Description
On this paper talk a proposed corporate entrepreneurial framework in the retail division of an agri business.
A proposed corporate entrepreneurial
framework in the retail division of an
agri-business
H van Antwerpen BCom, BCom (Hons)
10647392
Mini-dissertation submitted for the degree Masters in
Business Administration at the Potchefstroom Campus of
the North-West University
Promoter: Prof SP van der Merwe
November 2012
i
ACKNOWLEDGEMENTS
To God all the glory for helping me through this MBA study period.
I would also like to express my gratitude to the following people:
• My loving wife, Loraine and two sons, Lenro and Ruan, for their patience and
tolerance during the long hours of absence whilst in my study.
• My parents for their support and encouragement.
• Bernadette Viljoen and Claudi Smit for the typing and drawing of the figures and
tables.
• My promoter, Professor Stephan van der Merwe that were there for me as
mentor, supporter with a lot of dedication.
• My colleagues at Senwes Village, Retail division that supported me through this
study period.
ii
ABSTRACT
The global economy is creating profound and substantial changes for business and
industries throughout the world. In the agricultural industry this is also true regarding
the active consolidation of the food-value chain that is taking place at a rapid rate and
on the other hand a strong component of international competitiveness is becoming a
reality with multi-national role players positioning them globally. The consumer on
the other hand requires a simpler and cheaper supply chain and wants to participate
in the deliberations regarding the end product.
In order for Senwes to be successfully positioned as an intermediary, it is evident that
change is essential and unavoidable. Therefore, Senwes business platform has to
be enlarged, scale of volume has to be added and trade mark has to be addressed.
The literature review in this study confirmed that corporate entrepreneurship is
recognised as a potential viable means of promoting and sustaining competitiveness,
and transforming business and industry opportunities for value-creating innovation.
The primary objective of this study is twofold: Firstly, to assess the determinants of
corporate entrepreneurship and retail in an agri-business in South Africa and
secondly to propose an integrated framework to facilitate the process of establishing
and maintaining corporate entrepreneurship and retail within the specific agri-
business in South Africa.
A comprehensive literature overview on corporate entrepreneurship was conducted
in chapter 2. In the literature review corporate entrepreneurship was defined and the
necessity and fostering of corporate entrepreneurship discussed. A framework with
determinants for sustainable corporate entrepreneurship was furthermore explained.
The chapter was concluded with a discussion on corporate entrepreneurial strategy.
A historic overview of the agricultural industry in South Africa was presented. The
focus of the discussion was on the agri-business sector in South Africa with a
discussion on Senwes Limited.
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The nature of retail was discussed in chapter 4. An overview of the nature of retail
with a definition of retail was explained. The reason for the change in retail, with
different types of retailers as well as a strategic model was noted and discussed. A
specific focus in the chapter was given to the strategic drivers for retail success with
an overview of key retail success factors. The chapter was concluded with a
discussion on the future of retailing.
Empirical research was conducted after the literature review. The empirical research
focused on discussing the results obtained from the corporate entrepreneurial climate
and retail questionnaire. Middle management and first line supervisors/staff of
Senwes Village, Retail division, were selected as the sample population for this study
and a 65% ratingwas achieved. Basic demographic information were dealt with first,
after which the perceptions of the respondents with regard to the corporate
entrepreneurial orientation and climate constructs, constructs measuring retail and
perceived success of the business were discussed. Furthermore, relationships were
determined between demographic variables and the constructs measured in the
questionnaire.
Following the detailed empirical analysis done in chapter 5, conclusions were made
in chapter 6.
Regarding the entrepreneurial orientation survey, five variables describing theoretical
dimensions of Autonomy, Innovativeness, Risk-taking, Pro-activeness and
Competitive aggressiveness were extracted. The constructs Innovativeness,
Pro-activeness and Competitive aggressiveness are present in Senwes Village,
Retail division. Autonomy and Risk-taking are less prevalent in Senwes Village,
Retail division due to the lower average mean score that was obtained from the
empirical study.
In conclusion to the entrepreneurial climate survey, four variables describing
theoretical dimensions of Management Support, Work discretion,
Rewards/Reinforcement, Specific climate variables were extracted. The
construct that is already active within the business is Rewards/Reinforcement.
iv
Specific climate variable. Work discretion and Management support need
development to become present.
As far as the retail survey is concerned, six variables describing the theoretical
dimensions of Store factor, Technology, Service factor, Merchandise/Product,
Price and Segmentation/Target market were extracted. As indicated from the
results the constructs Store factor, Technology and Service factor are present in
the business. Merchandise/Product, Price and Segmentation/Target market
need development to become present in the business.
Regarding the perceived success survey is concerned three factors, Financial
measures, Process measures, People development were extracted. All three
factors are present in the business. .
Finally, recommendations were proposed by means of an integrated framework that
could assist the agri-business to establish and maintain corporate entrepreneurship
and retail within the business.
Key words: Corporate entrepreneurship; venturing; intrapreneurship; entrepre-
neurship; corporate entrepreneurial strategy; retail; agri-business; co-operatives.
v
TABLE OF CONTENTS
ACKNOWLEDGEMENTS i
ABSTRACT ii
TABLE OF CONTENTS v
LIST OF FIGURES xii
LIST OF TABLES xiii
CHAPTER 1: NATURE AND SCOPE OF THE STUDY
1.1 INTRODUCTION 1
1.2 PROBLEM STATEMENT 3
1.3 OBJECTIVES OF THE STUDY 4
1.3.1 Primary objective 4
1.3.2 Secondary objectives 4
1.4 SCOPE OF THE STUDY 5
1.4.1 Field of study 5
1.4.2 Geographical demarcation 5
1.5 RESEARCH METHODOLOGY 6
1.5.1 Literature review 6
1.5.2 Empirical research 7
1.6 LIMITATIONS TO THE STUDY 13
1.7 OUTLINE OF STUDY 14
CHAPTER 2: AN OVERVIEW OF CORPORATE ENTRERENEURSHIP
2.1 INTRODUCTION 17
vi
2.2 DEFINITION AND OVERVIEW OF CORPORATE ENTREPRENEUR- 18
SHIP
2.3 NECESSITY OF CORPORATE ENTREPRENEURSHIP 19
2.4 FOSTERING ENTREPRENEURSHIP IN A BUSINESS 22
2.5 FRAMEWORK FOR SUSTAINABLE CORPORATE 25
ENTREPRENEURSHIP
2.5.1 Triggers of corporate entrepreneurship 27
2.5.2 Structure 28
2.5.3 Organisational controls 28
2.5.4 Human resource management systems 29
2.5.5 Organisational culture 31
2.5.6 Conclusion 31
2.6 DETERMINANTS FOR MEASURING SUSTAINABLE CORPORATE
ENTREPRENEURSHIP INTENSITY INTERNALLY 31
2.6.1 Innovativeness 32
2.6.2 Risk-taking 34
2.6.3 Pro-activeness 35
2.6.4 Competitive aggressiveness 36
2.6.5 Autonomy 36
2.6.6 Determinants measuring the internal work environment 37
2.7 CORPORATE ENTREPRENEURSHIP STRATEGY 40
2.7.1 Critical aspects related to corporate entrepreneurship strategy 41
2.8 SUMMARY 41
vii
CHAPTER 3: OVERVIEW OF CO-OPERATIVES TO AGRI-BUSINESS
3.1 INTRODUCTION 44
3.2 OVERVIEW OF AGRICULTURAL INDUSTRY IN SOUTH AFRICA 44
3.3 AGRI-BUSINESSES SECTOR IN SOUTH AFRICA 48
3.3.1 Evolution of agri-businesses in South Africa 48
3.3.2 The effect of deregulation on the agricultural sector 50
3.3.3 The effect of deregulation on agri-businesses 50
3.4 SENWES LIMITED 51
3.4.1 Establishment of co-operative 51
3.4.2 Conversion from co-operative to business 51
3.4.3 Senwes Limited current status 57
3.4.4 Senwes Village 60
3.5 SUMMARY 61
CHAPTER 4: NATURE OF RETAIL
4.1 INTRODUCTION 64
4.2 DEFINITION OF RETAIL 64
4.3 CHANGES IN RETAIL 65
4.4 TYPES OF RETAILERS 66
4.5 RETAIL MARKETING DECISIONS 69
4.5.1 Segmentation 70
4.5.2 Target market 71
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4.6 STRATEGIC MODEL 72
4.6.1 Big-Middle segment 73
4.7 STRATEGIC DRIVERS FOR RETAIL SUCCESS THROUGH VALUE 75
4.7.1 Value as meaningful concept for retailers 75
4.8 KEY RETAIL SUCCESS FACTORS 76
4.8.1 Store factors 77
4.8.2 Service factors 79
4.8.3 Merchandise 81
4.8.4 Price 81
4.8.5 Supply chain 87
4.8.6 Technology 87
4.8.7 Promotion 89
4.8.8 Location 89
4.9 THE FUTURE OF RETAILING 90
4.10 SUMMARY 91
CHAPTER 5: RESULTS AND DISCUSSION OF THE EMPERICAL
STUDY
5.1 INTRODUCTION 95
5.2 GATHERING OF DATA 95
5.2.1 Study population 95
5.2.2 Questionnaire used in this study 96
5.2.3 Confidentiality 97
5.2.4 Statistical analysis of data 97
5.3 RESPONSES TO THE STUDY 98
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5.4 DEMOGRAPHIC INFORMATION OF RESPONDENTS 98
5.4.1 Age group classification of respondents 98
5.4.2 Gender of respondents 99
5.4.3 Racial group classification of respondents 99
5.4.4 Highest academic qualification achieved by respondents 100
5.4.5 Distribution of management/staff level 101
5.5 RELIABILITY OF THE QUESTIONNAIRE 101
5.6 ASSESSMENT OF THE QUESTIONNAIRE 103
5.6.1 Variable measuring corporate entrepreneurial orientation 104
5.6.2 Variables measuring corporate entrepreneurial climate 106
5.6.3 Variables measuring key retail success factors 106
5.6.4 Variables measuring perceived success in business 107
5.7 RELATIONSHIP BETWEEN CORPORATE ENTREPRENEURIAL 109
ORIENTATION CONSTRUCTS AND DEMOGRAPHIC VARIABLES
5.7.1 Relationship between corporate entrepreneurial orientation constructs 110
and the gender of respondents
5.7.2 Relationship between corporate entrepreneurial orientation constructs 110
and the management level of respondents
5.7.3 Relationship between corporate entrepreneurial orientation constructs 111
and highest academic qualification of respondents
5.8 RELATIONSHIP BETWEEN CORPORATE ENTREPRENEURIAL 112
CLIMATE AND DEMOGRAPHIC VARIABLES
5.8.1 Relationship between corporate entrepreneurial climate and the 112
gender of respondents
5.8.2 Relationship between corporate entrepreneurial climate and the 113
management level of respondents
5.8.3 Relationship between corporate entrepreneurial climate and the 113
qualification level of respondents
x
5.9 RELATIONSHIP BETWEEN KEY RETAIL SUCCESS FACTORS 114
AND DEMOGRAPHICS
5.9.1 Relationship between key retail success factors and the gender respon- 115
dents
5.9.2 Relationship between key retail success factors and the management 116
level of respondents
5.9.3 Relationship between key retail success factors and the highest acade- 117
mic qualification level of respondents
5.10 RELATIONSHIP BETWEEN PERCEIVED SUCCESS AND DEMO- 117
GRAPHICS
5.10.1 Relationship between perceived success factors and the gender of 117
respondents
5.10.2 Relationship between perceived success factors and the manage- 118
ment level of respondents
5.10.3 Relationship between perceived success factors and the highest acade-119
mic quailification level of respondents
5.11 SUMMARY 119
CHAPTER 6: CONCLUSIONS AND RECOMMENDATIONS
6.1 INTRODUCTION 121
6.2 CONCLUSIONS 122
6.2.1 Reliability of the corporate entrepreneurial climate and retail question- 122
naire
6.2.2 Demographical information 124
6.2.3 Conclusions on corporate entrepreneurial orientation 125
6.2.4 Conclusions on corporate entrepreneurial climate 128
6.2.5 Assessment of compliance to key retail success factors 130
xi
6.2.6 Assessment of perceived success of the organisation 134
6.2.7 Relationship between selected demographical variables and corporate 135
entrepreneurial orientation and climate,key retail success factors and
perceived success
6.3 RECOMMENDATIONS 139
6.3.1 Trigger events 141
6.3.2 Establishing a corporate entrepreneurial orientation and climate 143
6.3.3 Corporate orientation 146
6.3.4 Corporate entrepreneurial climate 147
6.3.5 Key retail success factors 150
6.4 ACHIEVEMENT OF OBJECTIVES 153
6.4.1 Primary objective 153
6.4.2 Secondary objectives 153
6.5 SUGGESTIONS FOR FUTHER RESEARCH 154
6.6 SUMMARY 157
BIBLIOGRAPHY 158
ANNEXURE A: Corporate entrepreneurial climate and retail questionnaire 177
ANNEXURE B: Corporate entrepreneurial orientation constructs 193
ANNEXURE C: Corporate entrepreneurial climate constructs 195
ANNEXURE D: Retail constructs 200
ANNEXURE E: Perceived success constructs 204
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LIST OF FIGURES
FIGURE 1.1: Area of operation of Senwes Limited, Retail Division 6
FIGURE 1.2: The research process of the study 14
FIGURE 2.1: The corporate entrepreneurship process 26
FIGURE 2.2: Relating innovations to risk 35
FIGURE 3.1: Volume of agricultural production 45
FIGURE 3.2: Gross farmer sector income 46
FIGURE 3.3: Net farm sector income (NFI) 48
FIGURE 3.4: Successful completion of the turnaround strategy 54
FIGURE 3.5: Senwes group structure 57
FIGURE 3.6: Turnover and net profit since becoming a public company 58
FIGURE 4.1: Retail landscape 72
FIGURE 4.2: The elements of the retail image 77
FIGURE 6.1: An integrated framework for corporate entrepreneurship 142
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LIST OF TABLES
TABLE 1.1: Constructs and number of items 9
TABLE 1.2: Constructs and number of items 10
TABLE 1.3: Constructs and number of items 10
TABLE 1.4: Constructs and number of items 11
TABLE 2.1: Sixteen dilemmas of innovation 33
TABLE 3.1: Senwes operations overview 60
TABLE 4.1: Selected aspects of store-based retail strategy mixes 67
TABLE 5.1: Rating of survey 98
TABLE 5.2: Age distribution 99
TABLE 5.3: Gender information 99
TABLE 5.4: Race distribution 100
TABLE 5.5: Highest academic qualification achieved 100
TABLE 5.6: Management/Staff level 101
TABLE 5.7: Cronbach alpha coefficient per construct 102
TABLE 5.8: Results of corporate entrepreneurial orientation 104
TABLE 5.9: Results of corporate entrepreneurial climate 106
TABLE 5.10: Results of key retail success factors 107
TABLE 5.11: Results of perceived success of the business 108
TABLE 5.12: Classification of d-value 109
TABLE 5.13: The relationship between gender and the corporate 109
entrepreneurial orientation constructs
TABLE 5.14: The relationship between management levels and the cor- 110
porate entrepreneurial orientation constructs
TABLE 5.15: The relationship between highest academic qualification and 111
the corporate entrepreneurial orientation constructs
TABLE 5.16: The relationship between gender and the corporate entrepre- 112
neurial climate of the business
TABLE 5.17: The relationship between management levels and the cor- 113
porate entrepreneurial climate of the business
TABLE 5.18: The relationship between highest academic qualification 115
xiv
and the corporate entrepreneurial climate of the business
TABLE 5.19: The relationship between gender and key retail success 116
factors
TABLE 5.20: The relationship between management level and key retail 116
success factors
TABLE 5.21: The relationship between highest academic qualification and 116
compliance to key retail success factors
TABLE 5.22: The relationship between gender and the perceived suc- 117
cess of the business
TABLE 5.23: The relationship between management level and the percei- 118
ved success of the business
TABLE 5.24: The relationship between highest academic qualification 119
and the perceived success of the business
1
CHAPTER 1
NATURE AND SCOPE OF THE STUDY
1.1 INTRODUCTION
The global economy is creating profound and substantial changes for business and
industries throughout the world (Groenewald, 2010:1). These changes make it
necessary for business to examine their purpose carefully and to devote a great deal
of attention to selecting and following strategies in their pursuit of levels of success
that have a high probability of satisfying multiple stakeholders.
Burns (2008:10) argued that many businesses have reacted to these new set of
challenges by downsizing, unbundling, focusing on core business, reengineering,
decentralisation, outsourcing, restructuring and relying on self-directed work teams.
Morris, Kuratko and Covin (2008:7) state that sustained competitive advantage, now
lies in the adaptability, flexibility, speed, aggressiveness and innovation which comes
down to one word namely, entrepreneurship. Christensen (2004:302) indicates that
many large businesses find it difficult to integrate the entrepreneurial spirit in a well-
structured or bureaucratic business. Therefore these business must think non-
traditionally to cope with the increasingly paradoxes. According to Johnson
(2001:135), if a business does not adopt a proactive attitude towards innovation and
the creation of new ventures, it is unlikely to survive in an increasingly, aggressive,
competitive and dynamic market place. Business is turning to corporate
entrepreneurship because they are not experiencing the continual innovation, growth
and value-creation that they had (Thornberry, 2001:1). Corporate entrepreneurship
is recognised as a potential viable means of promoting and sustaining
competitiveness, and transforming business and industries opportunities for value-
creating innovation (Aloulou & Fayolle, 2005:24).
According to Morris et al. (2008:20), remaining competitive is very different from
achieving sustainable competitive advantage. The quest for competitive advantage
requires that business and the managers within them continually reinvent
themselves.
2
From this brief introduction it is clear that business and industries throughout the
world are operating in an uncertain and dynamic global economy. Business of the
future needs continual innovation, growth and value-creation to survive. Through
corporate entrepreneurship the entrepreneurial spirit within business boundaries can
be created, allowing an atmosphere of innovation to prosper. It is also highlighted
that business need to achieve sustainable competitive advantage to remain
competitive (Groenewald, 2010:3).
The focus of this study is on an agricultural retail business with the changing retail
environment that affects the business sustainable competitive advantage. According
to Lotz (2009:174), South African agri-businesses are in a relative unique situation
due to the fact they have to content with the deregulation and liberalisation of the
agricultural sector, but also face increasing globalisation and changing consumer
preferences. Since the establishment of agricultural retail stores, these stores have
been in a privileged situation by having a captured market in the sense that farmers
were shareholders in these stores which brought some loyalty and commitment.
They had the advantage of being the only suppliers, especially in the rural areas, of
agricultural goods and other complimentary products to the farming community
(Jacobs, 2007:5).
Furthermore, finance availability for the farmers was limited and mostly done through
the co-operative structure which contributed to the loyalty factor of these farmers to
their co-operative (Ortman & King, 2007:46). Finance through the commercial
banking sector opened the door for these members to obtain financing somewhere
else and more competitors entered the market with credit facilities and other modern
attractions that lured these once loyal co-operative customers away from their
traditional buying patterns (Jacobs, 2007:2). This resulted in some of the co-
operatives to convert to business to obtain external funds to expand the business to
be more competitive. These changes forced the once content co-operatives into a
new playing field with higher demand on competition and a struggle to survive.
Reasons highlighted the importance of corporate entrepreneurship and retail within
the agricultural business as a means of developing an entrepreneurial and retail
environment that could contribute to a sustainable competitive advantage.
3
The purpose of this study is to develop a sustainable corporate entrepreneurial and
retail framework for an agricultural business in South Africa that will result in
sustainable, value-creation for their stakeholders.
This chapter provides the background and literature review of the study. It sets out
the research problem, purpose of the study, research objectives, research
methodology, as well as an outline of the chapters. This is done to guide the flow of
the study. In this study various terminology are sighted by different authors -
terminology such as business, organisation, venture and firm. For the purpose of this
study the term “business” will be used which refer to a profit seeking entity. Where
authors are directly referred to these constructs, it will not be changed.
1.2 PROBLEM STATEMENT
South African agri-businesses faced challenges such as increasingly international
competition, a changing social environment based on equity principals and
increasingly complex consumer demand (Doyer, D’Haase, Kirtsen & Van Rooyen,
2007:495). Several co-operatives subsequently converted to investor - oriented firms
(IOF`S) with the view to obtain easier access to various sources of capital, to align
the interest of the shareholders with those of the customers and to instil an
entrepreneurial flair often missing from conventional co-operatives (Ortmann & King,
2007:47- 48).
Agricultural businesses were confronted with the open market system and they had
to battle since. The agricultural retail businesses were also confronted with volatile
markets, costly input resources, disloyal customers buying direct from suppliers,
direct competition from suppliers and other retail and agricultural businesses
penetrating their area of business (Terblanche & Willemse, 2009:12). According to
Kotze (2012), agricultural retail business outlets in cities are subsidising agricultural
retail business outlets in rural areas. Jacobs (2007:7) argued that agricultural retail
business will lose their competitive market share due to not responding aggressively
to the changing trend in the retail environment. Esterhuizen, Van Rooyen and
D’Haase (2008:44) argued that agri-businesses in South Africa must recognise the
4
important role of corporate entrepreneurship (innovation) to maintain competitiveness
and sustainability.
The research will address the growing concern of the impact of factors mentioned on
the sustainability as well as value-creation for stakeholders in an agricultural retail
business operating in five provinces in South Africa. The research will measure the
current agricultural retail business against corporate entrepreneurial orientation
characteristics, as well as perceived success factors and key retail success factors to
determine a corporate entrepreneurial and retail framework, which would assist the
agri-businesses in adapting to the change that can create value and sustainability for
stakeholders.
1.3 OBJECTIVES OF THE STUDY
The following primary and secondary objectives were set for this study:
1.3.1 Primary objective
The primary objective of this study is twofold: Firstly, to assess the determinants of
corporate entrepreneurship and retail in an agri-business in South Africa and
secondly to propose an integrated framework to facilitate the process of establishing
and maintaining corporate entrepreneurship and retail within the specific agri-
businesses in South Africa.
1.3.2 Secondary objectives
In order to achieve the primary objective various secondary objectives were
formulated. The secondary objectives of the study are:
• Determine what is meant by corporate entrepreneurship and corporate
entrepreneurial strategy by means of a literature study.
• Describe the link between innovation and corporate entrepreneurship.
• Obtain insight into the phenomena of retail by means of literature review.
5
• Obtain an understanding of Senwes retail division within the agricultural industry
in South Africa.
• Assess the determinants of corporate entrepreneurship and retail within the
specific agri-business.
• Assess perceived success determinants within the business.
• Propose an integrated framework to assist in establishing and maintaining
corporate entrepreneurship and retail in a specific agri-business.
1.4 SCOPE OF THE STUDY
This section describes the field of study and the geographical demarcation.
1.4.1 Field of the study
The field of the study falls within the subject of entrepreneurship and marketing in
existing business with specific reference to corporate entrepreneurship and retail.
1.4.2 Geographical demarcation
The study is limited to Senwes Limited an agri-business within South Africa. Senwes
is an agricultural business that focuses on the provision of retail and production
inputs primarily to grain producers, as well as market access for agricultural produce.
This is strategically coupled with the provision of value-added services, which
include, among others, financing, insurance and agricultural technical services.
Senwes conducts its business predominantly in the North-West, Free State,
Gauteng, Northern and Western Cape. The group also undertakes international
trade in the SADC region as well as certain parts of East Africa. Senwes is a broad
based black economic empowered business.
The study is focusing on Senwes Limited, retail and input side. This division is
Senwes Village, Retail division. The area of operation of Senwes Village, Retail
division that took part in the study is indicated in figure 1.1.
6
Figure 1.1: Area of operation of Senwes Village, Retail division
Source: Senwes (2011:23)
1.5 RESEARCH METHODOLOGY
The study consists of two phases, namely a literature review and empirical research.
1.5.1 Literature review
The literature review for this study focused on the various aspects of the nature of corporate
entrepreneurship and retail. More specifically it focused on:
• Discussing what is meant by corporate entrepreneurship and corporate
entrepreneurial strategy.
• Describe the link between innovation and corporate entrepreneurship.
• Determining the internal business factors that have an influence on the corporate
entrepreneurial climate within the specific agri-businesses.
• Discussing the phenomena of retail and its key success factors.
• Finally, the literature review focussed on Senwes Limited, Retail division within
which the study was conducted and more specifically the challenges faced by the
agri-businesses that are part of the greater agricultural industry.
The literature review consisted mainly of an analysis of secondary sources such as
books, journal articles, unpublished theses and dissertations, papers and internet
7
sources such as websites. The literature review aided in acquiring a thorough
understanding of the problem that is being investigated, assisted in preparing a
suitable empirical research methodology and formed the basis of the questionnaire.
1.5.2 Empirical research
Empirical research primarily deals with the means of data collection and the use of
data (Lotz, 2009:7) as obtained from (Riley, Wood, Clark, Wilkie & Szivas, 2007).
The empirical research, for this study, consisted of the research design, sample
design, the research instrument, and method of data collection and the procedures
for data analysis. Chapter 5 offers a detailed discussion on the above empirical
research process and will only be presented briefly in this section.
1.5.2.1 Research Design
The empirical study will focus on the assessment of corporate entrepreneurial and
innovative levels, as well as perceived success determinants within business that
may determine the compliance to key retail success factors in an agricultural
business in South Africa.
A quantitative research design was followed in this study and more specifically
descriptive research was used as the basis for the research design. The descriptive
research consisted of a cross-sectional analysis which was conducted by means of a
sample survey that made use of questionnaires as research measuring instrument to
gather the required quantitative data. Welman, Kruger and Mitchell (2010:23)
indicated that descriptive research has two goals: explaining phenomena and
predicting behaviour. The goal of research is to explain the phenomena such as
human behaviour in the business and administrative science by indicating how
variables are related to one another and in what manner one variable affects another.
Furthermore, the possibility of explaining and predicting human behaviour may
enable us to change or control it.
In this study an attempt was made to determine the extent to which managers, first
line supervisors and staff in a specific agri-businesses is capable of fostering
sustainable corporate entrepreneurial behaviour as a path that is conducive to the
compliance to key retail success factors. The assessment will be done through the
8
Entrepreneurial health audit of Ireland, Kuratko and Morris (2006) and through
Entrepreneurial orientation of perceived success (Lotz, 2009). This assessment is
done in four steps: step one, assessing the business’ entrepreneurial intensity. Step
two, assessing the internal environment for corporate entrepreneurship climate. The
result of step one and two is to create an understanding of the corporate
entrepreneurial and innovative process and to development of a corporate
entrepreneurial framework. Step three; determine the compliance to key retail
success factors. Step four; assess perceived success determinants within the
business.
1.5.2.2 The study population and sample
The sample of internal perceptions will involve Village managers at the head office as
well as all branch and assistant branch managers and retail staff of an agricultural
business.
The study population was selected by means of a non-probability sampling
technique, convenience sampling, where a researcher selects the sample randomly
with a total population of 120 (Welman et al., 2010:69).
1.5.2.3 Constructing the research instrument
The research instrument selected for this study was a structured questionnaire (see
annexure A). The questionnaire, named the corporate entrepreneurial climate and
retail questionnaire, consisted of a front page and a covering letter which included
the instructions to the questionnaire. The questionnaire was divided into four
sections namely:
Section A: Corporate entrepreneurial orientation. The purpose of this section was to
measure the business’s entrepreneurial orientation and intensity within the agri-
businesses retail division. From the literature review five constructs were identified.
These constructs and the number of items per construct are indicated in table 1.1.
9
Table 1.1: Constructs and number of items
NO CONSTRUCT NUMBER OF ITEMS
1 Autonomy 5
2 Innovativeness 9
3 Risk-taking 5
4 Proactiveness 4
5 Competitive aggressiveness 4
Total 27
The items in this study were developed from scales used in the following previous
studies:
• Hornsby, Kuratko and Zahara (2002)
• Ireland et al. (2006)
• Lotz (2009)
• Miller (1983)
• Morris and Kuratko (2002)
• Morris et al. (2008)
Section B: Corporate entrepreneurial climate instrument. Section B of the
questionnaire was to understand why the business has developed its current level of
entrepreneurial orientation and intensity. More specific the corporate
entrepreneurship climate instrument (CECI) was used to assess, evaluate and
manage the business’s internal work environment in ways that support
entrepreneurial behaviour and the use of corporate entrepreneurship strategy. From
the literature review six constructs were identified. The constructs and the number of
items per construct are indicated in table 1.2.
This section consists of 78 questions and/or statements. Respondents were
requested to select the number, on a 1 to 5 Likert scale (where 1 indicates they
strongly disagree and 5 they strongly agree with the statement) in terms of which
best describes their opinion about a specific question or statement.
10
Table 1.2: Constructs and number of items
NO CONSTRUCT NUMBER OF ITEMS
1 Management support 19
2 Work discretion 10
3 Rewards/Reinforcement 6
4 Time availability 6
5 Organisational boundaries 7
6 Specific climate variables 30
Total 78
Section C: Key retail success factors - The purpose of this section was to measure
the business’s compliance to key retail success factors within the agri-businesses
retail division. From the literature review nine constructs were identified. These
constructs and the number of items per construct are indicated in table 1.3.
Table 1.3: Constructs and number of items
NO CONSTRUCT NUMBER OF ITEMS
1. Segmentation/Target market 4
2. Store factors 5
3. Service factors - process 8
4. Merchandise/Product 5
5. Price 13
6. Supply chain 2
7. Technology 12
8. Promotions 3
9. Location 2
Total 54
11
This section consists of 54 questions and/or statements. Respondents were
requested to select the number, on a 1 to 5 Likert scale (where 1 indicates they
strongly disagree and 5 they strongly agree with the statement) in terms of which
best describes their opinion about a specific question or statement.
Section D: Perceived success determinants of the business - The purpose of this
section was to measure perceived success determinants within the business. From
the literature review four constructs were identified. These constructs and the
number of items per construct are indicated in table 1.4.
Table 1.4: Constructs and number of items
NO CONSTRUCT NUMBER OF ITEMS
1. Financial measures 3
2. Process measures 3
3. People development 3
4. Future (Long-term) success 2
Total 11
This section consists of 11 questions and/or statements. Respondents were
requested to select the number, on a 1 to 5 Likert scale (where 1 indicates they
strongly disagree and 5 they strongly agree with the statement) in terms of which
best describes their opinion about a specific question or statement.
1.5.2.4 Collection of data
The actual gathering of data was done by means of the following procedure:
• An email was sent to Senwes Village, Retail division management with the
questionnaire attached explaining the purpose of the study and requesting
permission to distribute questionnaires within the Village division.
• After permission was obtained, an email was sent to the Assistant General
Manager Information Technology to obtain permission to electronically distribute
12
the questionnaire via the email system to the specific target sample. The
questionnaire would be answered via monkey survey.
• Village General Manager emailed a letter in support of the survey to all managers
and staff to encourage the completion of the questionnaires.
It simplified the data gathering process, since the questionnaires were answered
electronically via monkey survey. Questionnaires were also distributed via the
internal mail system to the branch managers that distributed the questionnaires to
staff related to the sampling population. After completion they send it back via the
internal mail system. The researcher captured the hard copies manually on monkey
survey. A total of 78 questionnaires were returned, whereof a total of 12 respondents
did not complete all statements of the questionnaire. All the data received were
analysed. Collection of data is presented in more detail in chapter 5.
1.5.2.5 Data analysis
The data collected will be statistically analysed by the Statistical Consultation
Services of the North-West University: Potchefstroom Campus.
Frequencies and percentages were calculated for the demographic variables age,
gender, race, highest qualifications obtained and functional level in which the
respondents worked in according to predetermined categories.
The results of the corporate entrepreneurial and retail survey were presented
showing the arithmetic mean and standard deviation for each construct.
A comparison of the mean differences between the demographic variables and
corporate entrepreneurial orientation and climate variables, retail variables and
perceived success variables were also examined by means of independent tests (p-
values) and effect sizes (d-values).
13
1.6 LIMITATIONS TO THE STUDY
The study attempts to make a contribution to the existing knowledge of corporate
entrepreneurship and retail. The following limitations regarding the study are
presented.
• Corporate entrepreneurship consists of two main antecedents. One pertains to
the internal business and the other to the external environment of the business
(Lotz, 2009:13). The study is limited to the internal business environment.
• The study only focuses on the agricultural environment within one business
operating in five provinces in South Africa, and could therefore not be applicable
to any other country, industry or agricultural business.
• The sampling method used to determine the agri-businesses study population
was non-probability sample. The findings can therefore not be considered to be
representative of all agri-businesses in South Africa. Care should be exercised in
the interpretation and the utilisation of the results and findings of the study and
cannot be generalised.
• The small sample size might not be representative of the situation in the entire
agri-businesses due to lack of generalisation.
• Respondents will know that research is being done, and the true situation in
division of the business might not be reflected.
• The limited time to conduct the study might have excluded some managers and
staff from the study.
• Limited information is available on corporate entrepreneurship and retail in
Senwes.
• The list of determinants of corporate entrepreneurship and retail is admittedly
incomplete, as new determinants are continually being added. The study only
14
assessed some of the corporate entrepreneurial and retail determinants. More
comprehensive research is still needed to enhance our understanding of these
determinants.
1.7 OUTLINE OF THE STUDY
A brief description of the main elements and focus of the study is set out below. A
schematic representation of the chapter outlay is shown in figure 1.2.
FIGURE 1.2: The research process of the study
15
Chapter 2: An overview of corporate entrepreneurship
This chapter will provide a broad literature review on corporate entrepreneurship. The
chapter begins with an explanation of the nature of corporate entrepreneurship and
includes a definition of corporate entrepreneurship, the necessity of corporate
entrepreneurship is explained, and a framework of corporate entrepreneurship is
described. A discussion will proceed on determinants of corporate entrepreneurship
and this chapter will be concluded with the final link in this section to integrate
corporate entrepreneurship with strategy.
Chapter 3: Overview of co-operatives to agri-business
The chapter will introduce the agricultural industry in South Africa as well as the
changes, challenges that the industry currently face. The evolution from co-operative
to the deregulation of the sector, to the forming of agri-businesses will be discussed.
An overview of Senwes Limited, as agri-businesses in South Africa will then be
discussed with specific focus on the retail division, called Senwes Village, Retail
division.
Senwes Village, Retail division focus specific on the retail activities of the agri-
businesses and must compete in this changing and competitive retail industry.
Chapter 4: Nature of retail
This chapter will provide a broad literature review on retail. The chapter begins with
an explanation of the nature of retail and includes a definition of retail, why retail is
changing, types of retailers are explained. Next, key retail success factors of the
twenty first century are outlined in the chapter. The chapter will be concluded by
focussing on new trends in the business of retail.
Chapter 5: Results and discussion of the empirical study
In this chapter the research methodology introduced in chapter one will be discussed
in more detail. The research problem, purpose of the study, objectives are
16
discussed. A detailed explanation will be given on the questionnaire used to obtain
empirical data. The section will be divided into two parts namely the gathering of
data, as well as the discussion and interpretation of results.
Finally, the data processing and analysis is explained by means of statically
techniques used.
Chapter 6: Conclusions and recommendations
Chapter six summarises the major purpose and findings of the research study. A
conclusion and recommendation of the study are presented.
The research objectives are revised. Finally, limitations of the study, contributions to
the field and recommendations are presented. A sustained corporate entrepreneurial
and retail framework is further proposed to foster a corporate entrepreneurial and
retail culture within the specific agricultural business environment. The chapter
concludes with an indication of the achievement of the objectives and the
suggestions for future research.
17
CHAPTER 2
AN OVERVIEW OF CORPORATE ENTREPRENEURSHIP
2.1 INTRODUCTION
Morris et al. (2008:3) state that business must continually, adjust, adapt or redefine
themselves as this is a fundamental principle in a free market economy. In this
global entrepreneurial revolution, the rate which business must transform is
accelerating. Burns (2008:4) as obtained from John Naisbatt (1994) confirmed this
view point that big business will find it increasingly difficult to compete with and in
general will perform more poorly than smaller speedier, more innovative business.
Ramachandian, Devarajan and Ray (2006:85) support this view point and add that
business need to adopt an entrepreneurial strategy, seeking competitive advantage
through continuous innovation to effectively exploit identified opportunities in order to
sustain and grow under such circumstances.
Ireland et al. (2006:10) state that business increasingly rely on corporate
entrepreneurship to develop and picture todays and tomorrows competitive
advantages that are grounded in innovation.
Taking into consideration the above mentioned in chapter 1 and the viewpoints of
these researchers, corporate entrepreneurship is considered as a source of
competitive advantage to move a traditional hierarchical business to a point where
sustainable entrepreneurship becomes a meaningful and an important component of
business.
In this chapter various aspects concerning corporate entrepreneurship will be
researched and investigated. This will lead to a broad literature review that will be
conducted to clarify the definition and overview of corporate entrepreneurship.
Secondly, the necessity of corporate entrepreneurship for business sustainability will
be highlighted followed by the discussion of a conceptual framework being used and
applied in the field of corporate entrepreneurship. The framework on which this
research is based will also be indicated with the determinants of corporate
entrepreneurship discussed. Next the aspects to foster, develop and implement
18
corporate entrepreneurship in a business are reviewed. Lastly, corporate
entrepreneurship as a strategy will be discussed.
2.2 DEFINITION AND OVERVIEW OF CORPORATE ENTREPRENEURSHIP
Morris et al. (2008:11) indicated that corporate entrepreneurship is a term used to
describe entrepreneurial behaviour inside established mid-sized and large
businesses. Ireland et al. (2006:10) confirmed this view by stating that corporate
entrepreneurship is a process through which individuals in established businesses
pursue entrepreneurial opportunities to innovate without regard to the level and
nature of current resources. Therefore entrepreneurial opportunities are situations in
which new products (goods and services) can be sold at a price exceeding their cost
of development, distribution and support. Srivastava and Agrawal (2010:164) argued
that corporate entrepreneurship is not a new concept and that Schumpeter (1934)
defined entrepreneurship as an individual act, indicated that everyone is an
entrepreneur when combinations of innovations are carried out.
Groenewald (2010:55) states that the concept of corporate entrepreneurship was
formally defined and both theoretically and empirically developed in the works of
Burgelman and Miller (1983). Corporate entrepreneurship became a separate
research topic when Pinchott’s (1985) book on intrapreneuring in the mid 1980’s was
published. Christensen (2004:305) argues that corporate entrepreneurship is still a
concept in search of a clear definition. This is confirmed by Groenewald (2010:55)
that argued that the concept corporate entrepreneurship within existing business is
known under many different labels, examples of these labels are: corporate
entrepreneurship, internal corporate entrepreneurship, intrapreneurship, corporate
venturing, entrepreneurial management, strategic renewal and strategic
entrepreneurship.
