ACCOUNTANCY @ UJ

Department of Accountancy
B Accounting (B Acc)

Learning Guide: Unit 1

Strategy

Financial Management 300

(FMA300 & S3BCTQ4) 2026

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MODULE OUTCOMES:
1. Understand the theory underlying the strategy
2. Understand and evaluate an entity’s strategy
3. Demonstrate a basic understanding of the impact of sustainability on business decision-making.
LEARNING OBJECTIVES / ASSESSMENT CRITERIA LEARNING PROCESS
At the end of this module students should be able to: (including sources & sample questions)
Strategy Development Process
a) Following a multi-capital management approach, 1: In class, the theoretical concepts of vision, mission, objectives generic
analyse and align the overall purpose of an competitive strategies, stakeholder analysis and the UN’s sustainable
organisation (to provide sustainable value to the development goals are discussed to create an understanding.
organisation and its stakeholders) with its context, 2: In a live practical class, the theoretical concepts in (1) are applied to real-
vision, mission, values, and mandates world examples by both the educator/guest lecturer and students to further
b) Facilitate and advise on the strategy development understand and apply the theoretical concepts in (1).
process of the organization 3: Students watch an additional video to further understand and apply the
c) Review key stakeholder roles and responsibilities in theoretical concepts in (1).
the organisation’s business plan and the execution of 4: Students make their notes to remember, understand and apply the concepts
its business strategy in (1) using the PP slides; videos; and the textbook.
d) Review the organisation’s strategic direction and 5: Students answer the following suggested questions in preparation for
highlight areas of potential value and risk assessments and the assignment:
- Question 1 module (part a)
- Question 2 module (part a)
- Question 1 (part c)
- Question 3 module
External and internal influences on the organisation’s strategy
a) Assess the contextual influencers on an 1: In class, the theoretical concepts of a SWOT analysis, PESTEL analysis and
organisation’s external and internal environment Porter's Five Forces are discussed to create an understanding. 2: In a live
(also taking into account, economic, industry, practical class, the theoretical concepts in (1) are applied to real-
competition, market, social, natural, technology and world examples by both the educator/guest lecturer and the students to further
political spheres) by using relevant strategic analysis understand and apply the theoretical concepts in (1).
tools, frameworks and models 3: Students watch additional videos to further understand and apply the
b) Review the impact of organisational internal factors theoretical concepts in (1).
(e.g., tone of the leadership, human resources 4: Students make their notes to remember, understand and apply the concepts
policies, personnel selection and development, in (1) using the PP slides; Module extra reading; videos; and the textbook.
remuneration strategies, management/trade union 5: Students answer the following suggested questions in preparation for
relationships) on the organisation’s strategy assessments and the assignment:
c) Review the impact of events and activities related to - Question 1 module (part b)
the organisation’s context while creating their Question 2 module (parts b & c)
business strategy
d) Identify and evaluate significant opportunities and
risks associated with the entity’s external and
internal environments
Implementing strategy
a) Review context relevant models to appraise the As above
organisation’s capabilities to achieve the business
strategy and purpose
b) Identify and evaluate significant business risks,
strengths, weaknesses, opportunities and threats
associated with the organisation’s external and
internal environments
c) Prepare a strategic response to the organisation’s
competitive environment by applying strategic
analysis tools to identified external and internal
factors

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 d) Assess the risk tolerance of the entity’s
stakeholders’ and its balance with opportunity
e) Identify priorities and actions either to mitigate
critical risks or capitalise on opportunities
f) Formulate insights into the impact of future
opportunities and risks
Building blocks of the business model
a) Assess the business model of the organisation in 1: In class, the theoretical concepts of the building blocks of a business model
terms of its key building blocks are discussed to create an understanding.
b) Consider and apply different perspectives to 2: Students watch an additional video to further understand and apply the
evaluate the organisation’s business model (e.g., theoretical concepts in (1).
risk, innovation, investment, etc.) 3: Students make their notes to remember, understand and apply the concepts
c) Assess the organisation’s business model as a in (1) using the PP slides; videos; and the textbook.
vehicle for the implementation of its business
strategy
d) Assess the organisation’s business model as a
vehicle for long-term value creation for
stakeholders

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 UNIT 1 - STRATEGY

Step 5: Self-reflection & correction:

Students are required to self-reflect during the practical class as they
are answering questions with the guest lecturer and identifying areas
of improvement.

Guidance to be provided to students regarding the best way to self-

reflect and correct while working through questions.

Any objective test will be released at the end of the day on 19

February 2026 in order for students to identify any improvement areas
as well.

Step 4: Solve the problem:

Guest lecturer to present a practical class illustrating the practical
application of the theory.

Step 3: Understand the theory:

Theory will be included in the lecture videos as well as in class

Step 2: Understand the problem:

Understanding the problem will be illustrated in the live class and
discussed with students.

Step 1: Problem discovery:

Students to follow the instructions included on Moodle in terms of the
pre-reading/preparation required before class.

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 The module outcome table above is an “educational” extension of the activities provided on Moodle.

Required Textbook:
 Financial Management - Carlos Correia 10th edition [aligned to the SAICA’s CA of the Future].
The 8th and 9th editions can however be used.
 Chapter focus:
 Chapters 1 (elements about ‘Corporate Strategy’) and 21 (8th, 9th and 10th editions)
 Relevant page numbers in the 10th edition:
 1-37 – 1-44 (to the end of UN Sustainable Development Goals)
 1-55 – 1-59 (Appendix 1.3 Stakeholder considerations and good corporate
citizenship)
 21-1 – 21-6 (up until Matrix Models)
 21.9 – 21.14 (up until Porters Value Chain)
 21.19 – 21.30 (Building Blocks of a Business Model)

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Additional content:
 Powerpoint slides (see Moodle)
 Overview of strategy (see module below)
 Suggested video links:
- Mission, vision and mandate
[Link]

- Star Bucks SWOT analysis

[Link]

- Overview of SWOT analysis and a PESTEL analysis

[Link]

- Stakeholder analysis background

[Link]

- Building blocks of a business model

[Link]

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OVERVIEW OF STRATEGY
 “Strategy is the direction and scope of an organisation over the long-term which achieves
competitive advantage for the entity through its configuration of resources within a changing
environment, to meet the needs of the market and to fulfil stakeholder expectations.”
(Johnson & Scholes, 1999)

 Strategy is the competitive moves and business approaches management has developed to
(Thompson & Gable, 2009):

 attract and please customers,

 conduct operations,
 grow the business and
 achieve performance objectives

 “A strategic plan is a statement of long-term goals along with an explanation of the strategies
and policies which will achieve these goals.” (CIMA official terminology, 2000)

An entity’s strategy is nearly always a blend of prior moves, approaches already in place, and new
actions being mapped out. The biggest part of an entity’s strategy usually consists of prior approaches
and practices that are working well enough to continue. Major changes in strategy can be expected on
occasion, especially in crisis situations, but they cannot be made often without creating internal chaos
and confusion among customers. From the perspective of the whole entity, the task of “strategizing” is
an ongoing exercise.

