STRATEGIC MANAGEMENT NAME Tafadzwa Shuvai Beauty Kudakwashe G Honour Edina Question: Create a SWOT map of any organisation of oyur choice and establish alternative strategies to reduce your level of exposure to negatives resulting from your SWOT map. Lecturer Mr. Mhonde

SURNAME REG NO. Murungu Chidume Mahoza Chapanda Mutihero Tengende R0645048 R0645783 R0644950 R0645087 R0541011 R0645047


Due date Introduction


A SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. The company in the discussion is Delta Beverages Zimbabwe. The company is operating in an ever-changing environment which brings strengths, weaknesses, opportunities and threats. SWOT Map for Delta Beverages
Reduction in brain drain Trade liberalizatio n Restoratio n of voting rights IMF

Indigenizatio n Training and developme nt Equipment Technology +2Quality products Low prices Skills Capacity


Land reform

Dollarizati on

Sanction s

0 -

+ + + 0 + + + + + + + + +

0 0 0 0 0 0 0

+ + + + + + + 0 + + + + -

+ 0 + + + + + 0 + + + 0

+ + + + + 0


+ + + + + + + + + + + + +

Integration Multination al Diversificat ion High customer base Access to raw materials


+1( S) +2( S) +3( S) +2( S) +1( S) +1( S) 0 2(W ) +2( S) 0 0 +2( S) 1(W ) -5



+12( -6 (T +10( O) ) O)

+8 (O )

-2 (T)

-13 ( T)

-13 (T )

The SWOT analysis shows that the firm is greatly affected by threats and opportunities.

These have resulted to a total of -5 which is a combination of the threats and weaknesses. The company therefore has to take guard of these threats especially from sanctions and the Indigenization Act. The restoration of voting rights, dollarization, Government of National Unity and reduction in brain drain has resulted in the organization managing to survive in the hostile environment.

Internal analysis Every firm needs to acquire appropriate technology in order to operate efficiently and effectively. Appropriate technology refers to methods of production and operation which are suitable to local economic and social conditions (Schumacher et al 1993). Delta Beverages, in particular Kwekwe Malting acquired new technology in 2009 in form of equipment to save labour costs. A new crank shaft was acquired from South Africa which is used to lift barley from silos into the conveyor belts for the production process. The machine helps to reduce labour cost since there was a reduction in the number of contract employees. Who used to off load the barley through manual means. Capacity it is defined by Slack et al (2002) as the ability to hold, receive to accommodate and in business systems it is viewed ad the amount of output that a system is capable of achieving at a particular time. The company has managed to increase its capacity by acquiring a fast and bulk producing machine. This has resulted in strength to the business as it is now able to produce more at lower price leading to reduced costs and lowering of prices. Skills The company recruits both skilled and unskilled labour. The unskilled labour is then sending for training and development and Mandel Training Centre in Harare. The training centre belongs to Delta Beverages and its duty is to ensure intensive training and development of the company's workforce. In most cases, those who hold management positions usually go for training at Mandel to enhance their skills. Access to raw materials Although Delta Beverages entered into contract with farmers for easy availability of

resources, this has been affected negatively by the land reform programme which saw the farms being possessed by individuals who lack skills in farming. The local framers are also not in a position to provide quality raw materials and in large quantities due to lack of equipment to use in the farming business.

External analysis Economic Dollarization The Government of Zimbabwe adopted a multi currency system at the beginning of 2009 with the United States Dollar, Rand and Pound being used as the preferred currencies by the transacting public and business. The adoption of other currencies other than the local currency, which had virtually become useless by end of 2008, has brought much welcomed stability in business, with budgets and planning now making sense in boardrooms in the country although it brought in challenges of raising capital for businesses.

