Research question:
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Session: May 2018

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Category: (To be mentioned for English and Hindi only)

Table of contents

Research question

2. Introduction

2.2 Background information

3. Methodology
3.1 Method 1
3.2 Method 2

4. Analysis
5. Evaluation
6. Conclusion

7. Bibliography

8. Appendix
Research Question: To what extent can Nike’s success be attributed to its 3 P’s of marketing(Price, Promotion and Product)?


In this extended essay I will answer the question as to what extent can Nike’s success be attributed to its 3 P’s of marketing, Price, Promotion and Product. In a short time Nike, has gone from an “underdog” business to a market leader. Nike, Inc.(Greek goddess of victory) is a major publicly traded sportswear and equipment supplier based in the United States, it was founded in 1964 as Blue Ribbon Sports and officially became Nike in 1971. Nike is not only successful in the footwear market but also in the apparel market. It accounted with the revenue of $29.6 billion USD in 2018. The company, is traded as NKE on the New York Stock Exchange (NYSE), has acquired several footwear and apparel companies over its history such as Cole Haan, Bauer Hockey, Converse, Hurley International, Starter and Umbro. The Nike swoosh is one of the most recognized logos, as well as one of the most reputable athletic sponsors in the world.

I will be looking at Nike predominantly in the context of the marketing mix and under that the Price, Promotion and Product, topic of the business management syllabus. While doing the early research for this essay it became clear that Nike’s marketing strategies form a large part of its image and are talked often in the Apparel industry. Nike’s footwear are a major sources of its profits and success – the marketing of them is also very important, but the products themselves form the core of this success.Footwear accounted for 61% of the company’s revenues in 2016. For this reason I will be focussing more on the marketing of Nike’s products.


Most of the theory used in the essay comes from Unit 4 of the Business Management syllabus: Marketing, and under that the 3 p’s of Marketing(Product,Price and Promotion).

To examine the effectiveness of Nike’s 3 p’s of marketing, the topic was first researched from secondary sources such as case studies, magazine articles , newspaper articles and blog posts (if the source was known to be reliable). It would be difficult to obtain primary research sufficient enough for this research paper.A wide understanding of Nike was necessary to answer the research question: In order to describe the 3 p’s of Marketing, I needed to know of other factors that could contribute to Nike’s success. These sources gave an overall impression and understanding of Nike, which could then be put in a relevant Business ; Management context. By analyzing these factors of Nike’s success and comparing them to another apparel company (Adidas), their importance and effectiveness to Nike can then be deduced.

Limitations of research:

• Newspapers can often be bias as their main interest is to maximise sales. Although I am not suggesting that figures and facts published are incorrect, often newspapers have been known to distort and skew stories in the past.

• Any reports validity must be considered because organisations can only test samples. It is near impossible to monitor the whole of Europe’s download usage.

Models and business tools:
I will be looking at the product portfolio of Nike and for that I will be using the BCG matrix,(Boston Matrix is a method of analysing the product portfolio of a business in terms of market share and market growth). I will use the SWOT analysis to examine how the promotion strategies of Nike is leading to its growth. The use of Pestle analysis will help me to see whether the pricing strategy is working or not.


In today’s competitive environment, Nike has been able to differentiate itself, compared to competitors, and has become the global leader in the athletic footwear/apparel industry. The absolute key to Nike’s success has been its excellent marketing strategies that allow the company to sell a massive quantity of its highly innovative products. Nike has become a transcendent super-brand, because it understands that products are made in factories, but brands are built “in the mind and bought by the consumer” (Kazi, 2011). The Nike swoosh is widely considered the most iconic logo in the business world and revolutionized the way that the corporation has been able to market its products.

BCG matrix on Nike’s Marketing of products atartegy.

Problem Child:
Question marks/Problem child are new lines of business with a low market share in an expanding market that the corporation believes can be grown into stars. To make question marks into stars, corporations must make significant cash outlays; this requires profit from their other lines of business. This commitment of resources is, of course, not without risk because question marks can become dogs. Question marks use growth strategies to get to profitability fast. Nike has decided to market a tailored line of sporting apparel to compete more directly with under amours high performance sweat resistant line of fitting clothing. Nike needs to closely monitor sales of these products to determine whether it has a star or a dog on its hand.
Stars are emerging business with a rapidly growing market share.Corporations typically plow profits back into the stars products, in the hope that a star will eventually gain enough market shares to become a cash cow. Stars often use growth strategies. Nike developed a star by hiring Tiger Woods to represent its new line of golf clubs. Nikes golf line has since done very well, finding a direct link between Tiger’s wins ; increased sales volume. The Nike+technology used to monitor a runner’s distance & calories burned hasbeen a pleasant star by Nike expects the market for Nike+ to grow rapidly.
Cash Cows:
Cash cows generate lot of revenue. They may exhibit low growth,but they have high market share e.g. Air Jordan sneakers. Cash cows typically use stability strategies.
Dogs give low return in a low growth market, & to add insult to injury, they have low market share – nothing is going right with a dogs. Therefore, corporations often divest or liquidate their dogs at some point when they determine the dogs is a hopeless case; for e.g. the World Wrestling Federation folded the XFL in 2001. Dogs require turnaround & retrenchment strategies. The business portfolio analysis helps corporate level managers figure out how to allocate cash & other resource among the organization’s business lines (as well as which corporate strategies to use). Managers use profits from cash cows to fund question marks ; sometimes stars. Any cash from dogs is also given to question marks ; stars, as well as any resources from their sale.

