2014 Global Immersion Johannesburg Company Overview. Ernst & Young Team 2 Sreekanth Boppana, Jessica Cunning, Luke Derda, Tiffani Guerre

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1 Contents Ernst & Young... 1 Coca Cola... 4 Eskom... 9 City of Johannesburg, Department of Housing Pick n Pay Native VML Ernst & Young Team 2 Sreekanth Boppana, Jessica Cunning, Luke Derda, Tiffani Guerre SWOT Analysis: Ernst & Young (EY) has many strengths that help the company in South Africa (SA). First, EY has a lot of prior experience setting up businesses in developing countries, a huge workforce consisting of the best talent pool from across the world, and a wide range of services that sustain revenue. Because EY is one of the big four consulting firms, EY has considerable influence in the United States that can be leveraged in order to mitigate some of the potential political risks in SA. 1 EY also has programs in place in SA to incubate entrepreneurs, which is important because it helps them capture potential young businesses for the long term. 1 Lastly, private equity investments remain strong in SA relative to most G20 markets. 1 One of EY s biggest weaknesses in SA is that there may not be as many quality employees in the local workforce, which could be attributed to lower secondary and tertiary education rates in Africa. 1 Moreover, heavy competition from the other big four firms in a growing market makes it much more challenging to get long-term clients for EY and for EY to grow. Lastly, hiring and firing is difficult and expensive in SA, which discourages new enterprises and the growth of small businesses that could become clients for EY. 1 EY has many opportunities in SA. First of all, the economy in SA is growing, urbanizing, and modernizing, and SA could become a potential gateway to the continent because SA has established relations with many other countries throughout Africa, which can be leveraged by EY in order to expand across the African continent. 2 In addition, many existing clients in the 1

2 United States are setting up businesses abroad, including in SA, so EY has the opportunity to draw those clients to utilize EY services in SA. This would be a huge advantage as a developing country initially depends on foreign direct investment to grow and sustain its economy. Lastly, the country has a mature and profitable financial sector, which is crucial for any business. 2 Some of the biggest potential threats that EY faces in SA are the political volatility and cultural shift toward reverse discrimination and the risk that there will be growing social unrest if the rate of unemployment is not tackled successfully. 1 Both of these issues could endanger the environment and the growth potential of the economy. 1 Moreover, the government in SA could introduce restrictive labor policies, such as specifying the minimum percentage of the workforce that should be black, which would present more obstacles to EY when finding employees. Lastly, SA is highly corrupt with high levels of crime affecting all businesses. 2 Any wrongdoing by EY in SA could seriously damage the company brand image in other parts of the world. 2 Exhibit Ernst & Young 3,7 Deloitte 4,7 PWC 5,7 KPMG 6,7 Revenues $25.8 billion $32.41 billion $31.5 billion $23.42 billion Growth Rate 5.8% 8% 4% 1.49% Headquarters London New York City London Amsterdam Employees 175, , , ,180 Global Operations 150 countries 140 countries 149 countries 156 countries Major Lines of Businesses Consulting in Advisory, Assurance, Tax, Strategic Growth Markets, Transactions, and Specialty Services Consulting in Audit, Corporate Finance, Risk Advisory, Tax, Infrastructure and Capital Projects, and Deloitte Digital Consulting in Advisory, Assurance, Tax, Country Desks, Integrated Reporting, IFRS, Private Company Services Consulting service in Auto motives, Financial Services, Construction, Healthcare, Mining, and Telecommunication s 2

3 References 1 Ernst & Young. (2013). The Power of Three. Retrieved from Africa/$FILE/EY-G20-country-report-2013-South-Africa.pdf 2 Ernst & Young SWOT Analysis. (2008). Retrieved from 3 Ernst & Young Global Limited. (2014). Retrieved from 4 Deloitte Development LLC. (2014). Retrieved from 5 PricewaterhouseCoopers LLP (PWC). (2014). Retrieved from 6 KPMG LLP. (2014). Retrieved from 7 The Big Four Accounting Firms. (2014). Retrieved from Questions for EY 1. What are the major industries EY deals with in SA? 2. What percentage of EY s customers are local? Foreign? 3. Does EY s consulting workforce act as an extension of a company s workforce or is the workforce strictly in advisory roles? 4. In a country with a lot of corruption, what challenges does EY face and how does EY maintain its integrity? 5. How difficult is it for EY to find skilled/educated labor in SA? 6. Does the supply of talent match the rate of growth for EY in SA? If not, how are they managing the shortcoming and what training programs are in place? 7. How does EY manage the diversity that its employees bring to the workplace? 8. What mentoring opportunities are there for entrepreneurs in SA? What other opportunities does EY see in SA? 3

