Linkages between a company's stated objectives, strategies ...gsblibrary.uct.ac.za/researchreports/2010/Amofa.pdf · financial, marketing and operational perspective) ABSTRACT . This

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TITLE OF RESEARCH

Linkages between a company‟s stated objectives, strategies and achieved results, from a financial,

marketing and operational perspective.

A Research Report

Presented to

The Graduate School of Business

University of Cape Town

In partial fulfilment

Of the requirements for the

Masters of Business Administration Degree

By

Margaret Ivy Amofa

December 2010

Supervisor: Professor Enrico Uliana

This research report is not confidential. It may be used freely by the Graduate School of Business.

I wish to thank Professor Enrico Uliana of the UCT Finance Department for his valuable advice on my

MBA research report.

I certify that except as noted above the thesis is my own work and all references used are accurately

reported in footnotes.

Signed:

Margaret Amofa

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MBA Research Report Page

2

(Linkages between a company’s stated objectives, strategies and achieved results, from a

financial, marketing and operational perspective)

ABSTRACT

This research seeks to identify and understand the linkages between a company‟s stated objectives, the

strategies undertaken and the actual performance achieved over a period of 5 years. A selection of 3

industries was made based on the researcher‟s areas of interest and the top 3 companies per industry

were selected based on their market capitalisation values.

The mission, vision, objectives and strategy information on these companies were reviewed in order to

establish whether there is a link between what that company states as its vision, mission and objective,

what it does in the execution of its strategy and what it achieves.

The review revealed that the selected companies have a clearly defined vision, mission and strategy

which they consistently follow from year to year. These strategies are followed in order to achieve

objectives which eventually lead to the achievement of the vision identified. The most common vision

statements were to be the leading company in their chosen industry.

The financial objectives were mainly centred on cost effective execution of plans and the creation of

value for shareholders and other stakeholders. The Marketing objectives were centred on branding and

expansion of markets into wider geographic areas whereas the operational objectives related to the

expansion of production and ensuring availability of resources to secure longevity for the business.

The review revealed that there is a link between what a company‟s mission is, the strategies chosen and

the actions taken to achieve the objectives. Where objectives were not achieved, it could easily be

linked back to either a global occurrence like the 2008 economic crises and/or an industry occurrence

like the construction industry downturn.

KEYWORDS: Mission, Vision, Strategy, Objectives, returns, value creation,

economic crises.

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CONTENTS

LIST OF TABLES AND FIGURES ................................................................................ ..5 - 9

1 INTRODUCTION ........................................................................................... 10 - 12

1.1 RESEARCH AREA AND PROBLEM ................................................................................................................ 10

1.2 RESEARCH QUESTIONS AND SCOPE ...................................................................................................... 10 - 11

1.3 RESEARCH ASSUMPTIONS .................................................................................................................... 11 - 12

2 LITERARTURE REVIEW ............................................................................... 13 - 16

2.1 DISCUSSION ......................................................................................................................................... 13 - 16

2.2 CONCLUSION .............................................................................................................................................. 16

3 RESEARCH METHODOLOGY ........................................................................ 17 - 18

3.1 RESEARCH APPROACH AND STRATEGY ....................................................................................................... 17

3.2 RESEARCH DESIGN, DATA COLLECTION METHODS AND RESEARCH INSTRUMENTS ..................................... 17

3.3 SAMPLING ................................................................................................................................................... 18

3.4 DATA ANALYSIS METHODS ......................................................................................................................... 18

4 RESEARCH FINDINGS, ANALYSIS AND DISCUSSION ........................................ 19 - 62

4.1 RESEARCH FINDINGS ........................................................................................................................... 19 - 20

4.2 RESEARCH ANALYSIS AND DISCUSSION .............................................................................................. 20 - 62

4.3 RESEARCH LIMITATIONS ............................................................................................................................ 62

5 RESEARCH CONCLUSIONS ........................................................................... 63 - 64

6 FUTURE RESEARCH DIRECTIONS ....................................................................... 65

REFERENCES .................................................................................................................................................. 67-67

APPENDICES ................................................................................................................................................... 67-94

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LIST OF TABLES

Table 1 - Industries & companies selected

Table 2 - Scores for companies from the mining industry

Table 3 – Scores for companies from the construction industry

Table 4 – Scores for companies from the food producers industry

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LIST OF FIGURES

FIGURE 1.1 FRAMEWORK

FIGURE 2.1 MISSION AND STRATEGY FRAMEWORK FOR BHP BILLITON

FIGURE 2.2 TURNOVER GROWTH GRAPH - BHP

FIGURE 2.3 CASH FLOW GRAPH - BHP

FIGURE 2.4 RETURN ON TOTAL ASSETS GRAPH - BHP

FIGURE 2.5 RETUN ON EQUITY GRAPH - BHP

FIGURE 2.6 CSI SPEND GRAPH - BHP

FIGURE 2.7 TIFR GRAPH - BHP

FIGURE 3.1 ANGLO AMERICAN MISSION AND STRATEGY FRAMEWORK

FIGURE 3.2 PIPELINE PROJECT GRAPH – ANGLO AMERICAN

FIGURE 3.3 OPERATING PROFIT GRAPH – ANGLO AMERICAN

FIGURE 3.4 RETURN ON TOTAL ASSETS – ANGLO AMERICAN

FIGURE 3.5 FIXED ASSETS TURNOVER – ANGLO AMERICAN

FIGURE 3.6 CASH FLOW GRAPH – ANGLO AMERICAN

FIGURE 3.7 CSI SPEND GRAPH – ANGLO AMERICAN

FIGURE 3.8 RETURN ON EQUITY GRAPH – ANGLO AMERICAN

FIGURE 3.9 DIVIDENDS PER SHARE GRAPH – ANGLO AMERICAN

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FIGURE 3.10 SAFETY PERFORMANCE GRAPH – ANGLO AMERICAN

FIGURE 4.1 ANGLO PLATINUM MISSION AND STRATEGY FRAMEWORK

FIGURE 4.2 PLATINUM OUNCES REFINED GRAPH – ANGLO PLATINUM

FIGURE 4.3 CASH ON MINE COST GRAPH – ANGLO PLATINUM

FIGURE 4.4 TURNOVER GROWTH GRAPH – ANGLO PLATINUM

FIGURE 4.5 OPERATING MARGIN GRAPH – ANGLO PLATINUM

FIGURE 4.6 SAFETY PERFORMANCE GRAPH – ANGLO PLATINUM

FIGURE 4.7 RETURN ON EQUITY GRAPH – ANGLO PLATINUM

FIGURE 4.8 DIVIDENDS PER SHARE GRAPH – ANGLO PLATINUM

FIGURE 5.1 AVENG MISSION AND STRATEGY FRAMEWORK

FIGURE 5.2 TURNOVER GROWTH GRAPH – AVENG

FIGURE 5.3 OPERATING PROFIT GROWTH GRAPH – AVENG

FIGURE 5.4 OPERATING MARGIN GRAPH – AVENG

FIGURE 5.5 EARNINGS PER SHARE GRAPH – AVENG

FIGURE 5.6 NET PROFIT BEFORE INTEREST & TAX GRAPH – AVENG

FIGURE 5.7 RETURN ON EQUITY GRAPH – AVENG

FIGURE 5.8 RETURN ON TOTAL ASSETS GRAPH – AVENG

FIGURE 5.9 DIVIDENDS PER SHARE GRAPH – AVENG

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FIGURE 5.10 NET PROFIT BEFORE TAX GRAPH – AVENG

FIGURE 5.11 SAFETY PERFORMANCE GRAPH – AVENG

FIGURE 6.1 M&R MISSION AND STRATEGY FRAMEWORK

FIGURE 6.2 OPERATING PROFIT GRAPH – M&R

FIGURE 6.3 TURNOVER GROWTH GRAPH – M&R

FIGURE 6.4 RETURN ON EQUITY GRAPH – M&R

FIGURE 6.5 NET PROFIT AFTER TAX GROWTH GRAPH – M&R

FIGURE 6.6 PROJECT PIPELINE GRAPH – M&R

FIGURE 6.7 RETURN ON TOTAL ASSETS GRAPH – M&R

FIGURE 6.8 SAFETY PERFORMANCE GRAPH – M&R

FIGURE 7.1 WBHO MISSION AND STRATEGY FRAMEWORK

FIGURE 7.2 SAFETY PERFORMANCE GRAPH – WBHO

FIGURE 7.3 PROJECT PIPELINE GRAPH – WBHO

FIGURE 7.4 TURNOVER GROWTH GRAPH – WBHO

FIGURE 7.5 RETUN ON EQUITY GRAPH – WBHO

FIGURE 7.6 DIVIDENDS PER SHARE GRAPH – WBHO

FIGURE 7.7 DEBT RATIO GRAPH – WBHO

FIGURE 7.8 CASH FROM OPERATIONS GRAPH – WBHO

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FIGURE 8.1 TIGER BRANDS MISSION AND STRATEGY FRAMEWORK

FIGURE 8.2 RETURN ON EQUITY GRAPH – TIGER BRANDS

FIGURE 8.3 DIVIDENDS PER SHARE GRAPH – TIGER BRANDS

FIGURE 8.4 TURNOVER GROWTH GRAPH – TIGER BRANDS

FIGURE 8.5 OPERATING PROFIT GROWTH GRAPH – TIGER BRANDS

FIGURE 8.6 NET PROFIT AFTER TAX GRAPH – TIGER BRANDS

FIGURE 8.7 RETURN ON TOTAL ASSETS GRAPH – TIGER BRANDS

FIGURE 8.8 NET PROFIT BEFORE INTEREST GRAPH – TIGER BRANDS

FIGURE 8.9 EBIT MARGINS GRAPH – TIGER BRANDS

FIGURE 9.1 ILLOVO MISSION AND STRATEGY FRAMEWORK

FIGURE 9.2 TURNOVER GROWTH GRAPH – ILLOVO

FIGURE 9.3 OPERATING MARGIN GRAPH – ILLOVO

FIGURE 9.4 GEARING GRAPH – ILLOVO

FIGURE 9.5 RETURN ON EQUITY GRAPH – ILLOVO

FIGURE 9.6 DIVIDEND PER SHARE GRAPH – ILLOVO

FIGURE 10.1 TONGAAT MISSION AND STRATEGY FRAMEWORK

FIGURE 10.2 RETURN ON EQUITY GRAPH – TONGAAT

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FIGURE 10.3 DIVIDENDS PER SHARE GRAPH – TONGAAT

FIGURE 10.4 NET PROFIT AFTER TAX GRAPH – TONGAAT

FIGURE 10.5 LTIFR GRAPH – TONGAAT

FIGURE 10.6 CSI SPEND GRAPH – TONGAAT

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1 INTRODUCTION

1.1 Research Area and problem

In practice companies may take actions which do not appear cohesive with their publicly stated

objectives. These actions may cause prospective investors to question whether the strategy of the

company has changed or whether it is still in line with its stated mission and if so, whether its future

performance will still be in line with what was previously estimated. This increases the risk profile of

the company which may lead to a risk discount which will reduce the value of the company.

This research seeks to identify and understand the linkages between a company‟s stated objectives, the

strategies undertaken and the actual performance achieved over a period of 5 years. This understanding

will improve our knowledge about the company as well as the industry and help us to gain greater

insight into the company‟s most likely future results and strategic choices.

1.2 Research questions and scope

The main research question is as follows:

Are there linkages between a company‟s stated objective, its strategic choices and achieved results and

does understanding that enable us to gain insight into that company‟s future performance and strategic

choices?

The above question can be broken down into the following sub questions:

Are there linkages between the company‟s stated objectives and its strategic choices?

Can these linkages between the company‟s strategic choices and its financial, marketing and

operational results be established by analysing the company‟s publicly available information?

To what extent does our understanding of the above enable us to anticipate that company‟s

future results and its strategic choices?

1.2.1 The Delimitations

The research will rely on publicly available information on the selected companies with the following

as the main sources of information:

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Annual Financial reports

Company websites

JSE (Johannesburg Stock Exchange) SENS information

Analyst writings

Newspaper articles

News media

The research will focus on the company‟s financial, marketing and operational strategy because these

are the main areas which are often translated well in publicly available information. Other areas of the

strategy such as the company‟s human resource strategy may not necessarily be as well articulated in

the external information and may require some assessment of internal information.