STRATEGIC MANAGEMENT PROCESS:

When developing a strategic plan, the managers of an entity have to answer the following three
questions:

 Where do we want to go? (Stage 1 and Stage 2)

 Where are we now? (Stage 3)
 How are we going to get there? (Stage 4 and Stage 5)

The managerial process of crafting and executing a company’s strategy consists of five
integrated stages:

1. Developing a strategic vision of the company’s future direction and focus.

2. Setting objectives to measure progress toward achieving the strategic vision.
3. Crafting a strategy.
4. Implementing and executing the chosen strategy efficiently and effectively.
5. Evaluating performance and initiating corrective adjustments that are needed in the company’s
long-term direction, objectives, strategy, or approach to strategy execution.

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Stage 1: Developing a strategic vision:

A strategic vision has little value to the organisation unless it’s effectively communicated down the line
to lower-level managers and employees.

Vision:
 Desired future state of the organisation (J. Payne, 2008).
 “What is our business and what will it be”?
 For a strategic vision to function as a valuable managerial tool, it must provide an understanding
of what management wants its business to look like and say something definitive about how the
company’s leaders intend to position the company beyond where it is today.

Mission:
 General expression of the entity’s overall purpose and is intended to reflect stakeholders’
expectations and it also communicates the corporate values (J Payne, 2008).
 “Who are we, what do we do and where we are headed” (Thompson & Strickland, 1990). “What
do we stand for?”

Stage 2: Setting objectives

Strategic objectives translate the mission into quantified milestones for the business to reach. Both
short-term and long-term objectives are needed. Short-term objectives spell out what management
needs to work toward over the next year or two; whilst long-term objectives direct managers to consider
what they can do now to boost the entity’s performance over the longer term. These objectives should
be “SMART”, i.e.:

• Specific – A precise attribute of the formulation sought;

• Measurable – Index or measure for determining the progress;
• Attainable – The objective must be realistic;
• Relevant – Appropriate to the mission statement;
• Time Bound – The time frame in which it must be achieved.

Objectives are the ends and strategy is the means of achieving the objectives. The moves and
approaches already taken indicate what the prevailing strategy is; the planned moves and approaches
signal how the prevailing strategy is to be changed.

Unless an entity’s mission and vision are translated into measurable performance targets, and real
pressure is put on managers to show progress in reaching these targets, the entity’s mission statement
will likely end up as nice words, good intentions, and unrealised dreams of accomplishment. It is
essential that performance objectives be stated in quantifiable or measurable terms that they contain a
deadline for achievement (Link to the module on Performance Measurement). Performance targets must
be established for the entity as a whole, but also for each separate manager, from the CEO down to the
lowest strategy manager. They should all be held accountable for achieving specific results in the units
they head (Link to the module on Performance Measurement).

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Stage 3: Crafting a strategy

 A company’s business strategy is the responsibility of the CEO and other senior executives and
is primarily concerned with strengthening the company’s market position and building
competitive advantage.
 Functional area strategies are concerned with the actions related to particular functions or
processes within a business.
 Operating strategies are concerned with the relatively narrow strategic initiatives and
approaches for managing key operating units (plants, distribution centres, geographic units), and
specific operating activities such as material purchasing or internet sales.
 Crafting a business strategy that yields sustainable competitive advantage has several facets:
deciding where a firm has the best chance to win a competitive edge, developing a
product/service that appeals to buyers and set the entity apart from rivals, and countering the
competitive moves of rival companies (this involves both offensive and defensive actions).

Stage 4: Implementing and executing the chosen strategy

 The implementation of an entity’s strategy involves the application of the management process
to obtain the desired results. Particularly, strategy implementation includes designing the entity's
structure, allocating resources, developing information and decision processes, and managing
human resources, including such areas as the reward system (Link to the module on
Performance Measurement), approaches to leadership, and staffing.
 The strategy-implementing tasks are easily the most complicated and time-consuming part of
strategic management. It cuts across virtually all facets of managing, and actions must be
initiated from many points within the entity.
 Depending on the amount of internal change involved, full implementation can take several
months to several years.

Stage 5: Evaluating performance and initiating corrective adjustments

 This is the trigger point for deciding whether to continue or to change the company’s vision,
objectives, strategy etc. So long as the company’s direction and strategy seem well matched to
industry and competitive conditions and performance targets are being met, the company’s
executives may decide to stay the course.
 The step involves monitoring the actual performance of the entity and comparing it against the
entity’s performance targets (Link to the module on Performance Measurement).
 Strategy may need to be modified because of shifts in the long-term direction because new
objectives have been set, or because changing conditions make fine-tuning or major overhaul
necessary.

In most entities, it is the role of the accountants to monitor and report progress against performance
targets. The techniques used include:
• Standard cost variance analysis (Link to the module on Standard Costing)
• Budgets and budgetary control (Link to the module on Budgets)
• Divisional financial performance measures such as ROI, RI, EVA (Link to module on
Performance Measurement).
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COMPETITIVE STRATEGIES AND INDUSTRY POSITIONING

Competitive strategies that provide distinctive industry positioning and competitive advantage in the
marketplace involve choosing between (1) a market target that is either broad or narrow, and (2) whether
the company should pursue a competitive advantage linked to low costs or product differentiation.

Five generic competitive strategies

1. Low-cost provider strategy (e.g.: Walmart)

 Striving to achieve lower overall costs than rivals and appealing to a broad spectrum of
customers, usually by under-pricing rivals.
 Used in a market with many price-sensitive buyers.
 Achieved through essential value chain activities, which are conducted more effectively
than rivals and eliminating some cost-producing activities. Benchmarking can also be
used.
 Strive to operate with exceptionally small corporate staff to keep administration costs to
a minimum.

2. Broad differentiation strategy

 Seeking to differentiate the company’s product or service from rivals in ways that will
appeal to a broad spectrum of buyers.
 Differentiation strategies are attractive whenever buyers’ needs and preferences are too
diverse to be fully satisfied by standardised products and services.
 Companies can pursue differentiation from many angles: i.e.: Multiple features (Microsoft
Windows); Engineering design or performance (BMW and Merc); quality manufacturing
(Michelin tyres).

Focused Strategies:
Defined by a geographic uniqueness or by special product attributes that appeal to only niche members.
E.g.: History Channel (DSTV), and Porsche (in sports cars).

3. Focused low-cost strategy

 Concentrating on a narrow buyer segment (or market niches) and outperforming rivals
by having lower costs than rivals and thus being able to serve niche members at a lower
price.
 Difference between a low-cost provider strategy and a focused low-cost strategy is the
size of the buyer group to which the company is appealing.

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4. Focused differentiation strategy
 Concentrating on a narrow buyer segment (or market niche) and outperforming rivals by
offering niche members customized attributes that meet their tastes and requirements
better than rivals’ products.
 Most markets contain a buyer segment willing to pay a price premium for the very finest
items available, thus opening the strategic window for some competitors to pursue
differentiation-based focused strategies aimed at the very top of the market pyramid.
 For example, companies like Chanel, Gucci and Louis Vuitton employ successful focused
differentiation strategies targeted at affluent buyers wanting products/services with world-
class attributes.

