Shine Africa - Final Report-2

ENTREPRENEURSHIP & EMPOWERMENT IN SOUTH AFRICA (EESA) 2013

Final Report: Shine Africa Logistics Owner: Webster Kushata

MPUMELELO CONSULTING

“

Because we believe in your ability to succeed”

CONSULTANTS:

Busisiwe Mutlaka

Nathalie W. Guerrier

John Snedegar

Charlie Bailey

Lee Schilder

Danicke Mishe Lentjies

Date: Tuesday, July 16th 2013

Page 1 of 92 Mpumelelo Consulting

TABLE OF CONTENT

Letter of Agreement …………………………………………………………3-6 SEE Model A.- Layer one: Then Entrepreneurial Core 1. The Core Strategic Issues……………………………………..8-9 2. The Entrepreneur ……………………………………….…..9-10

Table 1: The entrepreneur strengths and weaknesses……10 Map 1:Map of activities in a week ………………………..11

3. The Business Concept ……………………………………12-14 Table 2: The Business Depth and Breadth ………….14-15

4. The Opportunity …………………………………………15-20 Table 3: Market segment population …………..……17-19 Map 2: Customer buying processes …………………20-21

B.1 – Layer two: Internal Operations and Resources 1. Existence of Records and Bookkeeping System…………22-23 2. Financial Records ………………………………………..23-24 3. Costing Structure ………………………………………...24-26

Table 4: Fixed and Variable costs – Breakeven analysis….25-26 4. Cash Flow ……………………………………………………26 5. Account Receivables ………………………………………..26 6. Accuracy of Records ……………………………………..26-27 7. Financial planning …………………………………………..27 8. System for Collection and Payment of Tax …………………27 9. Revenue drivers and profitability of each ………………….28

Table 5: Revenue drivers and sales percentage……...29-30 10. The Economic Model ………………………………………31 Map 3: The economics of the business …………………31

11. Debt position and Financial structure ……………………..32 12. Performance benchmarking ratios …………………………32 13. Financial control and planning ……………………………33

B.2 – Layer two: Operational Considerations 1. Identifying business opportunity ……………………………34 2. Suppliers, payables and customer credit ……………………34 3. Internal Control ………………………………………………35 4. Key Bottlenecks ……………………………………………..35 5. Capacity and Demand Patterns …………………………..35-36 6. Purchasing Policies …………………………………………36 7. Customer service …………………………………………36-37

Map 4: Operations process…………………………..38-39 B.3- Layer two: Internal Infrastructure ……………………………....39

1. Location ………………………………………………………39 2. Staff ……………………………………………………….39-41


3. Information systems ………………………………………….41 4. Assets …………………………………………………………41 5. Security ………….……………………………………….41-42 6. Business registration …………………………………………42 C.- Layer three 1. Marketing ………………………………………………….43-45

Map 5: Points of customer contact …………………..45-47 2. Financial needs ………………………………………..…47-49 3. Ext ended Networks ………………………………………49-50

D.- Concluding Comment ………………………………………….50-51 Deliverables

1. Deliverable #1- Inventory Management System 1.1- Problem Statement ……………………………………….53 1.2- Desired Result ……………………………………………53 1.3- Solutions …………………………………………..…53-56 1.4- Argumentation ………………………………………56-57 1.5- Implementation ………………………………………57-58

2. Deliverable #2: Create and implement an identity package 2.1- Problem Statement ……………………………………….59 2.2- Desired Result ……………………………………………59 2.3- Solutions …………………………………………………60 2.4- Argumentation ………………………………………..…60 2.5- Implementation ……………………………………….60-61

3. Deliverable #3 : Develop and implement a bookkeeping and accounting system

3.1- Problem Statement ……………………………………….62 3.2- Desired Result ……………………………………………62 3.3- Solutions …………………………………………..…62-68 3.4- Argumentation ………………………………………..…69 3.5- Implementation ………………………………………69-75

4. Deliverable #4: Create and Implement a new product mix, pricing scheme and promotional techniques.

4.1- Problem Statement ……………………………………….76 4.2- Desired Result ……………………………………..…76-77 4.3- Solutions ……………………………………………...…77 4.4- Argumentation ………………………………………..…78 4.5- Implementation ………………………………………..78-88

5. Letter of appreciation ……………………………………….89-90


LETTER OF AGREEMENT

EESA PROGRAMME

OKLAHOMA STATE UNIVERSITY and UNIVERSITY OF THE WESTERN CAPE

Friday, June 14th 2013 Mr. Webster Kushata President Shine Africa Logistics Company Shop 3, Nyanga Terminus Cape Town, South Africa, 7750

Re: EESA PROGRAMME

Dear Mr. Kushata,

We first want to thank you for your participation in and support of the

Entrepreneurship Empowerment in South Africa Program. Our goal is to contribute in every

way possible to the sustainability and growth of your business and make this consulting

engagement a mutually rewarding experience. We look forward to working closely with you

and using the opportunity to gain insight into your company.

As we understand it, Shine Africa Logistics

With the EESA Program, the focus is on producing tangible deliverables that you can

use. We will be working intensely with you over the six weeks, employing a methodology

developed as part of the EESA Program over the past eight years. Our first task will be to

establish priorities in terms of your needs and what can be accomplished in the time that we

have. We will be using the S.E.E. model (Supporting Emerging Enterprises) to assess your

current situation and set the priorities.

is primarily involved in the selling of

Telecommunications and Internet Services. Moreover, it is a business that can be

characterized in terms of providing business services, such as, internet, telecommunications,

faxing, and photocopying. You face unique challenges in terms of: the lack of a proper

accounting system; the absence of a marketing plan and competent marketing mix; the lack of

staff; security concerns in and around your business; and aging equipment. Yet, you have

been successful in expanding your businesses product and service offering, as well as

continuing to persevere through troubled times. With this in mind, we see the primary focus

of the consulting engagement as an opportunity to collectively solve the problems that your

business faces.

While things are likely to change as the relationship evolves, for the present we

anticipate working on the following deliverables:


- Formally register your business.

- Create a marketing plan including a proper marketing mix for increasing sales.

- Create a computerized accounting system to manage your cash flows and identify your most

profitable products.

- Acquire a form of security to protect your assets.

- Create operational plan including defined job roles and hiring procedures.

- Develop a strategy to acquire a new inventory of computers.

The key is that we work with you in producing solutions that you can implement immediately

in the business to improve performance.

Our overarching goal is to serve your needs and build a relationship of trust with you.

The EESA experience over the years has made it clear that the best consulting relationships

are mutual ones---where both parties invest heavily. Our biggest requirement is your time. It

is critical that we are able to meet with you for 2-3 hours per week over the next six weeks.

We will be respectful of your time, as we know how valuable it is. But our hope is that we

can establish regular meeting times each week. The other key requirement is that we get an

intimate feel for your business. This means it is critical that we have access to your records,

bookkeeping information, costs, and other insights that help us do a better job. Our

commitment is to hold this information in the strictest of confidence. No one other than the

professor will have access to it, or to any of the work we do for you.

The engagement will commence on June 10, 2013 and will last until July 19, 2013.

Our team will regularly meet with Professors Michael Morris, Eric Mueller, and Jamie Kraft,

our faculty supervisors, and they will be working closing with us on the consulting

engagement. Their contact details are:

EESA Office Economics and Management Sciences 3.34. EMS Building University of the Western Cape Ph: 021 959 9327 Cell: 079 074 2837 Email: [email protected]

We will work with you on implementation of deliverables as the consulting

engagement unfolds. In addition, a final presentation will be made to you and the faculty

mentors at the end of the program, in the middle of July. The presentation and final report

will cover the primary deliverables of the consulting engagement.


In addition to making a meaningful contribution to your firm, we have some personal

goals in pursuing this consulting relationship. This opportunity will allow us to accomplish a

number of our own goals while simultaneously help you to accomplish yours. These goals

include: enhancing our consulting skills, improving our business problem solving skills,

learning to be more adaptable in business situations and learning to put our business theory

knowledge to practical use to gain valuable entrepreneurial experience. Finally, we would

also like to fulfill our individual educational goals and empower ourselves in the field of

business.

We look forward to working with you and this opportunity for a truly rewarding

experience. Once again, we thank you for your time and support. Please feel free to contact

us for clarifications on these issues, if any.

Yours sincerely,

Mpumelelo Consulting Team

Signature:____________________________ Date:___________________

Busisiwe Mutlaka

Signature:____________________________ Date:___________________

Charlie Bailey

Signature:____________________________ Date:___________________

Danicke Lentjies

Signature:____________________________ Date:___________________

Nathalie Guerrier

Signature:____________________________ Date:___________________

John Snedegar

Signature:____________________________ Date:___________________

Lee Schilder


In acceptance of the terms outlined above:

Signature: ____________________________

Mr. Webster Kushata

(President, Shine Africa Logistics)

Date: _________________________

Faculty Supervisor:

________________________________

Dr. Michael H. Morris

Professor and N. Malone Mitchell Chair in Entrepreneurship

School of Entrepreneurship

Oklahoma State University


SHINE AFRICA LOGISTICS

SEE Model


A -

Layer one: The Entrepreneurial core

1. The Core Strategic Issues

The core strategic issues that Shine Africa Logistics (SAL) is facing are: the lack of a

security system to protect the business assets, the owners inability to register the business due

to his illegal immigrant status, the complete absence of a marketing plan and correlated

marketing mix, the absence of a customer database, no formal accounting system, and

inadequate inventory management.

According to the owner, Webster Kushata, Shine Africa Logistics has a reliable

customer base consisting of taxi drivers, students and other people that frequent the Nyanga

terminus and Gugulethu mall area in which his stores are located. Despite being convenient

to its customers, the business lacks the differentiation from similar establishments in the

surrounding area. Although it is apparent that this is a strategic market place, there are serious

concerns regarding safety due to the high crime levels in this area. Because of the value that

Webster’s technological assets hold, he has become a target for criminal activity. He has been

broken into and robbed four times, and of these incidents, three have resulted in the complete

annihilation of his inventory. This has made it extremely difficult for Webster to pursue

growth in his business and has resulted in the occurrence of debt.

In addition to these security issues, Webster is also limited by his inability to register

the business. The effects of this flow into all aspects of SAL. In relation to security, Webster

is unable to insure the business and thus unable to recoup the losses he has incurred from

robbery. He is also unable to get a bank account and thus must rely on his South African

girlfriend to assist in his financial transactions. In addition to this, he is also unable to apply

for a loan or receive any type of financial assistance from outside investors.

One other important issue that Webster is facing is the complete absence of a

marketing plan. Although he sells his products/services very well on a personal basis, he does

not have enough time to develop a more thorough strategic marketing mix that will

differentiate him in the mind of his customers. This lack of differentiation has a significant

effect on SAL’s sales and profitability. On top of this, Webster has not recorded any

significant customer information that would assist him in defining his target market. Finally,

he has absolutely no advertising or promotion strategy other than relying on customers’ word

of mouth.


One bright point about this business is the presence of a manual bookkeeping system

which is regularly updated. However, this only consists of products or services that he has

sold and does not reflect the more detailed and sophisticated transaction information. This

observation has led us to the understanding that Webster is diligent and driven in his

bookkeeping and the only thing holding him back is his knowledge of more extensive

accounting. Unfortunately, this lack of proper accounting has led to severe cash flow

management problems within the company.

In relation to not have an accounting system, there is no portfolio management in

order to distinguish which products and services are worth pursuing and which he should

reconsider. This is directly related to the relationship between an operational accounting

system and a proper inventory management system. It is crucial for the survival and growth

of the company to create and implement structures and processes that will put the owner on

the right track and ensure that the business is profitable and able to grow.

2. The Entrepreneur

Webster Kushata is a 25 year old man originally from Zimbabwe. He received a

Matric certificate and was then pressured by his father to study in the medical field. After a

long process of fighting this pressure he ran away from home and moved to Mozambique

where he began working in the construction business. During this time, Webster was living in

the bush with a few friends and began a small business on the side that supplied construction

companies with thatch. During this time he lost his job as a construction worker because of

bad economic conditions in Mozambique at that time. Webster decided to make his way to

South Africa and eventually landed in Cape Town with only R3.50 in his pocket.

Without knowing a single person living in Cape Town, he slowly began picking up

part time jobs. His resilience and street smart nature along with his circumstances pushed him

into entrepreneurship. Through his part time jobs and now SAL, Webster has learned many

skills including, networking, interpersonal relations, sales, bookkeeping, and some

management skills. Thus far Webster has always seemed to find a way to make things happen

for himself even in the worst of times; one of Webster’s greatest traits.

In 2010, after Webster acquired enough capital from his several part time jobs, he

started Shine Africa Logistics, which he runs with his girlfriend. Due to several extenuating

circumstance this business has not been able to move beyond a survival venture. This

business is his only source of income which supports both himself and his girlfriend.


Additionally, Webster finds it hard to maintain a solid rapport in his business location

because of his immigrant status. Due to his lack of cash flow management and the four

robberies, Webster is currently in debt of R6,000 to his friends and does not have any money

saved up for his own personal finances or the business’.

Table 1 - Webster Kushata Strengths and Weaknesses

Webster wants to eventually create a business concept that he is able to take and apply in

other parts of Cape Town. His personal goals are to open up five more SAL’s in Cape Town

in the years to come. He enjoys the idea of providing a business that solves people's

problems, whether that is providing research and office tools for students or airtime for taxi

drivers. He currently is looking into becoming a franchise for Neotel internet service provider

to possibly help expand his products of telecommunications.


