Entrepreneurship Midterm Introduction



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Entrepreneurship Midterm


Introduction

After much deliberation of choosing an entrepreneur, either Taiwanese or foreign, I chose a South African entrepreneur. Most of my classmates chose a local business venture or business man from their respective countries. Hence the reason for me choosing someone who comes from my country

The person I would like to introduce is Mr. Raymond Ackerman. He is a very successful businessman and he is rated number twenty-three on the “Forbes Magazine” with a net worth of about US$545 million. However, his success did not come easy, as he had to overcome many obstacles in business and in life. He, like many entrepreneurs had to work hard, earn a little money in the beginning, but in the end, succeed. This man proved that you need to have tenacity in order to be a winner. This is the story of “Pick ‘n Pay”

Pick ‘n Pay

Mr. Ackerman was forced into becoming an entrepreneur. He was an executive at a supermarket chain when he got sacked because his thinking wasn’t in line with that of the shareholders. He returned from America with great ideas for the retail chain, but when his superiors heard them, they were dismayed and inevitably he got the sack. At that time he was based in Johannesburg, married with two children. Now he was unemployed, broke and had to fend to his family. He returned to his native city, Cape Town, where he and a few of his closest friends decided what would be the next step. His brother-in-law who is one of his closest friends motivated him to pursue the dream of owning his own supermarket.

There was a man called Jack Goldin who wanted to sell his four supermarkets, named “Pick ‘n Pay” in the Cape Town area. He wanted about R620 000 (NT$2,480,000) for all four. In the 1960’s this was an enormous amount of money to have in cash. So Mr. Ackerman and twenty-five of his closest friends managed to raise the money and buy the supermarkets.

“Pick n Pay’s” roots can be traced back to principles handed down to Raymond Ackerman when he was a commerce student at the University of Cape Town. His lecturer, Professor WH Hutt, believed implicitly in the principle of consumer sovereignty, and his words, “treat the customer like a queen and she will make you a king”, made a lasting impression on the young student.

The Company’s mission is consumerism, which in simple terms, means to interpret and satisfy customers’ needs by selling quality products at competitive prices, and providing courteous service in stores that are well located and pleasing to shop in. In addition, a policy of refunding goods without question has enabled Pick n Pay to establish long-term customer relationships, and has ultimately lead to an incredibly loyal customer base.

In its first trading year Pick n Pay achieved a profit of R310 000 (NT$1,240,000) on a turnover of R5-million (NT$20,000,000). Turnover subsequently climbed to R10-million (NT$40,000,000), and doubled the following year. Soon, “Checkers” and “OK Bazaars” took on “Pick n Pay” and starting a price war in the Western Cape. At the height of the battle, Ackerman received a letter from a Port Elizabeth businessman offering to sell him his small supermarket.

Taking the advice of a friend who had told him to treat the “Checkers/OK” attack as if it were a military campaign, Ackerman immediately left for Port Elizabeth where he bought the shop the same day. Two months later, a fully renovated “Pick n Pay”-branded store opened its doors for business. Mr. Ackerman quoted: “It saved us because it meant that both chains had to fight in Cape Town and Port Elizabeth. Their ultimate withdrawal was a real highlight.”

And so the scene was set for “Pick n Pay” to change the face of South African food retailing. Trading was tough back then, with the industry characterized by ruthless cartels. But challenge is what Mr. Ackerman thrived on. Not surprising, given his favorite saying is, “winning isn't everything – it's the only thing”! Determined to fight for the consumers’ right to a fair deal, Mr. Ackerman started cutting prices on basic items. He wanted to offer consumers basic commodities at low prices, but everyone said the government wouldn’t allow them.


In 1969, only two years after the Company was founded, a leading financial publication pronounced Pick n Pay “the star of the Cape supermarket scene”, and when the Company was listed as one of the “Sunday Times Top 100” companies, it became clear that Pick n Pay had truly come of age.

In 1973 Raymond Ackerman announced “Pick n Pay” greatest ever diversification – the Company’s entry into the field of “Hypermarkets.” The first “Hypermarket” opened in 1975 in Boksburg, bringing the concept of “one-stop-shopping” to the South African consumer for the first time. The opening beat all previous “Pick n Pay” trading records with an estimated R350 000 (NT$1,400,000) being taken in the first two days alone. Today there are twenty “Hypermarkets” located in South Africa.

In 1984 the Company acquired 50% interest in “Boardmans”, a chain of Cape-based home ware stores. The chain was to become wholly owned by “Pick n Pay” two years later.

Later that year, the company’s contribution to community won international recognition when the Marketing Institute of America honored “Pick n Pay” with a social responsibility award. Despite political turmoil and economic downturn, “Pick n Pay” continued to forge ahead. In 1983 turnover for the year exceeded R1-billion (NT$4bn) for the first time, and three years later the enormous expansion of the company was highlighted when turnover for 1986 doubled to R2-billion (NT$8bn).

However, it was not all smooth sailing, as “Pick n Pay” was forced to abandon its expansion into Australia due to union opposition. “Pick n Pay” was on the verge of building a second “Hypermarket” in Melbourne when the plumbers union rallied to bar them from the site. The company eventually turned its back on one of its prime businesses, the superb Brisbane store. Ironically, the store is still called “Pick n Pay”, and was subsequently sold to the original partner.

That year also saw the opening of the group’s 100th store. This coincided with a vigorous program of new store openings throughout the country. The stage was set for the company's entry into the ‘90s – a decade that was marked by significant political and social change, mirrored by equally important changes within the company.


Why Pick ‘n Pay is So Successful?

