Wal-Mart (Massmart) expansion into Africa

As Wal-Mart Stores plotted an African entry strategy, buying Massmart Holdings two years ago was just the right vehicle. With 377 stores across the continent and a strong position in South Africa, Massmart offered the Americans a firm foothold in a fast-growing region. 

Today, Walmart is reconsidering the strength of Massmart’s biggest store brand, Game, if not the wisdom of spending $1.8 billion (R16.5bn at yesterday’s exchange rate) for 51 percent of the company in 2011. As the world’s largest retailer expands in Africa, Massmart may drop the Game brand in favour of Walmart for stores outside of South Africa, because many Africans are put off by what they perceive as South Africa’s swagger.

“In Nigeria, people want to believe they are the gateway to Africa, in Kenya they want to believe they are the gateway, so an American brand is often more welcomed than a South African one,” Massmart chief executive Grant Pattison said in an interview yesterday. “You can put it down to regional competition, but we will look at using the Walmart name, or a name local to that country.”

Massmart, with stores in 12 countries, first moved outside its home market in 1993 when it opened a store under the Game brand in Botswana. The company now operates 14 Games, 13 CBW stores selling food, liquor and cosmetics wholesale, and one outlet of its Builders Warehouse hardware retail chain on the continent outside of South Africa.

The economy of sub-Saharan Africa will expand 5.3 percent this year, higher than the 3.6 percent expected worldwide, the International Monetary Fund has estimated.

Nigeria is forecast to grow 6.8 percent this year, its National Bureau of Statistics says. By 2030, Africa’s 18 biggest cities will have combined spending power of $1.3 trillion, consultant McKinsey estimates.

“Africa doesn’t want to feel like it’s being colonised by South Africa,” Momentum Asset Management portfolio manager Wayne McCurrie said. “There is definitely an allure in developing markets for American brands.”

Some analysts question the wisdom of abandoning the Game brand, which is known outside of South Africa for offering a wide range of goods. Other South African companies such as Shoprite and MTN had successfully expanded northward, Sasfin Securities director David Shapiro said. “Choosing the Walmart name over its own Massmart brands may be risky,” Shapiro said.

Walmart has not had a smooth ride as it has grown outside the US. Last year the company began investigating allegations that executives in Mexico paid more than $24 million in bribes to accelerate expansion there, and it is also probing operations in Brazil, India and China.

Walmart said last month that it expected to continue incurring costs related to its investigations of possible bribery in its international operations.

In the US, customers and workers say the company is struggling to keep shelves full. That has coincided with a decline in the retailer’s US workforce even as Walmart has added hundreds of new stores.

Pattison says Walmart offers Massmart advantages that extend far beyond its name. In Africa, the company is looking to Walmart’s UK supermarket chain, Asda, as it seeks to increase its produce offerings.

With little experience in produce, Massmart has tapped Asda’s know-how in ensuring a steady supply of fruits and vegetables and keeping them from spoiling, Pattison said. “As we expand our fresh line, we are learning from Asda.”

Massmart’s sales in the financial year to June last year rose 15.6 percent to R61.2bn, from 12 percent growth in the year before. Net income jumped 40 percent to R1.17bn last year. Sales in South Africa make up 92 percent of revenue.

Since September 23, 2010, the last day before the Walmart deal was made public, Massmart’s shares have advanced 46 percent, against 79 percent gains for rival Shoprite and 69 percent for the FTSE/JSE Africa general retail index. Pick n Pay Stores has declined 5.2 percent in the period.

Massmart says it is planning several new stores in countries where it is already present. And it is setting up Game outlets in Angola and Kenya, new markets for Massmart. Profit at Game stores outside South Africa was growing faster than sales, Pattison said. Walmart declined to comment.

Massmart’s drive north comes as retail sales in its home market are sluggish. The slowdown in consumer spending in South Africa will crimp profits for store owners.

Expansion in Africa could be slowed by a lack of infrastructure and difficulties in securing property, Pattison added. Those hurdles, as well as problems with corruption, a reliable legal system, and currency stability in some countries had to be assessed when planning stores, he said.

