital. Thus, indeed PnP is building their organisation with capabilities, people, and structure needed to execute the strategy. The only set back will be as stipulated; the talent attracted is not for monitoring the implementation but to do some activities of the strategy, the company need to set up a unit for the execution.

32

Strategic Analysis Report

4.2.2 Allocation resources which will drive strategy execution

Early in the process of implementing and executing a new or different strategy, managers need to determine what resources will be needed and then consider whether the current budgets of organisational units are suitable. Developing a strategy driven budget requires top management to determine what funding is needed to execute new strategic initiatives and to strengthen and modify the companies competencies and capabilities, this includes careful screening of requests for more people and new facilities and equipment, approving those that hold promise for making a contribution to strategy execution, and turning down those that don’t (Gamble et al, 2013). Pick n Pay’s ability to marshal resources is a significant part of strategy implementation. In marshalling resources, managers determine what resources are needed where and consider whether the budgets of the organisation units are suitable. Too little funding slows progress of strategy execution while too much funding wastes organisational resources. A wide range of environmental, social and governance trends should be combed to create new commercial and socio-economic challenges: Continued volatility of global commodity prices. Global resource availability challenges putting upward pressure on food prices. Resource use is a key focus of the optimisation drive. The Pick n Pay group has consistently reduced energy usage for the past 3 years and significant savings will enable further investment in reducing fuel and electricity consumption. The company has a key challenge in continuing to move forward and reduce their consumption and impact on natural resources as the business expands. Areas that PnP focuses on is the reduction in percentage of carbon footprint, to store energy intensity and the amount of waste recycled. Pick n Pay is a leader in the field of resource allocation, as explained in the above, the company has successfully allocated resources and continue to do so.

33

Strategic Analysis Report

4.2.3 Create a reward & incentives system that ties into the achievement of strategic and financial goals

According the balanced scorecard developed by researcher in Section 2, it is evident what PnP’s financial and strategic goals are. In order to create to stimulate and fuel the company’s strategy, there must be an incentive and reward system. However, retail is stipulated without ignoring that most retail industry companies have an incentive or reward system at hand. When an organisation is on the strategic move, rewards and incentives should be directly connected to the strategic vision. Over and above the existing system, the new strategy requires a new reward and incentive system. In the same way PnP has to have a good system of rewards and incentives for its employees in order to achieve its strategic objectives and growth sustainable. Implementation of initiatives requires support. There should be feedback and reward systems communicated to staff that support and motivate them towards near perfect strategy implementation. Another important aspect of this stage is that the organizational units and individuals should be properly aligned with the strategic priorities and enthusiastically committed to executing the strategy (Gamble et al, 2013). Therefore when we analysis Pick n Pay’s strategy implementation, we looked from one of their values, “We nurture leadership and vision, and reward innovation”. One of the policies says, “Employees and executives are rewarded for meeting key performance targets”. They have also a remuneration committee that ensures that corporate governance aspects and legal requirements are met when remuneration policies are reviewed, and to ensure that new remuneration plans and are put in place. In doing so the committee ensures that shareholder’s interests are protected and reward systems and remuneration policies are aligned to the Company’s risk profile.

34

Strategic Analysis Report

There are some guidelines that allow us to assess if a company is implementing the reward and incentive system for their strategic outcome. These guidelines are 8, but few of them will be discussed in line with the PnP strategy. Gamble, et al, (2013) says:  Make the performance payoff a major, not minor, piece of the total compensation package. As for Pick n Pay, the executives and management participate in the Group’s short-term incentive scheme. Bonuses awarded to executives and management are linked to the achievement of net profit growth hurdles as well as individual performance.  Have incentives that extend to all managers and workers, not just top management. Pick n Pay have a Employee Share Scheme, which incentivises key management and employees by providing them with an opportunity to acquire shares in the Group thereby aligning interests with shareholders and encouraging employee retention.  Administer the reward system with scrupulous objectivity and fairness. Although did not get an insight on how Pick n Pay is ensuring this, we can advise that one of the away to ensure fair and just rewards, as to benchmark to see best models used. Appoint a committee which include supervisors from stores, and representatives of unions.  Make sure that the performance targets each individual or team is expected to achieve involve outcomes that the individual or team can personally affect. It is Pick n Pay’s policy that employees and executives are rewarded for meeting key performance targets.

