This examination question paper consists of forty-seven (47) pages, including two additional pages

(pp 44-45) for writing and two pages (pp 46-47) for rough work.

INSTRUCTIONS

 Answer any four of the six questions.

 Each question counts 25 marks.
 Write legibly.
 Structure your answer logically by using headings and subheadings.
 Clearly indicate the numbers of the questions you have answered on the cover sheet of
this question paper.
 Pages 44-45 are extra pages for writing. Clearly indicate the number of the question
you are answering, should you make use of these pages.
 Pages 46-47 are for rough work only, and will not be marked.

This is a closed-book examination. You may not consult notes of any kind, or any person
except the invigilator, during the examination session.

[TURN OVER]
 2 MNG4801
May/June 2016

QUESTION 1

In the development of Strategic Management as a management approach, the use of specific

terminology as well as the contemporary business environment plays a central role (Topic 1;
Study Unit 1.3; Study Unit 1.4; Chapter 1 (Louw and Venter, 2013)). Nampak Holdings (Ltd.) is
Africa’s leading packaging company, manufacturing to the highest commercial and
environmental standards in metal, glass, paper and plastic. Read the following CEO Report
adapted from the Nampak Holdings (Ltd.) 2015 Integrated Annual Report. Answer the questions
that follow.

In 2015, Nampak made significant progress in our journey to sustainable growth and improved
performance. Driven to deliver on our strategy, we reshaped Nampak. We disposed of
low-margin and non-core businesses, invested to enhance our competitiveness, and
streamlined our business processes to ensure that we can create sustainable shareholder
value as a high-performance manufacturer.

With the appointment late in the year of our new chief financial officer – as well as new senior
management at Glass, DivFood and Plastics – we completed the revitalisation of our
leadership team, which is driving an important change in Nampak’s culture. We clarified our
operating model to give impetus to Nampak becoming a “hands on”, supportive, collaborative
and internally aligned operating company that works as a united team. In this way, we are
better able to pull the right levers to improve our performance in all respects after a
disappointing financial and operating performance in 2015.

Nampak’s strategy is our plan to get the best out of the business over the near to medium
term, and then grow in pursuit of our vision, which is to provide best-in-class packaging
throughout sub-Saharan Africa. In the year, we remained focused on our two broad strategic
objectives: to unlock further value from our base business, and to accelerate growth in the rest
of Africa.

With the sale of our underperforming Paper, Tissue and Flexibles businesses – which resulted
in cash proceeds of R2 billion and a 15% improvement in employee productivity – we
delivered on our strategic imperative to actively manage our portfolio. We are now able to
focus on improving our business performance – “buy better”, “make better”, “sell better” – in
our core Metals, Glass and Plastics operations, where we have a long-term competitive
advantage and where barriers to entry are higher.

We completed the first wave of our initiative to “buy better”. Through extensive engagement
with suppliers to all our divisions, we are leveraging the Nampak brand to get more favourable
terms to entrench our competitive strength. We expect this to unlock annual savings of at
least R120 million from 2016.

Our work to “make better” also delivered encouraging results. At our flagship Bevcan Springs
facility, we completed the conversion of our beverage can production lines from tinplate to
aluminium, and at Bevcan Rosslyn and Bevcan Angola we installed new aluminium can
production lines.
[TURN OVER]
 3 MNG4801
May/June 2016

By embedding operational excellence, and greater safety and efficiency principles, as well as
replacing key components, by year-end our new glass furnace at our complex at Roodekop
was able to recover fully from its commissioning challenges and produce at benchmark
productivity ratios.

We also began to make progress across the group in our efforts to “sell better”. In South
Africa, Bevcan renewed long-term contracts with important customers to cement its leading
market position.

We also see room to leverage our existing businesses on the continent and improve their
efficiencies, while partnering with major multinational customers and thereby mitigating some
of the payment risks associated with doing business in Africa.

2015 was indeed a challenging year for Nampak, in which we faced tough economic
conditions and experienced operational difficulties. However, we strengthened the factors
under our control by returning to the basics of manufacturing and focusing on operational
excellence and a culture of high performance, all driven by a strong leadership team.