5. Best-cost provider strategy (e.g.: Toyota’s Lexus)

 Giving customers more value for the money by satisfying buyers’ expectations on key
quality features/performance/service attributes while beating their price expectations.
 This is a hybrid strategy that blends elements of low-cost provider and differentiation
strategies; the aim is to have the lowest (best) costs and price among sellers offering
products with comparable differentiating attributes.
 Middle ground between pursuing a low-cost advantage and a differentiation advantage,
and between appealing to the broad market as a whole and a narrow market niche.
 Essence of a best-cost provider strategy is giving customers more value for their money
by satisfying buyer desires and charging a lower price for these attributes compared to
rivals.

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STRATEGIC POSITION AND ENVIRONMENT

Important tools for auditing the overall strategic position of the entity and its environment include:
SWOT analysis, PESTEL analysis and Porter’s Five Forces.

SWOT ANALYSIS

A scan of the internal and external environment is an important part of the strategic planning process.
Environmental factors internal to the entity usually can be classified as strengths (S) or weaknesses
(W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis
of the strategic environment is referred to as a SWOT analysis.
SWOT analysis provides information that is helpful in matching the entity’s resources and capabilities
to the competitive environment in which it operates.

The essence of SWOT analysis is to discover:

 What the entity does well in?

 How could it improve?
 Whether it is making the most of the opportunities around?
 Whether they are any changes in the environment which may require corresponding changes in
business strategy?

The choice of strategy is always bounded by what is legal, by what complies with government policies
and regulatory requirements, by what is socially acceptable, and by what constitutes community
citizenship. A strategy needs to be crafted to capture some or all of the entity’s best opportunities,
especially the ones that can enhance its long-term competitive position and profitability. Likewise, a
strategy should be geared to provide a good defense against external threats to the entity’s well-being
and future performance. Management should build a strategy around what the entity does well and avoid
strategies whose success depends heavily on something the entity does poorly in or has never done
before – strategy must be well-matched to company strengths and weaknesses. Pursuing an opportunity
without the entity’s competence and resources to capture it is foolish. An entity’s strengths make some
opportunities and strategies attractive; likewise, its internal weaknesses and its present competitive
market position make certain strategies risky or even out of the question.

From a strategy-making perspective, strengths are significant because they can be the cornerstone of
strategy and the basis on which to build a competitive advantage. A strategy should be grounded on the
company’s best skills and market strengths. At the same time, a good strategy needs to aim at correcting
weaknesses that make the company vulnerable or that disqualify it from pursuing an attractive
opportunity. Identifying opportunities and threats is important not only because they affect the
attractiveness of the company’s situation but also because they drive the formation of business-level
strategy. To be adequately matched to an entity’s situation, a strategy must (1) be aimed at pursuing
opportunities best suited to the entity’s capabilities and (2) provide a defense against external threats.
SWOT analysis is more than just a list – it is essential to evaluate the strengths, weaknesses,
opportunities and threats in terms of what conclusions can be drawn about the entity’s situation and
what their implications are.

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Some pertinent strategy-making questions to consider once the SWOT listings have been compiled
are:
 Does the entity have internal strengths to build an attractive strategy around?
 Does the entity’s weaknesses make it competitively vulnerable or do they disqualify the entity
from pursuing certain opportunities? Which weaknesses does the strategy need to correct?
 Which opportunities does the entity have skills and resources to pursue with a real chance of
success?
 What threats should management be worried most about, and what strategic moves does
management need to consider in formulating good defense?

ARE THE COMPANY’S COSTS AND PRICES COMPETITIVE?

One of the most telling signs of whether a company’s business position is strong or precarious is whether
its prices and costs are competitive with industry rivals. Two analytical tools are particularly useful in
determining whether a company’s prices and costs are competitive:

1. Company value chains

 The various activities that a company performs internally combine to form a value
chain.
 The value chain consists of the primary activities (creating value for customers) and the
support activities (facilitate and enhance the performance of the primary activities).

2. Benchmarking
 Entails comparing how different companies perform various value chain activities (i.e.:
how materials are purchased, how customers’ orders are filled, how maintenance is
performed).
 Objectives of benchmarking are to identify the best practices in performing an activity
and to emulate those best practices.

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EVALUATING A COMPANY’S EXTERNAL ENVIRONMENT

PESTEL ANALYSIS
A scan of the external macro-environment (environmental factors) in which the entity operates can be
expressed in terms of the following factors: Political, Economic, Social, Technological, Environmental
and Legal. This technique monitors the trends and conditions that could eventually impact the industry.

The purpose of the PESTEL analysis is to raise the consciousness of potential developments that could
have an impact on the industry and pose new opportunities or threats. Identifying PESTEL influences is
a useful way of summarising the external environment in which an entity operates. However, it must be
followed up by a consideration of how an entity should respond to these issues.

The PESTEL factors combined with external micro-environmental factors can be classified as
opportunities and threats in a SWOT analysis (see above).

Political: Includes government regulations under which the entity must operate. Some examples
include:
• Taxes, policies, trade restrictions, laws and regulations, political stability etc.

Economic: Affect the purchasing power of potential customers and the entity’s cost of capital. Some
examples include:
• Economic growth; interest rates; exchange rates; inflation rate.

Social: Include demographic and cultural aspects of the external macro-environment. These factors
affect customer needs and the size of the potential markets. Some examples include:
• Health consciousness; population growth rate; age distribution; career attitudes;
emphasis on safety; demographics; lifestyle changes (e.g.: single households).

Technological: Can lower barriers to entry, reduce minimum efficient production levels and influence
outsourcing decisions. Some examples include:
• Research and development activity; automation; technological incentives; rate of
technological change.

Environmental: Impact of the natural environment on the entity and vice-versa. Some examples
include:
• Weather, climate change, pollution, sustainability.

Legal: Includes laws and regulations under which the entity must operate. Some examples include:
• Laws, regulations and changes thereof.

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PORTER’S FIVE FORCES

An industry is a group of entities that market products/services which are close substitutes for each
other. Some industries are more profitable than others – WHY? The answer lies in understanding the
dynamics of competitive structure in an industry. Managers cannot devise a successful strategy without
insight into the industry’s unique set of competitive characteristics.

Even though competitive pressures in one industry are never precisely the same as in another, how
competition works from industry to industry is similar enough to use a common analytical model. The
most influential analytical model for assessing the nature of competition in an industry is Michael Porter’s
Five Forces Model.

Porter explains that there are five forces that determine industry attractiveness and long-run industry
profitability. These five forces are:
 The threat of entry of new entrants (competitors)
 The threat of substitutes
 The bargaining power of customers (buyers)
 The bargaining power of suppliers
 The degree of rivalry between existing competitors

Threat of new entrants:

If new entrants move into an industry they will gain market share, the rivalry will accelerate, and profits
will decline. If it is difficult to enter an industry the position of existing firms will be strengthened.
Impediments to entry of new firms are known as barriers to entry. The threat of new entrants largely
depends on the barriers to entry. High entry barriers exist in some industries (e.g.: shipbuilding) whereas
in other industries are very easy to enter (e.g.: estate agency, restaurants). Key barriers to entry include:
• Economies of scale; regulatory & legal restrictions; customer switching costs; the likelihood of
retaliation from existing industry players; access to raw materials and distribution channels.;
capital requirements; inability to gain access to technology and specialized know-how.