Nike is the company with the most revenue and the highest profit. Nike is therefore considered as star in the BCG Matrix. Even though Adidas and Puma have a similar percentage of profit, Adidas still has considerably more revenue than Puma.

Swot analysis of the promotional activities of nike:

The company’s advertisements present highly popular personalities, such as professional athletes. The target customers see that their favorite celebrities use the company’s products. As a result, the customers are motivated to mimic the behavior of these celebrities.
Nike also uses direct marketing to promote new products to the target market by utilizing salespeople to approach sports organizations in colleges to establish stronger relations and motivate them to buy its products.
Nike ads have been great at connecting with customers and most of its video ads have an inspirational theme. Its Unlimited You ad released some ten months ago was about breaking the limits. The ad spoke about defying your limits to realize your potential. Life is not about finding your limits. It is about realizing that you have none. These ads that Nike creates are like short stories that are full of energy and inspiration. It has uploaded 276 videos on Youtube that advertise its products and brand.
Nike FuelBand and the Nike+SportWatch GPS, Nike has been able to track its core customers and has learned that they spend an increasing amount of time on the Internet. This resulted in Nike launching online, digital ad campaigns on various social online communities/outlets. The Nike+ series of new innovative products records customers’ behaviors and patterns, as well as creating a platform for customers to really connect with Nike. By going digital, Nike is now able to directly communicate with its past and future customers, which allows it to understand what its target market wants out of a product.
Nike has used below the line promotion (promotion that is not a directly paid-for means of communication but based on short-term incentives to purchase, e.g. sales promotion techniques)in their marketing strategy, Roger Federer is contracted to Nike to wear their footwear and clothing. Nike designed a personalised jacket for Federer emblazoned with a crest of four tennis racquets, symbolising the four Wimbledon Championships he had previously won.
Nike also have it’s online store called Nikeid.com where you can customize your running shoes at your own taste what’s great about this feature is that if by any chance the bubble from your air max pops they could replace it, it’s like having a guarantee on your sneakers., over here customer satisfaction comes in place
Nike has used sales promotion which is a form of below the line promotion, Nike’s aim to use sales promotion is to achieve short term sales increases and repeat purchase by customers. This has lead increase in sales, Nike’s global revenue amounted to about 34.35 billion U.S. dollars.
Global presence:As of May 31, 2017, the company operated 1,142 stores globally, including 384 stores in the US and 758 stores internationally.

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TMC Thomas Meikles Centre
TMS Thomas Meikles Supermarkets
ATM An unattended machine outside the bank that dispenses money when
a corded bank card is used
SHP Shoprite
ZANU PF Zimbabwe African National Unity for Patriotic Front

ACKNOWLEDGEMENTSThe task of completing this attachment was not easy without assistance from others including supervisors, friends and family. I would like to appreciate both of my supervisors, the academic supervisor and attachment supervisor for their guidance and effort they put in the supervision from the start till the end. I would also like to thank all my fellow students from the faculty of social sciences for their motivation whenever things were difficult for me, they were there to support me especially those from the department of Community Development. Lastly I extend my gratitude to my family for their support during the years I was studying, without them it was difficult to complete my program.