Following a period of restructuring, significant investment in the rest of Africa and in new and
more competitive capacity in our home market, a more focused group has emerged: a group
that is well positioned to unlock operating leverage in the year ahead. With strong market
positions and long-term agreements with key customers, we are on track to deliver a
significant improvement in both our operating and financial performance in 2016.
Adapted from Nampak (Ltd.) 2015 Integrated Annual Report
http://www.nampak.com/DynamicData/AnnualReport/Current/Nampak%20IR%20%202015.pdf

1.1 Nampak Holdings (Ltd.) is a multi-business corporation. Differentiate between

business level strategy and corporate level strategy. Do this by providing:
 A description of each of these levels of strategy.
 The strategic perspective associated with each level of strategy.
 Two key questions associated with each level of strategy.
 The difference in decision-making responsibility for each level of strategy.
 Two examples of a corporate level strategic decision taken by Nampak.
[12]

[TURN OVER]
4 MNG4801
May/June 2016

[TURN OVER]
5 MNG4801
May/June 2016

[TURN OVER]
 6 MNG4801
May/June 2016

1.2 Explain what is meant by the term ‘strategic survival’. Illustrate this meaning with
two examples from the report. [4]

[TURN OVER]
 7 MNG4801
May/June 2016

1.3.1 Louw and Venter (2013:36-37) claim that there are five ‘tests’ for a winning
strategy. Describe any three of these ‘tests’, and utilise them to critically evaluate
Nampak’s strategy to ‘buy better, make better, sell better’. Substantiate each
evaluation with an example from the report. [6]

[TURN OVER]
 8 MNG4801
May/June 2016

1.3.2 Which ‘test’ cannot be used to critically evaluate Nampak’s strategy to ‘buy better,
make better, sell better’, and why? [3]

TOTAL: [25]

[TURN OVER]
 9 MNG4801
May/June 2016

QUESTION 2

Sustainability and corporate social responsibility (CSR) plays an increasingly important role in
the contemporary business environment and strategic direction is an important building block of
strategic planning (Topic 1; Study Unit 1.4; Topic 2; Study Unit 2.1; Chapter 2 and Chapter 3
(Louw & Venter, 2013)). Read the following case study regarding Sappi (Ltd.) and answer the
questions that follow.

Sappi (Ltd.) is a global company focused on providing dissolving wood pulp, paper pulp and
paper-based solutions to its direct and indirect customer base across more than 100 countries.
It produces approximately 5.7 million tons per year of paper, 2.4 million tons per year of paper
pulp and 1.3 million tons per year of dissolving wood pulp. It employs more than 12 000
people in 20 countries, with sales in more than 100 countries.

At the end of 2015, the Sappi Group generated operating profit of $136m (R2.2 billion), which
was higher compared to the same quarter last year, despite the translation effect of a weaker
euro relative to the dollar. Profit shot up by 22% year-on-year to $83m (R1.3 billion) due in
part to lower interest costs on reduced debt. "We had a strong year," Sappi CEO, Steve
Binnie remarked.

This performance is built on a strong focus on combined sustainability and financial factors.
Since the company’s birth in 1936, the welfare of the environment has played a significant
role, partly due to the intrinsic importance of the environment in the various value chains of the
Sappi group.

Ranking amongst the best sustainable companies – both local and abroad - Sappi (Ltd.) has
garnered multiple awards during the last couple of years, including the prestigious William D.
Schaeffer Sustainability award in North America in 2013. The Institute for Corporate Social
Development ranks Sappi (Ltd.) as the fourth best local company in South Africa in terms of
Corporate Social Responsibility. In 2014, of 156 companies assessed, Sappi was amongst 82
companies included in the JSE SRI index.

Sustainability is evidently entrenched in the recently revised mission statement of the

company: “Through the power of One Sappi – committed to collaborating and partnering with
stakeholders – we aim to be a trusted and sustainable organisation with an exciting future in
woodfibre.”

But it seems as if the strong financial achievements have provided Sappi (Ltd.) with the means
to increase their sustainability and corporate social responsibility (CSR) efforts. CEO Steve
Binnie pointed out that “Having the right people executing a clear strategy is key to our
ongoing sustainability. We achieved significant growth over the last year, and this is reflected
in our financial results…[this] has also shown real benefits in non-financial performance.”