Activity Time in hours per week

Responding to emails 8

Inventory control and bookkeeping 17

Selling 17

Planning 12

Customer support 9

Market analysis (Through social interaction) 7

Word of mouth marketing 7

Operation in both stores (facilitating business activities) 14

Commuting Between stores 4

Purchasing inventory 5


Map 1: Map of activities in a week

Assumptions:

Webster seems to be spending a lot of time doing activities in his stores. The reason

for this is that Webster does not know how to manage his employees, that is, his not very

good at delegation. He should allocate some time to do strategic planning for the business

because it is the core part for the business to grow. We believe he should increase the time

spent on accounting and bookkeeping.


3. The Business Concept

Shine Africa Logistics (SAL) is operating in the telecommunication industry focusing

primarily on offering internet services, as well a range of interrelated products and services

such as the sale of refurbished computers, portable landline telephones, photocopying,

printing, cell phone accessories, occasional phone repairs, airtime, cool drinks and cell phone

starter packs. SAL has 4 revenue drivers, 2 of these are operating in a predominantly

saturated market. This presents the challenge of creating a strong sense of value to customers

besides offering the products at a lesser price. In spite of this, SAL’s core business concept is

delivering affordable and convenient access to telecommunication and internet services.

We’ve evaluated that all the products and services are sold by other competitors in the

surrounding area. However, Webster believes that SAL and Lagunya (nearest internet cafe)

are competing for the market share of providing internet services in central Nyanga, which is

SAL’s immediate business environment.

There is little potential of growth for SAL’s current product mix because the majority

of surrounding businesses are also selling similar telecommunications products and fighting

for the same market share. We think there is opportunity for Webster to add to his product

mix, particularly products that customers use while using the internet, for example, snacks

and candy. Webster creates added convenience and personal interaction with his customers.

This is evident in the fact that many of the his regular customers who are taxi drivers simply

call or message him, requesting airtime which he sends to them with the possibility of them

only paying at a later stage with no interest attached. Webster has also happened to equip

quite a few of them with basic computer skills, they now often pop in and make use of his

internet services as well. In addition, he is readily willing to assist those who have minimum

computer skills when they come to create CV’s, but has specifically made it known that he

isn't interested in branching into the computer training stream. However, these aspects are

minimal and set his business apart from his competitors, they cannot be distinguished as a

solid differentiation strategy or a unique value proposition

The current product mix is a good start, but it has potential to be more focused

towards his segmented market. We have found that Webster is extremely driven and a

passionate businessman, but he does not know how to focus on a single product mix that will

help in acquiring a larger piece of the market share and improve his revenue drivers. He

currently sells too many items that do not aid in the selling process of his main revenue

drivers.


His products and services are virtual commodities with little differentiation between

his products and the competitive market. On top of this, his biggest revenue drivers are his

telecommunications and internet services. Both products offer low margins and low volume,

which is not conducive to build his business. Webster could possibly steal market share from

his competitors and increase his profitability through increased volume, but there is almost no

chance that he will increase his margins as most people in his area have a fixed understanding

of similar products/services prices. A better solution though would be increasing the number

of revenue drivers that he has to include services that offer a flexible pricing option. On top

of this flawed business model, Websters profitability is also hindered by his lack of proper

accounting technique. This has led to cash flow problems which, coupled with the multiple

break-in’s, have left him in debt to the tune of R6,000. The below model shows the depth and

breadth of his current product mix.

Table 2 - Business Depth and Breadth Chart

SAL’s depth and breadth chart of the product mix shows a better understanding as

where to focus Webster’s energy. We think that SAL has some diversity in the cool drinks

section, but not enough to stand out amongst his competitors. Additionally, the cool drinks

have very low profit margins. The breadth and depth of the product mix should be expanded

in the telecommunication and internet cafe services because they are the most diversified


revenue drivers and bring in 80% of the money into the business. Adding products in these

two sections will help mitigate the risk of meeting the breakeven point and boosting the

revenue drivers.

Although SAL’s primary focus is providing internet services, Webster has analyzed

that his other revenue drivers sell by capturing the customer who perhaps came with the

initial intention of photocopying or using the internet, yet then decides to buy a cool drink or

a cell phone pouch on impulse. However, we find his decision to continue offering these

products justified because we have learned from observing the business that many persons

who come in to buy airtime, particularly taxi drivers, also buy a drink.

SAL operates in the Nyanga terminus, a buzzing market place with foot traffic

constantly coming through the center as early as 5am and as late as 8pm. The location offers

a potential competitive advantage for exposure to SAL’s segmented market. However, SAL

has become a target for burglary because of their technological assets and lack of security

system. This location has its pro’s and con’s, however currently the threat has cost the

business more than the intention to grow it. Unless Webster prioritizes investing in a security

system, he shouldn't consider this location as an added value tool to the consumer at the risk

of security. The insecure location has already restrained business growth and could even

force him out of business in the future.

4. The Opportunity

According to a University of Cape Town study on cell phone use in townships, the

use of cell phones is rampant and the majority age group (ages 15 to 35), of low income

urban South Africans access the internet on a regular basis. These statistics show that of our

demographic in the townships, 97% use a cell phone daily and 83% use internet services

daily. This means that there is a growing market for businesses like Shine Africa Logistics.

The digital age of affordable telecommunications is one of the fastest growing sectors

of the South African economy, with a network that is 99.9% digital. This includes the latest

in fixed-line, wireless, and satellite communication. South Africa has the most developed

telecoms network in Africa. Today, the country is driven by massive growth in the mobile

telephony and broadband connectivity sector. The simplicity of telecommunication access

has stretched across South Africa from affluent economic hubs into the impoverished

townships. At the end of 2011, communications and popularity of cell phones and social


media presented businesses the opportunity to provide products/services that fulfill the

growing need to communicate and access the World Wide Web.

Breaking this down into clear and concise data, we begin to form a picture of this

market. In 2009 the telecom industry generated revenue of R110 billion. Of this, R78 billion

was generated by mobile subscription, R10 billion was generated by broadband subscription

and the remaining R22 billion was generated by fixed line subscription. We then broke down

this revenue data by population to estimate the possible market in which our client resides.

We took the ratio of population from all of South Africa and factored it down to Cape Town

specifically. At a factor of 14.7 to 1 we grossly estimate that the entire telecommunications

market for Cape Town is about a R7.48 billion per year. We then narrow this down to our

specific market area which is telecommunications and internet competent men and women

between the ages of 15 and 39 living, working or passing through the

Nyagna/Guguletu/Crossroads area, we factored this one more time taking the 2001

Stellenbosch population estimate for this area which was 170,537 people. With a factor of

19.93 to 1 we grossly estimate and find the telecommunications revenue for the

Nyanga/Guguletu area to be R375 million per year or about R2, 198 per person per year. This

is the revenue for a full spectrum of telecommunications service offerings. To make this

number relevant to the specific market in which our client is operating we will conservatively

weight the relevant market at .66 of total revenues. This means that our client’s relevant

market has potential revenues of R247.5 million per year or R1, 451 per person per year.

Webster believes his target market consists of primarily taxi drivers for airtime,

students who use the internet and the general public who frequents the mall or terminus area

and stop in for a cool drink. We believe that he has correctly defined his market. To be even

more specific though, we have defined these market segments in a more systematic manner.

His first key market segment is people in the Nyanga/Guguletu/Crossroads area that

are computer literate, have the financial ability to pay for internet services and utilize

terminus for commerce (about 22 thousand people). The second key market segment is

people in the Nyanga/Guguletu/Crossroads area who have a phone, frequently use their

minutes and utilize the terminus for commerce (about 26 thousand people). The third key

market segment is people in the Nyanga/Guguletu/Crossroads area who are computer literate,

have the ability to pay for internet services and work in or frequent a facility near the

Guguletu mall (about 28 thousand people). The final key market segment is people in the

Nyanga/Guguletu/Crossroads area who have a phone, frequently use their minutes and work


in or frequent a facility near the Guguletu mall (about 33 thousand people). He is targeting

these customers based specifically on their proximity to his storefront coupled with their need

for convenience. There is potential to grow his target market once he is able to ensure the

security of his assets in his business. Furthermore, by defining his product/service mix he will

be able to market his business to a more specific and defined market segment.

Table 3- Market Segment Population:

Nyanga Crossroads Gugulethu Totals

Population 59k 38k 74k 171k

Age Group (15-39) 27k 17k 34k 78k

Use Phone Frequently 26k 16k 33k 75k

Use Internet Frequently 22k 14k 28k 64k

To correctly determine the populations of our four key market segments we did the

following: We started with our base population of the Nyanga/Gugulethu/Crossroads

township region which is 170,537 people (Crossroads township was included in the market

share because it is the adjacent township to Nyanga/Gugulethu); we broke down the key

demographic region into 3 distinct townships (Nyagna, Gugulethu and Crossroads); in

utilizing the Statistics South Africa database we identified that 46% of South Africans are

between the ages of 15 and 39, which is our initial market segment breakdown; from here we

calculated 46% of the population from each region to identify our second segment

breakdown; next we used statistical data from a University of Cape Town study on cell phone

and internet usage in townships, which told us that 97% of our age oriented demographic use

cell phones frequently and 83% use the internet frequently. These numbers are significant

because they correctly define our client’s 4 key market segments. Putting these numbers to

practical use we can show our client that if he can capture just 10% of his key demographic in

the internet/Nyanga segment (ages 15-39) he could be making R3, 192,200 per year from this

one segment alone.


From analysis of these key segments we have extrapolated several key points that will

better allow us to understand our market. First, we noted that there is a larger population in

the Gugulethu area in terms of both cell phone and internet use. While Webster's main

location is in the Nyanga terminus, it may be beneficial for him to concentrate his efforts on

the Gugulethu area in terms of capturing a larger share of his key market segments. He can do

this by offering a product mix that fits the above segmented market. Another key point that

we noted from this analysis is that the cellphone market is about 17% larger than the internet

market. Finally, we noted that Webster has been putting the majority of his resources in the

smallest segment, the Nyanga internet segment. This information should be utilized to help

Webster better determine what product/service mix he should offer and in which location.

Furthermore, in looking at statistical data, we have found that the telecommunications

industry has been growing and are going to continue to grow in the coming years. According

to an article by the World Wide Worx they state that broadband internet access in South

Africa has grown by 128% between the years of 2010 and 2012 with approximately 8.5

million users at the end of 2011. According to this article, this industry is going to continue to

grow, perpetuated by the increased use of cellphones to access the internet. For Webster this

could mean possibly redesigning his marketing mix in the coming years to accommodate

some form of paid internet hot spot. Either way, it is quite clear that internet access in the

townships will be a big opportunity in the coming years.

Looking at Websters customer basis we have noticed a couple of clear customer

buying habits, however given the fact that Webster has paid little attention to these patterns,

our information in this area is limited. The customer habits that we have identified include:

taxi drivers tend to purchase airtime and beverages at the same time, taxi drivers tend to come

use the internet for taxi based information, students tend to use the internet more frequently

than other clients and use this time to chat with friends, job seekers tend to come in for the

sole purpose of changing their CV’s and generally need to pay the service fee that Webster

requires to do it for them.

Following these customer purchasing patterns, Webster has concluded that, on

average, each of his 4 computer registers 2.5 hours per day of activity and his internet cafe

has an average of 10 customer visits per day with a use of one hour per customer. A simple

calculation confirms that Webster averages total daily revenue of R100, which is generally

split between 10 customers. This means that the average customer spend per visit to the

internet cafe is R10. Unfortunately, these figures are not verifiable because Webster’s internet


management book was stolen in his most recent robbery and he has not since began re-

operating the internet cafe giving us no current data to work with, besides for Webster’s

assumptions.

Webster also faces problems that are conducive to the industry in which he is

operating, which make it very difficult to be profitable. First, SAL exists in a saturated and

competitive industry. The surrounding market is saturated with as many as 10 other internet

cafes in the area, all offering the same service with little differentiation. He also has high

fixed costs for his computers, plus internet service and airtime cards must all be prepaid.

Secondly, this market has relatively low barriers to entry. There is no special certification or

knowledge requirement necessary to open a competing internet cafe. Finally, there are almost

no customer switching costs, so if an establishment did come in at lower prices which, in a

commodity based market is bound to happen, he would lose his key advantage over the

competition.

Webster currently key competitive advantage is his low lying cost. This is a weakness

because competing on price is never a sustainable advantage. He has undercut his closest

competitor across the board and with no logical reason for customers to remain loyal to the

competition; this may in fact be contributing to Webster’s sales volume. Webster also has the

advantage of being in the best location relative to his competition in that he is located in the

exact center of the terminus. However, his competition does have the advantage of better

signage, larger premises and thus larger capacity.

Although Webster suffers in several areas of his business, he is also at a very integral

window of opportunity that, if properly capitalized upon, could rapidly increase his potential

market. The city of Cape Town has set in motion a plan to provide cheap internet access to all

of the township areas surrounding Cape Town. This R1.3 billion project will be implemented

over the next 7 to 10 years and will vastly improve the internet infrastructure in the townships

making wireless internet more accessible and affordable.

This growth in infrastructure is also coupled with the fact the more and more

township residents are becoming computer and internet savvy. With township based

companies such as Silulo providing computer based training courses, the demand for

computers and computer based services is going to rapidly rise in the next 7 to 10 years. If

Webster can properly define his product/service mix to correlate with this growth, he could

quickly see his business growing as well.