The spirit that guides the company and gives it its unique character is driven by the values and principles that inspired Mr. Ackerman to establish “Pick n Pay” in 1967. Those values and principles are considered sacred and, despite changing times, new developments, improved technology and radical strategies, they remain consistent.



Core principles
The core principles that constitute “Pick n Pay's” business activities include:

  • Maintaining abiding values, in spite of business practices changing with time.

  • Fostering respect for individuals, not as a strategic advantage, but because it is morally correct.

  • Acknowledging the difference between timeless principles and daily business practices.

  • Sticking to values – even if this appears to put us at a competitive disadvantage.

Sustainable business
For over four decades we have built a truly sustainable business. The growth and success of “Pick n Pay” is attributable to two fundamental principles:

  • An unwavering belief in consumer sovereignty

  • The application of the “four legs of the table” principle.

These principles were put into practice at the foundation stages of the company, and continue to be the cornerstone of the business

The four legs of the table

The “four legs of the table” principle follows a simple analogy: The business is essentially likened to a table supported by four legs, on top of which the consumer is positioned. Each leg is required to be equally strong so that the table may remain balanced and upright. The four legs comprise:


  • Administration

  • Merchandise

  • Promotion and social responsibility

  • People

Each leg is equally important to the success and continued sustainability of the business. Each requires, and continues to receive, equal focus and management support.

Building of sustainable communities
Sustainability businesses have an important role to play in the building of sustainable communities – a responsibility “Pick n Pay” embraces wholeheartedly. It is not simply a philanthropic way of thinking; it is an act of enlightened self-interest. The more economic freedom that exists within South African society, the more scope there will be for growth in the retail market. It is no surprise that our view is the same as it was at our inception – big business must work together towards securing the economic security and social wellbeing of generations to come.

Another major reason why “Pick ‘n Pay” has become so successful was owing to the fact that Mr. Ackerman has opened strategic distribution centers across South Africa. There are about three to four major distributions in the Western Cape alone. This means that the lead time when stores order the inventory, will be reduced significantly should the stores order directly from the supplier. This is the approach of “Walmart” in the U.S.A, where the distribution center is strategically situated to service the stores. Therefore, most “Pick ‘n Pay” stores are never out of stock of certain items; except if the supplier is out of stock.


Rebranding Of Pick ‘n Pay

At the end of 2007 “Pick n Pay” embarked on one of the most extensive rebranding exercises ever undertaken in South Africa. The new “Pick n Pay” logo heralded an evolutionary change, which while quite different from the original, retains the key features that have made “Pick n Pay” distinctive in the retail environment.

The rebranding was an important signal of the deeper underlying transformation, change and revitalization that the business was undergoing. Importantly it’s all about the customer – and about turning insight into customer needs into action responses to those needs. The rebranding process gave “Pick ‘n Pay” an opportunity to refresh, revitalize and re-energize the business, and most importantly to refresh the customer shopping experience. New talent was brought into the business to serve as a catalyst for the new culture of “Fresh Thinking” and innovation.

A tremendous amount of effort had been put into the re-energizing of the “Fresh Food” offering in order to deliver at store level. Training academies have been established in both the Western Cape and Gauteng to retrain all staff within these areas. The Western Cape facility has been running for over four years and the facility in Gauteng has been open since September 2009.

“Pick n Pay” worked closely with a local packaging company in order to alleviate the confusion surrounding all the house brands that existed under the Pick n Pay banner prior to the rebranding. A three-tier strategy under “Good, Better, Best” was clearly identified, with “GOOD” representing No name Brand (NNB), which would offer excellent value for money, “BETTER”, a “Pick n Pay” brand (PnP), which would incorporate the migration of all “Choice” merchandised previously under “Groceries”, as well as “Food hall”, previously merchandised under “Fresh.” BEST is still to be identified, and will be expanded during the course of 2013.

This strategy has now been implemented across the entire business, including “Fresh Perishables,” “Groceries” and “General Merchandise,” which was previously not the case. This total rebranding was completed towards the middle of 2009 and over the next two years “Pick ‘n Pay” will launch approximately 650 new products under the “NNB and PnP” brands across all categories. There was a consolidation of the “Fresh Convenience” lines due to the downturn in the economy; however more exciting new products will be launched during the course of 2011 and 2012.

The new customer magazine, “Fresh Living,” designed to talk directly to a broad cross section of “Pick n Pay’s” customers, is going from strength to strength and has already won numerous awards. Latest figures reveal that “Fresh Living” is currently one of the top selling women’s magazines in the country.


Pick ‘n Pay Today

Today there are bout eight-hundred and seventy “Pick ‘n Pay” stores in South Africa. The retail chain has expanded significantly in almost fifty years. One has to acknowledge Mr. Ackerman’s success just to merely survive in the beginning stages. To get into a market controlled by cartels and price-fixing rife, proves that he is a true entrepreneur.

“Pick ‘n Pay” has now become a franchise. If you, as an entrepreneur, would like to own a “Pick ‘n Pay” store, you need to ensure that all the standards are adhered to. Should you decide to purchase a franchise, it’s very expensive. In total, one percent of gross actual turnover you need to pay Pick ‘n Pay. This fee is payable with post-dated checks prior to opening and adjusted at the end of the financial year. This is reviewed annually in accordance with actual turnovers.

Should I have the resources and financial backing, I would definitely want to open my own “Pick ‘n Pay” supermarket. No “Pick ‘n Pay” store has ever closed down, owing to the fact that the standards are set very high and the owner of the store is carefully scrutinized. Like every industry there are competitors who would always compete with you on a daily basis, but “Pick ‘n Pay” has stood the test of time and today “Pick ‘n Pay” is a household name across South Africa.



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