“Modern retail can be successful [in places where] you can sign a lease, you can be profitable and competitive without taking a bribe, and the country has a relatively stable currency,” he said. – Bloomberg  

Source: IOL Business/ Bloomberg - Apr 22nd, 09:32

SEVEN STEPS TO STARTING A BUSINESS

Use this document as a reference tool when beginning to talk to an    individual or a group in your community about starting a business. It is designed to get introspection and to begin to test the feasibility of the business idea.

Step 1:                        Prepare for the adventure

ü  Do you have the motivation to be a business person?

ü  Do you have physical health, mental health, endurance, perseverance and a can-do attitude?

Step 2:                        Find your big idea

ü  Whether your idea is innovative or not, you’ll need and idea that reflects your interests and uses your skills

ü  You need to ask and answer, “Will my customers be interested in my business?”

ü  Observe others  in your industry (your potential competition), as a good source of information

ü  Take a look at your potential market (their needs, their interests)

ü  If you find a bank or financier willing to help you, don’t hesitate to speak with them

ü  Protect your idea by registering it with your government

Step 3:                        Do your market research and analysis

ü  Ask yourself eight questions:  what, to whom, how, where, when, why, how many, at what price

ü  Your analysis will allow you to identify the key success factors for your business (it might be price, delivery/distribution or service)

ü  By doing your research you may be able to identify other real needs (and thus, you may alter your original idea)

ü  While doing your research, you might identify potential customers and business partners (networking)

Step 4:                        Prepare your feasibility study

ü  Your plan should cover no less than three years

ü  Your plan should include items from steps 1, 2 and 3

ü  Who will run your business and what are their backgrounds, their anticipated salaries, their roles in your business, etc?

ü  You’ll need to figure out how much money you’ll need to open your business and when you’ll be needing it

ü  You’ll need to do a cash flow analysis. Consider financing. Look at how long, at what rate when you’ll be at breakeven and when you’ll be making a profit

Step 5:                        Getting financing

ü  A) From the informal sector:  family, friends, neighbors, your own savings, or other community groups

ü  B) From the formal sector:  micro finance institutions which come in three categories (and may or may not require collateral)

o   MFIs that work exclusively with their members

o   MFIs that work with anyone 

o   MFIs that give out loans but do not handle savings

ü  C) The formal classical banking sector made up of commercial banks (which will require collateral)

Step 6:      Deciding on the legal structure

ü  Will you be a sole proprietor, or a Pty Ltd. 

      Step 7:      Documentation

ü  The legal structure you select will require differing government fees and documentation. Your local Chamber of Commerce can be of assistance or speak to a local accountant.

Time Management

To manage your time effectively, you have to understand why Retail Manager's need a unique approach to time management.  

There are a lot of people working in a number of industries that just can’t use the standard time management techniques that are out there. And retail is certainly one of them.

To a limited extent, Retail Manager’s at Head Office level can use standard time management techniques but, even still, if they are in the field as often as they should be, they will not be able to operate at peak effectiveness by following those techniques.

Consider some of the obvious differences:

    Retail stores are open to the public for many hours each day and most days of the week. Some are 24/7... Monday to Friday, 8 – 5 simply doesn’t exist in the retail world.

    We can’t get to the bottom of the inbox by simply working late.

    There is rarely an office door for Retail Manager’s to close.

    There is no ‘do not disturb’ function on the phone. Customers may be calling.

    Retail Managers do not have the luxury of planning the majority of their time.

    We need to drop everything when the customer arrives and their precise time of arrival cannot be predicted!

    The workload can vary dramatically depending on how many customers arrive at the same time.

    When shipments are early or late…schedules and plans become useless.

    Stores are staffed by people working shifts.

    Each function being performed in a store is usually being handled by more than one person.
 

    Communication between team members is more complicated due to the nature of the business.

In retail, we need to work differently when it comes to managing our time. We need to learn how to manage our time using some best practices in a somewhat uncontrolled environment.