Durkan (2005:6) concluded with a definition of corporate entrepreneurship within a
business. “Corporate entrepreneurship can be defined as a process that goes on
inside an existing business and that may lead to new business ventures, the
development of new products, services or processes, and the renewal of strategies
and competitive postures.” In other words it could be seen as a tool in practice for
19
business development, revenue growth, profitability enhancement and the pioneering
of the development of new processes, products and services.
2.3 NECESSITY OF CORPORATE ENTREPRENEURSHIP
Kuratko (2007:6) states that the 21
st
century linked corporate entrepreneurship to
business’ efforts to establish sustainable competitive advantages as the foundation
for profitable growth. Morris et al. (2008:81) further argued that corporate
entrepreneurship could be manifested in business through corporate venturing or
strategic entrepreneurship. Kuratko (2007:8) indicated that Tidd and Taurins (1999)
concluded that there are two sets of motives that drive the practise of internal
corporate venturing: leveraging; to exploit existing corporate competencies in new
product or market arenas and learning to acquire new knowledge and skills that may
be useful in existing product or market arenas. They argued when the overall motive
is leveraging, there are some specific reasons for a business to engage in corporate
venturing and this include (Kuratko, 2007:9):
• To exploit under-utilised resources and build a new business around internal
capabilities that remains idle for prolonged periods.
• To extract value from existing resources and build a new business around
corporate knowledge, capabilities or other resources that have value in product-
market arenas not currently being served by the business.
• To introduce competitive pressures onto internal suppliers and build a new
business that becomes an alternative supplier to existing supply resources.
• To spread the risk and cost of product development and build a new business
whose target market promises to be larger than that for which the core product to
be offered by the business initially developed.
• To divest non-core activities and build a new business to pursue business
opportunities that the business is in a favourable position to exploit and the
business has no strategic interest in.
20
Next, learning motives for corporate venturing will be discussed.
Learning motives could be broken down in three major types (Kuratko,
2007:10):
• To learn about the process of venturing as a laboratory in which the innovation
process could be studied.
• To develop new competencies and build a new business as a basis for acquiring
new knowledge and skills pertaining to technologies, products, or markets of
strategic importance.
• To develop managers and build a new business as a training ground for the
development of individuals with general management potential.
Antoncic and Hisrich (2004:539) indicated that corporate entrepreneurship tends to
be a good direct predictor of the businesses wealth creation, profitability growth as
well as the performance indicator of the business. Bhardwaj, Grawal and Momaya
(2007:131) support this statement and indicated that corporate entrepreneurship is a
tool that allows business rejuvenate and revitalise and create new value through
innovation, business development and renewal. They state that new value-creation
is possible through high levels of entrepreneurial activity.
Gaw and Liu (2004:5) indicated the following benefits of an intrapreneurial culture:
• The underlying culture will undergo profound changes as innovation becomes
part of a business’ values.
• Turnover of top talent will decrease as a result of employees realising the
business’ commitment to their ideas and work.
• New business units will take shape as innovation leads to new markets and
opportunities.
21
• Increased autonomy and empowerment of employees will diminish the need for
hierarchical business structures, leading to flatter and more innovation friendly
environment.
• The result of this evolution for the business is sustained competitive advantage
through a cycle of innovation and prepares the business to deal with industry
changes and shocks.
Morris et al. (2008:7) indicated that remaining competitive is very different from
achieving sustainable competitive advantage. The quest for competitive advantage
requires that business and the managers continually reinvent themselves and could
be derived from five key organisational capabilities that will be discussed in the next
paragraph.
Advantage derives from five key organisational capabilities (Morris et al.,
2008:8):
• Adaptability (ability to adjust on a timely basis to new technologies, customer
needs, regulatory rules and other changes in conditions without losing focus or
causing significant disruption of core operations and commitments).
• Flexibility (ability to design business strategies, processes and operational
approaches that can simultaneously meet the diverse and evolving requirements
of customers, suppliers, financiers, regulators and other key stakeholders).
• Speed (the ability to act quickly on emerging opportunities, to develop new
products and services more rapidly, and to make critical operational decisions
without lengthy deliberations).
• Aggressiveness (an intense, focussed and proactive approach to eliminating
competitors, delighting customers and growing employees).
• Innovativeness (a continuous priority placed on developing and launching new
products, services, processes, markets and technologies).
22
From the above literature review the necessity for corporate entrepreneurship for
business can be summarised as follows (Groenewald, 2010:103):
• Businesses that instil corporate entrepreneurship can gain and sustain
competitive advantage at all levels of business.
• Rejuvenate and revitalise existing business.
• Develop new products, services and processes.
• Pursue entrepreneurial opportunities.
• Create new business within existing business.
• Foster strategic renewal of existing operations.
• Improve growth and profitability.
• Increase financial performance and create value.
2.4 FOSTERING ENTREPRENEURSHIP IN A BUSINESS
Hisrich, Peters and Shepherd (2008:68) define an entrepreneurially fostering
environment as an environment that enhances organisational members’ perceptions
of entrepreneurial action as both feasible and desirable. Scheepers, Bloom and
Hough (2008:2) as obtained from Levitt (1999) acknowledge above statement,
commented that as energy is the basis of life itself and ideas the source of
innovation, so is innovation the vital spark of all human change, improvement and
progress. Therefore the capacity to innovate and act in entrepreneurial ways is vital
to organisational change. Antoncic and Zorn (2004:7) argue that one important
element that is beneficial to corporate entrepreneurship is business and management
support for entrepreneurial activities.
Hayton (2005:24) argues that fostering corporate entrepreneurship, demands a more
enlightened approach to management including decentralisation of authority,
participation in decision making, cooperation, avoidance of bureaucracy and
encouragement of Risk-taking and creativity.
Morris et al. (2008:43-46) identified six ways that entrepreneurship is fostered in
established businesses.
23
• Traditional research and development departments
Morris et al. (2008:43) indicate that businesses have research and development
departments that are staffed with people that are technically qualified, that work on
improving existing products and developing new products. Therefore, the
department make it easy for everyone in the business to escape the responsibility for
innovation. Bhardwaj et al. (2009:195) agree with above statement that acquiring
resources and capabilities, the division level executives lead organisations as a
stand-alone business. Therefore the focus is to overcome technical obstacles
through research.
Antoncic and Hisrich (2001:496) link the innovativeness dimension with technological
leadership, supported by research and development (R&D), in developing new
products, services and processes to differentiate the business from its competitors
and thereby developing unique sets of competencies within the business.
• Ad hoc venture teams
Senior management commits them to an opportunity or respond to an immediate
threat and put up a team of employees out of the corporate mainstream to come up
with specific innovations and therefore will accomplish a specific task and mission,
but will not produce sustained entrepreneurship (Morris et al., 2008:44).
• New venture divisions
Some organisations took the venture team concept further by creating new venture
divisions that are permanent units in a business established for breakthrough
innovation and for creating entirely new markets (Morris et al., 2008:44). Hitt et al.
(1999:147) argue that when its members come from different functions and top
management actively supports the team’s efforts, the collective talent of the new
venture team is found to be particularly effective and therefore the new venture
teams should be drawn from the entire talent pool, which will ensure the best
outcomes. Therefore, by separating these divisions from normal operations, will
abandon traditional theoretical assumptions about the business’s products,
24
customers, costs, technology and competitors (Tyreman & Spencer, 1983:516). The
challenge of these divisions are that new market opportunities must have huge
market potential that will be supported by the mainstream operating units (Morris et
al., 2008:44).
• Entrepreneurship from champions and the mainstream
Entrepreneurship could originate from any level in the organisation where employees
recognise opportunities, develop innovative concepts and try to sell it to business
management. If the opportunity is rejected by management this employees as the
champions will try to keep the idea alive and will try to adapt it into a form that
management will accept it (Morris et al., 2008:45).
• Acquisitions
Morris et al. (2008:46) argue that the key here is strategic fit on making acquisitions
that are related to core competencies of the business, or on acquiring skills,
technologies and customers that complement the strategic direction of the business.
The challenge with acquisitions is to instil the values and cultures of the business in
each new acquisition. Thompson et al. (2012:388) argue that acquisitions aim at
building a stronger portfolio of competencies and capabilities when a market
opportunity can slip by faster than a needed capability can be created and when
industry conditions, technology or competitors are moving at such a rapid clip that
time is of essence.
• Outsourcing innovation
Morris et al. (2008:46) state that a number of businesses are buying some of the
intellectual capital of other business, individuals and in effect outsourcing innovation
and state that this is a realistic path because of the significant infrastructure and
personnel cost associated with having the necessary in-house capabilities. Saetre
(2001:15) mentioned as adopted from Kanter’s (1985, 1988) four points that are
illustrated why innovation and intrapreneurship is at times difficult to achieve within
the framework of existing businesses. Firstly, the uncertainty and ambiguity
25
associated with the innovation process contrary to the purpose of the organisation
per se. Secondly, the intensity of the learning process and the rate with which
changes and adaptations must be made are often impeded by sheer organisational
inertia. Thirdly, the competition of resources, not only from other innovative efforts,
but also from the everyday functions of the organisation itself, draws attention away
from the innovation process. Fourthly, organisations are structured along functional
lines in order to gain efficiency, while successful innovation processes are frequently
dependent on interdisciplinary interaction.
To conclude it could be that all these approaches listed could be operating in a given
business with different roles and performance standards established for each
(Saetre, 2001:15).
Marcus and Zimmerer (2003:18) indicate that as corporate entrepreneurship
programmes provide opportunities for success, increasing future research could
provide an objective basis for determining the extent to which such programmes are
feasible and have the potential to be incorporated into organisational structures. It is
therefore important to focus on a framework identified in literature promoting
sustainable corporate entrepreneurship.
Next paragraph, the framework for sustainable corporate entrepreneurship as
developed by Ireland et al. (2006) will be discussed.
2.5 FRAMEWORK FOR SUSTAINABLE CORPORATE ENTREPRENEURSHIP
The framework for sustainable corporate entrepreneurship as developed by Ireland
et al. (2006:13) focus on how to create sustainable corporate entrepreneurship where
attention is given to the characteristics of internal work environment that supports
corporate entrepreneurship. These characteristics are triggers, structures, controls,
human resource management systems and culture. Morris et al. (2008:75) made a
very important observation that within business entrepreneurial orientation can be
expected to differ significantly among various divisions, units and departments.
Ireland et al. (2006:10) argue that a corporate entrepreneurial strategy is an
important path for a business to make it possible for employees to engage in
26
entrepreneurial behaviour, using knowledge as the foundation for continuous and
successful innovations. The results of a study conducted by Barringer and Bluedorn
(1999) as cited by Groenewald (2010:94), states that in determining the relationship
between strategic management and corporate entrepreneurship, a business’
entrepreneurial orientation is influenced by nature of its strategic management
practices. Scanning intensity is an important correlate of entrepreneurial behaviour.
A strong relationship exists between planning, flexibility and corporate orientation.
For the purpose of this study, the corporate entrepreneurship framework developed
by Ireland et al. (2006:10-17) is adopted for this research. In the following section the
corporate entrepreneurship process will be discussed. The framework is illustrated in
figure 2.1.
FIGURE 2.1: The corporate entrepreneurship process
Source: Ireland et al. (2006:14)
The following characteristics of an internal work environment that supports corporate
entrepreneurship will be discussed.
Designing a
CE Strategy
Recognising
Strategic
Triggers
Creating an Internal Environment to Support CE
Structure
• Horisontal over vertical
• Few layers
• Broader spans of control
• Decentralisation
• Cross-functional processes
• Less formalisation
• Open communication flow
• Sense of smallness
Controls
Human Resources Management Culture
Entrepreneurial
Performance
• Control based on “no surprises”
• Loose-tight control properties
• Resource slack
• Internal venture capital pools
• Emphasis on self-control
• Empowerment and discretion
• Mutual trust
• Open information sharing
• Jobs that are broad in scope
• Multiple career paths
• Extensive job socialisation
• Individual and group awards
• High employee involvement in
appraisals
• Longer-term reward emphasis
• Appraisal and reward criteria
include innovativeness and
Risk taking
• Entrepreneurial learning
• Balanced individual collective
emphasis
• Emphasis on excellence
• Emotional commitment
• Freedom to grow and to fail
• Emphasis on results over process
• Celebration of innovation
• Healthy dissatisfaction and a
sense of urgency
• Innovativeness
• Risk-taking
• Pro-activeness
27
2.5.1 Triggers of corporate entrepreneurship
Ireland et al. (2006:13) argue that interactions among organisational characteristics,
individual characteristics and some kind of participating event in the business’s
internal work environment and external work environment are the precursors of
corporate entrepreneurship in organisations and are labelled as triggers. Triggers
originate from inside or outside of organisations, but the greatest pressures for
entrepreneurial behaviour come from the external environment. Hornsby, Kuratko
and Zahra (2002:259) indicated that researchers have sought to identify some of the
key variables that can affect the businesses pursuit of corporate entrepreneurship,
including internal organisational factors such as: the company incentive and control
systems (Sathe, 1985) culture (Kanter, 1985), organisational structure (Covin &
Slevin, 1991) and managerial support (Stevenson & Slevin, 1991). Therefore
according to Hornsby et al. (2002:259), individually and in combination, these factors
are believed to be important antecedents of corporate entrepreneurship efforts,
because they affect the internal environment, which determines in and support of
entrepreneurial initiatives within an established company. Burgelman’s (1983:1349)
research confirmed that internal organisational factors influence the types of
corporate activities a company pursue. Therefore factors inside the business also
trigger entrepreneurial behaviour and could include the following examples:
directives from top-level managers, employee rewards, slack resources, tension
between competing sets of interests, or a major problem with quality or cost control
(Ireland et al., 2006:13).
External pressures could be diminishing opportunity streams, rapid changes in
technology, labour shortages, aggressive competition moves, changes in industry or
market structures and regulatory threats (Ireland et al., 2006:13). Guth and Ginsberg
(1990:7) confirmed with research the following:
• The impact of major environmental shifts, such as deregulation, can influences
changes in strategy in a non-random way, with organisations moving away from
one generic strategy towards other generic strategies.
• The more dynamic and hostile the environment, the more businesses will be
entrepreneurial.
• Industry structure affects opportunities for successful new product development.
28
• Both opportunities and problems stem from potential of the business and its
competitors in an industry to find new combinations of resources that lead to
competitive advantage.
Ireland et al. (2006:13) concluded that quick recognition of these triggers help
organisations to identify the need and value as well as the shape for the corporate
entrepreneurial strategy.
2.5.2 Structure
The framework (figure 2.1) indicates that corporate entrepreneurship flourishes when
organisational structures have a relatively small number of layers (Ireland et al.,
2006:14). A restricted number of layers results in a broader span of control which in
turn creates opportunities for employees to act entrepreneurially. With fewer
managerial layers, authority and responsibility are decentralised, and horizontal or
lateral interactions among employees are encouraged. Burns (2008:141) confirms
that the underlying logic of a traditional business structure is geared towards a
hierarchical process that directs work activities. Furthermore, according to Lotz
(2009:61), many levels of approval in a traditional business have the potential to stifle
innovations. Echols and Neck (1998:43) indicated that entrepreneurial structures
should be new and separately organised from the old and existing ways of a
business, with a specific focus for new projects stemming from executive authority,
prestige and accountability. Morris et al. (2008:183) argued that corporate
entrepreneurial efforts on the other hand are about creating new things and moving
in new directions and is therefore almost always in conflict with traditional structures.
2.5.3 Organisational controls
According to Ireland et al. (2006:15), controls create value when they simultaneously
provide the stability business need to exploit current competitive advantages and the
flexibility required for employees to behave entrepreneurially for the purpose of
beginning to form competitive advantages. Burns (2008:183) agrees that most
organisational control systems are aimed at eliminating risk and uncertainty and that
this is something the entrepreneurial business must tolerate to promote efficiency
and effectiveness, which can be at the expense of innovation. Kuratko et al.
29
(2002:278) argued that the core principle in developing entrepreneurial control
requires that managers need to give up control to gain control. These authors
believed that there must be a transparency of information and that there must be no
surprises, communicate information timelessly for all who need to know. Burns
(2008:184) agrees that above statement will encourage employees the way an
owner-manager will think and is build round six principles:
• Free access to all financial information that is critical to tracking the business
performance.
• Continuous and overt attempt to present this information to employees.
• Training process that encourages an understanding of this information.
• Employees learn that part of their job is to improve the financial result whatever
way they can.
• People are empowered to make decisions in their job based on what they know.
• Employees have a stake in the organisation’s success or failure.
Burns (2008:184) argues that the answer is a balance philosophy that successful
business performance comes from a dispersed and high level of ownership and a
commitment to, an agreed-upon objective. Ireland et al. (2006:15) agree that positive
controls are linked to performance measures, allow significant directions and are
focussed on generating and sharing of knowledge that allows employees and
managers to identify problems before they surface.
2.5.4 Human resource management systems
Montoro-Sanchez and Soriano (2011:8) indicated that human resource management
(HRM) and entrepreneurship areas have seldom been studied together, even though
HRM plays a key role in entrepreneurial businesses as the shaker and mover in
business development and growth. Hayton (2005:31) indicated that the traditional
model of HRM encourage matching employee contributions to organisational needs
and inducements, a more relevant perspective to corporate entrepreneurship would
be to encourage the building of relationships among employees, between employees
and the business and between employees and key organisational stakeholders.
Therefore these inter-relationships are necessary because they represent essential
30
channels for the flow of knowledge and information, which are the building blocks of
innovation and entrepreneurial opportunities. Ireland et al. (2006:15) state that with
corporate entrepreneurship, the goals of effective human resource management are
for employees to learn how to:
• Embrace creative and innovative behaviour.
• Take reasonable levels of risk.
• Use a long-term orientation to evaluate innovation-based possibilities.
• Focus on results.
• Work cooperatively with others.
• Tolerate ambiguity.
• Assume responsibility for change.
Dabic, Ortiz-De-Urbina-Criado and Romero-Martinez (2011:17) confirm that
successful corporate entrepreneurship is promoted by entrepreneurially-friendly
processes related to recruiting, selecting, training, developing and rewarding.
Furthermore, they indicated that training should be continuous, less structured or
standardised and focused on individualised knowledge required. These programs
must develop trainee’s tolerance for risk, embrace change as a source of individual
and organisational growth and learn realities of organisational politics so that they are
able to obtain sponsors for their innovation based projects.
Hayton (2005:31) argued that discretionary practises, such as incentive pay,
employee suggestion schemes and formal employee participation programs are
those practices which encourage employee commitment, cooperation, knowledge
sharing and voluntary, extra role behaviours. Therefore rewards for entrepreneurial
achievements must be emphasised in a form of financial gain and must be balanced
with recognitions for effective teamwork. The reason for this is that long-term
success is a function of individual’s efforts and the work of people collaborating to
synergistically use their knowledge to produce value-creating innovations.
31
2.5.5 Organisational culture
According to Ireland et al. (2006:16), organisational culture is social energy that
drives or fails to drive an organisation and is a complex phenomenon that is felt or
experienced rather described in words. Kirby (2003:301) indicated that the guiding
principles in a traditional business is to not make a mistake, do not fail, do not take
initiative but wait for instructions and protect your back. In an entrepreneurial culture
the focus will be on the future rather them the past and the ability to develop and
transfer knowledge and produce an output (Hisrich et al., 2008:45). Ireland et al.
(2006:16) agree that entrepreneurially-intense cultures also place high importance on
being able to empower people in ways to allow them to act creatively and to fulfil their
potential. Authority and responsibility are decentralised to employees that are the
closest to the action to make decisions that are in the business best interest.
2.5.6 Conclusion
“The process of combining entrepreneurial behaviours (opportunity-seeking ones)
with strategic actions (opportunity-seeking within the context of a specific strategy) is
vital in designing and successfully using a corporate entrepreneurship strategy. The
ability for a firm to do these things results in a competitive advantage” (Ireland et al.,
2006:17).
2.6 DETERMINANTS FOR MEASURING SUSTAINABLE CORPORATE
ENTREPRENEURSHIP INTENSITY INTERNALLY
Corporate entrepreneurship (CE) and entrepreneurial intensity (EI) have been
emphasised by academics and in popular literature as essential survival strategies
for businesses in the new economy (Scheepers et al., 2007:240). According to
Birkinshaw (2003:3), corporate entrepreneurship refers to the development of new
business ideas and opportunities within large, established businesses and should not
be seen as a single event, but rather as part of the organisational culture of a
business. Ireland et al. (2006:26) state that entrepreneurial intensity is concerned
with the degree and frequency of entrepreneurship occurring within the business, as
well as the diagnosing of the internal work environment. This means that business’s
32
performance from the perspective of entrepreneurship at a point of time is shown by
its intensity score. Determinants that could assess the degree of entrepreneurship
are Innovativeness, Risk-taking and Pro-activeness and they added another
dimension, namely frequency of entrepreneurship, and called this phenomenon
entrepreneurial intensity (EI) (Morris & Sexton, 1996:6). Lumpkin and Dess
(1996:139-140) added two other dimensions namely Competitive aggressiveness
and Autonomy.
After understanding the business’ entrepreneurial intensity, it is important to
understand why the business has developed the current level of entrepreneurial
intensity. The determinants that indicate antecedents to corporate entrepreneurship
are: Management support, Work discretion; Autonomy, Reinforcement, Time
availability and Organisational boundaries (Scheepers et al., 2007:242). Hornsby
et al. (2002:269) identified with their research five factors (Management support,
Work discretion/Autonomy, Rewards/Reinforcement, Time availability and
Organisational boundaries) that are a parsimonious description of the internal
organisational factors that influence middle managers to foster entrepreneurial
activity within established businesses. Therefore the five determinants will assess,
evaluate and manage the business’s internal work environment in ways that support
entrepreneurial behaviour and the use of corporate entrepreneurial strategy.
2.6.1 Innovativeness
In the corporate entrepreneurship (CE) literature, Innovativeness is a predisposition
to engage in creativity and experimentation through the introduction of new products
(Rauch et al., 2009:763). Antoncic and Hisrich (2003:9) argue that the
Innovativeness dimension is broader than new product and services. Therefore
according to Jong, Parker, Wennekers and Wu (2011:5), Innovativeness also
include process-related innovations to bring new or improved production or marketing
methods or could apply to new kind of resources.
Mcfadezean, O’ Louglin and Shaw (2005:353) agree that Innovativeness reflects a
business’ tendency to engage in and support new ideas, novelty, experimentation
and creative processes that may result in new product and services. According to
33
Morris et al. (2008:53), business find that they must innovate more than the past due
to external forces, including the emergence of new and improved technologies, the
globalisation of markets (resulting in intensified competitive pressures), the
fragmentation of markets (resulting in intensified customer pressures), government
deregulation and dramatic social change.
According to Kuratko and Wesch (2001), adopdted by Oosthuizen (2006:136),
continuous innovation and an ability to compete effectively in international markets
are among the skills that are expected to increasingly influence corporate
performance in the twenty-first century’s global economy. Drejer (2006:143) stated
that there is a growing recognition that innovation has become the only sustainable
source of growth and competitive advantage. Morris et al. (2008:6) indicate that the
challenge to managers is one of creating an internal marketplace for ideas within
their businesses and encouraging employees to act on these ideas. The reality is
that innovation poses a large number of dilemmas for corporate managers as
indicated by Morris et al. (2008:58), as illustrated in table 2.1. Therefore it is
important to note that there must be a focus on best practices to overcome these
dilemmas.
TABLE 2.1: SIXTEEN DILEMMAS OF INNOVATION
1. Not all entrepreneurs are innovators, and not all innovators are entrepreneurs, but successful
entrepreneurship tens to involve continued innovation (in products, services, and process/methods).
2. Innovation is about the unknown. Management is about control. How do you control the unknown?
3. Innovation is often about breaking the rules. People who break rules don’t last long in organisations.
4. Successful innovation tends to occur when there are constraints, routines, and deadlines. There is a
need for both freedom and discipline, and the issue is one of balance.
5. Failure is likely if the company does not innovate. But the more the company innovates, the more it
fails.
6. An innovation succeeds because it addresses customer needs. Yet when you ask customers about
their needs, many do not know or cannot describe them to you except in very general terms.
7. Innovating can be risky. Not innovating can be more risky.
8. Innovation can be revolutionary or evolutionary. The costs, risks, and returns of both types differ, and
both require different structures and management styles.
9. A company that innovates is frequently making its own products obsolete when there was still profit
potential in those products.
10. Innovation requires supporting infrastructure to be successful, and the existing infrastructure is often
inadequate. However, these infrastructure needs may not become apparent until after the innovation is
developed.
34
11. While innovation is more technically complex and costly today, may breakthrough innovations do not
come from large companies or corporate R&D labs with sizeable budgets, but from individual inventors
and entrepreneurs.
12. People who design innovations typically seek to perfect their new product or service, making it the best
possible. But the marketplace often wants it to be “good enough”, not perfect. The additional time and
money necessary to make the innovation the “best possible” drive up prices beyond what the customer
will pay, and result in missed opportunity.
13. Technology-driven innovation often leads to dramatic new products that prove to be “better mousetraps”
nobody wants. Customer-driven innovation often leads to minor modifications to existing products or
“me-too” products meeting a competitive brick wall.
14. While typically associated with genius or brilliance, innovation is more often a function of persistence.
15. While innovation is sometimes associated with breaking the rules of the game, it frequently entails
playing an entirely different game.
16. Being first to market is not consistently associated with success, while being second or third
is not consistently associated with failure.
Source: Morris et al. (2008:58)
2.6.2 Risk-taking
The second dimension of corporate entrepreneurial intensity is Risk-taking. Jong et
al. (2011:7) state that Cantillon (1755) was among the first to define an entrepreneur
as a person who bears risk of profit or loss, Risk-taking is considered a fundamental
element of an entrepreneur. Lumpkin and Dess (2005:431) define Risk-taking as a
tendency to take bold actions such as venturing into unknown new markets,
committing a large portion of resources to ventures with uncertain outcomes and or
borrowing heavily. Jong et al. (2011:7) argue that entrepreneurs prefer moderate
rather than high risks, and try to manage or reduce risks as much as possible.
Burns (2005:16) agrees that Risk-taking involves a willingness to pursue
opportunities that have reasonable likelihood of producing losses of significant
performance discrepancies. The emphasis is not on extreme, uncontrollable risks,
but instead of risks that are moderate and calculated.
Therefore, it could be seen that there are a direct correlation between Innovation
and Risk-taking but in reality, it is a more complex relationship that are curvilinear,
shown in figure 2.2 (Morris et al., 2008:63).
35
Figure 2.2, indicated that risk is high when a business ignores new product and
service opportunities and engage in no or little innovations. Risk is also high when
business takes the opposite trait and come up with breakthrough innovations to
create new markets. Morris et al. (2008:62) argued that risk is lower and more
manageable when lots of trials and experiments are regularly pursued.
FIGURE 2.2: Relating innovations to risk
Source: Morris et al. (2008:63)
2.6.3 Pro-activeness
In the CE literature, Pro-activeness is an opportunity-seeking, forward-looking
perspective characterised by high awareness of external trends and events and
acting in anticipation thereof (Rauch, Wiklund, Lumpkin & Frese, 2009:761). Jong et
al. (2011:6) argue that Pro-activeness has been associated with pioneering
behaviour and initiative taking to pursue new opportunities and refers to the extent in
which organisations attempt to lead rather than follow in key business areas. Morris
et al. (2008:64) state that Miller (1987) associates Pro-activeness with
assertiveness as a dimension of strategy making and measures Pro-activeness in
three items: following versus leading competitors in innovation, favouring the tried
and true versus emphasising growth, innovation and development, and trying to
cooperate with competitors.
High
Low
RISK
Little to No
Innovative Activity
Home Run
Strategy
Lots of Trials and
Experiments / Balanced
Portfolio of Projects
INNOVATIVENESS
36
Therefore Pro-activeness could be seen as taking responsibility to implement
whatever is necessary to bring an entrepreneurial concept to fruition (Morris &
Kuratko, 2002:44). Oosthuizen (2006:83) stated that Pro-activeness is especially
effective at creating competitive advantages because it puts competitors in the
position of having to respond to successful initiatives. This is called first mover
advantage.
2.6.4 Competitive aggressiveness
Lumpkin and Dess (2001:433) state that Competitive aggressiveness refers to the
intensity of a business efforts to outperform industry rivals by a strong offensive
posture directed at overcoming competitors and may also be quite reactive as when
a business defends its market position or aggressively enters a market that a rival
identified. Barney (1991:99) argued that business create, acquire and leverage
resources to achieve sustainable competitive advantage. Christensen (2004:302)
agrees that the real challenge is to establish competitive advantage and the way to
accomplish that is through differentiation and continuous innovation, whether it is
related to the creation of new products and services, production, organisational
processes or business models.
Dess and Lumpkin (2002:445) confirmed with research that a strong competitively
aggressive stance gives a business the ability to be a decisive player in a field of
rivals and to act forcefully to secure or improve its position.
2.6.5 Autonomy
Lotz (2009:47) mentioned that Autonomy refers to the independent actions of an
individual or team in bringing forth an idea or a vision and carrying it through to
completion. Therefore Autonomy is essential to the process of leveraging a
business existing strengths, identifying opportunities and encouraging the
development of new ventures or improved business practises. Ferreira (2002:7)
argued that entrepreneurial participants, at the product or market level, will conceive
new business opportunities, engage in project championing efforts to mobilise
37
corporate resources for new opportunities and perform strategic forcing efforts to
create momentum for their development.
Burgelman (1983:1352) identified corporate entrepreneurship with autonomous
strategic behaviour that takes shape outside the current structural context, yet, to be
successful, it needs eventually to be accepted by the business and to be integrated
into its concept of strategy.
2.6.6 Determinants measuring the internal work environment
2.6.6.1 Management support
Scheepers et al. (2007:242) state that Management support capture the
encouragement and willingness of managers to facilitate and promote
entrepreneurial behaviour; including the championing of innovative ideas and
providing the resources people require to behave entrepreneurially. Kuratko,
Montago and Hornsby (1990:56) argue that these factors both individually and in
combination affect the organisational climate that moulds managers’ and employee’s
attitudes towards and interest in corporate entrepreneurship efforts. Furthermore
agreed support must derive from the highest level, be formulated into strategy and
then communicated through the organisation (Turner, 2002:45). Gaw and Liu
(2004:69) argue that direct support from senior management and middle managers
will be necessary for the intrapreneur to be successfully championing an idea.
2.6.6.2 Work discretion/autonomy
Ireland et al. (2006:27) state that Work discretion and Autonomy refers to top-level
manager’s commitment to tolerate failure, provide decision-making latitude and
freedom from excessive oversight and are willing to delegate authority and
responsibility to middle and lower level managers. According to Scheepers et al.
(2007:243), Autonomy refers to employees’ discretion and the extent to which they
are empowered to make decisions on the performance of their own work in the way
they believe is most effective.
38
Hornsby et al. (2002:257) state that middle managers lay the foundation for
employees in business to be innovative and take risks. Middle managers do this by
providing mostly (intrinsic rewards) that allow employees to experiment with and to
explore the feasibility. Floyd and Woodridge (1992) as adopted by Ikavalko and
Aalton (2001:2) argue that middle managers plays pivotal roles in championing
strategic alternatives to make business structures less resistant to change thereby
allowing corporate entrepreneurial strategies to flourish.
2.6.6.3 Reinforcement/rewards
Ireland et al. (2006:27) state that Reinforcement involves developing and using
systems that reinforce entrepreneurial behaviour, highlight significant achievements
and encourage pursuit of challenging work. Thompson, Peteraf, Gamble and
Strickland (2012:424) argue that financial incentives (combination of base-pay
increase, performance bonus, profit sharing plans, stock rewards, company
contribution to employee or retirement plans) generally head the list of motivating
tools for gaining wholehearted employee commitment to good strategy execution and
focusing attention on strategic priorities. Thompson et al. (2012: 424-425) state that
there are also successful businesses that use non-monetary incentives to enhance
motivation of employees and could include:
• Attractive perks and fringe benefits (College or tuition reimbursement, paid leave
to care for family members, recreational facilities, casual dress days, on-site child
care and flexitime).
• Give awards and other forms of public recognition to high performers and
celebrate the achievement of business goals.
• Invite and act on ideas and suggestions of employees.
• Create a work atmosphere in which there is a genuine caring and mutual respect
among workers and between management and employees.
• State the strategic vision in inspirational terms so that employees feel they are a
part of something very worthwhile in a larger social sense.
• Share information with employees about financial performance, strategy,
operational measures, and market conditions and competitors actions.
• Maintain attractive office space and facilities.
39
Turner (2002:184) agree with Thompson (2012) but add that the right people must be
encourage to act in the right roles with an entrepreneurial attitude to create value and
this must be founded in a reward system that is meaningful and motivating.
2.6.6.4 Timely availability/resources
Ireland et al. (2006:28) state that Time availability suggests evaluating workloads to
ensure that individuals and groups have the time needed to pursue innovations and
that their jobs are structured in ways that support efforts to achieve short and long-
term business goals. De Villiers-Scheepers (2012:410) agrees that time and
resource availability influences employees’ perceptions of the feasibility of
entrepreneurial behaviour, more specifically resource availability for entrepreneurial
activities. Therefore new and innovative ideas to thrive, individuals should have time
to incubate their ideas (Covin & Slevin, 1991:20).
Hornsby et al. (2002:258) argue that businesses should be reasonable in assigning
the workload of their employees and allow employees to cooperate on long-term
problem-solving. The reality of increasing work and time pressures may expose this
as a theoretical idea. Kuratko et al. (2005:704) agree that in entrepreneurial work
environments, employees should be allowed to conduct creative, entrepreneurial
experiments during a limited portion of their work time, the reality often falls short of
the ideal.
2.6.6.5 Organisational boundaries
Supportive business structure and Organisational boundaries provide
administrative mechanisms by which ideas are evaluated, chosen and implemented
(Hornsby et al., 2002:270). De Villiers-Scheepers (2012:411) argued that a
bureaucratic business structure leads to perceived boundaries, preventing
employees from noticing problems outside their own area of responsibility. Therefore
the business should be viewed from a holistic perspective as opportunities cut across
several functions.
40
2.6.6.6 Corporate entrepreneurial program
A corporate entrepreneurial program will assist staff in understanding corporate
entrepreneurship and what is expected from them. The following elements must be
included in the corporate entrepreneurial program: introduction to entrepreneurship,
entrepreneurial breakthroughs, creative thinking, idea development, process,
barriers, facilitators and triggers to entrepreneurial thinking, venturing planning
(Ireland et al., 2006:29).
2.7 CORPORATE ENTREPRENEURSHIP STRATEGY
Ireland et al. (2009:21) define corporate entrepreneurial strategy as a vision-directed,
organisational-wide reliance on entrepreneurial behaviour that purposefully and
continuously rejuvenates the organisation and shapes the scope of its operations
through the recognition and exploitation of entrepreneurial opportunity. Morris and
Kuratko (2002:150) argued that the comptempory business environment is
characterised by increasing risk, decreased ability to forecast, and fluid industry
boundaries that need an entrepreneurial mind-set that must unlearn traditional
management principles in order to minimise failure. The mind-set needs to create or
help shape its own environment by creating a strategic and entrepreneurial alertness
for it to survive the chaos, complexity and contradictions.
Sathe (2003:2) stated that strategic entrepreneurship is the integration of
entrepreneurial (opportunity seeking actions) and strategic (advantage seeking
actions) perspectives to design and implement entrepreneurial strategies that create
wealth.
Dhliwayo and Van Vuuren (2007:125) indicated that McGrath and MacMillan (2000)
outlined some of the characteristics of an entrepreneurial mind-set:
• Passionate seeking new opportunities.
• Pursue opportunities with enormous discipline.
• Pursue only the best opportunities and tightly link their strategy with the choice of
projects.
41
• Focus on execution, specifically adaptive execution when the best way to exploit
archives.
• Engage the energies of everyone in their domain (internally and externally).
Ireland, Hitt, Camp and Sexton (2001:510) state that effective integration of
entrepreneurial actions and strategic management actions facilitates a business’s
wealth-creating efforts. Groenewald (2010:115) argued that when entrepreneurship
and strategic management processes are integrated it will create synergy that
enhances the value of its outcomes.
2.7.1 Critical aspects related to corporate entrepreneurship strategy
According to Kuratko and Hodgetts (2007), as adopted by Groenewald (2010:119),
the following aspects that are recommended to develop a corporate entrepreneurial
strategy:
• Strategic vision must be clearly articulated by business leaders.
• Shared vision is critical for a strategy that seeks high achievement.
• Business must understand and develop innovation as the key element in their
strategy.
• Encouraging innovation requires a willingness not only to tolerate failure but also
learn from it.
• Structuring a corporate entrepreneurial climate by providing more information
sharing activities.
• An environment needs to be developed that will help innovate-minded people
reach their full potential.
• For business to promote innovation among their employers they must give careful
attention melding of individuals attitudes, values and behaviours with the
organisational factors, structures and rewards.
• Developing individual managers for corporate entrepreneurship through a
corporate entrepreneurial training programme.
• Developing venture teams that are self-directed and self-managing of a new
business.
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2.8 SUMMARY
The aim of this chapter was to introduce corporate entrepreneurship. This issues
addressed were the definitions and overview of corporate entrepreneurship, the
necessity of corporate entrepreneurship for business sustainability, a discussion on
the different conceptual frameworks applied in the field of corporate
entrepreneurship. The chapter included a framework for sustainability, with the
determinants indicated. The chapter was concluded with the final link namely
corporate entrepreneurship as strategy.
The true value of the literature review was to give an insight to the concept to create
sustainable competitive advantage through corporate entrepreneurship. Researches
confirmed the necessity of sustainable corporate entrepreneurship in the 21th
century due to the global entrepreneurial revolution in the free market economy.
Corporate entrepreneurship could be seen as a process that goes on the inside of an
existing business and that may lead to new business ventures, the development of
new products, services or processes and the renewal of strategies. It was also
confirmed that corporate entrepreneurship was not a new concept and that it is
known under different labels.
The quest for competitive advantage requires that business and managers
continually reinvent themselves through five key organisational capabilities:
adaptability, flexibility, speed, aggressiveness and innovativeness.
Entrepreneurship is fostered in seven ways in well-established business: through
research and development departments, ad hoc venture teams, new venture
divisions, entrepreneurship from champions and the mainstream, acquisitions,
outsourcing innovation.