TOC o “1-3” h z u TITLE: PROFFESSIONAL ATTACHMENT WORK RELATED PAGEREF _Toc501344787 h IABBREVIATIONS AND DEFINITION OF TERMS PAGEREF _Toc501344788 h IIACKNOWLEDGEMENTS PAGEREF _Toc501344789 h III1 HISTORICAL DEVELOPMENT. PAGEREF _Toc501344790 h 12 MISSION STATEMENTS FOR PICK N PAY PAGEREF _Toc501344791 h 42.1 VALUE STATEMENTS FOR PICK N PAY SUPERMARKETS PAGEREF _Toc501344792 h 42.2 OBJECTIVES PAGEREF _Toc501344793 h 53 ORGANIZATIONAL GOALS FOR PICK N PAY PAGEREF _Toc501344794 h 54 OPERATION ANALYSES PAGEREF _Toc501344795 h 64.1 SERVICES AT PICK N PAY PAGEREF _Toc501344796 h 74.2 FINANCIAL OPERATIONS FOR PICK N PAY PAGEREF _Toc501344797 h 8Fig 4.2 shows Pick n Pay cost of sales for the year ending 2016 PAGEREF _Toc501344798 h 95 ORGNISATIONAL STRUCTURE FOR PICK N PAY/ ORGANOGRAM PAGEREF _Toc501344799 h 12Table 5.1 shows the organizational structure for Pick n Pay at the branch level PAGEREF _Toc501344800 h 12Fig 5.1.2 shows the Pick n Pay hierarchy at regional level PAGEREF _Toc501344801 h 146 SWOT ANALYSES FOR PICK N PAY PAGEREF _Toc501344802 h 147 RELATIOSHIPS BETWEEN PICK N PAY AND OTHER STAKEHOLDERS PAGEREF _Toc501344803 h 168 RECOMMENDATIONS PAGEREF _Toc501344804 h 179 CONCLUSIONS PAGEREF _Toc501344805 h 19REFERENCES PAGEREF _Toc501344806 h 20
TOC “Heading 1” c Fig 4.2 shows Pick n Pay cost of sales for the year ending 2016 PAGEREF _Toc501344400 h 9
Table 5.1 shows the organizational structure for Pick n Pay at the branch level PAGEREF _Toc501344401 h 12
Fig 5.1.2 shows the Pick n Pay hierarchy at regional level PAGEREF _Toc501344402 h 14

The industrial attachment is an appreciable skills programme to equip students to the real life work experience. This programme involves all universities, colleges, polytechnics and all students from various institutions across the country.

The origins of the indigenous people of Zimbabwe have a long way to trace since it dates back to the 12th century stretching to this present day. The original tribes to settle in the land of Zimbabwe were the Bantu people of the Bambangenjalo kopje and the later the Shona tribe during the 15th and the 18th century. In the mid-19th century, another group the Ndebele who arrived from South Africa settled in the Bulawayo district. In 1890 a group of conquers came from the west Europe in the pioneer column organized by Cecil John Rhodes made their way into Zimbabwe and conquered what was already owned by the Ndebele and the Shona, the natural resources. From there the country then became named Southern Rhodesia and was a self-governing colony of the British Commonwealth. These events and interests of these three groups in particular on matters concerning universal suffrage and property rights would set the stage for most of the political events within the country over the 20th century.

Political environment.

The British Common wealth later unilaterally declared Southern Rhodesia independent in 1965 because of some reasons including the inability to remotely manage Southern Rhodesia from Britain, and then the Rhodesian Front government takes the lead. In 1980 this country then gained independence and became known as Zimbabwe. The conference of the Lancaster House Agreement guaranteed universal suffrage, which saw the Zimbabwe National Unity People’s Front (ZANU-PF) came to power in April 1980 winning 57 parliamentary seats or 63% of the votes and has remained in power to present day, winning consecutive elections of 1985, 1990,1995,2000,2008 etc. exhibit shows that election results and the composition of seats in the parliament, the main law making body within the country. In December 1987, unity talks between ZANU PF represented by the Shona and ZAPU represented by the Ndebele the main opposition party were concluded culminating in a merger of the two parties under the ZANU PF two years later.

Economic environment
With its well-diversified manufacturing sector, prosperous commercial farming varied mineral resources and a relatively dense infrastructure, the Zimbabwean economy is much more diversified than its neighbors, with the exception of South Africa. It is was less dependent than it is becoming now in the sectors of mining, education, health among others both as a share of the Gross Domestic Profit and in exports. Among the productive sectors, manufacturing is one of the most vital sectors contributing approximately 25% of the national income, although in value of the output and export earnings the two leading commodities are tobacco and gold. However agriculture, despite of generating less than 15% of GDP and mining barely half that level still dictates the overall health of the economy. Another exhibition shows the comparative economic indicators for Zimbabwe with some of its Southern African neighbours and with the UK and the US.
Historical Background of TM Supermarkets under Meikles Africa Limited in
The founders of the Meikles businesses, the Meikles brothers started their business with a general store in Masvingo in 1892. This was the start of the development of the retail chain that was to spread throughout the country. In 1915, Thomas Meikles founded the Meikles Hotel in Harare, the capital city of Zimbabwe. Throughout most of the 20th century the Meikles family focused on growing the retail and hotel interests collectively the Meikles businesses either organically or by means of acquisition. In the late 1950s significant investments were made to upgrade the Meikles hotel. In the mid-1970s the retail business took control and took over the management of Greatermans and Barbour’s both departmental stores that were leading during that period.
Starting the period 1996, the Meikles business undertook a successful merger with one of the retail business which is the Northchart investments limited a publicly trading business holding investments interest in South Africa on the Zimbabwe and London stock exchange. This merged firm was later renamed as Meikles Africa Limited and was well positioned to access both local and international markets to finance new growth opportunity.