To improve your effectiveness, attend our one day workshop in time management for only R995.00 all course material included.

For further information please contact training@mretailing.co.za for this and various other training workshops.

Retail Sales to grow 4.5% this year

In real terms it is expected that retail sales will grow by 4.5% versus 5.7% last year. Consumers are under greater financial pressure due to the increase of cost of living which is driven by the likes of fuel and electricity hikes. Although this anticipated growth is showing a slight decline on the previous year, it is however still almost 50% better than the average anticipated GDP growth for the country.

The total value of formal retail sales is expected to amount to just over R 747 Billion Rand. According to Market Research at the University of SA the retail outlets which are expected to show the highest real growth rates are General Dealers (4.8%) Furniture and Appliances (5.0% and the leaders being Clothing, Footwear and Leather retailers (7.0%).

6 Habits of True Strategic Thinkers

Many business leaders are frustrated that they spend too much time on the day-to-day issues and not get around to the strategic part of their business. Here's some tips on how to become the strategic leader your company needs.

If you find yourself resisting "being strategic," because it sounds like a fast track to irrelevance, or vaguely like an excuse to slack off, you're not alone. 

Every leader's temptation is to deal with what's directly in front of you, things that make an immediate impact on the bottom line, and also because it always seems more urgent and concrete. Unfortunately, if you do that, you put your company at risk. While you concentrate on steering around potholes, you'll miss windfall opportunities, not to mention any signals that the road you're on is leading off a cliff.

This is a tough job, make no mistake. "We need strategic leaders in South Africa!” is a pretty constant refrain at every company, large and small. One reason the job is so tough: no one really understands what it entails. It's hard to be a strategic leader if you don't know what strategic leaders are supposed to do.

Adaptive strategic leaders — the kind who thrive in today’s uncertain environment – do six things well:

Anticipate 

Most of the focus at most companies is on what’s directly ahead. The leaders lack “peripheral vision.” This can leave your business vulnerable to rivals who detect and act on ambiguous signals. To anticipate well, you must:

• Look for game-changing information at the periphery of your industry

• Search beyond the current boundaries of your business

• Build wide external networks to help you scan the horizon better

• Reframe problems to get to the bottom of things, in terms of root causes (root cause analysis)

• Challenge current beliefs and mind-sets, including your own

• Uncover hypocrisy, manipulation, and bias in organizational decisions

• Seek patterns in multiple sources of data

• Encourage others to do the same

• Question prevailing assumptions and test multiple hypotheses simultaneously (Don't just take things at face value)

• Carefully frame the decision to get to the crux of the matter

• Balance speed, rigor, quality and agility. 

• Take a stand even with incomplete information and amid diverse views. The Pareto principle applies in most cases where 20% of the analysis will give you 80% of the outcome and, by spending much more time and money on over analyzing to the end degree, you will in most cases reach the same outcome regarding the decision you need to take if you had stopped at 20% of the analysis. 

• Understand what drives other people's agendas, including what remains hidden (It is sometimes not what you see or hear, but rather what you don't see or hear)

• Bring tough issues to the surface, even when it's uncomfortable (Make the tough calls)

• Assess risk tolerance and follow through to build the necessary support

• Encourage and exemplify honest, rigorous debriefs to extract lessons

• As a leader you must always encourage your team to " Don't tell me what you think I want to hear, rather tell me how it really is"

• Shift course quickly if you realize you're off track (eliminate the red tape) 

• Celebrate both success and (well-intentioned) failures that provide insight

Think Critically

“Conventional wisdom” opens you to fewer raised eyebrows and second guessing. But if you swallow every management fad, herd like belief, and safe opinion at face value, your company loses all competitive advantage. Critical thinkers question everything. To master this skill you must force yourself to:

Interpret 

Ambiguity is unsettling. Faced with it, the temptation is to reach for a fast (and potentially wrongheaded) solution.  A good strategic leader holds steady, synthesizing information from many sources before developing a viewpoint. To get good at this, you have to:

Decide

Many leaders fall prey to “analysis paralysis.” You have to develop processes and enforce them, so that you arrive at a “good enough” position. To do that well, you have to:

Align

Total consensus is rare. A strategic leader must foster open dialogue, build trust and engage key stakeholders, especially when views diverge.  To pull that off, you need to:

Learn

As your business grows, honest feedback is harder and harder to come by.   You have to do what you can to keep it coming. This is crucial because success and failure--especially failure--are valuable sources of organizational learning.  