The most recent 5 years (2004 – 2009/2010) information of 3 companies per industry (3 industries) will

be reviewed.

1.2.2 Importance of the research

The research can be used by students and members of the general public who want to understand how

the strategic choices and actions of companies link back to their stated objectives and how these result

in that company‟s current and future performance. It can also assist people who are interested in

companies for valuation purposes.

1.3 Research Assumptions and Ethics

The following assumptions have been made:

1.3.2 The publicly stated mission and objectives of the company are those that are actively

pursued.

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1.3.3 Research Ethics

The ethics applied are as follows:

1.3.4 Due acknowledgements have been given when the work of others have been used.

1.3.5 A plagiarism declaration form has been completed and included in Appendix 4.1.

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2 LITERATURE REVIEW

2.1 Discussion

2.1.1 Figure 1.1 - Framework

2.1.2 Definition of company Vision, Mission and Objectives

A Corporate vision is a short, succinct, and inspiring statement of what the organization intends to

become or achieve in the future. It is the image that the leaders of the business have before they set out

Stated Mission and Vision of the Company

Strategies

Decisions & Actions

Results over time

(Financial, Marketing & Operational)

Achievement of stated objectives

http://www.1000ventures.com/info/people_inspiring_brief.html

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to reach them and it describes the aspirations for the future, without necessarily specifying the means

that will be used to achieve those desired ends.

A mission statement is the organization's vision expressed in clear and tangible terms. It makes

concrete the leader's view of the direction, purpose and fundamental principles by which the company

intends to operate (Abrahams, 2007).

Organisational objectives are the specific goals which relate to specific time periods and are stated in

terms of facts. The primary goal of any business is to increase stakeholder value. A company‟s

stakeholders are mainly its shareholders who own the business, employees who work for the business

and clients or customers who purchase products and/or services from the business.

This research will focus on determining what the stated vision, mission and objectives of the selected

companies are and identify the linkages between these and the strategies and actions taken by the

company to achieve the results in the reviewed data.

2.1.3 Definition of company strategy

There have been several books written on Strategy, most of which are on its formulation (Mintzberg,

Ahlstrand & Lampbel, 1998), content and the capabilities required to engage in strategy (Salaman, &

Asch, 2003). The research is to understand the strategy that management of the selected companies are

following by analysing the strategic choices, actions and performance of those companies over the

review period.

An organisation‟s strategy has been described as its „course‟ or Map (Cummings, & Wilson, 2003)

which helps to focus the minds of people within the organisation to take certain actions to achieve its

goals. It is also described as the art and science of informed action to achieve the company‟s specific

vision, objectives, or purpose (Daniell, 2006). Daniell goes on to say that strategy covers many

disciplines of business activity such as competition, human resources, technology, leadership,

communication, implementation and inspiration. In other words, it is what the company decides to do

in all areas of its business in order to achieve its chosen goal or objective.

Some writers on strategy have looked at strategy as a rational methodical process whereas others have

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seen it as an emergent process (Grattan, 2002) and have interpreted the process as either a top down or

bottom up process (Cummings, & Wilson, 2003). The formulation of strategy has been likened to a

military process (Grattan, 2002) whilst others have likened it to the crafting of clay by a potter

(Mintzberg, 2001). Rather than concentrating on the various definitions of strategy and its formulation,

this research will focus on identifying the strategy that a selected company is following by analysing its

past actions and results.

2.1.4 Strategy leads to actions

The concept of strategy has been described as a pattern in a stream of decisions (Mintzberg, 1978,

p.935) or consistency in behaviour over time (Mintzberg, Ahlstrand & Lampel, 2003). This means that

by looking at a string of decisions taken by a company, one should be able to piece together the

strategy in those patterns. Also if strategy becomes known through actions which were not necessarily

intended and emerges over time (Slevin & Covin, 1997, P. 189), then by studying a company over

time, we should be able to determine what its real strategy is and compare it to what its stated strategy

is, to determine whether there is a match between these two.

Strategy is about making tough choices and deliberately choosing to be different (Hammonds &

Loughran, 2001) which means that the company will take certain actions which are different and

superior to its competitors so as to out perform against them. The strategy which a company chooses to

pursue will therefore determine its actions. Harmonds and Loughran go on to argue that rather than not

having a strategy because it is perceived as old fashioned and no longer relevant, a company needs to

continuously pursue its strategy whilst improving its business and incorporating changes in technology

in order to continuously deliver value to its stakeholders.

The reason why strategy is linked to the capabilities within the organisation is that as Salaman & Asch

(2003) put it, there is very little point in developing strategies if they will not be acted upon due to lack

of capabilities within the company to make its execution possible. This therefore points to the fact that

strategy does in fact lead to actions.

Further more, according to Daniell, (2006) Strategy is the art and science of informed action to achieve

a specific vision or a higher purpose for a business enterprise. Viewed from this perspective therefore,

every action which leads to a specific objective, goal or result is inspired by a strategy and it is the

strategy behind actions which this research will endeavour to uncover.

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2.1.5 Actions lead to results

It is often said that Knowledge x Action = Results (Brown). This means that to get any results, there

must have been some actions that made those results possible. According to Covey, (2004) we must

always begin with the end in mind and create everything twice. Having a strategy allows us to envision

where we want to go and therefore create the end state the first time. The everyday actions we take as a

company brings the envisaged end state into being and creates it the second time.

The balanced scorecard is used to provide a framework by which strategy can be used to drive the

performance of the business. It helps planners to identify what should be done and measured (Kaplan

& Norton, 1992). Normally when the scorecard is used, the strategy is known by people within the

organisation who use the strategy to determine which actions need to be performed in order to achieve

the company‟s objectives. In this research, the researchers will be outside the company looking in and

will therefore not have the strategy document but will modify the scorecard so that it can be populated

with actions already taken and results achieved in order to trace it back to the original strategy.

2.2 Conclusion

From the above, it appears that a company‟s vision, mission and objectives will direct it to make

certain strategic choices and take actions which will ultimately result in the achievement of its set

objectives. The research will attempt to determine the linkages between these objectives, the strategic

choices and actions taken as well as the achieved results as evident in the data reviewed.

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3 RESEARCH METHODOLOGY

3.1 Research approach and strategy

The research was performed using both Qualitative and Quantitative research methodology. The most

recent 5 years publicly available information from the selected companies was collected and reviewed

and its content analysed. To understand the linkages between the information reviewed and the

company‟s vision, mission and objectives, the data collected was recorded and categorised according to

three broad areas namely financial, marketing and operational information.

3.2 Research design, data collection methods and research instruments

The vision, mission and objectives of each company was obtained from company websites and

recorded. The Annual Financial reports, analyst writings, SENS updates, Newspaper clippings and

website information of the selected companies were reviewed and analysed in order to understand the

company‟s financial, marketing and operational performance over the period of review.

Financial, operational and marketing performances and achievements were recorded and analysed.

Linkages were made between these and the strategies identified in the patterns revealed above to

determine whether or not the performances obtained over the period under review were as a result of

the strategic choices made and whether they are in line with the stated missions and objectives of the

selected companies.

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3.3 Sampling

3 Industries were selected based on the following criteria:

Table 1 - Industries & companies selected

Mining

(Author works in the mining

industry)

Construction

(Interesting industry because of

recent history)

Food Producers

(Easy to understand )

BHP Billiton

Anglo American

Anglo Platinum

Aveng

Murray & Roberts

Wilson Bayley Holmes

Tiger Brands Ltd;

Illovo Sugar;

Tongaat Hullet Ltd.

In each Industry, the 3 top companies listed on the JSE were selected using the value of their Market

capitalisation as the basis of selection. In the construction Industry, the company with the biggest

capitalisation was a construction products manufacturer rather than a pure construction company. The

fourth company which was an actual construction company was chosen in its stead. The selected

companies are reflected in the table above.

3.4 Data analysis methods

The information obtained for each company was reviewed and analysed using both qualitative and

quantitative data analysis methods. Qualitative information was coded and recorded and then analysed

for patterns and meaning. Quantitative information was analysed using financial ratios and then

reviewed for patterns, trends and meaning. The understandings from these patterns are recorded in this

report.

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4 RESEARCH FINDINGS, ANALYSIS AND DISCUSSION

4.1 Research Findings

The companies selected had a clearly defined mission and vision which stayed consistent over the

period of review with either minor changes or further clarification of what it actually meant during the

later part of the review. There were strong links found between what the company stated as its mission

and vision, the strategies they pursued and the achievement of its intended objectives.

100% of all the companies selected had „to be the leading company‟ within the industry or segment of

the industry as their stated mission.

Under the operational strategy, 56% of the companies wanted sustainable relationships as one of their

operations objectives with the highest component of that score coming from the construction

companies. Even those who did not specifically state it as an objective were doing exemplary things by

way of community engagement which often lead to community spending. The CSI spending in all the

companies selected was indicative of this with trends increasing even through the economic crises

period. 44% of the companies wanted to expand their production with a further 22% wanting to

continuously improve their business. 33% of the companies wanted more focused operations and had

either embarked on or were intending to dispose of non core assets in order to have a more streamlined

set of operations. 33% of the companies had improvement of safety performance as a major objective

and had shown improvements due to the focus given to this area of their business. Even those who did

not specifically state it as an objective had some kind of tracking mechanism for recording the lost time

injuries or the frequency rate. The safety achievements were tied in with wanting to keep employees

happy by providing them with a safe environment to work in.

Under the marketing objectives 33% of the companies wanted to find new markets for their products

with the majority of these being from the food producing companies. A further 22% wanted to find

new uses for their products. 22% of the companies were focused on delivering customer focused

solutions. Market leadership featured in 22% of the objectives of the entire population but it featured in

67% of the construction companies. Among the food producer, brand building, quality of products and

improving the market mix was what featured the most.

Under the financial objectives, 89% of the companies wanted increased returns and cash flows. 56% of

the companies wanted to create value for shareholders and other stakeholders and a further 33%

wanted to maximise values. In most of the companies, the reason why they wanted increased returns

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was to increase the wealth of shareholders or create value for them. 44% of the companies wanted cost

reduction with the majority of these coming from the mining and food producers.

.The biggest impact on the profitability of the selected companies from 2007 until 2009 was the global

economic crises which was stated as the most material event to affect them. Turnovers for this period

were lower than the performance before the crises.

The construction and food producers wanted low levels of debt probably due to the nature and cycles

of their business.

Growth was a favoured objective but it was applied to either growth in production, growth in earnings

or growth in size by way of either acquisitions or organic means.

Though not specifically tracked, it was commendable what the companies were doing in terms of

developing their employees and complying with the various industry codes on equity participation

either through diversity within the workforce or becoming BEE compliant. Some of these companies

had concluded some of the biggest BEE deals within their industries.

4.2 Research Analysis and Discussion

4.2.1 MINING INDUSTRY

In the mining industry, all three companies selected had clearly defined missions and visions supported

by strategies which they applied consistently over the period. Clear links were established between the

mission which they had, the strategy they adopted and the objectives they achieved. Though some

objectives on the finance side were not achieved, those instances could be linked back to the global

economic crises which all companies experienced in 2008.

Table 2 below, reflects some of the findings from the information reviewed on these companies.

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Table 2 - Scores for companies from the mining industry

BHP Anglo

American

Anglo

Platinum

Well defined mission and vision

Clear set out objectives

Clearly defined strategy?

Experience of the company consistent with industry trends?

Mission Achieved over the 5 year period?

Major changes in Leadership during the period?

Change in CEO

Change in CEO &

Chairman

Change in CEO

Investment into CSI projects

increasing trend over

the period

increasing trend

over the period

increasing trend

over the period

Strong Governance principles?

Link found between what it said, what it did and what it

achieved?