The focus of the chapter was on the framework for sustainable corporate
entrepreneurship of Ireland et al. (2006) with specific focus on the determinants of
the internal work environment that supports corporate entrepreneurship. The
determinants that will lead to intensity of corporate entrepreneurship discussed were:
43
Innovativeness, Risk-taking, Pro-activeness, Management support, Work
discretion, Reinforcement, Time availability and Organisational boundaries.
A corporate entrepreneurial program must be implemented in a business to integrate
the sustainable corporate entrepreneurial framework with the determinants.
Elements that will be covered in such a program is: introduction to
entrepreneurship, entrepreneurial breakthroughs, creative thinking, idea
developing process, barriers, facilitators and triggers to entrepreneurial
thinking as well as venture planning.
The final link in this chapter was to confirm that corporate entrepreneurship must be
converted into strategy as pre-requisite for the successful implementation of an
integrated corporate entrepreneurial framework.
The next chapter will focus on the changing agricultural industry in South Africa, with
a specific focus on Senwes Limited retail division.
44
CHAPTER 3
OVERVIEW OF CO-OPERATIVES TO AGRI-BUSINESSES
3.1 INTRODUCTION
The evolution of South African agricultural co-operatives has to be viewed in the
context of the evolution of South Africa’s agricultural sector, the regulation and
eventually the deregulation of agricultural marketing in South Africa. The purpose of
this chapter is to provide such a historical context. Accordingly, this chapter will give
an overview of the agricultural industry, factors influencing the agricultural industry
will be discussed, and the focus will be on the overview of co-operative to agri-
businesses. Finally, an overview of Senwes Limited will be given with specific focus
on Senwes Village, Retail division.
3.2 OVERVIEW OF AGRICULTURAL INDUSTRY IN SOUTH AFRICA
Lotz (2009:153) states that South Africa does not have ideal conditions for agriculture
and this is confirmed by the fact that less than 12% of the land is arable of which only
22% can be regarded as high potential arable land. A critical factor is that South
Africa’s rainfall is spread unevenly throughout the country. Almost 1.5% of
agricultural land (1.3 million hectares) is under irrigation.
Factors such as weather conditions, commodity prices, input cost, stock levels,
consumption demand as well as exchange rates will continue as never before to
influence agricultural production in the country (South Africa, 2010:10). This could
influence the production of field crops to decrease further. South Africa (2011:1)
confirms that field crops decreased in 2010/2011, but that agricultural production was
in total more or less the same and is illustrated in figure 3.1.
45
Figure 3.1: Volume of agricultural production
Source: South Africa (2011:1)
The volume of ?eld-crop production re?ected a 4.5% decrease as a result of a
decline in the production of summer grains. Maize production decreased by 2 million
tons or 15% from the previous season, followed by wheat with 530 000 tons or 27%.
Sugar cane, on the other hand, showed an increase of 3.3%. Horticultural production
increased slightly by 0.2%, mainly because of increases in the production of
vegetables and citrus fruit. The production of potatoes increased by 134 834 tons or
6.8% and that of onions by 71 214 tons or 14.6%. Citrus fruit, speci?cally grapefruit
and lemons, increased by 31 744 tons or 5.9%. Animal production also increased
slightly by 1.8% as a result of increases of 3.6% (24 698 tons) in cattle and calves
slaughtered and 3.3% (47 000 tons) in poultry slaughtered.
According to BFAB (2012:9), the following production estimates are made for
production of field crops until 2015:
• Maize: The Crop Estimates Committee (CEC) indicated the higher current
maize price increased the farmer’s intent for the 2011/12 planting season with
9.2%. Weather conditions could still have a big influence. In the five years to
2014/15 maize production is predicted to expand by just 1.5%, while
consumption will grow by 16%.
• Poultry: Production growth of 19.8% is envisaged through to 2014/15, while
consumption will increase by over 23%.
46
• Wheat: The CEC indicated 28.7% increase in wheat production in 2010/11.
This follows a 27% fall in production in 2009/10. Positive growth of 35% is predicted
through to 2014/15, although this reflects a low starting point.
BFAB (2012:10) confirms that the demand for food in general is expected to grow
over the next decade mainly due to population growth, whilst in real terms world
commodity prices are likely to remain fairly stagnant at higher plateau compared to
the previous ten years from 2001 to 2011.
South Africa (2011:1) indicated further that the prices of producers of agricultural
products decreased on average by 4.3% from 2009/2010 to 2010/2011. This
resulted in a decrease in the gross income of producers for the year end 30 June
2011 to R131 699 million, compared with R132 199 million the previous year, a
decrease of 0.4%. The decrease in income can be contributed to a combination of
small increases in prices farmers received for their products, lower than expected
production and slow deliveries of maize (South Africa, 2011:2). The gross income of
field crops decreased by 12% to R27 610 million for the year ended 30 June 2011.
The gross farmer sector income is illustrated in figure 3.2.
Figure 3.2: Gross farmer sector income
Source: South Africa (2011:2)
47
BFAB (2012:12) suggested that commodity prices in 2012 are expected to remain
well above those of the previous year and this is due to the significant rise in world
prices and the current United States draught conditions, and this will have an impact
on local prices that will remain high in 2013. The real gross income is expected to
increase by 6.3% in 2012 and further 13% in 2013 and beyond 2013 the growth rate
are expected to be stagnant as local prices in real terms are expected to remain flat.
South Africa (2011:3) indicated further that the net farm income amounted to
R33 161 million for the 12 months ended on 30 June 2011, which is 18.3% lower
than the previous 12 months. The decline in net farming income is the result of the
decrease of 0.4% in gross farming income and an increase of 10.4% in expenditure
on intermediate production inputs and services, payments for salaries and wages
represented 12.1% of the total farming costs and interest paid to financiers amounted
to 4.9% of total farming costs. The net farm sector income is illustrated in figure 3.3.
BFAB (2012:14) indicated that real gross income is expected to increase by 6% in
2012, with a further increase of 7% expected in 2013. From 2014 it is projected that
the annual growth rate will be 1.4% and in 2014 there will be an initial decline,
followed by a recovery and gradual increase in real gross income till 2021.
PriceWaterhouseCoopers (PWC) (2011:2) indicated that farming in general remains
unprofitable as a result of the poor competitive position in which local producers find
themselves in relating to their overseas counterparts. Grain prices play an important
role in producer’s credit worthiness, with particular emphasis on repayment and
management capacity.
48
Figure 3.3: Net farm sector income (NFI)
Source: South Africa (2011:3)
According to PWC (2011:4), agri-businesses will concentrate mainly on maintaining
prosperity through cost and risk management and will also focus on retaining market
share.
3.3 AGRI-BUSINESSES SECTOR IN SOUTH AFRICA
An overview of the history of South African co-operatives will be viewed in context of
the evolution of South Africa’s agricultural sector.
3.3.1 Evolution of agri-businesses in South Africa
According to the Competition Commission (2006:27), South Africa’s co-operative
movement was born in 1900’s to provide commercial farmers with collective buying,
marketing and organisational power. It specifically focused on input supplies and
joint marketing of production. The co-operatives became very powerful, holding a
monopoly in key agricultural sectors, backed by access to finance through the Land
Bank (Bosman, 1927:301). The Marketing Boards regulated product prices
(Marketing Act 26 of 1927) until 1994 and made use of co-operatives as the single
marketing system of maize.
49
As a result of the regulating body and the single marketing system, the actual
activities of co-operatives tended to span all functions necessary to produce the
product, bring it to the market and included financing, storage, processing,
packaging, distribution, sales and exports (Serfontein, 1970:3). Producers in the
sub-sector had to be members of the co-operatives.
Furthermore, Ortmann and King (2007:42) confirmed the unique characteristics of
co-operatives:
• Co-operatives are owned and democratically controlled by their members and
not by outside investors.
• Co-operatives return surplus income to members in proportion to their use of the
co-operative and not as a result of their investment or ownership share.
• Co-operatives are not motivated by profit, but by providing a service to satisfy
members.
• Co-operatives exist solely to serve their members.
• Co-operatives pays taxes on income retained for investment and reserves.
Ortmann and King (2007:46) argued that the substantial cost of supporting
commercial farmers in terms of subsidies, price support, tax concessions and the
misallocations of resources caused by distorted prices were not sustainable. As a
result of political changes happening, it led to a series of reforms in 1980, including
the removal of subsidies and tax concessions and deregulation of agricultural
financing and marketing. These actions reduced the role of agricultural co-operatives
and made them less dependent on government support.
Therefore, according to Sexton and Iskow (1993:15), the Commity of enquiry’s
recommendation into the Marketing act of 1937 led to the Marketing of Agricultural
Product Act, (No 47 of 1996) that ended the state control of agricultural commodities
and resulted in the demise of the marketing boards (Philip, 2003:18). The implication
of the act was a material effect on co-operatives. Co-operatives no longer have the
privilege of being appointed as agents of various marketing boards thus losing their
monopoly powers, and are no longer involved in distributing government subsidies,
but they still provide short and medium credit to the farmers (Vink & Kirsten,
50
2000:13). Therefore, several co-operatives have converted to investor-oriented firms
(IOF’s) and some are listed on the Johannesburg Securities exchange (Piesse,
Doyer,Thirtle & Vink, 2003:197).
3.3.2 The effect of deregulation on the agricultural sector
According to the Organisation for Economic Co-operation and Development (2008:3),
the most important effects of the deregulation of the agricultural sector are:
• Opening of the agricultural sector increased exports with a result in growth of
revenues.
• Shifts in production of grain to livestock in marginal production areas and an
increase in intensive farming in high potential areas.
• Farmer involvement in risk management by means of storage, forward contracts
and diversification.
• Strengthening role of organised markets and producer responsiveness to price
signals.
• Establishment of new enterprises in agriculture and downstream food processing
sectors.
3.3.3 The effect of deregulation on agri-businesses
Lotz (2009:164) indicated that many co-operatives change to IOF’s after the
deregulation of the agricultural sector. The advantage for the agri-businesses is an
increase in external funds that could be used to expand business products and
services. On the financial side it includes crop insurance, the ability to hedge input
cost (such as diesel) and personal finance planning for the farmer. On the technical
side, it included precision farming techniques and access to cutting edge feed, plant
and seed technologies.
As result, the largest impact to the agri-businesses sector is that they now have to
position themselves as business driven competitors in a less controlled free market
and global trading environment (Van Rooyen, Esterhuizen & Doyer, 2000:12).
51
The next section (3.4) will give an overview of Senwes Limited that converted from a
co-operative to an agri-business. The discussion will include a discussion on the
trade side of the business, Senwes Village, Retail division.
3.4 SENWES LIMITED
3.4.1 Establishment of co-operative
The 15
th
of May 1909 marked the birth of Senwes when forty farmers met in
Klerksdorp to assemble the “De Centraal Westelijke Co-operative Landbouw
Vereeniging”. Their initiative was to establish an Agricultural association that could
focus on the handling, marketing and input provision of agricultural products
(Serfontein, 1970:3).
3.4.2 Conversion from co-operative to business
Apart from tiring years of drought in the eighties, the democratisation of South Africa
in 1994 soon moved the focus to agriculture. According to Van Eeden (2009:85),
land distribution and land issues and greater visibility of the population of the country
in the agricultural sector were aspects that made agricultural business reconsider
their position and future positioning in South Africa economy.
From 1995, agriculture was taken from a regulatory economy to a free market that
was already operational worldwide.
Formulation of a business was confirmed on 10 April 1997 and this step leads to the
transformation of virtually every department of Sentraalwes, which was known from
then on as Senwes. Senwes entered the business world in a new jacket as Senwes
public business that would compete in the free market system in the future.
By 1999, it was clear that it had become necessary to transform Senwes into more
focused business units, although still customer-directed, in order to enhance the
confidence of investors. The value of the traditional core businesses in Senwes was
regarded as of particular importance. However, the demands that a diversified
52
structure made on the expenditure side, compounded by the unsatisfactory income
performance of many subsidiaries, caused Senwes to move into a financial bind
since there was no other alternative than to negotiate the immense losses for a
considerable period of time (Van Eeden, 2009:126).
During the 2000 financial year, the industrial portfolio suffered great losses and the
lack of management capabilities and resources led to a loss of focus on core
businesses. The company experienced problems in performing within a free market
environment which was gaining momentum in the country. Senwes was losing
market share and the image of the company was tainted (Van Eeden, 2009:127).
During 2000, the value of Senwes’ shares had dropped from R4.50 to only R0.07 due
to significant losses made by various business units and subsidiaries which led to
shareholder activism. This all came to head at a shareholders meeting in Kroonstad.
The shareholders demanded the resignation of all the non-executive board members
(Anon., 2000).
By March 2001, the commercial banks formed a consortium against Senwes and
made several demands. Among others, it was demanded that Senwes’ level of
management had to be improved (as the Gemini Group had recommended in an
earlier investigation). Furthermore, investigations had to be lodged in certain critical
operational fields of the company and that business units had to be restructured and
rationalised. Despite the worsening financial situation of Senwes, the Land Bank still
supported the company. In April 2001, the company reported a loss of R468 million
due to significant debt write-offs and losses realised by divisions and subsidiaries.
Drastic steps had to be taken (Senwes, 2001).
The board appointed Johan Dique as CEO in August 2001 with the specific challenge
of turning the company around and recovering lost shareholder value. In total,
shareholder value of about R570 million was lost between 1998 and the financial
year which ended on 30 April 2002. The focus was on strengthening the traditional
core agricultural business and industrial optimisation rather than on managing the
many existing, diversified industrial investments. Furthermore, the cash flow of the
company also had to recover sufficiently to reduce the debt burden. A strategic plan,
53
called the value-creation and development strategy, was approved by the board and
Senwes started executing it with great success (Van Eeden, 2009:132).
Senwes continued divesting from underperforming business activities and the
focused turnaround and value creating efforts remained the primary drivers of the
recovery process of returning to the core businesses of Senwes as agricultural
company. The last two subsidiaries were sold only months later. By the end of the
2003 financial year, the total value lost amounted to about R1 billion (Van Eeden,
2009:133).
In May 2002 a group of business men and attorneys formed Landboulex and
convinced a number of smaller shareholders to sign a mandate giving Landboulex
the power to vote on their behalf at the Annual General Meeting. In reaction to this,
Senwes’ management held an extensive road show with shareholders during the
spring of 2002 with Johan Dique as the main representative (Anon., 2002).
The program of transformation, the turnaround and value creating strategy and
business plan were presented to the shareholders. Shareholders were requested to
give the process, which they had approved in October 2000, a fair chance. In the
midst of Landboulex’s continued attempts to take Senwes over, the vast majority of
Senwes’ shareholders rejected the onslaught and voted in support of Senwes’ Board
and executive management in November 2002. In June 2003, Senwes instituted
actions against its former auditors, PriceWaterhouseCoopers and some of Senwes’
former executive directors due to negligence concerning investment decisions and
losses realised in the past (Van Eeden, 2009:129).
On 23 January 2004, after the turnaround process had been completed (refer to
figure 3.4), a five year strategy was approved to reposition the Senwes group in
addressing the increasing demands of the changing socio-political milieu and highly
competitive economic and agricultural environment.
54
Figure 3.4: Successful completion of the turnaround strategy
Source: Van Eeden (2009:186)
The value development strategy, which was actively implemented from 2004, was
initially accompanied by uncertainty and instability due to external pressure of
especially investors. For the sake of optimising the industry, some members of the
personnel corps of Senwes were retrenched to reduce the personnel corps to 1,091.
During the turnaround phase of Senwes, about 25% of the departments were
restructured, of which about half were again built up after 2004 in order to enhance
growth in support of achieving the strategic goals of value-creation (Van Eeden,
2009:134).
Prominent focus was afforded to the value-creation objectives to benefit both the
shareholders and customers of the company as well as to improve the image of the
company, internally and in the public arena. These strategic objectives were:
• Developing of values for shareholders of the Senwes group.
• The negotiation of a black economic empowerment transaction (BEE).
• Alliances with strategic partners.
• More effective and more continuous application of corporate management.
• Attention to the development of business confidence and business success.
55
• Continued seriousness regarding the key role Senwes must fulfil among its
producers in the agricultural industry.
• The pursuance of long-term profitability to the benefit of all interested parties.
Among others, it includes growth in the share price and a focus on a constant
stream of dividends.
Senwes management focused on the continued development and growth of the
existing core businesses. The strategy was implemented in different phases over a
period of four financial years, from 2003 to 2006. Management launched the Senwes
Business Alignment Project in an effort to boost the morale of employees after the
rationalisation phase completed during the turnaround. The first traces of the
Senwes Business Alignment Project were already visible in 2003 and by 2006 it was
refined and applied further. An important aim of the project was to inform the young
management team and the personnel corps about the value development strategy in
such a manner that they could actively support and promote the strategy. The
introduction of the Senwes Intranet was aimed at using this communications tool to
support the alignment project. Amongst others, the business alignment project also
entailed that the skills of employees had to be improved (Van Eeden, 2009:137).
Senwes also required a viable strategy to transform Senwes and to accommodate a
more representative black group of employees in adherence to black economic
empowerment and employment equity regulations. At the stage, Senwes also
assumed a leadership role in the Agricultural Business Chamber (ABC) in formulating
a black economic empowerment (BEE) charter for the agricultural sector, referred to
as AgriBEE (Anon., 2004).
In December 2005, Senwes succeeded in negotiating and facilitating a BEE deal with
a consortium, consisting of the Royal Bafokeng Nation and Treacle Private Equity,
whereby the consortium acquired a 27.14% share in Senwes Ltd. By July 2008, the
BEE interest Senwes enlarged when Treacle Private Equity acquired a further 5.8%
of the shares issued. This implied that black shareholders owned 34.7% of the
shares of Senwes and it was said that Senwes had advanced furthest with regard to
black economic empowerment in the country (Van Eeden, 2009:139).
56
In 2006, Senwes was already on its way to rebuilding the company’s image from that
of a doomed organisation to one of a respected industry role player. The company’s
shares were sold at levels of about R3.00. Due to the turnaround process (2001-
2003) and followed by the value development process for shareholders (2004-2009),
the share price of Senwes increased from R0.30 in 2001 to constant levels above
R5.00 with a climax of R6.50 by 2008 (Van Eeden, 2009:190). By late 2008, Senwes
qualified for listing in all respects, namely financial achievement, systems, quality of
management and compliance with corporate management.
Large investments were made in intellectual capital with regard to grain marketing to
develop it in such a way that it would deliver the same profitability as the grain
storage function. There was a lack of such expertise in South Africa, but through
product innovation Senwes ensured that it was able to market the maximum grain
that entered its silos. A market share of over 80% was achieved in 2007. On 2
October 2008, the Trade Department became Senwes Village and the division
established two retail shops under the sub-brand Senwes Village and Village Grocer
(Van Eeden, 2009:140).
Since the beginning of 2007, Senwes have grown to be one of the leading role
players in the South African agricultural sector, with a grain storage infrastructure of
70 silos. The company had a storage capacity for 4.6 million tons of grain, which
made about 30% of the total national capacity (Senwes, 2011:28). Roughly 32% of
the grain and oil seeds of the country were produced in the geographical region of
Senwes. Retail stores were deployed in rural towns across the service area which
supported input distribution to producers throughout the region.
The year 2010 was earmarked by the resignation of the CEO, Johan Dique, as well
as Steven Alberts, the financial director. Both of them pursued new opportunities
after their successful terms as executive directors of Senwes. There were no
significant changes in the group structure during the 2010 financial year.
57
3.4.3 Senwes Limited current status
Francois Strydom was appointed CEO with Corné Kruger appointed as the new
financial director during the 2011 financial year. During the year, the Board
constituted a new investment committee, under the leadership of Steve Booysen,
former CEO of ABSA. There were no other significant changes in the group structure
of Senwes during 2011. Senwes group structure is illustrated in figure 3.5.
FIGURE 3.5: Senwes group structure
Sources: Senwes (2011:27)
In June 2011, the holding company SenwesBel, bought back the Senwes shares
held by the Royal Bafokeng consortium to increase its majority shareholding in
Senwes to 59%. Treacle, which is part of the Royal Bafokeng consortium, sued
SenwesBel and Senwes on ground that they contravened the Company Act (71 of
58
2008) in the acquisition of the Senwes shares. The case was dismissed by the
Northern Gauteng High Court in February 2012 and Treacle was ordered to pay all
legal fees of both the parties (Anon., 2012).
The 2011 financial period was challenging in terms of the environment, business and
the global economy and in which Senwes and its producers experienced both the
best and the worst of agriculture. Senwes’ performance during the first six months
was significantly lower than the previous year, but exceptional recovery was
demonstrated during the second semester in the wake of improved agricultural
conditions (Senwes, 2011).
Senwes’ 2011 financial performance reflected a net profit of R219 million, which was
an increase from 2010 in spite of a substantial decrease in turnover. Despite the
relatively poor input provision year, Senwes maintained its business base with an
EBITDA result of R471 million (2010: R455 million). The share price reached an all-
time high with a closing price of R10.20 at year-end. Senwes’ share price has
increased by R7.70 over the past 5 years while dividends of R3.14 per share were
distributed, thus creating shareholder wealth of R1,96 billion since 2007 (Senwes,
2011).
Figure 3.6: Turnover and net profit since becoming a public company
Sources: Adapted from information contained in Senwes’ annual reports
59
The core business of the Group, Senwes Grainlink, follows a dual growth strategy,
namely coupling with a large international grain trading partner and expansion of the
African footprint. Good progress was made in this regard during the year by the
establishment of a joint venture with the European operational arm of Bunge and the
establishment of a regional structure in Southern Africa.
Senwes today is one of the leading agricultural businesses in South Africa, focusing
on the provision of inputs for agricultural production, as well as market access to
grain produce (Senwes, 2011:32). This also strategically coupled with provision of
value added service, which include financing, agricultural technical services, logistics
and insurance.
Senwes business activities are predominantly in the North-West, Free State,
Gauteng and Northern Cape provinces of South Africa, with limited operations in
Western Cape. Senwes has established a presence in Malawi as part of its Africa
expansion strategy, with the focus in grain trading activities.
The market access side of the business provide storage and handling through a well
deployed silo infrastructure, which has a capacity of 4,6 million tonnes and
constitutes more than 25% of the total South African commercial storage capacity.
Senwes Grainlink is responsible for market access.
The input side provides all production inputs, mechanisation, production and asset
finance, through competitive value and service packages. Senwes Village division is
responsible for the input side of the business. Senwes Village division have a
strategic partner in the form of Senwes Credit that is responsible for the finance
activities. The operations overview could be schematic viewed in table 3.1
60
Table 3.1: Senwes operations overview
CREDIT EXTENSION INPUT SUPPLY MARKET ACCESS
SENWES CREDIT
SENWES VILLAGE,
RETAIL DIVISION
SENWES GRAINLINK
FOCUS AGRICULTUALLY FOCUSED SERVICES
NATURE OF
BUSINESS
• Financing of agriculturally
oriented inputs
• Financing of medium-
and long-term assets for
farming purposes
• Financing of marketed
grain through various
financing products
• Supply production inputs to
the agricultural producer
• Supply mechanisation
equipment, spare parts and
maintenance services to
the agricultural producer
• Supply a variety of
hardware and convenience
products
• Create market access for
the grain producer
• Procurement and
marketing of grain
• Handling and storage of
grain
• Logistical services for the
procurement and
distribution of grain
Sources: Senwes: 2009:4
3.4.4 Senwes Village
3.4.4.1 Nature of business
Senwes Village have two core business activities, retail and mechanisation. On the
retail and mechanisation side of the business the business structures are aimed at
providing agricultural producers with exclusive and competitive value and service
packages. The extension of relevant input cost financing also results in added-value
for producers. Mechanisation supply mechanisation and maintenance services to the
agricultural producer with regard to agricultural equipment. Retail supplies a variety
hardware and consumer products to the agricultural producers and general public.
3.4.4.2 Positioning
Deployed infra and - marketing structures and product ranges to service the producer
in respect of production inputs and mechanisation requisites through twenty six retail
stores, twelve mechanisation workshops, four fuel stations and four convenience
stores.
61
3.4.4.3 Strategic objective
Senwes Village strategic objective is to fulfil the role of preferred supplier of
production inputs and mechanisation to the agricultural producers with distinction.
3.4.4.4 Village - Operational profit after interest before tax
During the 2011/2012 financial year, the supply input division contributed to 18%
(R65m) of the organisation’s profit before tax (Senwes, 2011:23).
3.4.4.5 Future focus, prospects and expectations of Senwes Village (Senwes
2009:16)
Senwes Village will focus on the following strategic objectives:
• Successful roll-out of Senwes Village value proposition.
• Upgrading of strategic retail outlets.
• Improving service offering and value adding.
• Expanding the product range and improving the quality.
• Focusing on after sales service.
• Expanding market share.
• Expanding total product and service offering.
• Establishing new outlets in strategically important areas.
• Optimising stock levels and product ranges.
• Increasing risk management practices.
• Focusing on qualitative aspects of the business.
3.5 SUMMARY
An overview was given of the evolution of the South African co-operatives in the
context of the evolution of the South African agricultural sector, the regulation,
eventually the deregulation of the agricultural marketing in South Africa.
62
The overview of the agricultural industry in South Africa highlighted, that we do not
have ideal conditions for agriculture and that less than 12% of the land is arable of
which only 22% can be regarded as high potential arable land. Factors such as
weather conditions, commodity prices, input cost, stock levels, consumption demand
as well as exchange rates will continue as never before influences agricultural
production in the country.
South Africa’s co-operative movement was born in 1900`s to provide commercial
farmers with collective buying, marketing and organisational powers. They
specifically focused on input supplies and joint marketing of production. Co-
operatives became very powerful and they held a monopoly in key agricultural
sectors.
Agricultural Product Act (No 47 of 1996) ended the state control of agricultural
commodities and resulted in the demise of the marketing boards. The implication of
the act was a material effect on co-operatives. Co-operatives no longer have the
privilege of being appointed as agents of various marketing boards thus losing their
monopoly powers, and are no longer involved in distributing government subsidies.
They still provide short and medium credit to the farmers. Several co-operatives
have converted to IFO’s and some are listed on the Johannesburg Securities
exchange.
The deregulation had the following effects on the agricultural sector: Opening of the
agricultural sector, increased exports with a result in growth of revenues; shifts in
production of grain to livestock in marginal production areas and an increase in
intensive farming in high potential areas; farmer involvement in risk management by
means of storage, forward contracts and diversification; strengthening role of
organised markets and producer responsiveness to price signals; establishment of
new enterprises in agriculture and downstream food processing sectors.
The largest impact of the deregulation on the agri-business sector is that they now
have to position themselves as business driven competitors in a less controlled free
market global trading environment.
63
Senwes today is one of the leading agricultural businesses in South Africa, focusing
on the provision of inputs for agricultural production, as well as market access to
grain produce. This also strategically coupled with provision of value added service,
which include financing, agricultural technical services, logistics and insurance.
Senwes business activities are predominantly in the North-West, Free State,
Gauteng and Northern Cape provinces of South Africa, with limited operations in
Western Cape. Senwes has established a presence in Malawi as part of its Africa
expansion strategy, with the focus in grain trading activities.
Senwes Village have two core business activities, retail and mechanisation. On the
retail and mechanisation side of the business the business structures are aimed at
providing agricultural producers with exclusive and competitive value and service
packages. The extension of relevant input cost financing also results in added-value
for producers. Mechanisation supply mechanisation and maintenance services to the
agricultural producer with regard to agricultural equipment. Retail supplies a variety
hardware and consumer products to the agricultural producers and general public.
Senwes Village strategic objective is to fulfil the role of preferred supplier of
production inputs and mechanisation to the agricultural producers with distinction.
The tool that the researcher suggests to obtain the future prospects and strategic
objectives is through corporate entrepreneurship, specific the sustainable corporate
entrepreneurial framework of Ireland et al. (2006). It is further important to measure
the Senwes Village department managers and first line supervisors against the
determinants for corporate entrepreneurship in sections 2.7 and 2.8. The result
obtained will determine the readiness for corporate entrepreneurship.
The next section is of utmost importance for the Senwes Village division. The focus
will be on key retail success factors needed to be successful in the changing retail
environment for the 21st century, with a further focus on new retail trends.
64
CHAPTER 4
NATURE OF RETAIL
4.1 INTRODUCTION
Krafft and Mantrala (2006:13) indicated that the global business environment has not
been kind to retailers since 9/11 and a number of factors add to their challenges:
deflation, high unemployment, lower consumer confidence, accounting irregularities,
ethnic violence and higher oil prices. Retailers are rising to these challenges in
different ways and entrepreneurially launching new formats, while others are
remaining competitive by driving costs down by using sophisticated communication
and information systems to manage their business (Dunne, Lusch & Griffith, 2002:9).
Soni (2010:4) stated that if retailers do not respond quickly and in appropriate ways,
they will find themselves floundering and being forced to take a deep hard look at
their business. In order to remain viable they must understand the key drivers for
retail success.
In order to understand the changing environment of retail, a broad overview of the
nature of retail will be discussed, followed by an indication of the key retail success
factors that retailers must consider to adapt to the changing environment to stay
competitive and unlock value for their customers.
4.2 DEFINITION OF RETAIL
Berman and Evans (2010:4) define retail as the business activities involved in selling
goods and services to customers for their personal, family or household use and
include every sale to the final consumer. Retail is the final stage of the distribution
process. Kotler and Armstrong (2010: 394) agree that retailing includes all activities
involved in the selling of products or services directly to the final consumer for their
personal, non-business use. Kerin, Hartley and Rudelius (2007:310) argue that
retailing is an important marketing activity, where producers and consumers meet
through retailing actions, but also creates customer value and has a significant
impact on the economy.
65
Retailing’s economic value is represented by the people employed in retailing as well
as by the total amount of money exchanged in retail sales. Hammond (2007:16)
concludes that the world’s best retailers do things ‘simple’ and brilliantly: they
communicate simple ideas clearly, quickly and meet straightforward needs in simple
straightforward ways.
4.3 CHANGES IN RETAIL
Morganosky (1997: 269) states that retailing are constantly changing due to the fact
that customers are continually seeking new outlets and demanding more from
retailers they choose to patronise. Kim, Niehm and Jeong (2010: 133) agree that a
growing number of customers are looking for more than quality products at a low
price. They desire products that express their unique, personal identity.
Therefore, Sit, Merrilees and Birch (2003:2) indicated in their research that
customers crave innovation in all aspects of their lives that includes recreational
sport, restaurant environments, shopping environments and marketing campaigns.
Jack Morton Worldwide (2006:1) agrees that retailers and marketing units are
allocating more resources towards experiential strategies, which entail amplifying
brand’s experience into a set of tangible, physical and interactive experience. Ruvio
and Shoham (2007:704) argue that the customer want an interactive experience with
the different brands. Kim et al. (2010:134) agree that customers seek to have an
interactive environment where they could communicate with knowledgeable brand
representatives not only to gather information but also share their perspectives.
Engelland, Hopkins and Larson (2001:15) confirmed with their research that
customers have been shown not only to demonstrate a need for novelty and
uniqueness, but they also derive enjoyment from evaluating information, discovering
facts and examining functional product attributes in their decision making process.
Kim et al. (2010:140) confirm in their research that enjoyment is a major component
of recreational shopping and one of the key antecedents of attitude towards the
shopping channel.
66
Cox, Cox and Anderson (2003 251) indicated in their research findings the following
shopping pleasures indicated by customers that could change the retail environment:
• Customers want to mingle with other shoppers to stimulate their social interaction.
• Customers want to stimulate emotional responses through bargain hunting and
feel that they achieved a certain goal.
• They want to browse through retailers merchandise to gain information about
products without buying.
• Some shoppers may derive pleasure from the sensory aspects of the retail
environment, its sights, sounds and smells.
• Some shoppers just enjoy the status and authority of being pampered by retail
and sale staff.
Therefore according to Krafft and Mantrala (2006:49), the reasons for structural
adjustments of retail can be presented as a process linking changes in the micro and
macro environment to the response by retail managers.
4.4 TYPES OF RETAILERS
Kotler and Armstrong (2010:395) indicated that retailers can be classified in terms of
several characteristics, including the amount of service they offer, the breadth and
depth of their product lines, relative prices they charge, and how they are organised.
The most important types of retail stores will be presented in table 4.1. Berman and
Evans (2010:131-132) indicated aspects of strategy mixes of 14 store based retail
institutions, divided into food-orientated and general merchandise groups with
specific reason why they have customer support.
67
Table 4.1: Selected aspects of store-based retail strategy mixes
TYPE OF RETAILER LOCATION MERCHANDISE PRICES
ATMOSPHERE
AND SERVICES
PROMOTION
Convenience store Neighborhood
Medium width and low
depth of assortment;
average quality
Average to above
average
Average Moderate
Conventional
supermarket
Neighborhood
Extensive width and depth
of assortment; average
quality; manuf acturer,
private, and generic
brands
Competitive Average
Heavy use of
newspapers, f lyers, and
coupons; self -service
Food-based superstore
Community shopping
center or isolated site
Full assortment of
supermarket items, plus
health and beauty aids and
general merchandise
Competitive Average
Heavy use of
newspapers and f lyers;
self -service
Combination store
Community shopping
center or isolates site
Full selection of
supermarket and drugstore
items or supermarket and
general merchandise;
average quality
Competitive Average
Heavy use of
newspapers and f lyers;
self -service
Box (limited-line) store Neighborhood
Low width and depth of
assortment; f ew
perishables; f ew national
brands
Very low Low Little or none
Warehouse store
Secondary site, often in
industrial area
Moderate width and low
depth; emphasis on
manufacturer brands
bought at discounts
Very low Low Little or none
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Caters for complete grocery needs, along with f ill-in general merchandise.
They have expanded remodeled existing supermarkets and build
numerious new stores.
FOOD ORIENTED
Of fer greater customer convenience with more product lines and a greater
variety, with better prices.
Intense competition from food stores, with low prof it margins.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Low-priced private label brands, with prices 20-30% lower than supermarkets.
Growth of these store has not been anticipated, sales has f allen in
recent years.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Availibility of f ill-in items when a customer does not want to travel to a shop or
supermarket.
Areas saturated with stores traditional market shrank.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Customers like one-stop shopping and will travel to get there. Impulse sales are
high.
Quite popular with shoppers
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Customers shop at warehouse stores f or bulk buying at very low prices.
Customers do not like to shop in warehouse settings. Brands may
be temporarely or permantly out of stock.
68
TYPE OF RETAILER LOCATION MERCHANDISE PRICES
ATMOSPHERE
AND SERVICES
PROMOTION
Specialty store
Business district or
shopping center
Very narrow width and
extensive depth of
assortment; average to
good quality
Competitive to
above average
Average to excellent
Heavy use of displays;
extensive sales f orce
Traditional department
store
Business district,
shopping center, or
isolated store
Extensive width and depth
of assortment; average to
good quality
Average to above
average
Good to excellent
Heavy ad and catalog use,
direct mail; personal selling
Full-line discount store
Business district,
shopping center, or
isolated store
Extensive width and depth
of assortment; average to
good quality
Competitive
Slightly below
average to average
Heavy use of
newspapers; price-
oriented; moderate sales
f orce
Variety store
Business district,
shopping center, or
isolated store
Good width and some
depth of assortment;
below-average to average
quality
Average Below average
Use of newspapers; self-
service
GENERAL MERCHANDISE
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Feature popular brands of average to good quality merchandise at competitive
prices.
Competition f rom other retailers too rapid expantion of some
businesses, saturation of prime locations, number of consolidations
bankruptcies and liquidations.
Traditional department stores: Emphasis on customer service and
knowledgable sales staf f .
Must clarify their niche in the market place.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Customer shop at speciality stores as a result of knowledgeable sales staf f ,
variety within a give category, service policies, intimate store size and
atmosphere, lack of crowds, absence of aisles.
Fail to attract customers who are interested in one stop shopping f or
multiple product categories.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Department stores: Sells wide range of products (such as apparel,
f urniture, appliances) with no merchandise pre-dominating.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Inexpensive and popular priced goods and services.
Heavy competition from speciality stores and discounters, older
f acilities, items low prof it margin.
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Sources: Berman and Evans (2010:131-132)
Table 4.1 illustrated the fourteen types of retail stores and gave an overview of
each type according to its location, merchandise, prices, and atmosphere and
service it offers with its focus on promotions. The table focuses on the reason
why customers support a specific retail type of store, as well as current
industry problems it faces. With this in mind, the table will give a retailer a
holistic overview of types of retail stores.
TYPE OF RETAILER LOCATION MERCHANDISE PRICES
ATMOSPHERE
AND SERVICES
PROMOTION
Of f-price chain
business district,
suburban shopping strip,
or isolated store
Moderate width but poor
depth of assortment;
average to good quality;
lower continuity
Low Below average
Use of newspapers;
brands not advertised;
limited sales f orce
Factory outlet
Out-of -the-way site or
discount mall
Moderate width but poor
depth of assortment; some
irregular merchandise;
lower continuity
Very low Very low Little; self-service
Membership club
Isolated store or
secondary site
(industrial park)
Moderate width but poor
depth of assortment; lower
continuity
Very low Very low
Little; some direct mail;
limited sales f orce
Flea market
Isolated site, racetrack,
or arena
Extensive width but poor
depth of assortment;
variable quality; lower
continuity
Very low Very low Limited; self -service
Store selling close-outs, discontinued merchandise, irregulars, f irst quality
merchandise at low prices.
Evaluate retail expertise, investment cost, impact of existing retailers
that buy f rom them, response of customers.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Reduced prices by 40-50%, also a promise of new merchandise on regular
base.
Discontinuity of merchandise, poor management of companies,
insuf f icient customer service, shake out of underf inanced business.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Shoppers touch and sample items and they like to haggle over prices. Market shift towards online auction sales.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Price-conscious customers, who must be a member to shop there.
Allocation of company ef f orts between business and f inal consumer
accounts, lacking of customers interest buying at warehouse type of
store, potential saturation of market.
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4.5 RETAIL MARKETING DECISIONS
Kotler and Armstrong (2010:402) argue that retailers are searching for new market
strategies to attract and hold customers as a result of service and assortments that
are looking more and more alike. Therefore service and product differentiation have
eroded amongst retailers and customers have become smarter and more price
sensitive, as they see no reason to pay more for identical brands, especially when
service differences are shrinking (Kerin et al., 2007:311).
Berman and Evans (2010:77) argue that retailers are now rethinking their market
strategies with specific focus on segmenting and targeting, store differentiation and
retail marketing mix.