With a firm hand on the present, Sappi (Ltd.) also focuses on the future. In December 2014
Sappi (Ltd.) and Edinburgh Napier University announced the discovery of a new low-cost
process to make nanocellulose - a 'wonder material' that could be used to build greener cars,
[TURN OVER]
 10 MNG4801
May/June 2016

thicken foods and even treat wounds. Sappi (Ltd.) followed this announcement by
commencing construction of a pilot-scale plant for low-cost Cellulose NanoFibrils production.

When asked which sustainability efforts Sappi (Ltd.) is most proud of, CEO Steve Binnie
replied: “Over the years, Sappi has made significant strides in decreasing the impact our
operations have on the environment. The primary focus for improvement is employee and
contractor safety…[although] mechanisation of the more dangerous activities is a solution.
This would have a negative impact on employment, an important consideration in a South
African context. Secondly, reducing our water use is not only important in areas where water
supply is constrained, but is an important step in further reducing our energy consumption. By
investing in newer technologies and more efficient use of water, we can reduce the water
extracted from the environment and lower our energy and water costs at the same time.”
Adapted from:
http://www.sappi.com/regions/sa/group/Pages/Company-history.aspx
http://www.sappi.com/group/Sustainability/FAQs/Sappi-FAQs-The-JSE-SRI-Index.pdf
http://www.sappi.com/regions/sa/group/GroupProfile/Pages/default.aspx
http://www.sappi.com/group/Sustainability/2014-Sappi-Group-Sustainability-Report.pdf
http://icsd.org.za/csr/csr-hub/
http://www.sappi.com/Investors/FinancialInformation/2015AIR/2015-Sappi-Annual-Integrated-Report.pdf
http://www.bdlive.co.za/business/industrials/2015/11/13/sappis-profit-rises-across-the-board

2.1 ‘Business activity’ and ‘economic goals’ are elements that should be evident in a
mission statement. Critically evaluate the mission statement of Sappi (Ltd.)
against these elements. In your answer:
 Provide a clear description of each element.
 Substantiate your critical evaluation with relevant theory.
 Reach a conclusion.
[9]

[TURN OVER]
11 MNG4801
May/June 2016

[TURN OVER]
 12 MNG4801
May/June 2016

2.2 From the case study, it is remarked that Sappi (Ltd.) is included in the JSE SRI
index. Provide the following:
 A brief description of the JSE SRI.
 The role of the JSE SRI in terms of sustainability.
 The implication for Sappi (Ltd.) to be included in the JSE SRI index.
[8]

[TURN OVER]
13 MNG4801
May/June 2016

[TURN OVER]
 14 MNG4801
May/June 2016

2.3 Sappi (Ltd.) exhibits a strong focus on sustainability and CSR. However,
some academics, economists and executives feel that there is a strong case
against CSR. Explain the generic theoretical argument against CSR, and
indicate with an example from the case study how one could use the Sappi
(Ltd.) case to argue against the business case for CSR. [5]

[TURN OVER]
 15 MNG4801
May/June 2016

2.4 Explain, with examples from the case, why Sappi’s use of sustainability and CSR
has resulted, and should continue to result, in strong financial performance. [3]

TOTAL: [25]

[TURN OVER]
 16 MNG4801
May/June 2016

QUESTION 3

External environmental analysis is one of the building blocks of strategic planning (Topic 2;
Study Unit 2.3; Chapter 5 and Chapter 6 (Louw & Venter, 2013)). Read the case study
concerning KWV and their operations in Russia, and answer the questions that follow.

Unlisted liquor group KWV Holdings, already a large exporter of wine to Europe, will target
new markets in the US and Russia in a bid to build sustainable long term profit growth.
Speaking at the annual general meeting (AGM), Niveus-held KWV CEO Andre van der Veen
stressed the push into new markets formed part of the company’s ambitions to become a
global, diversified alcoholic beverages group. He noted the US wine market was the largest
and most profitable in the world, but warned that KWV was likely to make losses in this market
initially.

Mr van der Veen said Russia would be a more profitable thrust for KWV than delving into the
Chinese market. "We have a way to go in Russia, but the country has a great affinity for
South African products […] and is less inclined to European and US products." This decision
of KWV seems pinned on 2012 - when exports to Russia quadrupled in a 12-month period.
Regarding new international advances, KWV’s USA and Russian offices are now operational.
The US, in particular, will take some time to yield profits. The American market has proved
challenging for South African wine producers, but KWV believes the investment will be
worthwhile, given the size of the market and the margin potential.