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4.2.1.1 BHP BILLITON

BHP is the largest diversified resources company based on its market capitalisation. The mission of the

company is to continue being the largest diversified company with the purpose of creating long-term

value through the discovery, development and conversion of natural resources, and the provision of

innovative customer and market-focused solutions. To do this, they have a strategy of pursuing and

obtaining resource assets with long lives which they manage and exploit at a low cost to provide

customer focused solutions. These solutions lead to increased returns which are used to deliver value to

its shareholders and other stakeholders. This mission and strategy stayed the same throughout the

period of review and though there were slight variations in the way it was worded, the gist of it

remained the same. The diagram below establishes the linkages between the company‟s mission, its

strategies and objectives. The points shaded in light green are the measures which will identify whether

or not the objectives were achieved.

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Figure 2.1 – Mission and Strategy framework for BHP Billiton

There were linkages found between the vision/mission and the objectives. To stay being the largest

diversified resources company in terms of its market capitalisation and asset base, the company needs

to ensure that it has a rich pipeline of projects to ensure longevity of the company‟s operations. It

therefore continuously seeks out new opportunities in previously unexplored territories in order to add

to its already wide inventory portfolio. Large sums of money is spent each year on projects to develop

these assets and to bring them on stream when the company anticipates that they will be required either

due to a market upswing or due to it being a replacement for another asset which has been depleted or

disposed of. The nature of their business itself did not change over the period nor did the extent of their

Mission

Largest diversified resource

company

Produce customer focused

solutions

Turnover growth

Increase in cash

flow

Good credit

ratings

New markets

Innovations /

solution introduced

Value to shareholders

and other stakeholders

Increased returns and

cash flow

Pursue long life / low

cost assets

Projects

pipeline

New markets

Customer /

market focused

solutions

Explore new

areas

Return on equity

Dividends paid

CSI projects

Safety of

employees

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involvement in the value chain. They operate as a diversified resources company with investments in

Oil production, and mining of various metals ranging from Aluminium, Base metals, diamonds, coal

and other steel metals. For their mining endeavours, they are involved in the exploration for viable

areas, the mining, refining and marketing of their products as well as in some cases, the further

beneficiation of their products.

They produce innovative customer focused solutions which leads to increased turnover and strong cash

flows. The strong cash flows are then used to create value to shareholders and other stakeholders. To

test for the achievement of this objective, the turnover growth, increase in cash flows generated and

their credit rating were analysed. From Figure 2.3 below, it is evident that the company had strong cash

flows generated for the period reviewed though there was a slight dip for the period following the

economic crises. There was also double digit turnover growth (Figure 2.2) until the period after the

economic crises but there is a recovery reflected in 2010. The company enjoys an A credit rating in line

with its objective.

Figure 2.2 – Turnover growth graph - BHP Figure 2.3 – Cash flow graph - BHP

Turnover grow th

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Turnover grow th 17% 20% 48% 25% -16% 5%

2005 2006 2007 2008 2009 2010

Chash flow from Operations ($ Millions)

0

5000

10000

15000

20000

25000

30000

Cash generatedfrom operations

9624 16268 21974 25148 25182 23276

Net operationscash flow

8374 11325 15957 17817 18863 17920

2005 2006 2007 2008 2009 2010

The strategy of selecting tier one investments with low running costs and long lives helps the company

to achieve its objective of creating long term value for its shareholders and other stakeholders. For its

shareholders, it ensures that the return on their investments is exceptional from year to year as reflected

in the return on total (Figure 2.4) assets and the return on equity (Figure 2.5) graphs below. Even in the

2009 year when the whole world was still reeling from the effects of the global economic meltdown,

the company was still able to deliver double digit returns.

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Figure 2.4 – Return on Total Assets graph – BHP Figure 2.5 – Return on Equity graph - BHP

Return on total assets %

0%

5%

10%

15%

20%

25%

30%

35%

Return on total assets%

22% 30% 32% 32% 15% 23%

2005 2006 2007 2008 2009 2010

Return on equity

0%5%

10%15%20%25%30%35%40%45%50%

Return on equity 34% 43% 45% 41% 16% 26%

2005 2006 2007 2008 2009 2010

For its communities, the company engages in several corporate social responsibility programs with the

aim of ensuring that those communities benefit from its operations. The corporate social responsibility

investment as reflected below (Figure 2.6) has increased year on year for the period of review and is

often far above the companies official commitment to spend 1%of its profits before tax on these

projects.

Figure 2.6 – CSI Spend graph – BHP Figure 2.7 – TIFR graph - BHP

CSI Spend (Dollars, Millions)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

CSI Spend (Dollars,Millions)

0.00 57.40 81.30 103.40 141.00

2005 2006 2007 2008 2009

TIFR

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

TIFR 8.70 5.60 5.90 7.40 0.00

2006 2007 2008 2009 2010

For its employees, the company ensures that they have a safe environment to work and a great effort is

made to track their safety performance to ensure that safety related programs are having the required

effect. Over the period of review some progress in the total injury frequency free rate (Figure 2.7) was

made in their safety performance but not yet to the standard to which they aspire.

From looking at this company, it is evident that they have a clearly defined vision and mission. This

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vision is clearly supported by their chosen strategy which was consistently followed with it resulting in

the achievement of their objectives even during the economic crises of 2008.

4.2.1.2 ANGLO AMERICAN

Anglo American is the second largest mining company listed on the Johannesburg stock exchange

based on its market capitalisation (Refer Appendix 2). The Group has a range of high quality, core

mining businesses covering platinum, diamonds, coal, base and ferrous metals and industrial minerals.

Its mission and vision is to become the largest mining company with a strategy to become the

investment of choice, the partner of choice and employer of choice. It is also focused on adding value

to its shareholders, customers, employees and the communities in which it operates.

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Figure 3.1 Vision and Mission framework – Anglo American

The company‟s strategy remained somewhat the same but was better clarified over the period. It‟s

objectives were also given more clarity and direction as the period progressed and key performance

indicators were identified to track and monitor the performance against set targets. At the beginning of

the review period, the company was both a diversified resource company and had holdings in other

companies which did not exactly fit the profile of what it was trying to become which was a focused

mining company. As an operational strategy, it was decided to dispose of the assets which were not

purely mining operations and to use the proceeds to invest in other long lasting assets within the

Mission

To become the leading global mining

company

Financial

Cost per unit

One Anglo

initiative

AO cost

savings

Return on assets

Cash generated

Maximising value

Cost savings &

technology sharing

Operational

Projects pipeline

Disposals & Acquisitions

Production Statistics

Safety statistics Return on

equity

Dividends

paid

CSI

projects

Safety of

employees

Marketing

Investment of

choice, Partner of

choice, Employer of

choice

3 core commodities

Precious, Base, Bulk

More focused mining

Increased production

& safety performance

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mining industry. The operations were also spread more across other geographical regions rather than

just Africa where the company‟s origins began.

In line with its strategy of becoming a more focused mining company, it was restructured in 2008 to

take care of its core mining focus areas which were represented as operating units in their own rights

with their own executive teams and where these were listed on a stock exchange, their own Boards. An

aggressive project schedule was embarked upon to ensure that the company had a strong pipeline of

long lasting assets to either expand its operations or replace operations which were coming to the end

of their life or had been disposed of. The One Anglo strategy of utilising the same technologies and

solutions across operating units was also implemented with all businesses operating under a similar set

of values. As a marketing strategy, it was decided to focus on 3 main core commodities, Precious, Base

and Bulk. Under this main heading, operations were carved out based on the metals produced. For

example, under the Precious, the Platinum and Diamond divisions were created and under Base, the

copper and Nickel divisions were formed.

As a financial strategy, cost savings and technology and best practice sharing was adopted which was

envisaged would lead to maximising value in the companies assets with a result that it would achieve

its aim of becoming the investment of choice, the partner of choice and the employer of choice.

To test the achievement of a more focused mining company we followed and analysed the acquisitions

and disposals which had occurred over the last few years and realised that companies such as Mondi

and Tarmac which did not quite fit within the mould of a mining company had been identified and

disposed off when the market was right for such a sale to occur. We also realised that acquisitions had

been made in South America to secure copper and nickel holdings which would add to the long life

assets which the company has and also keep it a more focused mining company. Figure 3.2 below

shows how the projects pipeline has increased over the period of review to show that the company is

constantly pursuing opportunities to expand its production capacity either through acquisitions or

expansion of existing operations.

The result of the more focused mining group was to increase both operational and safety performance.

The operating profits growth graph in figure 3.3 however reflects a decline rather than the intended

increase but this can be ascribed to events during and after the economic crises in 2008 when the

market for most of its commodities such as Platinum drastically reduced.

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Figure 3.2 – Pipeline projects graph – Anglo American Figure 3.3 – Operating Profit growth – Anglo American

Pipe line Projects (Dollars, Billions)

0.00

2.00

4.00

6.00

8.0010.00

12.00

14.00

16.00

18.00

Pipe line Projects(Dollars, Billions)

6.70 6.90 12.00 17.00 17.00

2005 2006 2007 2008 2009

Operating Profit grow th

-100%-80%-60%-40%-20%

0%20%40%60%80%

Operating Profitgrow th

33% 57% 8% -92% -60%

2005 2006 2007 2008 2009

As part of it‟s finance strategy, the company undertook a cost savings initiative with the purpose of

maximising value. Savings were proposed to come from an ongoing assets optimisation exercise as

well as supply chain savings initiatives. The asset optimisation was successful and as at the end of

2009, 1.6 billion dollars worth of savings had been generated with a forecast of 2 billion by 2011.

To test the maximising of asset value, the return on total assets and fixed assets turnover graphs as

reflected in figures 3.4 and 3.5 were reviewed. Double digit returns were achieved for the 2 years prior

to the economic crises after which it dropped to negligible percentages. The fixed asset turnover also

reflects a downward trend after the crises years. Strong cash flows were generated from the operations

even through the crises years as reflected in Figure 3.6.

Figure 3.4 – Return on total assets – Anglo American Figure 3.5 – Fixed Assets Turnover – Anglo American


0%

5%

10%

15%

20%


9% 16% 18% 1% 0%

2005 2006 2007 2008 2009

Fixed Asset turnover

0.00

0.10

0.20

0.30

0.40

0.50

0.60

Fixed Asset turnover 0.57 0.54 0.57 0.53 0.37

2005 2006 2007 2008 2009

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Figure 3.6 – Cash Flow graph – Anglo American Figure 3.7 – CSI Spend graph – Anglo American

Cash flow s from operations ($ Million)

0

2000

4000

6000

8000

10000

12000

Cash flow s fromoperations ($ Million)

7265 9012 9375 9579 4904

2005 2006 2007 2008 2009

CSI Spend (Dollars, Millions)

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

CSI Spend (Dollars,Millions)

56.70 50.30 60.50 76.20 82.50

2005 2006 2007 2008 2009

On the Partner of choice front, the company decided to embark on sustainability programs and invested

in social responsibility programs which would deliver value to the communities within which the

company operates. As can be clearly seen in Figure 3.7, the CSI spend was on an increasing trend for

the entire review period even during the crises years.

On the investment of choice front we reviewed the return on equity and the Dividends paid. As

reflected in Figures 3.8 and 3.9. There were double digit returns prior to the crises years and single

digit returns after wards. Dividend payments were on an increasing trend until 2009 when due to the

effect of the economic crises, the company decided to waive the final dividend.

Figure 3.8 – Return on equity graph – Anglo American Figure 3.9 Dividends per share graph – Anglo American

Return on equity

0%

5%

10%

15%

20%

25%

30%

35%

40%

Return on equity 11% 26% 34% 3% 10%

2005 2006 2007 2008 2009

Dividends per share (cents)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

Dividends per share(cents)

79.00 95.00 124.00 130.00 44.00

2005 2006 2007 2008 2009

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On becoming the employer of choice, the company decided to embark on an aggressive safety

campaign which would instil the culture of zero harm as its safety target for the years ahead. Several

mines were closed to align them to the new safety way and performance indicators and targets were put

in place to track and monitor safety achievements. From the graph below, it is evident that the safety

drive had the desired effect of reducing fatalities and injuries though the ultimate goal of having zero

fatalities is yet to be achieved. Training programs were also undertaken to ensure that the right skills

are developed within the company and talent is well managed in the organisation.

