Figure 2.1: Development of strategic management as a way of life in business 16 Figure 2.2: The three stages of transformation and renewal in an organization 17 Figure 2.3: Strategy requirements for staticvs.
INTRODUCTION
Background to the research
PPC is South Africa's leading cement supplier, with seven manufacturing facilities and five cement depots in South Africa, Botswana and Zimbabwe. Today PPC is the market leader in South Africa, with a product range that covers all applications and a technical services team that is ready to provide industry solutions. PPC is proud of its achievements and the fact that its products have played a vital role in the development of the country.
Problem statement
The success of the research will be based on evidence that a significant number of successful companies are implementing continuous strategy innovation. It is important to note that there are two parts to the research question that must be answered in order to satisfactorily fulfill the purpose of the study. To keep the research focused and relevant, most of the research will be based on one company, namely PPC Cement.
STRATEGIC DECISIONS IN CONTEXT
Other unforeseen challenges will certainly arise during the research. Success will not be determined by the absence of challenges, but by careful and educated use of research instruments.
SAMPLE CASE STUDIES
PPC CEMENT COMPANY LIMITED CASE STUDY
EVALUATION OF THE CASE STUDY
CONCLUSION AND RECOMMENDATIONS
Summary
- STRATEGY REGENERATION PROCESS
A strategy will only work well when the internal and external conditions of the organization are relevant to what the strategy is designed for. This can be achieved by considering the strategic vision of the organization against future business environment scenarios to determine the degree of alignment (INTERNET 3). The strategy regeneration approach takes a holistic view of the environment, identifying trends, key driving forces, strategic issues and key uncertainties, and looks into the future by developing industry scenarios and forecasts.
AS A WAY OF BUSINESS LIFE
Change and adaptability
Along with the demands for change and adaptability, companies must have strategies in place that will help them meet these demands. Ford in the automotive industry is an example of the new economy and the old economy working together. Ford partnered with Oracle and formed a separate business unit to operate in the old as well as the new economy.
Globalisation of the world economy: Strategies for South African managers
The mission and vision must be authentic and can turn either in a self-interested direction, reflected in the income statement, or in a contributing direction, as measured by the statement of added value. A review of the second article shows a clear distinction between the approaches required in static and dynamic business environments. There is a clear divergence indicated by the two document reviews in the method to be followed in the continuous renewal of the business strategy.
Summary
- Dividend Analysis
- Dividend Analysis
- Competitor Analysis
- Sales Analysis
- Recent Stock Performance
- Corporate, environmental and social governance
This represents an increase of 15.2% compared to 2002, when the company's sales were 4.28 billion South African Rand. For the same 12-month period ended September 30, 2003, the company reported earnings of 3.89 South African Rand per share. This represents an increase of 11.8% compared to 2003, when the company's sales were 26.19 billion South African Rand.
During the same twelve month period ending 29/02/2004, the company reported earnings of 1.10 South African Rand per share. During the same twelve month period ending 12/31/2003, the company reported earnings of 0.70 South African Rand per share. During the same twelve month period ending 12/31/2003, the company reported earnings of 1.70 South African Rand per share.
This represents an increase of 14.2% from 2002, when the company's turnover was 20.18 billion South African Rand. During the same twelve month period ending 9/30103, the company reported earnings of 7.53 South African Rand per share. The company's earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to 2.17 billion South African Rand, or 9.4% of sales.
The company's accounts receivable amounted to 3.31 billion South African Rand, equivalent to 52 days of turnover. This represents an increase of 56.1% from 2002, when the company's turnover was 12.43 billion South African Rand. The company's earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to 6.21 billion South African Rand, or 32.0% of sales.
Prospects
The charter for the SA mining industry sets guidelines for empowerment and upliftment within the context of the new Minerals and Petroleum Resources Bill. A target of 26% involvement of historically disadvantaged South Africans over ten years has been set. The overall objective is the expansion of opportunities for historically disadvantaged persons to enter the mining and minerals industry or benefit from the exploitation of the country's mineral resources.
At the same time, it is the government's stated policy that it will allow the market to play a key role in achieving this goal. The processing of licenses will henceforth be facilitated by a scorecard approach, which takes into account applicants' progress in terms of ownership level, management diversity, employment equity, human resource development, procurement and patronage. While the PPC is already well advanced on a number of these requirements, the full implications and measurement requirements of the bill and its associated charter were still under review at the time of this report.