4 Coca Cola Team 6 James Patitsas, Drew Rattigan, Anika Zaman Background on Coca Cola The Coca Cola company is a major player in the global beverage industry, and its top two competitors include PepsiCo and Dr Pepper Snapple Group (ref. exhibit 1), followed by Monster Beverages Corp. Investors feel that the global beverage industry has a positive future, with Moody's Investors Services quoting "We expect annual operating profit growth of about 6% for the global beverage industry in the coming months" (ref. appendix 1). In South Africa, the first Coca-Cola product was sold in Johannesburg in the 1930s reaching Cape Town by Today, South Africa is the largest Coca-Cola market in Africa, with four bottling partners, 9,000 employees, and 17 facilities. Currently, they have twelve sparking (carbonated) beverages and nine still (noncarbonated) beverages in their product portfolio (Coca-Cola Company, 2012). The South African beverage industry has exhibited a growing trend in the past few years. The market had total revenues of $3.3bn in 2012, representing a Compound Annual Growth Rate (CAGR) of 5% between 2008 and Market consumption volumes increased with a CAGR of 4.3% between 2008 and 2012, to reach a total of 2.9 billion liters in Experts forecast that the performance of the market will accelerate, with an anticipated CAGR of 3.1% for the five-year period , which is expected to drive the market to a value of $3.9 by the end of 2017 (ref. appendix 2). SWOT Analysis of Top Competitors for Coca Cola 1) PepsiCo: The biggest strength of PepsiCo is its product diversification, not only within the beverage industry but also into the snack food industry with brands like Lay s, Doritos, Quaker foods, Cheetos, Tostitos. It s benefits from strong brands such as Pepsi and Mountain Dew, which enjoy large brand loyalty and customer base, along with a robust global distribution system. Some of the weaknesses of PepsiCo include over-dependence on the US market, and harm to its reputation due to product recalls and controversies. On the other hand, the biggest opportunity for PepsiCo lies in its product diversification, especially in the snack food business 4

5 which paves way for international expansion. Within the US, there lie great opportunities for Aquafina in the bottled water market. The key threats for the firm come from intense global competition and changing consumer trends in terms of carbonated soft drinks. 2) Dr. Pepper Snapple Group: The key strength of Dr. Pepper Snapple group is its efficient operations and strong operational network whereas the biggest weakness is the firm s geographical limitation to the Western markets. Further, the key opportunity area for Dr. Pepper Snapple Group is increasing demand for brands Orange Crush and A&W root bear which will enable the firm to have a stronger foothold in the beverage industry. The key threat is competition from larger beverage brands and its dependence on the Western market. 3) Monster Beverages Corp: The biggest strength of Monster Beverages Corp is the strong brand identity and well-defined target segment of its flagship brand Monster energy drink. Having said that, the key weakness of the firm is its over-dependence on the sole brand Monster Inc. There are significant opportunities for the firm within the energy drink segment of the beverage market where they can potentially capture a larger market share, and the significant threat for the firm is the emerging negative consumer perceptions regarding energy drinks which might affect sales of the breadwinner brand. SWOT analysis of Coca Cola While the following SWOT analysis will discuss the Coca-Cola Company as a whole, the strengths, weakness, opportunities, and threats outlined can all be applied to Coca-Cola South Africa as well. The Coca-Cola Company has been in business for over 125 years. Its greatest strengthens are it s brand recognition and market share. Coca-Cola is one of the most, if not the most, recognized brand in the world with the largest market share in the global beverage industry. Another strength of the Coca-Cola Company is there extensive distribution and bottling networks. In South Africa alone, Coca-Cola has close partnerships with four leading national bottling companies. These partnerships allow the company to deliver high quality products to over 75% of South Africa s landmass. Some weaknesses of the company include a strong, narrow focus on carbonated drinks and a high debt level caused by rapid growth from acquisitions. Another weakness is the health issues 5