Figure 3.10 – Safety Performance graph – Anglo American

Safety Performance

0.00

0.20

0.40

0.60

0.80

1.00

1.20

0.005.0010.0015.0020.0025.0030.0035.0040.0045.0050.00

FIFR 0.17 0.17 0.02 0.01 0.01

LTIFR 0.00 0.00 0.02 1.04 0.76

Fatalities 46.00 44.00 40.00 27.00 19.00

2005 2006 2007 2008 2009

From the above, it is evident that there are clear links between company‟s mission, the strategies

adopted and the achievements of its objectives though the full realisation of those objectives were

hampered by the economic crises in 2008.

4.2.1.3 ANGLO PLATINUM LIMITED

Anglo Platinum Ltd is a Precious Group Metals (PGMs) mining company. It produces about 40% of

the world‟s supply of platinum and has as it‟s vision to increase its lead as the world‟s number one

platinum organisation. To do this, it has the objective of becoming the number one company in

finding, mining, processing and marketing PGMs for the maximum benefit of all its stakeholders.

This mission and vision stayed consistent over the period of the review and became clearer and more

succinct over that period.

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Figure 4.1 – Anglo Platinum Mission and Strategy framework

As a marketing strategy, the company intends to understand and develop the market for PGMs. To

develop the market, the company embarked on several programs jointly with the Platinum Guild

Industry organisation and to research companies like Johnson Mathey in order to expand the use of

platinum and associated products for the automobile and other industries as well as to find new uses for

Vision

To increase our lead as the world‟s number

one platinum organisation

Financial

Cost per unit

AO cost

savings

Return on

assets

Turnover

growth

Superior financial

growth

Cost efficiency

Operational

Production

Statistics

Safety statistics

CSI spend

Return on

equity

Dividends

paid

CSI projects

Safety of

employees

Marketing

Creating value

Develop market for

PGMs

Expand into

production opportunity

Sustainable practices

and relationships

Become number one at

finding & producing

PGM s

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these products. It also formed alliances with government and other organisation to identify further

beneficiation opportunities. There were marketing campaigns in China and Japan to further develop the

demand for Platinum and Palladium for jewellery production and marketing purposes. Technological

advances in the production of fuel cells using PGMs are also at advanced stages. With these

undertakings, the demand for Platinum group metals grew, aided of course by the increasing world

regulatory environment concerning the implementation of strict emission laws. The demand for PGMs

therefore grew during the period of review and was only affected by the global economic problems in

2008 and 2009 following the resultant slump in demand which affected all companies within the

industry. The market has recovered since then.

From an operational perspective, the company has a strategy to grow its production into the space

created by the growth in demand. To do this, the company needs flexibility to either tune in more or

less production depending on demand and supply factors.

The company also needs to engage deal with some sustainability issues and have beneficial

relationships with the communities within which they work. With the above, the company can then

achieve its objective of becoming the number one company in finding, mining, refining and marketing

„safe profitable platinum‟. From Figure 4.2 we can clearly see the reduction in production as a result of

the shrinking demand in the period before and after the economic crises. The year end of Anglo

Platinum is December so the slow down affected it in the tail end of 2007 as well as the 2008 full year.

Figure 4.2 – Platinum ounces refined – Anglo Platinum Figure 4.3 – Cash cost – Anglo Platinum

Platinum Ounces Refined (000's)

2100.00

2200.00

2300.00

2400.00

2500.00

2600.00

2700.00

2800.00

2900.00

Platinum OuncesRefined (000's)

2453.20 2816.00 2474.00 2386.60 2451.60

2005 2006 2007 2008 2009

Cash on mine costs / Ref. Ounce

0.00

2000.00

4000.00

6000.00

8000.00

10000.00

12000.00

14000.00

Cash on mine costs /Ref. Ounce

5670.00 5748.00 8129.00 11448.00 11261.00

2005 2006 2007 2008 2009

From a finance perspective, the company wants to be cost effective in its production in order to deliver

superior financial growth. As per the cost effective strategy, evident in Figure 4.3, the 2009 costs were

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kept flat as compared to 2008. It is intended that the cost will be kept flat for an additional year.

To test the achievement of the superior financial growth, the turnover growth and operating margin

information were reviewed.

From the figures 4.4 and 4.5 graphs below, one can clearly see that the company enjoyed good turnover

growth and margins until the economic crises occurred.

Figure 4.4 – Turnover growth – Anglo Platinum Figure 4.5 – Operating Margin – Anglo Platinum

Turnover grow th

-40%

-20%

0%

20%

40%

60%

80%

Turnover grow th 19% 69% 19% 9% -28%

2005 2006 2007 2008 2009

Operating Margin

0%5%

10%15%

20%25%

30%35%

40%45%

Operating Margin 26% 41% 40% 33% 2%

2005 2006 2007 2008 2009

To conduct the business safely, cost effectively and competitively, the company embarked on a safety

drive to improve the culture around the expectation for a zero harm environment similar to that adopted

by its parent company Anglo American. As reflected in the graph below (figure 4.6), the safety

performance improved dramatically over the period of the review.

Figure 4.6 – Safety Performance Fig 4.7 – Return on Equity – Anglo Platinum

Safety Performance

0.00

5.00

10.00

15.00

20.00

25.00

30.00

LTIFR 2.06 2.52 2.03 1.74 1.37

Fatalities 25.00 19.00 25.00 18.00 13.00

2005 2006 2007 2008 2009

Return on equity

0%

10%

20%

30%

40%

50%

60%

Return on equity 22% 42% 44% 50% 10%

2005 2006 2007 2008 2009

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For the shareholders, the company‟s aim is to give them a return on their equity and cash distributions

in the form of dividends. From the graphs in figures 4.7 and 4.8, healthy returns on equity were

obtained during the period until the economic crisis hit. Dividends were also paid to the shareholders

until the economic crises and its resultant hardships rendered the company unable to pay them in the

short term. There are indications that the dividends payments will be resumed soon.

Figure 4.8 – Dividends per share – Anglo Platinum


0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00


638.00 783.00 747.00 423.00 0.00

2005 2006 2007 2008 2009

For its communities, the company engaged in several CSI related projects with an increasing trend

during the period of review. For the employees, the company had several training programs to improve

their skills and to ensure that there is enough talent within the pipeline for succession planning

purposes.

Based on the above, it is evident that there was a link between the company‟s clearly defined vision

and mission statement and the strategy which it applied over the period of review to achieve its

objectives.

4.2.2 CONSTRUCTION INDUSTRY

In the construction industry, all three companies selected had clearly defined missions and visions

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supported by strategies which they applied consistently over the period of review irrespective of

changes to the executive or board members.

The strategies followed were consistent with what they intended to achieve and the results achieved

were in line with the objectives set. A link was therefore established between what the companies

stated as their vision or mission, what they did by way of the strategies they followed and the results

they eventually achieved.

The table below reflects some of the findings from the information reviewed on these companies:

Table 3 - Scores for companies from the Construction industry

Aveng Murray &

Roberts

Wilson

Bayley

Holmes



Further clarification

required


Further cleanup

required

Nature of the business stayed consistent?



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Major changes in Leadership during the period?

Change in CEO &

chairman

Change to

executives & board

Change in CEO

Investment into SCI projects

Yes, but not

mentioned in later

years


Board with strong experience in chosen fields


achieved?

Consistency found in

what it did and what

it said. Good results

achieved.

Consistency found

in what it did and

what it said. Good

results achieved

4.2.2.1 AVENG LTD

The Aveng group has the Vision and Mission to be a leading infrastructure development company

providing a diverse range of construction, infrastructure and engineering products, services and

solutions for customers. This stayed consistent during the period.

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Figure 5.1 – Aveng Mission & Strategy framework

The Finance strategy is that of growth and value creation. To test the achievement of the growth

strategy, we reviewed the turnover growth and the operating profit growth of the company. The graphs

in figures 5.2 and 5.3 revealed that the company experienced a decline in the level of growth in its

turnover though they were still double digit numbers. The slow down in growth could be linked again

to the global crises. The Operating profit declined steeply in 2008 and to a lesser extent in 2009. The

operating margin in 2008 and 2009 was lower than the 2007 year but since this was the year of extra

ordinary growth within the industry, it could mean that the margin of 34% was the anomaly.

Mission

Aveng aims to be a leading infrastructure

development company

Financial

Turnover

growth

EBIT margins

Segmental

performance

Return on

equity

Div. paid

Value to shareholders

Growth

Operational

Kind of projects

Production

Statistics

Safety statistics

CSI spend

Market share

Geographic

spread

Marketing

Deepen the product

footprint

Reinforce leadership

Building iconic

buildings

Sustainable practices

and relationships

Employer of choice

Company which

employees are proud

of

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The company included earnings per share as one of the metrics which they track to indicate growth.

From the graph (Figure 5.5) below, it is evident that the earnings per share was also on an increasing

path until 2009 when it begun its downward trend. If one compares it to the prior boom years of 2006

then the trend even after 2008 was still positive.

Figure 5.2 – Turnover growth – Aveng Figure 5.3 – Operating profit growth - Aveng

Turnover grow th

0%

5%

10%

15%

20%

25%

30%

35%

40%

Turnover grow th 0% 38% 34% 14%

2006 2007 2008 2009


-200%

0%

200%

400%

600%

800%

1000%

1200%


0% 1114% -67% -13%

2006 2007 2008 2009

Figure 5.4 – Operating Margin - Aveng

Operating Margin

0%

5%

10%

15%

20%

25%

30%

35%

40%

Operating Margin 4% 34% 8% 6%

2006 2007 2008 2009

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Figure 5.5 – Earnings per share – Aveng Figure 5.6 – Net profit before Int. & Tax - Aveng

Earnings per share (cents)

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

Earnings per share(cents)

154.90 343.50 591.40 528.50 483.60

2006 2007 2008 2009 2010

Net profit before interest & tax

0.00

1000.00

2000.00

3000.00

4000.00

5000.00

6000.00

7000.00

8000.00

9000.00

Net profit beforeinterest & tax

950.00 8108.00 3400.00 2952.00 2611.00

2006 2007 2008 2009 2010

The other finance related strategic objective was that of creating value for the shareholders. To test the

achievement of this, the return on equity, return on total assets and dividends paid were reviewed.

From the graphs (Figures 5.7, 5.8 and 5.9) below it is evident that they were able to show double digit

returns on equity even through the period of the economic crises, though the period of the downturn

reflected lower returns. The dividends paid (Figure 5.9) reflected an upward trend until 2008 when the

effects of the down-turn was felt by the company.

Figure 5.7 – Return on Equity – Aveng Figure 5.8 – Return on total assets - Aveng

Return on equity

0%

10%

20%

30%

40%

50%

60%

70%

80%

Return on equity 17% 68% 22% 19% 15%

2006 2007 2008 2009 2010


0%

10%

20%

30%

40%

50%


6% 38% 11% 9% 9%

2006 2007 2008 2009 2010

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Figure 5.9 – Dividend per share - Aveng


0.0020.0040.0060.0080.00

100.00120.00140.00160.00


38.00 85.00 145.00 145.00 145.00

2006 2007 2008 2009 2010

The marketing strategic objectives were to deepen the product footprint and to reinforce the company‟s

leadership position in certain areas. The company did this by expanding their markets externally into

other regions with Africa and other continents such as Australia and to branch out into other sectors

such as the Energy, Mining and Transportation. Part of the company‟s strategy is to achieve a revenue

balance between the higher risk construction work and the lower risk construction materials. This is

achieved through the spread of businesses which the company is involved in.

To allow the company to better handle the management of the different operations, a decentralised

model of operation is followed in which the strategic direction is set at the centre but the performance

against that is left to the various operations.

The company also had a net profit margin target of 8% which it wanted to achieve. From the graph

(Figure 5.10) below, it appears that the company was able to beat this target during the period and is

consistent with their later decision to move the target up to a range between 7.5% and 10%.

The company wants to be involved in projects which will leave a legacy for the families of its

employees to be proud of and help it to become an employer of choice. Operationally therefore, they

set out to ensure that they take on iconic projects which satisfies that objective. For example, during the

2010 world cup, the company was involved in building the Soccer City stadium in Gauteng.

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Following on from the employer of choice agenda, the company improved its safety performance by

implementing a safety program with the slogan „Home without harm, everyone, everyday‟. From the

graph in Figure 5.11 below, though there was initially not much improvement in the fatalities

experienced by the company, the tide has begun to turn with 2010 seeing a reduction of about 50% in

the fatality numbers. Training, development and mentorship Programmes were also undertaken during

the year.

