MNG3701/202/2/2020

Tutorial Letter 202/2/2020

Strategic Planning
MNG3701

Semester 2

Department of Business Management

IMPORTANT INFORMATION:
This tutorial letter contains feedback on Assignment 02.
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CONTENTS

1 INTRODUCTION .......................................................................................................................... 3
2 FEEDBACK ON ASSIGNMENT 02 .............................................................................................. 4
3 CLOSING REMARKS ................................................................................................................ 12

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1 INTRODUCTION

The purpose of this tutorial letter is to provide feedback on Assignment 02. Please read the
feedback very carefully, as it gives you guidance on what was expected of you in Assignment 02.

As with assignment 01, assignment 02 was based on the case study of Takealot.com. You were
told to use the links provided in Tutorial Letter 101 to conduct an internet search on Takealot.com
and answer the questions given. You were also given the following instructions to complete the
assignment:

1. Begin the essay with an introduction.

2. Answer each question in a separate paragraph with a clear heading/subheading.
3. When answering the question, begin by discussing the theory from the book and other
sources, then apply them to the case given.
4. Reference your work properly.
5. End your essay with a conclusion.
6. This question should therefore consist of an introduction, body and conclusion.

In addition, you also had to fulfil the correct technical requirements by structuring your essay
according to the guidelines provided in section 7.6.2 of Tutorial Letter 101. In other words, you
also had to number the pages and the headings. You should have provided a table of contents
on the first page of the assignment and included a list of references (according to the Harvard
referencing method) at the end of the assignment. Up to five marks were deducted if your essay
did not meet the technical requirements. The body of your assignment should not have exceeded
ten pages, excluding the cover page, introduction, conclusion and list of references.

You were also provided assessment criteria and points of consideration that we follow as we
assess your work. This was done so that you know what was expected of you in answering the
questions.

If you submitted your assignment online, you will receive your marked assignment, together with
the marker’s assessment, in your myLife e-mail account immediately after the marking has been
completed. If you submitted your assignment by post, note that your assignment will not be
marked due to the lockdown as communicated on myUnisa.
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2 FEEDBACK ON ASSIGNMENT 02

ASSIGNMENT 2 (Questions 1.1–1.4) (50)

Note: The answer below is a guide on how to approach a question like this. Each essay was
different and was assessed individually. Marks were allocated based on the strength of students’
arguments and practical application of the theory.

An essay must start with an introduction. The aim of the introduction is to introduce key
concepts and issues that will be dealt with in the essay. It is also important to introduce the
reader to the company on which the assignment is based – in this case, Takealot.com.

2.1 INTRODUCTION

This essay focuses specifically on analysing the micro environment of Takealot.com.

Takealot.com is a South African-based online retail company. This organisation was officially
launched in June 2011, following the successful acquisition of an existing e-commerce business
called Take2 by the US-based investment firm, Tiger Global Management and Kim Reid in
October 2010. Today, takealot.com is the leading e-commerce retailer in South Africa and one of
the largest, most innovative e-commerce retailers on the African continent. It has rapidly evolved
since its inception, opening and expanding warehouses in Johannesburg, Durban and Cape
Town, while expanding department selection to over 21 departments across electronics, lifestyle,
media and gaming, and fashion.

The essay is structured as follows: It starts by discussing the concept of resources, whereby we
explain the relationship between resources, capabilities and core competencies, followed by an
explanation of the VRIO acronym. The essay concludes by explaining the various business-level
strategies used to create and sustain competitive advantage. Throughout, practical examples will
be provided to substantiate the discussion.

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The introduction is followed by the body of the assignment, consisting of different paragraphs.
Important aspects to remember:
• You were instructed to answer each question in a separate paragraph.
• You needed to use PARAGRAPHS and SUBPARAGRAPHS to structure your essay.
o These paragraphs must have meaningful headings and subheadings that are
numbered.
o Avoid using bullet points when writing essays.