4.5.1 Segmentation
Dunne et al. (2002:228) define segmentation as a method that retailers use to
examine, or break down heterogeneous consumer populations in smaller, more
heterogeneous groups based on their characteristics. Kotler and Armstrong
(2010:402) agree with this view point that retailers must first segment and define their
target markets and then decide how they will differentiate themselves in these
markets and until retailers define and profile their markets, retailers cannot make
consistent decisions about product assortment, services, pricing, advertising, and
store décor.
Kotler and Armstrong (2010:225) argue that effective segmentation require five basic
elements to be successful.
• The size, purchasing power and profiles of the segment must be measurable.
• Market segments are accessible and therefore can be reached and served.
• They are large or profitable enough to serve.
• Therefore, they are differentiable, conceptually, distinguishable and respond
differently to different marketing mix elements and programs.
• Finally, they must be actionable whereby effective programs can be designed for
attracting and serving these segments.
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4.5.2 Target market
According to Kotler and Armstrong (2010:225), a target market consists of a set of
buyers who share common needs or characteristics that a company decide to serve.
Therefore a target market is that segment of the market that the retailer decides to
pursue through its marketing efforts (Dunne et al., 2002:228). In this view target
market is customarily interpreted as a mechanism that allows businesses to take
advantage of customers (Anderson & Simester, 2001:316). Sawhney (1998:54)
emphasises that customers are becoming very sophisticated and are demanding
customised products and services to match their individual preferences and tastes.
Hunt and Arnett (2004:10) agree that the existence of product and service variety
could be a result of customers seeking variety in their own consumption and/or
different customers’ wanting different variants because tastes differ. Therefore
retailers in the same line of retail trade often pursue different target markets to gain
competitive advantage and make it important for retailers to identify there target
markets before they decide how best to reach the target market (Berman & Evans,
2010:71).
Dunne et al. (2002:228) argue that there are three criteria that exist if a target market
will be successfully reached:
• Firstly, the selected market segment should be measurable or able to be
described or able to be described using objective measures on which data are
available, such as age, gender, income, education, ethnic group or culture.
• Secondly, is the accessibility or degree to which the retailer can target its
promotional or distribution efforts to a particular segment? The key issues are
through what media the specific target could be reached?
• Finally, successful target market requires that the segment be substantial enough
to be profitable for the retailer.
“Retailers that select markets that are measurable, accessible and substantial will be
able to generate higher profit results” (Dunne et al., 2002:229).
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4.6 STRATEGIC MODEL
Levy, Grewal, Peterson and Connely (2005:84) argued that retailing is a dynamic
enterprise and they propose a framework for investigating factors that motivate the
structure and evolution of retailing. They named the framework the Big-Middle and
were depicted in figure 4.1, and were defined as the market place in which the
largest retailers compete in the long run, for the reason that the largest number of
potential customers reside (Brown, Dant, Igene & Kaufmann, 2005:89). According to
Sheth and Sisodia (2002:10), retailers do not have to be in the Big-Middle to be
successful in the short run, those that become the largest, and by implication, the
most successful are drawn there overtime in their search for scale of economies,
increased revenues and incremental profits.
Figure 4.1: Retail Landscape
Source: Levy et al. (2005:85)
The model describes the evolution of the retail strategy based on two dimensions:
relative price, which depicted on the horisontal axis and relative offerings on the
vertical axis (Levy et al., 2005:85).
According to Krafft and Mantrala (2006:14) retailers fall into one of four segments:
Innovative, Big-Middle, Low-Price and In-Trouble. Therefore retailers occupying
Value
Big-Middle Segment
Innovative
Low-Price
In-Trouble
Exit
Retailing
High
Low
Low High
Relative Price
R
e
l
a
t
i
v
e
O
f
f
e
r
i
n
g
s
73
the innovative segment direct their strategies towards quality-conscious markets
seeking premium offerings. Low-Price retailers appeal to the price-conscious-
segment. Big retailers thrive because of their value offerings and In-Trouble
retailers are those who are unable to deliver high levels of value relative to their
competitors. The Big-Middle concept will be discussed in the next paragraph that
will indicate factors that create the structure and motivate the evolution of retailing.
4.6.1 Big-Middle segment
This Big-Middle segment focus on the largest segment potential base of customers
in the long-term by providing an innovative offering or low price or it could be both,
thus providing superior value to customers (Levy et al., 2005:85).
Large retailers have succeeded in leveraging their innovative-low price position to
transform their niche appeal to the mass market and they occupy an entirely different
position in the market place, achieved by offering innovative merchandise that are
broader and deeper and at reasonable prices (Krafft & Mantrala, 2006:17). Sheth
and Sisodia (2002:11) argue that these businesses become volume-driven and their
initial customer base simply cannot generate sufficient revenue to support their
desired growth and they become generalists.
Therefore these businesses successfully transformed themselves by transforming
their image by simply offering either innovative merchandise or low prices to an
image as a retailer that provide great value over a broader array of merchandise
(Brown et al., 2005:97). Gorton, Sauer and Supatpongkul (2011: 1624) indicated that
Wal-Mart and Target is examples of businesses in the Big-Middle segment.
Brown et al. (2005:100-101) as sighted by different authors suggested early and
current elements that will lead to the success in the Big-Middle.
Early elements that lead to the success in the Big-Middle segment
• Basic merchandise - Wingate and Brisco (1946) distinguished between mass
distribution of merchandise for which an active demand already exists and
launching new products which have to be sold to the ultimate consumer in order
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that an active demand may come into being. Launching new products is the
innovative segment and not the big middle.
• Product standardisation - Baxter (1931) argued that by generating buying
economies and higher inventory turnover, retailers can obtain lower prices, more
sales.
• Frequently purchased goods - Baxter (1931) stated that this approach leads to
scale economies in purchase and high turnover at low margins.
• Focused inventory - Brown et al. (2005:100) indicated that focusing inventory on
products that are widely acceptable, but that do not appeal to customers in the
tails of a normal distribution of tastes, inventory turnover can be kept at a high
level; indeed an attempt to meet the requirements of the last 15% of customers,
will usually prove very costly.
• Direct purchases - Savitt (1999) stated to ensure inventory availability across the
entire system, early chain retailers purchased direct from producers.
• Skilled buyers - Beckmann and Nolen (1938) stated that due to the enormous
purchases compared, with non-chain retailers, chains developed training
programs to teach negotiating skills.
Brown et al. (2005:100) argue that logistics was earlier regarded as important, but
inventory management was perceived paramount. Therefore, currently modern
discounters like Wal-Mart, is trying the method to match inventory supply with
consumer demand by combining demand effectiveness with cost efficiency (Brown et
al., 2005:101).
Levy et al. (2005:87) confirm that above will be achieved through a high sophisticated
supply chain management system, innovation in technology and operations whereby
businesses realise their idealised goal of a seamless integration with suppliers,
manufactures, warehouses and stores.
Levy et al. (2005:87) conclude that businesses in the current situation will transform
to the Big-Middle segment through five primary value levers:
• Innovative merchandise.
• Technology.
• Supply chain management.
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• Price optimisation.
• Store name/image.
4.7 STRATEGIC DRIVERS FOR RETAIL SUCCESS THROUGH VALUE
Levy et al. (2005:86) argued that retailers who successfully compete in the Big-
Middle provide a compelling value proposition to their customers and are able to
respond quickly to market changes and as a result customers in return become loyal
to the Big-Middle retailers partially because these retailers provide them with what
they need, what they are accustomed to, good service and excellent relationship
management programs.
Therefore retailers realise that being flexible and being able to adapt quickly to
changes in the marketplace are the key to survival (Brown et al., 2005:103). Central
to the ability to capitalise on new opportunities is the recognition of the importance of
managing elements of the offering that influences customer’s perceptions of value
(Thompson et al., 2012:195).
Berman and Evans (2010:28) argued that from the perspective of the manufacturer,
wholesaler and retailer, value is embodied by a series of activities and processes, a
value chain that provides a certain value for the customer. Therefore it is the totality
of tangible and intangible products and consumer attributes offered to customers
(Thompson et al., 2012:146). Berman and Evans (2010:28) state that value from
customer’s perspective is the perception of all the benefits from a purchase formed
by the total retail experience and therefore value is based on perceived benefits
versus price paid.
4.7.1 Value as meaningful concept for retailers
Berman and Evans (2010:29) state the following reasons why value is such a
meaningful concept for retailers:
• Customers must always believe that they get their money’s worth.
• A strong retail effort is required so that customers perceive the level of value
provided in the manner the business intends.
76
• Value is desired by all customers, but it means different things to different
customers.
• Customer comparisons for shopping prices are easy through ads and World
Wide Web. Thus, prices have moved closer together for different types of
retailers.
• Retail differentiation is essential so that a business is not perceived as a “me too”
retailer.
• A specific value / price level must be set.
In the next section a discussion on the key success factors for retail will be noted.
4.8 KEY RETAIL SUCCESS FACTORS
Jacobs (2007:11) argues that some authors or retail specialist place more
importance on certain key retail success factors than others, but in general all of
them agree upon a few basic factors which need to be in place to survive in the harsh
world of retailing. Gauri, Trivedi and Grewal (2008:257) agree that the key retail
success factors may help determine customer choice and shopping behaviour.
Baker, Parasuraman, Grewal and Voss (2002:120) confirmed in their research that
retail environments and atmospherics builds on environmental psychology and that
design, social setting and ambience influence costumer service quality perceptions
and shopping behaviour.
Lal and Rao (1997:60) also demonstrated the importance of the characteristics of the
trading area, such as the population density, income, distance from the store for the
appropriate choice of a format and pricing strategy for a retailer.
Although there are many key retail success factors that affect customer’s perception
of value, major success factors will be discussed: store factors, service factors-
process, merchandise/product, price, promotion, supply chain management
and technology, financial performance, employee experience, and customer
service. Berman and Evans (2010:506) agree that these factors contribute to a
retailer’s image and it is the totality that forms the overall image. Figure 4.2 is a
schematic representation of the elements of the retail image.
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Figure 4.2: The elements of the retail image
Source: Berman and Evans (2010:506)
4.8.1 Store factors
Krafft and Mantrala (2006:18) state that a key value driver at store level is developing
the right combination of format and retail environmental factors. Kotler and
Armstrong (2010:404) argue that the store’s atmosphere is an important element in
the retailer’s product arsenal and the aim is to create a unique store experience, one
that suits the target market and moves customers to buy. Berman and Evans
(2010:506) agree that creating and maintaining a retail image is a complex, multi-
step on-going process and the aim must be that a costumer must be able to
determine the following about a store in three seconds, its name, its line of trade its
claim to fame, its price position and its personality.
Therefore, according to Backstrom and Johansson (2006: 419), to conceptualise the
different aspects that may influence in-store experiences and store behaviour it have
been referred to as general dimensions such as atmospherics, design and social
dimensions. Kotler and Armstrong (2010:404) argue that atmospherics has been the
area that received the most attention and can be described as relating to factors in
the store environment that can be designed or manipulated in order to create certain
Merchandise
attributes
Customer
service
Target
market
Firm’s
positioning
Store
location
Pricing
Overall
Retail Image
Attributes of physical
facilities
Shopping
experiences
Community
services
Promotion tools
• Advertising
• Public relations
• Personal selling
• Sales promotion
78
emotional and behavioural responses from the customer. Hoffman and Turley
(2002:3) indicate that atmospherics are composed of both tangible elements (the
building, carpeting, fixtures, point of purchase decorations) and intangible elements
(colour, music, temperature, scents) that comprise of service experiences.
Backstrom and Johansson (2006:419) argue that positive store experience is crucial
in order to offer experiences rather than just product and services and they suggest
that atmosphere is of great importance specifically in a service context due to its
nature. Foxall and Greenly (2000:39) agree that by consistently seeking to control
and to add substance to the atmosphere of retail stores, retailers may influence
customers when they are evaluating what type of service and what type of products
they offer. Backstrom and Johansson (2006:417) as adopted from Spies, Hesse and
Loesch (1997) indicated that a positive atmosphere can lead to approach behaviours,
which implies that customers stay longer in the store and spends more money or that
the propensity of impulse buying increases.
Therefore, Kotler and Armstrong (2010:405) state that successful retailers
orchestrate every aspect of the customer’s store experience and that it confirms that
retail stores are more than simply assortment of goods. Store atmosphere offer a
powerful tool by which retailers can differentiate their stores from other competitors
(Backstrom & Johansson, 2006:420).
Gottdiener (1998:29) argues that while atmospherics is commonly used to describe
the rather intangible aspects of the store environment, store design is normally
applied to signify the more tangible elements present in the interior store environment
and may be used to reinforce the values associated with a specific brand name.
Design relates to store layout and display (Backstrom & Johansson, 2006:420).
Buttle (1984:104) described display as the design of the way in which articles are
presented in the store to facilitate and stimulate customer purchasing behaviour.
Kotler and Armstrong (2010:255) argued that the role of retail designers has
progressed from plain shoplifting to the provision of entertainment and inspiration to
customers.
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The social dimension consists of all interactions (physical and emotional) customers
have with other members of society and with staff of the retailer (Backstrom &
Johansson, 2006:417).
Kelly and Hoffman (1997:408) argue that the mood or credibility of salespersons
seems to be important for good service encounters to occur and have also shown to
have a profound effect on customer’s loyalty to the store. Therefore, Kelly and
Hoffman (1997:423) state from a managerial perspective that it is extremely
important to manage the positive affect of service providers and this could be
accomplished through the recruitment and selection of employees who are more
likely to experience positive affect while on the job. Bitner, Booms and Mohr
(1994:95) suggested another viable means of managing employee and customer
affect is through the physical surroundings of the service organisation through a
service culture that will contribute to the establishment of a work environment that is
conducive to positive affect.
4.8.2 Service factors
Krafft and Mantrala (2006:19) indicate that given the time and effort that is invested
by retailers in attempts to attract customers into their stores, it is amazing that so
many retailers pay little attention to customer service. They state that it is common to
visit retail stores and see half-filled shopping carts abandoned by shoppers that got
tired of waiting for their turn at the checkout, or to see shoppers looking for a
particular item they want to purchase but have not because they can’t find a service
provider to assist or provide them with information (Krafft & Mantrala, 2006:20).
Fullerton (2005:100) argues that under a relationship marketing paradigm, customer
commitment, rather than service quality, is the prime driver of customer loyalty to the
service provider. Morgan and Hunt (1994:10) state that commitment is a complex
construct and is a psychological force that links the customer to the organisation with
which the customer does business. Allen and Meyer (1990:2) agree that the two
major components of commitment are affective commitment and continuous
commitment.
80
Therefore, according to Gundlach and Mentzer (1995:78), affective commitment in
the marketing relationship has been defined as a complex mixture of attitudinal
loyalty, involvement and attachment. Fullerton (2005:101) argues that the
development of social bonds between the customer and the organisation with which
the customer does business is an important stage in the development of commitment
in marketing relationships. Achrol (1997:56) argues that people develop affective
commitment for businesses to which they feel they belong. Therefore, Fullerton
(2005:101) agrees that if the marketing relationship is built on affective commitment,
customers maintain a relationship because they identify with and like the business
with which they do business.
The following elements are main drivers of good customer service and will establish
affective commitment (Levy et al., 2002:20):
• Level of convenience a particular store provides.
• Retailers must ensure that their store personnel are well trained to provide five
source of convenience:
- decision convenience, to provide customers with appropriate information so
that they can make informed buying decisions;
- access convenience, making sure that they know where merchandise is and
will assist the customer in finding it;
- transaction convenience, involving training to facilitate transactions such as
checkouts and returns;
- benefits convenience, helping customers to understand the benefits of the
product and services that will result in a more enjoyable experience and of;
- post benefit convenience, providing the training and empowerment to rectify
post purchase problems.
Levy et al. (2002:20) conclude that retailers that attend to aspects of customer’s
service can contribute to customer perception of value, resulting in a strong
competitive position.
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4.8.3 Merchandise
Berman and Evans (2012:384) state that merchandising consists of the activities
involved in acquiring particular goods and/or services and making them available at
the place, time, prices and quantity that enable a retailer to reach its goals.
Olson (2007:1) stated that times have changed and customers will not be dictated to
any more due to the fact that customer tastes are more complex than ever before
and profitable life-cycles have shortened, requiring all-time quick turnarounds.
Jacobs (2007:32) agrees that retailers know that to stand out, they must offer unique
merchandise, a constant changing mix of unique and interesting merchandise should
be displayed in creative ways.
Retailers who excel in merchandise management do it in one of two ways (Grewal,
Krisham, Levy & Munger, 2007:25):
• Firstly, they concentrate in finding unique merchandise that appeal to their target
customers.
• Secondly, they can be certain that enough merchandise is where the customer
wants it.
Grewal et al. (2007:25) conclude that more product variety could lead to higher sales
levels, but retailers do not have the luxury of simply adding more inventories, where
productivity in merchandise management is essential to long-term viability.
4.8.4 Price
Grewal, Roggeveen, Compeau and Levy (2012:1) argue that in the face of radical
changes in the global market place (a worldwide recession, significant technological
turbulence) customers are not only changing their shopping behaviours but also their
value perceptions. Therefore retailers must respond appropriately by monitoring the
environment to identify changes, both expected and unexpected with the following
results (Grewal et al., 2012:1):
• Remain more in touch with customer preferences.
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• Take advantage of opportunities created by new customer’s preferences.
• Enhance the value they offer to the customer.
Therefore, Levy et al. (2007:1) argue that most retailers do not use price as a basis
for achieving sustainable competitive advantage, because it is too easy for
competitors to copy a low-price strategy. Therefore retail managers have to consider
key factors, such as the customers, competition and government regulations and
then develop, implement and evaluate the appropriate pricing strategy and tactics.
Grewal, Ailawadi, Gauri, Hall, Kopalle and Robertson (2011:546) state that recently
retailers have employed sophisticated dynamic pricing models that use data from
internet purchases or company enterprise resources planning systems to set prices.
Nagle, Hogan, and Zale (2010: 9) agree that sophisticated dynamic pricing models
update prices frequently, based on changing supply or demand characteristics.
Kopalle (2010:117) argues that retailers must consider several factors when
developing an optimal dynamic retail pricing and promotional schedule namely: inter
and intra-category optimisation, market expansion and contraction effects, modelling
frameworks, model performance, the psychological aspects of pricing, objective
functions, optimisation, parameter estimation, product relationship and scalability.
4.8.4.1 Traditional retail pricing techniques
Levy et al. (2004:15) argue that retailers make pricing decisions on time-honoured
rules and in many situations apply fixed percentage onto their cost and this will also
apply for markdowns. Stores (2002) confirms that another rule-based approach that
is followed is to price merchandise above, below or at parity with the competition’s
pricing. Levy et al. (2004:15) state that retailers use a rule-based approach because
it is easy to calculate and implement, particular in multi-store chains.
(a) Weaknesses of retail based pricing
Levy et al. (2004:15) acknowledged the following weaknesses of retail based pricing:
83
• Most fundamental weakness is that none have anything to do with what
represents the optimal price or markdown. Price is based on what has happened
in the past, previous year or past week.
• The second problem with the way retailer’s price and markdown merchandise is
the system wide character of their decisions. Markdown could be implemented
through the whole chain of retail, but in certain region the demand could be
higher due to seasonal trends. The decision should be that there must not be a
markdown in that region.
• Most retailers do not find it prudent to use different prices in the same trade area,
because customers could become confused or worse disillusioned with integrity
of the retailer. Yet differential pricing in diverse trade areas particularly if they are
geographically isolated, can provide opportunities for increased gross profit
margins and more precise inventory control.
• Customers learn from past experience when merchandise will be placed on sale.
Such sale-savvy play havoc with retailers gross margins due to the fact that
customers wait for a sale.
The next paragraph will explain how retailers could maximise their profits through
retail pricing:
4.8.4.2 Critical components to be incorporated into retail pricing
Retailers are interested in maximising their profits and that is why they need to
understand how to price their merchandise optimally (Berman & Evans, 2010:481).
Next a discussion will follow on the other six factors that must be taken into account
to determine optimal prices.
4.8.4.2.1 Price sensitivity effects
At basic level, to determine an optimal initial or markdown price, the retailer must
assess it’s own-price elasticity to measure how sensitive demand is to price for a
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given item over a period of time (Levy et al., 2004:16). Dodds, Monroe and Grewal
(1991:307) confirmed in their research that although price elasticity’s have a negative
sign, to suggest that an increase in price usually results in a decrease in demand, in
some situations, a decrease in price can lead to the perception of lower quality,
which decrease demand. Price-quality inferences are well documented in
behavioural pricing research and indicate that quality signals such as warranties,
store reputation, brand image must be incorporated (Srivastava & Lurie, 2004:117).
Furthermore, Sethuraman and Tellis (2002:55) argue that joint effects of advertising
and price promotions on price sensitivity and demand must be incorporated explicitly.
4.8.4.2.2 Substitution effects
Substitution effects, cross-price elasticity or cross-price effects of a brand refer to the
effect of a change in price of a stock keeping unit (SKU) on the demand for a
competing SKU (Besanko, Dube & Gupta, 2005:1). Bell, Chaing and Padmanabhan
(1999) note that almost 75% of customer response to promotions is due to brand
switching. Therefore, Levy et al. (2004:16) argue that if an SKU can steal market
share from a competing SKU, the retailer should evaluate the relative margins of the
two SKU’s before lowering the price of the target SKU. Hall et al. (2004:179) suggest
that retailers should adopt a category management approach to develop a pricing
strategy.
4.8.4.2.3 Dynamic effects of price promotions
Retailers often assume that sales (there is no promotion and when there is a
promotion offered) for a given SKU are independent of past pricing activity, but
according to Levy et al. (2004:17), evidence suggests that sales may be affected by
prior discounting activities. Winer (1986:250) research confirmed that consumer
behaviour demonstrated that customers evaluate retail prices for items relative to
certain internal benchmarks or reference prices. This is a result of retailers supplied
information that plays a prominent role in affecting these internal reference prices
and retail-supplied reference prices (Lichtenstein & Bearden, 1998:55). Kalwani,
Yim, Rinnie and Sugita (1990:251) argue that customer’s internal references prices
also can be influenced by past prices, brand promotion frequency and the type of
85
store. Therefore, according to Levy et al. (2004:16), price promotions are likely to
affect customer reference prices or price expectations.
Anderson and Simester (2004:4) indicated that deeper price discounts in the current
period increased future purchases by first time customers (a positive long run effect)
but reduce future purchase by established customers (a negative long run effect).
4.8.4.2.4 Segment-based pricing effects
Binkley and Bejnarowicz (2003:27) argue that customers in different markets behave
differently with regard to their own and cross-price elasticity’s as well as how they
react to price changes. Therefore, by taking these differential factors into
consideration retailers can implement different price and promotion plans across
various markets (Levy et al., 2004:17).
Inman, Mcalister and Hoyer (1990:339) argue that in some categories, retailers may
be wasting profits by over discounting their merchandise in an effort to appeal to a
deal-prone segment, for which a small discount might be sufficient.
4.8.4.2.5 Cross-category effects
Good price and promotion optimisation software should be able to take into
consideration the effect of one category’s price level on another, particularly with
regard to substitute and complementary items (Walters, 1991:17). Therefore
considering a complete basket of goods simultaneously, a retailer may be in a better
position to optimise its price and promotion levels (Levy et al., 2004:17).
4.8.4.3 Implementing retail pricing
In developing and implementing effective pricing strategy several factors must be
taken into account.
86
a) Market factors
Levy et al. (2004:18) indicated that retailers must consider market factors other than
profit maximisation such as minimum sales and margin requirements, as well as
price image. Berman and Evans (2010:481) agree that this is a significant
improvement over traditional pricing techniques, because price image explicitly
incorporates the relationship between actual price, perceived price, as well as
external competitive factors.
b) Grouping items
According to Dhar, Hoch and Kumar (2001:165), retailers, particularly these involved
with fast consumer goods, often realign their merchandising strategy to maximise
sales and profits of a category and they confirm that this process is known as
category management.
c) Continual learning
One of the problems with traditional methods is that retailers set prices on the basis
what has happened in the past and do not plan on what is likely to be in the
preceding weeks (Levy et al., 2004:18).
d) Psychological price thresholds and reference effects
Anderson and Simester (2003:97) state that shoppers in a grocery store do not
notice the last digit of a price, so retailers is free to round their price up to the nearest
nine or by example to R2, 99. Therefore, Levy, Chen, Ray and Bergen (2004:791)
agree that this tactic could increase sales by 3% with almost no increase in cost.
Kopallo, Rao and Assuncoa (1996:60) research suggests that dynamic pricing is
optimal when the positive impact of a gain on sales outweighs the negative impact of
a corresponding loss.
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e) Price change cost
Levy, Bergen, Dutta and Venable (1997:791) indicate that it is expensive for retailers
to change prices and therefore a price change cost must be built into any
optimisation model. They argue that if the cost of the changing price is greater than
the additional revenue projected from the price change, it makes more sense to leave
the price alone.
4.8.5 Supply chain
Krafft and Mantrala (2006:21) state that in time of slow or no sales growth, rising
expenses, management acumen in supply chain management can generate
significant profits straight to the bottom line. Therefore, according to Brown et al.
(2005:101), this involves efficient and effective integration of suppliers,
manufacturers, warehouses, retailers and transport intermediaries in to a seamless
value chain, so that merchandise are distributed in the right quantities, to the right
locations, at the right time, to minimize system wide costs, while satisfying the
service levels required by its customers.
4.8.6 Technology
Grewal et al. (2012:3) acknowledge that the economic environment is not the only
macro-level factor that defines consumer behaviour and that technological changes
associated with social and mobile localisation and personalisation have resulted in
vast disruptions in retailer marketing practices as well customer shopping practices.
Sorescu, Frambach, Singh, Rangaswany and Bridges (2011:3) state that many
changes are driven by an increasing presence of the internet in every minute, corner
of customer’s lives and that the ambiguity of Wi-Fi and 3G networks, as well as the
number of devices available to access these networks, ensures that customers can
quickly and easily access the internet, regardless of space, time or location.
Therefore, technology allows retailers to enhance customer perceptions of value by
leveraging opportunities through the integration of online, social, mobile, localisation
and personalisation technology (Grewal et al., 2012:5).
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Brown et al. (2005:97) state that retailers that excel in the Big-Middle use technology
that goes hand in hand with superior supply chain management and that these
retailers use technology throughout their supply chain. Kraft and Mantrala (2006:22)
indicated that most of the retailers collect sales data from the point of sale, but it is
what is done with the data collected that separates superior retailers from the rest.
There are retailers that use sales data to work closely with suppliers to plan
production and inventory replenishment.
Tajima (2006: 261) states that Wall-Mart use radio frequency identification
technology (RFID) to tag merchandise that will give them the following benefits:
• To locate mislaid products.
• To deter theft.
• To offer customer personalised sales pitches through displays mounted in
dressing rooms.
• Ultimately tags and readers could replace barcodes and checkout labour.
• Total labour warehouse cost could be cut by 3% through more efficient receiving,
shipping and exception handling.
Ko, Kim, Kim and Woo (2007:65) state that cutomer relationship management (CRM)
is a business philosophy and set of strategies, programs and systems that focuses
on identifying and building loyalty with retailers and most valued customers and that
purchase data is also the basis for advanced customer relationship management
programs (CRM). Reinartz and Kumar (2002:86) identified a number of advantages
of CRM:
• Increased profits.
• More customer relationships.
• More repurchase.
• Accurate customer information collected.
• Enhanced customer loyalty.
• Improved inefficiency customer management.
• Reduced cost of new customer acquisition.
• Greater ease in developing new products.
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• Increased sales by additional purchases.
• Reduced cost of direct marketing.
• Increased brand loyalty.
• Increased customer life time value.
4.8.7 Promotion
Grewal et al. (2011:45) indicate that retailers use past purchase history data to
customise promotions for individual customers, not just for customer segments and
they confirm that customised promotions are growing steadily in all retail channels.
Nelsin and Shankar (2009:70) state that the challenge is to access real-time
promotional effectiveness data that could help a business to tailor their offers and to
integrate customer and competitor responses immediately into their promotional
campaign designs.
Sales promotions are a marketing tool for retailers to increase sales to customers
and include a wide assortment of tools namely: coupons, contests, cent-off deals,
premiums, all of which has many unique quantities (Kotler & Armstrong, 2010:441).
Kraft and Mantrala (2006:345) agree that sales promotions play an important role in
marketing programs of retailers. Alvarez and Casielles (2005:57) argue that the
objective of a sales promotion will be reached to greater extent when it’s done
sporadically, when the customer does not expect it.
Ailawadi, Lehmann and Nelsin (2001) as adopted by Krafft and Mantrala (2006:346)
indicate that promotions in the 21st century are facing new opportunities and
challenges as technology plays an increasing part in retailing and include
technologies such as loyalty cards, electronic media at the point of sale, and
electronic shopping assistants are likely to have an impact on how retailers use
promotions.
4.8.8 Location
Kotler and Armstrong (2010:406) argue that retailers point to three critical factors in
retail success: location, location and location!! It is very important that retailers
select locations that are accessible to their target market and are consistent with the
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retailers positioning (Lin & Liu, 2012:591). Brown (1993:185) state that Huff (1963)
proposed that the probability that a customer patronise a certain shopping area, is
directly related to its size, inversely related to its distance from the customer, and
inversely related to the utility of competing shopping areas.
Li and Liu (2012:597) state that most stores today cluster together to increase their
customer pulling power and to give consumers the convenience of one-stop
shopping out of the central business district to suburbs due to consumer behaviour.
4.9 THE FUTURE OF RETAILING
Retailers operate in a harsh and fast changing environment, which offers threats and
opportunities, and a major challenge for retailers in emerging markets is the absence
of a well-developed and functioning retailing distribution network, mass media,
transportation and storage infrastructure (Goldman, Ramaswami & Krider, 2002:281).
Verhoef, Reinartz and Kraft (2010:247) agree that consumer’s demographics,
lifestyles and shopping patterns are changing rapidly and so are retail technologies,
and for retailers to be successful, retailers need to choose target segments carefully
and position themselves strongly by involving customers in developing innovations.
Dawar and Chattopadhyay (2002:457) state that the average customer in the
emerging markets tends to be price sensitive; however, the economic growth in
emerging markets is also creating a growing relatively wealthy middle class.
Futhermore, Reinartz et al. (2011:60) commented that the result of the up coming
middle class are creating attractive retail markets, which have lured major
international retailers such as Wal-Mart into these regions.
Burgess (2003:157) indicated that given the greater price sensitivity coupled with the
wide income disparity among individuals and households in emerging markets,
retailers are faced with the challenge of effective targeting different costumer groups
within these national markets. This will result in businesses to focus on the income
pyramid.
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As a result of the growth in emerging markets the focus is high on technology
innovativeness, as a consequence of skipping one or more generations of
technology, and the associated sunk infrastructure cost (Reinartz, 2011:60).
Retailers in emerging markets have to take the following retailing developments in to
consideration in their planning and executing of their competitive strategies to be
sustainable (Kotler & Armstrong, 2010:408-412):
• New retail forms emerge to meet new situations and customer needs, but the life
cycle of new retail forms is getting shorter.
• Growth of non-store retailing have abroad array of alternatives, including mail,
television, and phone and online shopping are increasingly as a result of
customers avoiding the hassles and crowds at malls by doing more of their
shopping by phone or computer.
• Retail convergence as a result of retailers that are increasingly selling the same
products at the same prices to the same consumers in competition with a wider
variety of other retailers. This will result in merging of customers, products,
prices.
• Competition between chain super-stores and smaller independent stores has
become particularly heated and the arrival of super-stores can quickly force
independents out of business.
• Global expansion of major retailers with unique formats and strong brand position
are increasingly moving into other countries. (Many are expanding to escape
mature and saturated home markets.)
• Retail stores as “communities” or “hangouts” as a result of the rise of number of
people living alone, working at home, or living in isolated sprawling suburbs,
there has been establishment, regardless of the service or product that they
offer, also provide a place for people to get together.
4.10 SUMMARY
Retail can be defined as business activities involved in selling goods and services to
customers, for their personal, family or household use and include every sale to the
final consumer. Retail is the final stage of the retail process.
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Retail can be presented as a process linking changes in the environment to the
response by retail managers.
Retailers can be classified in terms of several characteristics, amount of service they
offer, the breadth and depth of their product lines, relative to prices they charge and
how they are organised. The most important types of retail stores are: speciality
stores, department stores, supermarkets, convenience stores, discount stores, off-
price retailers and super-stores.
Retailers are searching for new market strategies to attract and hold consumers.
This is due to the fact that service and assortments are looking more and more alike.
Service and product differentiation eroded amongst retailers.
Customers have become smarter and more price sensitive. They see no reason to
pay more for identical brands especially when service differences are shrinking.
Retailers are now rethinking their market strategies with specific focus on
segmenting, targeting, store differentiation and retail marketing mix.
Retailers who compete successfully in the Big-Middle provides a compelling value
proposition to their customers and are able to respond quickly to market changes.
Customers in return become loyal to Big-Middle retailers partially because these
retailers provide them with what they need, what they accustomed to, goods and
service and excellent management programs.
From the perspective of the retailer value is embodied by a series of activities and
processes that provides a certain value for customers. Value from the customer
perspective is the perception of all the benefits from a purchase formed by the total
retail experience. This value is based on perceived benefits versus price paid.
Retailers place more importance on certain key success factors then others, but in
general agree upon few basic factors which need to be in place to survive in the
harsh world of retailing.
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Eight key success factors are mentioned in this document which is common in the
retail environment.
Firstly, the key value driver at store level is the developing, the right combination of
format and retail and retail environment factors. The goal of retailers is to create a
unique store experience, one that sends the target market and move customers to
buy.
Secondly, the focus of retailers must be on the service factors to attract and retain
customers.
Thirdly, retailers who excel in merchandise management do it in two ways:
• they find the merchandise that appeal to their target market;
• secondly they try to be certain that there is enough merchandise where the
customer wants it.
Fourthly, retailers must understand the price key success factor and principles as a
strategy to achieve sustainable competitive advantage.
In time of slow or no sales growth, rising expenses, management acumen in supply
chain management can generate significant profits straight to the bottom line.
The six factors are sales promotions that are a marketing tool for retailers to increase
sales to customers. Typical examples of retailer’s promotions are temporary price
reductions, features and displays. Advertising is becoming less effective,
communication through promotions reaches the customer at the place where most
purchase decisions are made.
The seventh key success factors point to three critical factors: location, location and
location!! It is very important that retailers select locations that are accessible to their
target markets and are consistent with the retailers positioning.
Retailers operate in harsh and fast changing environment, which offers threats and
opportunities. Consumer’s demographics, lifestyles and shopping patterns are
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changing rapidly and so are retail technologies. To be successful, retailers need to
choose their target segments carefully and position them strongly.
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CHAPTER 5
RESULTS AND DISCUSSION OF THE EMPERICAL STUDY
5.1 INTRODUCTION
The primary objective of this study is to assess the current corporate entrepreneurial
climate, as well as the compliance to key retail success factors within Senwes
Village, Retail division and to suggest a corporate entrepreneurial and retail
framework for the business. This chapter merges the literature study from chapter
two (corporate entrepreneurship) with the background of the agricultural
environment and the organisation in chapter three, with the literature review on
retail in chapter four. This is achieved by the empirical research conducted. The
assessment was done through the entrepreneurial climate questionnaire, constructed
by Lotz (2009), the entrepreneurial health audit of Ireland et al. (2006) as well as the
retail questionnaire and the questionnaire on perceived success of the business
(Lotz, 2009) (Annexure A). This chapter will cover the data gathering process,
survey responses, status of the entrepreneurial climate and perceived success, as
well as the compliance with key retail success factors in Senwes Village, Retail
division. A detail discussion will follow on the correlation between the constructs and
the demographical data.
5.2 GATHERING OF DATA
The electronic questionnaire was sent out by email, with a link to Monkey Survey and
the hard copies were sent by the internal mail system, with specific instructions on
how to complete and return it. The sampling method that was used for the study was
non-probability; subsequent sections below discuss the data gathering process in
detail.
5.2.1 Study population
The target population for this study was middle management, first line supervisors
and staff of Senwes Village, Retail division. A database of the study population was
obtained from the Senwes internal data system. The database consisted of 120
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employees at the specified division with specific knowledge of retail. The entire
population was targeted for the study.
Permission was obtained from Senwes Village, Retail division management to
distribute the questionnaires to the target population. Further permission was
obtained from the Assistant General Manager Information Technology, Mr Martin van
Zyl to electronically distribute the questionnaire via the email system to the specific
target sample, by using the Monkey Survey software.
5.2.2 Questionnaire used in this study
As mentioned above, the survey instrument used in this study was a standard
questionnaire developed by Ireland et al. (2006) and Lotz (2009). The retail section
of the questionnaire was developed by the researcher from the literature review. The
purpose of the questionnaire was to determine the entrepreneurial climate,
assessment of the business against the perceived success variables, as well as the
compliance to key retail success factors.
The questionnaire uses a five-point Likert scale as measurement tool and
respondents have to indicate the degree of agreement or disagreement with a
specific statement. The following scale was used to measure the respondents’
agreement or disagreement with the statement under study: 1 = Strongly disagree,
2 = Slightly disagree, 3 = Neither agree nor disagree, 4 = Slightly agree and
5 = Strongly agree.
The questionnaire was divided into five sections:
Section A: Corporate entrepreneurial orientation consists of five constructs that
measure the business entrepreneurial orientation. Section A of the questionnaire
covers the five constructs included Autonomy, Innovativeness, Risk-taking, Pro-
activeness and Competitive aggressiveness.
Section B: Corporate entrepreneurial climate consists of six constructs that measure
the entrepreneurial climate of the internal business environment in order to determine
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the readiness of the culture for entrepreneurship internally. The six constructs
included are: Management support, Work discretion, Rewards/Reinforcement,
Time availability, Organisational boundaries and Specific climate variables.
Section C: Key retail success factors consist of nine constructs that measure the
business compliance to these key retail success factors. The nine constructs that
are included are: Segmentation/Target market, Store factors, Service factors -
process, Merchandise/Product, Price, Supply chain, Technology, Promotions
and Location.
Section D: Perceived success determinants of the business consist of four
constructs that measure the perceived elements of success. The four constructs that
are included are: Financial measures, Process measures, People development,
and Future success (long-term).
The questionnaire concludes with Section E that records the respondents
demographical information. Here respondents have to indicate their Age group,
Gender, Race, Highest academic qualification and Management level in the
organisation.