Above all, rising trends in gross fixed capital investment are evident in all sectors of the South African economy, and as a result the company expects continued growth in cement sales in the coming year. In the medium term, this company remains well positioned to benefit from any economic improvement in Zimbabwe and exports. Operating costs were negatively impacted by the full impact of the weaker rand and higher producer inflation.
Despite these developments, improved operating results were expected across all business units and the group remained well prepared to take advantage of any market conditions and opportunities that might arise.
Corporate governance
In terms of non-financial aspects, the company will supplement these expanded reporting requirements by adopting the Global Reporting Initiative's Sustainability Reporting Guidelines on economic, environmental and social performance. The company increased corporate accountability this year to a level of compliance that enabled the company to achieve full compliance with the King II report by September 30, 2003. A philosophy of balancing disclosures to obtain the most meaningful overall understanding of the company's corporate governance structures, as well as economic (including financial), environmental and social performance has been adopted.
Compliance with the law in all countries in which the company operates is a minimum requirement. As a centralized body, PPC's board of directors strives to balance corporate and governance constraints. Furthermore, the directors believe that the established governance principles and practices are appropriate for the company's activities, for the benefit of the shareholders and also in the interests of the relevant stakeholders.
While retaining overall responsibility and taking into account its reserved matters, the board of directors has delegated the authority to manage the day-to-day affairs of the company to the CEO and other executive directors. Each committee acts within a written mandate, delegating certain functions of the board with clearly defined purposes, membership requirements, duties and reporting procedures. The committees are regularly assessed by the board for their functioning and effectiveness.
Chairmen of board committees must attend annual general meetings to answer any questions raised by shareholders.
Board of directors
Therefore, the responsibility for running the board and the executive responsibility for running the business are differentiated. The roles of the chairman of the board and the chief executive officer are separate. The group secretary also administers the legal requirements of the company and its subsidiaries in South Africa.
No director or officer of the company may trade the company's shares during the embargo period determined by the board in terms of a formal policy implemented by the group secretary. The head of internal audit and the senior audit partner responsible for the external audit attend all meetings. Audit parameters and internal controls are discussed between the audit committee and the external auditors as part of the audit process.
The chairman of the audit committee presents a report on the intermediate and final results at the board meeting held for the approval of these results. The audit committee has established principles for the use of the external audit firm for non-audit services and approves the corresponding fees above certain materiality limits. An internal audit charter that defines the function, responsibility and authority of the group's internal audit activity is approved by the audit committee.
Subordinate internal audit reports are submitted to the audit committees of the relevant business units.
Risk management
- Strategic group mapping
Several controls are in place to ensure good management by business unit managers as well as group directors. The capacity of cement producers is more than 10 million tons of cement per year. Although PPC is one of the cheapest manufacturers in the world, their competitive advantage comes from the premium price they can charge for their products.
Capacity Utilization: One of the reasons that PPCs can gain cost competitiveness is the fact that they can reach over 110%. Since the collapse of the price cartel in the cement industry, cement manufacturers have had to learn a few competitive skills. This was forced by the unpredictable market share and also the price sensitivity of customers.
Major events can have a direct impact on determining the future and direction of the industry; these are the driving forces in the sector. The government has determined that all natural resources are the heritage of all citizens of the country. The quality of cement is measured in terms of purity and consistency of the product.
Therefore, the next section will present the goals and strategies of the competitors – ie.
Generic competitive strategies: PPC Cement
The company has planned regional, national and international expansions in the last three years. The next chapter will help develop and recommend a method in which PPC can constantly regenerate its strategy to stay ahead of the competition. It is clear that some of the companies in the less competitive sectors tend to be complacent and unresponsive to environmental change.
Among the ten companies in the sample population (Chapter 3), the longest strategy renewal period is 5 years and the shortest is % one year. The only shortcomings for short strategy renewal processes that PPC Cement needs to watch out for are:-. PPC Cement operates in the rapidly globalizing and ever-changing South African market, in order to remain competitive they must focus on the following:-.
Competing for the future should not be seen as just another 'big hairy audacious goal', but rather a strategy in which the senior management team is concerned with competitiveness in the current markets, and also in the firm's ability to in the markets of the future. Establishing future competitiveness will at least guarantee PPC's survival in the cement business of the future. Businesses very often believe that 'the customer is king' and in the process neglect the other stakeholders – mostly their employees.
Further research on the topic of 'continuous regeneration of business strategy' will be useful in the difficult situation to further prove the hypothesis that continuous and responsive business strategies bring success to companies.