Threat of substitutes:

The presence of substitute products can lower industry attractiveness and profitability because they limit
price levels. If there is a threat from a rival product, the firm will have to improve the performance of their
products by reducing costs and prices and differentiation. The threat of substitute products depends on:
• Buyers’ willingness to substitute; relative price and performance of substitutes; customers’
loyalty; cost of switching to substitutes.

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Bargaining power of customers (buyers):

Customers are the people/organizations who create demand in the industry. The bargaining power of
customers is greater when:
• There are few dominant customers/buyers and many sellers in the industry
• Products are standardised
• Customers threaten to integrate backwards into the industry.

Bargaining power of suppliers:

Suppliers are the entities that supply materials, labour and components to the industry. The cost of items
bought from suppliers can have a significant impact on the entity’s profitability. If suppliers have high
bargaining power over an entity, then in theory the entity’s industry is less attractive. The bargaining
power of suppliers will be high when:
• There are many buyers and few suppliers
• There are undifferentiated, highly valued products
• The resource they supply is scarce
• Cost of switching to an alternative supplier is high
• Suppliers threaten to integrate forward into the industry (e.g.: brand manufacturers threatening
to set up their own retail outlets).

Rivalry:

The intensity of rivalry between competitors in an industry will depend on:

• The structure of competition e.g.: rivalry is more intense where there are many small or equally
sized competitors. Rivalry is less when an industry has a clear market leader.
• Rivalry is usually stronger when demand for the product is growing slowly.
• The structure of industry costs e.g.: industries with high fixed costs encourage competitors to fill
unused capacity by price cutting.
• Degree of differentiation: Industries where products are commodities e.g.: steel and coal have
greater rivalry. Industries where competitors can differentiate have less rivalry.
• Switching costs: the rivalry is reduced where buyers have high switching costs e.g.: there is a
significant cost associated with the decision to buy a product from an alternative supplier.
• Strategic objectives: when competitors are pursuing aggressive growth strategies, the rivalry is
more intense (i.e.: price cuts or other competitive weapons to boost unit volume).
• Exit barriers: when barriers to leaving an industry are high (e.g.: the cost of closing down
factories) then competitors tend to exhibit greater rivalry.

The collective strength of the Five Forces determines the entity’s profitability. The stronger the forces,
the less likely an entity will be profitable in the long run. Knowing the forces and how they impact the
industry enables managers to decide on their strategy.

Having analysed the forces operating in the market, managers can seize opportunities, counter threats,
build barriers to entry, seek to increase power in relation to buyers of sellers, improve the entity’s position
in relation to competitors and analyse and develop strategies.

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ADDITIONAL INFORMATION

It is vital that decision-makers are clear about the entity’s strategy since it forms the basis of all other
decisions. These statements aim to communicate the strategy of the entity not only to managers and
employees, but also to all other stakeholders. The generic strategy followed by a strategic business unit
must be very apparent and flow from the mission statement all the way through to the objectives of an
entity. The entity’s strategy ought to be ethical. Every entity has duties to its stakeholders (Internal,
connected and external). These stakeholders hold certain expectations as to what the entity should do
and how it should do it; each affects the entity and is affected by it. For an entity to display consistently
high ethical standards, the CEO and those around the CEO must be openly and unequivocally
committed to ethical conduct.

Stakeholders can be defined as, a person, group, organization, or system that affects or can be
affected by an entity's actions. Stakeholders can be identified as:

 Internal stakeholders (employees, management etc.)

 External stakeholders (communities, government, pressure groups etc.)
 Connected stakeholders (customers, suppliers, trade unions, financiers etc.)

When determining an entity’s objectives and strategies, management must consider the impact it
would have on the various stakeholders. When assessing the impact of strategies and objectives on
an entity the following is assessed and classified as high or low:

- The power of the stakeholder to influence/change the objective, strategy and

- The interest of the stakeholder in the strategy or objective (to what extent are they impacted by
the decision).

The process of managing strategy is ongoing – nothing is final, and all prior actions are subject
to modification.

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 QUESTION
BANK
Please take note that module questions (as below) were set in prior years.
Therefore, the external and internal business environment has changed
for these companies and industries. These questions are provided, not
based on completeness in the current situation/environment, but rather
as guidance on how to tackle questions and how to document succinctly.

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QUESTION 1 – PREVIOUS ASSESSMENT (20 MARKS)

Let the bun fight begin

In the red and yellow corner, we have the seasoned opponent, McDonald’s, which has been in the
country for nearly 20 years. In the red and blue corner, we have newcomer Burger King, making its
debut on South African soil. The business rivalry between the world’s two largest hamburger makers is
well known.

Burger King South Africa chief executive Jaye Sinclair shows no sign about concern about arriving after
McDonald’s and is confident the brand will take off. Sinclair says this is the right time to break into the
local market.

The company expects to create 5 000 jobs in the first five years. “We have a big enough middle class
to support a brand like Burger King,” Sinclair says. While the local market seems saturated with fast-
food outlets, Sinclair says: “We believe there is a lot of growth in the market and that our offering will
find a lot of traction.”

McDonald’s corporate affairs director Sechaba Motsieloa doesn’t appear to be moved by Burger King’s
arrival. “Everyone has to fight for their place and their own share of the market. We’re at an advantage
because we have a 19-year headstart,” he says.

McDonald’s has 177 outlets in the country and serves 7 million people a month. This has given
consumers the chance to grow accustomed to what McDonald’s has on offer. People know they can
walk into any McDonald’s – whether in Cape Town or New York – and have the same experience.
“That’s what it means to be a global entity,” says Motsieloa.

But Burger King also has some impressive statistics. Burger King Worldwide president José Cil, who is
in Cape Town, says: “Our flame-grilling heritage and our obsession with delivering great-tasting, high-
quality and freshly made products set us apart.” One of the other things that sets Burger King apart is
that it has forgone Coca-Cola, opting instead for Pepsi-Cola. And patrons will be offered bottomless
cooldrinks with their meals. Burger King is halaal certified and therefore the bacon Whopper will be
missing from its South African menu.

While it is the flame-grilled beef patty that is the most popular item on the menu, South Africans want
chicken. A variety of chicken, fish and vegetarian options have been included on the menu. The new kid
on the block will not have any impact on the tried-and-tested McDonald’s menu. Motsieloa says the Big
Mac, quarter pounder with cheese, McFeast deluxe and the grilled chicken fold-over are among the
most popular items on its menu.

The fact that customers know what to expect, the consistency in service and the quality of food are what
keep people coming back. “We’re quite comfortable with our success. Wherever we’ve opened
operations it has been successful, and we don’t expect it to be any different now,” says Motsieloa.