5.2.3 Confidentiality
Confidentiality of all respondents were assured, by submitting the questionnaires
anonymous. This resulted in that no respondent could be identified.
5.2.4 Statistical analysis of data
The Statistical Consultancy Services of the North-West University: Potchefstroom
Campus was approached for assistance in the analysis of the collected data. The
data was analysed using Statistica 10 (Statsoft, 2011). The analysis used both
descriptive and inferential statistics. The validity of the questionnaire was assessed
by calculating the Cronbach alpha coefficients.
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5.3 RESPONSES TO THE SURVEY
The survey was distributed via email and the internal mail system to the target
population. Table 5.1 illustrates the response rate.
Table 5.1: Rating of survey.
Details Number Percentage
Questionnaires distributed 120 100%
Questionnaires received 78 65%
Questionnaires analysed 78 65%
Reminders were sent by email to the target population to remind them of the due
date for completion of the questionnaire. A total of 78 questionnaires were received
over a period of 30 days. This represented a response of 65 percent of these, 12
respondents did not complete the demographical section (In the tables this data will
be noted as missing). Four questionnaires were received after the deadline and
were not analysed. The final ratingof questionnaires that were analysed were 65%.
5.4 DEMOGRAPHIC INFORMATION OF RESPONDENTS
Section E of the questionnaire captured the demographic information of the
respondents. Recorded were the age group, gender, race, highest academic
qualification and management level in the division.
5.4.1 Age group classification of respondents
The results of the age group classification of the participating respondents are
presented in table 5.2.
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Table 5.2: Age distribution
Age group Number Percentage
? 29 6 7%
30 - 39 21 26.9%
40 - 49 16 20.5%
50 - 59 22 28.20%
60+ 1 1%
Missing 12 15.3%
TOTAL 78 100%
The age of the respondents presented above indicated that 7% of the respondents
are younger than 29 years, and only 1% of the total grouping being older than 60
years. The majority of the respondents (75.6%) fall within the 30 to 59 years age
group. A total of 12 (15.3%) respondents did not indicate their age group.
5.4.2 Gender of respondents
Table 5.3 depicts the results of the gender of participants in this study.
Table 5.3: Gender information
Gender Number Percentage
Male 47 60.3%
Female 19 24.4%
Missing 12 15.4%
TOTAL 78 100.0%
From the 78 respondents that participate in the study, 47 (60.3%) are male and 19
(24.4%) are female. A total of 12 (15.4%) respondents did not indicate their gender.
Males thus out number their female colleagues.
5.4.3 Racial group classification of respondents
Respondents were requested to indicate their racial group. Table 5.4 depicts the
race distribution of the respondents.
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Table 5.4: Race distribution
Race group Number Percentage
Black 9 11.5%
White 50 64.1%
Coloured 7 9.0%
Indian 0 0%
Missing 12 15.4%
TOTAL 78 100%
The majority of the respondents 50 (64.1%) were white, while 16 (20.5%) were non-
whites. A total of 12 (15.4%) respondents did not indicate their race group.
5.4.4 Highest academic qualification achieved by respondents
Respondents were requested to indicate their highest academic qualification. Table
5.5 illustrates the highest academic qualification of the respondents.
Table 5.5: Highest academic qualification achieved
Qualification Number Percentage
Lower than grade 12 6 7.7%
Grade 12 31 39.7%
National Certificate 13 16.7%
National Diploma 6 7.7%
3 Year degree 4 5.1%
Post graduate qualification 6 7.7%
Missing 12 15.4%
TOTAL 78 100%
Table 5.5 indicates the largest group of respondents 31 (39.7%) are represented by
people with a grade 12 qualification. A total of 6 (7.7%) respondents have not grade
12 qualifications. If diplomas, degrees and post graduates are grouped together,
then 29 (37.2%) of the respondents have attained a tertiary academic qualification. A
total of 12 (15.4%) respondents did not indicate their qualification.
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5.4.5 Distribution of management / staff level
The objective of this question was to determine the distribution of the management /
staff level of respondents. The information will be used to correlate the relationship
between the level of management / staff and corporate entrepreneur’s behaviours
and compliance to key retail success factors. Table 5.6 presents the management /
staff level of the respondents in this study.
Table 5.6: Management / Staff level
Level Number Percentage
Snr Middle Management 5 6.4%
Middle Management 32 41%
First line Supervisor 15 19.2%
Staff 14 17.9%
Missing 12 15.4%
TOTAL 78 100%
Table 5.6 indicates that the majority of respondents in this study (32; 41%) were
derived from middle management level. Five (6.4%) respondents were derived from
senior middle management level. Fifteen (19.2%) respondents were derived from
first line supervisory level, with 14 (17.9%) from staff level. A total of 12 (15.4%)
respondents did not indicate their management level.
5.5 RELIABILITY OF THE QUESTIONNAIRE
Welman et al. (2010:9) state that quantitive researchers focus more on reliability, that
is, consistent and stable measurement of data as well as replicability. Raimond
(1993:55) agrees that reliability is concerned with the findings of the research and
relates to credibility of the findings.
Morse, Barette, Mayan, Alson and Spiers (2002:15) state that reliability could be
determine by using the internally consistency method. Therefore, the Cronbach
coefficient alpha is a measuring instrument of internally consistency (Welman et al.,
2010:147). Cortina (1003:103) states that if a construct yields a large alpha
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coefficient, then it can be concluded that a large portion of the variance in the test
results for the construct is attribute to general and group factors. Kent (2007:142)
agrees that the coefficient varies between 0, for no reliability, to 1 for maximum
reliability and that value of 0.6 is acceptable, although 0.7 is preferred to indicate a
higher level of reliability.
Table 5.7 indicates the Cronbach alpha coefficients of the constructs measuring
Entrepreneurial orientation, Entrepreneurial climate, Retail and Perceived
success of the business.
Table 5.7: Cronbach alpha coefficients per construct
Section A: Corporate entrepreneurial orientation
constructs
Cronbach
alpha
1. Autonomy 0.718
2. Innovativeness 0.865
3. Risk-taking 0.673
4. Pro-activeness 0.800
5. Competitive Aggressiveness 0.627
Section B: Corporate entrepreneurial climate constructs
1. Management support 0.875
2. Work discretion 0.862
3. Rewards/Reinforcement 0.731
4. Specific climate variables 0.757
Section C: Key retail success factor constructs
1. Segmentation/Target market 0.814
3. Service factors - process 0.909
4. Merchandise/Product 0.767
5. Price 0.693
Section D: Perceived success constructs
1. Financial measures 0.794
2. Process measures 0.852
3. People development 0.814
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The results of Section A of the questionnaire, as indicated in table 5.7, suggest that
the instrument used in this study to assess entrepreneurial orientation within Senwes
Village, Retail division has acceptable reliability, as only two constructs had a lower
alpha coefficient than 0.7. The constructs of Risk-taking and Competitive
aggressiveness will however not be discard based on research of Kent (2007:142).
Section B of the questionnaire results obtained from the study indicated in table 5.7
that the instrument used in this study to assess the entrepreneurial climate within
Senwes Village, Retail division, has acceptable reliability, as the two constructs had
lower alpha coefficients than 0.7.
As indicated in table 5.7, the results of Section C of the questionnaire, suggest that
the instrument used in this study to assess the compliance to key retail success
factors within Senwes Village, Retail division, has not acceptable reliability as six of
the nine constructs had lower alpha coefficients of 0.7.
The results of Section D of the questionnaire, as indicated in table 5.7, suggest that
instrument used in this study to assess perceived success within the business, has
acceptable reliability, as only one construct had a lower alpha coefficient than 0.7.
5.6 ASSESSMENT OF THE QUESTIONNAIRE
The detail assessment of the questionnaire will be discussed in this section.
5.6.1 Variables measuring corporate entrepreneurial orientation
The results of the empirical research can now be scrutinised as the reliability of the
questionnaire has been verified. Lotz (2009) identified five constructs that assess the
entrepreneurial orientation in an organisation. Using the Likert scale, five items for
Autonomy, nine items for Innovativeness, five items for Risk-taking, four items for
Pro-activeness, and four items for Competitive aggressiveness were put to
respondents, resulting in a total of twenty seven statements.
Respondents had to indicate their degree of agreement or disagreement with each
statement (1 = Strongly disagree, 2 = Slightly disagree, 3 = Neither agree nor
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disagree, 4 = Slightly agree, 5 = Strongly agree). Thus a higher number representing
agreement with the statement suggests that the statement perceived tot be true.
Likewise, a low number representing disagreement with the statement, suggest that
the statement is perceived to be untrue.
Levine, Stephan, Krehbiel and Berenson (2008:219) state that the normal distribution
is the most common continuous distribution used in statistics. They indicate further
that the normal distribution has several important theoretical properties:
• It is bell shaped in its appearance.
• Its measures of central tendency (mean, medium and mode) are equal.
• Its interquartile range is equal to 1.33 standard deviation. (It means that the
middle 50% of the values are contained within an internal of two thirds of a
standard deviation below the mean and two-thirds of standard deviation above
the mean) and has an infinite range (- ? < x < ?).
The findings of the survey are ranked from highest to lowest mean value and are
shown in table 5.8 below.
Table 5.8: Results of corporate entrepreneurial orientation
NO CONSTRUCT n x s
2 Innovativeness 78 4.010 0.673
4 Pro-activeness 72 3.833 0.862
5 Competitive aggressiveness 71 3.538 0.759
1 Autonomy 78 3.476 0.758
3 Risk-taking 72 3.277 0.716
TOTAL 74 3.626 0.753
Table 5.8 indicates that an average mean of 3.626 was recorded considering all five
constructs measuring entrepreneurial orientation and an average standard deviation
of 0.753. The constructs which scored the highest agreement to the presence
thereof in Senwes Village, Retail division are Innovativeness ( x = 4.010), Pro-
activeness ( x = 3.833) and Competitive aggressiveness ( x = 3.538).
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The constructs that scored the lowest and indicated a relative negative sentiment
were Autonomy ( x = 3.476) and Risk-taking ( x = 3.277). The number of
respondent’s feedback differs from construct due to the fact that respondents did not
complete all the statements and this resulted in excluding data from this study and
could be depicted in table 5.8 labelled under n.
Table 5.8 indicated the mean values across the constructs ranked from the highest to
the lowest. As there are no norms in interpreting a Likert scale, for the purpose of
this study, it is assumed that a score greater than three out of five is an indication of
a positive inclination towards the statement.
From this assumption it is evident that the middle management, first line supervisors
and staff had a positive sentiment to all the constructs measuring entrepreneurial
orientation, i.e. these were Innovativeness, Pro-activeness, Competitive
aggressiveness, Autonomy and Risk-taking.
5.6.2 Variables measuring corporate entrepreneurial climate
Ireland et al. (2006) identified six constructs that assessed the entrepreneurial
climate in the organisation. Using the Likert scale, 19 items for Management
support, 10 items for Work discretion, six items for Rewards/Reinforcement, six
items for Time availability, seven items for Organisational boundaries and 30
items for Specific climate variables. The constructs Time availability and
Organisational boundaries were excluded for statistical analysis due to very low
Cronbach alpha coefficients of (0.294) and (0.481) respectively, as discussed in
section 5.5.
Table 5.9 presents the results of the mean analysis of the constructs determining
entrepreneurial climate in the business.
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Table 5.9: Results of corporate entrepreneurial climate
NO CONSTRUCT n x s
3 Rewards/Reinforcement 69 3.679 0.726
6 Specific climate variable 68 3.442 0.388
2 Work discretion 69 3.175 0.828
1 Management support 69 2.916 0.615
TOTAL 69 3.303 0.639
Table 5.9 indicates an average mean of 3.303 was recorded and an average
standard deviation of 0.639. The constructs which scored the highest (strongest
agreement to the preference thereof in Senwes Village, Retail division) are
Rewards/Reinforcement ( x = 3.679), Specific climate variable ( x = 3.442) and
Work discretion ( x = 3.175).
The construct that scored the lowest and indicated a neutral sentiment was
Management support ( x = 2.916). Table 5.9 indicated the mean values across the
constructs ranked from the highest to the lowest. As there are no norms interpreting
a Likert scale, it is assumed that a score greater than three out of five is an indication
of a positive inclination towards the statement.
From this assumption it is evident that the middle management, first line supervisors
and staff had a positive sentiment towards Rewards/Reinforcement, Specific
climate variable and Work discretion.
5.6.3 Variables measuring key retail success factors
A total of nine constructs were identified that assessed the compliance to key retail
success factors.
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Table 5.10: Results of key retail success factors
NO CONSTRUCT n x s
3 Service factor 67 3.646 0.991
4 Merchandise/Product 67 3.493 0.804
5 Price 67 3.333 0.553
1 Segmentation/Target market 67 3.216 0.925
TOTAL 67 3.422 0.818
Table 5.10 indicates an average mean of 3.422 was recorded and an average
standard deviation of 0.818. The constructs with the highest agreement are Service
factor ( x = 3.646), Merchandise/Product ( x = 3.493), Price ( x = 3.333) and
Segmentation/Target market ( x = 3.216). From this assumption it is evident that
middle management, first line supervisors and staff had a positive sentiment towards
Service factor, Merchandise/Product, Price, Segmentation/Target market.
5.6.4 Variables measuring perceived success in business
Lotz (2009) identified four constructs that assessed perceived success in the
business. Using the Likert scale, 3 items for Financial measures, 3 items for
Process measures and 3 items for People development were used in this
research.
Table 5.11 presents the results of the mean analysis of the constructs determining
perceived success of the business.
Table 5.11: Results for perceived success of the business
NO CONSTRUCT n x s
1 Financial measures 66 4.409 0.688
2 Process measures 66 4.111 0.845
3 People development 66 3.575 1.032
Table 5.11 presents the result of the analysis on perceived success of the business
from highest to lowest mean scores.
108
Financial measures ( x = 4.409) and Process measures ( x = 4.111) obtained the
highest mean results. People development ( x = 3.575) obtained the weakest
mean.
Financial measures with a mean of ( x = 4.409) is interpreted that Village
respondents perceive positive financial growth and performance within the business.
The construct with the lowest score was People development ( x = 3.575) and that
indicated that Village respondents perceive employees committed to the business.
5.7 RELATIONSHIP BETWEEN CORPORATE ENTREPRENEURIAL
ORIENTATION CONSTRUCTS AND DEMOGRAPHIC VARIABLES
An empirical analysis was done to determine the effect of demographical variables
on the entrepreneurial orientation constructs measured by the questionnaire.
Therefore, quantitive tests need to be preformed to verify whether any observed
influence of demographic variables is significant enough to be discussed further. In
order to test for statistical significance, the two sample t-test was used. The results
of the t-test are p-values and d-values.
Simple conservative approach was used for the study by applying the t-test.
According to Levine et al. (2008:337), a p-value is the probability of getting a test
statistical equal or more extreme than the sample result, given that the null
hypothesis is true. Therefore, they state that a small p-value indicates a low
probability of equal means and therefore indicates statistical significance.
Levine (2008:539) argues that a smaller p-value than 0.05 is considered as sufficient
evidence of a statistically difference.
According to Govender (2010:88), in order to overcome the effect of the sample size
on the p-value, the d-value was also calculated. The d-value is employed to test the
practical significance of a standardised difference between the means. The effect
sizes which held to signify practical significance are presented in Table 5.12.
109
Table 5.12: Classification of d-value
d-value Interpretation
> 0.8 Large effect
0.5 to 0.8 Medium effect
0.2 to 0.5 Small effect
Source: Govender (2010:88)
5.7.1 Relationship between corporate entrepreneurial orientation constructs
and the gender of respondents
Demographical information was captured in section E of the questionnaire and is
analysed in this section. The analysis was done to determine if there is a significant
difference between the evaluations based on the mean scores of male and female
respondents with regard to a specific construct. Table 5.13 below indicates the
relationship between the five constructs measuring entrepreneurial orientation and
the demographic variable gender, with mean ( x ) standard deviation (s), t-test (p) and
effect sizes (d).
Table 5.13: The relationship between gender and the constructs
MALE FEMALE
NO
CONSTRUCT n x s n x s
p d
1 Autonomy 47 3.434 0.768 19 3.484 0.806 0.818 0.06
2 Innovativeness 47 4.044 0.709 19 3.953 0.692 0.632 0.13
3 Risk-taking 47 3.191 0.774 19 3.494 0.567 0.085 0.39
4 Pro-activeness 47 3.787 0.881 19 4.039 0.596 0.185 0.29
5 Competitive aggres-
siveness
47
3.489
0.753
19
3.570
0.763
0.216
0.34
Table 5.13 above indicates that there are no significant statistical differences (p <
0.05) between gender of respondents for the constructs used in this study to
measure entrepreneurial orientation.
110
5.7.2 Relationship between corporate entrepreneurial orientation constructs
and the management level of respondents
This analysis determines if there is a significant difference between the evaluations
based on the combined mean scores of the middle management and first line
supervisors and staff. Table 5.14 below illustrates the results of the t-test and effect
size analysis.
Table 5.14: The relationship between management levels and the corporate
entrepreneurial orientation constructs
MIDDLE
MANAGEMENT
FIRST LINE
SUPERVISOR /
STAFF
NO
CONSTRUCT
n x s n x s
p
d
1 Autonomy 37 3.502 0.680 29 3.379 0.885 0.538 0.14
2 Innovativeness 37 4.177 0.609 29 3.816 0.764 0.043 0.47
3 Risk-taking 37 3.313 0.772 29 3.234 0.682 0.666 0.10
4 Pro-activeness 37 3.945 0.760 29 3.750 0.873 0.344 0.22
5 Competitive
aggressiveness
37 3.547 0.772 29 3.586 0.756 0.838 0.05
As indicated in table 5.14, there are statistical significant (p < 0.05) differences in the
evaluation between middle management and first line supervisors/staff with regard to
the Innovativeness (p = 0.043) construct measuring entrepreneurial orientation.
Table 5.14 shows that with regard to the calculation of effective sizes, the result can
be summarised as follows. The variable management level of the respondents has a
medium effect (d < 0.50) on Innovativeness (d=0.47).
The result indicates practically significant difference (with a medium effect) between
the perception of middle management and first line supervisors/staff regarding
Innovativeness. The result also indicates that first line supervisors/staff are
practically significant more positive about Innovativeness, in comparison with middle
management.
111
5.7.3 Relationship between corporate entrepreneurial orientation constructs
and highest academic qualification level of the respondents
The analysis determines if there is a significant difference between the evaluations
based on the combined mean scores of staff with a grade 12 and lower academic
qualification and tertiary academic qualification. Table 5.15 below illustrates the
results of the t-test and effect size analysis.
Table 5.15: The relationship between highest academic qualification levels and
the entrepreneurial orientation constructs
GRADE 12 AND
LOWER
TERTIARY
ACADEMIC
QUALIFICATION
NO
CONSTRUCT
n x s n x s
p
d
1 Autonomy 37 3.378 0.752 29 3.537 0.803 0.414 0.20
2 Innovativeness 37 4.063 0.667 29 3.961 0.747 0.569 0.14
3 Risk-taking 37 3.432 0.620 29 3.082 0.818 0.062 0.43
4 Pro-activeness 37 3.932 0.789 29 3.767 0.847 0.421 0.19
37 3.756 0.695 29 3.319 0.778 0.021 0.56 5 Competitive
aggressiveness
As indicated in table 5.15, there are statistical significant (p < 0.05) differences in the
evaluation between staff with a grade 12 and lower academic qualification and staff
with a tertiary academic qualification with regard to the Competitive
aggressiveness construct (p = 0.021).
Table 5.15 shows that with regard to the calculation of effective sizes, the result can
be summarised as follows. The variable qualification of the respondents has a
medium to large effect (d > 0.50) on Competitive aggressiveness (d=0.56).
The result indicates practically significant differences (with a medium effect) between
the perception of staff with a grade 12 and lower academic qualification and staff with
a tertiary academic qualification regarding Competitive aggressiveness. The result
also indicates that staff with a grade 12 and lower academic qualification are
112
practically significant more positive about Competitive aggressiveness, in
comparison with staff with a tertiary academic qualification.
5.8 RELATIONSHIP BETWEEN CORPORATE ENTREPRENEURIAL CLIMATE
AND DEMOGRAPHIC VARIABLES
An empirical analysis was done to determine the effect of demographical variables
on corporate entrepreneurial climate, as measured by section B in the questionnaire.
The statistical significance as discussed in section 5.7 was used for the assessment
of corporate entrepreneurial climate of the business.
5.8.1 Relationship between corporate entrepreneurial climate and the gender
of respondents
Table 5.16 indicates the relationship between the factors measuring the corporate
entrepreneurial climate of the business and gender of the respondents, with the
mean ( x ) standard deviation (s), t-test (p) and effect sizes.
Table 5.16: The relationship between gender and the corporate entrepreneurial
climate of the business
MALE FEMALE
NO
CONSTRUCT n x s n x s
p
d
1 Management support 47 2.869 0.633 19 3.016 0.618 0.389 0.23
2 Work discretion 47 3.196 0.719 19 3.052 1.093 0.609 0.13
3 Rewards/Reinforcement 47 3.712 0.730 19 3.622 0.781 0.669 0.12
4 Specific climate variables 47 3.451 0.413 19 3.433 0.343 0.860 0.04
The results in table 5.16 indicated no statistical significant difference (p < 0.05) in the
mean values between the perceptions of male and female middle managers and first
line supervisors and staff. Female respondents rated two of the four variables more
positive than the male respondents.
113
5.8.2 Relationship between corporate entrepreneurial climate and the mana-
gement level of respondents
Table 5.17 indicates the relationship between the factors measuring organisational
climate of the business and the management level of respondents, with mean ( x ),
standard deviation (s), t-test (p) and effect sizes (d).
As indicated in table 5.17, there are statistical significant (p < 0.05) differences in the
evaluation between middle management and first line supervisor/staff with regard to
the Work discretion (p = 0.041).
Table 5.17: The relationship between management level and the corporate
entrepreneurial climate of the business
MIDDLE
MANAGEMENT
FIRST LINE
SUPERVISORS/
STAFF
NO
CONSTRUCT
n x s n x s
p
d
1 Management support 37 2.891 0.684 29 2.936 0.557 0.772 0.07
2 Work discretion 37 3.348 0.648 29 2.903 0.986 0.041 0.45
3 Rewards/Reinforcement 37 3.738 0.708 29 3.620 0.786 0.530 0.15
4 Specific climate variables 37 3.495 0.426 29 3.382 0.343 0.239 0.26
Table 5.17 shows that with regard to the calculation of effective sizes, the result can
be summarised as follows. The variable management level of the respondents has a
medium effect (d < 0.50) on Work discretion (d=0.45).
The result indicates practically significant difference between the perception middle
management and first line supervisors/staff regarding Work discretion. The result
also indicates that first line supervisors/staff are practically significant more positive
about Work discretion, in comparison to middle management.
114
5.8.3 Relationship between corporate entrepreneurial climate and the highest
academic qualification level of respondents
Table 5.18 indicates the relationship between the factors measuring organisational
climate of the business and the qualification level of the respondents, with mean ( x ),
standard deviation (s), t-test (p) and effect sizes (d).
As indicated in table 5.18, there are statistical significant (p < 0.05) differences in the
evaluation between staff with a grade 12 and lower academic qualification and staff
with a tertiary academic qualification with regard to the Specific climate variables (p
= 0.010).
Table 5.18 shows that with regard to the calculation of effective sizes, the result can
be summarised as follows. The variable qualification of the respondents has a
medium to large effect (p > 0.50) on Specific climate variables (0.59).
Table 5.18: The relationship between highest academic qualification levels and
the corporate, entrepreneurial climate of the business
GRADE 12 AND
LOWER
TERTIARY
ACADEMIC
QUALIFICATION
NO
CONSTRUCT
n x s n x s
p
d
1 Management support 37 3.007 0.609 29 2.789 0.640 0.167 0.34
2 Work discretion 37 3.191 0.835 29 3.103 0.852 0.675 0.10
3 Rewards/Reinforcement 37 3.680 0.791 29 3.695 0.682 0.934 0.02
4 Specific climate variables 37 3.552 0.409 29 3.310 0.331 0.010 0.59
The result indicates practically significant difference between the perception of staff
with a grade 12 and lower academic qualification and staff with a tertiary academic
qualification regarding Specific climate variables. The result also indicates that
staff with a grade 12 and lower academic qualification are practically significant more
positive about Specific climate variables, in comparison with staff with a tertiary
academic qualification.
115
5.9 RELATIONSHIP BETWEEN KEY RETAIL SUCCESS FACTORS AND
DEMOGRAPHICS
An empirical analysis was done to determine the effect of demographical variables
on key retail success factors as measured by section C in the questionnaire. The
statistical significance as discussed in section 5.7 was used for the assessment of
key retail success factors.
5.9.1 Relationship between key retail success factors and the gender of
respondents
Table 5.19 indicates the relationship between the factors measuring the compliance
to key retail success factors of the business and gender of the respondents, with the
mean ( x ), standard deviation (s), t-test (p) and the effect sizes.
Table 5.19: The relationship between gender and key retail success factors
MALE FEMALE
NO
CONSTRUCT n x s n x s
p
d
3 Service factor 47 3.683 0.881 19 3.572 1.022 0.681 0.11
4 Merchandise/Product 47 3.191 0.783 19 3.431 0.874 0.707 0.10
5 Price 47 3.666 0.566 19 3.251 0.526 0.434 0.20
7 Technology 47 3.680 0.467 19 3.807 0.396 0.274 0.27
The result indicated no statistical significant difference (p < 0.05) in the mean values,
between the perceptions of male and female respondents. Female respondents
were on average more positive towards the variables.
5.9.2 Relationships between key retail success factors and the management
level of respondents
Table 5.20 indicates the relationship between the factors assessing compliance to
the key retail success factors of the business and the management level of
respondents, with mean ( x ), standard deviation (s), t-test (p) and effect sizes (d).
The result indicated no statistical significant difference (p < 0.05) in the mean values
116
between the perceptions of middle management and first line supervisor / staff
respondents.
Table 5.20: The relationship between management level and the key retail
success factors
MIDDLE
MANAGEMENT
FIRST LINE
SUPERVISOR /
STAFF
NO
CONSTRUCT
n x s n x s
p
d
3 Service factor 37 3.736 0.973 29 3.543 0.844 0.391 0.20
4 Merchandise/Product 37 3.567 0.799 29 3.400 0.815 0.407 0.21
5 Price 37 3.407 0.578 29 3.238 0.514 0.215 0.29
7 Technology 37 3.788 0.384 29 3.626 0.511 0.162 0.32
5.9.3 Relationship between key retail success factors and the highest
academic qualification level of respondents
Table 5.21 indicates the relationship between the factors measuring compliance to
key retail success factors and the highest academic qualification level of the
respondents, with mean ( x ), standard deviation (s), t-test (p) and effect sizes (d).
Table 5.21: The relationship between highest academic qualification levels and
compliance to key retail success factors
GRADE 12 AND
LOWER
TERTIARY
ACADEMIC
QUALIFICATION
NO
CONSTRUCT
n x s n x s
p
d
2 Service factor 37 3.773 0.822 29 3.495 1.019 0.237 0.27
4 Merchandise/Product 37 3.474 0.770 29 3.517 0.859 0.839 0.05
5 Price 37 3.397 0.510 29 3.252 0.603 0.305 0.24
7 Technology 37 3.695 0.521 29 3.744 0.340 0.652 0.09
The results in table 5.21 indicated no statistical significant difference (p < 0.05) in the
mean values between the perceptions of respondents with a grade 12 and lower
academic qualification and respondent with a tertiary academic qualification.
117
5.10 RELATIONSHIP BETWEEN PERCEIVED SUCCESS AND DEMOGRAPHIC
VARIABLES
An empirical analysis was done to determine the effect of demographical variables
on the perceived success of the business, as measured by section E in the
questionnaire. The same test of statistical significance discussed in section 5.7 was
used for the perceived success of the business.
5.10.1 Relationship between perceived success factors and the gender of
respondents
Table 5.22 indicates the relationship between the factors measuring perceived
success of the business and gender of the respondents, with mean ( x ), standard
deviation (s), t-test (p) and effect sizes (d).
Table 5.22: The relationship between gender and the perceived success of the
business
MALE FEMALE
NO
CONSTRUCT n x s n x s
p
d
1 Financial measures 47 4.383 0.742 19 4.473 0.547 0.587 0.12
2 Process measures 47 4.092 0.850 19 4.157 0.856 0.779 0.08
3 People Development 47 3.567 0.965 19 3.596 1.209 0.926 0.02
The result indicated no statistical significant difference (p < 0.05) in the mean values
between the perception of males and females. Female respondents were on
average mere positive towards the variable.
5.10.2 Relationship between perceived success factors and the management
level of respondents
Table 5.23 indicates the relationship between the factors measuring the perceived
success of the business and the management level of respondents, with mean ( x ),
standard deviation (s), t-test (p) and effect sizes (d).
118
Table 5.23: The relationship between management level and perceived success
of the business
MIDDLE
MANAGEMENT
FIRST LINE
SUPERVISOR/
STAFF
NO
CONSTRUCT
n x s n x s
p
d
1 Financial measures 37 4.540 0.573 29 4.241 0.791 0.093 0.38
2 Process measures 37 4.288 0.703 29 3.885 0.964 0.054 0.42
3 People Development 37 3.693 1.004 29 3.425 1.064 0.302 0.25
As indicated in table 5.23, there are no statistical significant (p < 0.05) differences in
the evaluation between middle management and first line supervisor/staff.
5.10.3 Relationship between the perceived success of a business and the
highest academic qualification level of respondents.
Table 5.24 indicates the relationship between factors of perceived success and the
qualification level of the respondents, with mean (x), standard deviation (s), t-test (p)
and effect sizes (d).
Table 5.24: The relationship between highest academic qualification levels and
perceived success of a business
GRADE 12 AND
LOWER
TERTIARY
ACADEMIC
QUALIFICATION
NO
CONSTRUCT
n x s n x s
p
d
1 Financial measures 47 4.342 0.775 29 4.494 0.560 0.360 0.20
2 Process measures 37 4.0901 0.859 29 4.137 0.842 0.821 0.06
3 People measures 37 3.648 0.971 29 3.482 1.114 0.528 0.15
The result indicated no statistical significant difference (p < 0.05) in the mean values
of respondents with a grade 12 and lower academic qualification and respondents
with a tertiary academic qualification. Respondents with a grade 12 and lower
academic qualification were on average more positive towards the constructs.
119
5.11 SUMMARY
The empirical research done in this chapter was of a quantitive nature, as it consisted
of a survey questionnaire. The questionnaire was used to measure the Corporate
entrepreneurial orientation (five constructs), Entrepreneurial climate (six
constructs), Key retail success factors (9 constructs), and Perceived success
(four constructs) at Senwes Village, Retail division. The constructs were based on
the discussion in the literature review chapter 2 and 4. The data gathering process
response to the survey and demographical information of the respondents was
discussed.
Cronbach's alpha coefficient values were used to determine the internal consistency
among items in the questionnaire. Two constructs of entrepreneurial orientation
alpha values were less than 0.70 and were not discarded from this study due to
(Kent, 2007:142) that indicated a result of 0.6 as acceptable. This indicates a
relatively high level of internal reliability of the research instrument. Two constructs
of corporate entrepreneurial climate alpha values were less than 0.70 and were
discarded from this study due to the fact that their results were below 0.6. This
indicates a high level of internal reliability of the research instrument. Five constructs
of the key retail success factor alpha's value were less than 0.7 and were discarded
from this study. This indicated low level of research reliability of the instrument. Only
one of the constructs of perceived success of the business obtained a Cronbach
alpha values were less than 0.7 and was discarded from this study, indicating a
relatively high level of internal reliability of the research instrument.
It was conducted that corporate entrepreneurial orientation and corporate climate are
prevalent in Senwes Village, Retail division as the average mean was 3.626 and
3.303 respectively. From perceived success of the business assessment, it was
determined that Financial measures, Processes measure, and People
development are relatively strong in the business, Future success is the weakest.
The p-value and effect size (d-value) were used to determine statistically significance
and practical significant respectively of the constructs and demographical properties.
120
In the following chapter conclusions will be drawn from the findings discussed in this
chapter and recommendations will be made on how to foster a corporate
entrepreneurial framework that will be prevalence for compliance of key retail
success factors and perceived success of the business.
121
CHAPTER 6
CONCLUSIONS AND RECOMMENDATIONS
6.1 INTRODUCTION
The Senwes 2020 strategy is based on building a company that creates value for all
of its stakeholders on a sustainable basis. The company vision is to be an admired
agri-business and achieve the status of:
• Preferred investment.
• Preferred employer.
• Preferred supplier.
• Preferred partner.
• Preferred citizen.
Senwes 2020 vision is driven by the need to grow as well as the mitigation of risk,
given the maturity of the business and the market in which it operates. The strategic
direction is targeted at diversification across the agricultural value chain (Senwes,
2012:20).
Strydom (2012) stated that in the food-value chain active consolidation on the
primary production level is taking place at a rapid rate and on the other hand a strong
component of international competitiveness is becoming a reality, with multi-national
role players positioning them globally (Senwes, 2012:21). The consumer also
requires a shorter, simpler and cheaper supply chain and wants to participate in
deliberations regarding the end product.
In order for Senwes to be successfully positioned as an intermediary, it is evident that
change is essential and unavoidable. Therefore, Senwes business platform has to
be enlarged, scale of volume must be added, geography and trade mark has to be
addressed.
122
Therefore to address the need for a changing business environment
recommendations will be made and illustrated in a proposed integrated corporate
entrepreneurial framework (refer to section 6.3).
The final chapter on the assessment of corporate entrepreneurship, perceived
success and retail within Senwes Village, Retail division comprises of two main
sections. In the first section of this chapter, conclusions will be drawn on the results
of the literature study and findings of the empirical study. The section will begin with
establishing reliability of the instruments used in examining the Cronbach alpha
coefficients. Thereafter, conclusions will be drawn on the demographical information
of the respondents, assessment of corporate orientation and climate, compliance to
key retail success factors and perceived success of the business.
The second section of the chapter will be to indicate recommendations on a
corporate entrepreneurial framework within Senwes Village, Retail division. This
section will conclude with an evaluation of the achievement of objectives and to
indicate suggestions for further research.
6.2 CONCLUSIONS
Conclusions will follow the basic structure of the questionnaire, by firstly assessing
the reliability of the survey by evaluating the Cronbach alpha coefficients, thereafter
the basic demographic information will be addressed, after which the five constructs
measuring corporate orientation will be evaluated. This will be followed by evaluating
the six constructs measuring corporate climate. Next, the nine constructs measuring
the compliance to key retail success factors will be evaluated. Finally, the four
constructs measuring perceived success of the business will then be evaluated.
6.2.1 Reliability of the corporate entrepreneurial climate and retail
questionnaire
Welman et al. (2010:9) state that quantitive research focus more on reliability that is,
consistent and stable measurement of data as well as reliability. Morse et al.
(2002:15) indicated that reliability could be determined by using the internally
123
consistency method. Welman et al. (2010:147) confirmed that the Cronbach alpha
coefficient is a measuring instrument of internal consistency.
Kent (2007:142) indicated that the Cronbach alpha coefficient varies between 0, for
no reliability to 1 for maximum reliability and that the value of 0.6 is acceptable,
although 0.7 is preferred to indicate a higher level of reliability.
Following the results of the survey two constructs measuring entrepreneurial
orientation, Risk-taking (0.673) and Competitive aggressiveness (0.627), obtained
a Cronbach alpha coefficient below 0.7. Based on the criteria of Kent (2007:142) all
five constructs can therefore regarded as being reliable, and the results could be
statistically analysed.
Two variables from section B of the questionnaire, measuring corporate
entrepreneurial climate, obtained a Cronbach alpha coefficient well below 0.7. For
the purpose of this study the variables Time availability and Organisational
boundaries with Cronbach alpha coefficients of (0.294) and (0.481) respectively,
were excluded from the analysis due to the criteria of Kent (2007:142).
Five variables from section C of the questionnaire, measuring key retail success
factors obtained a Cronbach alpha coefficient well below 0.7. For the purpose of this
study the variables Store factors (0.511), Price (0.693), Technology (0.584),
Supply chain (0.093), Promotions (0.435) and Location (0.133) will be excluded
for the purpose of this study.
Based on the criteria of Kent (2007:142) four of the nine constructs could be
regarded as reliable and the results of these constructs in section C could be
statistically analysed.
Only one variable from section D of the questionnaire, measuring perceived success
of the business, obtained a Cronbach alpha coefficient below 0.7. For the purpose of
this study the variable Future success (long term) which obtained a coefficient of
(0.372) was discarded from the analysis. A lower score might be attributed to
respondent lack of understanding the questions.
124
Owing to the fact that the Cronbach alpha coefficient values exceeding 0.7 were
recorded on three of the constructs measuring corporate entrepreneurial orientation,
four constructs measuring corporate entrepreneurial climate, three constructs
measuring key retail success factors and three constructs measuring perceived
success of the business, it is concluded that the research instrument used in this
study to assess corporate entrepreneurial climate and retail within Senwes Village,
Retail division has acceptable reliability.
6.2.2 Demographical information
Demographical information of respondents was obtained regarding age, gender,
race, highest academic qualification and management level. From the
demographical data received, 12 out of 78 respondents did not complete their
demographical data. This data were excluded from the study. The following general
conclusions are drawn regarding demographic information.
The majority of middle management and first line supervisors/staff are
between the ages of 50 to 59 years. As obtained (21; 26.9%) of the
respondents are between the age of 20 to 39 years, and the respondents
between the age of 40 to 49 years are (16; 20.5%). The finding indicated that
the majority of middle management and first line supervisors/staff are younger
than 49 years of age.
The normal retiring age according to Senwes company policy is 60 years and
this is a concern due to the fact that the middle management and first line
supervisors/staff in the 50 to 60 age range are 23 (29.20%) respondents. This
finding suggests that the business must focus on succession planning to fill
the gap of knowledgeable resources that will be lost when their retirement
start.
Middle management and first line supervisors/staff, who responded to the item
on race, were white 50 (64.1%). This indicates that transformation is needed
to comply with the demographic status of the region.
125
The largest group of 40 (47.4%) of the respondents have a grade 12 and
lower academic qualification, where as 29 (37.18%) of the respondents have a
tertiary academic qualification. This could indicate a lack of knowledge
needed to understand the changing business environment and the actions
needed to respond to change and this could have a negative impact on
corporate entrepreneurship and retail.