2.1.1 RELATIONSHIP BETWEEN RESOURCES, CAPABILITIES AND CORE

COMPETENCIES

Resources are the productive assets owned by organisations used to transform inputs to
marketable outputs, capabilities are the capacity of an organisation to deploy resources for a
unique result (Nieuwenhuizen, 2019). Core competencies involve the combination of various
resources and capabilities. The development of core competencies usually takes place over a
period of time and is a process of accumulation and learning how to use a unique combination of
resources and capabilities. Core competencies that are not continuously sustained will eventually
lose their ability to yield a competitive advantage (Rothaermel, 2017). “Their complex co-
ordination, integration and harmonisation across production skills, technologies and capabilities
make core competencies difficult to imitate” (Nieuwenhuizen, 2019:154). Figure 1 below depicts
the relationship between resources, capabilities and core competencies (refer to your study guide
for more details).

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Figure 1. The relationship between resources, capabilities and core competencies

CAPABILITIES
RESOURCES
- productive
- capacity of an
assets owned by organisation to

the organisation deploy resources

for a unique end
result

CORE
COMPETENCIES
- competencies that
distinguish an
organisation from
others in an industry
and form the basis of
its competitive
advantage

Source: Adapted from (Amit & Schoemaker, 1993).

Examples of Takealot.com’s resources: Money - new capital injection of R960 million from
Naspers and $100m investment from Tiger Global. Structures – over 25 pickup points across
South Africa. Reputation of the organisation-Takealot.com is known as a leading South African
online retailer. Employee know how - Takealot.com employs over 2000 employees that are
knowledgeable and contribute towards making Takealot.com the most innovative online retailer
in the African continent. Ability to innovate - Takealot.com is a pioneer and the most innovative
ecommerce retailers on the African continent. Their collection points and easy to use apps are
examples of their innovation. location - the flagship pickup point on the bridge over the N1
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highway in Midrand, is accessible from both sides of the highway. It is well located and offers
convenience to many customers.

An example of Takealot.com’s capability: Takealot has the capacity to deliver packages to

Takealot Pickup Points across the country, allowing shoppers to collect orders at their
convenience. This logistics capability was established after acquiring Mr Delivery, later
rebranded as Mr D Food and Mr D Courier.

An example of Takealot.com’s core competency: The logistics capability and the location
resource (has 55 branches nationwide) not only offers convenience to customers but also
distinguish Takealot.com from competitors in the industry and contributes towards providing
unique customer service (core competence).

2.1.2 VRIO
In order for resources and capabilities to become core competencies, they should be valuable
(V), rare (R), inimitable and non-substitutable (I), and exploitable by the organisation (O). Each
of these VRIO measures can therefore be used to test the strategic value of an organisation’s
resources and capabilities.

The section below, provides an explanation of VRIO with the use of examples;

Valuable: To be valuable a capability must increase efficiency by using fewer resources to

generate maximum outputs or by using the same resources to generate more outputs
(Nieuwenhuizen, 2019). The logistics capability (Mr D Food and Mr D Courier) discussed in the
previous section is an example of a valuable capability as it enables them to implement a strategy
that improves efficiency and effectiveness.

Rare: a resource or capability is considered rare when owned by one organisation and its
competitors do not own it (Nieuwenhuizen, 2019). Takealot’s flagship pickup point on the bridge
over the N1 highway in Midrand, which is accessible from both sides of the highway. This location
resource is rare and differentiates them from competitors in the online industry by providing
customers with convenience and choice on how they would like to receive their products.
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Inimitable: inimitable capabilities and core competencies are valuable, unique, and complex
resources, it includes intangible resources and capabilities that make it difficult to copy what an
organisation is doing (Nieuwenhuizen, 2019). Takealot.com’s core competency (as indicated in
the previous sections (refer to an example of Takealot.com’s core competency) its complex and
differentiates it from its competitors and contributes towards providing a unique customer service
that customers cannot get anywhere else but from Takealot.com.