Map 2: Customer Buying Process

Service:


Product


B.1-

Layer Two: Internal Operations and Resources

1. Existence of Records and Bookkeeping System

SAL has a basic transaction recording system in place, for each transaction that occurs

in the business it is recorded manually in a notebook. Webster sees the basic value of keeping

his books, but they are confusing for someone to study and were not a true reflection of all

the activities that occur in the business setting. The costs of inventory as well as expenses

aren’t recorded in the books. For each day, all the products are written side by side in a

column and each time something is sold they put an amount in the corresponding cell. At the

end of each day, Webster totals the sales. There are missing records sometimes for up to six

consecutive days.

It is impossible to verify the amount in the books as there is no paper trail whatsoever.

At the end of each day Webster writes the names in a completely different book the names of

the persons who owe him money and the amount but no dates are mentioned. One example

of inconsistency is the airtime sales, one of his biggest revenue drivers, are not recorded each

day to track how much is made from each sale. The transaction records for Shine Africa

consist only of:

It is little things in his basic accounting strategy that are making the records inaccurate

and incomplete. Webster needs to have a process that he will follow in order to record every

transaction. There should be some kind of internal receipt that will be used for the suppliers

that don’t give an invoice to Shine Africa for inventory purchase. SAL should also hand a

receipt to customer and keep a copy for record purpose. The bookkeeping system has a lot of

room to be improved and needs a simple format that can be implemented in order for Webster


and his employees to track transactions and other important financial data. One simple way

will be for Webster to follow a simple, foundational process as the one below.

2. Financial Records

Webster does not keep track of the amount of sales he makes in a month; we believe

this to be true because he does not have a proper record keeping system. The transactions are

not recorded in a logical manner. Webster finds it difficult to explain his financial records to

us without becoming confused. There is insufficient data to figure key numbers such as his

breakeven point or the margins of each item sold.

Data such as the actual revenue made for each product in a month, actual amounts that

customers are owing to the business, actual costs of all the products the business incurs, etc.

is all the information we received from Webster that were estimates from previous

knowledge. He did not provide us any hard data that we could use to confirm what he was

telling us and make conclusions from. Things like receipts of payments and invoices, deposit

slips, etc. Although the financial records of SAL are very slim, Webster has found a way to

get by with the information he records, but lacks the information needed to make sound

business decisions. To assist SAL in terms of bookkeeping, a system for record keeping will

be developed for Webster, one that will be an accurate and true reflection of the business’

operations/ cash inflow and outflows.


Although SAL is not a registered business, and therefore does not pay taxes, Webster

is pursuing a formal registration under his girlfriend’s name. With that in mind, the financial

records manual that will be developed for the business will be sufficient in the proper tools

needed to manage his taxes in the future. This will ensure the longevity of the financial

management process of in the midst of potential changes of the structure of the business once

it is registered. In addition, for the business to be liable to pay taxes it must at least be

making R630,000 of income annually, at the moment the business is not making that much

money thus they will not be having any complications in that department.

3. Costing Structure

Shine Africa has a fixed costing structure, most of their costs are predetermined in the

market and some are just estimates. A fixed cost structure means that most of the costs

needed to generate revenue cannot be reduced rapidly when sales decline. However during

boom periods these costs don’t need to go up, thus help the business in generating huge

profitability for the business. What we learnt from the books of SAL and from Webster

himself is that the business has too high fixed costs and very little variable costs. These high

fixed costs have thus resulted in the break-even point of the business to be high too as well as

the business’ operating leverage.

The following is a table with the list of all the fixed and variable costs of the business

and the eventual break even analysis.


Table 3 - Fixed and Variable costs - Break even analysis

Implications: The business has a positive break-even point, this means that they are making

enough sales to cover all their operating costs. Just to put clarity on a few elements of the

table, an explanation is provided below. Regarding the Nyanga Store rent as you notice there

is no amount stated as a cost, this is because the store has a section of its premises that it rents

out for the same amount of money (R1500.00 per month) as the rent payment for the whole

building. In terms of the Airtime (Employee communication) part, here this is the airtime that

is used for business purposes. For example if an order needs to be made to Coca Cola for the

drinks or if there needs to be a phone call made to a customer to inquire about their credit

status, etc. The salaries of the employees are fixed; they get paid on monthly bases. That is

every month end they get R6000.00 in total for all employees. Webster has decided to use

this employee payment method because he saw it to be more easy and simpler for the

employees to comprehend. Obviously for a bigger market and for a registered business this

will need to be changed to a larger salary or hourly wage by law. This is the reason why the

salaries are under fixed costs and not variable, because they are not paid by the hour. The


business uses a bank account that is under Webster girlfriends’ name, (when we ask who has

full control he says he is the one who has it). This means that all costs incurred from using the

bank account are paid for by the business.

4. Cash flow

SAL has cash flow management problems; there is no system to manage money

coming in and out of the business. The money that is made each day is used to pay the

expenses for more inventories in order to open shop the next day. Also some money is

allocated to paying off his debt. There is no money kept in the bank account (of the

girlfriend) belonging to the business. Webster’s initial plan was to deposit the cash at the end

of each day, but he is not making enough at the end of the day to follow this plan.

5. Accounts Receivable

Webster has a fairly good relationship with his regular customers, so he offers them

airtime on credit, but we have learned that some of his “regular” customers have skipped out

on their payments. He says there are 7 specific customers he does not credit airtime to due to

this problem. Although Webster has stopped crediting these customers, his loyal customers

will often take between one week and a month to pay him back. He does not seem to have

any credit policies in place to manage his accounts receivables, for example to give a

customer a certain period of time to pay back the money owing to the business or placing

interest on the credited airtime. He says he does not have any credit payment terms in place,

because he is a small business operating in a market that is competitive and that there are zero

switching costs. He is simply afraid of losing business.

6. Accuracy of Records

Although Webster has some information in his accounting book he doesn’t have any

invoices or receipts for the transactions made by the company. It is thus extremely difficult to

determine how much the business spends in a period and on what. The owner stated that the

business is profitable but without any actual records there is no way of knowing for sure. The

absence of a proper bookkeeping system and accounting procedures makes it easy to spend

the business’ money illogically and without any control. The money of the business should be

used for business related purposes and someone should be responsible for every transaction.


7. Financial Planning

Shine Africa isn’t making use of any pricing system and doesn’t have any pricing

strategy. The only posted prices are a small sheet that lists the prices of internet and

telecommunication related products. The products that are sold are priced according to what

Webster thinks the customers are willing to pay. For example he said that everyone knows

how much a phone charger costs in a retail location: R30. For him it is simple to just go with

the flow without any other practical considerations, like considering the cost of goods sold.

Budgeting isn’t really part of Webster activities. Although he presented an annual

budget to us, something he did once at the request of his mentor, we believe that there was no

real substance behind it. Without any proper records, it is impossible for him to have an idea

of the past performance of the business, thus making the budget unrealistic. Webster also

mentioned that he buys whatever the business needs, in terms of inventory, when it is

apparent that there is a need, but not because it was planned this way. He uses the cash he has

received from the revenue generated that week to buy the inventory. In some situations, he

just embarks in a deal without realizing the implications it will have financially on his

business. For example, he started selling starter pack (SIM cards that need to be registered)

but has to stop when it became apparent that it wasn’t a fair deal for the business.

There is a real need for Webster to start planning and budgeting and hopefully he will

be able to do that with the bookkeeping system we are developing for him. Webster will be

able to put his time and resources into what is good for the business.

8. System for Collection and Payment of VAT

Shine Africa isn’t a registered business in Cape Town. An entrepreneur doing

business in South Africa is expected to pay Value Added Taxes (VAT) only if the business is

registered and this does not apply to Webster. As it is, he also does not have to charge his

customers VAT. We think Webster should register his business because of his goal to open

up 5 SALs in the near future. He is unable to apply for funding or loans without being

registered and he cannot insure his business, which would help him deter the financial

setbacks if he is robbed again.


9. Revenue Drivers and Profitability of Each

The products that Shine Africa is selling can be regrouped in four (4) revenue drivers:

1. Telecommunication services:

- Portable landline phone

- Airtime

- Cell phone repair

- Starter pack

- Phone accessories

2. Refurbished computers--buys refurbished computer then resells

3. Internet café services

- Internet surfing

- Photocopying

- Fax

- Printing

4. Drinks

The internet cafes represent the revenue driver that brings the most profit into the

business at 42%. Next are the telecommunication services at 40%. Below is a table that

represents the percentages for each revenue drivers for Shine Africa.


Table 4 - Revenue Drivers and Sales Percentage

Implication: Webster not only needs to be aware of the most profitable revenue driver(s) but

he also needs to consider the value that each product is bringing in the business. For example,

the portable landline phones aren’t selling quickly and they are only taking shelf space.

Furthermore, the markup isn’t really significant. Webster should evaluate the importance of

each product and determine the ones that need to be dropped or complemented. The Internet

surfing represents the product with the highest markup. Webster should focus more on this

service and invest in it instead of another product/service. By capitalizing on the strongest

products in each revenue driver Webster will increase their profitability potential and the

wealth of the business. The important thing is for him to be aware of the value and potential

of each of his products and use the financial information to make strategic decisions.


Revenue Drivers

Implication: By considering the chart above, we believe that the toughest challenge Webster

faces is learning how to manage the business’ financial performance. Shine Africa will

achieve consistent profitability when Webster knows the critical factors that drive its

profitability and works relentlessly on those areas of the business. Webster should put more

focus on the revenue drivers that are bringing the better part of the business revenue. When

developing a marketing effort, Webster will have to concentrate the majority of his resources

in telecommunication services and internet cafe services. Webster should be aware that Shine

Africa’s competitive advantage is influenced by the strategic structure and execution of its

cost drivers.


10. Economics of the Business

Map 3: Economics of the Business

Implication: Shine Africa as a low volumes, low margins for certain products and average

margin for others, high fixed costs (operating leverage) and a 4 revenue drivers having fixed

pricing is a very unattractive venture. It is likely very difficult to make money. Shine Africa’s

success or failure mostly depends upon the volume of sales and what products sell. The level

of sales represents the key determinant of the success of the business. Webster needs to be

aware that a small gain in sales will lead to a very large change in income, while a small

decrease in sales will lead to a large decrease in income. This high degree of magnification

increases the importance for Webster of making sure that sales increase rather than decrease.

For that reason, Webster should do whatever is possible to maintain and increase the

business’ market share.


11. Debt Position and Financial Structure

Webster has some debts that he took out for the business. This was when SAL got

robbed the fourth time and was forced to borrow a total of R6000 from his close friends to

finance the business. Although he has taken on debt, he does not have any interest payment,

thus the business is not incurring any extra costs for the loan. Even though he is not incurring

any interest payments, the business is not making enough money on a regular basis to pay

back the debt and cover his expenses.

12. Performance Benchmarking Ratios

Webster does not have any financial statements that allow him to make a sound

benchmark ratio. Using the information that we were able to retrieve in the business books

we have calculated the following ratios:

- Gross margin ratio = gross margin / sales revenue

= 5630.80 / 13056.4

= 0.43 R

Shine Africa earns 43 cents from every rand of sales after deducting the cost of good sold.

- Debt ratio = total debt / total assets

= R6000 / R36000

= 0.17

Shine Africa has more assets than debt as his debt ratio is less than 1. This indicates that the

level of risk for potential investor is minimal.

- Safety margin = sales revenue / break-even sales

= R13056.40 / R10246.20

= 127%

Shine Africa is trading above break-even. It is good for the business as the further above

100% the safety margin the higher the profit.

In conclusion, although the business is risky considering it’s economic model, there is

hope for future growth. With the implementation of some structures, procedures and changes

in the way the business is run, Shine Africa should be able to grow in size, market share and

revenue


13. Financial Controls and Planning

Webster says that he only loses control of his finances when crediting airtime to

customers. He takes on the total risk for these loans, but in the past only 7 customers have not

paid him back. By providing this service he has been able to establish loyalty from some of

his market, particularly taxi drivers. The only other financial controls at stake are the start up

packages. When the packages are given out, he loses control of the rest of the customer

connection. He does not receive payment for the package until the customer uses the package,

which can take 3 months before he even sees a paycheck. He only receives a paycheck for

10% of the packages given out, because the majority of the packages are never used.

Moreover, SAL is a cash business meaning that all transactions are cash coming in and out.

This has many repercussions in terms of employee theft. We cannot specifically say that

Webster has any measures in place to make sure that employees don’t pocket money from the

business. This is especially tough to figure out because Webster runs the business at two

different locations. However, at the end of each Webster does a stock count to match the

opening balances of some product (like drinks) with the products that were sold to the cash

on hand, but this is not as effective either with the nature of a cash only business. Also this is

not as effective because some products take a long time to sell so it becomes easy for them to

get stolen. The fact that he does not do a stock count of all the products in the store(s) opens

greater opportunities for money or stock theft. All in all for Webster it seems like he does

business on a trust basis, he does not really consider his employees a threat for theft.

We find this disturbing because the employees were hired very quickly when the shop

opened up and there was not any process used to decide if the employees matched the set

values of the business. The employees already do not show up to work without notifying

Webster and take advantage of his friendliness. There is no reason to believe that they are not

pocketing some cash between transactions. The products do not have listed prices, so it gives

the employees the opportunity to sell a product for R40 when the product normally costs R30.