Senior management needs to pay close attention to installing an effective and efficient reporting and monitoring system. Management needs to be able to objectively monitor performance relating to strategy implementation and make the relevant course corrections along the way. They have also the responsibility to ensure adequate communication and co-ordination between all relevant players involved in the implementation.
35

Strategic Analysis Report

4.2.4 Exercising strong leadership to drive execution forward ‘We nurture leadership and vision, and reward innovation’ – Pick n Pays values

The strategy of a company needs to be communicated down to the lowest level of employees to be even remotely executed successfully. The leaders of an organization are the roots of a company. Their good or bad judgment, their morals and ethical behaviour is what makes their business a success or a failure and it’s believed that in the case of Pick ‘n Pay is a success. Pick ‘n Pay’s top management can delegate authority to middle and lower level managers in order to get the implementation process on the move. Although there are causalities observed, the company is generally doing very well in achieving their strategic goals through their leadership. Operating excellence is what sets the top management apart from normal management, as they are the ones personally leading the implementation process.

The key roles in leading the strategy execution process are;  Being out in the field,  Seeing how well operations are going,  Gathering information first hand,  Gauging the progress being made,  Being diligent and adept in spotting gridlock,  Freeing out problems and issues, and  Learning the obstacles in the path of good execution.

Company managers typically goes to the stores almost every day in a month, they have schedule visits to every store in their region, when they get to the store, not only do they speak to the managers and staff they actively engage customers to seek feedback of their shopping experience. Mr. Chris, who is the Gauteng manager, goes to the stores they manage every week, as they are too many. What we observed is that when there is a new store opening like in East Rand for an example, the leadership of the
36

Strategic Analysis Report

organization is actively involved; some even wear overalls to go assist in the successful opening of the store. There is a huge difference between management and leadership, one mistake that many leaders make is to manage people instead of leading them. When you manage, you dealing with administration, policies, precepts, and you consider figures. A good strategic execution needs leadership that is helping people to find their place in the vision, helping them understand how they can contribute to drive the vision of the organization. The more a company understands the difference between the two the better will they execute the strategy.

4.2.5 Instilling a corporate culture that promotes good strategy execution Every company has its own unique culture. Corporate culture can be defined as the company’s internal work climate which is shaped by its core values, beliefs, business principles, traditions, work practices, style of operating, this entails the way things are done, norms, and the conduct environment in the organisation. As for Pick n Pay, their growth and success of is attributable to three basic principles, which forms the cornerstone of their business:  Consumer sovereignty;  Doing good is good business; and  Maximising business efficiency.

The PnP experience has demonstrated that there can be no substitute for these three time-tested legacy principles. The executive leadership of Pick n Pay has again focused on these principles, the need to continue perfecting them and to ensure that they lie at the core of their business philosophy and model. These are three principles that form the base for the company corporate culture, all employees are now visible in the floors, they have adopted an open plan office

37

Strategic Analysis Report

approach, whereby when consumers’ are shopping they can literally see the store management. There is no status when coming to customers, from top to bottom employees, everybody wears PnP uniform, Mr Chris Mawhinney, also mentioned that “even our tea lady look like us, we embrace the culture of oneness”. This in turn makes them to be more approachable, more friendly and more easily identifiable by the consumers, which is in turn will make them to have a control and sovereignty of their consumers. This is good for strategic execution. Pick n Pay’s CEO, when he speak about the principle of “doing good is good business”. He says “My belief is that, in turn, good business, and the growth that flows from it, creates further opportunities to do good”, (Integrated Annual report 2013:21). We are convinced that PnP have what, Gamble et al, 2013; call ‘High-Performance cultures’. This are the cultures that standout in organisations that have taken about themselves to integrate corporate culture in everything they do. These are traits that have ‘can do’ do spirit, pride in doing thing right, no-excuses but accountability, and a pervasive results-oriented work climate where people go extra mile to meet objectives. This successfully implemented from top to bottom. The company also embrace the culture of ethical behaviour which is watched by the social and ethics committee which performs an oversight and monitoring role with the aim of further entrenching the good ethics within the company. This was deeply discussed in the sustainability section above. Another culture which PnP was able to implement very well is the commitment to sustainable operating principles which goes back to the late 1980s.This is in keeping with their traditional core belief that sustainable businesses have an important role to play in the building of sustainable communities, that is their aspirations and achievements in their efforts to add value to the broader economy and society of which they are a part of. . Strategy implementation is essentially all about taking a vision or overall objectives that an organisation has set out and turning these into reality. There are a number of factors that can derail strategy implementation such as failure to launch the right or appropriate
38