Exploitable by the organisation: the organisation’s structure and systems (O) should be
suitable for a specific competitive advantage. If an organisation cannot exploit a resource or
capability, it will have little value (Nieuwenhuizen, 2019).
Takealot.com’s resources and capabilities are exploitable as it has enabled Takealot.com to be a
pioneer and the most innovative e-commerce retailers on the African continent.

2.1.3 STRENGTH AND WEAKNESS

Strengths and weaknesses are found in the micro-environment – meaning that they are internal
to the organisation. The internal/micro-environment consists of factors that are within the control
of the organization.
A strength is a positive internal attribute that an organisation can use to achieve its objectives.
Examples include Money - New capital injection of R960 million from Naspers and $100m
investment from Tiger Global. Structures – over 25 pickup points across South Africa.
Reputation of the organisation-Takealot.com is known as a leading South African online
retailer. Employee know how - Takealot.com employs over 2000 employees that are
knowledgeable and contribute towards making Takealot.com the most innovative online retailer
in the African continent. Ability to innovate - Takealot.com is a pioneer and the most innovative
ecommerce retailers on the African continent. Their collection points and easy to use apps are
examples of their innovation.
Weaknesses are negative factors that detract from an organisation from its strengths. These are
things that an organisation should improve on in order to be competitive (Parsons, 2018).

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Since its inception in 2011 Takealot.com has been running on venture capital, it has been using
cash at a rapid rate- meaning that it has not been profitable. Its reliance on venture capital and
not on its own profitability for such a long time can be regarded as a weakness, because “If
Takealot’s major shareholders – Naspers and Tiger Global Management – decide to stop funding
the company, it will quickly have to become cashflow positive. This can have an impact on prices
and service levels, which may provide smaller players with an opportunity to gain market share”.
Recommendation: It is recommended that Takealot.com should use less of the venture capital
and start finding ways to be profitable.

Another weakness stems from its vision. Takealot.com’s focus on Africa only, indicates that there
is room for improvement in this regard given that it competes with big international online retailers
such as Amazon and Alibaba. Recommendation: it is recommended that Takealot.com should
consider expanding globally and not only focus on the African continent.

2.1.4 BUSINESS-LEVEL STRATEGIES

2.1.4.1 Cost leadership (or low-cost provider) strategy

Cost leadership strategy, also referred to as the ‘no-frills’ strategy, gains a competitive advantage
by maintaining a lower overall cost base (Louw & Venter, 2013). This strategy is characterised by
the following features; it targets a broader section of the market, it sustains its competitive
advantage by seeking to create the same or similar value for customers by delivering products or
services at a lower cost than competitors, enabling the organisation to offer lower prices to its
customers (Rothaermel, 2017).
Examples include Asus portable led display R3 398 and Mobicel excite laptop 14.1” R3 699.
These are budget friendly Laptops with basic features targeted at a broad section of consumers.
Consumers in this market are not looking for ‘frills’. They are price sensitive and choose not or
cannot afford better quality goods.

2.1.4.2 Differentiation strategy

A differentiation strategy is a way for an organisation to differentiate itself from competitors, as it

aims to produce products and services that are unique across the industry (Louw & Venter, 2013).
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This strategy is suitable when customers are not price-sensitive and willing to pay a premium
price for the ‘uniqueness’ they value in a product or service. This strategy is characterised by the
following features: it targets a broader section of the market, it seeks to create higher value for
customers than the value that competitors create. The emphasis is on uniqueness of product or
service features and it charges a premium price for products or services offered (Rothaermel,
2017).
Examples include 16-inch MacBook R59 999; Dell XPS R42 999 and Acer swift 7 R24 999. These
laptops are expensive however, customers are willing to a premium for their unique features.

2.1.4.3 Best-cost provider strategy

The best-cost provider strategy is a combination of low cost and differentiation strategies. It gives
customers more value for their money by offering upscale product features at a lower production
cost than competitors (Jansen van Rensburg, 2019). Organisations can follow this strategy to
serve broad or narrow target market. Lazenby (2018) explains that this strategy is characterised
by the following features; it targets customers who are value-focused, it sustains its competitive
advantage by giving customers value for money, products or services offered have appealing and
upscale features and it focuses on best value by either providing features at a lower price than
that of competitors or matches competitor price but provides better features.