Figure 5.10 - Net profit before tax – Aveng Figure 5.11- Safety performance - Aveng

Net profit (before int. & Tax) Margin

0%

10%

20%

30%

40%

Net profit (before int. &Tax) Margin

6% 37% 11% 9% 8%

2006 2007 2008 2009 2010

Safety Performance

0

5

10

15

Fatalities 4 4 10 10 5

DIFR 0.65 0.67 0.67 0.44

2006 2007 2008 2009 2010

From the above, it is evident that there is a link between the company‟s vision and the strategies it has

adopted to achieve its objectives.

4.2.2.2 MURRAY & ROBERTS

Murray & Roberts is South Africa‟s leading construction and engineering group focused on selected

regional economies and specialist global markets. It has a commitment to sustainable earnings growth

and value creation which it categorises as not negotiable. This mission stayed consistent for the entire

period of the review.

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Figure 6.1 – M&R Mission & strategy framework

The financial strategic objective which the company wants to achieve is sustainable earnings growth

and value creation. To test the achievement of this, the operating margin (Figure 6.2 ), turnover growth

(Figure 6.3), net profit after tax growth (Figure 6.5), return on assets (Figure 6.7) and return on equity

Mission

South Africa‟s leading construction

and engineering group focused on

selected regional economies and

specialist global markets.

Financial

Turnover

growth

Net profit

growth

EBIT margins

Return on

equity

Return on

assets

Div. paid

Share price

Value creation

Sustainable earnings

Growth

Operational

Expansion

projects

Project pipeline

Safety statistics

CSI spend

Market share

Segmental

performance

Marketing

Vertical integration

Geographic expansion

Service diversification

Capacity to deliver

World class delivery

of customer

requirements

Supplier of

engineering solutions

of choice

Sustainable

relationships

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(figure 6.4).

The operating margin target that the company wants to achieve is 5, 0% to 7, 5%. From the graph

(Figure 6.2) below it can be seen that the company has been operating within the target margin range

for some time even through the difficult 2008 and 2009 period. The company experienced double

turnover growth figures (Figure 6.3) for the review period except for the 2010 year when it experienced

a deficit growth percentage as a result on some contracts being cancelled in the Middle East as an after

effect of the global crises in the Middle East. The target return on shareholder equity for the company

is 20%. The company steadily received higher percentages over the period of review with an increasing

trend even through the crises period. In 2010, the amount reduced to 17% due to earnings being lower

because of the contract cancellations experienced during the year. Net profit after tax (Figure 6.5) were

also in double digits and only went into negative growth during 2010.

Figure 6.2 – Operating margin – M&R Figure 6.3 – Turnover growth – M&R

Operating Margin

0%

2%

4%

6%

8%

10%

12%

Operating Margin 1% 5% 4% 9% 11% 5%

2005 2006 2007 2008 2009 2010

Turnover grow th

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Turnover grow th 19% 11% 61% 57% 21% -5%

2005 2006 2007 2008 2009 2010

Figure 6.4 – Return on equity – M&R Figure 6.5- Net profit after tax - M&R

Return on equity

0%5%

10%15%20%25%30%35%40%45%50%

Return on equity 12% 15% 24% 35% 43% 17%

2005 2006 2007 2008 2009 2010

Net Profit (After Tax) Grow th %

-100%

-50%

0%

50%

100%

150%

Net Profit (After Tax)Grow th %

-5% 33% 91% 118% 41% -58%

2005 2006 2007 2008 2009 2010

The company has identified its key future growth markets as the construction economies of Southern

Africa, the Middle East and Southeast Asia and the specialist mining and energy natural resource

markets of South Africa, Australia and Canada. It is in these areas that the company intends to apply its

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strategy of vertical integration, geographic expansion and service diversification.

On the operational side, the company has ensuring that they have the appropriate capacity to deliver

and a commitment to deliver world class fulfilment of customer requirements as its strategic objective.

This will ensure that they become the supplier of engineering solutions of choice and help them attain

their mission to become South Africa‟s leading construction and engineering group. What helps them

in this objective is the clarity they have around what they are good at, which is their core skill in

engineering and a core capability in contracting, as well as their core competence in industrial design.

As can be seen in the graph in figure 6.6 below, their project pipeline during the period before the

crises increased and only fell after the effects of the crises took hold of the market and some customers

pulled back on previously agreed contracts.

Figure 6.6 – Project pipeline – M&R Figure 6.7 – Return on total assets – M&R

Project Pipeline (R Billions)

0

10

20

30

40

50

60

Project Pipeline (RBillions)

0 8.5 10 38 55

2005 2006 2007 2008 2009


0%2%4%

6%8%

10%12%

14%16%


6% 4% 13% 14% 7% 3%

2005 2006 2007 2008 2009 2010

After the experiences of the crises period, the company took the decision to embark on a new strategic

path which they named „Reframing Murray & Roberts. Under this strategy, they prioritised organic

growth and acquisitions as what was required to build the critical mass necessary to remain competitive

and maintain future growth in their targeted sectarial and geographic markets. Accordingly, they

adopted a system of centralised strategy and policy formulation together with decentralised

performance and proceeded to cluster their operations into six “super-segments” within the domestic

and international markets.

To ensure that the company has the capacity to deliver, it needs to have healthy employees who work

within a safe environment. The company therefore has a strong health & safety focus which is tracked

by monitoring the number of fatalities per year and the lost time injury frequency rate (LTIFR) for

every 200 000 hours worked. The graph in figure 6.8 below reflects the eventual drop in fatalities in

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2009 and the progressive reduction in the LTIFR for the period.

Community involved leadership is also an area of focus and it is to ensure that communities in which

the company operates benefit from its operations. Over the period, an increasing trend is reflected

(Figure 6.9) thereby showing the commitment that the company feels for those communities.

Figure 6.8 – Safety performance – M&R Figure 6.9 – CSI Spend – M&R

Safety Performance

0

2

4

6

8

10

12

14

16

18


LTIFR 0 0 4.6 3.01 2.44

2005 2006 2007 2008 2009

CSI Spend ( R millions)

0

2

4

6

8

10

12

14

16

CSI Spend ( Rmillions)

0 10 10 10 13.8

2005 2006 2007 2008 2009

From the above, it is evident that there is a link between the company‟s clearly defined missions to

which it applied a consistent strategy in order to achieve its set goals during the period of review.

4.2.2.3 WILSON BAYLEY HOLMES

WBHO is a leading company in the construction industry in southern Africa and Australia, and is

principally involved in building construction, civil engineering and roads and earthworks. The

company has as its vision and mission, to become the leading construction company wherever they

operate, delivering quality solutions consistently and a pleasure to do business with. This stayed

consistent throughout the period of the review. The group is engaged in an expansion programme into

central and West Africa.

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Figure 7.1 – WBHO Mission & strategy framework

Mission

To be the leading construction company

wherever we operate, delivering quality

solutions consistently and a pleasure to do

business with.

Financial

Debt ratio

Cash flow

generated

Return on

equity

Div. paid

Turnover

growth

Improve returns to

shareholders

Low debt levels

Allow for acquisitions

to expand business &

create organic growth

Operational

Kind of projects

Acquisition and

J/v deals

Safety statistics

CSI spend

Market share

Geographic

spread

Marketing

Provide unequalled

service, maintain

market share

Cordial relations,

minimise disputes

Concentrate on areas

of expertise

Safe environment

Strategic partnerships

Community

relationships

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The operational strategy they have chosen to adopt is that of concentrating their activities on those

areas where their engineering, construction and management skills will have the greatest effect. To test

the achievement of this objective we reviewed the kind of projects which the company had been

involved in recent years. 2 of them were the OR Tambo international airport extensions and the King

Shaka International airport in Durban.

The second operational strategic objective for the company is that of providing a safe environment for

its employees. The LTIFR (Figure 7.2) reduced over the period of review, however the fatalities have

remained at stable levels and would therefore require extra interventions to bring them in line with their

objective of having Zero fatalities.

Figure 7.2 - Safety performance - WBHO

Safety Performance

00.5

11.5

22.5

33.5

44.5


LTIFR 0 3.5 2.9 3.2 2.7

2005 2006 2007 2008 2009

The next operational objective relates to partnerships with Joint venture partners as well as people from

previously disadvantaged communities. The company formed joint venture partner relationships with

relevant companies during the period of review and undertook an empowerment deal which saw

employees, black managers and previously disadvantaged communities benefiting from those

transactions. To test the achievement of this, the level of involvement within the communities was

verified by way of CSI projects initiated by the company and the results of those projects. The

company made a commitment to spend 1% of its pre-tax earnings on CSI projects and even in the

down turn years spent about 11 million a year on CSI related projects.

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The marketing objectives states that the company would like to provide an unequalled service to its

customers and achieve cordial relationships with minimum disputes. The only test as to whether this

was achieved would be on the actual performance of the business and the strength of their project

pipeline because to some extent, if their work was not good enough, they would not be able to get

repeat business and word of mouth alone would ensure that business dried up. The two graphs below

(Figures 7.3 and 7.4) reflect that the company‟s order book or project pipeline was quite strong during

the period of review and showed an increasing trend until the economic crises occurred. Even through

the crises period, there was still a healthy level of projects in the pipeline. Turnover growth (Figure 7.4)

during the period was also good. Even after the economic decline, the company still experienced

double digit growth in turnover.

Figure 7.3 - Project Pipeline – WBHO Figure 7.4 - Turnover Growth - WBHO

Project pipeline (R Billions)

02468

101214161820

Project pipeline (RBillions)

0 6.1 10.6 18.3 15.3

2005 2006 2007 2008 2009

Turnover grow th

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Turnover grow th 27% 4% 61% 49% 27% -5%

2005 2006 2007 2008 2009 2010

The financial objectives are to keep debt at low levels, to allow for acquisitions to expand the business

to make further organic growth possible and to improve returns to share holders. From the graphs in

Figures 7.5 and 7.6 below, the returns given to shareholders by way of return on equity and dividends

were quite favourable and had an increasing trend until after the global crises occurred.

Figure 7.5 – Return on Equity – WBHO Figure 7.6 – Dividends per share - WBHO

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Return on equity

0%5%

10%15%20%25%30%35%40%45%50%

Return on equity 19% 20% 34% 42% 44% 26%

2005 2006 2007 2008 2009 2010


0

50

100

150

200

250

300


45 60 116 242 218 105

2005 2006 2007 2008 2009 2010

To test for the company‟s ability to keep debt low and create cash flows to allow for the acquisitions,

the debt ratio and the cash generated from operations were reviewed. From the graphs in Figures 7.7

and 7.8, the debt ratio decreased over the review period to 2% and strong cash flows were generated

from the operations throughout the crises period. This means that the company is set up for any

acquisitions it may intend to embark on.

Figure 7.7- Debt Ratio – WBHO Figure 7.8 – Cash generated from operations - WBHO

Debt ratio

0%

5%

10%

15%

20%

25%

30%

35%

Debt ratio 13% 30% 20% 16% 5% 2%

2005 2006 2007 2008 2009 2010

Cash generated from operations (RM)

0

500

1000

1500

2000

2500

Cash generated fromoperations (RM)

285 240 1239 2239 2288 1065

2005 2006 2007 2008 2009 2010

From the above, it is evident that there is a link in what the company‟s mission is, its strategy and the

actions taken to achieve its stated goals

4.2.3 FOOD PRODUCTION INDUSTRY

Table 4 - Scores for companies from the food producing industry

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Tiger Brands Lt Illovo Sugar

Tongaat

Hullet Ltd




Nature of the business stayed consistent?



Progress made but

some work still

required to get there

Investment into SCI projects

increasing trend over

the period

increasing trend

over the period

increasing trend

over the period



achieved?

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4.2.3.1 TIGER BRANDS LTD

Tiger brands is a branded fast-moving consumer packaged Goods Company that operates mainly in

South Africa and selected emerging markets. It has a Mission to add value to life through great brands

and great people with a vision to be the world‟s most admired branded consumer packaged goods

company in the emerging markets. This stayed consistent throughout the review period.