6 associated with some of their most popular brands. As research into the nutrition of carbonated drinks continues, Coca-Cola could suffer the loss of some health conscious consumers. Given these strengthens and weaknesses, Coca-Cola has several key opportunities. One is the development of healthier food and beverage brands. The increasing demand for nutritious products presents an opportunity for Coca-Cola to diversify its currently narrow portfolio. Threats to the company include the increasing demand for full disclosure of nutrition facts on the label of products, competition from companies such as PepsiCo and Dr. Pepper Snapple group. In addition, the change in consumer preferences from sugary, carbonated drinks to a healthier lifestyle could become a major threat to the carbonated beverage industry. Appendix Table 1: Brief Overview of the Largest Four Beverage Companies Globally 2012 Data $$$ Billions Coca Cola PepsiCo Dr. Pepper Snapple Group Coke, Fanta, Pepsi, Gatorade, Mt. Dr. Pepper Sprite Dew Monster Bev. Corp. Monster Energy Drink Top Brands Revenue $ 48 $ 65.5 $ 5.6 $ 1.7 Oper. $ 10.8 $ 9.1 $ 1 $ 0.46 Income Net Income $ 9 $ 6.2 $ 0.53 $ 0.29 Total $ 86.2 $ 74.6 $ 8.8 $ 1.4 Assets Employees 146, ,000 19, Exhibit 1: Market Share of Coca Cola and its Top 2 Competitors 6

7 Exhibit 2: Coca Cola s Product Portfolio Contributions to Sales Revenue Sources 1) Coca Cola Company. "Coke South Africa Products Coke Product Information." Coke South Africa Products. N.p., Web ) 3) 4) Exhibit 1: 5) Exhibit 2: Questions for Coca-Cola: 1. How does Coca-Cola influenced communities within South Africa? 2. Can you tell us more about the Aids Awareness and active healthy living campaigns? 3. How do the strategies for Coca-Cola South Africa different from the Coca-Cola Company as a whole? What challenges are unique to South Africa? 4. How are your relationships with bottlers maintained and will you expand the bottling network? 7

8 5. How does Coca Cola build brand awareness and brand equity within the South African market? Are there any specific marketing communication tools tailored to the South African consumers or does it rely on global advertisements?? 6. Other than the flagship brand Coke, which are the highest selling brands within the portfolio in the South African market, and which do you think has good growth potential? 7. What is the key competing category for Coke in South Africa? Is it competing with other carbonated soft drinks or other segment beverages such as water or tea? 8. How have the remnants of apartheid impacted Coca Cola company, its workers, its sales? 9. How did the World Cup in South Africa impact Coca Cola? 10. How does PepsiCo compare to Coca Cola in South Africa? What strategies do you use in growing market share 8

9 Eskom Team 4 Elizabeth Guiley, Joe Henry, Shaman Hulmane, Nahom Woldemariam Eskom was established on March 1, 1923 as an electricity supplier to South Africa. Eskom has transformed into one of the top 15 suppliers of electricity in the world. It supplies 95% of the total electricity used in South Africa. As it has almost completely monopolized the electricity market in South Africa, it has expanded into the SADC region (Southern African Development Community). Eskom supplies roughly 45% of Africa s electricity, making it the single largest electricity supplier in Africa. In total, Eskom serves over 5.1 million customers. Eskom is continuing to expand its operations. Eskom s current debt/equity ratio is 1.7. [See Exhibit A and Exhibit B for recent financial information.] Coal is Eskom s single largest expense to their business. This electricity generator is financially relevant as a merger between two companies, Xstrata and Glencore, in the coal industry is on the horizon. Eskom s coal expense is projected to grow by an average of 7% a year for the next few years. Recently a multi-billion dollar merger between two companies, Xstrata and Glencore has been in the works. The multibillion-dollar merger between Xstrata and Glencore has had no regulatory issues in most countries where the two commodity companies operate. However, in South Africa, the merger is facing a last-minute objection by Eskom, who wants price and supply restrictions placed on the merger. Xstrata is one of the world's largest exporters of thermal coal used to generate electricity and one of the largest producers of coal used to make steel. Glencore is the largest shareholder in Xstrata with an interest of 33.65% and acts as a trader of Xstrata coal. The merged entity would account for approximately approximately for 15% of Eskom's coal supply, and it would also be one of the largest traders of coal in the market. As Eskom is a monopoly in South Africa, the following list was compiled regarding potential avenues of electricity supply that may compete with Eskom. Other true business competitors have offered Eskom a minimal challenge in the past. However, none have been successful. Some potential threats to Eskom are: - Municipalities, self-generation by customers - Utilities in the Southern African Power Pool 9