Example include Dell latitude Core i5 R6 994, Asus laptop Core i3 R9, 999 and Lenovo notebook
i5 R 11, 499. These laptops are affordable and offers upscale features at a lower price therefore
giving value for money.

2.1.4.4 Focus strategy

A focus strategy (either focused cost leadership or focused differentiation) involves targeting a
niche market and offering products and services to that particular market while excluding others
(Jansen van Rensburg, 2019). Therefore, the main differentiator between a broad and a focused
strategy is that a focused strategy is aimed at serving the needs of a limited group of customers,
while a broad strategy focuses on serving a broad section of the market (Lazenby, 2018).

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• Focused low-cost strategy - The strategy relies on reducing production costs and increasing
sales volume. Example include the Mobicel excite this is a low-cost laptop, with a 2 GB Memory,
at a price of R3549. The laptop is suitable for beginner users who will mainly use it for typing
documents.
• Focus differentiation strategy - The strategy relies on achieving high profit margins. Example
Asus ZenBook Pro Touch Screen R64 999. This laptop is unique and match the requirements
and taste of the targeted customers. It is best suitable for gaming mainly because of its fast
processor.

2.2 CONCLUSION

The body is followed by the conclusion. In a conclusion you sum up your essay, without
introducing new ideas. The goal is to reiterate and summarise the essay’s body and leave
readers with a final impression. Remember to keep it simple and short.

The essay analysed the micro-environment of Takealot.com. Whereby it was highlighted that
Takealot.com has resources, capabilities and core competences. It deploys its resources through
the use of various capabilities that result in core competencies that provide it with a competitive
advantage. The essay also explained the acronym VRIO and concluded by using Laptop brands
as examples to explain various business level strategies.

2.3 REFERENCES

Jansen van Rensburg, M. 2019. ‘The external context of strategy’. In: Venter P. (ed). Practising
Strategy: A Southern African context. Cape Town: Juta.

Lazenby, K. 2018. The strategic management process: A South African perspective. 2nd edition.
Cape Town: Van Schaik.

Louw, L & Venter, P. 2013. Strategic Management: Developing sustainability in Southern Africa.
3rd edition. Cape Town: Oxford.

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Nieuwenhuizen, C. 2019. ‘Strategic resources and capabilities’. In: Venter P. (ed). Practising
Strategy: A Southern African context. Cape Town: Juta

Parsons, N. 2018. What Is a SWOT Analysis, and How to Do It Right (With Examples) [Online].
Available from: https://www.liveplan.com/blog/what-is-a-swot-analysis-and-how-to-do-it-right-
with-
examples/#:~:text=SWOT%20stands%20for%20Strengths%2C%20Weaknesses,intellectual%2
0property%2C%20and%20your%20location. [Accessed: 01 October 2020].

Rothaermel, F. 2017. Strategic Management 3e. 3rd edition. New York: McGraw-Hill Education.

University of South Africa. Department of Business Management. 2020. Strategic planning: Only
learning guide for MNG3701. Pretoria: Unisa.

Venter, P. 2019. The relationship between general management principles and strategic
management, in Practising strategy: A Southern African context, edited by P Venter. Cape Town:
Juta.

3 CLOSING REMARKS

We would like to encourage you to refer to the learning outcomes in the study guide and ensure
that you can achieve them. You are advised to pay special attention to the concepts you have not
yet mastered especially where you have provided the wrong answers in the assignments.

All tutorial letters for this module, including this one, are available on myUnisa. We encourage
you to use myUnisa, especially the Discussion Forum and the Additional Resources tools in
order to keep up to date with developments in the course and to interact with fellow students.

You are welcome to contact us if you have any queries. We trust that the information in this tutorial
letter has given you a better understanding of how to balance strategic management theory and
application.

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We wish you success in the coming exams!

Kind regards
The MNG3701 Lecturers

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