But all is not well in the contemporary Russian market. The Russian currency – the Ruble -
was devastated by falling oil prices, economic sanctions and geopolitical tensions over
Ukraine. It finally collapsed in late 2014, after efforts to shore it up failed. Broadly speaking,
Russian wine distributors are operating in a government-imposed and coordinated system,
with margins varying from 100% to 200%. Most wine importers will have little choice but to
accept more risk, agree to suspended payments, and offer deeper discounts. The choice is
simple: either back up the distributors or de facto quit the market.

Oddly enough, opportunities are abundant within the Russian wine trade. Wine distributors
with weak financials are disappearing, new wine bars are opening and Russian consumers are
starting to actually think about what they choose to drink. Price and quality relation is
becoming a major factor of choosing wines for the average Russian wine drinker.

Despite the paradoxical outlook towards Russia as a consumer of South African wine, total
South African wine exports declined 25% from 2013 to 2014. Yet Russia still absorbs 6.5% of
all wine exported from South Africa. Contrary to the Russian market, exports to China nearly
doubled over the same period, although it absorbs only 2% of wine exports.
Adapted from:
http://www.bdlive.co.za/business/industrials/2015/06/29/kwv-seeks-to-tap-into-russia-and-us
http://www.financialmail.co.za/moneyinvesting/2015/06/04/kwv-holdings-painful-brandy-hangover
http://www.sawis.co.za/info/download/BI_Daagliks_25_sep_2015.pdf
http://www.winereport.ru/the-russian-market-in-crisis/
http://www.winereport.ru/time-to-bring-your-wines/
http://www.sawis.co.za/info/download/Book_2015_eng_finaal.pdf
http://www.wine.co.za/news/news.aspx?NEWSID=22995
[TURN OVER]
 17 MNG4801
May/June 2016

3.1 KWV needs to take changes within the macro-environment into account. Do
the following:
 Provide a brief theoretical description of the term ‘macro-environment’.
 Name three factors or forces of the macro-environment KWV needs to
consider.
 Substantiate your answer with three examples from the case. [8]

[TURN OVER]
 18 MNG4801
May/June 2016

3.2 According to Louw & Venter (2013:179) changeability is a measurement tool to

assess to which degree the macro-environment can change. It consists of two
aspects – complexity and novelty. You should:
 Explain what is meant by complexity and novelty.
 Provide examples from complexity and novelty from the case.
 Critically evaluate KWV’s decision to continue exports to Russia.
[6]

[TURN OVER]
19 MNG4801
May/June 2016

[TURN OVER]
 20 MNG4801
May/June 2016

3.3 “Oddly enough, opportunities are abundant within the Russian wine trade.” If
KWV had to conduct a customer analysis of the Russian wine consumer, which
principles should they take into consideration? Discuss any three of these
[9]
principles.

[TURN OVER]
21 MNG4801
May/June 2016

[TURN OVER]
 22 MNG4801
May/June 2016

3.4 Explain why is it prudent that KWV retain their focus on the Russian market,
and why should they not shift their focus to the Chinese market? [2]

TOTAL: [25]

[TURN OVER]
 23 MNG4801
May/June 2016

QUESTION 4

Strategy selection is one of the building blocks of strategy implementation (Topic 2; Study Unit
2.4; Chapter 10 (Louw & Venter, 2013)). Read the case study concerning Starbucks and Taste
Holdings. Answer the questions that follow.

Starbucks Coffee Company and Taste Holdings today announced a licensed partnership that
will see Starbucks stores open across South Africa. For the first time in Southern Africa,
Starbucks will open full-format stores bringing the entire range of its food and beverages,
including its ethically-sourced Arabica coffee, to South African consumers.

“We are proud to be bringing Starbucks to South Africa next year,” says Kris Engskov,
president, Starbucks Europe, the Middle East and Africa (EMEA). “Working with Taste, our
partner, we’re going to deliver a great Starbucks experience. The coffee market here is
vibrant and growing fast – we want to be part of that growth, bringing the passion and energy
of this remarkable country into the design of our first store and our first barista team. We can’t
wait to get started.” The license agreement sees Taste owning the exclusive rights to develop
Starbucks retail outlets in South Africa. As Taste is the licensee, it will own and operate the
stores directly.