10 - Hydro potential from countries such as the Democratic Republic of Congo, and external utilities such as EDF and Quebec Hydro entering the South African market - Independent businesses or investors erecting/operating power generating plants - Usage of natural gas resources as a primary energy source - New technology development allowing greater use of renewable resources such as wind energy and solar energy. [See Exhibit C for a current SWOT Analysis] [See Exhibit D for Questions that could be asked of the speaker at Eskom] Appendix [Exhibit A] Income Statement (9/30/13): Revenue, Operating Profit, Net Profit Source: Retrieved ruary 20,

11 [Exhibit B] - Assets, Liabilities & Equity Source: Retrieved ruary 20,

12 [Exhibit C] Current SWOT Analysis of Eskom Sources: (1) Retrieved ruary 15, 2014 (2) Retrieved ruary 15, 2014 (3) Retrieved ruary 15, 2014 Strengths Monopoly of electricity supplier market in South Africa Significant state funding through 1990 s Developed infrastructure in a country that can anticipate 6-8% growth rate over the next 10 years Opportunities Stable and developed market to continue to penetrate Weaknesses Since late 2007, the company has had multiple occasions where they have run out of power, causing rolling blackouts Threats Potential inability to meet demand Stay competitive to ensure maintenance of monopoly Works Cited 1) - Retrieved ruary 13, ) Retrieved ruary 19, ) spx - Retrieved ruary 19, 2014 Questions for Eskom: 1. What is your contingency plan for if/when the coal supplies that generate electricity are fully utilized? 2. Your company has been in business for almost a century. What factors do you attribute to your success? 3. What infrastructure obstacles have you run into when attempting to service customers in rural areas? 4. Do you have the goal of being the primary electricity supplier to all of Africa? If so, what timeline have you set forth for the company and what strategies do you plant to implement to satisfy this goal? 5. Are the rolling blackouts that are occurring a concern of your? What plans do you have in place to ensure that these no longer continue? 12

13 City of Johannesburg, Department of Housing Team 1 Brenda Cannizzaro, Gurvinder Choudhary, TJ Clarke, Dharell Mosby Part 1 (See Appendix A for financials) According to their 2040 Growth and Development Strategy, the City of Johannesburg aims to be a resilient, liveable, and sustainable city by With this in mind, the Department of Housing is responsible to facilitate the delivery, in sustainable human settlements, of safe, affordable, adequately serviced, and well located housing opportunities 1 The Department of Housing has five major divisions which it operates. The Integrated Human Settlement Policy, Planning and Research division is responsible for developing initiatives that create housing opportunities for Johannesburg residents. The Housing Programme Support division is responsible for supporting the department s community projects, along with housing allocations. The Human Settlement Programmes division is responsible for working with other departments in the government and private sector to implement the Housing Department s plans. The Public Housing Stock Management division essentially works as the land lord to all of the city housing opportunities. The Business Management Support division, as implied in its name, is responsible for the overall management of the department (i.e. budgeting, administration, management of contracts). The Department of Housing has established a variety of programmes that helps it to uphold their mandate of providing housing for all of Johannesburg s residents. Some of these programmes include public housing stock management, upgrading informal settlements, top structure construction, hostel redevelopment programme, and people s housing process. The Department of Housing has four flagship projects currently underway that focus on mixedincome housing developments. Lehae this project is located along the Golden Highway, which neighbors Lenasia. This development will have a total of 5,344 housing opportunities that will consist of rented, bonded, and RDP (a South African socio-economic policy that aims to alleviate poverty while enhancing their social services) units. Along with rentals, this community will also offer its residents a variety of socio-economic amenities such as schools, religious 1 "Department of Housing." City of Johannesburg - Department of Housing. City of Johannesburg. Web < 13