Figure 8.1 – Tiger Brands mission & Strategy Framework

Mission

To be the world‟s most admired branded

consumer packaged Goods Company in

emerging markets.

Financial

Turnover

growth

Return on

assets

Profit margins

Organic growth

and acquisitions

Invest in categories

that deliver

sufficient top line

growth

Operational

Return on equity

Dividends paid

Safety statistics

CSI spend

Market share

Geographic

spread

Marketing

Brand building

New Markets -Africa

World class facilities

Continuous

improvement &

innovation

Value creation for all

stakeholders

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As part of its marketing objectives, the company wants to have great brands. This was tested by

reviewing the brand awareness ranking information which revealed that the company has been able to

gain market share in several of its product markets especially in the latter end of the review and seen it

advance towards its vision of becoming the most admired branded consumer packaged goods in

emerging markets. The company‟s woes with the competition tribunal during 2008 did not do much for

it in this endeavour but with the subsequent paying of the fine, purging of its long standing executives

and other initiatives undertaken, it will no doubt be able to soon put this episode behind it. The other

marketing objective is to explore new markets within Africa. The test of that is the geographic footprint

that the company now has within the African continent.

As part of the operational strategic objectives, the company wants to add value to lives of its

stakeholders. This is seen in its selection of products which are used in all facets of every day life. To

share holders, adding value means giving them a good return on equity and paying them a dividend.

From the graph in Figure 8.2 below, the company achieved double digit returns on equity and those

returns during the crises period was much higher than 2010 even with all the activity surrounding

South Africa hosting the world cup with its associated increase in foreign nationals visiting the country

to be a part of the world event. The dividends per share reflected in Figure 8.3 below, was also on an

increasing trend before the crises occurred.

.Figure 8.2 – Return on equity – Tiger Brands Figure 8.3 – Dividends per share – Tiger Brands

Return on equity

0%

10%

20%

30%

40%

50%

60%

Return on equity 46% 50% 29% 29% 34% 13%

2005 2006 2007 2008 2009 2010


0.00

200.00

400.00

600.00

800.00

1000.00


500.00 603.00 660.00 786.00 704.00 270.00

2010 2009 2008 2007 2006 2005

The financial strategic objective is to invest in categories of investments which deliver sufficient top

line growth and to have growth through acquisitions as well as organic means. To test the achievement

of this, the turnover growth and the return on assets were reviewed. From the graph in Figure 8.4

below, the turnover growth was erratic as were the operating profit growth and the net profit

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growth over the period of review reflected in figures 8.5 and 8.6 below, but a portion of this can be

attributed to the global crises in 2008 and 2009. The company however achieved excellent returns on

assets during the period of review as reflected in figure 8.7 below and showed returns higher than 30%

even through the recession years until in 2010 when the company‟s turnover may have been impacted

by the reputational damage it suffered due to some findings by the competition commissioner.

Figure 8.4 – Turnover growth – Tiger Brands Figure 8.5 – Operating profit growth – Tiger Brands

Turnover grow th

-60%

-50%

-40%-30%

-20%

-10%

0%10%

20%

30%

Turnover grow th 0% 11% -1% 22% 3% -50%

2005 2006 2007 2008 2009 2010


-60%-50%-40%-30%-20%-10%

0%10%20%30%


0% 14% 24% 7% -11% -49%

2005 2006 2007 2008 2009 2010

Figure 8.6 Net profit after tax – Tiger Brands Figure 8.7 Return on total assets – Tiger Brands


-80%

-60%

-40%

-20%

0%

20%

40%

60%


0% 48% -26% 6% 35% -58%

2005 2006 2007 2008 2009 2010


0%

5%

10%

15%

20%

25%

30%

35%


29% 29% 31% 32% 31% 15%

2005 2006 2007 2008 2009 2010

In the later part of the review, the company stayed true to its acquisition and expansion into Africa

strategy with its acquisition of a 51% stake in Haco Industries (Kenya) and a 74.7% stake in

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Chococam (Cameroon) as well as its planned acquisition of AVI Limited which was unfortunately

abandon after the management of AVI declined their offer.

In 2008, the company had an EBIT margins target of 6 - 8% in 1-3 years, 8 - 10% in 4-5 years and

+12% in ≥ 5 years. From the graph (Figure 8.9) below, those margins were achieved. Net profit

before interest growth (Figure 8.8) during the period of review were however erratic.

Figure 8.8 – Net profit before Int. growth – Tiger Brands Figure 8.9 – EBIT margins – Tiger Brands

Net profit before interest grow th

-50%-40%

-30%-20%

-10%0%

10%

20%30%

40%50%

Net profit beforeinterest grow th

0% 43% -22% 8% -41%

2010 2009 2008 2007 2006

EBIT margins

0%2%

4%6%

8%10%12%

14%16%

18%20%

EBIT margins 15% 19% 15% 13% 8% 14%

2010 2009 2008 2007 2006 2005

From the above, it is evident that the company had a vision and mission which stayed consistent

throughout the review period and that actions taken were consistent with the strategy to achieve those

objectives.

4.2.3.2 ILLOVO SUGAR

Illovo Sugar is a leading sugar and other down stream products manufacturing company. The group is

Africa‟s biggest sugar producer and has extensive agricultural and manufacturing operations in six

African countries. The company has the vision to be the leading sugar and downstream products

operation in Africa, an increasing global player and a world-class organisation.

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Figure 9.1 – Illovo Mission & Strategy framework

As its financial objective, the company wants to be a low cost producer, improve profitability by

greater than CPI, have low debt levels (< 40%) and enhance the wealth of the shareholders. To test

these, turnover growth, Operating margins, debt ratios, return on equity and dividends paid were

reviewed. The company‟s turnover growth in Figure 9.2 has had an increasing trend even with 2008

taken into account. This is also in line with the company‟s operational objective to expand its

operations. The operating margin in Figure 9.3, has stayed consistent even through the crises period

and has shown a slight increase in 2010 meaning that the company is keeping its production costs

under control even though its turnover is increasing. The gearing ratio (figure 9.4) has moved

Mission To be the leading sugar and downstream

products operation in Africa, an increasing

global player and a world-class organisation.

Financial Unit costs

Ranking on

low producers

list

Profit margins

Debt ratio

Turnover

growth

Return on equity

Dividends paid

Div. Cover

Enhance wealth of the

shareholder

Low cost production

Improve

profitability

Low debt

Operational

Safety statistics

Efficiency statistics

Production levels

CSI spend

Awards won

Revenue

per stream

Brand

ranking

Research

spend

Marketing

New markets &

customer needs

Quality products and

service to customers

Research new uses

Increase production &

yields

Safe working

environment

Social responsibility

World class

organisation

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significantly higher than previous years to a worrying 70% which is far higher than the company‟s

target of 40%. From the financial reports, this increase is due to the group‟s continued capital

investment in projects at all its operations. Return on equity in Figure 9.5 shows double digit returns

even during the crises period and the dividend paid in Figure 9.6 showed an increasing trend until 2010

which shows that the company is meeting its objective of enhancing shareholder wealth.

Figure 9.2 – Turnover growth – Illovo Figure 9.3 – Operating Margin - Illovo

Turnover grow th

-30%

-20%

-10%

0%

10%

20%

30%

Turnover grow th -21% 6% 15% 8% 27% -2%

2005 2006 2007 2008 2009 2010

Operating Margin

0%

5%

10%

15%

20%

Operating Margin 5% 14% 17% 16% 16% 18%

2005 2006 2007 2008 2009 2010

Figure 9.4 – Gearing - Illovo

Gearing %

0%

10%

20%

30%40%

50%

60%

70%

80%

Gearing % 55% 24% 12% 40% 70%

2005 2006 2007 2008 2009

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Figure 9.5 – Return on equity – Illovo Figure 9.6 Dividends per share - Illovo

Return on equity

0%

5%

10%

15%

20%

25%

30%

Return on equity 3% 25% 22% 22% 28% 14%

2005 2006 2007 2008 2009 2010


0

20

40

60

80

100

120


25.5 62.5 75 85.5 106 86

2005 2006 2007 2008 2009 2010

As its marketing objectives, the company intends to search for new opportunities for sugar and identify

the needs of customers so that quality products and services can be provided to them.

As its operations objective, the company wants to expand production, have a safe working environment

for its employees, and engage in social responsibility so as to become a world class organisation. The

company making its expansion aims a reality with several operations with expansion initiatives in place

and is quoted as the reason why the debt ratio has been on rise in recent years. This appears to be

benefiting the group as production performance is said to have improved during the later period of the

review.

From the above information, it is evident that the company has a clearly articulated vision and mission

with strategies in place to ensure the achievement of related strategic objective.

4.2.3.3 TONGAAT HULETT

Tongaat Hulett is an agri-processing business which includes integrated components of land

management, property development and agriculture. Through its sugar and starch operations in

Southern Africa, Tongaat Hulett produces a range of refined carbohydrate products from sugar cane

and maize. The company has a mission to create value for all stakeholders in a manner that is

sustainable, responsible and contributes meaningfully to the social and physical environment in which

it operates.

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Figure 10.1 – Tongaat Mission & Strategy framework

As part of the financial strategic objective, the company wants to reduce the costs of production,

enhance earnings growth and increase stakeholder returns. To create value for its shareholders, the

company generates good returns on equity and pays out dividends. These metrics were therefore

reviewed and the graphs in Figures 10.2 below show that the company saw double digit returns during

the period of review with an unusual spike in 2007. Even through the worst economic turmoil the

world has seen in years, the company was able to get good returns and pay a dividend (Figure 10.3)

when other companies were not able to do so.

.

Mission

To create value for all stakeholders in a manner

that is sustainable, responsible and contributes

meaningfully to the social and physical

environment in which it operates.

.

Financial

Unit costs

Ranking

on low

producers

list

Turnover

growth

Return on equity

Divs paid

CSI spend

Earnings

growth

Enhance

stakeholder

returns

Reducing costs of

production

Operational

Safety statistics


Production levels

Cane to sugar recoveries

Utilisation %

Sales mix

achieved

Geographic

spread

Marketing

Improve sales mix by

increasing high value

products

Increase production &

yields

Streamline operations

Eliminate non core

Improve processing

skills & capacity

Continuous

improvements

Capacity

Mi

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Figure10.2 – Return on equity – Tongaat Figure 10.3 – Dividends per share - Tongaat

Return on equity

0%

20%

40%

60%

80%

100%

120%

140%

Return on equity 11% 13% 116% 20% 56%

2005 2006 2007 2008 2010


0.00

100.00

200.00

300.00

400.00

500.00

600.00


400.00 550.00 310.00 310.00 275.00

2005 2006 2007 2008 2010

To create value for its employees, the company has to exist and be profitable to secure jobs, develop

the employees, have a favourable environment for all diverse groups to work and ensure their safety.

As reflected in the graph in Figure 10.4 below, the company had net profit growth throughout the

period of review except for the 2008 year due to the economic crises. It also had a very good safety

record (figure 10.5) during that period. Even though they experienced fatalities, their lost time injury

frequency rate followed a reducing trend for the entire period.

Figure 10.4 – Net profit after tax – Tongaat Figure 10.5 – LTIFR - Tongaat


-200%

-100%

0%

100%

200%

300%

400%

500%


193% 23% 426% -80% 345%

2005 2006 2007 2008 2010

LTIFR

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

LTIFR 0.31 0.21 0.14 0.11 0.10

2005 2006 2007 2008 2010

The company has very good training programs in place and has made impressive in roads into making

sure that its workforce represents the demographics of the society within which they operate. Currently,

50, 2% of management, and 77, 5% of skilled and supervisory positions are filled by black employees.

Of the 450 graduates taken into the company, 58 % are black employees, with women constituting 32,

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9% of those. The company concluded a 25% BEE equity deal which made provision for strategic

partners, disadvantaged communities surrounding its land developments, small cane grower

communities surrounding its South African sugar mills and BEE management and employee share

ownership schemes. In fact so important is the transformation agenda that the Employment equity

committee is chaired by no other than the CEO himself.

To create value to it‟s community stakeholders in a manner that is sustainable, responsible and

contributes meaningfully to the social and physical environment in which it operates, the company

engages in CSI projects. As reflected in the graph in Figure 10.6 below, during the period of review,

these followed an increasing trend.

