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Kuda-turn Around Progamme

Kuda-turn Around Progamme

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Published by kays chapanda
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Published by: kays chapanda on May 21, 2010
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05/25/2010

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MIDLANDS STATE UNIVERSITYFACULTY OF COMMERCEBUSINESS MANAGEMENT DEPARTMENT
Group assignment
Module:
Strategic Management (BM405)
Programme:
Business Management (PDP)
Surnames First namesRegistration numbers
Chapanda Kudakwashe GraciousR0645087Tengende EdinaR0645047Murungu TafadzwaR0645048
QUESTIONEvaluate relevance and adequacy of turnaround strategy as used by anyorganisation of your choice in the hospitality and tourism sector.
 
In Zimbabwe, tourism played a very significant role in the development of the nationaleconomy taking advantage of its most diversified tourism resource base. The contributionof the 0.7% in 1980 to 9.8% in 2007. Notwithstanding natural attractions, very limitedtourism development occurred during the past nine years owing to challenges associatedwith perceived country risk, lack of working capital, inadequate domestic services, anddeteriorating infrastructure.
Turnaround strategies of the Rainbow Tourism Group
RTG wage bill continued to increase from 15% in 2009 to 35% of total costs in February2010 and since 2009 the company only made a profit in May 2009 and a loss of US$742000 was realised in June . Due to continuous increase in operational costs, andcontinuous losses, the company implemented turnaround strategies. The company hasdeveloped strategies to boost tourism, focussing on: (a) destination re-branding; (b)review of our international marketing strategy; (c) development of market-specificmarketing programmes; and (d) targeting the world’s top tourist generating markets.
Cost reduction strategies
According to Robertson (2010), in order to reduce operation cost the company is nowimporting from China and India, Look East where despite the long distances involvedlanding policy costs are 30% lower than local goods. This strategy is feasible since lower operations costs will enable competitive pricing and the company will be able to use themoney to invest in other sectors. Also this strategy will also attract China and Indiatourists into the country.According to www.fingaz.com March 2010, RTG’s wage bill had increased from 15% to32% and to reduce these costs the company retrenched non core staff and contractworkers. This strategy is to a great extent relevant since the company should focus on thecore activities and reduce unnecessary expenses. However some of the staff may beneeded in the future since the company is in the process of expanding its operations.
 
After realizing that one of its small business unit (SBU) Tourism Services Zimbabwe(TSZ), had diverted from focus of operation or core activities, the company reshuffledtop management. Also different lodges were placed under one umbrella management.This strategy is very relevant since it help to reduce unnecessary cost.The company also signed a lease agreement for 182 roomed hotels in Mozambique,Zambia, and South Africa. This was aimed at increasing revenue and capacity of thecompany. The strategy is viable considering the negative publicity of political issues inZimbabwe. Locating in other countries without such negative publicity will attract morevisitors thereby increasing revenue for the company.
Financing strategies
As part of STERP, tourism revival will be prioritised through securing external lines of credit for working capital, rehabilitation of infrastructure and importation of capitalequipment among others. Financing will also benefit from engagement and incentivisingZimbabweans in the Diaspora to make meaningful investment in the tourism sector.The Rainbow Tourism Group (RTG), Zimbabwe’s second largest hospitality concern, hasshifted its funding options to pension funds after encountering muted resistance fromforeign financial institutions skeptical about Zimbabwe’s poor credit rating. TheZimbabwe Stock Exchange-listed group, which reported a US$742 000 loss in the half-year ending June 30 2009, has revived its regional expansion drive after failed attempts to penetrate the Democratic Republic of Congo in 2003. Chipo Mtasa, the group chief executive officer said foreign financial institutions were making restrictive demands before approving proposals from the group, which operates the Rainbow Towers inHarare, in addition to close to a dozen hotels and lodges across Zimbabwe.The primary “wishful thinking” turnaround strategy is the search for conventionalfinancing. When a firm gets into financial trouble, it often seems just a little money willfix the problem. They spend months looking for the funds. When you speak to the CEOand CFO, they are always certain the last financier they met with will come through. But,

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