Detailed conclusions on the relationship between selected demographic variables
and corporate orientation and climate, key retail success factors and perceived
success of the business are presented in section 6.3.
6.2.3 Conclusions on corporate entrepreneurial orientation
A rating of three on the five point Likert scale is regarded, for the purpose of this
study, as an average rating. The average mean of all the constructs measuring the
entrepreneurial orientation at Senwes Village, Retail division was 3.422 which could
be regarded as a just above average response. For the purpose of this study, mean
responses of x < 3 are interpreted that the construct has a lower prevalence in the
business and needs development.
A mean response of x > 3 is interpreted as being evident in the business and must
be maintained and sustained in corporate entrepreneurial orientation. Based on the
results in chapter 5, it indicate that the constructs for corporate entrepreneurial
orientation has a strong presence in Senwes Village.
Conclusion for each individual construct is:
6.2.3.1 Innovativeness
Mcfadzean et al. (2005:353) indicated that innovativeness reflects a business
tendency to engage in and support of new ideas, novelties, experimentation and
creative processes that may result in new product and services. The construct,
Innovativeness received the highest rating with a mean of 4.010 meaning that the
126
participating respondents in general slightly agree with the statements measuring the
construct.
It seems that respondents feel that Senwes Village, Retail division place a strong
emphasis on innovation with a continuous result of new innovative products, services
and processes. Respondents have the belief that Senwes Village, Retail division
belief that innovation is a necessity for the business future, with the focus on
continuous innovation.
6.2.3.2 Pro-activeness
Rauch et al. (2009:761) state that in the corporate entrepreneurial literature, Pro-
activeness is an opportunity seeking, forward looking perspective characterised by a
high awareness of external trends and events and acting in anticipating thereof.
The construct, Pro-activeness, obtained a rating of an average mean of 3.833
implying that the respondents slightly agree with the statements of the construct.
This implies that respondents agree that Senwes Village, Retail division continuous
monitor market trends and identity future needs for customers by often introducing
first new products, services and processes.
6.2.3.3 Competitive aggressiveness
Lumpkin and Dess (2001:433) state that Competitive aggressiveness refers to the
intensity of business efforts to outperform industry rivals by a strong offensive
posture directed at overcoming competitors and may also be quite reactive as when
a business defends its market position or aggressively enters a market that a rival
identified.
The construct, Competitive aggressiveness, obtained the third lowest rating ( x =
3.538). This suggest that respondents slightly agree that Senwes Village, Retail
division is very aggressive and intensely competitive, to combat industry trends that
may threaten the survival of the business or competitive position.
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6.2.3.4 Autonomy
Lotz (2009:47) states that Autonomy refers to the independent actions of an
individual or team in bringing forth an idea or a vision and carrying it through to
completion.
The construct, Autonomy, obtained a rating with a mean of 3.476. This implies that
respondents slightly agree that they have Autonomy in their work. They imply that
they have the authority to be creative; they are allowed to make decisions and have
the flexibility to resolve problems.
6.2.3.5 Risk-taking
Lumpkin and Dess (2005:431) define Risk-taking as a tendency to take bold actions
such as venturing into unknown new markets, committing a large portion of
resources to ventures with uncertain outcomes and or borrowing heavily. Jong et al.
(2011:7) argue that entrepreneurs prefer moderate rather than high risks, and try to
manage or reduce risks as much as possible.
The construct, Risk-taking, obtained a rating with a mean of 3.277. This implies that
respondents were neutral and did not agree or disagree with the statements
regarding Risk-taking. This imply that the business do not favour Risk-taking, even
if it is calculated risks. This could be as a result of negative outcomes of investments
in the history of the business, as well as regulatory factors such as corporate
governance. The respondents also felt that the term "risk taker" is not considered a
positive attribute for employees of this business. Taking this response rates into
consideration Senwes Village, Retail division will have to develop an action plan to
enhance the tolerance for risks.
6.2.4 Conclusions on corporate entrepreneurial climate
The five point Likert scale was also used to assess how middle management and first
line supervisors/staff perceived the corporate entrepreneurial climate within Senwes
Village, Retail division. Initially, six constructs of corporate entrepreneurial climate
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were tested, where of, the constructs Time availability and Organisational
boundaries were excluded from this study due to very low Cronbach alpha
coefficients of (0.294) and (0.481) respectively, as discussed in section 5.5.
The average mean score of the four remaining constructs included in this study are
3.303. The average mean of all the constructs measuring entrepreneurial climate
within Senwes Village, Retail division can be regarded as a just above average
score. This implies that the remaining constructs of corporate entrepreneurial climate
are present in Senwes Village, Retail division but needs development to be
sustainable in the business.
Conclusions for each individual construct are:
6.2.4.1 Rewards/Reinforcement
Ireland et al. (2006:27) state that Reinforcement involves developing and using
systems that reinforce entrepreneurial behaviour, highlight significant achievements
and encourage pursuit of challenging work. The construct,
Rewards/Reinforcement, obtained the highest mean score, with a mean value of
3.679. This mean value suggest that respondents slightly agree with the statements
regarding Rewards/Reinforcement.
The respondents suggest that they are getting recognition from their superiors for
work well done. They also imply that there is a lot of challenge in their work.
6.2.4.2 Specific climate variables
The construct, Specific climate variables, obtained the second highest rating with a
mean value of 3.442. This suggest that the respondents was neutral and that they
did not agree or nor disagree with the statements regarding the construct.
The respondents indicated with the rating of the construct that they are uncertain that
the business created a culture, climate, process and structure to promote
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innovativeness. This construct is important for developing and sustaining corporate
entrepreneurship in the business. The suggestion would be to determine role and
responsibility and authority of each job level regarding corporate entrepreneurship to
develop a program rectifying this gap. This is also an important aspect that the
steering committee on excellence must take into consideration if they need creative
and responsive suggestions on improving the internal work environment. This will
have a further impact on the implementation of intervention in the business.
6.2.4.3 Work discretion
Ireland et al. (2006:27) state that work discretion and autonomy refers to top-level
managers commitment to tolerate failure and to provide decision making latitude and
freedom from excessive oversight and are willing to delegate authority and
responsibility to middle and lower level managers.
The construct, Work discretion, obtain an average mean value of 3.175. This
indicates a neutral rating, suggesting that they do not have the autonomy in their own
work place. This implies work by rule. This could hamper a culture of innovativeness
for improving work environment. Senwes Village, Retail division operates within rigid
policies and procedures and does not easily tolerate rule bending.
6.2.4.4 Management Support
Scheepers et al. (2007:242) state that Management support capture the
encouragement and willingness of managers to facilitate and promote
entrepreneurial behaviours including the championing of innovative ideas and
providing the resources people require to behave entrepreneurially.
The construct, Management support, obtained the lowest rating with an average
mean of 2.916. This implies a low or neutral rating to the statements of the construct.
Furthermore, this implies that the respondents indicated that management do not
encourage innovativeness by not creating a support structure.
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6.2.5 Assessment of compliance to key retail success factors
Nine constructs were identified in assessing the compliance to key retail success
factors. The constructs with very low Cronbach alpha coefficients were discarded:
Supply Chain, Promotions and Location, Store factor, Technology.
The five point Likert scale were also used. The constructs that were included in this
study was Service factor, Merchandise/Product, Price and Segmentation/Target
market.
Key retail success factors obtained on average mean of 3.422, that imply that it is
prevalent in Senwes Village, Retail division.
6.2.5.1 Store factor
Kraft and Mantrala (2006:18) state that a key value driver at store level is developing
the right combination of format and retail environmental factors. Kotler and
Armstrong (2010:404) argue that store atmosphere is an important element in the
retailer's product arsenal and the aim is to create a unique store experience, one that
suits the target market and moves the customers to buy.
The construct, Store factor obtained the highest rating with an average mean of
3.901. This imply that respondents indicated that the construct is important for retail
in Senwes Village, Retail division and indicated that Senwes Village, Retail division
comply to this construct. This could be as a result that Senwes upgraded some of
the branches, with other branches that was renovated by the Corporate service
department. The branches were also merchandised to better the flow of the
customer shopping experience.
6.2.5.2 Technology
Grewal et al. (2012:3) argue that the economic environment is not the only macro -
level factor that defines consumer behaviour and that the technological changes
associated with social and mobile localisation and personalisation have resulted in
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vast disruptions in retailer marketing practices as well as customer shopping
practices.
The construct, Technology, obtained the second highest average score with an
average mean of 3.717. Respondents indicated that they slightly agree that the
construct is important for retail in Senwes Village, Retail division and that the division
must incorporate Technology in their retail business. Respondents indicated also
Technology, that are not yet efficient or implemented, that must be investigated and
that is important for Senwes Village, Retail division.
The efficiently of the Supply chain management and effective integration of
suppliers and transport intermediaries.
Electronic shelve labelling that must be used to improve pricing methods in the
shop pricing methods in the shop.
Village could differentiate themselves if new technology is used to improve
service and product levels to customers like customer relations management
system.
Village must use nano-technology in identifying customers.
Village must implement e-retail to expand its geographical footprint.
This indication of Technology that must be investigated will be discussed at the
recommendation section of his chapter.
6.2.5.3 Service factor
Kraft and Mantrala (2006:19) argue that given the time and effort that is invested by
retailers in attempts to attract customers into the stores, it is amazing that so many
retailers pay so little attention to customer service. They state that it is common to
visit retail stores and see half filed shopping carts abandoned by shoppers that got
tired of waiting for their turn at the checkouts, or to see shoppers looking for a
particular item that they want to purchase but have not because they can't find a
service provider to assist or provide them with information.
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The construct, Service factor obtained an average mean of 3.646. This indicates
that the construct is important for Senwes Village, Retail division and slightly agree
that they comply with the construct.
There were two statements that obtained a ratingof three and were the lowest
scored.
Staff is well trained to help customers understand the benefits of product and
services.
Staff is well trained and empowered to rectify post purchase problems.
Above will be discussed in the section recommendations.
6.2.5.4 Merchandise/Product
Berman and Evans (2012:384) state that merchandising consists of the activities
involved in acquiring particular goods and/or services and making them available at
the place, time, price and quantity that enable a retailer to reach its goals.
Olson (2007:1) states that time have changed and customers will not be dictated to
any more due to the fact that customer tastes are more complex than ever before
and profitable life-cycles have shortened, requiring all-time quick turnarounds.
The construct, Merchandise/Product, obtained a rating of an average mean of
3.493, which indicate a neutral response towards the statements regarding the
constructs.
The respondents imply that they did not agree nor disagree that the merchandise
appeal to the target market and they were also uncertain that the product range are
wide and deep enough.
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6.2.5.5 Price
Grewal et al. (2012:1) argue that in the face of radical changes in the global market
place (a world wide recession, significant technological turbulence) customers not
only changing their shopping behaviours but also their value perceptions.
The construct, Price, obtained a rating with mean value of 3.333. The respondents
imply that they did not agree or nor disagree that they know the pricing methods used
in Senwes Village, Retail division. This could be because pricing is a centralised
function of the Procurement section at Senwes Village, Retail division head office.
6.2.5.6 Segmentation/Target market
Dunne et al. (2002:28) define segmentation as a method that retailers use to
examine, or break down heterogeneous consumer populations in smaller, more
heterogeneous groups based on their characteristics.
The construct, Segmentation/Target market, obtained the lowest mean value of
3.216. This indicates a neutral response, suggesting that they did not agree or
disagree with the statements regarding the construct. Segmentation is an important
construct in retail to determine the business Target market and to determine what
products and services to offer that could satisfy the needs of the customers.
6.2.6 Assessment of perceived success of the organisation
The five point Likert scale was also used to assess how middle management and first
line supervisors/staff perceive the success of the business. Initially, four factors
indicative of business success were tested in order to serve as dependent variables
being influenced by corporate entrepreneurship climate. The factors, Future
success, had to be discarded due too a low Cronbach alpha coefficient.
The average mean response of the tree constructs is 4.031. This indicated that
middle management and first line supervisors/staff perceived the success of the
business positively.
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6.2.6.1 Financial measures
The construct, Financial measures, obtained an average mean rating of 4.409. The
respondents indicated with this response the business has experienced growth in
turnover, growth in profits and growth in market share over the past few years.
6.2.6.2 Process measures
With a mean rating of 4.111, this construct was ranked second of the three business
success variables evaluated. Respondents slightly agree with the statements that
the competitive position, effectiveness (doing the right things) and the efficiency
(doing things right) of the organisation has improved over the past few years.
6.2.6.3 People development
The mean rating of the construct, People development was 3.575 and is ranked the
lowest of the three perceived business success constructs. Middle management and
first line supervisors/staff slightly agree with the statements of this construct. They
indicated that employees are a valuable asset to the business and that the morale of
the employees has improved over the last few years. They also agree that
employees are committed towards the business.
6.2.7 Relationship between selected demographic variables and corporate
entrepreneurial orientation and climate, key retail success factors and
perceived success
The demographic variable gender, management level and highest academic
qualification will be correlated with the constructs measuring corporate orientation,
corporate entrepreneurial climate, key retail success factors and perceived success
of the business.
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6.2.7.1 Relationship between gender and corporate entrepreneurial orientation
constructs
The results indicated no statistical significant difference (p < 0.05) in the mean value
between the perceptions of male and female respondents with regard to any of the
corporate entrepreneurial orientation constructs. Female respondents were more
positive regarding the entrepreneurial orientation constructs when compared to their
male colleagues.
6.2.7.2 Relationship between gender and corporate entrepreneurial climate
constructs
Overall, male respondents are more positive regarding corporate entrepreneurial
climate constructs than their female colleagues. The results indicated no statistical
difference (p < 0.05) in the mean values between the perceptions of male and female
middle management and first line supervisors/staff.
6.2.7.3 Relationship between gender and key retail success factors.
The results indicated no statistical significant difference (p < 0.05) in the mean
values, between the perception of male and female respondents. Overall, female
respondents were on average more positive towards the key retail success factors.
6.2.7.4 Relationship between gender and perceived success of the business
Female respondents were on average more positive towards perceived success of
the business as their male colleagues. The result indicated no statistical significant
difference (p < 0.05) in the mean values between the perception of male and female
respondents.
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6.2.7.5 Relationship between management levels and corporate orientation
constructs
The study indicated that the difference between the mean value of corporate
entrepreneurial orientation and management level is statistical significant regarding
Innovativeness (p > 0.043). The variable management level of the respondents has
a small effect (d < 0.50) on Innovativeness (d=0.47). The result indicates a
practically significant difference between the perception of middle management and
first line supervisors/staff regarding Innovativeness. The result also indicates that
first line supervisors/staff are practically significant more positive about
Innovativeness, in comparison to middle management.
6.2.7.6 Relationship between management levels and corporate entrepreneurial
climate constructs
Overall, the result indicated that first line supervisors/staff are practically significant
more positive about Work discretion, in comparison to middle management. The
results indicate that there are statistical significant (p < 0.05) differences in the
evaluation between middle management and first line supervisors/staff regard to the
Work discretion construct with a p-value of 0.041.
The variable management level of the respondents has a small effect (d < 0.50) on
Work discretion (d = 0.45).
The result indicates a practically significant difference between the perception of
middle management and first line supervisors/staff regarding Work discretion. The
result also indicates that first line supervisors/staff are practically significant more
positive about Work discretion, in comparison to middle management.
6.2.7.7 Relationship between management levels and key retail success factors
The result indicated no statistical significant difference (p < 0.05) in the mean values
between the perceptions of middle management and first line supervisors/staff.
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6.2.7.8 Relationship between management levels and perceived success factors
There are an indication of statistical significance (p < 0.05) in the evaluation between
middle management and first line supervisors/staff with regard to the construct,
Process measures with a p-value of 0.054.
The variable management level has a small effect (d < 0.50) on Process measures
with a d-value of 0.42.
The result indicated practically significant difference between the perception between
middle management and first line supervisors/staff regarding Process measures.
The result overall indicates that first line supervisors/staff are practically significant
more positive about the construct Process measures, in comparison to middle
management.
6.2.7.9 Relationship between qualification and corporate entrepreneurial orientation
constructs
Overall, there are statistical significant (p < 0.05) differences in the evaluation
between staff with a grade 12 and lower academic qualification and staff with a
tertiary academic qualification with regard to the construct. Competitive
aggressiveness with a p-value of 0.021.
The variable highest academic qualification of the respondents has a medium to
large effect (d > 0.50) on Competitive aggressiveness (d = 0.56).
The result indicates that staff with a grade 12 and lower academic qualification are
practically significant more positive about the construct, Competitive
aggressiveness, in comparison with staff with a tertiary academic qualification.
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6.2.7.10 Relationship between highest academic qualification and corporate
entrepreneurial climate
Senwes Village, Retail division respondents result indicated a statistical significant (p
< 0.05) differences in the evaluation between staff with a grade 12 and lower
academic qualification and staff with a tertiary academic qualification with regard to
the construct, Specific climate variable (p = 0.010).
Regarding the calculation of effective sizes, the variable highest academic
qualification of the respondents illustrated a medium to large effect (d > 0.50) on the
construct, Specific climate variable with d = 0.59.
Senwes Village, Retail division staff with a grade 12 and lower academic qualification
are practically more positive about the construct, Specific climate variable, in
comparison with staff with a tertiary academic qualification.
Furthermore, the result indicates a practically significant difference between the
perception of staff with a grade 12 and lower academic qualification and staff with a
tertiary academic qualification regarding the construct Specific climate variables.
6.2.7.11 Relationship between highest academic qualification level and key retail
success factors
The results obtained from the empirical study indicated no statistical difference
(p < 0.05) in the mean values between the perception of respondents with a grade 12
and lower academic qualification and respondents with a tertiary academic
qualification.
Overall, the results indicated that staff with an academic qualification of grade 12 and
lower are more positive regarding the constructs, than staff with a tertiary academic
qualification.
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6.2.7.12 Relationship between highest academic qualification level of respondents
and perceived success
The result overall indicate that staff with a tertiary academic qualification are more
positive than staff with a grade 12 and lower academic qualification regarding
perceived success of a business.
Furthermore, the result indicated that there is no statically significant difference
between the mean values of the staff with a grade 12 and lower academic
qualification and staff with a tertiary academic qualification.
6.3 RECOMMENDATIONS
It is evident that from the conclusions made on the five constructs of entrepreneurial
orientation, six constructs of entrepreneurial climate, nine constructs of retail and four
constructs of perceived success that entrepreneurial orientation exist in Senwes
Village, Retail division, but that the corporate entrepreneurial climate must be
developed to support the entrepreneurial orientation that will have an impact on the
key retail success factors and perceived success of the business.
Furthermore it was evident what key retail success factors were indicated as
necessary for Senwes Village, Retail division and that certain key retail success
factors aught to be addressed to create a sustainable business environment.
Positive results on the perceived success of the business affirm that the environment
for corporate entrepreneurship is very positive and fruitful.
From the literature study it was evident that to foster and create an corporate
entrepreneurial climate, demands a more enlightened approach to management
including decentralisation of authority, participation in decision making, evidence of
bureaucracy and encouragement of Risk-taking and creativity (Hayton, 2005:24).
In chapter three, with the time of the study, micro and macro environmental changes
in the agricultural business environment as described in chapter three supported the
need for a change in corporate entrepreneurial climate within the business.
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The challenge for Senwes Village, Retail division as a business will be as indicated
by Groenewald (2010:103) to:
• In still corporate entrepreneurship to gain and sustain competitive advantage.
• Rejuvenate and revitalise existing business.
• Develop new products and services.
• Pursue entrepreneurial opportunities.
• Create new business within existing business.
• Foster strategic renewal of existing operations.
• Improve growth and profitability.
• Increase financial performance and create value.
The recommendations are discussed by means of an integrated framework that
Senwes Village, Retail division can use to establish and enhance corporate
entrepreneurship that will have an impact on the compliance to key retail success
factors with an impact of perceived success of the business. This integrated
framework is presented in figure 6.1.
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Figure 6.1: An integrated framework for corporate entrepreneurship
TRIGER
EVENTS
STRUCTURE
CONTROLS
HUMAN RESOUCE
MANAGEMENT
CULTURE
ENTREPRENEURIAL ENTREPRENEURIAL
ORIENTATION CLIMATE
SUSTAINABLE SUCCESS OF
AGRI - BUSSINESS
6.3.1 Trigger events
Ireland et al. (2006:13) argue that interactions among organisational characteristics,
individual characteristics and some kind of participating event in the business's
internal work environment and external work environment are the precursors of
corporate entrepreneurship in organisations and are labelled as triggers. Triggers
originate from inside or outside of the organisation, but the greatest pressures for
entrepreneurial behaviour come from the external environment.
EXTERNAL
ENVIRONMENT
INTERNAL
ENVIRONMENT
KEY RETAIL
SUCCESS FACTORS
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Guth and Ginsberg (1990:7) confirmed with research the following external triggers:
The impact of major environmental shifts, such as deregulation, can influences
changes in strategy in a non-random way, with organisations moving away
from one generic strategy towards other generic strategy.
The more dynamic and hostile the environment, the more business will be
entrepreneurial.
Industry structures affect opportunities for successful new product
development.
Both opportunities and problems stem from potential of the business and its
competitors to find new combinations of resources that lead to competitive
advantage.
Ireland et al. (2006:13) concluded that quick recognition of these triggers help
organisations to identify the need and value as well as the shape for corporate
entrepreneurial strategy. More specifically, agri-businesses are faced with a number
of triggering events (refer to section 3.2) that may be solved through innovative
processes and ideas.
Factors such as weather conditions, commodity prices, input cost, stock levels,
consumption demand as well as the exchange rates will continue as never before
influence agricultural production in the country, with direct influences on the agri-
business (refer to section 3.2) and will require innovative product, services and
processes to face these challenges.
Senwes Village, Retail division strategic objective is to fulfil the role of preferred
supplier of product inputs and mechanisation to the agricultural producers with
distinct (refer to section 3.4.4.3). In order for Senwes Village, Retail division to
achieve this strategic, goal it must constantly monitor the external environment by
tasking the Committee for the Centre of excellence to investigate new trends in the
market, possible political and regulatory policy changes, new technologies,
competitor moves, best practices in the agri-business sector internationally and
nationally. This information must be used as strategic business intelligence that must
143
be available for divisions in the creation of strategy in time to react on external and
internal changes in the business environment.
6.3.2 Establishing a corporate entrepreneurial orientation and climate
It is important to create a corporate entrepreneurial climate that will enhance the
exploitation of trigger events. The following recommendations are presented
regarding structure, culture, human resource practices and control mechanisms to
develop a corporate entrepreneurial climate.
Structure
Corporate entrepreneurship flourishes when organisational structures have a relative
small number of layers that will result in a broader span of control which in turn
creates opportunities for employees to act entrepreneurially (Ireland et al., 2006:14).
Furthermore, according to Lotz (2009:61), many levels of approval in traditional
business have the potential to stifle innovations. Echols and Neck (1998:43)
indicated that entrepreneurial structures should be new and separately organised
from the old existing ways of a business, with specific focus on new projects
stemming from executive authority, prestige and accountability.
Therefore, it will be important for Senwes to have the committee for the centre of
excellence that could identify opportunities centrally for corporate entrepreneurship
and communicate opportunities to the relevant divisions for investigations for
possible business development. The divisions in turn must create a structure to have
the capacity and knowledge to investigate possible business developments and to
conclude with a business plan. An innovative divisional structure can only be
successful if it has the authority in decision making, the capacity and resources to
investigate opportunities and to implement business plans. Senwes Village, Retail
division must investigate its current structure to determine its capacity and resources
exist to fulfil its obligation to be corporate entrepreneurial.
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Controls
According to Ireland et al. (2006:15), controls create value when they simultaneously
provide the stability business need to exploit current competitive advantages and the
flexibility required for employees to behave entrepreneurially for the purpose of
beginning to form competitive advantages. Kuratko et al. (2007:78) agreed that the
core principle in developing entrepreneurial control requires that managers must give
up control to gain control.
The recommendation will be to create an owner-manager control environment
through its employees as indicated by Burns (2008:184) and it is build round six
principles:
Free access to financial information that is critical in tracking business
performance.
Continuous attempt to present this information to employees.
Training process that encourages an understanding of this information.
Employees learn that part of their job is to improve the financial result when
ever they can.
People are empowered to make decisions in their job based on what they
know.
Employees have a stake in the organisations success or failure.
Hayton (2005:31) indicated that the traditional model of human resource
management encourages matching employer contributions to organisational needs
and inducements, a more relevant perspective to corporate entrepreneurship would
be to encourage the building of relationships among employees, between employees
and the business and between employees and key stakeholders.
The recommendation to the agri-business is to measure its goals for corporate
entrepreneurship against Ireland et al. (2006:15) learning objectives from an effective
human resource management system that include the following elements:
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• Embrace creative and innovative behaviour.
• Take reasonable levels of risk.
• Use long-term orientation to evaluate innovation - based possibilities.
• Focus on results.
• Work co-operatively with others.
• Tolerance ambiguity.
• Assume responsibility for change.
Dabic et al. (2011:17) confirm that successful corporate entrepreneurship is
promoted by entrepreneurially-friendly processes relating to recruiting, selecting,
training, developing and rewarding.
Organisational culture
Kirby (2003:301) indicated that the guiding principle in a traditional business is not to
make a mistake, do not fail, do not take initiative but wait for instructions and protect
your back. In an entrepreneurial culture the focus will be on the future rather than the
past and the ability to develop transfer knowledge and produce an output (Hirsch et
al., 2008:45).
Senwes Village, Retail division must determine if an organisational culture for
corporate entrepreneurship exists within the business specific to authority and
responsibility that are decentralised to employees that are the closest to the action to
make decisions that are in the business best interest.
The next section will focus on the determinants for corporate orientation within the
business and will focus on Autonomy, Innovativeness, Risk-taking, Pro-
activeness and Competitive aggressiveness to enhance a corporate
entrepreneurial climate within Senwes Village, Retail division.
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6.3.3 Corporate orientation
The empirical research in chapter 5 confirmed that corporate orientation is relatively
present in Senwes Village, Retail division with an average mean result of 3.626 (refer
to section 5.6.1). The corporate orientation determinants necessary to assess the
fostering of an entrepreneurial climate as determined in the empirical study (refer to
section 5.6) are Innovativeness, Pro-activeness, Competitive aggressiveness,
Autonomy and Risk-taking. However, it is important to strengthen constructs of
corporate orientation that received a ratingof an average mean value less than 3.5.
Therefore detailed recommendations will only be made on Autonomy and Risk-
taking.
6.3.3.1 Autonomy
Lotz (2009:47) mentioned that Autonomy refers to the independent actions of an
individual or team in bringing forth an idea or vision and carrying it through to
completion. Therefore Autonomy is essential to the process of leveraging a
business existing strengths, identifying opportunities and encouraging the
development of new ventures or improved business practices. Therefore, it reflects
that managers/first line supervisors should communicate clear objectives and tasks
to employees, in such a way that it allows employees the freedom to pursue a
number of different approaches to perform their tasks. It allows employees the
freedom to approach problems in ways that make the most of their expertise and
their creative thinking.
6.3.3.2 Risk-taking
Lumpkin and Dess (2005:431) define Risk-taking as a tendency to take bold actions
such as venturing into unknown new markets, committing a large portion of
resources to ventures with uncertain outcomes. Jong et al. (2011:7) state that
entrepreneurs prefer moderate rather than high risks, and try to manage or reduce
risks as much as possible. The emphasis is not on the extreme uncontrollable risks,
but instead of risk that are moderate and calculated.
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Senwes Village, Retail division staff should know what are their boundaries within
their work environment regarding taking calculated risks. This implies that a
delegation of authority must be set for different staff levels to know the boundaries for
calculated risks. Mistakes within the set boundaries must be tolerated and viewed as
part of the learning process. A reward system should be implemented for
Innovativeness that will lead to positive outcomes for Senwes. Furthermore, it is
important to implement a management system to ensure that mistakes and failures
are documented and made available for all employees to use as learning
opportunities.
6.3.4 Corporate entrepreneurial climate
The results obtained from the empirical study in chapter 5 (refer to section 5.6.2)
indicated that an average mean of 3.303 was recorded for entrepreneurial climate.
This imply that the corporate entrepreneurial climate is present in Senwes Village,
Retail division, but has to be developed to make it an active and a sustainable
management tool. Constructs that were identified to enhance the corporate
entrepreneurial climate are Rewards/Reinforcement, Specific climate variable,
Work discretion and Management support.
The detailed focus will also be on constructs that obtained an average mean less
than 3.5. Therefore detailed recommendations will be made on Management
support, Work discretion and Specific climate variable.
6.3.4.1 Management support
Scheepers et al. (2007:242) state that Management support capture the
encouragement and willingness of managers to facilitate and promote
entrepreneurial behaviour, including the championing of innovative ideas and
providing resources people require to behave entrepreneurially. Turner (2005:45)
states that support must derive from the highest level be formulated into strategy and
then communicated through the organisation.
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This literature review confirm the discussion on Risk-taking (refer to section 6.3.5.2)
that stated that there must be a formal policy on corporate entrepreneurship in
Senwes Village, Retail division. This will include policy, procedure, formal
communication structures, how to list innovations, scale of incentives that could be
obtained for positive outcomes.
6.3.4.2 Work discretion
Ireland et al. (2006:27) state that Work discretion and Autonomy refers to top-level
managers’ commitment to tolerate failure, provide decision-making latitude and
freedom from excessive oversight and is willing to delegate authority and
responsibility to middle and lower managers. Hornsby et al. (2002:257) state that
middle managers lay the foundation for employees in business to be innovative and
take risks. Middle managers do this by providing (intensive rewards) that allows
employees to experiment with and to explore the feasibility.
The importance of the role of middle management as mentor group for the process of
corporate entrepreneurship is acknowledged. To obtain the best result from the
middle management group is to put them through corporate entrepreneurial training
that includes how to foster and implement an entrepreneurial climate in the work
place as mentor. After the training mentors will be evaluated in the workplace to
determine how theoretical knowledge obtained is put into practices. Mentorship must
be part of their bonus system.
6.3.4.3 Specific climate variables
Ireland et al. (2006:16) agree that entrepreneurially intense cultures also place high
importance on being able to empower people in ways to allow them to act creatively
and to fulfil their potential. Authority and responsibility are decentralised to
employees that are the closest to the action to make decisions that are in the
business best interest.
149
The question to answer is how to create an environment in Senwes Village, Retail
division where employees could manage and be creative in their work environment
as well as to manage their succession and development plan?
This involves basic human resource management principles of selecting the right
people for the job, training and performance appraisal with a link to succession
planning. People must be hired that have a passion for a specific position in a
company. Employees must determine through their job description their role and
task. They must be mentored, trained and evaluated to determine if they are
competent. Formal appraisal must be done on a quarterly basis to measure the
competency level of staff and to identify interventions for incompetence and
succession planning discussion must be done with the formal appraisals.
Authority and responsibility could now be decentralised to staff that are declared
competent. They will be in a situation to best take decisions in the place of work that
is the closest to the action.
6.3.5 Key retail success factors
Kotler and Armstrong (2010:402) argue that retailers are searching for new market
strategies to attract and hold customers as a result of service and assortments that
are looking more and more alike. Therefore service and product differentiation
eroded among retailers and customers have become smarter and more price
sensitive, as they see no reason to pay more for identical brands, especially when
service differences are shrinking (Kerin et al., 2007:311).
Therefore recommendations will focus on certain key retail success factors that were
determined in the empirical study in chapter 5 (refer to section 5.6.3) with an average
mean value less than 3.5. This includes the following constructs:
Segmentation/Target market, Price and Merchandise/Product.
Senwes Village, Retail division respondents indicated that the following key retail
success factors must present to differentiate them from competitors: Store factors,
150
Technology, Service factors, Merchandise/Product, Price and
Segmentation/Target market.
6.3.5.1 Segmentation/Target market
Dunne et al. (2002:228) define Segmentation as a method that retailers use to
examine or break down heterogeneous consumer populations in smaller, more
heterogeneous groups based on their characteristics. Kotler and Armstrong
(2010:402) agree with this view point that retailers must first segment and define their
target markets and then decide how they will differentiate themselves in these
markets and until retailers define and profile their markets, retailers cannot make
consistent decisions about product assortment, services, pricing, advertising and
store decor.
Respondents indicated in the empirical study in chapter 5 that Senwes Village, Retail
division does not know their target market. The recommendation is that Senwes
Village, Retail division must determine its segment of business with specific focus on
determining their target market. Effective segmentation could be done by
determining five basic elements (Kotler & Armstrong, 2010:225):
The size, purchasing power and profiles of the segment must be measurable.
Market segment are accessible and therefore can be reached and served.
They are large and profitable enough to be served.
Therefore, they are differentiable, conceptually, distinguishable and respond
differently to different marketing mix elements and programs.
Finally, they must be actionable whereby effective programmes can be
designed for attracting and serving these segments.
Dunne et al. (2002:229) confirm that retailers that select markets that are
measurable, accessible and substantial will be able to generate higher profit results.
151
6.3.5.2 Price
Grewal et al. (2012:1) argue that in the face of radical changes in the global market
place (a world wide recession, significant technological turbulence) customers are
not only changing their shopping behaviours but also value perceptions. Therefore
Senwes Village, Retail division must respond appropriately by monitoring the
environment to identify changes, both expected and unexpected with the following
results:
Remain more in touch with customer preferences
Take advantage of opportunities created by new customer preferences
Enhance the value they offer to the customer.
Senwes Village, Retail division must also investigate the implementation of
sophisticated dynamic pricing models that will update prices frequently, based on
changing supply or demand characteristics.
6.3.5.3 Merchandise/Product
Berman and Evans (2012:384) state that Merchandising consist of the activities
involved in acquiring particular goods and/or services and making them available at
the place, time and quantity that enable a retailer to reach its goals. Olson (2007:1)
states that time have changed and customers will not be dictated to anymore due to
the fact, that customer tastes are more complex than ever before and profitable life-
cycles have shortened, requiring all-time quick turnarounds.
Senwes Village, Retail division will excel in merchandise management if they:
Concentrate in finding unique merchandise that appeal to their target market.
The depth and length of the merchandise appeal to their target market with the
focus on availability.
152
6.3.5.4 Further recommendations
In addition to the recommendations made above, the following recommendations
should be considered to foster a corporate entrepreneurial climate in Senwes Village,
Retail division:
• Senwes must implement succession planning to fill the gap of knowledgeable
resources that will be lost due to retirement.
• Employment equity must be implemented to balance the male to female ratio in
the business.
• Transformation is needed in the business to comply with the demographic status
of the region. This could influence the businesses BEEE status that might
influence future business opportunities.
• To understand the changing business environment and how to react to change,
knowledgeable resources are needed and this could be obtained through an
establishment of a learning culture in the business.
• To investigate the efficiency of the supply chain management and the effective
integration of suppliers and transport intermediaries.
• To investigate the implementation of electronic shelve labelling that must be used
to improve pricing methods in the retail stores.
• Village could differentiate themselves if new technology is used to improve
service and product levels to customers like customer relations management
system.
• Village must use nano-technology in identifying customers to protect customers
and employees of fraudulent transactions.
• Village must implement e-retail to expand its geographical footprint.
• Staff must be trained to gain product knowledge to help customers understand
the benefits of product and services.
• Staff must be trained and empowered to rectify post purchase problems and
thereby enhance customer service.
The above recommendations focus on the efficiencies revealed from empirical study.
It should however be noted that focus must also be kept on those constructs that
153
were rated relatively high by middle management and first line supervisors/staff. It is
therefore also recommended that the positive variables must be reinforced.
6.4 ACHIEVEMENT OF OBJECTIVES
The measurement of success of this study is based upon achievement of the primary
and secondary objectives, as presented in 1.3 of this study.
6.4.1 Primary objective
The primary objective of this study is twofold: Firstly, to assess the determinants of
corporate entrepreneurship and retail in an agri-business in South Africa and
secondly to propose an integrated framework to facilitate the process of establishing
and maintaining corporate entrepreneurship and retail within the specific agri-
businesses in South Africa. The primary objective was achieved by realising the
secondary objectives of this study.
6.4.2 Secondary objectives
The secondary objectives, which support the primary objectives, are listed below
together with an evaluation of whether they were achieved:
• To determine what is meant by corporate entrepreneurship and corporate
entrepreneurial strategy by means of a literature study.
• To describe the link between innovation and corporate entrepreneurship.
• To obtain insight into the phenomena of retail by means of literature review.
• To obtain an understanding of Senwes retail division within the agricultural
industry in South Africa.
• To assess the determinants of corporate entrepreneurship and retail within the
specific agri-business.
• To assess perceived success determinants within the business.
• To propose an integrated framework to assist in establishing and maintaining
corporate entrepreneurship and retail in a specific agri-business.
154
The first secondary objective namely, to determine what is meant by corporate
entrepreneurship and corporate entrepreneurial strategy by means of a
literature study, was achieved through a literature review on corporate
entrepreneurship was done in chapter 2.
The second secondary objective namely, to describe the link between innovation
and corporate entrepreneurship was achieved, in section 2.6.1 where innovation
and link to corporate entrepreneurship was discussed.
The third secondary objective was to obtain insight into the phenomena of retail
by means of literature review, was achieved through a literature review on the
nature of retail was done in chapter 4.
Chapter 3 also addressed the fourth secondary objective to obtain an
understanding of Senwes retail division within the agricultural industry in
South Africa. Chapter 3 provided a literature overview of the history from co-
operatives to agri-business and gave an insight to the current and future situation of
the agricultural industry in South Africa. A specific focus in this chapter was given to
the history of Senwes Limited as well as an overview of Senwes Village, Retail
division.
The fifth secondary objective namely, to assess the determinants of corporate
entrepreneurship and retail within the specific agri-business was achieved, by
the assessment of the questionnaire that analysed the determinants of corporate
entrepreneurship and retail in Senwes Village, Retail division. This was done in
section 5.6.
The sixth secondary objective to assess perceived success determinants within
the business was achieved by analysing the perceived success factors for a
business in section 5.6.
Chapter 6, figure 6.1 addressed the seventh secondary objective namely, to
propose an integrated framework to assist in establishing and maintaining
corporate entrepreneurship and retail in a specific agri-business was achieved
155
by a proposed integrated corporate entrepreneurial framework within a specific agri-
business retail division.
6.5 SUGGESTIONS FOR FURTHER RESEARCH
Based on the findings of the study, the following suggestions are put forward for
consideration pertaining future research on corporate entrepreneurship and retail in
the agricultural industry.