14 institutions, and business sites. This type of set up allows residents to live, work, and play all in the same place. Lufhereng this housing development is located in Gauteng and will be the largest housing community in that area, offering 24,000 housing units. This project was developed as an extension of the Soweto residential complex and is south-west of the Johannesburg Central Business District. The location of the development will provide residents with economic opportunities, while the development itself will provide them with social amenities such as schools, creches, clinics, and recreational facilities. Fleurhof this development is a transit-oriented project located along the Main Reef Road, 13 kilometers (8 miles) west of the Johannesburg Business District. The motivation behind this project is the City of Johannesburg s initiative to convert empty/rundown lots of land in the city to housing. This development will offer over 9,000 units that will be RDP and bonded units. Pennyville this development is located near the New Canada Train Station. This project is being built in four phases and will offer residents 3,200 different housing opportunities that will be affordable and sustainable, in line with the National Department of Human Settlements Breaking New Ground Initiative (an initiative that focuses on the development of sustainable human settlements). Part 2 See Appendix B Part 3 Strengths - The City of Johannesburg is a city of optimism - creating a Growth and Development Strategy (GDS) which will guide the city through The City of Johannesburg has entrusted the Department of Housing to ensure that any future programs implemented will complement the goals set by the GDS 2. Arguably their biggest strength is the hope for a better tomorrow that their members possess. Weaknesses - A major weakness of the housing industry involves an influx of citizens who currently lack adequate and affordable living. Johannesburg is a divided city: the poor mostly 2 "Department of Housing-Values, Flagship Projects, Departmental Structure." City of Johannesburg - Department of Housing. City of Johannesburg. Web < 14

15 live in the southern suburbs or on the peripheries of the far north, and the middle class live largely in the suburbs of the central and north. Around 20% of the city lives in abject poverty in informal settlements that lack proper roads, electricity, or any other kind of direct municipal service. Another 40% live in inadequate housing with insufficient municipal housing 3. The local strategy is to decrease those numbers by providing adequate housing with necessary amenities, such as electricity, water and waste removal at an affordable rate. Opportunities - From an opportunity standpoint, the housing industry appears to be an emphasis of importance within the City of Johannesburg, especially in providing adequate and affordable housing in urban, inner-city areas. The Department of Housing is in a prime position to complete such an initiative and achieve positive results in an effort to draw more people back into living and investing in Johannesburg. This is an immense opportunity and it would be to the benefit of the Department of Housing and the City of Johannesburg if other companies continued their involvement. Threats - A major threat to this initiative is proportional funding. This means that most of the funding to maintain Johannesburg will be used for the wealthier sections and less towards the poor areas. The result has spurred the growth of black market rentals (back-yard shacks) by shack farmers 4. A lack of housing in the city has forced many to set up squatter settlements on the outskirts of the city. Most of these communities lack electricity and running water, and residents live in makeshift shacks made of scrap metal, board, and other discarded materials. Town planners have attempted to build streets and provide residents with basic needs 5. Part 4 Questions: (1) With the four housing projects underway, what is the process the Department implements to find residents for those housing units? (2) What portion of people living in poverty in Johannesburg will be eliminated once the four housing projects are up and running? How long do you think it will be before all four housing developments are completed and fully occupied? 3 Smith, David. "Johannesburg rebuked over 'world-class cit'y advert.". The Guardian, 11 Jul Web < 4 "Chapter 3: Opportunities." City of Johannesburg GDS 2040 Strategy Archives. City of Johannesburg Department of Housing, 24 Oct Web < 5 Beall, Jo, Owen Crankshaw, and Susan Parnell. "Environment and Urbanization:Local government, poverty reduction and inequality in Johannesburg.". Sage Publications, 1 Apr Web < 15