This allows the employee to pocket R10 without anybody knowing.


B.2- Layer two: Operational Considerations

1. Identifying Business Opportunity

Shine Africa represents a convenience store where, for example people can buy

airtime and a cool drink in one place and save some time. However, there is not proper

signage that suggests the product mix offered, only the name of the business is shown.

2. Suppliers, Payables and Customer Credit

Webster buys his entire inventory for the store in cash; therefore he does not have any

outstanding amounts owed to his suppliers. Webster doesn’t maintain any particular

relationship with suppliers. Some of his suppliers do know him because he has been buying

from them for months and sometimes they offer him small discounts. However, Webster

doesn’t think that those are relationship he can really leverage.

Webster has a fairly good relationship with his regular customers, so he offers them airtime

on credit at times, but we learned that some of his “regular” customers have skipped out on

their payments. He says there are 7 specific customers he does not credit airtime to due to this

problem.

His other customers always pay him back, most will pay within a day, but sometimes

they take anywhere from a week to month to pay him back. He does not seem to have any

credit policies in place to manage his accounts receivables, for example to give a customer a

certain period to pay back the money owed to the business or placing interest on the credited

airtime. He says he does not have any credit payment terms in place, because he is a small

business operating in a market that is competitive and that there are zero switching costs.

We think Webster should implement some sort of accounts receivable policy for the

airtime that is credited out. We think the policy should be should be strong enough to push

customers to pay him back within a reasonable time, but also not too strong that he loses his

customers. We would recommend requiring an interest payment after a customer that does

not pay Webster within three weeks. This gives taxi drivers plenty of time to acquire cash to

pay Webster back, especially since taxi drivers operate in a cash business, meaning cash is

always available.


3. Internal Controls

Webster doesn’t have any formal education in business and management. All of his

core business values come from real work experience. Due to his lack of management skills,

Webster has not developed any formal procedures for maintaining each aspect of his

business. Webster is personally responsible for controlling his stock. Every morning he

counts what he has in his two shops and writes it down in a notebook. He adds any inventory

received during the day and counts again before he closes the shops. If he is not in a shop

during the day he will come back at closing time and go over the inventory book with his

employees, before they clock out. Webster doesn’t keep track of the inventory that he buys in

term of cost. He doesn’t have any policies for purchasing inventory and doesn’t record the

amounts paid for the products that he buys, which means there is no paper trail. Furthermore,

he doesn’t have any policies for purchasing inventory. This lack of internal controls limits

Webster’s capability to understand the value of his inventory.

4. Key Bottlenecks

Webster faces only a few bottlenecks. He buys his inventory when he realized he

needs more of a certain product. There have been times that he could not offer a certain

product because he had run out.

The biggest bottleneck is if there is a high demand for internet use at SAL, they can

only accommodate 4 internet users at a time due to the amount of computers they own. We

do not know how often this happens, but it is very likely this could happen once Webster has

a marketing campaign that brings more customers into the store.

5. Capacity and Demand Patterns

Shine Africa doesn’t have a targeted capacity. Webster only tracks what was sold in

order to know what is left. He doesn’t use this information to evaluate his capacity in relation

to the customers’ demand. Webster admitted that sometimes he runs out of a particular

product and only realize that when someone is asking to buy one. There are also products that

Webster has in the shops that aren’t selling and some products that customers are asking for

and that he isn’t selling. The obvious conclusion is that Webster doesn’t have any idea about

what his customers want, in what quantity, and when. It will be useful for Webster to start

investigating the patterns of his customers demand and start stocking his shops with the right

products in the right quantity.


At the terminus location, SAL is capable of operating four internet computers at one

single time and printing from two different printers. If Webster’s employees are there he is

able to sell other products at the same time as operating the internet cafe.

As Webster has set hours of operations, from 8AM to 6PM, he has the possibility to

study the buying habits of his target market in terms of what products they buy and when.

6. Purchasing Policies

Shine Africa doesn’t have any purchasing policies. Webster buys inventory as he goes

and doesn’t have any specific rules or processes to follow. He chose his suppliers randomly

depending on their proximity to his shops and the prices they are offering. Selling prices for

its products are set not according to his costs but according to what the customers are used to

paying for a particular product and in some instance depending on what his competitors are

charging. We think Webster must begin considering the pricing structure of his products. He

needs to calculate the costs of goods sold into the price to truly understand his profit margins

and the choices he makes regarding his product mix.

7. Customer Service

One of Webster’s greatest skills is interacting with customers. He is very confident in

his relations with each individual that comes into the shop and often strikes up a friendly

conversation throughout the transaction. Additionally, he is capable of noticing key

interaction points in order to make a sale or suggest an additional item to the customer’s

purchase. Even though Webster is sincere with his customers, his employees lack structure on

how to interact with customers and are usually disengaged with the customer. This is a

weakness that Webster is well aware of and seems to accept. The solution is to either train the

sales persons so they can learn how to sell or find people with skills that Webster will be able

to capitalize on.

Webster doesn’t have formal procedures for customer complaints. We do not find this

limiting to the business when Webster is there because of his own social skills and likeable

personality. In considering his employees, we see a lack of customer complaint procedures to

potentially hinder his business due to their lack of interpersonal relation skills. We believe a

set process taught to the employees on how to deal with customer complaints would go a

long.


Although Webster does not have a customer complaint policy, he decided to give a

one year warranty when people buy a refurbished computer and 3 months when people buy a

landline phone. He will normally replace the faulty product without arguing with the client.

However, we believe that Webster should state conditions under which he will accept to

provide a replacement to a customer. Without any boundaries there is a risk that customers

will take advantage and bring back products that were broken by them and not because of a

manufacturing defect. For broken cell phones, he will either replace or fix the phone at no

charge within three months of the purchase. As for the telecommunications accessories, he

also guarantees the customer’s purchases for up to three months and will replace any faulty

items.

We think Webster’s quality controls in terms of customer service are viable, but he

needs to outline these guarantees for customers to see when purchasing a product. This will

allow Webster to fall back on the pre-stated agreement if there is a complaint in the future.


Map 4: Operations Process


Implications: SAL’s operational process is applied with the absence of promotions and

advertising upon acquiring stock, which highlights SAL’s complete reliance on word of

mouth to attract customers to the store. In addition, Webster hasn't considered how he would

handle his capacity which currently is 4 computers, versus customer demand in peak time

instances. Furthermore, an important aspect of concern relating to this cash business is SAL’s

employee’s integrity concerning their responsibility to record each sales transaction. This

aspect poses a threat of employee’s refraining from recording sales and simply pocketing the

money. The business should consider their cash transaction procedure a priority for

improvement to ensure a greater deal of security and assurance.


1. Location

B.3- Layer two: Internal Infrastructure

SAL is located in the Nyanga Terminus, shop #3. The terminus is a taxi/bus transit

center with a constant in/out flow of people coming to and from other areas of Cape Town.

There are six parking spaces in the front of the shop, but the majority of customers

come through the terminus by foot. The shop is roughly 400 square feet, not including the

area he sublets. Customers can access 70% of the shop; this area consists of a few scattered

chairs and a walkway. The other 30% consists of a cement bar that separates the employees

from customers with the drink fridge and shelves full of inventory behind it.

The location itself provides the business with a constant flow of customers from the

beginning to the end of the day. Since it is in the taxi terminus, the business receives a wide

diversity of people commuting through the terminus, which gives Webster the opportunity to

market to a broad spectrum of people.

2. Staff

Webster has three employees that help him run his two SAL locations. All three

employees are paid on a monthly salary basis. His girlfriend is one of the employees; she

earns R1500 per month. She is very shy, has very little interpersonal relationship skills, but

she is very responsible and helpful in the operational process of the business. The only

setbacks are her lack of competency to make personally connections with customers and

capitalize on sale opportunities.

Webster’s other two employees are two young female adults. Both are extremely

unreliable and often fail to show up to work without notifying Webster. At times, the ladies

will show up to work for a consistent amount of time, but then not show for several days.

Additionally, when they are at work, they are absent minded and do not interact with

customers or try to make any sales. In spite of this, Webster still pays each employee R1200

per month, which they agreed upon when they were hired. The employees have become too

comfortable with Webster and take advantage of his leniency. Webster has never

reprimanded them for not showing up to work.

Webster quickly hired these girls when he opened up shop because he needed the help

right away. There was no logical or rational decision making when considering his

employees.


Normally in the type of business Webster is in, he would pay his employees an hourly

wage. We have critically looked at this portion of the business and mapped out the pros and

cons of paying his employees a salary. For SAL’s employees there are 160 possible working

hours in a month, which is 20 days out of the month for 8 hours each day. If you divide 160

hours into the salary of R1200, it breaks down into a wage of R7.5 per hour. This is less than

half of the legal minimum wage in South Africa. With that said, we have also learned that the

two employees (not Webster’s girlfriend) come only 80% of the time, which breaks down

into 16 days per month or a total of 128 hours. This means these two employees are earning

R9.4 per hour, still below the legal minimum wage of R16 per hour.

There are several ways to view this information. For starters we could see this

information as a positive for the business. If Webster were paying his employees an hourly

wage of R16, he would have to pay each employee between R2048 (128 hrs) and R2560 (160

hrs) per month. This obviously is 3.6 times more than what he pays them on a salary.

Another way to view this information is as a negative. There is a possibility that

absence of his employees 20% of the time could have a direct correlation in SAL’s lack of

growth over the last two years. Also, If Webster were paying his employees an hourly wage,

they would feel a greater incentive to come to work each day.

We recommend that Webster critically evaluates his employees. We believe there

should be a staff meeting held where; Webster can formally address the absence of the

employees issue; illustrate a series of goals he wants to achieve for SAL over the course of a

certain time frame; what the duties are for his employees in order to achieve these goals;

promise some sort of incentive for his employees if the goals are achieved (for example a

bonus); and finally, develop a three strike plan of action that states if an employee misses

work three days without the shift being covered or notifying Webster of strenuous

circumstances they will be fired.

Lastly, we would recommend Webster to take a step back and evaluate his employees.

Since the hiring process was done quickly, we cannot be sure of the morale of the employees.

We must look at the business objectively and ask if there is a possibility they are in on the

theft of the business.

3. Information Systems

Webster does not have a formal system to manage his customer database. The only

true data he keeps about his customers are the taxi drivers that owe him money for airtime. In


the past he used to keep a written log of customers that used the Internet, including their

name, email, and phone number, but this book was stolen in the most robbery. He does have

access to all his customer contact information that has bought airtime, but it is hard to get a

hold of this information.

Webster does have access to computers on a daily basis, but does not utilize the

technological resources for accounting, bookkeeping, or customer database. He hopes to one

day begin using excel for his financial management.

4. Assets

Webster owns a small car that he uses for business and personal travel. Additionally,

Webster has seven computers, one color printer, two black and white printers, three Internet

modems, four flash vending terminals for airtime, a Neotel Internet server, ten chairs, a large

coca-cola fridge, two ten foot long wall mount shelves, and a wall mount back board for

hanging small products. Additionally, he has his entire inventory, but does not know exactly

what he owns or the value. Webster does not have any accounting machines, cash registers,

or administrative equipment.

5. Security

Security has been one of Webster’s defecting problems for his business. The physical

structure is very insecure. It has five entry points. There are two doors on the front side, one

has a door on a hinge for access into the building, the other is a steel door that has been

sealed off. Additionally, there is a large window with a steel bar cage screwed into the

outside wall covering this entry point. There is one door that is at the back of the business

that is also sealed off. The last door is for backdoor access to the connecting business

adjacent to SAL. The doors are not very secure, and robbers have had success primarily

breaking through the back door of the adjoining business. At SAL’s second location at the

Gugulethu Square Mall, many neighboring businesses have been held up in broad daylight.

This is one of Webster’s biggest fears.

6. Business Registration

Currently the business cannot be registered since Webster is an illegal immigrant, but

he is open to registering the business in his girlfriend’s name, as she is a South African.



C -1. Marketing

Layer Three

Webster appears to be a good salesman, which is a critical success factor in 21st

century business, however nothing can replace the direction, profitability or potential

business growth than knowing your customer’s needs. In analyzing SAL’s marketing

approach we’ve evaluated that Webster’s focus is centered on sales, therefore he buys and

sells a variety of products and services in an attempt to grow his business. Although his

salesmanship is excellent, his lack of formal training in small business marketing is a

severely limiting factor. He currently has no marketing plan and has done nothing in terms of

market research. These constraints could be the reason that he doesn't understand who his

consumer market segment is and the significance of serving them. This marketing situation

significantly affects many aspects such as SAL’s positioning, branding, pricing and

ultimately his future in business.

SAL has diverse marketing needs such as a unique value proposition to ultimately

have competitive advantage over at least his immediate competitor Lagunya and then the

other competitors in the surrounding area. Currently SAL doesn't follow a strategic selling

process, we assume Webster doesn't understand its significance; we need to ensure he

understands the logic, advantage and discipline of following a selling process. This process

requires him to get involved in the consumers buying journey by creating awareness through

advertising promotions, for example bundling products. Furthermore, Webster needs to

communicate the reasons why SAL should be preferred over the competition. He can do this

by developing a relationship with his customers; understand their needs and delivering the

appropriate marketing mix to build customer retention. In closing he can follow up with the

customer through a simple form of communication that will continue to build brand identity

and reputation.