This research is confined to only one agricultural business, specific to the Senwes
Village, Retail division; it should be done in other agricultural retail businesses
nationally. A further suggestion is to include the customer perception also in further
studies to obtain a balanced picture of corporate entrepreneurship and retail.
There would be a benefit from expanding the study to a larger population, as this
would enable higher level statistics like exploratory factor analysis to be preformed.
Similar studies to date focused on corporate entrepreneurship within the agricultural
sector or a specific agri-business. No evidence was find where studies incorporated
corporate entrepreneurship with retail in the agricultural environment. A study needs
to be performed on corporate entrepreneurship with the focus on retail, with customer
perceptions included in the South African agricultural environment in order to assess
the success, obstacles, improvements and consequences experienced.
6.6 SUMMARY
This chapter concludes the study on a proposed corporate entrepreneurial framework
for Senwes Village, Retail division. Conclusions drawn from the empirical research
results, as presented in chapter five, was discussed.
The Cronbach alpha coefficients established the reliability of the items testing each
construct, after which demographics of gender, managerial level and highest
academic qualification was discussed. Thereafter the five constructs measuring
corporate orientation was discussed, followed by a discussion of the four constructs
156
measuring corporate entrepreneurial climate, a discussion followed on the seven
constructs measuring retail and then the discussion was concluded with the three
constructs that measure perceived success of a business in relation to the results of
the empirical study.
Middle management and first line supervisors/staff of Senwes Village, Retail division
felt the most positive regarding the following corporate entrepreneurial orientation
constructs: Innovativeness ( x = 4.010), Pro-activeness ( x = 3.833) and
Competitive aggressiveness ( x = 3.538).
The constructs that middle management and first line supervisors/staff had a
negative sentiment were Autonomy ( x = 3.476) and Risk-taking ( x = 3.277).
Of the variables measuring corporate entrepreneurial climate within Senwes Village,
Retail division, middle management and supervisors / first line supervisors/staff felt
most positive about Rewards/Reinforcement ( x = 3.679), Specific climate variable
( x = 3.442). Middle management and first line supervisors/staff had a negative
sentiment about Work discretion ( x = 3.175) and Management support ( x =
2916).
Variables measuring retail within Senwes Village, Retail division, respondents
responded stronger about Store factor ( x = 3.901), Technology ( x = 3.717),
Service factor ( x = 3.646). Respondents had a negative sentiment about
Merchandise/Product ( x = 3.493), Price ( x = 3.333) and Segmentation/Target
market ( x = 3.216).
According to the results obtained from this empirical study conducted, the variables
measuring perceived success of the business, middle management and first line
supervisors/staff felt very strongly about all of the variables that included Financial
measures ( x = 4.409), Process measures ( x = 4.111) and People development
( x = 3.575).
Various demographical variables were found to influence perceptions regarding the
presence of the items of corporate entrepreneurial orientation, climate and retail, as
157
well as perceived success of a business. These variables were tested for statistical
significant variances in perceptions, and there was no notable difference in the
perception found.
Section 6.3 dealt with recommendations and practical ways which corporate
entrepreneurship and retail could be enhanced in Senwes Village, Retail division.
This was illustrated through a proposed integrated framework for corporate
entrepreneurship.
The chapter concludes by addressing the achievement of all of the objectives and
makes recommendations on possible future research that could be undertaken
based on this study.
158
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177
ANNEXURE A: CORPORATE ENTREPRENTEURIAL CLIMATE AND RETAIL
QUESTIONNAIRE
CORPORATE ENTREPRENEURIAL
CLIMATE & RETAIL QUESTIONNAIRE
CONFIDENTIAL
Note: All responses are confidential and neither the individual nor the
organisation would be identified in any report or release.
Copyright © reserved
Code number:
178
CORPORATE ENTREPRENEURIAL
CLIMATE & RETAIL QUESTIONNAIRE
Dear Senwes Village respondent
Corporate entrepreneurship and Retail is becoming increasingly important for the
competitiveness of Senwes Village as we face dynamic competition unleashed by
globalisation as well as by local competitors. Internal environmental factors play a
crucial role in translating entrepreneurship into performance. The intensity and
climate of corporate entrepreneurship in Senwes Village will have a direct impact on
the key success factors necessary for retail.
Senwes Village is becoming the Agricultural market leader in South Africa. The role
of senior, middle management and first line supervisors and staff therefore becomes
crucial as the responsibility lies with them to be more entrepreneurial to adapt to the
changing business environment and to comply with key retail success factors that will
result in moving the bottom line.
Very little to no research has been conducted on corporate entrepreneurship and
retail in the Agricultural retail sector in South Africa. Corporate entrepreneurship in
Senwes Village should therefore emphasise the establishment of business models,
processes and structures in the corporate retail sector so as to increase the level of
corporate entrepreneurship and compliance with key retail success factors. The
focus of this research study is on senior, middle and first line management and staff
in Senwes Village with specific focus on the retail division.
This questionnaire attempts to measure the corporate entrepreneurial climate
as well as the conformance to key retail success factors in your department in
order to determine whether it is conducive to foster a corporate entrepreneurial
and retail spirit.
The survey is divided into four sections:
Part A is the corporate entrepreneurial orientation questionnaire.
Part B is the corporate entrepreneurial climate questionnaire.
179
Part C is the retail questionnaire.
Part D is the perceived success of the business questionnaire.
Part E consists of biographical information.
Your contribution is highly valued and appreciated.
Please complete every question / statement to ensure the validity and reliability of the
study.
GENERAL INSTRUCTIONS
All questions must be answered by ticking (X) or highlighting the relevant block.
Use the following key to indicate your preference:
Please select the number which best describes your opinion about a specific
question or statement. In the example beneath, the respondent slightly agreed to the
statement listed.
S
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e
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A
g
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e
A03
My manager helps me to get my work done by removing
obstacles in my way.
1 2 3 X 5
SCALE TERM USED
5 Strongly agree
4 Slightly agree
3 Neither agree nor disagree
2 Slightly disagree
1 Strongly disagree
180
SECTION A: CORPORATE ENTREPRENEURIAL ORIENTATION
This section consists of 27 statements. Please indicate to what extent you agree
or disagree with each statement. Please mark the applicable block with a cross
(X).
S
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S
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l
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A
g
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e
A01
I have enough autonomy in my job without
continual supervision to do my work.
1 2 3 4 5
A02
Our business allows me to be creative and try
different methods to do my job.
1 2 3 4 5
A03
Employees in our business are allowed to make
decisions without going through elaborate
justification and approval procedures.
1 2 3 4 5
A04
Employees in our business are encouraged to
manage their own work and have flexibility to
resolve problems.
1 2 3 4 5
A05
I seldom have to follow the same work methods
or steps while performing my major tasks from
day to day.
1 2 3 4 5
A06
Our business regularly introduces new services/
products/ processes.
1 2 3 4 5
A07
Our business places a strong emphasis on new
and innovative products/services/processes.
1 2 3 4 5
A08
Our business has increased the number of
services/products offered during the past two
years.
1 2 3 4 5
A09
Our business is continually pursuing new
opportunities.
1 2 3 4 5
A10
Over the past few years, changes in our
processes, services and product lines have
been quite dramatic.
1 2 3 4 5
A11
In our business there is a strong relationship
between the number of new ideas generated
and the number of new ideas successfully
implemented.
1 2 3 4 5
A12
Our business places a strong emphasis on
continuous improvement in products/service
delivery/processes.
1 2 3 4 5
181
A13
Our business has a widely held belief that
innovation is an absolute necessity for the
business’s future.
1 2 3 4 5
A14
Our leaders seek to maximise value from
opportunities without constraint to existing
models, structures or resources.
1 2 3 4 5
A15
When confronted with uncertain decisions, our
business typically adopts a bold posture in
order to maximise the probability of exploiting
opportunities.
1 2 3 4 5
A16
In general, our business has a strong inclination
towards high-risk projects.
1 2 3 4 5
A17
Owing to the environment, our business
believes that bold, wide-ranging acts are
necessary to achieve the business’s objectives.
1 2 3 4 5
A18
Employees are often encouraged to take
calculated risks concerning new ideas.
1 2 3 4 5
A19
The term “risk-taker” is considered a positive
attribute for employees in our business.
1 2 3 4 5
A21
Our business is very often the first to introduce
new products/services/processes.
1 2 3 4 5
A22
Our business typically initiates actions which
competitors respond to.
1 2 3 4 5
A23
Our business continuously seeks out new
products/processes/ services.
1 2 3 4 5
A24
Our business continuously monitors market
trends and identifies future needs of customers.
1 2 3 4 5
A25
In dealing with competitors our business
typically adopts a very competitive “undo-the-
competitor” posture.
1 2 3 4 5
A26
Our business is very aggressive and intensely
competitive.
1 2 3 4 5
A27
Our business effectively assumes an
aggressive posture to combat industry trends
that may threaten our survival or competitive
position.
1 2 3 4 5
A28
Our business knows when it is in danger of
acting overly aggressively (this could lead to
erosion of our business’s reputation or to
retaliations by competitors).
1 2 3 4 5
182
SECTION B: CORPORATE ENTRENEURIAL CLIMATE
This section consists of 78 statements. Please indicate to what extent you agree or disagree with
each statement. Please mark the applicable block with a cross (X).
S
t
r
o
n
g
l
y
D
i
s
a
g
r
e
e
S
l
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B01
My organisation is quick to use improved work
methods.
1 2 3 4 5
B02
My organisation is quick to use improved work
methods that are developed by workers.
1 2 3 4 5
B03
In my organisation, developing one’s own ideas
is encouraged for the improvement of the
corporations.
1 2 3 4 5
B04
Upper management is aware and very receptive
to my ideas and suggestions.
1 2 3 4 5
B05
A promotion usually follows from the
development of new and innovative ideas.
1 2 3 4 5
B06
Those employees who come up with innovative
ideas on their own often receive management
encouragement for their activities.
1 2 3 4 5
B07
The “doers on projects” are allowed to make
decisions without going through elaborate
justification and approval procedures.
1 2 3 4 5
B08
Senior managers encourage innovators to bend
rules and rigid procedures in order to keep
promising ideas on track.
1 2 3 4 5
B09
Many top managers have been known for their
experience with the innovation process.
1 2 3 4 5
B10
Money is often available to get new project ideas
off the ground.
1 2 3 4 5
B11
Individuals with successful innovative projects
receive additional rewards and compensation
beyond the standard rewards system for their
ideas and efforts.
1 2 3 4 5
B12
There are several options within the organisation
for individuals to get financial support for their
innovative projects and ideas.
1 2 3 4 5
B13
People are often encouraged to take calculated
risks with ideas around here.
1 2 3 4 5
183
B14
Individuals risk takers are often recognised for
their willingness to champion new projects,
whether eventually successful or not.
1 2 3 4 5
B15
The term “risk taker” is considered a positive
attribute for people in my work area.
1 2 3 4 5
B16
This organisation supports many small and
experimental projects realising that some will
undoubtedly fail.
1 2 3 4 5
B17
An employee with a good idea is often given free
time to develop that idea.
1 2 3 4 5
B18
There is considerable desire among people in
the organisation for generating new ideas
without regards for crossing departmental or
functional boundaries.
1 2 3 4 5
B19
People are encouraged to talk to employees in
other departments of this organisation about
ideas for new projects.
1 2 3 4 5
B20
I feel that I am my own boss and do not have to
double check all of my decisions with someone
else.
1 2 3 4 5
B21
Harsh criticism and punishment result from
mistakes made on the job.
1 2 3 4 5
B22
This organisation provides the chance to be
creative and try my own methods of doing the
job.
1 2 3 4 5
B23
This organisation provides the freedom to use
my own judgement.
1 2 3 4 5
B24
This organisation provides the chance to do
something that makes use of my abilities.
1 2 3 4 5
B25
I have the freedom to decide what I do on my
job.
1 2 3 4 5
B26
It is basically my own responsibility to decide
how my job gets done.
1 2 3 4 5
B27
I almost always get to decide what I do on my
job.
1 2 3 4 5
B28
I have much autonomy on my job and am left on
my own to do my own work.
1 2 3 4 5
B29
I seldom have to follow the same work methods
or steps for doing my major tasks from day to
day.
1 2 3 4 5
B30
My manager helps me get my work done by
removing obstacles and roadblocks.
1 2 3 4 5
184
B31
The rewards I receive are dependent upon my
innovation on the job.
1 2 3 4 5
B32
My supervisor will increase my job
responsibilities if I am performing well in my job.
1 2 3 4 5
B33
My supervisor will give me special recognition if
my work performance is especially good.
1 2 3 4 5
B34
My manager would tell his/her boss if my work
was outstanding.
1 2 3 4 5
B35 There is a lot of challenge in my job. 1 2 3 4 5
B36
During the past three months, my work load kept
me from spending time on developing new
ideas.
1 2 3 4 5
B37
I always seem to have plenty of time to get
everything done.
1 2 3 4 5
B38
I have just the right amount of time and work
load to do everything well.
1 2 3 4 5
B39
My job is structured so that I have very little time
to think about wider organisational problems.
1 2 3 4 5
B40
I feel that I am always working with time
constraints on my job.
1 2 3 4 5
B41
My co-workers and I always find time for long-
term problem solving.
1 2 3 4 5
B42
In the past three months, I have always followed
standard operating procedures or practices to do
my major tasks.
1 2 3 4 5
B43
There are many written rules and procedures
that exist for doing my major tasks.
1 2 3 4 5
B44
On my job I have doubt of what is expected of
me.
1 2 3 4 5
B45 There is little uncertainty in my job. 1 2 3 4 5
B46
During the past year, my immediate supervisor
discussed my work performance with me
frequently.
1 2 3 4 5
B47
My job description clearly specifies that
standards of performance on which my job is
evaluated.
1 2 3 4 5
B48
I clearly know what level of work performance is
expected from me in terms of amount, quality
and timelines of output.
1 2 3 4 5
185
B49
This company definitely rewards employees who
take calculated risks and innovate.
1 2 3 4 5
B50
Jobs in this company tend to be broadly defined
with considerable discretion in how tasks are
performed.
1 2 3 4 5
B51
In this company, employees can pursue multiple
career paths.
1 2 3 4 5
B52
This company tries hard to develop the creative
potential of employees.
1 2 3 4 5
B53
Annual performance appraisals in this company
include an evaluation of employee
innovativeness.
1 2 3 4 5
B54
Around here, it seems like there is more concern
with process than with performance.
1 2 3 4 5
B55
This company does a good job of balancing
incentives for individual initiative with incentives
for team collaboration.
1 2 3 4 5
B56
If you are not innovating on the job, you cannot
get ahead in this company.
1 2 3 4 5
B57
An overly bureaucratic structure takes away
from our ability to be entrepreneurial in this
company.
1 2 3 4 5
B58
Our company is organised in a way that
encourages managers to “micromanage”
employees and projects.
1 2 3 4 5
B59
We have too many levels of management in this
company.
1 2 3 4 5
B60
I would characterise the company structure as
being highly flexible.
1 2 3 4 5
B61
A rigid chain of command limits our ability to
experiment with new ideas.
1 2 3 4 5
B62
Red-tape and slow approval cycles are problems
in this company.
1 2 3 4 5
B63
Managers in this company strongly believe in
delegating decision-making responsibility.
1 2 3 4 5
B64
Controls are very tight in this company; we tend
to count every dollar and every hour.
1 2 3 4 5
B65
Senior management focuses on eliminating any
slack within budgets.
1 2 3 4 5
B66
Once budgets are finalized and accepted, they
are difficult to revise.
1 2 3 4 5
186
B67
The lines of command clearly allocate authority
and responsibility to each business
unit/department.
1 2 3 4 5
B68
The organisational structure is very clearly
defined and delineated.
1 2 3 4 5
B69
In this company, employees have a lot of say in
how things are done.
1 2 3 4 5
B70
Ours is a culture that rewards the tried and the
true.
1 2 3 4 5
B71
This is a company that celebrates innovative
achievements.
1 2 3 4 5
B72
We have a culture that strongly discourages
failure.
1 2 3 4 5
B73
There is a sense of urgency in this company
regarding the importance of change and
innovation.
1 2 3 4 5
B74
This company subscribes to the motto “if it ain’t
broke, don’t fix it”.
1 2 3 4 5
B75
Innovation and risk-taking are core values in this
company.
1 2 3 4 5
B76
Lines of command clearly allocate authority and
responsibility to each business unit/department.
1 2 3 4 5
B77
New ideas tend to receive quick go/no go
decisions from management in this company.
1 2 3 4 5
B78
The company’s environment encourages people
to talk openly with others about ways to improve
the firm’s operations?
1 2 3 4 5
187
SECTION C: RETAIL
This section consists of 54 statements. Please indicate to what extent you agree or disagree with
each statement. Please mark the applicable block with a cross (X).
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C01
Village Profile their markets (Age, gender, income,
education, culture and buying preferences are
known).
1 2 3 4 5
C02
The target market (Village customer) needs for
products and services are satisfied
1 2 3 4 5
C03
Customer profiled data are used to stock retail
shops.
1 2 3 4 5
C04 Village know their target market. 1 2 3 4 5
C05
Village creates a unique store experience for
customers.
1 2 3 4 5
C06
Retail environment are designed to have a unique
shopping flow (shopping flow).
1 2 3 4 5
C07
Customers perception of value are heavily
influenced by their perception of a store’s look and
feel (music, colour, scent and crowding could have
an impact on overall experience).
1 2 3 4 5
C08
Store that offers a pleasant shopping experience
will result in greater spending.
1 2 3 4 5
C09
Store atmosphere will differentiate Village from
their competitors.
1 2 3 4 5
C10
Village branch management pay attention to
customer service.
1 2 3 4 5
C11 Village staff pays attention to customer service. 1 2 3 4 5
C12 Checkout points enhance customer service. 1 2 3 4 5
C13
Staff is well trained to provide customers with
appropriate information so that they could make
informed buying decisions.
1 2 3 4 5
188
C14
Staff is well trained making sure that they know
where merchandise is and will assist the customer.
1 2 3 4 5
C15
Staff is well trained to facilitate transactions such
as checkouts and returns.
1 2 3 4 5
C16
Staff is well trained to help customers understand
the benefits of products and services.
1 2 3 4 5
C17
Staff is well trained and empowered to rectify post
purchase problems.
1 2 3 4 5
C18
Our customers always believe that they get their
money’s worth at Senwes Village
1 2 3 4 5
C19 Our merchandise appeal to the target market. 1 2 3 4 5
C20
Enough merchandise is where the customer wants
it.
1 2 3 4 5
C21
Our merchandise differentiates Village from its
competitors.
1 2 3 4 5
C22 More product variety leads to higher sales levels. 1 2 3 4 5
C23
Senwes Village product range is wide and deep
enough
1 2 3 4 5
C24
Village staff knows the pricing methods that are
applied.
1 2 3 4 5
C25 Prices are based on what happened in the past. 1 2 3 4 5
C26
Differentiated pricing systems apply in different
geographical areas.
1 2 3 4 5
C27
Village pricing methods differentiate us from the
competitors.
1 2 3 4 5
C28
Price sensitivity affects are taken into account to
determine optimal or markdown pricing.
1 2 3 4 5
C29
Promotional pricing must be limited to formal
promotion activities centrally driven from Head
office.
1 2 3 4 5
C30
Promotional pricing must be decentralised to
branch level.
1 2 3 4 5
C31
Price and promotional software must be used to
determine optimal prices.
1 2 3 4 5
C32
Village consider market factors other than profit
maximisation when setting prices.
1 2 3 4 5
189
C33
Village sets prices on what is going to happen in
markets or market trends.
1 2 3 4 5
C34
Psychological pricing methods could lead to better
profit margin (eg: Retailers will round price till the
nearest nine (R2, 99).
1 2 3 4 5
C35
Village built price change cost into its price
optimisation model.
1 2 3 4 5
C36
Customers agree that Village is value for money
retailer.
1 2 3 4 5
C37
Supply chain management can generate
significant profits to the bottom line.
1 2 3 4 5
C38
Our Supply chain management are efficient and
effective in the integration of suppliers and
transport intermediaries so that merchandise are
distributed in the right quantities, right locations,
right time, to minimise system cost, while satisfying
service levels required.
1 2 3 4 5
C39
Village use sales data of POS to improve its
proposition to its customers.
1 2 3 4 5
C40
Sales data are used to work closely with suppliers
to plan inventory management.
1 2 3 4 5
C41
Sales data are used to improve customer relations
management.
1 2 3 4 5
C42
Electronic shelve labelling must be used to
improve pricing methods in the shops.
1 2 3 4 5
C43
Village could differentiate themselves if new
technology is used to improve service and product
levels to customers like an Customer relations
management (CRM) system.
1 2 3 4 5
C44 SAP technology is a retail friendly system. 1 2 3 4 5
C45
Village must invest in other retail technology other
than SAP.
1 2 3 4 5
C46
Village must use nano-technology in identifying
customers.
1 2 3 4 5
C47
Village must implement e-retail to expand its
geographical foot print.
1 2 3 4 5
C48
Sales promotions are a marketing tool for Village to
increase sales.
1 2 3 4 5
C49 Advertising is becoming less effective. 1 2 3 4 5
190
C50
Communications through promotions reaches the
customer at the place and time most purchase
decisions are made.
1 2 3 4 5
C51
Village uses different forms of price promotions
effective and efficient, such as temporary price
reductions, coupons, displays and other POS
material.
1 2 3 4 5
C52
Technology such as loyalty cards, electronic media
at POS, electronic shopping assistant will have an
impact how retailers use promotions.
1 2 3 4 5
C53
Village retail locations are accessible to the target
markets and are consistent with its positioning.
1 2 3 4 5
C54
Village retail stores must cluster with other retail
stores to give consumers the convenience of a one
stop shopping.
1 2 3 4 5
191
SECTION D: PERCEIVED SUCCESS OF THE BUSINESS
This section consists of 11 statements. Please indicate to what extent you agree or disagree with
each statement. Please mark the applicable block with a cross (X).
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D01
Our business has experienced growth in the
turnover over the past few years.
1 2 3 4 5
D02
Our business has experienced growth in profit
over the past few years
1 2 3 4 5
D03
Our business has experienced growth in market
share over the past few years.
1 2 3 4 5
D04
The competitive position of our business has
improved over the past few years
1 2 3 4 5
D05
The effectiveness(doing the right things) of our
business has improved over the past few years
1 2 3 4 5
D06
The efficiency ( doing the right things) of our
business has improved over the past few years
1 2 3 4 5
D07
In our business, employees are viewed as the
most valuable asset of the business.
1 2 3 4 5
D08
Our employees are highly committed to our
business
1 2 3 4 5
D09
The moral (job satisfaction) of our employees has
improved over the past few years.
1 2 3 4 5
D10
The image (stature) of our business, relative to our
competitors, has grown over the past few years.
1 2 3 4 5
D11
During difficult economic periods, investments in
research and development/innovative projects
continue and no significant financial cuts are
made.
1 2 3 4 5
192
SECTION E: BIOGRAPHICAL INFORMATION
The following information is needed to help with the statistical analysis of data for
comparisons among different interest groups. All your responses will be treated
confidentially. Your assistance in providing this important information is
appreciated.
Please mark the applicable block with a cross (X).
E01 Indicate your age group ? 29 30 - 39 40 - 49 50 - 59 60+
E02 Indicate your gender Male Female
E03 Indicate your race Black White Coloured Indian
E04
Indicate your highest academic qualification
Lower than Grade 12
Grade 12
National certificate
National diploma
3-year degree
Post graduate qualification
E05 Indicate your management level Snr Middle
management
(Job Grade 16
upwards)
Middle
management
(Job Grade 12- 15)
First Line
supervisory
level
(Job grade till 11)
Staff – (Job Grade till 10)
THANK YOU VERY MUCH FOR YOUR VALUED INPUT.
193
ANNEXURE B: CORPORATE ENTREPRENEURIAL ORIENTATION
CONSTRUCTS
Items measuring corporate orientation the latent constructs
AUTONOMY
Autonomy A01
I have enough autonomy in my job without continual supervision to do
my work.
Autonomy A02
Our business allows me to be creative and try different methods to do
my job.
Autonomy A03
Employees in our business are allowed to make decisions without
going through elaborate justification and approval procedures.
Autonomy A04
Employees in our business are encouraged to manage their own work
and have flexibility to resolve problems.
Autonomy A05
I seldom have to follow the same work methods or steps while
performing my major tasks from day to day.
INNOVATIVENESS
Innovativeness A06 Our business regularly introduces new services/ products/ processes.
Innovativeness A07
Our business places a strong emphasis on new and innovative
products/services/processes.
Innovativeness A08
Our business has increased the number of services/products offered
during the past two years.
Innovativeness A09 Our business is continually pursuing new opportunities.
Innovativeness A10
Over the past few years, changes in our processes, services and
product lines have been quite dramatic.
Innovativeness A11
In our business there is a strong relationship between the number of
new ideas generated and the number of new ideas successfully
implemented.
Innovativeness A12
Our business places a strong emphasis on continuous improvement in
products/service delivery/processes.
Innovativeness A13
Our business has a widely held belief that innovation is an absolute
necessity for the business’s future.
Innovativeness A14
Our leaders seek to maximise value from opportunities without
constraint to existing models, structures or resources.
RISK-TAKING
Risk-taking A15
When confronted with uncertain decisions, our business typically
adopts a bold posture in order to maximise the probability of exploiting
opportunities.
194
Risk-taking A16
In general, our business has a strong inclination towards high-risk
projects.
Risk-taking A17
Owing to the environment, our business believes that bold, wide-
ranging acts are necessary to achieve the business’s objectives.
Risk-taking A18
Employees are often encouraged to take calculated risks concerning
new ideas.
Risk-taking A19
The term “risk-taker” is considered a positive attribute for employees in
our business.
PRO-ACTIVENESS
Pro-activeness A21
Our business is very often the first to introduce new
products/services/processes.
Pro-activeness A22 Our business typically initiates actions which competitors respond to.
Pro-activeness A23
Our business continuously seeks out new products/processes/
services.
Pro-activeness A24
Our business continuously monitors market trends and identifies future
needs of customers.
COMPETITIVE AGGRESSIVENESS
Competitive aggressiveness A25
In dealing with competitors our business typically adopts a very
competitive “undo-the-competitor” posture.
Competitive aggressiveness A26 Our business is very aggressive and intensely competitive.
Competitive aggressiveness A27
Our business effectively assumes an aggressive posture to combat
industry trends that may threaten our survival or competitive position.
Competitive aggressiveness A28
Our business knows when it is in danger of acting overly aggressively
(this could lead to erosion of our business’s reputation or to retaliations
by competitors).
195
ANNEXURE C: CORPORATE ENTREPRENEURIAL CLIMATE CONSTRUCTS
Items measuring corporate entrepreneurial climate the latent constructs
MANAGEMENT SUPPORT
Management support B01 My organisation is quick to use improved work methods.
Management support B02
My organisation is quick to use improved work methods that are
developed by workers.
Management support B03
In my organisation, developing one’s own ideas is encouraged for the
improvement of the corporations.
Management support B04
Upper management is aware and very receptive to my ideas and
suggestions.
Management support B05
A promotion usually follows from the development of new and
innovative ideas.
Management support B06
Those employees who come up with innovative ideas on their own often
receive management encouragement for their activities.
Management support B07
The “doers on projects” are allowed to make decisions without going
through elaborate justification and approval procedures.
Management support B08
Senior managers encourage innovators to bend rules and rigid
procedures in order to keep promising ideas on track.
Management support B09
Many top managers have been known for their experience with the
innovation process.
Management support B10 Money is often available to get new project ideas off the ground.
Management support B11
Individuals with successful innovative projects receive additional
rewards and compensation beyond the standard rewards system for
their ideas and efforts.
Management support B12
There are several options within the organisation for individuals to get
financial support for their innovative projects and ideas.
Management support B13
People are often encouraged to take calculated risks with ideas around
here.
Management support B14
Individuals risk takers are often recognised for their willingness to
champion new projects, whether eventually successful or not.
Management support B15
The term “risk taker” is considered a positive attribute for people in my
work area.
Management support B16
This organisation supports many small and experimental projects
realising that some will undoubtedly fail.
Management support B17
An employee with a good idea is often given free time to develop that
idea.
196
Management support B18
There is considerable desire among people in the organisation for
generating new ideas without regards for crossing departmental or
functional boundaries.
Management support B19
People are encouraged to talk to employees in other departments of
this organisation about ideas for new projects.
WORK DIRECTION
Work discretion B20
I feel that I am my own boss and do not have to double check all of my
decisions with someone else.
Work discretion B21 Harsh criticism and punishment result from mistakes made on the job.
Work discretion B22
This organisation provides the chance to be creative and try my own
methods of doing the job.
Work discretion B23 This organisation provides the freedom to use my own judgement.
Work discretion B24
This organisation provides the chance to do something that makes use
of my abilities.
Work discretion B25 I have the freedom to decide what I do on my job.
Work discretion B26 It is basically my own responsibility to decide how my job gets done.
Work discretion B27 I almost always get to decide what I do on my job.
Work discretion B28
I have much autonomy on my job and am left on my own to do my own
work.
Work discretion B29
I seldom have to follow the same work methods or steps for doing my
major tasks from day to day.
REWARDS/REINFORCEMENT
Rewards/Reinforcement B30
My manager helps me get my work done by removing obstacles and
roadblocks.
Rewards/Reinforcement B31 The rewards I receive are dependent upon my innovation on the job.
Rewards/Reinforcement B32
My supervisor will increase my job responsibilities if I am performing
well in my job.
Rewards/Reinforcement B33
My supervisor will give me special recognition if my work performance is
especially good.
Rewards/Reinforcement B34 My manager would tell his/her boss if my work was outstanding.
Rewards/Reinforcement B35 There is a lot of challenge in my job.
197
TIME AVAILABILITY
Time availability B36
During the past three months, my work load kept me from spending
time on developing new ideas.
Time availability B37 I always seem to have plenty of time to get everything done.
Time availability B38 I have just the right amount of time and work load to do everything well.
Time availability B39
My job is structured so that I have very little time to think about wider
organisational problems.
Time availability B40 I feel that I am always working with time constraints on my job.
Time availability B41 My co-workers and I always find time for long-term problem solving.
ORGANISATIONAL BOUNDARIES
Organisation boundaries B42
In the past three months, I have always followed standard operating
procedures or practices to do my major tasks.
Organisation boundaries B43
There are many written rules and procedures that exist for doing my
major tasks.
Organisation boundaries B44 On my job I have doubt of what is expected of me.
Organisation boundaries B45 There is little uncertainty in my job.
Organisation boundaries B46
During the past year, my immediate supervisor discussed my work
performance with me frequently.
Organisation boundaries B47
My job description clearly specifies that standards of performance on
which my job is evaluated.
Organisation boundaries B48
I clearly know what level of work performance is expected from me in
terms of amount, quality and timelines of output.
SPECIFIC CLIMATE VARIABLES
Specific climate variables B49
This company definitely rewards employees who take calculated risks
and innovate.
Specific climate variables B50
Jobs in this company tend to be broadly defined with considerable
discretion in how tasks are performed.
Specific climate variables B51 In this company, employees can pursue multiple career paths.
Specific climate variables B52 This company tries hard to develop the creative potential of employees.
198
Specific climate variables B53
Annual performance appraisals in this company include an evaluation of
employee innovativeness.
Specific climate variables B54
Around here, it seems like there is more concern with process than with
performance.
Specific climate variables B55
This company does a good job of balancing incentives for individual
initiative with incentives for team collaboration.
Specific climate variables B56
If you are not innovating on the job, you cannot get ahead in this
company.
Specific climate variables B57
An overly bureaucratic structure takes away from our ability to be
entrepreneurial in this company.
Specific climate variables B58
Our company is organised in a way that encourages managers to
“micromanage” employees and projects.
Specific climate variables B59 We have too many levels of management in this company.
Specific climate variables B60 I would characterise the company structure as being highly flexible.
Specific climate variables B61 A rigid chain of command limits our ability to experiment with new ideas.
Specific climate variables B62 Red-tape and slow approval cycles are problems in this company.
Specific climate variables B63
Managers in this company strongly believe in delegating decision-
making responsibility.
Specific climate variables B64
Controls are very tight in this company; we tend to count every dollar
and every hour.
Specific climate variables B65 Senior management focuses on eliminating any slack within budgets.
Specific climate variables B66 Once budgets are finalized and accepted, they are difficult to revise.
Specific climate variables B67
The lines of command clearly allocate authority and responsibility to
each business unit/department.
Specific climate variables B68 The organisational structure is very clearly defined and delineated.
Specific climate variables B69 In this company, employees have a lot of say in how things are done.
Specific climate variables B70 Ours is a culture that rewards the tried and the true.
Specific climate variables B71 This is a company that celebrates innovative achievements.
199
Specific climate variables B72 We have a culture that strongly discourages failure.
Specific climate variables B73
There is a sense of urgency in this company regarding the importance
of change and innovation.
Specific climate variables B74 This company subscribes to the motto “if it ain’t broke, don’t fix it”.
Specific climate variables B75 Innovation and risk-taking are core values in this company.
Specific climate variables B76
Lines of command clearly allocate authority and responsibility to each
business unit/department.
Specific climate variables B77
New ideas tend to receive quick go/no go decisions from management
in this company.
Specific climate variables B78
The company’s environment encourages people to talk openly with
others about ways to improve the firm’s operations?
200
ANNEXURE D: RETAIL CONSTRUCTS
Items measuring key retail success factors the latent constructs
SEGMENTATION/TARGET MARKETING
Segmentation/Target marketing C01
Village Profile their markets (Age, gender, income, education, culture and
buying preferences are known).
Segmentation/Target marketing C02
The target market (Village customer) needs for products and services are
satisfied
Segmentation/Target marketing C03 Customer profiled data are used to stock retail shops.
Segmentation/Target marketing C04 Village know their target market.
STORE FACTORS
Store factors C05 Village creates a unique store experience for customers.
Store factors C06
Retail environment are designed to have a unique shopping flow (shopping
flow).
Store factors C07
Customers perception of value are heavily influenced by their perception of
a store’s look and feel (music, colour, scent and crowding could have an
impact on overall experience).
Store factors C08
Store that offers a pleasant shopping experience will result in greater
spending.
Store factors C09 Store atmosphere will differentiate Village from their competitors.
SERVICE FACTORS - PROCESS
Service factors - process C10 Village branch management pay attention to customer service.
Service factors - process C11 Village staff pays attention to customer service.
Service factors - process C12 Checkout points enhance customer service.
Service factors - process C13
Staff is well trained to provide customers with appropriate information so
that they could make informed buying decisions.
Service factors - process C14
Staff is well trained making sure that they know where merchandise is and
will assist the customer.
Service factors - process C15 Staff is well trained to facilitate transactions such as checkouts and returns.
Service factors - process C16
Staff is well trained to help customers understand the benefits of products
and services.
201
Service factors - process C17 Staff is well trained and empowered to rectify post purchase problems.
MERCHANDISE/PRODUCT
Merchandise/Product C18
Our customers always believe that they get their money’s worth at Senwes
Village
Merchandise/Product C19 Our merchandise appeal to the target market.
Merchandise/Product C20 Enough merchandise is where the customer wants it.
Merchandise/Product C21 Our merchandise differentiates Village from its competitors.
Merchandise/Product C22 More product variety leads to higher sales levels.
PRICE
Price C23 Senwes Village product range is wide and deep enough
Price C24 Village staff knows the pricing methods that are applied.
Price C25 Prices are based on what happened in the past.
Price C26 Differentiated pricing systems apply in different geographical areas.
Price C27 Village pricing methods differentiate us from the competitors.
Price C28
Price sensitivity affects are taken into account to determine optimal or
markdown pricing.
Price C29
Promotional pricing must be limited to formal promotion activities centrally
driven from Head office.
Price C30 Promotional pricing must be decentralised to branch level.
Price C31 Price and promotional software must be used to determine optimal prices.
Price C32
Village consider market factors other than profit maximisation when setting
prices.
Price C33 Village sets prices on what is going to happen in markets or market trends.
Price C34
Psychological pricing methods could lead to better profit margin (eg:
Retailers will round price till the nearest nine (R2, 99).
202
SUPPLY CHAIN
Supply chain C35 Village built price change cost into its price optimisation model.
Supply chain C36 Customers agree that Village is value for money retailer.
TECHNOLOGY
Technology C37
Supply chain management can generate significant profits to the bottom
line.
Technology C38
Our Supply chain management are efficient and effective in the integration
of suppliers and transport intermediaries so that merchandise are
distributed in the right quantities, right locations, right time, to minimise
system cost, while satisfying service levels required.
Technology C39 Village use sales data of POS to improve its proposition to its customers.
Technology C40
Sales data are used to work closely with suppliers to plan inventory
management.
Technology C41 Sales data are used to improve customer relations management.
Technology C42
Electronic shelve labelling must be used to improve pricing methods in the
shops.
Technology C43
Village could differentiate themselves if new technology is used to improve
service and product levels to customers like an Customer relations
management (CRM) system.
Technology C44 SAP technology is a retail friendly system.
Technology C45 Village must invest in other retail technology other than SAP.
Technology C46 Village must use nano-technology in identifying customers.
Technology C47 Village must implement e-retail to expand its geographical foot print.
Technology C48 Sales promotions are a marketing tool for Village to increase sales.
Technology C49 Advertising is becoming less effective.
PROMOTIONS
Promotions C50
Communications through promotions reaches the customer at the place
and time most purchase decisions are made.
Promotions C51
Village uses different forms of price promotions effective and efficient, such
as temporary price reductions, coupons, displays and other POS material.
203
Promotions C52
Technology such as loyalty cards, electronic media at POS, electronic
shopping assistant will have an impact how retailers use promotions.
LOCATION
Location C53
Village retail locations are accessible to the target markets and are
consistent with its positioning.
Location C54
Village retail stores must cluster with other retail stores to give consumers
the convenience of a one stop shopping.
204
ANNEXURE E: PERCEIVED SUCCESS CONSTRUCTS
Items measuring perceived success factors the latent constructs
FINANCIAL MEASURES
Financial Measures D01
Our business has experienced growth in the turnover over the past few
years.
Financial Measures D02 Our business has experienced growth in profit over the past few years
Financial Measures D03
Our business has experienced growth in market share over the past few
years.
PROCESS MEASURES
Process Measures D04
The competitive position of our business has improved over the past few
years
Process Measures D05
The effectiveness(doing the right things) of our business has improved
over the past few years
Process Measures D06
The efficiency ( doing the right things) of our business has improved over
the past few years
PEOPLE DEVELOPMENT
People Development D07
In our business, employees are viewed as the most valuable asset of the
business.