A brief description of the Meikles business
Meikles Africa Limited comprises five subsidiary companies as indicated in Exhibit 6. The principal operating subsidiaries are Thomas Meikles Centre (Private) Limited (TMC) (incorporating the hotel and department store businesses) and Thomas Meikles Supermarkets (Private) limited which operates the supermarket retail interests (TMS) of the group. Thomas Meikles Properties (Private) Limited, Ninety Speke Avenue (Private) Limited and Petria Properties (Private) Limited are property owning subsidiaries of the principal operating business units within TMC and TMS.
Pick n Pay historical background before merging with TM Supermarkets
Born in 1931, Raymond Ackerman was a boy from one of the most leading family retailers in South Africa. His father Gus Ackerman founded the Ackerman department store in 1916. Raymond studied commerce at the University of Cape Town under the guide of an economist W.H Hutt and one of the philosophies of Hutt was customer sovereignty. After graduating from school he went on to work for his father’s businesses as a trainee manage in 1951. While still working at the distribution warehouse he was bought by another department store, Greatermans which by then located in Johannesburg.

Thomas Meikles Supermarkets
Thomas Meikles Supermarkets abbreviated as TM Supermarkets operates 56 stores in Zimbabwe currently with further stores under construction and renovations. TM Supermarkets have a wide range of goods covering food stuffs and other consumable items. During the year ended 1996 over 90% of the sales were of food and daily home use items. Generally the supermarkets do not offer consumer credit and most of the sales are for cash, cheques or credit card transactions. TM Supermarkets have a long chain of approximately 1000 suppliers for many of whom TM Supermarkets is the largest single account. The cost prices with the suppliers are negotiated centrally for the chain as a whole and the approximate average settlement period for supplier accounts is 7 weeks. With the decline of the industrial activities on the Zimbabwean plateau, more than 80% percent of the products in the supermarkets are imports with a few local products generated from the local small enterprises.

Alliance with Pick n Pay
It was in 1996, when TM Supermarkets and the South African supermarket chain Pick n Pay agreed to form an alliance. This association covered a number of aspects including the provision of retail expertise from Pick n Pay. Moreover TM Supermarkets was able to procure the supply of both food and non-food merchandise through Pick n Pay at more competitive price and terms than at present. The coalition also involved Pick n Pay owning 25% of the issued share capital of TM Supermarkets private limited in consideration of reciprocal investment of 30 million South African rand that approximately 6.5 million United States Dollar by Meikles Africa Limited in Pick n Pay. These arrangements involved the setting up of a new joint venture company owned on an equal basis by Pick n Pay and Meikles Africa Limited for the development of supermarkets for the development of other supermarkets in other countries across the African continent. Currently most of the TM Pick n Pay stores are operating under the brand name Pick n Pay to match the name recognized continentally in Africa, though in Zimbabwe the share is 52% and 49% for TM Pick n Pay respectively. In the following sections, I will use the term Pick n Pay to represent TM Pick n Pay Supermarkets.

With our hearts we create a great place to shop.

With our minds we create an create an excellent place to shop
1. We Serve
This statement in itself encapsulates the essence of Pick n Pay’s belief that it’s a business there to support not only the customers and suppliers but also its colleagues and associates in the company and countrywide.

2. With our hearts we create a great place to shop
This element as part of the mission statement are based on the premise that the experience enjoyed by customers shopping at Pick n Pay supermarkets are directly linked to the experience enjoyed by Pick n Pay workers in their work environment. This means that there is a mutual relationship that Pick n Pay seems to be in existence between them and the customers.

3. With our minds we create an excellent place to shop
As part of the ever changing evolutionary process confronting the retail industry, It is crucial for the retail to plan accordingly so that the physical assets of the company are keep up to date in terms of maintenance and repairs and more importantly they reflect the ever changing demands of diverse customers.

The TM Pick n Pay supermarkets is not just a company of bricks and mortar, it’s also the people that works within organisation. Values are set and laid out so that these people act and behave in fulling the company’s mission.

Here are values laid down by the TM Pick n Pay Supermarkets:
We are passionate about our customers and we will fight for their rights.

We care for and respect each other.
We foster personal growth and opportunity.

We nurture leadership and vision and reward innovation.
We live by honesty and integrity.

We support and participate in our communities.

We take individual responsibility.

We are all accountable.