After dollarization, inflation, previously Zimbabwe's most elusive enemy whose figures had reached 231 million percent in 2008, has been running in the negative territory (deflation) since February 2009, with the month-month figure for May standing at -1 percent. The enable the companies like Delta to charge more stable prices and to be able to raise money without depreciating in value which was difficult before dollarization. According to www.tradeinvestafrica.com , for investors who got in early, like mobile operator Econet and agribusiness firm Delta Corp, dollarisation of the economy in April rewarded their foresight, enabling companies to achieve quick gains. The official adoption of the multiple currency trading system has also had a phenomenal effect in terms of resuscitation of business, availability of previously scarce goods and services and bringing back confidence into the economy, Ruzvidzo said in a Herald commentary Gustafsson (2002) states that there is a cost of losing a guarantor, usually the central bank, as a lender of last resort in full dollarized countries. Therefore absents of lender of last resort combined with extremely volatile nature of deposits tricking into consideration the banking

sector has led to the decline in the loans to deposit ratio (LDR) in Zimbabwe. It is almost impossible for Zimbabwean companies to raise without vibrant and adequately capitalised financial institutions to price risk and to advance credit to companies that need funding. Had it not been the foreign sister companies assisting Delta, it could not have managed to perform at such a better level. According to Green and Oh (2002), a credit crunch is an inefficient situation in which credit worthy borrowers can not obtain credit at all, or cannot get it at reasonable terms, and lenders show excessive caution which may or may not be traceable to regulatory distortion, leaving the would be borrowers unable to fund their investment projects.

Global economic recession The global economic recession currently taking place is affecting the demand and price of goods. People do not have enough disposable income to buy many products especially luxurious products and this lead to price reduction due to decrease in demand. This is taking place but in Zimbabwe it is difficult to see since the country is improving from its ailing economy. Had it not been this recession, the Zimbabwe economy could have been at another stage. Therefore Delta is also affected because the current demand of its products could have been more than that had it not been the Global economic recession.

Legal Indigenization

The beginning of March 2010 saw the government passing the Indigenisation Act which requires businesses to hand over at least 51 per cent ownership to indigenous Zimbabweans. It is said the Indigenization and Economic Empowerment regulation is meant to benefit ‘indigenous’ Zimbabweans who were disadvantaged before independence in 1980. However the law did not yield positive results to date.

Trading on Zimbabwe's stock exchange had plummeted from a daily average of US$2 million to US$500 000, since a controversial empowerment law was published. Emmanuel

Munyukwi, the chief executive of the stock exchange, confirmed the development to the South African Mail and Guardian newspaper. Therefore it will be difficult for listed companies like Delta to raise funds through the stock exchange under such a situation.

The Zimbabwe Times of 16 March 2010 reported complete disaster of this law. During the week before 1 march a company that is exploring gold in Kadoma, CAG list on ASX, was performing very well and registering the highest volume and trades per day, there was a lot of enthusiasm in the market, however when the news about indigenisation got into the market, investors simply withdrew and sold all their shares. Visiting the investor forum, hotcopper.com.au the sentiment about Zimbabwe and this law was so negative and any move to implement this law means literally no foreign investment yet most Zimbabwean companies like Delta are surviving from foreign investment. ZimPlatinum also listed on ASX suffered the same fate. Yet next door in Botswana, Botswana Minerals LTD is doing very well and Nikwe Platinum in SA is performing very well.

Ideally, external funding is required but the restrictive ownership threshold will deter investors. It is also difficult for locals to attract foreign capital given the negative perception of investing in the country. Although the government is working on revising the issue, it already caused some negative results to investment in the country since trading on Zimbabwe's stock exchange has plummeted from a daily average of US$2 million to US$500 000, since a controversial empowerment law was published. Trade liberalization The imposition of COMESA free trade area is a threat to Delta products because this development has increased competition from foreign products. Foreign products especially those from South Africa are cheaper because of mass production and more advanced equipment which reduces cost of production. However it enables the company to cheaply import raw materials and advanced equipment which was very expensive before the COMESA.


Sanctions The sanctions imposed by the US in July 2008 have made Zimbabwe a high risk country to invest. The sanctions were at one time partially removed after the implementation of the GNU but they were renewed due to the outstanding issues in the GNU which include the unofficial appointment of the Reserve bank governor and the attorney general. These sanctions are causing Zimbabwe to be considered as a high risk country for investment. Therefore Delta will face difficulties when trying to find an external investor thus posing as a threat to the organization.