Strategic Analysis Report

initiatives. But on the above said corporate culture of Pick n Pay, one can see the implementation of their strategies will do well as it will land in the right corporate culture. However, what seemed to lack is still the culture teamwork, working amongst business units is not promoted, and this can be a great injector in terms of the time objectives are to be achieved. 4.3 The Evaluation of the implementation

The evaluation of the implementation of the Pick n Pay requires us to evaluate a lot issues critically, like what we have discussed above, and also aspects like the assessment of the performance of the organization in achieving the objectives. We look at it from a perspective of how they got to where the reports are saying. This will what will give an insight on the level of the implementation competence, as strategist, we must always look at something that went wrong, or something that may go wrong in the implementation process. During 2011/2012 Pick n Pay had the following objectives that they want to achieve as part of the strategy and they comfortably achieved some of these objectives but some were not achieved as they had to deal with certain issues they could not handle. Analysing the execution of the strategy requires us to analyse them against the strategic objectives that Pick n Pay had aimed to achieve.  Strategy Number 1: Launching of the consumer loyalty programme (Smartshopper): Pick n Pay was relatively new in this programme but they progressed immensely by 2012, to extend that they passed the other retailers who had been implementing this strategy before them. The company became the largest loyalty programme in South Africa in 2012, with over five million cardholders, which created major benefits for their consumers as they obviously gained discounts after they consumed or bought a certain amount of times. The victory progressed in 2013, with over 6 million cardholders by end of 2012/2013 financial year.
39

Strategic Analysis Report

Pick n Pay had to invest in a new system which was relatively new in the South African and African markets, but what they did indicated immense maturity as they went passed retailers like Clicks who had been leaders in the programme. This indicates a great level of implementation as they executed the strategy brilliantly because they went in a relatively new programme but ended up going passed the market leaders of the programme as they gain a lot of support from its consumers but were still providing the clients with great benefits. Their marketing system required them to have adequate information systems and operating systems which would enable them perform essentially better than before in terms of sales. The smartshopper programme required them to be precise in their execution of the new strategy, because other retailers were already in the game, PnP had to come up with something new, and innovate. To avoid repeating the same thing that other rivals were doing. This was a differentiation strategy, targeting a larger niche of the market.  Strategy Number 2: Pick n Pay had previously disregarded the idea of operating with a single distribution centre in a certain region, so this was slowing or depriving their supply chain. They only opened a distribution centre in May 2012 in the Gauteng region. They were receiving their products and goods directly from their suppliers to the stores which were very much costly for the firm. However they created a new supply chain process which was built in Longmeadow. The Longmeadow distribution centre has continued to improve the PnP process as they provide cheaper transport costs and more efficiency and the actually retail stores don’t have to keep a lot of stock in the store rooms, which leads to high insurance costs. The new distribution centre indicates the usage of Process Reengineering, which is regarded as the evaluation of a process and re-thinking of the way things are done for better and continuous improvements (Gamble et al, 2013). So, PnP had to assess their supply chain to see if it had any faults and they found that it was not working to its full potential and this meant it required change.

40

Strategic Analysis Report

The implementation of the Longmeadow distribution improved the value chain of Pick n Pay as it provides greater efficiency and better cost gains. Introducing a new distribution centre for an organization is a great feet and requires a lot of effort and time, and the way Pick n Pay implemented it was pretty much impressive, but according to the Pick n Pay Gauteng Regional Manager Chris Mawhinney, it still requires a lot of work because there are times where they are lacking in demand of certain products. The implementation of the new distribution in such a small amount of time has been impressive because they have gained in terms of process improvements and growth in the organization. Although it is not the best distribution process but it has continued to improve and make head way forward to improve their value chain and their consumer satisfaction. They had to implement immense information systems to ensure the new distribution centre operate accordingly and that systems which would provide efficiency and provide precise services. The new distribution centre required the employees to have access to five areas of data which would enable them to assess the progress of their information system and these require the following:  Consumer data: the new distribution have to have relevant information on the locations of the consumers and the retail stores which had a lot of consumers and form priority systems, to ensure appropriate demands were also are met.  Operations data: this data enables the operations to find improvements as a way to improve consumer satisfaction through better quality and efficiency. This would assist with factors such as inventory management, sales management, shipment deliveries and the appropriate defect measurements which are much appropriate for Pick n Pay’s new distribution centre.  Supplier/Partner data: the new distribution involves the cooperation with suppliers immensely as PnP had to create a relationship, where the suppliers and partners understand the goals and targets in a way that both benefits from it.
41

