MIDLANDS STATE UNIVERSITY FACULTY OF COMMERCE DEPARTMENT OF
BUSINESS MANAGEMENTSTRATEGIC MANAGEMENT NAME Tafadzwa Shuvai Beauty
Kudakwashe G Honour Edina Question: Create a SWOT map of any
organisation of oyur choice and establish alternative strategies to
reduce your level of exposure to negatives resulting from your SWOT
map. Lecturer Mr. Mhonde1
SURNAME REG NO. Murungu Chidume Mahoza Chapanda Mutihero
Tengende R0645048 R0645783 R0644950 R0645087 R0541011 R0645047
MODE OF ENTRY PARALLEL (4.2) CONVENTIONAL (4.2) CONVENTIONAL
(4.2) PARALLEL (4.2) PARALLEL (4.2) PARALLEL (4.2)
Due date Introduction
31-03-10
A SWOT Analysis is a strategic planning tool used to evaluate
the Strengths, Weaknesses, Opportunities, and Threats involved in a
project or in a business venture. The company in the discussion is
Delta Beverages Zimbabwe. The company is operating in an
ever-changing environment which brings strengths, weaknesses,
opportunities and threats. SWOT Map for Delta BeveragesReduction in
brain drain Trade liberalizatio n Restoratio n of voting rights
IMF
Indigenizatio n Training and developme nt Equipment Technology
+2Quality products Low prices Skills Capacity
GNU
Land reform
Dollarizati on
Sanction s
0 -
+ + + 0 + + + + + + + + +
0 0 0 0 0 0 0
+ + + + + + + 0 + + + + -
+ 0 + + + + + 0 + + + 0
+ + + + + 0
-
+ + + + + + + + + + + + +
Integration Multination al Diversificat ion High customer base
Access to raw materials
-
+1( S) +2( S) +3( S) +2( S) +1( S) +1( S) 0 2(W ) +2( S) 0 0 +2(
S) 1(W ) -5
Funding
-12(T)
+12( -6 (T +10( O) ) O)
+8 (O )
-2 (T)
-13 ( T)
-13 (T )
The SWOT analysis shows that the firm is greatly affected by
threats and opportunities.
These have resulted to a total of -5 which is a combination of
the threats and weaknesses. The company therefore has to take guard
of these threats especially from sanctions and the Indigenization
Act. The restoration of voting rights, dollarization, Government of
National Unity and reduction in brain drain has resulted in the
organization managing to survive in the hostile environment.
Internal analysis Every firm needs to acquire appropriate
technology in order to operate efficiently and effectively.
Appropriate technology refers to methods of production and
operation which are suitable to local economic and social
conditions (Schumacher et al 1993). Delta Beverages, in particular
Kwekwe Malting acquired new technology in 2009 in form of equipment
to save labour costs. A new crank shaft was acquired from South
Africa which is used to lift barley from silos into the conveyor
belts for the production process. The machine helps to reduce
labour cost since there was a reduction in the number of contract
employees. Who used to off load the barley through manual means.
Capacity it is defined by Slack et al (2002) as the ability to
hold, receive to accommodate and in business systems it is viewed
ad the amount of output that a system is capable of achieving at a
particular time. The company has managed to increase its capacity
by acquiring a fast and bulk producing machine. This has resulted
in strength to the business as it is now able to produce more at
lower price leading to reduced costs and lowering of prices. Skills
The company recruits both skilled and unskilled labour. The
unskilled labour is then sending for training and development and
Mandel Training Centre in Harare. The training centre belongs to
Delta Beverages and its duty is to ensure intensive training and
development of the company's workforce. In most cases, those who
hold management positions usually go for training at Mandel to
enhance their skills. Access to raw materials Although Delta
Beverages entered into contract with farmers for easy availability
of3
resources, this has been affected negatively by the land reform
programme which saw the farms being possessed by individuals who
lack skills in farming. The local framers are also not in a
position to provide quality raw materials and in large quantities
due to lack of equipment to use in the farming business.
External analysis Economic Dollarization The Government of
Zimbabwe adopted a multi currency system at the beginning of 2009
with the United States Dollar, Rand and Pound being used as the
preferred currencies by the transacting public and business. The
adoption of other currencies other than the local currency, which
had virtually become useless by end of 2008, has brought much
welcomed stability in business, with budgets and planning now
making sense in boardrooms in the country although it brought in
challenges of raising capital for businesses.