The partnership will see direct job creation opportunities as each Starbucks store opens, in
addition to opportunities at the Taste support office in Johannesburg. Taste expects that the
indirect impact of skills transfer into South Africa, and the localisation opportunities in the
supply chain will be meaningful. In addition, Starbucks and Taste have committed to
continuing Taste’s Changing Lanes program, employing predominantly from currently
unemployed youth directly from the communities in which they trade.

Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and
roasting high-quality Arabica coffee. Today, with more than 22,000 stores around the globe,
Starbucks is the premier roaster and retailer of specialty coffee in the world.

Taste Holdings is a South African-based management group and a leading licensor of global
brands in the Southern African region. Taste Holdings commenced business in 2000 with
Scooter’s Pizza as their starting entity. By 2015, the company evolved into a corporate
behemoth generating R723 million annually in core revenue.

It currently owns and licenses a portfolio of franchised and owned, category specialists, Quick
Service Restaurants (QSR) and retail brands currently represented in five countries in
Southern Africa. It also owns, operates and franchises Zebro’s Chicken, The Fish & Chip Co,
Maxi’s Restaurants, Scooters Pizza and St Elmo’s Woodfired Pizza. Their food division is
vertically integrated.
Adapted from:
http://www.tasteholdings.co.za/src/news_pdf/Starbucks_Coffee_comes_to_South_Africa_in_2016.pdf
http://www.tasteholdings.co.za/milestones.php
http://www.tasteholdings.co.za/results.php

[TURN OVER]
 24 MNG4801
May/June 2016

4.1 Identify and describe Starbucks’ corporate strategy. As part of your answer,
you should include:
 The corporate strategy in its specific type and form.
 A description of the core elements of this strategy.
 Two examples from the case study to substantiate your answers. [8]

[TURN OVER]
25 MNG4801
May/June 2016

[TURN OVER]
 26 MNG4801
May/June 2016

4.2 Evaluate the decision of Starbucks to work with Taste Holdings. In your
answer:
 Indicate what benefits would be expected from their corporate strategy.
 Discuss why Taste Holdings is a suitable ‘partner’.
 Provide four examples from the case to substantiate your evaluation.
[8]

[TURN OVER]
27 MNG4801
May/June 2016

[TURN OVER]
 28 MNG4801
May/June 2016

4.3 “Their food division is vertically integrated.” Explain the concept of vertical
integration. In your answer:
 Clearly differentiate between vertical integration and horizontal
integration.
 Discuss the difference between forward vertical integration and backward
vertical integration.
 Explain under which conditions forward vertical integration will occur.
 Explain under which conditions backward vertical integration will occur.
 Provide your own example of backwards vertical integration at Scooter’s
Pizza. [9]

[TURN OVER]
29 MNG4801
May/June 2016

TOTAL: [25]

[TURN OVER]
 30 MNG4801
May/June 2016

QUESTION 5

Leadership is one of the building blocks of strategy implementation (Topic 3; Study Unit 3.3;
Chapter 12 (Louw & Venter, 2013)). Read the case study pertaining to Ross Faragher-Thomas,
the Managing Director of Virgin Active SA. Answer the questions that follow.

Passion and energy have become critical and complementary attributes for today’s winning
business leaders, helping them to focus on developing excellent businesses that provide
market-leading products and services. Ross Faragher-Thomas, MD of Virgin Active SA, says
today’s corporate leaders need a lot of energy and passion for what they, and the companies
they manage, are doing.

With a strong background in marketing and a keen sense of leadership, Ross Faragher-
Thomas has been involved with Virgin Active for 14 years, including the turnaround and re-
branding of the company and its strategic expansion in South Africa.

“Any good CEO or MD is expected to deliver growth and returns - it is a given. However, how
you run a business has changed. This is a world of transparency and companies have to be
authentic, sincere and really believe in what they are doing. A great company cannot simply
make claims about itself. It must have a real sense of belief and passion in its business,”
Faragher-Thomas says.

He also makes the point that this passion must be evident to everyone in the enterprise and
the positive energy that he or she brings to the business needs to trickle down through every
level. “As the CEO or MD you have to be genuine and share your passion with everyone in
the organisation.”