What Burger King may lack in its local footprint, it makes up in the restaurant experience.

Sources (adapted): [Link]

1.1512979#.VMnP7V4cQ88 and
[Link]

19
QUESTION 1 – PREVIOUS ASSESSMENT (Continued)

REQUIRED:

a) Explain (based on the scenario and what you know about the company) what generic business
strategy McDonalds is following. (3)

b) Perform a Porter’s Five Forces pertaining to McDonalds South Africa. (7)

c) List with examples, some of the key initiatives you would expect McDonalds South Africa to have
in place to ensure business sustainability; as well as possible measures to compete with Burger
King South Africa. (10)

20
QUESTION 1 – PREVIOUS ASSESSMENT (SUGGESTED SOLUTION)
(20 MARKS)
a).
Low-cost provider strategy (1)
- McDonalds is striving to achieve lower overall costs compared to its rivals (1) while also
appealing to a broad spectrum of customers (1), given that it offers a wide variety of burgers:
fish, beef, chicken and vegetarian. (1)
- McDonalds provides similar products to its competitors but at a lower price (1).
- McDonalds’ customers are mostly price-sensitive (1) (students, families where eating out is
expensive etc.) (1)
- Customers make their purchasing decisions based on price and convenience. (1).
- Furthermore, McDonalds has modern and technologically advanced equipment in its restaurants
to make sure that it keeps costs as low as possible. (1)
MAX 3

b).
Rivalry in the industry
- The fast food industry is highly competitive as there are many competitors. (1) i.e.: KFC, Burger
King, Nandos, Steers and Wimpy (1) (and these only relate to the burger industry) and the fast
food market is a growing industry (1), this increases rivalry, as new franchises are opened in
competing areas.
- McDonalds has a strong brand presence given that it is well established and have been in the
South African market for a while, which reduces the threat of rivalry. (1)

Bargaining power of customers

- Customer loyalty isn’t present in this industry (1) as customers make their purchasing decisions
based on price and convenience. (1) This means that the customer has the purchasing power.
(1)
- The counter argument is that there are so many customers in this market. Therefore, they have
little bargaining power over McDonalds. (1)

Bargaining power of suppliers

- Limited threat of suppliers integrating forwards; given that McDonalds has a very strong brand
presence and would be difficult to compete at the same level. (1)
- The bargaining power of suppliers would be limited as McDonalds is such a big player. (1)

Threat of substitutes
- There are no switching costs for customers and various substitutes’ available (competitors)
thereby creating a threat of customers switching to alternatives. (1)

Threat of new entrants

- Barriers to entry are low for the fast food industry, and therefore there is always a new competitor
in the horizon. (1)
MAX 7

21
QUESTION 1 – PREVIOUS ASSESSMENT (Suggested Solution - Continued)

c).
1. Human capital asset
 Send employees on training programmes (1). For example: These training programmes could range
from on-the-job training for new recruits to college-level management courses for more senior
employees. Employees could also be trained on how to monitor food, labour and utility costs (1).
 Appropriate reward structures (1). For example: There should be suitable reward structures for all
levels of employees and appropriate KPIs put in place. Therefore, employees should only be
remunerated on what they can control (1).
 Detailed succession planning at all levels (1).

2. Water and waste management

 McDonalds could have JOJO tanks at all their branches, given that water is a scarce resource in
South Africa. This water could be used for washing dishes etc. (1).
 All McDonald’s materials (cool drink containers and food containers) should be recyclable. (1).

3. Energy consumption
 Installation of solar panels and low energy switches at all branches (1)/also useful for business
continuity as less reliance is placed on the South African power supply (1).

4. Corporate social programmes

 Support communities through social initiative programmes. I.e.: when people purchase food a certain
amount is donated to charity. (1).
 Creating awareness of HIV amongst staff by encouraging employees to know their status. (1).

5. Supply chain management

 Use of economic order quantities to optimise supplier and McDonald’s profitability (1).
 Use of at least two suppliers for each material item required (1).

6. Production process improvement

 Use of total quality management tools such as JIT (1).
 Identification of bottlenecks (1).
 On-going evaluation of new and emerging production processes and raw materials that can improve
what McDonald’s is currently doing. (1).

7. Asset management
 Pre-emptive maintenance programmes on all machinery and equipment at McDonald’s branches (1).
 Operator training programmes (1).

22
QUESTION 1 – PREVIOUS ASSESSMENT (Suggested Solution - Continued)

8. Existing customers and to create new customers

 Measuring and monitoring the extent of customer satisfaction (1). E.g. send out customer marketing
surveys in each branch. (1)
 Identification of new menu ideas that satisfy existing customer needs (1). Offering of a wide menu
and a variety of beverage choices. Have healthy choices (salads, grilled chicken, smoothies) on the
menu, in addition to their popular food items (Big Mac and Quarter Pounder). Add drinks and food
options such as cappuccinos, espressos, lattes and Halaal/Kosher options to attract another market.
(1).
 Expansion of dining opportunities: Extend the traditional dining hours, as well as the drive-through
hours in the popular locations. (1).
 Affordable pricing. McDonalds could try keep costs as low as possible by closely scrutinizing
administrative costs and other corporate expenses. Could also implement supplier monitoring
programmes to ensure that its suppliers are the most competitive. (1).
MAX 10

23
QUESTION 2 (PREVIOUS ASSESSMENT) (20 MARKS)

Apple is an American multinational technology company headquartered in California, that designs,

develops, and sells consumer electronics, computer software, and online services. The
company’s hardware products include the iPhone smartphone, the iPad tablet computer,
the Mac personal computer, the iPod portable media player, the Apple Watch smartwatch, and
the Apple TV digital media player. Apple's consumer software includes the macOS and iOS operating
systems, the iTunes media player, the Safari web browser, and the iLife and iWork creativity and
productivity suites.

Apple was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in April 1976 to develop and sell
personal computers. It was incorporated as Apple Computer, Inc. in January 1977, and was renamed
as Apple Inc. in January 2007 to reflect its shifted focus toward consumer electronics. Apple
(NASDAQ: AAPL) joined the Dow Jones Industrial Average in March 2015. Apple is the world's largest
information technology company by revenue, the world's largest technology company by total assets
and the world's second-largest mobile phone manufacturer.

The company enjoys a high level of brand loyalty and, according to Interbrand's annual Best Global
Brands report, has been the world's most valuable brand for 4 years in a row with a valuation in 2016 of
$178.1 billion. Apple has a limited distribution network because of the company’s policy of exclusivity.
For instance, the company carefully selects authorized sellers of its products. Apple has a premium
pricing strategy, where most of its sales revenue is from the high-end market. Furthermore, the company
must still penetrate markets, especially developing countries where Apple’s market reach is still limited.