All these lead to a conclusion that products are available to the customers representing quality. The organisation will give back to the communities as a way of recognizing the communities they work on. In addition, Pick n Pay supermarkets also ensure job security and a fair business practice amongst its stakeholders.
2.2 OBJECTIVESTo make a meaningful and measureable contribution in the areas that they operate
To develop open and transparent partnerships and relationships with relevant organisations.

To focus on initiatives that is in alignment with Pick n Pay initiatives.

To work with other stakeholders for a mutual benefit
3 ORGANIZATIONAL GOALS FOR PICK N PAYIt is Pick n Pay policy to maintain a broad-based share option scheme for employees. This is an integral part of our remuneration philosophy and ensures that the interests of staff are aligned with those of shareholders. It gives all levels of management the opportunity to acquire shares in the Pick n Pay group, affording them the opportunity for economic uplift, and encourages employee retention. It is a key differentiator between the Pick n Pay and other retail employers.

Remuneration reflects the relative skill, experience, contribution and performance of the individual. Base salary is set at levels that are competitive with the rest of the market so that the Pick n Pay can attract, motivate and retain the right calibre of people to achieve the Pick n Pay’s strategic business objectives. Remuneration is directly linked to annual performance assessments. Annual increases in base salary are determined with reference to the scope of the employee’s role, the competence and performance of the employee, the projected consumer price index and comparable increases in the general and retail market.

4 OPERATION ANALYSESRetail operations are about being hands on as it includes many activities ranging from managing, accounting, administration, merchandising, and service departments. A store manager’s job is about managing resources such as people, merchandise, finances and promotions to deliver optimal customer service level. This job is about interacting with the customers and employees. It requires a person who is active when it comes to issues that needs planning, organizing, delegating and adapting to constantly changing circumstances and demands. This does not end there but it is the duty of the store managers to ensure that the stores is working to achieve the trading standards of the Pick n Pay supermarkets which means putting in hours before the customers arrive for their shopping and making sure that every department is in order after closing the shop.

Pick n Pay Supermarkets operations are anchored on the four legs of the retail table namely administration, merchandising, advertising and social responsibility as well as people.

This refers to various administrative controls, finance and store development in brief the mechanics of running business. This leg has an important philosophical aspect that relates to return on profit as well as capital. A policy of not trying to maximize profit is based on Ackerman’s belief that profit maximisation is an outdated business philosophy. Throughout its history, Pick n Pay has therefore avoided the mistake by buying heavily forward on a rising market to keep prices down in an inflationary climate.

This leg is crucial to the retail market because it is one of the processes that attract customers to use goods and services at Pick n Pay Supermarkets. Merchandising represents an establishment of what consumers really want and providing it at the right place in the right environment. Pick n Pay supermarkets take the definition of merchandising further to define the process as readiness to engage into conflict in the name of customer sovereignty. In addition, this was Ackerman’s belief that if he can supply any item to the customer at a lower price they have the right to it and price regulation was not a matter to his business.

Advertising and social responsibility
Pick n Pay Supermarkets has always regarded advertising and social responsibility as two sides of the same coin and the concept that doing well is good business underpins all of TM Pick n Pay’s social investments initiatives. This does not necessarily mean that the supermarket concentrates on doing well for the customer but also empowering the employee with the resources they need to grow and improve their lives. Pick n Pay Supermarkets has known for its outspoken objection to injustices and the plight of the disadvantaged in our society and has endorsed that viewpoint by contributing around six percent of after tax profit on average to community development programmes. It is believed that consumerism and social responsibility are inextricably linked. Profits are the bloodstream of our economic world but social responsibility is woven completely through a businessperson whole existence.

There is no doubt that the retail table would be imbalanced without the fourth leg, the company’s people. Good working conditions better rate of pay than competitors, fringe benefits that include housing loans and a genuine interest in the welfare of very staff member are important to the way.
4.1 SERVICES AT PICK N PAYCustomers can buy everything they need from a quick daily top-up to a larger weekly or monthly bulk shop. Fresh produce and butchery offerings are complemented by an in-store bakery, deli and hot food counter. Pick n Pay supermarkets serve a wide range of communities, from lower and middle-income families to the most affluent households. Product ranges are tailored to meet the needs of customers. Some stores focus on basic necessities and local produce while others boast specialty service counters, wine rooms, flower markets and sushi bars. Pick n Pay supermarkets trading under the Pick n Pay, Family, Daily and Mini-market banners, provide easily accessible locations and parking.

A hypermarket is a one-stop-shop offering fresh produce, butchery, deli, bakery and hot food counter, plus specialist categories not always available in a supermarket such as clothing, appliances, kitchenware, home improvement, garden and pool accessories, and toys and an expanded health and beauty range. These retail sites are large, catering for destination shoppers, with wide aisles and ample parking. Prices are very competitive, leaning towards multi-pack and bulk-buy items and increased targeted promotional activity.