SAL has been operating from hand to mouth for approximately 2 years now, which

has restrained attempts to pursue any meaningful advertising or promotion. SAL does have

some signage, however according to Webster the name has no significant meaning which

implies that brand identity and the brand reputation is none existent. This means that current

and potential customers may find it hard to engage in an experience of affiliation that a

telecommunications service provider could offer the customer.

Webster’s current position in the market is defined by his convenient locations and

low prices. While this mildly describes the image he occupies in the consumers mind, it is not


a very strong position. He has not defined himself on any other platform other than price and

location. Even though he demonstrates a good manner in terms of his customer service, he

has not been effective in translating this to his employees and therefore his business does not

hold consistency in this crucial area. To continue to compete in this market, Webster will

need to better define his position. Several factors that he could focus on to improve his

positioning include: creating customer awareness through advertising, customer service and

product availability.

In terms of his competition, Webster is threatened by the exact factors in which he

lacks in his own positioning. Webster biggest competitor is Lagunya which is an internet cafe

located not 300 meters from his main location in the Nyanga terminus. Webster is actually

very good friends with the owner and used to work for him before opening his own stores.

Webster claims that Lagunya offers better customer service, in terms of all employees

contributing to a meaningful buying experience, and has better customer awareness. They

have a very large sign that clearly denotes the products/services that they offer and this sign is

placed on the divider between the road that passes right by the terminus. These factors give

Lagunya the competitive advantage of customer awareness and buying experience.

In terms of branding, SAL currently has no ambiance or store presence, the store has a

ordinary set up missing some basic aspects such as paint to help create a warmer

environment. He has branded himself as being low price and even this affiliation is weak at

best. From what Webster is telling us, we have gathered that he is using a penetration pricing

strategy. He is attempting to price below his competitors in hopes of gaining market share,

which is never a sustainable form of competitive advantage. He is attempting to do this

without any form of sales promotion, marketing media campaign or effective advertising.

This strategy must be evaluated due to the fact that it could cause undercutting.

To build and maintain a loyal customer base, Webster has utilized the technique of

selling on credit. He uses this technique almost solely for sale of airtime. His only form of

customer screening for this offer is based upon trust. He only offers credit to people who he

recognizes and trusts. To remember who still owes him money Webster keeps a manually

drafted master list that he marks off once the customer has repaid him. He has said that this

system works fairly well, but he still encounters customers that never pay him back.

Referring back to Webster’s lack of market research, we have found that Webster has

done a poor job of targeting his key market segments, which we have defined as

telecommunications and internet competent men and women between the ages of 15 and 39


living, working or passing through the Nyagna/Guguletu/Crossroads area. He seems to

recognize that this segment makes up a large portion of his market share; however his sales

approach appears to be equal across the board. He does not seem to understand the

differentiation between transactional and relationship sales approaches. While his personality

would elude to the possibility of a relationship sales approach, Webster has said that he does

not offer repeat customers any form or discount or bundled deal.

Moving forward, Webster will need to evaluate each of his customer transactions and

understand the concept of lifetime customer value, he also needs to evaluate his pricing of

which he has no unique method; in fact he has set it lower than his competitors. We assume

this decision was taken with the hope of attracting more customers and possibly having some

advantage over his competitors.


Map 5: Points of Customer Contact

Key Points:

Word of Mouth:

• This point is vitally important as Webster relies on this form of advertising to attract

customers

• It is imperative that we assist Webster in adding other forms of marketing


Store Location:

• SAL is located in a convenient space, however the area that he operates in is not

always safe - which is discouraging for potential customers and harmful to his

business

• The space provides adequate parking in front of the store which eliminates some

security concerns customers might have

Store Experience:

• Upon entering, SAL employees are not friendly and do not make much of an effort to

assist customers with any queries they might have

• The conditions within the store are not hygienic and are far from comfortable

• These factors contribute to a store experience that is not very appealing and needs

attention

• Webster will have to consider making his store more presentable and more inviting

2. Financial Needs:

This company is currently an unregistered business. The business remains

unregistered because of the illegal immigrant status that Webster currently holds. He has a

very strong desire to register the business and operate a legitimate venture. However, there

are several barriers currently preventing this from happening. According to our contact in the

Ministry of Home affairs, Webster would need to go to the Customs House in the CBD and

present himself as an immigrant with no papers. They would then interview him and decide

what to do from there. Our contact believes that he would, in fact, get his Refugee I.D. which

would allow him to formally register his business; however there is a chance that he could be

deported back to Zimbabwe. This is a route that would need much more consideration before

any action could be taken. We have also considered several alternative routes to accomplish

this goal. These revolve around the fact that Webster’s girlfriend is a South African resident.

We have considered the fact the Webster could register the business under her name,

as he has already done with his bank account, however, this would have its own challenges as

well. The idea was suggested that Webster could simply marry his girlfriend and immediately

be granted South African citizenship but when presented with this idea he instantly retracted

and said he was not looking to go this route. Whatever the solution, the registration of his

business is clearly a challenge that we will need to resolve in order to legitimize his efforts

and move his business forward.


As far as SAL’s financial position is concerned, Webster is in a very ambiguous

situation. He claims to have R13,000 cash savings on hand (not bank related) but this

number is completely unverifiable. He claims to not trust the bank and prefers to keep the

money on his person. This is believable when coupled with the fact that his girlfriend is the

one with complete control over the bank account. What does not seem to make sense is why

someone with R13,000 in savings would take out loans from 12 different people to the tune

of R6,000 in total. Either way, Webster claims to have R13,000 in savings and R6,000 in

outstanding debt, and with no paper trail to validate these claims we are forced to take him at

his word until proven otherwise. Following this, we are unclear as to his ability is to service

this debt because of the aforementioned incongruities in his financial standing.

Because of these inconsistencies and his current business registration status, we do

not believe that Webster is in any position to acquire capital. First, he has no relationship with

the bank and this route is not viable in terms of generating capital. In asking Webster directly

about his capital needs, he responded by saying that he would not feel comfortable taking in

any money without a proper business structure to make that money profitable. However

we’ve evaluated an approximate amount of R10 000 should be enough to acquire the

necessary systems he needs to better his business. These include security; marketing and the

acquisition of more computers would be marked as the priorities. Even though he is not in the

position to receive capital, he does feel that he could acquire a possible investment from a

fellow businessman, Roy Clarke, but this would only be possible if he registered his business

first. When asked if he would be willing to give up control and/or equity in his business

Webster stated that this would not be a problem.

The capital needs that Webster is looking at in the future are relatively small. His first

concern is for the safety of his business and he does not want to bring any undo capital or

assets into the business if it is just going to get stolen. Therefore, his more pressing capital

needs are regarding the acquisition of enough money to secure his store and replenish the

stock of computers that were lost in this most recent break-in. This exact amount is still

unknown to us until we understand exactly how Webster would go about securing his

premise.

Webster’s major assets and liabilities right now include the following: short term asset

of R13,000 cash; short term liability of R6,000 in accounts payable; long term asset of 7

computers, 4 printers and one car; and no long term liabilities.


As far as his personal financial status, Webster appears to be ok. He takes a R2500

sum out of the business each month and pays his girlfriend a fixed monthly salary of R1500.

Other than this, there are no other people dependent on the venture for support. He and his

girlfriend both say that they do not have a credit card.

3. Extended Network

Relationships and networking have been extremely important to Webster’s relative

success thus far. He came to Cape Town without knowing anyone. Since this time, he has

leveraged his likeable personality and made some good connections in the community.

According to Webster, one of the best relationships he has made recently is with a

local businessman, Roy Clarke. Roy is looking to invest in other local businesses that show

drive and potential. Unfortunately, because Webster has not registered his business, Roy will

not invest in him right now. He has however offered to mentor Webster. Roy has been giving

Webster business lessons and simple homework assignments via email that are helping

Webster to sharpen his business skill. If Webster can register his business and get a handle on

his finances, Roy has stated that he would consider investing in him.

Another beneficial relationship that Webster has is with The Business Place. Webster

has utilized this resource to take helpful workshops and actually came into contact with the

EESA program through this connection.

Because of his legal status, Webster has not had the chance to make any type of

connection with the bank. Along these lines, Webster finds it hard to make connections

within the community because of his foreign status. He has mentioned that he has even been

refused a rental spot in the Guguletu mall for this very reason.

Webster’s connection with his suppliers is an ambiguous one. Many of his suppliers

are actually large corporations (Vodacom, Flash and Coke) that he simply distributes for. He

says that most of these suppliers he has never even met in person. He simply orders the

quantity from them once a month over the phone. For his merchandise needs, he goes to

Pakistani dealers in Ryland. He says that this relationship is good but has not led to any

discounts or special offers.

One possibly beneficial relationship that Webster has mentioned could yield him low

cost advertising if he leverages it properly. He claims to be on good terms with the chairman

of operations for a major taxi service. Given the fact that many of his customers are taxi

drivers, this relationship could become massively valuable to Webster. He has confirmed that


he would feel comfortable approaching this person regarding a business relationship.

Furthermore we plan on getting him involved with the Ekasi Network where he is able to get

effective interactive assistance, as well as expose to a variety of small business opportunities

which could advance business growth.

Webster has stated that he previously used five agents to distribute his starter packs

for The Starter Pack Company. He has recently stopped selling this product and has since

discontinued these relationships. He explains this extended business had too many

complications which caused inconvenience for the field workers who had to wait up to 3

months for their wages from the starter pack company .It is unclear whether or not they could

be rekindled if the need arose. These five agents were simply community members looking to

make a small wage and thus held no key skills that Webster could utilize. Along these lines,

Webster has stated that if he ever did need to hire additional help to work his stores he would

just put up a hiring sign. He has not signified any particular criteria upon which he hires his

employees and says that there are many willing and able people in the community that could

work the store. He would simply put up a hiring sign to attract this labor. As far as we know,

Webster has no known legal or government contacts to speak of.

D- Webster has proven to be a very switched on and driven entrepreneur. He has

overcome great adversity to reach a point in which his business is actually slightly profitable

and supporting him on a day to day business. Even though he has made a lot of progress since

arriving to South Africa, there is still a long way to go in terms of solidifying his business

structure. Webster faces challenges concerning almost every major aspect of a business’s

foundation. He has a virtually non-existent marketing plan and very limited understanding of

his key market segments. He also shows very little differentiation from his competition and

does not understand the difference in sales technique based on customer lifetime value. His

accounting system is incomplete and is completely unbacked by a traceable paper trail.

Operations of the business are not clearly defined and there is no inventory management

system to speak of. He does not understand which products are selling or what margin he is

making on those products. There is also a clear barrier in terms of Webster’s status as an

illegal immigrant. He cannot register his business and has not built any sort of relationship

with the bank. This has also severely limited his access to capital. Another major flaw in his

business is the security. The robberies he has endured have greatly set him back and if he

Concluding Comments


wants to move forward in any meaningful manner, this issue will be paramount in addressing.

In conclusion, Webster has an extremely resilient and driven demeanor in terms of his

approach to business but will need to implement the fundamental business systems in order to

focus this energy and drive his business to the next level.


SHINE AFRICA LOGISTICS

DELIVERABLES


Deliverable #1: Inventory Management System

1.1 Problem Statement

After spending time with Webster and analyzing Shine Africa as a business, it became

obvious to the team that there wasn’t a proper system in place to track and control inventory.

As a business that has such a diverse product mix, an essential part of Shine Africa is being

able to track inventory and sales. The way inventory is being tracked now is ineffective and

inaccurate and doesn’t bring any value in the management of the business. The result is a

book containing a lot of confusing information about inventory and no distinction between

inventory coming in and going out. The fact that the business sometimes went out of stock

for a particular product and realized this fact only when there was a demand is the result of its

lack of control over inventory.

1.2 Desired Result

In order for the business to be successful, Webster has to understand that the

inventory control system must be accurate and effective because information concerning the

units sold and those in inventory is an essential basis for intelligent decision about pricing

and reordering. An updated inventory control will allow Webster to notice sale trends, and

know what inventory to buy for the business. Having the correct amount of inventory, correct

display method and tracking it properly may help Shine Africa to succeed against the

competitors.

1.3 Solution

The implementation of a simple inventory management Spreadsheet will help the

business to not only keep track of every piece of inventory, but also have an idea of which

one is being sold quickly and which one is spending a lot of time on the shelves. The

spreadsheet will include columns containing the items’ codes, the quantities, a description of

the items, their costs as well as their selling prices. It will also have a feature that will alert

Webster when an item has reached the reorder level. The objective is to create a user friendly

tool for the business.


COMPONENTS OF THE SYSTEM:

Below is step by step instructions that will be given to Webster to operate the system

Product list and Inventory levels:

Step 1: Product needs to be entered into the excel sheet


o Item #, unique to the item needs to be entered into the Item # column (Eg. When adding

Coca-cola as a item, it is given the number 1 as a unique item #)

o Item name is entered into the item column (Coca-cola)

o Item’s cost price is entered (R5.00)

o Item’s selling price is entered (R9.00)

• Coca-cola is now recognized as a product in the spreadsheet

Step 2: Once products are recognized, Webster will be able to record inventory going in and

inventory going out.

o Each time a new item is added in table 1, a corresponding entry will be added in table 2

(Eg. Coca-cola is added as an item, Coca-Cola’s item # must be entered into the first column

of table 2

o When inventory levels change, Table 2 will display the quantity level of each product

o Eg. When Coca-cola (Item# 1) is bought or sold, its quantity level will update accordingly

o Table 2 will also notify Webster when he needs to order new inventory (An item# number

cell will turn red once that specific items quantity is below its re-order point re-order point)

Transaction Sheet:

Step 3: Any purchase or sales transaction must be recorded from the receipts Webster

collects throughout the day

o The receipts Webster creates will contain all of the information needed to populate the

cells in table 3


o If inventory is sold, the quantity must be recorded as a negative number

o If inventory is purchased, the quantity must be recorded as a positive number

o When a transaction takes place, Webster will fill in the date, quantity and item# of the

transaction and the rest of the table will be populated

Financial Output:

Step 4: At this point the entire Spreadsheet will be updated and financial information will be

provided in table 4

o This information can be used in accounting systems

• More information will be added once implemented (Not only total sales, COGS, and

gross profit)

1.4 Argumentation:

An inventory management system is a fundamental part of any retail based business.