The company, similarly to its competitors is known for its rapid innovation to keep abreast with the latest
technologies. This is encapsulated in Apple’s vision statement as set out below:

APPLES VISSION STATEMENT

“We believe that we are on the face of the earth to make great products and that’s not changing.
We are constantly focusing on innovating. We believe in the simple not the complex. We believe
that we need to own and control the primary technologies behind the products that we make,
and participate only in markets where we can make a significant contribution. We believe in
saying no to thousands of projects, so that we can really focus on the few that are truly important
and meaningful to us. We believe in deep collaboration and cross-pollination of our groups,
which allow us to innovate in a way that others cannot. And frankly, we don’t settle for anything
less than excellence in every group in the company, and we have the self- honesty to admit
when we’re wrong and the courage to change.”

Sources (adapted): [Link] [Link]

analysis-recommendations; and [Link]

REQUIRED:
a) In your opinion what is Apple’s dominant generic competitive business strategy? Briefly motivate
your answer. (3)
b) Discuss the most notable strengths, weaknesses, opportunities and threats of Apple based on the
information in the question and your knowledge of the company. (12)
c) With regards to a PESTEL analysis, discuss only certain Economic, Social and
Environmental/Ecological aspects that may impact Apple. (5)

24
QUESTION 2 (PREVIOUS ASSESSMENT) Suggested Solution (20 MARKS)

Note to markers: Students will not necessarily come to the same points as the memo. Therefore,
award marks based on students’ insightfulness and their knowledge of Apple, as long as it is relevant.

a) Source (adapted): [Link]

 Apple’s dominant generic strategy is broad differentiation (1)

 This is applicable when a company seeks to differentiate itself from its rivals, by appealing
to a broad spectrum of the market (1).
 For example, this is applied by Apple as follows: the company’s emphasis is on elegant
design (1) combined with user-friendliness (1), and high-end branding by differentiating the
company (1).
 Furthermore, Apple’s products are designed for everyone, thereby supporting a broad
market reach (1). For example, Apple reaches individuals and business organizations
through the MacBook product line but also the younger generations through the iPod
portable media player etc. (1)
 In this way, the generic strategy of broad differentiation supports the company in maintaining
its leadership and position as a high-end and high-value business. (1)

Or:
 A student could also argue a focused differentiation strategy (1).
 For example, Apple is a niche brand where revenue is mainly derived from limited to the
high-end market (1).
 Furthermore, the company has a limited distribution network and has a policy of exclusivity,
and therefore focuses on a narrow segment of the market. (1).
[Max 3]

b) Source (adapted): [Link]

Note to markers:
 Students can only obtain marks for a SWOT analysis is they have applied the relevant
strength/weakness/opportunity/threat to Apple. Therefore, merely stating “it is the strongest
brand in the world” is not sufficient for a mark.
 As above, students may come up with additional points not in the memo, please award
marks accordingly, based on students’ insightfulness and their knowledge of Apple, as long
as it is relevant

The SWOT analysis identifies the biggest strengths that enable the company to withstand threats in its
business environment. These threats can reduce business performance. In Apple’s case, the following
are the most notable organizational STRENTHS:

 Apple is one of the most valuable and strongest brands in the world. This shows that the
company is capable of introducing profitable, quality products by virtue of its strong brand
image (1).
 Apple maintains its premium pricing strategy, which comes with high profit margins. This
is a major strength because it creates flexibility for the firm to adjust prices while ensuring
significant profits (1).
 Apple is known for rapid innovation based on the company’s intensive growth strategies.
(1). Rapid innovation enables the firm to keep abreast with the latest technologies to ensure
competitive advantage. (1).

25
QUESTION 2 (PREVIOUS ASSESSMENT) Suggested Solution (Continued)

 Continued leadership in the industry, as it continues to keep up with consumer tastes and
preferences. (1).
 Apple’s wide product range allows it to service various markets, e.g professionals, youth,
organisations, etc. and stimulate growth. (1)
 Apple has diversified income streams given its wide product offering and is therefore not
reliant on one product range. (1)
 Apple operates in nearly all of the developed countries, thus ensuring good returns from
various international markets. (1)
 Apple’s headquarters is located in the tech-hub of the world (California) which gives ready
access to skilled labour, infrastructure to support its business model and vision. (1)
 As one of the largest companies in the world, Apple has access to vast resources
(economies of scale) that will allow it to take advantage of new expansion
opportunities/technologies. (1)
 As one of the market leaders in the sector, Apple can dictate trends, set prices and overall
influence (economies of scale) the market for its own benefit. (1)

Weaknesses can serve as obstacles to business growth. In Apple’s case, the following organizational
weaknesses are the most notable:

 Limited distribution network: This shows that such an exclusive strategy supports control
over the distribution of products, but limits the company’s market reach/growth prospects.
(1)
 Premium pricing strategy: This would mean that its sales are limited to the high-end
market (middle to upper classes). (1).
 High selling prices/premium pricing strategy: Because of the premium pricing strategy,
the majority of consumers are unable to purchase Apple products because of the relatively
high prices. (1). Customers from the lower class, which represents the majority of buyers in
the global market. (1).

Opportunities influence the strategic direction of business organizations. In Apple’s case, the following
are the most significant opportunities in its business environment:

 Distribution network expansion: An expanded distribution network can help the firm reach
more customers in the global market. (1).
 Rising demand for tablets and smartphones: This is an industry that is always developing
and therefore have an opportunity to evolve their current tablets and smartphones. (1).
 Creation of new product lines: Apple has the opportunity to explore new product lines. Its
current product lines are highly successful. (1). Award mark for examples (1).
 The emergence of developing countries may create new avenues/markets for Apple to
grow its business. (1)

26
QUESTION 2 (PREVIOUS ASSESSMENT) Suggested Solution (Continued)

Threats can limit or reduce the financial performance of companies. In Apple’s case, the following
threats are the most significant:

 Competition: Apple competes with firms like Samsung, which also uses rapid innovation
(1). Therefore, consumers can easily switch to competitors brands if they are more
innovative as such Apple has to maintain its competitive advantage. (1)
 As a premium priced company, Apple may find itself harder hit by economic downswings,
e.g. recessions. (1)
 Imitation: This threat is significant because of the large number of firms that can easily
imitate Apple’s products (1).
[Max 11]
[Available 24]

Communication & layout: (1). [Total 12]

c) Source (adapted) [Link]

Note to markers: Students do not need to know if the economic/social or environmental factor is
an opportunity or threat in order to obtain the mark.

Economic external factors:

 Stable economies of developed countries (opportunity): The economic stability of most

developed countries creates opportunities for companies like Apple to expand their
businesses. (1)
 Rapid growth of developing countries (opportunity): The rapid growth of developing
countries is more significant. For instance, the high economic growth rates of Asian/African
countries are major opportunities for Apple to increase revenues through sales in these
foreign markets. (1)
 A period of recession in one of their major operating developed countries could severely
decrease their profits (threat). (1)
 Individuals from countries that have a weak currency compared to the USD, may struggle
to purchase Apple products, due to dollar linked products (threat). (1)

27
QUESTION 2 (PREVIOUS ASSESSMENT) Suggested Solution (Continued)

Social external factors:

 Rising use of mobile access (opportunity): The trend of the increasing popularity of
mobile access is an opportunity for Apple to continue providing easy-to-use mobile devices.
The firm has already taken steps to exploit this opportunity, such as through the iPhone,
iPad, and Apple Watch. (1)
 Rising use of social media (opportunity): The rising use of social media is also an
opportunity because it increases demand for digital devices like Apple products. (1)
 Rising use of technology (opportunity): The use of different technological products will
continue to increase, and therefore Apple always has opportunities to be innovative. (1)
 Change in demographics (opportunity): Children are starting to use technologies at a
younger age, and therefore this is an opportunity to seize (1).