After dollarization, inflation, previously Zimbabwe's most
elusive enemy whose figures had reached 231 million percent in
2008, has been running in the negative territory (deflation) since
February 2009, with the month-month figure for May standing at -1
percent. The enable the companies like Delta to charge more stable
prices and to be able to raise money without depreciating in value
which was difficult before dollarization. According to
www.tradeinvestafrica.com , for investors who got in early, like
mobile operator Econet and agribusiness firm Delta Corp,
dollarisation of the economy in April rewarded their foresight,
enabling companies to achieve quick gains. The official adoption of
the multiple currency trading system has also had a phenomenal
effect in terms of resuscitation of business, availability of
previously scarce goods and services and bringing back confidence
into the economy, Ruzvidzo said in a Herald commentary Gustafsson
(2002) states that there is a cost of losing a guarantor, usually
the central bank, as a lender of last resort in full dollarized
countries. Therefore absents of lender of last resort combined with
extremely volatile nature of deposits tricking into consideration
the banking
sector has led to the decline in the loans to deposit ratio
(LDR) in Zimbabwe. It is almost impossible for Zimbabwean companies
to raise without vibrant and adequately capitalised financial
institutions to price risk and to advance credit to companies that
need funding. Had it not been the foreign sister companies
assisting Delta, it could not have managed to perform at such a
better level. According to Green and Oh (2002), a credit crunch is
an inefficient situation in which credit worthy borrowers can not
obtain credit at all, or cannot get it at reasonable terms, and
lenders show excessive caution which may or may not be traceable to
regulatory distortion, leaving the would be borrowers unable to
fund their investment projects.
Global economic recession The global economic recession
currently taking place is affecting the demand and price of goods.
People do not have enough disposable income to buy many products
especially luxurious products and this lead to price reduction due
to decrease in demand. This is taking place but in Zimbabwe it is
difficult to see since the country is improving from its ailing
economy. Had it not been this recession, the Zimbabwe economy could
have been at another stage. Therefore Delta is also affected
because the current demand of its products could have been more
than that had it not been the Global economic recession.
Legal Indigenization
The beginning of March 2010 saw the government passing the
Indigenisation Act which requires businesses to hand over at least
51 per cent ownership to indigenous Zimbabweans. It is said the
Indigenization and Economic Empowerment regulation is meant to
benefit indigenous Zimbabweans who were disadvantaged before
independence in 1980. However the law did not yield positive
results to date.
Trading on Zimbabwe's stock exchange had plummeted from a daily
average of US$2 million to US$500 000, since a controversial
empowerment law was published. Emmanuel5
Munyukwi, the chief executive of the stock exchange, confirmed
the development to the South African Mail and Guardian newspaper.
Therefore it will be difficult for listed companies like Delta to
raise funds through the stock exchange under such a situation.
The Zimbabwe Times of 16 March 2010 reported complete disaster
of this law. During the week before 1 march a company that is
exploring gold in Kadoma, CAG list on ASX, was performing very well
and registering the highest volume and trades per day, there was a
lot of enthusiasm in the market, however when the news about
indigenisation got into the market, investors simply withdrew and
sold all their shares. Visiting the investor forum,
hotcopper.com.au the sentiment about Zimbabwe and this law was so
negative and any move to implement this law means literally no
foreign investment yet most Zimbabwean companies like Delta are
surviving from foreign investment. ZimPlatinum also listed on ASX
suffered the same fate. Yet next door in Botswana, Botswana
Minerals LTD is doing very well and Nikwe Platinum in SA is
performing very well.
Ideally, external funding is required but the restrictive
ownership threshold will deter investors. It is also difficult for
locals to attract foreign capital given the negative perception of
investing in the country. Although the government is working on
revising the issue, it already caused some negative results to
investment in the country since trading on Zimbabwe's stock
exchange has plummeted from a daily average of US$2 million to
US$500 000, since a controversial empowerment law was published.
Trade liberalization The imposition of COMESA free trade area is a
threat to Delta products because this development has increased
competition from foreign products. Foreign products especially
those from South Africa are cheaper because of mass production and
more advanced equipment which reduces cost of production. However
it enables the company to cheaply import raw materials and advanced
equipment which was very expensive before the COMESA.
Political
Sanctions The sanctions imposed by the US in July 2008 have made
Zimbabwe a high risk country to invest. The sanctions were at one
time partially removed after the implementation of the GNU but they
were renewed due to the outstanding issues in the GNU which include
the unofficial appointment of the Reserve bank governor and the
attorney general. These sanctions are causing Zimbabwe to be
considered as a high risk country for investment. Therefore Delta
will face difficulties when trying to find an external investor
thus posing as a threat to the organization.