16 (3) Could the Department of Housing speak more to what they are doing to contribute towards the realization of sustainable and integrated delivery of water, sanitation, energy and waste? (4) What does the Department of Housing feel is its biggest obstacle to providing affordable housing to Johannesburg residents? (5) A lot of times, so much more goes into lifting people out of poverty than just providing them affordable housing (job training skills, education, etc.). Is the Department of Housing partnering with any other governmental agencies to help decrease poverty beyond just providing housing to the poor? (6) What initiatives or strategies are taken to cut costs and keep the houses affordable? Appendix A - City of Johannesburg Financials (June 2012 June 2013) 16

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19 Appendix B - Competitor Information Johannesburg Housing Company Affordable Housing Company (AFHCO) Founded Company Type Private sector, non-profit, social Private housing institution Rental Units 4,000 5,500 Built to Date Goal of 4,800 by 2016 Buildings ,800 rental apartments o 1,000 under development in ,000m 2 in retail, commercial, and light industrial space Portfolio R700 million + R1.6 billion Worth CEO Elize Stroebel Wayne Plit Divisions N/A 1. Afhco Holdings a. Provider of rental accommodations 2. Afhco Property Management a. Responsible for managing Afhco s properties, also manages some 3 rd party properties 3. Afhco Construction Management a. In-house construction company responsible for Afhco s building and research applications Employees No Data Afhco Holdings no data Afhco Property Management 110 Afhco Construction Management 20 FT, 250 employed through contractors Properties Broken down into 3 portfolios: 1. Greenfields 2. Mpumalanga 3. Kopano Commercial: 75,000 square meters Retail Offices Industrial o Current Tenants include: (Shoprite, KFC, Standard Bank) Residential 4,000 units under management 19

20 Mission The JHC is committed to urban regeneration through the provision of quality, value for money accommodation and service for all who choose to live in JHC projects and neighbourhoods, in a manner that is both sustainable and promotes growth. Afhco aims to achieve its vision through providing affordable, high quality, well-managed rental property to the residential, retail and commercial sectors by focusing on: Commercially sustainable projects. Affordability for households. Exceptional customer service with tenant / owner base. Integrity, Credibility, Effectiveness Values Commitment, Teamwork, Integrity and Sustainability Website/Source

21 Pick n Pay Team 5 Stew Jamieson, Brittanie Phillips, Brijesh Kundu With our upcoming trip to South Africa, our group was charged with the task of researching Pick n Pay. With the middle class growing all over the world, there is going to be more disposable income across all regions. The Pick n Pay is the second largest supermarket chain store in South Africa, established in 1967 by Raymond Ackerman. It can also be found in other regions of southern Africa, such as Namibia, Botswana, Zambia, Mozambique, Mauritius, Swaziland and Lesotho. With revenue of around $6.69 billion, Pick n Pay is the second largest retail chain in South Africa. Last year, the company reported Net Profit Margin of 0.93% and EPS of $0.13. Shoprite and Massmart are its biggest competitors in the retail sector. The below table provides comparative statistics between Pick n Pay and its competitors. Pick n Pay has recently expanded across several African countries. It currently has 95 stores and hopes to add at least another 5 stores in the next several years. The company is headquartered in South Africa and will use its close proximity to form partnerships with local chains in other countries. Currently, Pick n Pay is investing $25Million in renovations across its stores. This will help modernize the stores and improve the quality of the shopping experience. It has recently incorporated a food blog, in 2010, which will help drum up customer loyalty and recognition among shoppers. Unfortunately, the financial crisis has caused shoppers to frequent their stores less with purchasing down it must strengthen its brand. With the recent move of Walmart the main threat for Pick n Pay is foreign competition. Pick n Pay stands to grow through its partnerships and now that it is focusing on distribution centers and technology it has a chance to move up from the number two position. Competitors Pick n Pay Shoprite Massmart (Walmart) Revenue $6,697.66M $9.38B $5.49B (estimated) Net Income $62.22M $363.73M $128M Year of founding Total Assets $1.47B $3.39B $ 2.1B Employees 50, ,338 - Headquarters Kenilworth, Cape Twon, South Africa Western Cape, South Africa 21 Sandton, South Africa