Environmental/Ecological external factors

 Business sustainability (opportunity): Apple will need to continually address this through
recycling and related programs. (1). In addition the company would need to continually seek
new technological solutions to improve the energy efficiency of Apple products (1) i.e.:
improved batteries (1); components that emit less heat. (1); how to dispose of broken
devices (1).
 As an innovative technology company, Apple, will need to be at the forefront of sustainable
technological solutions through, e.g. sustainable packaging, environmentally friendly power
sources. (1)
[Max 5]
[Available]

28
QUESTION 3 – PREVIOUS QUESTION

PART A (9 Marks)

Tiger Brands, the South African food giant at the centre of the listeriosis storm engulfing the
country, is facing serious brand erosion as a result of the way it handled the unfolding crisis.
Most people believe Tiger Brands could have responded better to the listeriosis crisis.

Tiger Brands was thrown into the centre of the listeriosis storm after South Africa’s National
Institute for Communicable Diseases announced that its investigation had traced the origins of
the disease to one of the company’s biggest meat processing plants. The culprit was identified as
polony from the Enterprise Foods facility that produces a range of cold meats.

Tiger Brands, a $2.5 billion Johannesburg Stock Exchange-listed business, owns Enterprise
Foods among other continent-wide popular food brands. South Africa has been struggling with
the listeriosis outbreak for 14 months. Unable to find the source of the affected products, the
outbreak developed into the worst case of listeriosis in the world. By the end of February 2018,
health authorities had confirmed 948 cases with 180 fatalities.

The repercussion was always going to be unforgiving. But Tiger Brands has not helped the
situation. It has overlooked a number of the accepted protocols of handling a crisis of this nature.
As a result, the company’s brand equity is taking serious strain.

Tiger Brands compromised its brand equity in three key areas.

Response speed: An organisation’s survival in a crisis, particularly when lives are at risk,
depends enormously on the speed of its responses. Tiger Brands could have been more rapid in
its responses. The source of the listeriosis outbreak was announced by South Africa’s Health
Minister, Aaron Motsoaledi, at midday on Sunday 4 March 2018. He announced that Tiger Brands
had been issued with safety recall notices. But the company only held a media briefing a day
later. Given that the minister would have given the company advanced warning (even before the
official media briefing), its response was far too slow.

Continued strategic engagement: Since the media conference, the company has engaged in
very limited meaningful communication that would have helped it reclaim some brand equity.
Organisations need to understand that in a crisis, they are competing with every form of media –
including social media – to tell their story. If organisations do not keep engaging with stakeholders,
others in the media fill the vacuum. It also leaves the door wide open for speculation and
insinuation. The lack of engagement inevitably raises concerns about how transparent the
company has been in handling this crisis.

Compassion: In its limited communication Tiger Brands failed to show compassion – an essential
ingredient for navigating a crisis of this magnitude. Unless the organisation acknowledges how its
audience is feeling, which Tiger Brands failed to do, any organisation in crisis is fighting an uphill
battle. The company’s lack of compassion meant that the company came across as cold and
unsympathetic. By showing compassion, an organisation creates a bond and puts audiences in
a receptive state, key components to any successful communication.

29
QUESTION 3 – PREVIOUS QUESTION (Continued)

Tiger Brands will be remembered for trying to deny responsibility and refusing to apologise. This
impression was created by ill-advised comments made by the company’s CEO Lawrence
MacDougall when he was grilled by journalists. In one response he said: “There has been no
direct correlation between our products and the deaths yet, so we are unaware of any direct link”.

The fact that the crisis had led to 180 deaths called for a dose of compassion, not a defensive
response.

What now for Tiger Brands?

Tiger Brands will have to embark on serious brand rehab. To achieve that it will have to be totally
transparent in the management of the crisis, engage strategically with stakeholders and be
mindful of the tone of its engagement. The company will have to become more visible and must
be seen to be a critical part of solutions.

But it’s also important to point out that the listeriosis crisis goes beyond Tiger Brands. It isn’t just
a crisis for the company. The outbreak has had a major impact on food outlets – big and small –
in the country. It has also affected companies and consumers beyond South Africa’s borders, so
much so that the crisis could do long-lasting damage to the country’s cold meats industry.

All stakeholders related to the listeriosis crisis, including the South African government, the
National Institute for Communicable Diseases and the processed meat industry, should step away
from trying to face the crisis on their own. They should also stop trying to shift responsibility.
Instead, they should think of working together.

This calls for a completely different approach to brand rehab after a crisis. It calls for a systems
approach that envisages all the affected parties understanding that they are interconnected. In a
cooperative, integrated system like this, the equity of the one organisation’s brand is linked with
the equity of other brands and institutions in the system.

South Africa needs to take a more collective approach if it’s going to deal with the crisis effectively.

Source: Struwig, I. (2018). Three major mistakes Tiger Brands made in response to the
listeriosis crisis. Available at: [Link]
made-in-response-to-the-listeriosis-crisis-93210.

REQUIRED MARKS

PART A

(a) Discuss the influence key stakeholders may pose on Tiger Brands subsequent
to the listeriosis outbreak and the recall of certain of their processed meat (9)
products.

30
QUESTION 3 – PREVIOUS QUESTION (Continued)
SUGGESTED SOLUTION (9 MARKS)
a)

Layout: Mark awarded for student identifying different stakeholders (for example as set out
below), or firstly writing in a paragraph who the key stakeholders are.
(1).

Consumers:
- Will consumers be able to trust the brand again after the recall of certain products (1).
Consumers may therefore move to other competitors or avoid certain processed
products completely (1)
- Lawsuits/claims against the company as a result of listeriosis illnesses or fatalities (1).

Government:
- Government may enforce more stringent controls (1) and stricter health regulations
(1) to ensure food safety, especially given that many South Africans rely on processed
meat as a source of protein.

Customers (retailers):
- Given that consumer safety was in jeopardy, retailers may withdraw certain processed
meat products from their shelves permanently (1).

Companies and consumers (Beyond South Africa’s borders):

- Government from other countries may enforce stricter/more export regulations in
terms of food exports from South Africa (1), and this may have long lasting damage
to the country’s cold meat industry in terms of export sales (1).
Employees/Unions:

- The closing down of the production facilities (Polokwane, Germiston and Pretoria,
Claville) could impact staff morale (1). Secondly the ceasing production has been
estimated at around R50 million of EBIT, therefore employees’ job security may be in
jeopardy, which could raise concerns for unions (1).