Strategic Analysis Report



Employee data- the data of employee is arguably the most important as it provides the capabilities and skills patterns of the employees as they would have to operate the distribution centres. The employees need to be trained accordingly to the requirements of the retail industry and should be always guided to the satisfaction of the end-client.



Financial performance or gains data- this data provides an analysis of the gains of the new distribution centre as to how it is affecting the company as a whole. According to the Gauteng Regional Manager, the new distribution improved the efficiencies and cost management immensely as it lowered down the distribution costs and the value chain.

These are some of the tools that can immensely improve the new centre that is opened, (Gamble, et al, 2013).  Strategy Number 3 Another strategic objective that PnP aimed to achieve is the expansion into Africa, in countries like Zambia, Mozambique and Mauritius. Market leaders like the Shoprite Group were the first to expand into Africa and have made immense gains as they have even expanded into Central Africa. PnP fell behind in its quest to expand into Africa which means they are playing catch up game. A major issue in the South African retail industry is the lack of competent and skilled labour, and PnP is also hampered by the same issues which might have been the reason they haven’t excelled in their quest into Africa. Most organizations provide some form of training for their employees or workers but the question is whether PnP invested enough in making sure that they are: Staffing their firm with the appropriate employees to be able to expand into Africa, and this requires marketing and creating systems that attract valuable employees to ensure that the organization has great personnel with quality skills. PnP like many retailers are focused on low-costs in their employment policies and this the reason why they have been slacking behind in the last five years because they don’t invest enough on their labour.
42

Strategic Analysis Report

Through their lack of staffing – competent and qualified - their organization has indirectly disabled its capabilities because they don’t have the appropriate employees with the accurate skills and capabilities to perform adequately. This is very much important in implementing the strategy of any organization, so it limited their progress in Africa. The lack of skilled employees has limited their value chain because it means the employees limits the gains of the firm in the supply chain, and it’s probably why firms like Pick n Pay lost a percentage of their market share from 31% to 28% in the last past five years. 4.3 Market Position There is substantial competition for retail space both within South Africa and in other African markets. Ensuring that PnP increases its overall share of trading space over the long term is an important strategic priority. Over the past three years the space growth has lagged to extend that competition particularly into the faster growing lower income areas and small stores was almost impossible. This does not only directly reduces PnP market share but also puts pressure on like-for-like sales growth. During one f the interviews, PnP outlined that they will continue to develop store formats and channels that meet customers’ changing needs both in Pick n Pay and Boxer, in South Africa and beyond. Additionally they continue to build a pipeline of new sites, whether green-field or through acquisition that will ensure they meet aspirations. PnP stores in the lower income (or LSM) areas continue to outperform their higher income counterparts in turnover growth. PnP stores trade well in this arena and they see these emerging market stores as a significant opportunity for all Pick n Pay brands. Consequently they are looking to grow their trading space in these markets. Although over recent years growth has benefited retailers positioned in the LSM 4 – 6 markets, PnP strongly believe that South Africa will begin to win the war against poverty and as more South Africans start to prosper, PnP will see growth increasingly flowing into the LSM 6 – 8 markets, which is their trading heartland.

43

Strategic Analysis Report

With that being said, PnP is confident that they are perfectly positioned to benefit from this future shift. They believe that they are the aspiration supermarket brand in the lower income markets, because of the value and quality they offer in world-class stores. However, they seek to be the supermarket of choice for all South Africans, with a format to suit every shopper and every shopping occasion. The Gauteng region planned at opening about 60 stores in these LSMs, these will enhance the market position of PnP

In South Africa the Pick n Pay compete most directly with stores from the Shoprite Group, Spar and Woolworths. With their recent acquisition of Massmart, Walmart has announced its intention to build a large food retailing business. All of these retail chains also compete with the informal sector, which today still comprises about one third of the total food retail market. As the formal food retail market expands its store footprint, offering more convenient shopping at lower prices, the informal sector is coming under increasing pressure.