Most businesses will benefit from a well-designed inventory tracking system, and Webster’s

business is not different. Inventory management increases profitability, improves cash flow,

improves decision-making, and increases customer satisfaction. Forecasting, controlling and

managing inventory increases productivity and sales, while reducing costs, resulting in

greater profitability. The accuracy improvements and time savings, in addition to the

reduction of fixing costly mistakes that result from an effective inventory system can result in

considerable cost savings across an organization. Purchasing the correct inventory in the right

amount to meet customer demand, while eliminating slow-moving, obsolete inventory leads

to higher profits and better cash flow. Rapid, accurate data collection enables access to real-

time business intelligence across all areas of a company. Responding to trends, seasonality,

promotions & changing marketing conditions results in having the right products in stock for

customers. Properly identified products available to ship enable customers to order & receive


the correct items quickly. Customer service tools integrated within inventory managements

equips the entire company to deliver consistent, personalized care for your customers.

1.5 Implementation:

Before deciding what kind of inventory system will be best for Shine Africa we asked

Webster some questions about his computer skills and his preference between having and

paper base inventory system or a computer base one. He assured us that he spends a great

deal of his time on the computers that are in the Guguletu shop. He also mentioned that he is

fairly able to work on the computers and manage his inventory in an excel spreadsheet.

The team has training sessions with Webster in order to teach him how to use the

spreadsheet and understand the information that is recorded there. The key was to have him

do most of the work during the implementation in order for us to ensure that he will be able

to continue to work on the document properly when we are not here to help him anymore.

Recording some of the transactions after explaining to him how the document works was how

we started implementing the inventory system for Shine Africa. Webster has shown a good

understanding of the inventory system and has started recording the business inventory in it.

In the next page is a step by step process, describing how we implemented the

deliverable:


Step 1: Product list The first thing we explained to Webster was how to use the product list component of the excel inventory system. This is where we helped Webster record all the products that the business is offering. With Webster we gave each product a unique item number, we provided a description for them and recorded their costs and selling prices. We gave Webster a couple of day to work on the system and then we assess his understanding based on the entries he made.

Step 2: Transaction list The next sheet we used with Webster was the

transaction list. It is used for inventory and accounting purposes. This is a paper transaction recording sheet

that contains daily information about the products that were sold and buy. The information that must be recorded to populate the inventory database were

taken from this document.

Step 3: Transaction sheet At this step, we show Webster how to input the

information from the transaction list into the electronic transaction sheet. As transactions are

recorded, the rest of the database has been updated automatically because the sheets in the document are

linked together. When the business acquires new inventory, the quantity is recorded as a positive

number, and when a sale is made and inventory levels decrease, the quantity sold is recorded as a negative

number. Throughout the month, this is the only sheet where Webster will need to record the transactions. Webster was required to demonstrate that he knows

how to operate this sheet by inputting sales information into the transaction sheet from the

transaction list.

Step 4: Inventory Levels We then introduced the inventory level sheet to

Webster. At this stage all of the data were already updated and we explained to the entrepreneur how to interpret the information. For example, every time the quantity level of a product is equal to or drops below

it’s reorder point, the quantity row of that specific product will turn red and the Webster will know that

he needs to update his stock.

Step 5: Sales/Product Sheet The next sheet in the document is the sales sheet. This is were Webster was able to see the sales level and

profitability of each product. Those information were updated automatically as sales were recorded in the

transaction sheet. Even though this sheet is self explanatory, we made sure to explain to Webster how

it works.

Step 6: STATS This sheet is where Webster was able to find statistical information regarding the business’

inventory. Webster dídn't have to enter any information in the sheet because it generated the

statististics automatically based on the informtions in the other sheets. Financials, as well as sales charts

were explained to Webster. He will have the opportunity to know at the end of each month which product was sold the most and what the profitability of every single product is. The objective of this sheet

is to help Webster make sounds business decision regarding the product the the busienss is offering,.

To implement the inventory management system we first used fake numbers in order to

explain to Webster how the document works and try it with different scenarios. The next step

was to start recording the business inventory information so Webster could have a good

understanding of the process. Finally, we gave Webster some times to input by himself the


rest of the information in the system. We then assess his understanding and encouraged him

to ask questions about the system and had him lay out any challenges that he faced while

using the system. We made sure to consider any feedback that we received from Webster and

we made changes in the system to adapt it to the reality of the business and its owner.

Deliverable #2: Create and Implement an Identity Package


Shine Africa Logistics as a brand and name does not have any meaning, nor does it

communicate the values and offerings of the business to it’s customers. After speaking with

Webster we have learned that the name of the business does not have any significance and he

really does not know what inspired him to name his business Shine Africa Logistics. The

name and signage should be used as a communicative marketing tool for the business, but the

name is irrelevant to the business and the signage is minimal.

Additionally, the physical layout and ambiance of the business is not inviting and

does not cater to the customers. Much of the space in the business is not utilized to its full

capacity due to the current setup of the business and could be rearranged to better the

customer flow and cater to a better selling process. Finally, the inside of the business is run

down and could use some basic restoration to make the customers feel more invited and thus

more inclined to stay in the shop using the services.

2.2 Desired Result

We would like to create a name that embodies the business and also speaks to

Webster’s customers. Webster understands the importance of the business’ name as a basic

tool for awareness in the marketplace. Furthermore, we want the name to give Webster

ownership of the business and make him feel proud when he hears someone say the name of

his business.

We would like to leverage Coca Cola, a current supplier of Shine Africa, to get free

signage with the new name and proper display of SALs product/service mix so customers

understand what the business offers.

Additionally, we hope to acquire the necessary materials for painting the business and

rearranging the current layout of the business. We think new coloration and fresh paint will

create ambiance and be more inviting to customers. Also, being in a nicer, aesthetically


pleasing setting generates the customer experience and makes the customer feels comfortable

to sit and use the internet for an extended amount of time. Furthermore by rearranging the

physical layout of the business will increase SALs capacity and encourage efficient

operations.

2.3 Solution

Upon our consulting recommendations, Webster decided to rename the business

“KasiNet: Your Community Connection Center.” We contacted Coca Cola and they have

designed a new sign with the colors of blue and white, which will also includes a custom logo

designed by us, and the sign lists the appropriate product mix. Furthermore, Webster and us

have designed a new layout for business that is more functional.

We contacted several paint manufacturers in the Cape Town area with the hopes to

acquire their surplus paint. Additionally, we have also been contacting several construction

companies and lumber manufacturers to see if they have scrap material lying around that we

can utilize.

2.4 Argumentation

The brand name is key for Webster in order to create a name for his business in the

community. With a name that is bold and delivers information to the customer about the

product/service offering, the business will attract new customers. Additionally, for Webster to

work towards his goal of opening up several other internet cafes, with a name and brand that

is already established in the community, he will have far less problems attracting attention to

the business.

The experience of the customer starts with the first contact of KasiNet, that being the

physical layout and ambiance. The store must have a pleasant atmosphere or Webster’s

customers will want to go somewhere else. Creating an identity package will aid Webster in

building customer loyalty and an added bonus is it creates a nicer place for his employees to

work.

2.5 Implementation

Since connecting with Coca Cola, the Nyanga Coca Cola representative has come to

Webster’s business to measure the location for the new sign. The sign has been created and

will be installed by Coca Cola by July 19th. The new name of the business is “KasiNet: Your


Community Connection Center.” Since the new name and logo have been used, Webster has

received positive feedback from his customers and they like the name. The new colors of the

business are red, white, and blue. The sign has been painted with these colors and have a

standard Coca Cola logo on the side of the sign. The sign was completely free by leveraging

the Coca Cola relationship. Additionally, the sign lists the main product mix offered by

KasiNet. The sign will be hung by Coca Cola on July 19th. In addition to the new name, we

have also created the logo for KasiNet that is bold and makes a lasting impression in the

customer’s mind.

The KasiNet Logo:

We were able to acquire a donation of red, white, and blue paint from a local Cape

Town business called “Paint and Place.” They donated the paint and also brushes and rollers

to paint the business. We went to KasiNet on July 15th, 2013 as a team to paint the business.

We worked alongside Webster, his girlfriend and ourselves to paint the entire business. We

decided to paint the business’ walls three different colors to make the inside of the business

pop out to the customers once they entered the front door. We painted the front desk a solid

blue color with a white table top to keep it as fresh and clean looking as possible.

We were able to acquire two desks donated by University of Western Cape for the

internet cafe portion of the business. We rearranged the inside of the business by placing the

computers on the desks against the wall of the walkway surrounding the front desk. The

space leaves enough room for customers to sit and use the computers, as well as, leaves

enough room for customers to comfortably move about the business without disturbing the


internet users. We then made the employee section behind the desk smaller and utilized new

available counter space for the printer, fax and copy machines. The Coca Cola cooler was

moved back behind the counter, closer to the employees for easier access.



Deliverable #3: Develop and Implement a Bookkeeping and Accounting

System

Shine Africa logistics at the moment does not have a proper system to track the

overall performance of the business. It is very difficult for the business to determine how

much money is coming in and going out as well as how well the business is doing in general.

This as a result has made it extremely difficult to do financial statements and reports for

strategic decision making. Not even a basic system for tracking income and expenses, debtors

and creditors, is in place. The book in which Webster keep the accounting information is

confusing and doesn’t outline what each number means. This means that Webster sometimes

has to rely on his memory when information is needed. All the business activities are cash

transactions and there is no paper trail for them in the form of receipts and invoices. This has

huge implications on cash inflow and cash outflow of the business. As a result of these

inadequacies, profits/losses made in the business are not true reflections of its real

performance. Webster is thus unable to do any projections, forecasting or budgeting, for the

business.

3.2 Desired Result

In order for Webster to understand the business’ financial performance/position, be

able to determine how much profit the business makes at a certain point in time, he needs to

organize his expenses and income accordingly and distinguish fixed cost from variable

costs. A method to do that would be through a system that would allow Webster to keep

record of all transactions, expenses, revenues and purchases that occur on a daily basis. This

will enable him to identify revenue drivers that are making the business money and those

that aren’t. This system will allow him at the end to produce financial statements and reports

that are important for making business strategic decisions. Thus the desired outcome is to

have this system to reconcile every part of the business, be able to link the operations, cash

flows and other parts of the business in order to create a flow.

.

3.3 Solution


Considering the not too extended knowledge of Webster in Excel the team has

decided that a basic bookkeeping system will be implemented to assist him in organizing all

cash receipts and payments, differentiate which costs are fixed and which are variable,

determine the amount of sale the business needs to make every month to break-even and keep

track of receivables and payables. The consulting team has created a excel document that

regroup calculation sheets that are linked together in order to make it easier for Webster to

record the business transactions as well as saving time.

In order for Webster to be able to record the transaction of the day he has to have a

way to track these transactions. We created a transaction sheet form for sales and purchases

that will help Webster keep track of every single transaction involving cash coming in or

going out in the business as well as the ones on credit.

Transaction sheet:

This is a single sheet that will allow Webster to record the transaction on the excel document

without having to deal with a lot of paper receipt.

The excel accounting and bookkeeping system is composed of six (6) sheets that will

communicate different information about the finances of the business. This system is simple


and easy to use and require a minimum input from Webster other than the daily transactions.

Most of the information on the other sheets will change automatically when the daily

transaction are recorded and a very small amount will be entered manually by Webster.

The first sheet is a “Daily Revenue & Expenses” sheet. It will be used to record

daily business transactions and demand that Webster preserves pertinent documents such as

receipts, invoices and bank statements in order to be able to reconstruct transactions and

reconcile revenue and expenditure. Any cash money that comes into the business or goes out,

no matter the source and the reason, will have to be recorded in this sheet. Record keeping is

essential for the daily operation of Webster’s business, and is a habit that the consulting team

is helping him cultivate. It will aid in making precise and efficient business decisions through

the review and analysis of financial statements and reports and help in determining the

profitability of the business.


The only thing that Webster will have to do is transfer the transactions on the

“Transaction sheet” in this document. The beginning balance of cash will be added at the start

of each month and every day Webster will have an actual and instantaneous cash balance

based on the amount of money coming in and going out of the business in the given day. This

is a practical recording sheet that keeps both expenses and revenues together.

The sheet that follows is a really simple form that will help Webster to follow his

Payables. Even though the business is not buying on credit actually the consulting team

wanted to arm Webster with a practical tool that will help him when the business is growing.

This will also help him make a difference between payables and the money he receives from

loans as for him it’s quite the same now.

The third sheet in the document is to keep track of the payables of the business.