Moreover Pick n Pay Express offers a targeted convenience range that satisfies an immediate top-up shop or a quick meal solution. The range is limited and is mainly focused on daily needs. Value-added services offered include ATMs, lottery, and airtime and electricity purchases. These sites are located in high traffic flow areas including high-density residential areas and public transport intersections.

Pick n Pay liquor stores are situated close to our supermarkets but with separate entrances. These stores provide customers with the added convenience of purchasing liquor while doing their grocery shop. Pick n Pay liquor stores also help customers to cater for parties and functions by providing a full delivery service. To be more convenient liquor is now found within the supermarket.

Pick n Pay Supermarkets are committed to giving our customers convenient and affordable basic healthcare, by providing a wide range of vitamins, supplements, sports nutrition, self-medication, medical services, clinics and dispensaries.

4.2 FINANCIAL OPERATIONS FOR PICK N PAYThe Pick n Pay group’s turnaround plan since the 2014 financial year has been to grow its sales by giving customers a better value offer and a more modern shopping experience, reducing its costs, and modernising its operations, in particular by centralising its buying and supply chain. By the end of the 2015 financial year, the Pick n Pay completed the first stage of its three-stage plan, having stabilised the business through strong financial control, greater operating efficiency and effective business management systems.

The second stage of the Pick n Pay group’s plan is to change the trajectory of performance and deliver sustainable trading margin improvement. Among the key objectives in this second stage are improved store efficiency, reductions in operating costs, and further progress on supply chain centralisation. These and other steps create meaningful headroom to deliver lower prices and better value for customers. With low levels of economic growth, rising costs and high unemployment, customers are now more than ever seeking out low prices and exceptional value. Against this background, the Pick n Pay took decisive steps in the first half of this year to accelerate its plan, in particular by reducing its costs and modernising its operations in order to deliver better value and a better offer to customers.

Fig 4.2 shows Pick n Pay cost of sales for the year ending 2016
As can be seen from the funnel chart above and as has been the case with Pick n Pay in the past, and probably always will be, one can hardly see the value for their profits as the amount is so small compared to their turnover achieved. As was the case with Shoprite (SHP), margins for general retailers are extremely thin in South Africa, because of the amount of competition out there. This does bode well for consumers though as price wars between large retails helps to keep inflation in check. But of course there is not a lot of meat on the bone in terms of profits being taken home after bringing in such large amounts of revenue.? Pick n Pay has a net profit margin of just 1.1%. ?
Based on PIK’s financial results, the markets they operate in and the economic environment they find themselves in, we value PIK at between R59.20 and R59.35 a share. We therefore feel that PIK is fully valued and would not recommend investing in them yet. It has come down since our last valuation when we mentioned that it is overvalued, but our advice stands, we would rather suggest looking at Shoprite or Woolworths, and feel that PIK’s turnaround plan as started in 2014 is yet to show the kinds of results that warrant’s PIK’s current PE ratio of basically 50. In addition to this the ROE is essentially the same as interest earned on the money market. Thus PIK is not really providing investors with greater returns than the money market, and investors’ needs returns greater than the money market to compensate them for the additional risk of investing in a company instead of investing on the money market.

Pick n Pay is pleased with the enhanced efficiencies and cost reductions that are being achieved through our investment in centralised category-based procurement, distribution, administration and related systems. In the first half of this year we completed the rollout of our fully integrated forecast and replenishment system, and substantively improved our two main distribution centres. Pick n Pay implemented a specialised high-density picking area pick tunnel in Philippi Distribution Centre in the Western Cape, significantly increasing the efficiency of handling slow-moving and single-item units. This has increased the capacity of the facility from 8 000 line items to 14 500, enabling us to centralise an additional 50 suppliers in the Western Cape. The group have implemented the warehousing system in our Longmeadow Distribution Centre in Gauteng. This system had been introduced successfully at Philippi, and we expect it to contribute to a 40% increase in picking efficiency at Longmeadow by the end of the financial year. Notwithstanding the costs associated with these two initiatives, we reduced our distribution costs in both facilities compared to the same period last year. Pick n Pay’s improved systems have enabled more effective inventory management, with stock levels reduced by two days in the distribution centres and the total value of stock on hand being down 6% on a like-for-like basis. Stock availability remains a challenge, and while we have seen a 2% improvement over the period, we continue to work closely with suppliers to achieve further improvement. Pick n Pay group have reduced trading expenses as a percentage of sales by 0.2 percentage points, from 17.7% to 17.5%, largely through improved labour scheduling and productivity at store level, and a more streamlined support office function following the head office restructure in the previous financial year.

