MIDLANDS STATE UNIVERSITY

FACULTY OF COMMERCE

DEPARTMENT OF BUSINESS

MANAGEMENT

STRATEGIC MANAGEMENT

NAME SURNAME REG NO. MODE OF ENTRY

Tafadzwa Murungu R0645048 PARALLEL (4.2)

Shuvai Chidume R0645783 CONVENTIONAL (4.2)

Beauty Mahoza R0644950 CONVENTIONAL (4.2)

Kudakwashe G Chapanda R0645087 PARALLEL (4.2)

Honour Mutihero R0541011 PARALLEL (4.2)

Edina Tengende R0645047 PARALLEL (4.2)

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

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 Due date 31-03-10

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 Trade Restoratio

Indigenizatio Land Dollarizati in brain liberalizatio Sanction n of voting
n GNU reform on drain n s rights IMF
Training
and
developme
- + 0 + + - - + +1(
nt S)
+2(
- + 0 + 0 + - +
Equipment S)
+3(
- + 0 + + + - +
Technology S)
+2Quality +2(
- 0 - + + + - +
products S)
+1(
0 + - + + - - +
Low prices S)
+1(
- + 0 + + - - +
Skills S)
Capacity - + - + + - - + 0
-
- + 0 0 - - - + 2(W
Integration )
Multination +2(
- + 0 + 0 + - +
al S)
Diversificat
ion
- + - + + - - + 0
High
customer - + - + + - - +
base 0
Access to
raw - + - + + + - + +2(
materials S)
-
- + 0 - 0 0 - + 1(W
Funding )
+12( -6 (T +10( +8 (O -13 ( -13 (T
-12(T) O) ) O) ) -2 (T) T) ) -5

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
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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

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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.

Political
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

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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
9
in the organization managing to survive in the hostile environment.

Bibliography

www.alafrica.com

www.tradeinvestafrica.com