Government of national unity (GNU) The formation of the GNU brought some light in terms of the political situation in Zimbabwe which had hindered foreign investment. It contributed to the revival of the economy because its formation saw many companies who were sabotaging resuming operations. It led to the partial removal of sanctions by the United states which enabled the country to source some funds outside the country. However the sanctions were renewed due to some outstanding issues which include official appointment of the reserve governor and the Attorney General. Also the GNU seem to be unpromising because of the clashes taking place within that government for example the recent indigenization law which Mr Tsvangirai said he was not consulted in its implementation and publishing despite the fact that it was supposed to be approved by council of ministers. According to www.alafrica.com, any lackadaisical attitude towards full commitment to the GNU provisions would be heavily penalised by foreign investors who are very sensitive to sovereign risk that affect their investments.This will have a negative impact on Delta’s outside investment in which investors fear the political risk.

Land reform The land reform in Zimbabwe which is referred to as the Third Chimurenga, involved the seizure of white owned farms by the blacks. Most blacks do not have much experience and commitment to farming. Some have changed the farms which used to produce commercial crops to non commercial crops. Most of the few who were given farming equipment sold it and now can not meet the demand for those inputs without enough farming machinery. This

is a challenge to Delta since it resulted in raw material shortages which include barley, maize, sorghum and wheat. The company resorted to importing some of the raw materials which is very expensive.

Restoration of voting rights by International Monetary Fund (IMF) Zimbabwe IMF voting rights were removed due to political instability. This resulted in difficulties in obtaining funds from this institution and many companies felt the consequences since the government did not have adequate sources of funds to assist ailing companies. However after the formation of the Government of National Unity the voting rights were restored because the IMF was seeing some hope in the political situation of the country. Thus the country will have some representatives when it comes to borrowing of funds. This has positive implications to Delta which will manage to benefit from such funds through the government such funds through the government. Social Reduction in brain drain The formation of the GNU and the dollarization in Zimbabwe resulted in reduction of experienced and skilled workers leaving the country because people have seen hope in the economy. This benefited Delta which managed to retain a few experienced and skilled workers and therefore the production of quality products is not greatly compromised. Also experienced and skilled workers in the agricultural sector which is the major source of Delta raw materials are no longer leaving the country and thus promising to the quality and quantity of raw materials. Technological Technology is ever improving and now at a very faster rate. This is resulting in the production of quality products and mass production. However Delta is not too behind the technology since it gets assistance from its sister company. Most recently the company obtained more advanced bottling machinery from its sister company in South Africa. Therefore this is an opportunity for Delta which is able to move with technology and thus

able to produce in large quantities thereby gaining economies of scale, to have a competitive advantage of its close competitor – Mutare Bottlers and also able to meet customer expectations in terms of quality.

Overcoming threats and weaknesses Delta Beverages can overcome its threats and weaknesses using the opportunities and strengths at hand. To overcome the threats from the indigenization act, the company can invest more into the stock market. This means that there will be additional income from the stock market though it will be shared upon with the other party. Another option is to offer a high percentage of its shares to its local employees. Opening more branches regionally will also reduce the risk of being affected by the issue of indigenization. Land reform has resulted in the reduction of raw materials in terms of quality and quantity. They can advantage of the trade liberalization and the dollarisation to acquire new materials from outside Zimbabwe. The issue of sanctions is brad and challenging to almost each and every organization here I Zimbabwe. The company (Delta Beverages) can strengthen ties outside Zimbabwe making use of its sister companies which are in other countries. The company also has got some weaknesses. The major weaknesses from the SWOT

analysis are lack of funding and integration. This can be overcome by the company when it uses its strengths of good quality and low priced products. This will help to increase the capital base. They can also go into vertical, horizontal and quasi integration. Conclusion The SWOT analysis shows that the firm is greatly affected by threats and opportunities. These have resulted to a total of -5 which is a combination of the threats and weaknesses. The company therefore has to take guard of these threats especially from sanctions and the Indigenization Act using the strategies suggested in the discussion. The restoration of voting rights, dollarization, Government of National Unity and reduction in brain drain has resulted

in the organization managing to survive in the hostile environment.

Bibliography www.alafrica.com www.tradeinvestafrica.com

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