Although Shine Africa doesn’t have a credit policy, Webster does sell on credit to some of

his clients. Every single transaction on credit will be reported in the “Receivables” sheet that

is linked to the financial statements sheet. As the business will grow Webster needs to

understand that Keeping track of accounts receivable is crucial to smooth cash flows. He

cannot leave this task at the bottom of his priority list as this could adversely impact the

business growth and consequently, profitability. This is an extremely simple sheet that will

help him prioritize his action in collecting money that customers owe him by knowing

exactly when the sale was made.


In order for Webster to have a better understanding of his fixed and variable costs, a

sheet was added to keep track of the different costs of the business. With the distinction made

for Webster between fixed and variable costs, he will be able to analyze each of them and

determine if he needs to make any changes in how money is allocated to each of them. This

sheet also is very important in the break even analysis of the business. As Webster doesn’t

keep track of all the costs associated with running the business, this sheet represents a good

way for him to record all of his costs from now on.

The consulting team has included all three financial statements (Income statement,

Balance sheet, Cash Flow statement) in the next sheet. This sheet is getting information from

all the other sheets in the document. For every month Webster will know the exact profit the

business is making by looking at the income statement. Some information will be

automatically added and the rest will be easily tracked in the transaction sheet of the month

and added by Webster.


The balance sheet will help Webster to know what his business is worth as he is

investing in it. Actually, he doesn’t know how much he has invested in the business and the

value of his equipments. The balance sheet put everything together to help Webster clearly

understands the company’s financial position. It will serve outside advisors such as bankers

to evaluate the creditworthiness of the business in the future.

Finally the cash flow statement ties together all the details from the income statement

and the balance sheet in order to give Webster a summary of the overall picture of his cash

inflows and outflows for his business. Seeing his business in this summarized format will

help him understand how the detailed transactions affect the business. The Cash Flow

statement will allow Webster to look at how and in what areas the business is generating

cash, or not generating cash. Armed with this information he will be able to make

adjustments to his operations, or investing or financing activities.

The last sheet is a simple break even analysis of the business. As Webster has

shown that he has knowledge on the matter, we have included this sheet that doesn’t

require him to add any information at all for the moment. It is linked with the other sheets

and will automatically provide a break even analysis at the end of the month when all

information has been recorded.

He will have a better understanding of how profitable different products or

services might be, how much product must be sold to cover costs or what happens if costs

or prices change. Knowing his break-even points will be important for Webster in making

solid business decisions and achieve the business’ desired income.


This system will still be useful as Shine Africa grows and it is key that Webster

knows how to use it to its full potential. The team is planning to go over every single sheet

with Webster in order to get him acquainted with the system and own it. We will then enter

some of the data of the current month with him and see how he is handling the system.

Having him records the remaining data will be used as a test. Although information on how

to use the system and the meaning of the numbers are explained in the spreadsheet, we want

to go over them with Webster and answer his questions so we can be sure that he fully

understand the importance of the system.

3.4 Argumentation

• Proper book keeping is important to sustaining and expanding the business. Without

it, Webster runs the risk of hitting cash flow crunches, wasting money, and missing

out on opportunities to expand his business. Because now Webster will be keeping

proper records of his business transactions, he will be properly positioned to carry out

proper business evaluation and see how his business is doing.

• In the future, any financial institution that wants to do business with Webster must

demand for his business records. The opportunity for him to get financing will depend

on his ability to prove that he is serious about his business and produce them.


• Effective and efficient record keeping practices will secure Shine Africa internal thief

and dishonest employees.

• It will allow Webster to determine how profitable or not every areas of the business

are.

• It will allow Webster to separate personal and business funds and thus manage the

business in a more professional way.

3.5 Implementation plan

The best way to teach the client how the accounting and bookkeeping system works is

by practicing with him. The idea is to go over the document as a whole and make him

understand how each component are linked together. One important point also is to have the

client clearly understand the importance of the system. Without him seeing a logical reason

for using it there is a big possibility that he won’t be motivated to learn how to use it

correctly.

A step by step process in implementing the accounting and bookkeeping system:

Step 1: Using the transaction sheet - It will replace the notebook the client is using to write

all the sales that the business is making in a day. However, this excel sheet put together in the

same space the revenues and expenses of the business for a given month. Only the

transactions that involve cash should be recorded in this sheet. It is strongly recommended

that the client records the transactions daily in order to embrace the discipline and not let the

work accumulated. During the implementation the sheet was used by the client with one of

the consultant’s supervision and guidance. This sheet will also be used for inventory control.

- Printing the transaction sheet and making enough copies for the month is necessary.

Guidelines in using the Transaction sheet

- Each transaction sheet should have a number and the numbers should follow a sequence.

- The date for the transactions should always be mentioned. 2 sheets can be used for one day

but one sheet should not contain transactions made on different dates.


- When recording a transaction use a check mark to specify to nature of the transaction (is it a

sale or a purchase? cash or on credit?)

- Use the sheet to record the transactions in the "Daily Revenues & Expenses" sheet for cash

transactions and in the “Payables" and "Receivables" sheets for transactions on credit.

Step 2: Electronic recordings - The actual recording in the “Daily Revenues & Expenses”

sheet is facilitated by a drop down list function added for some of the column. This is saving

Webster time because he doesn’t have to write everything. This form is the electronic version

of the transaction sheet. The only difference is that the transactions in the latter will be

recorded in payables for the purchases that were made on credit and receivables for the sales

that were made on credit. To teach Webster how to use this form we recorded with him the

transactions that happen during the beginning of the current month. After he had entered one

or two days, the best way to see if he will be able to use the form was to let him record the

rest of the information himself and guide him in the process.

This Sheet will serve only to record transactions that involved tangible cash coming in

and going out of the business.

Guidelines in using the “Daily Revenue & Expenses “sheet

- The part for revenue is for: Cash from sale of products and services - Personal money that

the owner invest in the business - Money that the owner borrow from another entity to invent

in the business - Money received from loan to other entities.

- The part for expenses is for: Cash used to buy inventory - Salaries that are paid to the

employees and the owner - Payment for rent, electricity, advertising, employee and/or

owner’s transport and communication, office supplies or any other expenses that are directly

related to the business operations.

- The beginning balance has to be entered only at the beginning of each month. The

beginning balance of one month is the ending balance of the previous month.

- The date, the receipt number and Item/service columns have a drop-down list that will allow

the user to select information without having to type everything.

- Daily cash balance is found in the cash balance column. The ending balance of each day

should not be reported in the beginning balance column.


- Refer to Payables and Receivables sheets in order to record transactions that were made on

credit.

- The Cash balance at the end of the month is the amount that needs to be recorded in the

excel spreadsheet for the following month as beginning cash balance.

NB: Personal expenses

(any expenses that aren’t incurred because of the business

operations) should be kept separate from the business record system.

- This sheet is to record the transactions that are directly related to the operations of the

business.

Guidelines in using the “Payables “sheet

- This sheet only concerns buying inventory on credit. It is not for money borrowed from

other entities.

- When the business pays a supplier, the amount should be removed from this account and

added to the "Revenue & Expenses sheet".

- Any outstanding payables for one month should be reported in the next month sheet.

Guidelines in using the “Receivables “sheet

- This sheet is to record the transactions that are directly related to the operations of the

business.

- This sheet only concerns sales of product and/or services on credit.

- When a customer pays the business, the amount should be removed from the receivables

sheet and reported in the "Daily Revenue & Expenses sheet.

- Any outstanding receivables for one month should be reported in the next month sheet.

Step 3: Keeping track of the costs - The business costs identified should be separated

between fixed and variable. A list of the actual costs is provided and can be improved if

necessary in the future. The total variable costs (the ones that vary depending on the business

sales volume and that rise as sales increases and fall as sales decreases) and fixed costs (the

costs that don’t change with an increase or decrease in the amount of goods or services sold

and that will have to be paid by Shine Africa, independent of any business activity) for a

month will be recognized and reported in the “Fixed & Variable costs “sheet. Those costs are

will be easily identified in the “Daily Revenue & Expenses “sheet and the total for each will

be added to the costs sheet at the end of each month. Webster will have a clear idea of his


business capacity to cover its operating expenses and will be able to decide which costs need

to be watched.

Step 4: Reconciliation - At the end of each month the transactions recorded in the “Daily

Revenues & Expenses” sheet, “Payables” and “Receivables” sheets as well as the “Fixed &

Variable costs” will be put together to create the income statement, the balance sheet and the

cash flow statement. The income statement will allow Webster to know if the business is

profitable or running on loss for a particular month. The balance sheet is to help Webster

know what his business is worth and what his contribution to the business represents in term

of money. The other one, the cash flow statement, is the most important part of the financial

package when it comes to the management of a small business as Shine Africa. Webster’s

business runs on cash and knowing where cash is and where it’s gone is among the most

important things Webster can know. The cash flow statement will tell him if he is running out

of money while he is profitable. It will also tell Webster if he is taking too much money out

of the business and he will see the results of building inventory, letting receivables grow or

paying suppliers more quickly. Webster will have to enter a minimum of information in the

financial statements sheet. The numbers in blue are the one that he will have to manually

enter and the numbers in black are automatically added by the system.

The consulting team explained to Webster how to interpret the numbers that are in his

financial statements, know how they affect his business and what tactics he can use to

improve them for the next period. One way we did that was by creating scenarios by putting

fake numbers in the system in order for him to understand the impact for example of sales,

account payable or inventory cost increase or decrease.

- The sheet contains a set of 3 financial statements that are linked together. A change in one

will affect the 2 others.

Explanations in the sheet

- The Income Statement put the business revenue from sales with the business expenses

together. The expenses are subtracted from the revenue and the result is the profit or loss of

the business for a given month. The amount in blue should be entered manually and the

necessary information will be found in one of the previous sheets. The amount in black will

be entered automatically when information were recorded in the previous sheets. This

statement is telling if the business is making money or if it is running on a loss for a given

period.


- The Balance Sheet is a snapshot of the assets the company owns, the debts it owes, and

how much it is worth. The balance sheet summarizes the company's financial condition at a

particular time. Total assets must always equal total liabilities plus equity. Assets, or the

means used to operate the company, are balanced by the company's financial obligations,

along with the equity investment brought into the company and its retained earnings.

- The Cash Flow Statement serves as a map that tells where cash came from and where it

went. The cash flow statement shows if the business is running out of money, even if it is

profitable at the same time. One of the most important traits a potential investor will seek is

the business’ ability to generate cash.

Step 5: How to use Break-even analysis - The break-even analysis sheet is set up in a way

that will help Webster knows the Minimum Sales Volume needed to avoid losses. Webster

will be able to determine the sales quantity or number of products that must be sold in order

for the business to generate enough revenue to pay its expenses. Knowing how many units

must be sold to reach the break-even point will allow Webster to avoid incurring losses over a

given period of time. Webster will also be able to plan his target profit levels with this sheet.

The analysis will allow him to know how much profit he can earn at different sales volumes.

Any sales volume or number of units sold exceeding the breakeven point will result to a

profit. By setting various sales volumes that exceed the break-even point, we wanted Webster

to know how much profit can be generated at each sales volume. This will help him to set

sales targets that will let him achieve desired profit levels. Lastly, Webster will be able to

schedule his merchandise inventory requirements. The quantity of stock that must be

available to consumers at any given time plus the schedule of additional stock to be

purchased are matters that can be planned only after the break-even analysis has been made.

After setting inventory volume based on figures provided by the break-even analysis,

Webster will be able to prepare initial inventory stock and plan a schedule of restocking

based on cash flow.

The entire system was tested with the entrepreneur, first with fake numbers in order to

make him understand how it works. After that we started recording the actual transactions of

the business and have him finish them. We had the possibility to see if he understands the

meaning of the numbers and how his decisions can affect them in the next period. The goal

was to have him own the system enough so he will be able to train someone else to use it in

the future.


Implementation - Transaction Recording Process


Deliverable #4: Create and implement a new product mix, pricing scheme

and promotional techniques

4.1 Problem Statement:

Shine Africa Logistics (SAL) doesn’t current marketing mix is flawed due to the fact

that Webster doesn’t consider the implication of each component of the mix. One issue is that

Webster is selling products that the business is keeping in inventory but is not selling.

Webster doesn’t also consider selling small things that are in demand. Not knowing the

profitability of each product and service makes it difficult for him to decide on an effective

product mix. In addition, these products/services are offered at random prices. Webster does

not have a structure for setting prices for his products. He prices most of his products based

on his competition, his strategy is to use perpetual penetration pricing, so if a competitor

charges R10 an hour for internet use per customer he will charge R8.50. He does not consider

other aspects that have an impact on the price of the product, like the costs incurred to get the

product to the customer. The prices are intentionally set lower than the competitors and

competing according to prices can be very harmful to the business because anyone can come

in the marketplace and set prices lower than Webster.

Although SAL has been operating for the past 2 years, Webster has not yet initiated

any form of advertising or promotion. The specific township location is buzzing with activity

and foot traffic and is ideal for the kind of business Webster is running. However, the store

presence is rather dull and not ideal for a comfortable lengthy internet session. The current

marketing mix analysis validates the absence of a synergistic combination of product,

promotion, price and place to effectively make a difference in the marketplace.

4.2 Desired result:

By revising SAL’s marketing mix with effective tools we want Webster to be able to

market his products in a way that will help distinguish them from their competitors in the

wider marketplace. The objective is to have the business sells some by-products at a very

cheap rate in order to attract customers to buy the business main products. The idea is to have

the customers inside the shop in the first place and increase the possibility for the business to

sell more than one product at once. However, we want Webster to have a process in deciding

what product to sell in the business. Webster has to look at the profit margin for each of the


products he is selling. While the number of product sales is important in deciding on the mix,

the profitability of each product is also key.