Figure 10.6 – CSI spend - Tongaat

CSI (R millions)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

CSI (R millions) 4.40 6.80 15.70 12.00 130.70

2005 2006 2007 2008 2010

The company has a marketing objective to improve its sales mix by increasing high value products.

For its operational objective, the company wants to increase production, streamline its operations by

eliminating non core activities and continuously improve its yields, processing skills and milling

capacity. The review of the company‟s information revealed that it is consistently following an

expansion path that favours large-scale agriculture and agri-processing operations in selected countries.

In keeping with its streamlining objective, the Group has divested from a number of non-core

businesses and refocused its operations, leveraging the synergies that exist between its agri-processing

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operations and prime agricultural land holdings

Based on the above, it evident that not only does the company have a clear mission and strategy which

was consistent over the period of review, but that those goals were actually achieved.

4.3 Research Limitations

The main limitation of the research is that it uses only externally available information on the

companies selected so there is a possibility that things which were not in the public domain were

overlooked.

The research also looks at decisions and actions taken and tries to understand them in the light of the

chosen strategy of the company. It therefore is not able to ascertain which decisions could have been

taken to be more consistent with that strategy.

Though some of the intentions behind actions taken are evident in the actual actions themselves or the

results of those actions taken, without internal confirmation, one cannot be certain that those were in

fact the intentions at the time those decisions or actions were taken.

We have chosen to exclude any portions of the strategy which will not be easily understood from

purely external sources.

The selection of companies used were all in the top category within the chosen industry and this means

that most of the companies would have very good strategies and systems in their very nature and hence

the strong links found in their missions strategies and achievements. The limitation inherent in this is

that we are unable to see what happens if those links are not in place.

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5 RESEARCH CONCLUSIONS

The initial research questions were as follows:

1. Are there linkages between the company‟s stated objectives and its strategic choices?

2. Can these linkages between the company‟s strategic choices and its financial, marketing and

operational results be established by analysing the company‟s publicly available information?

3. To what extent does our understanding of the above enable us to anticipate that company‟s

future results and its strategic choices?

From the analysis of information reviewed, there was enough evidence to support the view that there

are indeed linkages between what a company chooses as its vision and mission statement, the strategies

it adopts and the actions it takes to achieve its strategic objectives. These links have been identified and

articulated in the research analysis and discussion portion of this document and therefore answers

question 1 in the affirmative.

As proposed at the beginning of the research exercise, information obtained was purely from external

sources for example, financial reports of the selected companies, their websites, SENS announcements

and newspaper readings. The fact that all the findings were obtained purely by reviewing these publicly

available information confirms the fact that these linkages can be established by only analysing

publicly available information and therefore answers question 2 in the affirmative.

Question 3 is the most difficult of the 3 question to answer in that it expects us to extrapolate the

learnings from reviewing the information into the future of that company and attempt to forecast what

the strategic choices are likely to be and what the results of those choices will be at that future date.

This is indeed difficult in that the future results of the company is dependent not only on what happens

internally within the company but also on what is happening within the industry at the time as well as

the macro economy and indeed, the world. Though there is enough evidence to support the view that

with the understanding obtained, one can easily see what the likely responses to certain occurrences

will be based on what they have done in the past, even that is dependent on the executive team and the

board at the time of those occurrences.

From a purely financial, marketing and operational perspective, one can forecast the future results by

looking at past trends and things which are currently in place for the company to either perform at

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similar levels or materially above previous levels due to production capacity improvements or

introduction of new uses for the products or markets to supply them to. From a holistic perspective,

when one includes what the employees, communities and governments are likely do in the future which

may impact of the company‟s future performance; it will affect the accuracy of that estimate. Therefore

to answer question 3, the view would be that the future predictive value of information obtained from

external sources would be limited as there are so many nuances to what is happening in the company

that may not be externally evident for prolonged periods of time. In improve the accuracy of that

forecast; a closer link to the companies would have to be established by way of interviewing some of

the executives of the companies to establish if there are any shifts in thinking, intentions or strategies

that may materially affect the company in future years.

From the above therefore, we can conclude that there are links between what the company states as its

vision and mission, the strategies it adopts in order to achieve its objectives and the results they

achieve. These links can be easily identified and understood by reviewing publicly available

information but to have accuracy in the predictive or future estimative power with that information,

you would need a closer association with the company by way of interviews with the executives or the

board in order to identify any material shifts in thinking or strategy which may affect the future.

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FUTURE RESEARCH DIRECTIONS

Future work can be done on extending the number of companies and the number of industries so as well as having a

better mix of the categories of companies used for example, some smaller and less successful companies can be

included as well to establish whether the links are as easy to establish in those companies as well.

A survey of selected members of the management teams of those companies can also be done in order to get a richer

understanding of the intentions of management when certain decisions or actions were taken and to get a feel for

whether there are any major shifts in thinking or strategies underway. This, as stated previously will improve the

estimative ability of the information obtained.

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http://www.tigerbrands.com/Investor/Default.htm

Tongaat Hullet web site (2010). Electronic references: Annual reports (2005 – 2009). Retrieved October 2010 from

http://www.tongaat.co.za/imc/annual_reports/ar_home.asp

WBHO web site (2010). Electronic references: Annual reports (2005 – 2009). Retrieved October 2010 from

http://overendstudio.co.za/online_results/wbho/annual_results_2010/index.php

http://www.angloamerican.co.za/en/media/reports-and-publications.aspx

http://www.angloplatinum.com/investors/results/2009.asp

http://www.aveng.co.za/financials/annual_reports

http://www.bhpbilliton.com/bb/investorsMedia.jsp

http://www.illovo.co.za/Financial/Annual_Reports/Annual_Report2010.aspx

http://www.murrob.com/fin_annual_reports.asp

http://www.tigerbrands.com/Investor/Default.htm

http://www.tongaat.co.za/imc/annual_reports/ar_home.asp

http://overendstudio.co.za/online_results/wbho/annual_results_2010/index.php

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APPENDICES

Appendix 1 – Research Instruments

Appendix 2 – List of JSE listed Companies (Used for selection)

SELECTED COMPANIES IN THE MINING INDUSTRY

Company Name Market Capitalisation Ranking

Bhp Billiton Plc 522,863,253,689

1

ANGLO AMERICAN PLC 412,279,448,293

2

Anglo Platinum Ltd 180,942,648,072

3

Northam Platinum Ltd 16,871,113,440

11

SELECTED COMPANIES IN THE CONSTRUCTION INDUSTRY


PRETORIA PORT CEMNT 18862962571

1

AVENG LTD 16632807365

2

Murray And Roberts H Ord 14935167855

3

Wilson Bayly Hlm-ovc Ord 8382000000

4

Ceramic Industries Ltd 2780320364

7

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SELECTED COMPANIES IN THE FOOD PRODUCING INDUSTRY


Tiger Brands Ltd Ord 35470790283 1

Illovo Sugar Ltd 12058458116 2

TONGAAT HULETT LTD 10408855786 3

Avi Ltd 9345803666 5

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Appendix 3 – Mission, Vision & Strategies of Companies reviewed

APPENDIX 3.1 MISSION, VISION AND STRATEGY FOR BHP BILLITON

BHP Mission & Vision Objectives & Strategy Metrics used to measure

achievement

2005 We are BHP

Billiton, a leading

global resource

company.

Our purpose is to

create long-term

value through the

discovery,

development and

conversion of

natural resources,

and the provision

of innovative

customer and

market-focused

solutions.

Financial

Growth – using our cash flow to

meet future demand and create

options

Financial strength and discipline

– A commitment to a solid „A‟

credit rating

World-class assets – our world-

class assets provide the cash

flows that are required to build

new projects, to pay our

employees, suppliers, taxes and

partners, and ultimately to pay

dividends to our shareholders.

We maintain high-quality assets

by managing them in the most

effective and efficient way. We

pursue this objective through our

unchanged strategy of investing

in „tier one‟ assets that are large,

low-cost and long-life to provide

a balanced portfolio of export-

oriented commodities.

A deep inventory of growth

projects

Cash flow generation

Turnover growth

Credit rating

Cash flow generation

Dividends paid

Return on assets

Projects pipeline

Marketing

Reach new markets at a time

when the economy is

experiencing significant growth.

Seek out opportunities and work

closely with our customers to

help grow their businesses.

customer and market-focused

solutions

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Operational

Lead through innovation in every facet

of our operations.

A focus on the upstream extraction of

natural resources

A diversified portfolio of commodities

and assets and geographic regions that

reduce the volatility of cash flows

A focus on seaborne traded commodities

Our Corporate Objective is to create

long-term value through the discovery,

development and conversion of natural

resources.

Licence to operate – we ensure that

those who are impacted by our

operations also benefit by the operation.

It is a critical part of our strategy to

successfully deliver our growth projects

on time and on budget.

Growth options – we use exploration,

technology and our global footprint to

identify the next generation of

opportunities where we can invest and

use our skills and strengths.

The strength of our strategy is in the

balance

Between optimising current conditions

and progressing our pipeline of next

generation high-growth opportunities.

Essentially, our strategy is to ensure we

have a suite of long-life, low-cost assets,

diversified by geography and

commodity, that can be expanded and

that are largely export-oriented.

The growth opportunities implicit in this

strategy mean we can move quickly to

increase capacity from an existing

operation when we determine that global

demand warrants such an expansion.

We actively compete for access to

undeveloped resources in regions

throughout the world.

working hard to be leaders in safety,

Environmental management and

community engagement.

CSI spend

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APPENDIX 3.2 MISSION, VISION AND STRATEGY FOR ANGLO AMERICAN

Anglo

American

Mission &

Vision

Objectives & Strategy Metric used to measure

achievement

Anglo

American aims

to become the

leading global

mining

company

Financial

Cost savings and synergies

as well as technology and

knowledge sharing treated

as key priorities

Ensuring that maximum

value is gained from

ownership of it‟s assets

Anglo American‟s strategy

is to seek to invest in

opportunities that will

deliver strong cash flows

through the cycle and which

offer the greatest potential

for optimisation and

expansion

We are now progressing

into the second phase of our

strategy, where we are

seeking to maximise the

value we derive from each

of our assets).

growth ( 12 billion projects

approved and 29 billion

under consideration) and

engagement

Investment of choice : Asset

optimisation and new

capital investments

Partner of choice:

Sustainable development

Employer of choice: Safety

& people

AO cost savings

Return on assets

Return on Investments

Operating profit growth

Return on investments

Pipeline values

Asset Optimisation

achievements

CSI spend

Training spend, LTIFR,

Fatalities

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Marketing

Centred around three core

commodity categories –

precious, base and bulk.

Market shares of different

products

Operational

Anglo American‟s strategy

has been to become a more

focused mining group, in

the process simplifying its

structure and enhancing

returns.

.

Committed to delivering

operational excellence in a

safe and responsible way,

adding value for

shareholders, customers,

employees and the

communities in which the

company operates

Assets held, businesses

invested in

Fatalities, LTIFR

Return on equity,

Dividends

CSI spend

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APPENDIX 3.3 MISSION, VISION AND STRATEGY FOR ANGLO PLATINUM

Anglo

Platinum

Mission & Vision Objectives & strategy Metrics used to

measure achievement

Our mission is to

mine, process,

refine and market

platinum, other

platinum group

metals, and base

metals.

Our vision is to

increase our lead

as the world‟s

number one

platinum

organisation.

.

Financial

Delivering financial growth

that is superior in our

business;

Developing employees so

that they can achieve

personal growth; and

empowering all employees

by providing appropriate

training and equipment.

To conduct our business

cost-effectively and

competitively.

Turnover growth

Training spend

Cost per unit

Marketing

Our strategy is to develop

the market for platinum

group metals,

Our strategy is to create

maximum value through

understanding and

developing the market for

PGMs,

Programs undertaken

Alliances formed

Initiatives

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Operational

to expand our production

into that opportunity

Sustainable development

and market development;

and developing mutually

constructive and beneficial

relationships with our

broad stakeholder base.

Our objective is to be the

number one company in

finding, mining, processing

and marketing platinum

group metals for the

maximum benefit of all our

stakeholders.