22 Exhibit 1: Pick n Pay Net Profit Margin Exhibit 2: Hoover's Annual Balance Sheet Statement Return to Hoover's PICK N PAY STORES LTD Primary Industry: Investment Firms Exchange: Johannesburg: PIK Fiscal Year-End: ruary All amounts in millions of US Dollars except per share amounts. Total Assets ($, million) Current Assets Cash Net Receivables Inventories Assets Other Current Assets Total Current Assets Net Fixed Assets Other Noncurrent Assets , Total Assets ($, million) 1, , , , ,

23 Liabilities Current Liabilities Accounts Payable Short-Term Debt Other Current Liabilities , Total Current Liabilities 1, , Long-Term Debt Other Noncurrent Liabilities , Total Liabilities 1, , , , Shareholder's Equity Preferred Stock Equity Common Stock Equity Total Equity Shares Outstanding Copyright 2014 Morningstar, Inc. Financial Data provided by Morningstar. Copyright 2014, Hoover's, Inc., ALL RIGHTS RESERVED. Questions for Pick n Pay: 1. What plans if any does Pick n Pay have for more expansion into Africa? 2. How has the food blog been working, have you seen a positive impact? 3. What does Pick n Pay plan to do about the growth of its competitors? 4. Is Pick n Pay able to operate successfully and profitably if the competitors lower their prices more to attract more customers? 5. How does Pick n Pay plan to overcome the lack of investment in supply chain 6. Do you think that Pick n Pay, being a company controlled by a family, will stay like that for the long haul and keep its core culture 7. What is the main take away that Pick n Pay is looking for from the new renovations? 23

24 Native VML Team 3 Carolina Herrera, Silviya McVeigh, Apurv Vachhani, Joe Volansky In March 2014, a group of PSU Smeal MBA students will be spending the portion of a day visiting NativeVML. NativeVML is a South African company self-described as Africa s leading full service digital agency..strategically and creatively-led..[bringing] cutting edge digital and marketing solutions to South Africa and the African continent. 6 NativeVML, a small 170 person cog in a greater machine, first started to come to its current form in 2010 through a merger of three South African marketing agencies, Brandsh, Cambrient and Stonewall+ Digital Marketing in the creation of Native. On 11 Dec 2013, Native and VML announced another partnership, this time the combination of the two created NativeVML. VML is a subsidiary of Young and Rubicam, a 16,000 person advertising company headquartered in New York City. Young and Rubicam is further a subsidiary of WPP plc, a publicly traded British multinational advertising marketing and public relations firm headquartered in London. WPP employees 165,000 people globally with a market capitalization of $30B and 2012 bottom line of $1.4B. 7 While the company is part of a larger organization, it retains its local flavor and business focus. In South Africa, NativeVML s clients have included the world-wide branded and recognizable names of General Motors, L Oreal and Nestle, among others. They also do a broad array of local work, from cupcake companies to liquor manufacturers. They are a strong company as assessed through their online portfolio. Specific detailed pro forma statements are not readily available for viewing. A weakness, also assessed through online observation, might be that they aren t terribly diverse from what can be gleaned through some basic internet browsing there company consists of many whites while South Africa is 75% black. Often profitability comes through adapting to local cultures. Not a necessity, but does this company reflect the demographics appropriately to further their success? They have the continent to capture as it grows. Africa is a huge market. It is also a continent stricken with an 6 NativeVML FactSheet pdf Accessed 22FEB Accessed 23FEB

25 uncertain business environment. South Africa itself has corruption and at times shaky governance and infrastructure. The continent as a whole is far worse. Questions for VML: 1. Your social media feeds can take an edgy twist; is that indicative of South African culture or a marketing choice made by the NativeVML team? 2. You market yourselves as a digital agency, but when perusing your portfolio, your work is often far more tangible and hands-on what really sells? 3. Does digital social media really do little more than to create online ecospheres of shared content that never makes its way toward real revenue? 4. South Africa makes up a small chunk of Africa. What is business like in the rest of the continent and what are your projections for it moving forward? (Locally, the Ecotones (Ryan M.). Nigeria, with its population? 5. What are the effects of destabilized North Africa on the South? 6. You have a very entrepreneurial spirit about what you do (with given bios, promoted culture, even a Chief Growth Officer). How do you keep this spirit while experiencing organic growth and being integrated with a corporate giant? 25