In relation to price we aim to educate Webster on how to set prices that are not only

reasonable to the consumer but that also don’t sell his business profits short. In addition

Initiating promotional activity is sure to significantly increase awareness and increase sales

by attracting new customers and possibly increase existing customer usage as well as

possibly stealing competitors’ customers. Furthermore, creating a warmer environment

conducive to extended visits is sure to appeal stronger to his internet users who spend longer

time periods in his store.

4.3 Solution:

Creating and implementing an effective synergistic marketing mix that entails

structure and guidance for acquiring new products that are profitable, in demand and which

will attract customer to use the core business activity. The team has developed a logical

pricing structure that will help Webster include the business costs when setting prices. The

system will help Webster to keep prices at competitive levels and not sell his products and

services at a loss without being aware of it.

Webster needs to create awareness of his business and the consulting team believes

that it is necessary to develop a promotional mix to inform, persuade and remind customers

about the products and services the business has to offer. Flyers and posters will be created

with the new name, logo and slogan of the business to create awareness and different kind of

sales promotions will be developed to entice customers to come especially in this business to

buy the products or services. The flyers will be distributed flyers in the business area,

specifically to high schools and taxi drivers. The posters will be put up around the business

location and Webster’s relationship with the taxi drivers will be leveraged so some posters

can be plastered in the back windows of the taxis. This is to increase the usage rate of the

products and services that the business has to offer.

The consulting team believes that improving the store ambiance by creating a new

layout and improving the store’s ambiance will also play a role in attracting the customers.

This aspect is related to the creation of an identity package and will be discussed further

separately. The end result is to increase the percentage of visits and the time spent at the

store, specifically for internet users.


4.4 Argumentation

The business environment has evolved into fast paced activity and changes leaving

21st century businesses with only one option to survive and possibly thrive which is

pursuing growth avenue’s and strategies. Therefore, due to the marketing mix setting the

foundation for a sustainable and profitable business Webster requires understanding and

application of effective and appropriate measures and techniques (synergistic marketing mix)

to establish and maintain his business in order to grow.

The new product mix will increase sales by offering products and services that will

meet the demands of a large amount of consumer. The business product mix will particularly

be important in the competitive market where there are multiple competitors competing for

different the same customers. The product mix will increase sales because Webster will be

able to capture consumers from across the market and avoid a consumer switching to a

competitor.

Although the promotional mix offers businesses 4 means of executing promotions, we

have analyzed that advertising and sales promotion happen to be the most effective way

Webster could communicate to his target market who are high school students, taxi drivers

and a portion of the general public who are computer literate. Advertising will be a good way

for Webster to build awareness and it is effective at reaching a wide audience. Furthermore,

the repetition of main brand and product positioning will help Webster build customer trust.

On the other hand, sales promotion will stimulate quick increases in sales by targeting

promotional incentives on particular products and it represents a good short term tactical tool.

The pricing scheme will assist Webster in determining the right prices to sell at, how

much profit margin he is making on each product, which products he is losing money on.

That way he will be able to make decisions about each product. Also when he needs to add a

new product in his product line, he can first use the model to determine how much to charge

the product by accounting for all the costs he incurs to get the product to the customer.

4.5 Implementation

At the beginning of the implementation of this deliverable the team ensured that we

were communicated effectively the significance and importance of reviving Shine Africa’s

(SAL) marketing mix. We realized that should he not understand the significance and the

potential of these tools to help him grow his business, he will quickly go back to doing


business as usual once we leave. We therefore set out to teach Webster how a new product

selection criteria could help him maintain focus in telecommunications, his chosen line of

business, we communicated how promotional activity tends to increase sales and keeps the

buzz around his store, and how logical profit mark up’s keeps his business sustainable.

A sustainable and effective marketing mix requires hands on maintenance. We’ve

implemented criteria for purchasing new products which will logically guide purchase choice

and test these in the form of every new products running on a 2 week trial period as a

practical way of validating the new product purchase decisions from customer sales activity.

Four step checklist for purchasing products

New product selection criteria:

Step 1: Does it fit my line of business?

Telecommunication service?

Telecommunication product?

Snacks and Drinks?

Should customer interaction lead to a new demand that will give the business an advantage

over the competitors and it will bring a sustainable profit to the business consider adding to

the product or service.

Step 2: How does it affect my competitors?

Are my competitors selling the same product/service?

Will it give me an advantage (long term) over my competitors?

Preferably, it should give an advantage over the competition, should the business offer the

same products the competitors are offering the business will be left to compete on price


which isn't ideal.

Step 3: The benefit to my customers Vs the profit to me?

Does it meet my customers’ needs or wants?

Is it profitable to my business?

The cost of purchasing should not exceed the benefit to the customer. The products and

service need to meet both the customers’ needs and in doing so benefit the business with

sustainable profit. However, should the product be profitable (low cost and able to sell at a

large margin) yet it doesn't meet demand it should not be considered a sustainable route to

making business (slow and ineffective). Buy 2 or 3 to limit the risk of over stocking the

item. Supplying the customers’ needs and wants should be what keeps the business alive

and successful.

Step 4: does it align with my price range:

Can I afford to sell this at a sustainable profit?

Does it suit my target markets price range?

Test: buy a few (E.g 5) of the products and put them on a 2 week trial to monitor sales and

then make the final decision to pursue it based on actual customer response to it. Be

comfortable with testing before considering.

Add: Listen to the customers, test the products/services they would like e.g chips, cigarettes,

sweets.

After going thru those steps we decided, with Webster’s support, to add new products,

chips and sweet, chocolate bars to extend the snacks product line. Based on the answers we

got from the questions above, we concluded that these items are viable. Webster has started

with the two weeks trial (test) in store to monitor customers’ response and will afterwards

make the final decision based on sales.


Promotions:

We’ve initiated promotional activity at Shine Africa and implemented advertising and

sales promotion. Flyers have been distributed in the business surrounding areas and posters

have been put up. The objective was to attract the attention of his target market customers

which is composed mainly of high school students and taxi drivers. Webster also managed to

convince a few taxi drivers to advertise his promotion in their taxis by sticking the posters in

their back windows. This will extend coverage through the Nyanga area. We’ve evaluated a

few options with Webster and settled with running two promotions which appeal to the

general public and specifically to high school students. Webster agreed that a suitable

promotion would be 30mins free internet connection after 1hr which appeal more to the high

schools students and taxi drivers, and then free starter pack in store to general customers. To

ensure Webster maintains the standard and quality of his flyers and posters, we’ve equipped

him with an easy 5 step process to follow in order to do effective promotions in the future.

Upon implementation we went through the process with Webster and made clear references

and examples of how the one’s we set up strategically followed the 5 step process we taught

him.

Guidelines to effective promotion:

NB: Effective promotion is always centered on the consumer, and the value the businesses

products and services have to offer them. Therefore the business is not being promoted but

how the business is able to meet potential customers’ needs.

The 5 step promotion process:

1st step: The consumers is appealing: “Grab my attention please”

How could we grab the consumers’ attention?

Select the color and headline for the promotion.

- Color: eye catching color

- Headline: should be a catchy phrase not necessarily the business name or

anything other than the central promotional focus. It should complement the

picture and be positioned above it. This should be printed in black ink so

that is easily seen.


2nd step: Attach a relevant picture that is able to stir the “ need” or “want”

The picture should be relevant to the business and more so relevant to the

promotion being advertised.

- Provocatively

- Less is more

- Simple yet effective

3rd step: formulate concise promotional information

Use as few words as possible to explain the promotion and time period of

availability.

- Example: “15 mins free internet this month only”

4th step: state clear shop details/address and contact information if necessary

This is positioned preferably at the bottom of the page not to dominate or be in

competition with the promotion information.

- At this stage you explain where the promotion is available, as clear as

possible as misunderstanding could interfere with the customer showing up

at your store.

5th step: a concise list of other services available

This is featured at the very bottom of the page.

It could be in smaller font as it is not the central focus however it could be an extra

factor that stirs a desire in the potential customers’ decision to visit your store.

- Example: Photocopying, printing, and laminating.

Evaluation:


The significance of evaluation is specifically important for future reference as to

which promotions and communication techniques work best and therefore logically deciding

what to pursue and what to eliminate.

This will entail:

• Webster and/or his shop assistants will ask new customers how they heard about the

store. This will help him distinguish which form of communication is most effective.

For example word of mouth, sales promotions or advertising.

• Webster and/or his shop assistants will ask regular customers what brings them back

to the store each time. This will let him know if his differentiation lies in his

convenient location, product mix or his customer service.


Shine Africa – New flyers and Posters


Pricing model:

Initially what the team did was to determine the business’ expenses and costs and

categorize them into fixed or variable costs.

After this distinction, we then determined the costs that are directly involved in making sure

that the customer gets the product, when they want it, besides the actual cost of the product.

They include costs such as transportation (petrol) to stock the products, electricity for

providing internet, etc. For example, for the phone accessories Webster told us that he spends

R200 per week on petrol and usually goes twice to buy the products. We determined how

much the total is for all variable costs, the following is the way we determined how much the

variable cost per unit for each product is:

Total variable costs = Total Variable cost/quantity (number of phone

accessories)

= R950/191

= R4.97 VC per unit (for phone accessories)

For the electricity we had to separate it because not all of the products consume

electricity, even without it they would not be affected like the phone accessories. Webster

told us that he spends R250 per store for electricity. When we were doing the SEE model we

determined the average number of hour’s internet services is consumed by customers every

day, we found it to be 2.5 hours.

So: = 10 hours of operations per day X 7 days X 4 weeks

= 280 hours in a month

And then = R250 of electricity per month / 280 hours per month

= R0.89 per hour electricity everyday

So: = 2.5 hours X 3 computers = 7.5 hours internet

consumption per day

Therefore = 7.5 x R0.89 (electricity per hour)

= R6.70 cost of electricity per day for internet usage.


Thus = R250 - R187.60 (R6.70 x 7 x 4) = R62.40 for other

services like faxing, copying etc

With all of this data we were able to determine the variable costs per unit for all the different

products Webster offers. All of this at the end was to enable us to calculate what the

contribution margin each product produces and what the profit margins are for each of them.

With all of this information Webster could see which products he is losing money on, which

ones to lay off and which ones to add to the product line that will add value to the business.

The following table shows the contribution margins (in rands) and profit margin of the

products of Shine Africa Logistics:


To implement the new pricing model, we first explained to Webster how we got to the

numbers that are shown in the table above. Before, Webster didn’t realize that he was losing


money on any of the product with negative contribution margin. We worked on the pricing

model with Webster and showed him the products that he was losing money on. Webster

agreed to increase the prices of some of his products such as faxing and copying. Based on

the pricing model we also agreed that he remove some of the products that are outdated and

were no longer selling in the market, (such as the cell hangers). As of the implement date,

Webster will also no longer sell milk and the super glues on which he is losing money. For

the faxing and printing service, we determine a new price. Webster has increase the faxing

price from R6.00 to R8.00 for local, from R8 to R10 for national and is keeping the

international the same price because the demand for the international faxing service is very

low. We also brought it to Webster’s attention that copying and printing can’t be the same

price as he is losing money on them. We set the printing at R1.50 and left the copying at R1.

Webster will be able to use the table above to set prices whenever he decides to add

any new product or service in the business. We used the pricing model with Webster and

determine how much he should price the chips, chocolate bars, sweets and cigarettes that are

being added to the business’ product mix.


Tuesday, July 16th 2013 Mr. Webster Kushata President Shine Africa Logistics Company Shop 3, Nyanga Terminus Cape Town, South Africa, 7750 Dear Webster,

Team Mpumelelo Consulting would like to formally thank you for the opportunity to work

with you over the past six weeks. We truly appreciate your willingness to open up your entire

business and work side by side with us. The trust we have built is a blessing and we thank you for

believing in us as we have believed in you.

We appreciate your enthusiasm and eagerness to learn and develop a legitimate business

operation. Our team has learned just as much from you as you have learned from us. We all agree that

your character, your drive to succeed, and your desire to learn is inspiring and we thank you for that

inspiration. Most people would have given up if they had the same type of hardships and setbacks as

you, but your perseverance and courage has brought you up each time. We are blessed to know such a

resilient and strong person as you are.

As we have lived and breathed your business for the last six weeks. We have seen you grow

in your business knowledge and seen great improvement in your ability to understand each aspect of

your business. We know that if you keep pushing forward on the path that you are on, the hard work

will pay off. We look forward to seeing the growth of your business and expansion into new markets

for KasiNet.

As we end this consulting engagement we want you to know we are always a resource to you

for any questions or advice you might need in the future. Apart from business, we all think of you as a

friend and hope to stay in contact through the coming years. Thank you again for your time and effort.

Best Regards, Mpumelelo Consulting Signature:____________________________ Date:___________________ Busisiwe Mutlaka


Signature:____________________________ Date:___________________ Charlie Bailey

Signature:____________________________ Date:___________________ Danicke Lentjies

Signature:____________________________ Date:___________________ Nathalie Guerrier Signature:____________________________ Date:___________________ John Snedegar Signature:____________________________ Date:___________________ Lee Schilder

Documents

Shine Africa - Final Report-2