 Make sure you set time aside to dedicate to strategic thinking - Good luck!

www.mretailing.co.za

3 out of 4 new appointments fail

Hiring and retaining the best people is one of the most critical jobs the owner or manager of a company has. In surveys, most rate their success at about one excellent hire out of four. The other three either weren’t a good fit or didn’t have the ability that their training or resume indicated.

That’s a huge problem. As Jim Collins wrote in his indispensable management book “Good to Great: Why Some Companies Make the Leap ... and Others Don't,” getting the “right people on the bus and the right people in the right seats” is the most essential task in business.

While good hires energize those around them, bad hires become energy drains. Bad appointments dampen productivity and suck up management time and attention.  

Often, it’s not skills or credentials that predict success. What really matters is whether the prospective candidate fits the job. Do they have characteristics that match those of your top performers? It sounds a bit squishy, and yes, hiring may be part art, but it’s also a science. You can assign metrics to the characteristics that make a difference in performance and better predict candidates’ success.

Here are five tips that may help you hire and retain top performers.

1.   Use a structured hiring process that goes beyond resumes and interviews.

We begin by determining the applicant’s basic employability characteristics: integrity, reliability, and work ethic. This assessment helps screen out people who are not likely to perform well or fit your performance culture. 

2.   Get an objective understanding of your best people.

Study your top performers; develop a performance model--a benchmark-- for that position. Once these have been established then look for a close match between the applicants’ scores and the performance benchmark. You can use the information to coach employees, determine training needs as well as for promotion and succession planning decisions.

3.   Develop customized performance models.

 One size does not fit all. Slight differences in the model may have a big impact on performance. Start with critical or problem positions where productivity or turnover may be an issue. Be certain that your performance metrics are objective and clearly identified so you can differentiate between top and bottom performers. The model that derives from this process will help you improve performance in all your positions.

 4.   Have your supervisors and/or management also take the assessment.

This way, they can better understand themselves and their direct reports, and coach them toward increased productivity. The reports give supervisors a “user’s manual” for each direct report that shows challenge areas, how to motivate them and how to get a better performance.

5.  Repeat for every hire, for every position.

More input will produce better benchmarking. If this sounds like reverse engineering, it is. This method has proved to be highly reliable, helping achieve good hires three times out of four versus the one out of four times.

 This approach will definitely help you to consistently identify, hire, retain, and manage great employees.

For any retail training requirements, please contact us at training@mretailing.co.za or visit our website www.mretailing.co.za

Woolies, Spar, Shoprite & JDG

CEO Ian Moir of Woolies tables outstanding results. Headline earnings per share up by 21%; Revenue up by 18% and return on equity (ROE) increased to 58%. Woolies trying to now get shoppers to go from being basket shoppers to being trolley shoppers by increasing its pack sizes and offering bulk and new brands. Time will tell if this strategy will eat into Pick n Pay's market share.

Spar Group on the other hand has reported that due to fuel and utility cost increases that they have experienced tougher trading conditions with turnover coming in at R15.8bn, a growth of 10.7%

Shoprite Africa's biggest grocer posted a turnover of R46.7bn, a growth of 13.8% increase for the six months ending December 2012.

It is with sadness that the JD Group CEO Grattan Kirk who is also the chairperson of the SA Retail Council has resigned as CEO from JDG. David Sussman the JDG founder will step in as the acting CEO.  David is also a board member of Steinhoff UK and Steinhoff has a 51% stake of JDG. Henk Greeff who is the executive director for strategy and human resources also tabled his resignation.