He indicates that the power is in the hands of the customers and they are more prepared,
insightful and knowledgeable than ever before: “They are giving their hard-earned money to
companies that they feel they can believe in. Not only must the CEO be passionate about the
company but his or her beliefs and values must reflect those of his customers.”

He strongly suggests finding and employing the talent needed to drive a successful
organisation: “You need to ensure that the people the organisation hires have values that are
aligned with the values of the company. Unless the enterprise, the leadership of the
organisation and the employees share the same set of values, the business is going to have
difficulty succeeding in the long term and on a consistent basis.”

In a highly competitive and rapidly changing world, today’s company leaders cannot show up
at the office at 9am and head home at 4.30pm. Instead, to maintain a sustainable, competitive
position, they need to be totally involved in their business and in addition to the time spent in
the office; they also need to be out in the field feeling the pulse of the market. It demands
considerable energy to maintain this grueling pace, according to Faragher-Thomas.

Setting an example, he admits to waking up three times a night to check his messages: “As a
CEO or MD, you have to be able to energise the organisation through the energy that you
[TURN OVER]
 31 MNG4801
May/June 2016

apply to the business. You can be in any number of businesses and still make money.
However, when you care about the role the business takes and you are passionate about its
purpose, you will lift yourself and the business to the next level.”

The company’s reason for being is to help people lead better and healthier lives. “Our
members are able to have better lives and engage more with their families and communities.
We centre the business on people interacting and being social with one another. This is a
place people can come and exercise and meet other people. We believe we make a
difference and we play an important role in helping our members achieve their goals and as a
result we have a highly sustainable business,” Faragher-Thomas remarks.
Adapted from
http://www.bdlive.co.za/featuredpartners/odgersberndtson/2015/08/27/leading-with-passion-is-the-only-way-to-lead
http://www.timeslive.co.za/lifestyle/2010/06/07/my-gadget-ross-faragher-thomas

5.1 “Transformational leadership has produced improved employee outcomes in

many different types of organisations, and consists of the four I’s.” (Louw &
Venter 2013:426). Explain what is meant by ‘the four I’s’. In your answer:
 Identify the four I’s.
 Describe each of the four I’s.
 Provide two examples from the case associated with any of the four I’s.
[14]

[TURN OVER]
32 MNG4801
May/June 2016

[TURN OVER]
33 MNG4801
May/June 2016

[TURN OVER]
 34 MNG4801
May/June 2016

5.2 Explain how Faragher-Thomas uses his leadership to set organisational

direction and to drive the strategy. Substantiate each explanation with an
example from the case. [4]

[TURN OVER]
 35 MNG4801
May/June 2016

5.3 Identify the link between the leadership style of Faraghar-Thomas, and the
industry Virgin Active operates in. Explain why his style of leadership is
effective. [4]

[TURN OVER]
 36 MNG4801
May/June 2016

5.4 “We believe we make a difference and we play an important role in helping our
members achieve their goals and as a result we have a highly sustainable
business.” Explain what is meant by the term ‘sustainable’ in the context of
this quote. Substantiate your explanation with an example from the case study
where ‘sustainable’ is used in a similar context. [3]

TOTAL: [25]

[TURN OVER]
 37 MNG4801
May/June 2016

QUESTION 6

Organisational architecture is a building block of strategy implementation, whereas strategic

control consists of various control methodologies (Topic 3; Topic 4; Study Unit 3.4; Study Unit
4.1; Chapter 13 (Louw & Venter, 2013)). Read the case study regarding Volkswagen’s
‘Dieselgate’ scandal, and answer the questions that follow.

The Volkswagen (VW) emissions cheating scandal illustrates the fact that flawed culture,
governance and accountability can undermine even well-respected products and technologies.
The scandal, in which VW admitted it deliberately covered up its true diesel vehicle emissions
readings, is not about a lack of technical competence. In fact, the company’s very
competence enabled it to create the sophisticated ruse in the first place. What is coming into
question is corporate leadership’s character and the morality of leadership decision-making.

With early reports indicating that the emissions cheat was probably deliberate and sanctioned
by some in the leadership, the scandal illustrates the trust damage and financial costs of a
lack of governance, accountability and risk planning.