As well as driving profit growth, cost and operational improvements strengthen Pick n Pay’s ability to enhance the shopping trip for customers. This is crucial to its strategic aim of sales-led growth. Lower costs enable us to invest more in the customer offer in a period of high inflation. Internal food inflation for the half-year was held to 6.7%, compared to food CPI of 8.4%. We recognise that our customers are increasingly price sensitive in this current market and are shopping around for the best deals. Pick n Pay responded through the launch of Pick n Pay Brand Match at the end of August. Customer feedback and the results to date have been very encouraging. Brand Match is strengthening confidence in the competitiveness of our prices, and building even greater loyalty in Pick n Pay. Pick n Pay have improved the quality of its fresh, perishable and pre-packaged convenience ranges. Through the “Fresh Promise” Pick n Pay has reaffirmed its commitment to the quality of its fresh produce, and this has been positively received by its customers. It has used smart shopper insight to enhance its in-store offer, and have added new value-added areas into stores, such as biltong bars and fresh flowers.

Customers are seeking greater convenience. As a result, our smaller, more convenient stores have out-performed our larger hypermarket format. However, hypermarkets remain a valuable part of our business, attracting a large number of customers and generating significant revenue for the Pick n Pay. There are substantial opportunities to improve their efficiency and offer for customers, and we are developing an overall strategy as well as an individual plan for each hyper. Pick n Pay has already refitted three larger stores as part of this strategy. It has appointed a member of its senior management team, Neal Quirk, as the head of its Hypermarket business. Neal’s focus and operational expertise will ensure that trading densities improve through better use of space and stronger customer focus. Pick n Pay clothing business delivered strong growth over the period, through both an expanded range and additional space allocations in our supermarkets.

Pick n Pay continue to strengthen our position outside South Africa with established franchise businesses in Botswana, Lesotho, Namibia and Swaziland, and a growing company-owned business in Zambia. These operations have performed well over the period. Segmental revenue is up 15.0% to R1.7 billion, with like-for-like growth of 7.8%. Segmental profit has grown by 43.0% to R135.1 million, partly driven by the Pick n Pay’s strategic decision to exit Mozambique and Mauritius last year. It also continues to actively examine opportunities for sustainable growth outside South Africa. As a result, we plan to extend our operations in the medium term by opening stores in Ghana, one of the most rapidly growing markets in Africa. Pick n Pay is also close to completing our analysis of the opportunities available to us in Nigeria. Pick n Pay’s approach outside its borders remains measured and no investment will be undertaken without a comprehensive understanding of a market and its supply chain capacities
Pick n Pay is beginning to benefit from its new talent-spotting and performance management processes. It is investing more in training and development to ensure it have the right skills and capabilities in place, and are continuously reviewing its head office structure to ensure we offer an efficient and effective support function for its stores. Pick n Pay has made a number of new senior management appointments from within the talent pool at Pick n Pay. This strengthens its decision-making capacity and demonstrates our commitment to recognising and developing talent within the business, and rewarding successful leadership.

The Pick n Pay is encouraged by this improved profit performance. Good expense control and improved operational efficiency is delivering higher returns and strengthening the capacity of the business to deliver on our strategy of customer-focused, sales led growth. We are impatient to lead more change in Pick n Pay and accelerate progress on our plan. A great deal of hard work remains to be done under increasingly challenging economic conditions, but we intend to sustain the momentum we have built up over the past 18 months.

5 ORGNISATIONAL STRUCTURE FOR PICK N PAY/ ORGANOGRAMTable 5.1 shows the organizational structure for Pick n Pay at the branch level

The branch manager oversees day-to-day operations of the store. It is the duty of the branch to make sure that all departments are supporting each other to surpass set targets. The branch gets help from three of his/her assistant branch managers of whom one amongst them is the co-branch manager. The co-branch acts as a branch manager when the branch manager is away. The branch administrator has a closer relationship with the administration clerks in the sense that they perform duties that are related. They perform administration work including controlling documents such as invoices and delivery notes and any information technology related work. In addition the customer service managers works with the information desk team to assist customers who have queries either on goods or services Pick n Pay offers. Section managers have a big task of monitoring all other departments such as fruits and vegetables, butchery, bakery, warehouse, takeaway and deli, sales floor and cash office. While they are monitoring those departments, they also have a role of supervising their subordinates to maintain a flow of work.