Furthermore, the informal sector is served through the wholesale channel where Massmart is the largest player. PnP is working tirelessly to enter into this market and become the retailer of choice. They continuously monitor market trends and set its strategy accordingly to ensure that PnP take advantage of the market.

44

Strategic Analysis Report

SECTION 5
CONCLUSION
In concluding this report, it is evident that PnP has done very well for themselves in the past 5 years. The company has demonstrated significant strategic implementation competence in most of their strategies mentioned in the report. However just like many other companies in various industries, Pick n Pay still have a weakness of not taking the vision, mission, and values of the company into much consideration. The vision and mission in most companies stays in the website and reports and never re-visited to accommodate new developments happening in the company. The vision and mission of PnP is in some extend relevant to its internal and external environment. What we pointed out in the vision itself is that there is no universal strategic vision guiding the overall implementation. The three principles mentioned can in essence develop a great strategic vision, which will in turn give a clear direction to everyone in the company. Their Strategic Objectives showed a great success in terms of results, all what the company has aspired to achieve has been evidently showed in their performance indicators, for an example customer loyalty programme (smartshooper) has done very well since is conception. The roll-out of the stores in Africa is one challenge, as discussed in the report. This is due to the fact that other rivals, like Shoprite Group have done significantly well in these markets. PnP struggles to gain a bigger market share in north and West Africa countries where rivals have dominated already. We pointed out that one challenge might have been the shortage of skill- staffing right and qualified people for PnP. However, we noted that the appointment of the new CEO, who came with a volume of international experience, will deliver this strategic objective very well. This is due the fact that he is an expert in domestic and internal expansion of the company.

45

Strategic Analysis Report

6. REFERENCE

Bennett, A. & Nieman, G. (2006). Business Management: A value chain approach: 2. South Africa: Van Schaik. Berryman-Fink, C. & Fink, C. B. (1996). Ethics in the Workplace. Manager's Desk Reference. pp105-109. Campus Square Pick n Pay store. 2014. Interview conversation, 17 March Cresta Mall Pick n Pay store. 2014. Interview conversation. 21 March. Deloitte, T (2010). Redesigning Business Value: A Roadmap for Sustainable Consumption. The World Economic Forum. Erwin, P.M. (2011). Corporate codes of conduct: The effects of code content and quality on ethical performance. Journal of business ethics. Vol 99(4): 535-548. Gamble, J.E. (2013). Essentials of Strategic Management: The Quest for competitive Advantage. International Edition 2013. McGraw-Hill Irwin: New York Kaplan , R and Norton, D (2008). Developing the strategy: Vision, Value Gaps and Analysis. Harvard Business School Mr C Mawhinney (General Manager: Gauteng Supermarkets). 2014 Interview conversation, 11 March Pick n Pay Website. 2014. Accessed (29 March 2014) URL: http://www.picknpay.co.za/home Pick n Pay. (2011). Pick n Pay Integrated Annual Report. Boston Graphics: London Pick n Pay. (2012). Pick n Pay Integrated Annual Report. Boston Graphic: London Pick n Pay. (2013). Pick n Pay Integrated Annual Report. Boston Graphics: London

46

Strategic Analysis Report

South Africam Audience Research Foundation. (2012). AMPS Report on brands. Accessed: (01 May 2014). URL: http://www.saarf.co.za/ Volberda ,H.W, Morgan, R.E, Reinmoeller, P. Hitt, M.A. Ireland, R.D, Hoskisson, R.E (2010) Strategic Management: Competitiveness and Globalization (Concepts only), South-Western Higher Education:Singapore Why are ethics important? Access (20 March 2014) URL: http://answers.yourdictionary.com

47

Strategic Analysis Report

Appendix
Appendix A: Pick n Pay Awards and Recognitions

48

Strategic Analysis Report

Appendix B:

Source: Pick n Pay Website

Appendix C: Cape Argus

Source: Pick n Pay Website

49