VW’s deception raises the cultural question: how does this respected brand’s leadership make
decisions? Culture (an oft-used but poorly defined concept) is not "how we do things around
here"; it is the environment in which organisations make decisions. The top 50 brands in the
world are great brands because they make great decisions based on great values.

Successful organisations have values so strong, so clear and so behaviourally structured that
the employees and leadership don’t have to always ask for permission because they know
that if they make decisions based on their values, they’ll always be right. A values-driven
leadership’s greatest dividend is trust.

As a result, a CEO’s top job is to build and maintain trust. It has been said that trust is the
essential lubricant of a social and corporate system because it changes everything. Why?
Because it’s the only thing that means everything. Trust is the most vital leadership
competency of the new global economy. Relationships based on trust consistently outperform
relationships based on contracts. The economic value of trust may seem intangible — until
one assesses the high cost of trust lost.

VW’s greatest threat is from its financial, regulatory and media stakeholders: how can you
trust a leadership team that threatens the economic viability of the company? Indeed, the
latest reports indicate that the first class-action lawsuits are already being launched against
the company by shareholders in the US. Residents and employees in VW’s hometown of
Wolfsburg are urging the company to take steps to restore trust in its own brand and in the
"Made in Germany" label.

How is VW handling this crisis? The company is handling this situation very well. No one is
issuing denials: there has been a clear admission of responsibility. The company is following
all of the principles of responsible crisis mitigation. VW has replaced its CEO, launched an
investigation, communicated with all staff and launched a website to keep shareholders and
[TURN OVER]
 38 MNG4801
May/June 2016

customers informed. This straight talk demonstrates respect for the company’s three primary
trust constituencies: its customers, its employees and society in general.

VW’s leaders are showing clear signs of having every intention of tackling the crisis in a
transparent way. With interim VW chairman Berthold Huber describing the crisis as a "political
and moral catastrophe", new CEO Matthias Mueller has promised to do whatever it takes to
repair the company’s reputation. CEO and president of Volkswagen Group of America,
Michael Horn, said: "While we are still gathering all the facts, it’s clear that our company
betrayed the trust of you, our customers, our employees, our dealers and the public."

Being prepared and well-rehearsed is paramount in dealing with any crisis. Without investing
in a crisis plan and strategy, your board, stakeholders and customers will be left asking the
tough question: why didn’t you plan ahead?
Adapted from
http://www.bdlive.co.za/opinion/2015/10/01/vws-emissions-admission-dents-essential-trust-in-brand

6.1 In the case study, the term ‘culture’ is referred to as “an oft-used but poorly
defined concept.” Define the term culture, clearly indicating its relation to
strategic alignment and implementation. [5]

[TURN OVER]
 39 MNG4801
May/June 2016

6.2 A company’s values are intrinsically linked to its culture. Discuss the
importance of values related to a company’s culture, and provide two
examples from the case to substantiate your answer. [5]

[TURN OVER]
 40 MNG4801
May/June 2016

6.3 Discuss how the culture of Volkswagen would have caused such a scandal in
the company. [3]

[TURN OVER]
 41 MNG4801
May/June 2016

6.4 “The company is handling this situation very well.” Explain what is meant by
‘handling’ in terms of strategic control. In your answer:
 Describe the four possible strategic control systems.
 Indicate which strategic control system is being utilised by Volkswagen
in this ‘situation’. Include two examples from the case.
 Explain which strategic control system failed, which led to this ‘situation’. [12]

[TURN OVER]
42 MNG4801
May/June 2016

[TURN OVER]
 43 MNG4801
May/June 2016

TOTAL: [25]
EXAMINATION QUESTION PAPER TOTAL: [100]
©
UNISA 2015

[TURN OVER]
 44 MNG4801
May/June 2016

[ADDITIONAL PAGES]

[TURN OVER]
 45 MNG4801
May/June 2016

[ADDITIONAL PAGES]

[TURN OVER]
 46 MNG4801
May/June 2016

[ROUGH WORK ONLY - THESE PAGES WILL NOT BE MARKED]

[TURN OVER]
 47 MNG4801
May/June 2016

[ROUGH WORK ONLY - THESE PAGES WILL NOT BE MARKED]

[TURN OVER]