Fig 5.1.2 shows the Pick n Pay hierarchy at regional level
Parent name Pick n Pay Limited Category Supermarket Sector Retail SWOT Analysis
Mission and objectives
Strengths 1.Cost advantage due to economies of scale
2.Rapid Online growth is boosting sales through a new channel
3. Customer loyalty is high because of strong focus on good service
4.Strong brand equity developed due to long heritage and presence in over 10 countries
5.Strong efficient Supply chain managed by 50000 people
6. Cooperate Social Responsibility programs and Sponsorship have improved the company reputation improving its brand equity and image as a family store With our hearts we create a great place to shop
We serve
Weaknesses 1. Less marketing communication to public about their image
2. The large size had made the company complacent in its operations leading to loss of major market share
3.Slower rollout into emerging markets
Opportunities 1. Emerging markets and expansion abroad
2. Innovation in supply chain technology
3. Product and services expansion
4. Distribution and national expansion of stores nationally
5. Franchise model is a lucrative opportunity for a company like Pick n Pay with a long heritage and strong brand equity
6. Rebranding the company to appeal to younger target segments
7. Adding new exclusive brands and products to improve sales
With our hearts we create a great place to shop
Threats 1. Intense Competition from existing retailers2. Economic slowdown
Lower cost competitors or imports4. Product substitution5. SPAR and OK, as a competitors penetrating the market with better global ties and cheaper substitute (imported) products
6. External changes like changing tax policies, government regulations and other stiff laws
7 RELATIOSHIPS BETWEEN PICK N PAY AND OTHER STAKEHOLDERSThe Pick n Pay money box program is a corporate social investment program and was started in our stores as a way to raise much needed funds for various charities. The overall campaign message is “Your Change can Change Lives” and serves to encourage customers to drop their spare change into the money boxes fitted at the till points in store. The spare change is then collected regularly by the store manager and deposited into the money box fund which in turn pays out the funds raised to the charity organisations. Some of the organisations include the Quad Para Association on South Africa and the Sunflower Foundation.

All employees have access to low-interest loans from the Pick n Pay. The primary objective of this benefit is to assist employees with the acquisition of residential property. Loan values are capped at varying amounts, depending on the employee’s position in the Pick n Pay. Affordability tests are performed before any loan is granted, to ensure the employee does not experience financial strain. All housing loans are secured by the employee’s retirement funding. Currently in Zimbabwe housing are taking place in Nyabira where Pick n Pay offer loans to its employees to have properties in terms of houses. So TM Pick n Pay works with the local city council for the allocation of land to its employees.

Pick n Pay remains determined to play a strong and positive role in the communities it serves and in the prosperity of the country as a whole. It has expanded the number of Pick n Pay Women’s Walks in association with Pink Drive, helping to increase public awareness of breast cancer. Pick n Pay has increased our support for Community Food Gardens and other community programmes. On sustainability, Pick n Pay has exceeded the target to reduce its energy use by 30% against a 2008 baseline. The overall climate change strategy has been recognised by Pick n Pay’s inclusion in the renowned CPD Global Leaders Index and the international Dow Jones Sustainability Index.

8 RECOMMENDATIONSDespite the fact that the business of Pick n Pay is expanding throughout the whole of Africa one would recommend that to increase employee loyalty, Pick n Pay Supermarkets have a lot do. It is its duty to make sure that all its employees have proper housing closer to all its operating branches. Housing projects must be carried out in such a way that they does not inconvenience work for example the location of projects can be far from operating cities and this have an impact on time employees take on commuting to work.

Moving on, reward is something that motivates the employees and this can help the company to achieve targeted profits. Rewarding employees most at the bottom of the hierarchy for example salesfloor workers for any talent they have is important for the organisation. A reward motivates the employees and as a result they tend to put an extra effort for them to get more rewards. So this will then increase profits for the organisation.

9 CONCLUSIONSIn conclusion I found the work environment very satisfactory. The Pick n Pay organisation encourages cooperation so everyone I met in this organisation was willing to work together with a goal of achieving growth in terms of profits.
Committed and trustworthy employees are the most significant factors to becoming an employer of choice; it is no surprise that companies and organizations face significant challenges in developing energized and engaged workforces. However, there is abundance of research to demonstrate that increased employee commitment and trust in leadership can positively impact the company’s bottom line. In fact, the true potential of an organization can only be realized when the productivity level of all individuals and teams are fully aligned, committed and energized to successfully accomplish the goals of the organization. Thus, the objective of every company should be to improve the desire of employees to stay in the relationship they have with the company.

REFERENCEShttp://www.picknpay-ir.co.za/financials/results/interim-2014/pnp-s tores_ended_21082014/review_of_operations.php. (Accessed 25 October 2017).Pick n Pay Stores Limited Review Of Operations. Accessed 11 November 2017

PnP Cooperate Governance report 2017.

Pick n Pay integrated annual report 2014.

Pick n Pay integrated annual report 2016.

TM PnP shelf charter 2017.