SUMMATIVE ASSESSMENT 1 (MODULES 1, 2 & 3): MANAGEMENT PRINCIPLES

SECTION C : CASE STUDIES

CASE STUDY 1

ABC company initially supplied businesses with exceptional quality textiles. Later on they started to supply businesses with professional quality uniforms and also sports gear. They provide their customers with quality products and services on time and on budget to enhance the image and performance of their customers' companies.

As the company grew, so did its workforce. From two people in a garage, their wholesale division has grown from servicing a small localised market in Cape Town, to one that today meets the requirements of clients in many other locations throughout South Africa.

The current organisational structure is designed around the different products. Although each manager knows all the other products quite well, they each are responsible for one type of product only: Tim is in charge of the industrial uniform section, Sally overlooks the sportswear section and Heather runs the textile division. All three of them are competent with their section, but Tim for instance would have liked to be more involved in the other sections as well.

To serve its widening markets the business needs flexible and well-trained staff that can recognise the needs of their customers. The employees work in a wide range of roles in both store and non-store functions, such as:

- Customer Assistants on the shop floor either directly assisting customers or preparing orders for delivery to customers who have ordered online.

- Department Managers leading a team of Customer Assistants
- Warehouse employees who help catalogue and store clothing and textiles.
- Office-based staff working in a range of functions at Head Office, including finance, purchasing, personnel or marketing.

- Logistics staff who plan and carry out the distribution of products to stores.

Andy works in Sally's department (sportswear) and manages a small team of customer assistants who must prepare online orders for delivery. He expects them to liaise with the customers before setting up the order, to ensure maximum client satisfaction. As the team members are still new, they lack the necessary experience and are not willing to take on the responsibility of liaising with the customers themselves. Currently this all comes down to Andy, who then does not have sufficient time for his managerial duties. He intends seeking advice in this regard.

Due to the business's great success and customer demand, management have been thinking about establishing an outlet in Durban. They have the opportunity to buy an existing warehouse in Durban for R 1,5 million. The other option is to rather invest an amount of R 800 000 in a new product range.

ABC must make a decision: should they buy the existing clothing retailer or is it better to invest an amount of R 800 000 in a new product range.

They did some investigation into the probability of success and failure of each option, and possible results. With this information at hand, they decided to use a decision tree to help them with this big decision. The estimated outcomes and probabilities are as follows:

They have two options:

A: Buy an existing business for R 1.5 m. B: Invest in new product range R 800 000.

Successful option A will give 20% gain, failed option A will give 10% loss. There is a 40% chance of success and a 60% chance of failure for option A.

Successful option B will give 10% gain, 5% loss. There is a 50% chance of success and a 50% chance of failure for option B.

QUESTIONS: CASE STUDY 1

a. Draw up a decision tree to determine expected values for each option. Use the results to decide which option to choose.

b. Identify the mission of ABC and translate it into at least 3 measurable, long-term goals.

c. Draw up a table or diagram to illustrate ABC business as a system that operates in a specific environment, by identifying:

- inputs from the environment,
- processing of inputs and
- outputs to the environment.

a. What type organisational structure does ABC have currently?

b. What are the disadvantages of this structure for this specific organisation?

c. The organisation has a vision of expanding the business and opening more branches in different areas. Suggest a new structure for the organisation, that would fit in better with their strategy. Motivate your choice.

Use the leadership cycle model to suggest the most effective leadership style for Andy.

CASE STUDY 2

Sportswear

Joe and Jane are customers of ABC's. They own a sportswear retail shop. Their shop is in an area that has changed over the last five years form a once vibrant business and retail hub with three large shopping centres to a business environment focusing nowadays mainly on vehicle maintenance and support services.

The rental cost in the area is very competitive in comparison to other new shopping centres in the vicinity. Various new and exciting shopping centres in the neighbouring suburbs have opened their doors. The business was exceptionally successful, but has experienced an average annual drop in sales of 10% during the past four years.

Joe is convinced that the decline in turnover can be attributed to the drop in customer traffic in the shopping centre. Competitors are opening new stores in other suburbs. There are currently two similar stores who are extremely price competitive and provide a variety of goods at lower prices.

Joe has lowered the prices of their popular products since the beginning of last year. Although sales increased by 15% during the previous year, profit dropped by 5%. During December, two shop owners in the area were gunned down.

QUESTIONS: CASE STUDY 2

i. What external factors are influencing the success and survival of the sportswear shop in the shopping centre?

ii. What factors should they have considered in their strategic planning?

CASE STUDY 3
(From Business Management-a value chain approach by Gideon Nieman and Alf Bennet)

When Eskom had started the shutdown of the Highveld power station in 1958, one of the small towns in the Free State became a ghost town.

The shutdown caused the number of residents to shrink from 2000 to about 463.

Eskom stated that the power station could no longer continue to operate because of the rising labour and maintenance costs.

Question:

a. Explain what changing environmental conditions could have caused the shutdown of the power station.

b. Explain from the viewpoint of a retailer, how environmental conditions caused the town to be closed.

c. How do you think the changes in the environment affected the operations of a vegetable farmer?