Shareholders:
- The share price plummeted after the recall of certain processed meat products, and
therefore shareholders sold shares in the company, given reputational damage (1).

Any other valid point e.g.: Comments on lenders/banks no longer providing financing; or the
influence of the media on the public.

[Max 9]

31
Assessment 1 (2025) Strategy question (30 marks)

The Klein Karoo is a beautiful, remote area nestled in the middle of the Western Cape province
of South Africa. The Klein Karoo is a breathtaking valley surrounded by mountains. The main
town in the Klein Karoo area is Oudtshoorn. This area is known for the vast number of
ostriches on the farms. The towns in Klein Karoo are sparsely scattered, with very few
restaurants and entertainment facilities. This area is known for its beautiful landscapes and
tranquil environment. The limited internet coverage provides visitors with an opportunity to
escape the urban jungle. The area is very secluded from major cities and thus visitors need to
take a long drive to reach any of these areas. Due to the weather conditions in the Klein Karoo,
there are specific times during the year when the guests are less likely to visit due to rainfall
and flooding.

The Klein Karoo is also known for its cottages, small cabins and villas which are available for
any visitors. The hospitality industry in the Klein Karoo is different to the hospitality industry in
major cities. Major cities have many hotels that are part of the Tsogo Sun Group or Sun
International. These major companies pride themselves on the sophistication and image that
their brands portray. The hospitality industry in the Klein Karoo aims to provide a more
personal experience by providing a more unique environment and ensuring that the space is
occupied by fewer people, which results in less disturbance and people enjoying the tranquility
of the area. The Klein Karoo also has less light and noise pollution due to the lower population,
which allows visitors to enjoy experiences such as stargazing.

The Star Gazer Villa is a family-owned business in the Klein Karoo that offers four-star
accommodation to visitors in the area. The villa has been around for generations. The
business is currently owned by the Fourie brothers, Piet and Johan. Piet is the elder brother
and took over the villa from their parents when he turned 18. Johan has a degree in business
management and tourism. Johan had a bigger vision for the villa. Johan wanted to convert the
villa into Klein Karoo’s first 5-star hotel. He wanted to emulate the image of Tsogo Sun or Sun
International as he felt this would be a first for the area. Johan felt that this would be the ideal
strategy for their villa to move with the trends of the hospitality industry. After obtaining
quotations in terms of the conversion they decided that the cost outweighed the benefit of
converting the villa at that specific point in time a few years ago.
The following can be found on the Star Gazer Villa website:

About us:
The Star Gazer Villa is a scenic and exclusive villa located in the Klein Karoo. Our beautiful
villa offers privacy and seclusion to those who need a break from reality. Visitors can
experience the quiet charm and beauty of the countryside in South Africa. Enveloped by
various mountain ranges, we provide a unique experience that is second to none.
Some of the unique activities we have on offer:
- Stargazing
- Marshmallow roasting around a campfire
- Hikes
- Boat cruise at the river
- Personal villa kitchen

Our mission:
Our mission is to provide unique and valuable experiences and accommodation for all guests
with a special personalised touch at a reasonable price.

32
Our vision:
Our vision is to be the first choice and gem in terms of accommodation for guests who visit the
Klein Karoo.
Due to the secluded nature of the villa, Star Gazer offers a small, personalised menu for
guests when they arrive. The menu aims to showcase the ingredients which are exclusive to
the specific season and items that are native to the Klein Karoo region.
The following table indicates the ratings which Star Gazer obtained relative to its competitors in
the area (out of 10):

Category Star Gazer rating Competitor

rating
Staff friendliness 9.0 8.5
Range of facilities 8.5 9.0
Cleanliness 9.0 8.0
Comfort 10.0 8.0
Value for money 9.5 8.0
Location 7.0 7.0
Breakfast Not applicable 8.5
included

Before the Covid-19 pandemic hit, the villa had a bigger restaurant on the premises, which
allows customers a wider range of food options. Based on the recent customer reviews, guests
love the villa but hope for more options in terms of food and entertainment. The hospitality
industry in general has seen a period of growth since the pandemic. Hotels are utilising
artificial intelligence to elevate customer experiences and are ensuring that they are
environmentally friendly in terms of the products and services they offer.

Wellness tourism is also on the rise as travelers aim to ensure their health and well-being
remains a priority while on holiday. Post the pandemic, travelers take their work along with
them to ensure that they are able to work on the move.

Based on some initial ratios performed by Piet he confirmed that the villa had the same group
of guests who returned to the villa for holidays, however, it has been a few months since the
villa had any new guests. After discussing his concerns with Johan, they decided to strategise
ways to improve things at the villa. After days of discussions with many stakeholders, they
determined that their top 2 options were the following:

Option 1
- Well-established restaurant: George is a friend of Johan’s from high school and has
invested in a few franchises in the Western Cape. George has invested in fast food chains as
well as sit-down restaurants. After speaking to Johan, George thought about the opportunity of
possibly investing in a Casa Bella restaurant franchise at the Star Gazer villa. Casa Bella is
known for its quality and affordable food, which has a wide variety of options on their menu.
This would be the first Casa Bella in the Klein Karoo area. George was in the process of
looking for a lucrative investment opportunity and he felt that he could assist his good friend
Johan but needed first to do his due diligence in terms of this opportunity.

Option 2
- Creating a Klein Karoo chain of hotels: Piet reached out to the other owners of hotels,
bed and breakfast (B&B) and villas in the Klein Karoo area. Piet wanted to enquire from the
other hotels if they were experiencing the same issue in terms of guest trends. On his way to
speak to each owner, he realised that each hotel, B&B and villa had its own unique twist which
33
 guests would appreciate. For example, the hotel 5 kilometres away from Star Gazer has
entertainment for children in terms of jungle gyms, trampolines and swimming pools. These
were amenities that Star Gazer did not have as their guests were mainly between the ages of
20 and 80, guests doesn’t bring their children with. He came up with the idea of having a
shuttle service that could take guests between the different hotels in the Klein Karoo area so
that guests could enjoy different restaurants and entertainment in various areas. Due to the
various attractions being scattered he felt that a complimentary shuttle service would appeal to
guests.

REQUIRED:
(1) Identify and explain the generic competitive strategy currently in place for Star
Gazer Villa 2

(2) Considering Star Gazer’s current strategy, discuss the advantages and 8
disadvantages of possibly joining forces with other hotels, B&B’s and villas in
the area (Option 2). Your answer should be in the form of a table

Communication mark – Tabular format 1C

(3) In terms of the franchise option proposed by George (Option 1) answer the
following questions:
(a) Identify and evaluate the strengths and opportunities which Star Gazer will 8
utilise in their pitch to George to discuss their current situation and why
George should invest in a franchise for their villa.
(b) Identify and evaluate the weaknesses and threats that George would need to 8
consider before investing in a franchise at the villa.
(4) Based on the two options proposed, which option would you suggest to Piet 3
and Johan based on the ideal strategy that Johan had a few years ago?

TOTAL MARKS 30

34
Assessment 1 (2025) Strategy Memo

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