Government of national unity (GNU) The formation of the GNU
brought some light in terms of the political situation in Zimbabwe
which had hindered foreign investment. It contributed to the
revival of the economy because its formation saw many companies who
were sabotaging resuming operations. It led to the partial removal
of sanctions by the United states which enabled the country to
source some funds outside the country. However the sanctions were
renewed due to some outstanding issues which include official
appointment of the reserve governor and the Attorney General. Also
the GNU seem to be unpromising because of the clashes taking place
within that government for example the recent indigenization law
which Mr Tsvangirai said he was not consulted in its implementation
and publishing despite the fact that it was supposed to be approved
by council of ministers. According to www.alafrica.com, any
lackadaisical attitude towards full commitment to the GNU
provisions would be heavily penalised by foreign investors who are
very sensitive to sovereign risk that affect their investments.This
will have a negative impact on Deltas outside investment in which
investors fear the political risk.
Land reform The land reform in Zimbabwe which is referred to as
the Third Chimurenga, involved the seizure of white owned farms by
the blacks. Most blacks do not have much experience and commitment
to farming. Some have changed the farms which used to produce
commercial crops to non commercial crops. Most of the few who were
given farming equipment sold it and now can not meet the demand for
those inputs without enough farming machinery. This7
is a challenge to Delta since it resulted in raw material
shortages which include barley, maize, sorghum and wheat. The
company resorted to importing some of the raw materials which is
very expensive.
Restoration of voting rights by International Monetary Fund
(IMF) Zimbabwe IMF voting rights were removed due to political
instability. This resulted in difficulties in obtaining funds from
this institution and many companies felt the consequences since the
government did not have adequate sources of funds to assist ailing
companies. However after the formation of the Government of
National Unity the voting rights were restored because the IMF was
seeing some hope in the political situation of the country. Thus
the country will have some representatives when it comes to
borrowing of funds. This has positive implications to Delta which
will manage to benefit from such funds through the government such
funds through the government. Social Reduction in brain drain The
formation of the GNU and the dollarization in Zimbabwe resulted in
reduction of experienced and skilled workers leaving the country
because people have seen hope in the economy. This benefited Delta
which managed to retain a few experienced and skilled workers and
therefore the production of quality products is not greatly
compromised. Also experienced and skilled workers in the
agricultural sector which is the major source of Delta raw
materials are no longer leaving the country and thus promising to
the quality and quantity of raw materials. Technological Technology
is ever improving and now at a very faster rate. This is resulting
in the production of quality products and mass production. However
Delta is not too behind the technology since it gets assistance
from its sister company. Most recently the company obtained more
advanced bottling machinery from its sister company in South
Africa. Therefore this is an opportunity for Delta which is able to
move with technology and thus
able to produce in large quantities thereby gaining economies of
scale, to have a competitive advantage of its close competitor
Mutare Bottlers and also able to meet customer expectations in
terms of quality.
Overcoming threats and weaknesses Delta Beverages can overcome
its threats and weaknesses using the opportunities and strengths at
hand. To overcome the threats from the indigenization act, the
company can invest more into the stock market. This means that
there will be additional income from the stock market though it
will be shared upon with the other party. Another option is to
offer a high percentage of its shares to its local employees.
Opening more branches regionally will also reduce the risk of being
affected by the issue of indigenization. Land reform has resulted
in the reduction of raw materials in terms of quality and quantity.
They can advantage of the trade liberalization and the
dollarisation to acquire new materials from outside Zimbabwe. The
issue of sanctions is brad and challenging to almost each and every
organization here I Zimbabwe. The company (Delta Beverages) can
strengthen ties outside Zimbabwe making use of its sister companies
which are in other countries. The company also has got some
weaknesses. The major weaknesses from the SWOT
analysis are lack of funding and integration. This can be
overcome by the company when it uses its strengths of good quality
and low priced products. This will help to increase the capital
base. They can also go into vertical, horizontal and quasi
integration. Conclusion The SWOT analysis shows that the firm is
greatly affected by threats and opportunities. These have resulted
to a total of -5 which is a combination of the threats and
weaknesses. The company therefore has to take guard of these
threats especially from sanctions and the Indigenization Act using
the strategies suggested in the discussion. The restoration of
voting rights, dollarization, Government of National Unity and
reduction in brain drain has resulted9
in the organization managing to survive in the hostile
environment.
Bibliography www.alafrica.com www.tradeinvestafrica.com