Supply versus demand

dynamics

Production levels

CSI spend

Industry ranking

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APPENDIX 3.4 MISSION, VISION AND STRATEGY FOR AVENG

Aveng Mission & Vision Objectives & Strategy Metric to measure

achievement

MISSION

Building a proud and

lasting legacy of which

customers, shareholders

and employees, their

families and future

generations will be

proud.

VISION

The Aveng Group aims

to be a leading

infrastructure

development company

providing a diverse

range of construction,

infrastructure and

engineering products,

services and solutions

for customers,

sustainable profitability

for shareholders and a

great place to work for

employees.

Financial

Return on equity %

Growth in earnings per share

Enhancing the profitability

of the existing portfolio; and

achieving EBIT margins of

8%

Growing annual turnover by

CPI +10%

Double digit annual revenue

growth and

achieve operating margins

ranging between 7% and 9%

Maximum debt-to-equity

ratio of 25%.

Revenue balance between

higher risk construction

activities and lower risk

construction materials,

products and services.

Generate and extract more

Value for shareholders.

Return on equity

Earnings per share growth

EBIT margins

Turnover growth

Revenue growth

Debt to equity ratio

Spread of operations between

construction and construction

materials

Return on equity

Dividends paid

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Marketing

Deepen products and service

footprint

Expand our product/service

footprint

By offering more

comprehensive and

technically demanding

solutions across the value

chain to selected clients

primarily in the following

sectors:

Infrastructure

Energy

Mining

Transportation

Reinforcing the Group‟s

leadership position in

selected areas of the

infrastructure market in

South Africa;

Consolidating its position as

a first-tier player in

Australia;

Geographic expansion of

current footprint in Africa

and the Middle East

Number of product and

service lines

Mix of products

Market share

Market share

Countries within which they

operate

Acquisitions made

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Operational

Ongoing involvement in

building iconic structures,

landmark buildings, bridges,

dams, airports and power

stations which form the

backbone of many

economies in developing

countries.

Home without harm,

everyone, everyday.

Employer of choice

Higher risk construction and

engineering

activities and the lower risk

materials,

products and services

operations

Construction and

engineering activities within

South Africa and

internationally

Business unit structure with

customer-facing decision-

making as low as practicable

Active contribution to social

development and

sustainability

to leverage Group strengths

and pursue opportunities in

the water and power sector

Nature of construction jobs

done

Safety statistics

Ranking in best companies to

work for competition

Revenue stream from

segments of the business

Geographic spread of

segmental information

CSI spend

Segmental performance

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APPENDIX 3.5 MISSION, VISION AND STRATEGY FOR MURRAY & ROBERTS

M&R Mission & Vision Objectives & Strategy Metric to measure

achievement

South Africa‟s

leading construction

and engineering

group focused on

selected regional

economies and

specialist global

markets.

Commitment to

sustainable earnings

growth and value

creation, and the

leverage of our

capabilities into

new geographic

regions and growth

markets through

acquisition,

strategic partnership

and joint venture.

World class

fulfilment is our

mission. We deliver

capital projects and

engineered products

to customer

requirements

We serve the

development needs

of emerging

societies.

Financial

Sustainable earnings

growth

Value creation.

Our consolidated

margin target is 5,0%

to 7,5%

Our target return on

shareholder funds is

20%

balance sheet strength

and consistent credit

rating

a risk management

framework

Mergers &

acquisitions to both

consolidate and

expand market or

regional presence

to deliver a superior

performance profile

to reinstate the share

in a range above 9 000

cents* within the

foreseeable future,

Prioritises organic

growth and

acquisitions required

to build the critical

mass necessary to

remain competitive

and maintain future

growth in our targeted

sectarial and

geographic markets.

Net profit growth

Return on assets


Profit margin

Return on equity

Dividends paid

Debt ratio

Systems in place

Acquisitions made

Turn over growth

Share price

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Marketing

Vertical integration

within markets or

regions

Geographic expansion

in core markets

Service diversification

within core regions

increased activity in

all our regional and

sectaral markets,

including growth

opportunities

associated with the

2010 Soccer World

Cup in South Africa

focus our Group on

selected market

segments and

efficiently deploy

capital and cash

resources

Market share

Geographic areas operated

in

Service offerings within

regions

Turnover growth in

various regions


Operational

Capacity to deliver

a formalised order

book procurement

system

health & safety focus

community involved

leadership

performance delivery

2/3rd

of activity in SA

and the balance in

external countries

Expansion projects

Projects pipeline

Fatalities, LTIFR

CSI spend

Segmental

performance

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APPENDIX 3.6 MISSION, VISION AND STRATEGY FOR WILSON BAYLEY HOLMES

WBHO Mission &

Vision

Objectives & Strategy Metrics to measure

achievement

Vision

To be the leading

construction

company

wherever we

operate,

delivering quality

solutions

consistently and a

pleasure to do

business with.

Financial

To improve returns to

shareholders at a rate in

excess of the real growth of

the economy and the

construction sector in

particular.

To keep debt at acceptable

levels with due regard to the

nature of our industry and

the types of contracts

undertaken.

Most of the growth is

organic but acquisitions in

specific parts of the business

are done to enhance

capability thereby

facilitating additional

organic growth.

Return on equity

Dividends paid

Debt ratio

Acquisitions made

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Marketing

To provide unequalled

service, deliver specified

quality, maintain cordial

relationships, minimise

disputes.

To strive to provide an

unequalled service to our

clients

To maintain cordial

relationships with our clients

and their professional

advisers and to minimise

areas of dispute.

Consolidate position and

maintain market share

Awards won

Disputes

Awards won

Growth of the business

Market share

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Operational

To concentrate on those

areas where our engineering,

construction and

management skills will have

the greatest effect.

To give the highest priority

to providing a safe

environment within which

our workforce can be

productively employed.

To deliver the standards of

construction quality

specified.

To form strategic

partnerships and participate

in joint ventures with other

industry players where

appropriate.

To interact with the

disadvantaged of the

communities in the areas

where we contract in an

attempt to improve their

standards of health and

education.

Nature of wok done

Fatalities, LTIFR

Awards won

Repeat business

Joint venture deals done

CSI spend

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APPENDIX 3.7 MISSION, VISION AND STRATEGY FOR TIGER BRANDS

Tiger

Brands

Mission & Vision Objectives & Strategy Metrics to measure

achievement

2005 Our vision

To be the world‟s

most admired

branded consumer

packaged goods

company in

emerging markets.

Mission

Adding value to

life through great

brands and great

people

Financial

Invest in categories that can deliver

significant top-line growth

Invest in Innovation (research and

development as well as market

support)

Invest in targeted acquisitions that

will deliver value

Profitable top-line growth through

Local leadership, Selective

globalisation

Capital expansion

Domestic Acquisitions

International Expansion

Driving profitable top line growth

Organic Growth

Funding dependent on acquisition

but avoiding currency risk is a key

factor

• EBIT margins:

1-3 years c.6 - 8%

4-5 years c.8 - 10%

≥ 5 years +12%

Turnover growth

Return on assets


Return on equity

Dividends paid

Profit margins

Earnings margins

Geographical spread of

businesses

Production increases

Types of funding used

EBIT margins

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Marketing

Brand building and innovation of

core business

Great Brands

capability critical

Brand awareness rankings

Operational

Value creation for all our

stakeholders in an environment of

respect, teamwork, imagination and

action-orientation

World Class Facilities

Continuous improvement &

innovation of core business

Focus on East, West, Central and

Southern Africa

Local partnership and RTM

CSI Spend

Expansion & stay in

business capital

Geographic footprint

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APPENDIX 3.8 MISSION, VISION AND STRATEGY FOR TONGAAT HULETT

Tongaat Mission & Vision Objectives & Strategy Metrics to measure

achievement

The business seeks

to create value for

all stakeholders in a

manner that is

sustainable,

responsible and

contributes

meaningfully to the

social and physical

environment in

which it operates.

Financial

Decreasing unit costs of

production of sugar production

Strategy of sugar expansions in

low cost regions with access to

attractive markets

to enhance shareholder returns

reducing costs will further

contribute to earnings growth

Tongaat-Hulett Sugar is striving

to maintain an internationally

competitive cane growing and

manufacturing base through the

identification and elimination of

all non-value adding processes

and activities

strategically positioned to further

leverage efficiencies and

economies as sugar milling in

the region moves to improve its

cost competitiveness

.

.

Cost per unit of production

Ranking on low cost

producers list

Return on equity

Return on Assets

Dividends paid

Turnover growth

Earnings per share

Disposals made

Marketing

The current investment

philosophy is to optimise

existing capacity by improving

the sales mix through

increasingly high value products.

Sales mix achieved

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Operational

continuous improvement of its

operations

by increasing the utilisation of its

existing milling assets through

an improvement in yields, cane

to sugar recoveries and the area

under cane,

Focus is to increase sugar

production substantially from the

level of 1 106 000 tons produced

in 2008.

The focus going forward is on

opportunities to increase the

range of higher value products,

with good progress in adhesives

and mining product initiatives.

African Products and Tongaat-

Hulett Sugar continue to assess

opportunities to capitalise on

their joint agri-processing skills.

The matching of milling capacity

to available cane supplies

remains a key driver of low cost

sugar production.

Technology management is a

key element of Tongaat-Hulett

Sugar's lean manufacturing

strategy

It is accelerating its programme

of releasing new developments,

benefiting from the buoyant

property market in recent years

and increasing interest from

national and international

investors.



Increase in production levels


Utilisation percentages

Technology used

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APPENDIX 3.9 MISSION, VISION AND STRATEGY FOR ILLOVO SUGAR

Illovo Mission & Vision Objectives & Strategies Metrics to measure

achievement

be the leading

sugar and

downstream

products operation

in Africa,

An increasing

global player and a

world-class

organisation.

Financial To enhance the wealth of shareholders Lowest-cost producers in the world. improve the profitability of downstream products increase profits greater than CPI To maintain a dividend cover of at least two-times. efficient usage of funds employed, with the objective of not exceeding gearing of 40% over the long term an interest cover of not less than five times

Cost per unit of production

Ranking on low cost producers

list

Net profit growth

Return on equity

Return on Assets

Dividends paid

Turnover growth

Earnings per share

Disposals made

Operating profit margins

Dividend cover – target of 2

Debt ratio target not to exceed

40%

Interest cover not more than 5

Marketing To seek new opportunities for sugar and downstream products nationally and internationally. To be proactive in identifying the needs of customers To consistently deliver quality products and services to customers. To undertake research and development to improve returns, and develop new products and applications, from its core commodity products using every stick of cane.

New markets, geographical

footprint

Brand ranking?

Research spend

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Operational To achieve a sustainable, balanced and integrated economic, social and environmental performance. To provide all employees with a working environment that is safe and without risk to their health. To expand the group’s sugar and cane production. To maximise usage of bagasse and biomass to generate electricity for own operations and to supply Power into national grids. To be socially responsible, and maintain and develop appropriate ethical, environmental and risk Management standards as an integral part of the business.

To take cognisance of all stakeholders’

interests in the group’s business.


Increase in production levels

Segmental performance, % of income from electricity generation?

CSI spend

Safety statistics

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APPENDIX 4.1 D ec la rat ion

1 . I k n o w t h a t p l ag i a r i sm i s w r on g . P l ag ia r i s m i s t o u s e an o th e r ‟ s wo rk an d

p r e t end t h a t i t i s my o w n .

2 . I h av e u sed a r eco gn i s ed con ven t i on fo r c i t a t i o n and r e f e r en c i n g . E ach

s i gn i f i c an t con t r i bu t i on and q u o t a t i on f r om th e w o rk s o f o th e r p eo p l e h as

b een a t t r i b u t ed , c i t ed an d r e f e r en ced .

3 . I c e r t i f y t h a t t h i s su bm iss io n i s a l l m y o wn w o rk .

4 . I h av e n o t a l l o w ed an d wi l l no t a l l o w an yo n e to cop y t h i s e s s a y w i t h th e

i n t en t i on o f p as s ing i t o f f a s t h e i r o wn wo r k .

Ma rga re t A mof a

S i gn atu re :

D a t e : 10 D ecemb er 20 10

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