People Development D08 Our employees are highly committed to our business
People Development D09
The moral (job satisfaction) of our employees has improved over the past
few years.
FUTURE SUCCESS (LONG-TERM)
Future success (Long-term) D10
The image (stature) of our business, relative to our competitors, has grown
over the past few years.
Future success(Long-term) D11
During difficult economic periods, investments in research and
development/innovative projects continue and no significant financial cuts
are made.
doc_766174245.pdf
On this paper talk a proposed corporate entrepreneurial framework in the retail division of an agri business.
A proposed corporate entrepreneurial
framework in the retail division of an
agri-business
H van Antwerpen BCom, BCom (Hons)
10647392
Mini-dissertation submitted for the degree Masters in
Business Administration at the Potchefstroom Campus of
the North-West University
Promoter: Prof SP van der Merwe
November 2012
i
ACKNOWLEDGEMENTS
To God all the glory for helping me through this MBA study period.
I would also like to express my gratitude to the following people:
• My loving wife, Loraine and two sons, Lenro and Ruan, for their patience and
tolerance during the long hours of absence whilst in my study.
• My parents for their support and encouragement.
• Bernadette Viljoen and Claudi Smit for the typing and drawing of the figures and
tables.
• My promoter, Professor Stephan van der Merwe that were there for me as
mentor, supporter with a lot of dedication.
• My colleagues at Senwes Village, Retail division that supported me through this
study period.
ii
ABSTRACT
The global economy is creating profound and substantial changes for business and
industries throughout the world. In the agricultural industry this is also true regarding
the active consolidation of the food-value chain that is taking place at a rapid rate and
on the other hand a strong component of international competitiveness is becoming a
reality with multi-national role players positioning them globally. The consumer on
the other hand requires a simpler and cheaper supply chain and wants to participate
in the deliberations regarding the end product.
In order for Senwes to be successfully positioned as an intermediary, it is evident that
change is essential and unavoidable. Therefore, Senwes business platform has to
be enlarged, scale of volume has to be added and trade mark has to be addressed.
The literature review in this study confirmed that corporate entrepreneurship is
recognised as a potential viable means of promoting and sustaining competitiveness,
and transforming business and industry opportunities for value-creating innovation.
The primary objective of this study is twofold: Firstly, to assess the determinants of
corporate entrepreneurship and retail in an agri-business in South Africa and
secondly to propose an integrated framework to facilitate the process of establishing
and maintaining corporate entrepreneurship and retail within the specific agri-
business in South Africa.
A comprehensive literature overview on corporate entrepreneurship was conducted
in chapter 2. In the literature review corporate entrepreneurship was defined and the
necessity and fostering of corporate entrepreneurship discussed. A framework with
determinants for sustainable corporate entrepreneurship was furthermore explained.
The chapter was concluded with a discussion on corporate entrepreneurial strategy.
A historic overview of the agricultural industry in South Africa was presented. The
focus of the discussion was on the agri-business sector in South Africa with a
discussion on Senwes Limited.
iii
The nature of retail was discussed in chapter 4. An overview of the nature of retail
with a definition of retail was explained. The reason for the change in retail, with
different types of retailers as well as a strategic model was noted and discussed. A
specific focus in the chapter was given to the strategic drivers for retail success with
an overview of key retail success factors. The chapter was concluded with a
discussion on the future of retailing.
Empirical research was conducted after the literature review. The empirical research
focused on discussing the results obtained from the corporate entrepreneurial climate
and retail questionnaire. Middle management and first line supervisors/staff of
Senwes Village, Retail division, were selected as the sample population for this study
and a 65% ratingwas achieved. Basic demographic information were dealt with first,
after which the perceptions of the respondents with regard to the corporate
entrepreneurial orientation and climate constructs, constructs measuring retail and
perceived success of the business were discussed. Furthermore, relationships were
determined between demographic variables and the constructs measured in the
questionnaire.
Following the detailed empirical analysis done in chapter 5, conclusions were made
in chapter 6.
Regarding the entrepreneurial orientation survey, five variables describing theoretical
dimensions of Autonomy, Innovativeness, Risk-taking, Pro-activeness and
Competitive aggressiveness were extracted. The constructs Innovativeness,
Pro-activeness and Competitive aggressiveness are present in Senwes Village,
Retail division. Autonomy and Risk-taking are less prevalent in Senwes Village,
Retail division due to the lower average mean score that was obtained from the
empirical study.
In conclusion to the entrepreneurial climate survey, four variables describing
theoretical dimensions of Management Support, Work discretion,
Rewards/Reinforcement, Specific climate variables were extracted. The
construct that is already active within the business is Rewards/Reinforcement.
iv
Specific climate variable. Work discretion and Management support need
development to become present.
As far as the retail survey is concerned, six variables describing the theoretical
dimensions of Store factor, Technology, Service factor, Merchandise/Product,
Price and Segmentation/Target market were extracted. As indicated from the
results the constructs Store factor, Technology and Service factor are present in
the business. Merchandise/Product, Price and Segmentation/Target market
need development to become present in the business.
Regarding the perceived success survey is concerned three factors, Financial
measures, Process measures, People development were extracted. All three
factors are present in the business. .
Finally, recommendations were proposed by means of an integrated framework that
could assist the agri-business to establish and maintain corporate entrepreneurship
and retail within the business.
Key words: Corporate entrepreneurship; venturing; intrapreneurship; entrepre-
neurship; corporate entrepreneurial strategy; retail; agri-business; co-operatives.
v
TABLE OF CONTENTS
ACKNOWLEDGEMENTS i
ABSTRACT ii
TABLE OF CONTENTS v
LIST OF FIGURES xii
LIST OF TABLES xiii
CHAPTER 1: NATURE AND SCOPE OF THE STUDY
1.1 INTRODUCTION 1
1.2 PROBLEM STATEMENT 3
1.3 OBJECTIVES OF THE STUDY 4
1.3.1 Primary objective 4
1.3.2 Secondary objectives 4
1.4 SCOPE OF THE STUDY 5
1.4.1 Field of study 5
1.4.2 Geographical demarcation 5
1.5 RESEARCH METHODOLOGY 6
1.5.1 Literature review 6
1.5.2 Empirical research 7
1.6 LIMITATIONS TO THE STUDY 13
1.7 OUTLINE OF STUDY 14
CHAPTER 2: AN OVERVIEW OF CORPORATE ENTRERENEURSHIP
2.1 INTRODUCTION 17
vi
2.2 DEFINITION AND OVERVIEW OF CORPORATE ENTREPRENEUR- 18
SHIP
2.3 NECESSITY OF CORPORATE ENTREPRENEURSHIP 19
2.4 FOSTERING ENTREPRENEURSHIP IN A BUSINESS 22
2.5 FRAMEWORK FOR SUSTAINABLE CORPORATE 25
ENTREPRENEURSHIP
2.5.1 Triggers of corporate entrepreneurship 27
2.5.2 Structure 28
2.5.3 Organisational controls 28
2.5.4 Human resource management systems 29
2.5.5 Organisational culture 31
2.5.6 Conclusion 31
2.6 DETERMINANTS FOR MEASURING SUSTAINABLE CORPORATE
ENTREPRENEURSHIP INTENSITY INTERNALLY 31
2.6.1 Innovativeness 32
2.6.2 Risk-taking 34
2.6.3 Pro-activeness 35
2.6.4 Competitive aggressiveness 36
2.6.5 Autonomy 36
2.6.6 Determinants measuring the internal work environment 37
2.7 CORPORATE ENTREPRENEURSHIP STRATEGY 40
2.7.1 Critical aspects related to corporate entrepreneurship strategy 41
2.8 SUMMARY 41
vii
CHAPTER 3: OVERVIEW OF CO-OPERATIVES TO AGRI-BUSINESS
3.1 INTRODUCTION 44
3.2 OVERVIEW OF AGRICULTURAL INDUSTRY IN SOUTH AFRICA 44
3.3 AGRI-BUSINESSES SECTOR IN SOUTH AFRICA 48
3.3.1 Evolution of agri-businesses in South Africa 48
3.3.2 The effect of deregulation on the agricultural sector 50
3.3.3 The effect of deregulation on agri-businesses 50
3.4 SENWES LIMITED 51
3.4.1 Establishment of co-operative 51
3.4.2 Conversion from co-operative to business 51
3.4.3 Senwes Limited current status 57
3.4.4 Senwes Village 60
3.5 SUMMARY 61
CHAPTER 4: NATURE OF RETAIL
4.1 INTRODUCTION 64
4.2 DEFINITION OF RETAIL 64
4.3 CHANGES IN RETAIL 65
4.4 TYPES OF RETAILERS 66
4.5 RETAIL MARKETING DECISIONS 69
4.5.1 Segmentation 70
4.5.2 Target market 71
viii
4.6 STRATEGIC MODEL 72
4.6.1 Big-Middle segment 73
4.7 STRATEGIC DRIVERS FOR RETAIL SUCCESS THROUGH VALUE 75
4.7.1 Value as meaningful concept for retailers 75
4.8 KEY RETAIL SUCCESS FACTORS 76
4.8.1 Store factors 77
4.8.2 Service factors 79
4.8.3 Merchandise 81
4.8.4 Price 81
4.8.5 Supply chain 87
4.8.6 Technology 87
4.8.7 Promotion 89
4.8.8 Location 89
4.9 THE FUTURE OF RETAILING 90
4.10 SUMMARY 91
CHAPTER 5: RESULTS AND DISCUSSION OF THE EMPERICAL
STUDY
5.1 INTRODUCTION 95
5.2 GATHERING OF DATA 95
5.2.1 Study population 95
5.2.2 Questionnaire used in this study 96
5.2.3 Confidentiality 97
5.2.4 Statistical analysis of data 97
5.3 RESPONSES TO THE STUDY 98
ix
5.4 DEMOGRAPHIC INFORMATION OF RESPONDENTS 98
5.4.1 Age group classification of respondents 98
5.4.2 Gender of respondents 99
5.4.3 Racial group classification of respondents 99
5.4.4 Highest academic qualification achieved by respondents 100
5.4.5 Distribution of management/staff level 101
5.5 RELIABILITY OF THE QUESTIONNAIRE 101
5.6 ASSESSMENT OF THE QUESTIONNAIRE 103
5.6.1 Variable measuring corporate entrepreneurial orientation 104
5.6.2 Variables measuring corporate entrepreneurial climate 106
5.6.3 Variables measuring key retail success factors 106
5.6.4 Variables measuring perceived success in business 107
5.7 RELATIONSHIP BETWEEN CORPORATE ENTREPRENEURIAL 109
ORIENTATION CONSTRUCTS AND DEMOGRAPHIC VARIABLES
5.7.1 Relationship between corporate entrepreneurial orientation constructs 110
and the gender of respondents
5.7.2 Relationship between corporate entrepreneurial orientation constructs 110
and the management level of respondents
5.7.3 Relationship between corporate entrepreneurial orientation constructs 111
and highest academic qualification of respondents
5.8 RELATIONSHIP BETWEEN CORPORATE ENTREPRENEURIAL 112
CLIMATE AND DEMOGRAPHIC VARIABLES
5.8.1 Relationship between corporate entrepreneurial climate and the 112
gender of respondents
5.8.2 Relationship between corporate entrepreneurial climate and the 113
management level of respondents
5.8.3 Relationship between corporate entrepreneurial climate and the 113
qualification level of respondents
x
5.9 RELATIONSHIP BETWEEN KEY RETAIL SUCCESS FACTORS 114
AND DEMOGRAPHICS
5.9.1 Relationship between key retail success factors and the gender respon- 115
dents
5.9.2 Relationship between key retail success factors and the management 116
level of respondents
5.9.3 Relationship between key retail success factors and the highest acade- 117
mic qualification level of respondents
5.10 RELATIONSHIP BETWEEN PERCEIVED SUCCESS AND DEMO- 117
GRAPHICS
5.10.1 Relationship between perceived success factors and the gender of 117
respondents
5.10.2 Relationship between perceived success factors and the manage- 118
ment level of respondents
5.10.3 Relationship between perceived success factors and the highest acade-119
mic quailification level of respondents
5.11 SUMMARY 119
CHAPTER 6: CONCLUSIONS AND RECOMMENDATIONS
6.1 INTRODUCTION 121
6.2 CONCLUSIONS 122
6.2.1 Reliability of the corporate entrepreneurial climate and retail question- 122
naire
6.2.2 Demographical information 124
6.2.3 Conclusions on corporate entrepreneurial orientation 125
6.2.4 Conclusions on corporate entrepreneurial climate 128
6.2.5 Assessment of compliance to key retail success factors 130
xi
6.2.6 Assessment of perceived success of the organisation 134
6.2.7 Relationship between selected demographical variables and corporate 135
entrepreneurial orientation and climate,key retail success factors and
perceived success
6.3 RECOMMENDATIONS 139
6.3.1 Trigger events 141
6.3.2 Establishing a corporate entrepreneurial orientation and climate 143
6.3.3 Corporate orientation 146
6.3.4 Corporate entrepreneurial climate 147
6.3.5 Key retail success factors 150
6.4 ACHIEVEMENT OF OBJECTIVES 153
6.4.1 Primary objective 153
6.4.2 Secondary objectives 153
6.5 SUGGESTIONS FOR FUTHER RESEARCH 154
6.6 SUMMARY 157
BIBLIOGRAPHY 158
ANNEXURE A: Corporate entrepreneurial climate and retail questionnaire 177
ANNEXURE B: Corporate entrepreneurial orientation constructs 193
ANNEXURE C: Corporate entrepreneurial climate constructs 195
ANNEXURE D: Retail constructs 200
ANNEXURE E: Perceived success constructs 204
xii
LIST OF FIGURES
FIGURE 1.1: Area of operation of Senwes Limited, Retail Division 6
FIGURE 1.2: The research process of the study 14
FIGURE 2.1: The corporate entrepreneurship process 26
FIGURE 2.2: Relating innovations to risk 35
FIGURE 3.1: Volume of agricultural production 45
FIGURE 3.2: Gross farmer sector income 46
FIGURE 3.3: Net farm sector income (NFI) 48
FIGURE 3.4: Successful completion of the turnaround strategy 54
FIGURE 3.5: Senwes group structure 57
FIGURE 3.6: Turnover and net profit since becoming a public company 58
FIGURE 4.1: Retail landscape 72
FIGURE 4.2: The elements of the retail image 77
FIGURE 6.1: An integrated framework for corporate entrepreneurship 142
xiii
LIST OF TABLES
TABLE 1.1: Constructs and number of items 9
TABLE 1.2: Constructs and number of items 10
TABLE 1.3: Constructs and number of items 10
TABLE 1.4: Constructs and number of items 11
TABLE 2.1: Sixteen dilemmas of innovation 33
TABLE 3.1: Senwes operations overview 60
TABLE 4.1: Selected aspects of store-based retail strategy mixes 67
TABLE 5.1: Rating of survey 98
TABLE 5.2: Age distribution 99
TABLE 5.3: Gender information 99
TABLE 5.4: Race distribution 100
TABLE 5.5: Highest academic qualification achieved 100
TABLE 5.6: Management/Staff level 101
TABLE 5.7: Cronbach alpha coefficient per construct 102
TABLE 5.8: Results of corporate entrepreneurial orientation 104
TABLE 5.9: Results of corporate entrepreneurial climate 106
TABLE 5.10: Results of key retail success factors 107
TABLE 5.11: Results of perceived success of the business 108
TABLE 5.12: Classification of d-value 109
TABLE 5.13: The relationship between gender and the corporate 109
entrepreneurial orientation constructs
TABLE 5.14: The relationship between management levels and the cor- 110
porate entrepreneurial orientation constructs
TABLE 5.15: The relationship between highest academic qualification and 111
the corporate entrepreneurial orientation constructs
TABLE 5.16: The relationship between gender and the corporate entrepre- 112
neurial climate of the business
TABLE 5.17: The relationship between management levels and the cor- 113
porate entrepreneurial climate of the business
TABLE 5.18: The relationship between highest academic qualification 115
xiv
and the corporate entrepreneurial climate of the business
TABLE 5.19: The relationship between gender and key retail success 116
factors
TABLE 5.20: The relationship between management level and key retail 116
success factors
TABLE 5.21: The relationship between highest academic qualification and 116
compliance to key retail success factors
TABLE 5.22: The relationship between gender and the perceived suc- 117
cess of the business
TABLE 5.23: The relationship between management level and the percei- 118
ved success of the business
TABLE 5.24: The relationship between highest academic qualification 119
and the perceived success of the business
1
CHAPTER 1
NATURE AND SCOPE OF THE STUDY
1.1 INTRODUCTION
The global economy is creating profound and substantial changes for business and
industries throughout the world (Groenewald, 2010:1). These changes make it
necessary for business to examine their purpose carefully and to devote a great deal
of attention to selecting and following strategies in their pursuit of levels of success
that have a high probability of satisfying multiple stakeholders.
Burns (2008:10) argued that many businesses have reacted to these new set of
challenges by downsizing, unbundling, focusing on core business, reengineering,
decentralisation, outsourcing, restructuring and relying on self-directed work teams.
Morris, Kuratko and Covin (2008:7) state that sustained competitive advantage, now
lies in the adaptability, flexibility, speed, aggressiveness and innovation which comes
down to one word namely, entrepreneurship. Christensen (2004:302) indicates that
many large businesses find it difficult to integrate the entrepreneurial spirit in a well-
structured or bureaucratic business. Therefore these business must think non-
traditionally to cope with the increasingly paradoxes. According to Johnson
(2001:135), if a business does not adopt a proactive attitude towards innovation and
the creation of new ventures, it is unlikely to survive in an increasingly, aggressive,
competitive and dynamic market place. Business is turning to corporate
entrepreneurship because they are not experiencing the continual innovation, growth
and value-creation that they had (Thornberry, 2001:1). Corporate entrepreneurship
is recognised as a potential viable means of promoting and sustaining
competitiveness, and transforming business and industries opportunities for value-
creating innovation (Aloulou & Fayolle, 2005:24).
According to Morris et al. (2008:20), remaining competitive is very different from
achieving sustainable competitive advantage. The quest for competitive advantage
requires that business and the managers within them continually reinvent
themselves.
2
From this brief introduction it is clear that business and industries throughout the
world are operating in an uncertain and dynamic global economy. Business of the
future needs continual innovation, growth and value-creation to survive. Through
corporate entrepreneurship the entrepreneurial spirit within business boundaries can
be created, allowing an atmosphere of innovation to prosper. It is also highlighted
that business need to achieve sustainable competitive advantage to remain
competitive (Groenewald, 2010:3).
The focus of this study is on an agricultural retail business with the changing retail
environment that affects the business sustainable competitive advantage. According
to Lotz (2009:174), South African agri-businesses are in a relative unique situation
due to the fact they have to content with the deregulation and liberalisation of the
agricultural sector, but also face increasing globalisation and changing consumer
preferences. Since the establishment of agricultural retail stores, these stores have
been in a privileged situation by having a captured market in the sense that farmers
were shareholders in these stores which brought some loyalty and commitment.
They had the advantage of being the only suppliers, especially in the rural areas, of
agricultural goods and other complimentary products to the farming community
(Jacobs, 2007:5).
Furthermore, finance availability for the farmers was limited and mostly done through
the co-operative structure which contributed to the loyalty factor of these farmers to
their co-operative (Ortman & King, 2007:46). Finance through the commercial
banking sector opened the door for these members to obtain financing somewhere
else and more competitors entered the market with credit facilities and other modern
attractions that lured these once loyal co-operative customers away from their
traditional buying patterns (Jacobs, 2007:2). This resulted in some of the co-
operatives to convert to business to obtain external funds to expand the business to
be more competitive. These changes forced the once content co-operatives into a
new playing field with higher demand on competition and a struggle to survive.
Reasons highlighted the importance of corporate entrepreneurship and retail within
the agricultural business as a means of developing an entrepreneurial and retail
environment that could contribute to a sustainable competitive advantage.
3
The purpose of this study is to develop a sustainable corporate entrepreneurial and
retail framework for an agricultural business in South Africa that will result in
sustainable, value-creation for their stakeholders.
This chapter provides the background and literature review of the study. It sets out
the research problem, purpose of the study, research objectives, research
methodology, as well as an outline of the chapters. This is done to guide the flow of
the study. In this study various terminology are sighted by different authors -
terminology such as business, organisation, venture and firm. For the purpose of this
study the term “business” will be used which refer to a profit seeking entity. Where
authors are directly referred to these constructs, it will not be changed.
1.2 PROBLEM STATEMENT
South African agri-businesses faced challenges such as increasingly international
competition, a changing social environment based on equity principals and
increasingly complex consumer demand (Doyer, D’Haase, Kirtsen & Van Rooyen,
2007:495). Several co-operatives subsequently converted to investor - oriented firms
(IOF`S) with the view to obtain easier access to various sources of capital, to align
the interest of the shareholders with those of the customers and to instil an
entrepreneurial flair often missing from conventional co-operatives (Ortmann & King,
2007:47- 48).
Agricultural businesses were confronted with the open market system and they had
to battle since. The agricultural retail businesses were also confronted with volatile
markets, costly input resources, disloyal customers buying direct from suppliers,
direct competition from suppliers and other retail and agricultural businesses
penetrating their area of business (Terblanche & Willemse, 2009:12). According to
Kotze (2012), agricultural retail business outlets in cities are subsidising agricultural
retail business outlets in rural areas. Jacobs (2007:7) argued that agricultural retail
business will lose their competitive market share due to not responding aggressively
to the changing trend in the retail environment. Esterhuizen, Van Rooyen and
D’Haase (2008:44) argued that agri-businesses in South Africa must recognise the
4
important role of corporate entrepreneurship (innovation) to maintain competitiveness
and sustainability.
The research will address the growing concern of the impact of factors mentioned on
the sustainability as well as value-creation for stakeholders in an agricultural retail
business operating in five provinces in South Africa. The research will measure the
current agricultural retail business against corporate entrepreneurial orientation
characteristics, as well as perceived success factors and key retail success factors to
determine a corporate entrepreneurial and retail framework, which would assist the
agri-businesses in adapting to the change that can create value and sustainability for
stakeholders.
1.3 OBJECTIVES OF THE STUDY
The following primary and secondary objectives were set for this study:
1.3.1 Primary objective
The primary objective of this study is twofold: Firstly, to assess the determinants of
corporate entrepreneurship and retail in an agri-business in South Africa and
secondly to propose an integrated framework to facilitate the process of establishing
and maintaining corporate entrepreneurship and retail within the specific agri-
businesses in South Africa.
1.3.2 Secondary objectives
In order to achieve the primary objective various secondary objectives were
formulated. The secondary objectives of the study are:
• Determine what is meant by corporate entrepreneurship and corporate
entrepreneurial strategy by means of a literature study.
• Describe the link between innovation and corporate entrepreneurship.
• Obtain insight into the phenomena of retail by means of literature review.
5
• Obtain an understanding of Senwes retail division within the agricultural industry
in South Africa.
• Assess the determinants of corporate entrepreneurship and retail within the
specific agri-business.
• Assess perceived success determinants within the business.
• Propose an integrated framework to assist in establishing and maintaining
corporate entrepreneurship and retail in a specific agri-business.
1.4 SCOPE OF THE STUDY
This section describes the field of study and the geographical demarcation.
1.4.1 Field of the study
The field of the study falls within the subject of entrepreneurship and marketing in
existing business with specific reference to corporate entrepreneurship and retail.
1.4.2 Geographical demarcation
The study is limited to Senwes Limited an agri-business within South Africa. Senwes
is an agricultural business that focuses on the provision of retail and production
inputs primarily to grain producers, as well as market access for agricultural produce.
This is strategically coupled with the provision of value-added services, which
include, among others, financing, insurance and agricultural technical services.
Senwes conducts its business predominantly in the North-West, Free State,
Gauteng, Northern and Western Cape. The group also undertakes international
trade in the SADC region as well as certain parts of East Africa. Senwes is a broad
based black economic empowered business.
The study is focusing on Senwes Limited, retail and input side. This division is
Senwes Village, Retail division. The area of operation of Senwes Village, Retail
division that took part in the study is indicated in figure 1.1.
6
Figure 1.1: Area of operation of Senwes Village, Retail division
Source: Senwes (2011:23)
1.5 RESEARCH METHODOLOGY
The study consists of two phases, namely a literature review and empirical research.
1.5.1 Literature review
The literature review for this study focused on the various aspects of the nature of corporate
entrepreneurship and retail. More specifically it focused on:
• Discussing what is meant by corporate entrepreneurship and corporate
entrepreneurial strategy.
• Describe the link between innovation and corporate entrepreneurship.
• Determining the internal business factors that have an influence on the corporate
entrepreneurial climate within the specific agri-businesses.
• Discussing the phenomena of retail and its key success factors.
• Finally, the literature review focussed on Senwes Limited, Retail division within
which the study was conducted and more specifically the challenges faced by the
agri-businesses that are part of the greater agricultural industry.
The literature review consisted mainly of an analysis of secondary sources such as
books, journal articles, unpublished theses and dissertations, papers and internet
7
sources such as websites. The literature review aided in acquiring a thorough
understanding of the problem that is being investigated, assisted in preparing a
suitable empirical research methodology and formed the basis of the questionnaire.
1.5.2 Empirical research
Empirical research primarily deals with the means of data collection and the use of
data (Lotz, 2009:7) as obtained from (Riley, Wood, Clark, Wilkie & Szivas, 2007).
The empirical research, for this study, consisted of the research design, sample
design, the research instrument, and method of data collection and the procedures
for data analysis. Chapter 5 offers a detailed discussion on the above empirical
research process and will only be presented briefly in this section.
1.5.2.1 Research Design
The empirical study will focus on the assessment of corporate entrepreneurial and
innovative levels, as well as perceived success determinants within business that
may determine the compliance to key retail success factors in an agricultural
business in South Africa.
A quantitative research design was followed in this study and more specifically
descriptive research was used as the basis for the research design. The descriptive
research consisted of a cross-sectional analysis which was conducted by means of a
sample survey that made use of questionnaires as research measuring instrument to
gather the required quantitative data. Welman, Kruger and Mitchell (2010:23)
indicated that descriptive research has two goals: explaining phenomena and
predicting behaviour. The goal of research is to explain the phenomena such as
human behaviour in the business and administrative science by indicating how
variables are related to one another and in what manner one variable affects another.
Furthermore, the possibility of explaining and predicting human behaviour may
enable us to change or control it.
In this study an attempt was made to determine the extent to which managers, first
line supervisors and staff in a specific agri-businesses is capable of fostering
sustainable corporate entrepreneurial behaviour as a path that is conducive to the
compliance to key retail success factors. The assessment will be done through the
8
Entrepreneurial health audit of Ireland, Kuratko and Morris (2006) and through
Entrepreneurial orientation of perceived success (Lotz, 2009). This assessment is
done in four steps: step one, assessing the business’ entrepreneurial intensity. Step
two, assessing the internal environment for corporate entrepreneurship climate. The
result of step one and two is to create an understanding of the corporate
entrepreneurial and innovative process and to development of a corporate
entrepreneurial framework. Step three; determine the compliance to key retail
success factors. Step four; assess perceived success determinants within the
business.
1.5.2.2 The study population and sample
The sample of internal perceptions will involve Village managers at the head office as
well as all branch and assistant branch managers and retail staff of an agricultural
business.
The study population was selected by means of a non-probability sampling
technique, convenience sampling, where a researcher selects the sample randomly
with a total population of 120 (Welman et al., 2010:69).
1.5.2.3 Constructing the research instrument
The research instrument selected for this study was a structured questionnaire (see
annexure A). The questionnaire, named the corporate entrepreneurial climate and
retail questionnaire, consisted of a front page and a covering letter which included
the instructions to the questionnaire. The questionnaire was divided into four
sections namely:
Section A: Corporate entrepreneurial orientation. The purpose of this section was to
measure the business’s entrepreneurial orientation and intensity within the agri-
businesses retail division. From the literature review five constructs were identified.
These constructs and the number of items per construct are indicated in table 1.1.
9
Table 1.1: Constructs and number of items
NO CONSTRUCT NUMBER OF ITEMS
1 Autonomy 5
2 Innovativeness 9
3 Risk-taking 5
4 Proactiveness 4
5 Competitive aggressiveness 4
Total 27
The items in this study were developed from scales used in the following previous
studies:
• Hornsby, Kuratko and Zahara (2002)
• Ireland et al. (2006)
• Lotz (2009)
• Miller (1983)
• Morris and Kuratko (2002)
• Morris et al. (2008)
Section B: Corporate entrepreneurial climate instrument. Section B of the
questionnaire was to understand why the business has developed its current level of
entrepreneurial orientation and intensity. More specific the corporate
entrepreneurship climate instrument (CECI) was used to assess, evaluate and
manage the business’s internal work environment in ways that support
entrepreneurial behaviour and the use of corporate entrepreneurship strategy. From
the literature review six constructs were identified. The constructs and the number of
items per construct are indicated in table 1.2.
This section consists of 78 questions and/or statements. Respondents were
requested to select the number, on a 1 to 5 Likert scale (where 1 indicates they
strongly disagree and 5 they strongly agree with the statement) in terms of which
best describes their opinion about a specific question or statement.
10
Table 1.2: Constructs and number of items
NO CONSTRUCT NUMBER OF ITEMS
1 Management support 19
2 Work discretion 10
3 Rewards/Reinforcement 6
4 Time availability 6
5 Organisational boundaries 7
6 Specific climate variables 30
Total 78
Section C: Key retail success factors - The purpose of this section was to measure
the business’s compliance to key retail success factors within the agri-businesses
retail division. From the literature review nine constructs were identified. These
constructs and the number of items per construct are indicated in table 1.3.
Table 1.3: Constructs and number of items
NO CONSTRUCT NUMBER OF ITEMS
1. Segmentation/Target market 4
2. Store factors 5
3. Service factors - process 8
4. Merchandise/Product 5
5. Price 13
6. Supply chain 2
7. Technology 12
8. Promotions 3
9. Location 2
Total 54
11
This section consists of 54 questions and/or statements. Respondents were
requested to select the number, on a 1 to 5 Likert scale (where 1 indicates they
strongly disagree and 5 they strongly agree with the statement) in terms of which
best describes their opinion about a specific question or statement.
Section D: Perceived success determinants of the business - The purpose of this
section was to measure perceived success determinants within the business. From
the literature review four constructs were identified. These constructs and the
number of items per construct are indicated in table 1.4.
Table 1.4: Constructs and number of items
NO CONSTRUCT NUMBER OF ITEMS
1. Financial measures 3
2. Process measures 3
3. People development 3
4. Future (Long-term) success 2
Total 11
This section consists of 11 questions and/or statements. Respondents were
requested to select the number, on a 1 to 5 Likert scale (where 1 indicates they
strongly disagree and 5 they strongly agree with the statement) in terms of which
best describes their opinion about a specific question or statement.
1.5.2.4 Collection of data
The actual gathering of data was done by means of the following procedure:
• An email was sent to Senwes Village, Retail division management with the
questionnaire attached explaining the purpose of the study and requesting
permission to distribute questionnaires within the Village division.
• After permission was obtained, an email was sent to the Assistant General
Manager Information Technology to obtain permission to electronically distribute
12
the questionnaire via the email system to the specific target sample. The
questionnaire would be answered via monkey survey.
• Village General Manager emailed a letter in support of the survey to all managers
and staff to encourage the completion of the questionnaires.
It simplified the data gathering process, since the questionnaires were answered
electronically via monkey survey. Questionnaires were also distributed via the
internal mail system to the branch managers that distributed the questionnaires to
staff related to the sampling population. After completion they send it back via the
internal mail system. The researcher captured the hard copies manually on monkey
survey. A total of 78 questionnaires were returned, whereof a total of 12 respondents
did not complete all statements of the questionnaire. All the data received were
analysed. Collection of data is presented in more detail in chapter 5.
1.5.2.5 Data analysis
The data collected will be statistically analysed by the Statistical Consultation
Services of the North-West University: Potchefstroom Campus.
Frequencies and percentages were calculated for the demographic variables age,
gender, race, highest qualifications obtained and functional level in which the
respondents worked in according to predetermined categories.
The results of the corporate entrepreneurial and retail survey were presented
showing the arithmetic mean and standard deviation for each construct.
A comparison of the mean differences between the demographic variables and
corporate entrepreneurial orientation and climate variables, retail variables and
perceived success variables were also examined by means of independent tests (p-
values) and effect sizes (d-values).
13
1.6 LIMITATIONS TO THE STUDY
The study attempts to make a contribution to the existing knowledge of corporate
entrepreneurship and retail. The following limitations regarding the study are
presented.
• Corporate entrepreneurship consists of two main antecedents. One pertains to
the internal business and the other to the external environment of the business
(Lotz, 2009:13). The study is limited to the internal business environment.
• The study only focuses on the agricultural environment within one business
operating in five provinces in South Africa, and could therefore not be applicable
to any other country, industry or agricultural business.
• The sampling method used to determine the agri-businesses study population
was non-probability sample. The findings can therefore not be considered to be
representative of all agri-businesses in South Africa. Care should be exercised in
the interpretation and the utilisation of the results and findings of the study and
cannot be generalised.
• The small sample size might not be representative of the situation in the entire
agri-businesses due to lack of generalisation.
• Respondents will know that research is being done, and the true situation in
division of the business might not be reflected.
• The limited time to conduct the study might have excluded some managers and
staff from the study.
• Limited information is available on corporate entrepreneurship and retail in
Senwes.
• The list of determinants of corporate entrepreneurship and retail is admittedly
incomplete, as new determinants are continually being added. The study only
14
assessed some of the corporate entrepreneurial and retail determinants. More
comprehensive research is still needed to enhance our understanding of these
determinants.
1.7 OUTLINE OF THE STUDY
A brief description of the main elements and focus of the study is set out below. A
schematic representation of the chapter outlay is shown in figure 1.2.
FIGURE 1.2: The research process of the study
15
Chapter 2: An overview of corporate entrepreneurship
This chapter will provide a broad literature review on corporate entrepreneurship. The
chapter begins with an explanation of the nature of corporate entrepreneurship and
includes a definition of corporate entrepreneurship, the necessity of corporate
entrepreneurship is explained, and a framework of corporate entrepreneurship is
described. A discussion will proceed on determinants of corporate entrepreneurship
and this chapter will be concluded with the final link in this section to integrate
corporate entrepreneurship with strategy.
Chapter 3: Overview of co-operatives to agri-business
The chapter will introduce the agricultural industry in South Africa as well as the
changes, challenges that the industry currently face. The evolution from co-operative
to the deregulation of the sector, to the forming of agri-businesses will be discussed.
An overview of Senwes Limited, as agri-businesses in South Africa will then be
discussed with specific focus on the retail division, called Senwes Village, Retail
division.
Senwes Village, Retail division focus specific on the retail activities of the agri-
businesses and must compete in this changing and competitive retail industry.
Chapter 4: Nature of retail
This chapter will provide a broad literature review on retail. The chapter begins with
an explanation of the nature of retail and includes a definition of retail, why retail is
changing, types of retailers are explained. Next, key retail success factors of the
twenty first century are outlined in the chapter. The chapter will be concluded by
focussing on new trends in the business of retail.
Chapter 5: Results and discussion of the empirical study
In this chapter the research methodology introduced in chapter one will be discussed
in more detail. The research problem, purpose of the study, objectives are
16
discussed. A detailed explanation will be given on the questionnaire used to obtain
empirical data. The section will be divided into two parts namely the gathering of
data, as well as the discussion and interpretation of results.
Finally, the data processing and analysis is explained by means of statically
techniques used.
Chapter 6: Conclusions and recommendations
Chapter six summarises the major purpose and findings of the research study. A
conclusion and recommendation of the study are presented.
The research objectives are revised. Finally, limitations of the study, contributions to
the field and recommendations are presented. A sustained corporate entrepreneurial
and retail framework is further proposed to foster a corporate entrepreneurial and
retail culture within the specific agricultural business environment. The chapter
concludes with an indication of the achievement of the objectives and the
suggestions for future research.
17
CHAPTER 2
AN OVERVIEW OF CORPORATE ENTREPRENEURSHIP
2.1 INTRODUCTION
Morris et al. (2008:3) state that business must continually, adjust, adapt or redefine
themselves as this is a fundamental principle in a free market economy. In this
global entrepreneurial revolution, the rate which business must transform is
accelerating. Burns (2008:4) as obtained from John Naisbatt (1994) confirmed this
view point that big business will find it increasingly difficult to compete with and in
general will perform more poorly than smaller speedier, more innovative business.
Ramachandian, Devarajan and Ray (2006:85) support this view point and add that
business need to adopt an entrepreneurial strategy, seeking competitive advantage
through continuous innovation to effectively exploit identified opportunities in order to
sustain and grow under such circumstances.
Ireland et al. (2006:10) state that business increasingly rely on corporate
entrepreneurship to develop and picture todays and tomorrows competitive
advantages that are grounded in innovation.
Taking into consideration the above mentioned in chapter 1 and the viewpoints of
these researchers, corporate entrepreneurship is considered as a source of
competitive advantage to move a traditional hierarchical business to a point where
sustainable entrepreneurship becomes a meaningful and an important component of
business.
In this chapter various aspects concerning corporate entrepreneurship will be
researched and investigated. This will lead to a broad literature review that will be
conducted to clarify the definition and overview of corporate entrepreneurship.
Secondly, the necessity of corporate entrepreneurship for business sustainability will
be highlighted followed by the discussion of a conceptual framework being used and
applied in the field of corporate entrepreneurship. The framework on which this
research is based will also be indicated with the determinants of corporate
entrepreneurship discussed. Next the aspects to foster, develop and implement
18
corporate entrepreneurship in a business are reviewed. Lastly, corporate
entrepreneurship as a strategy will be discussed.
2.2 DEFINITION AND OVERVIEW OF CORPORATE ENTREPRENEURSHIP
Morris et al. (2008:11) indicated that corporate entrepreneurship is a term used to
describe entrepreneurial behaviour inside established mid-sized and large
businesses. Ireland et al. (2006:10) confirmed this view by stating that corporate
entrepreneurship is a process through which individuals in established businesses
pursue entrepreneurial opportunities to innovate without regard to the level and
nature of current resources. Therefore entrepreneurial opportunities are situations in
which new products (goods and services) can be sold at a price exceeding their cost
of development, distribution and support. Srivastava and Agrawal (2010:164) argued
that corporate entrepreneurship is not a new concept and that Schumpeter (1934)
defined entrepreneurship as an individual act, indicated that everyone is an
entrepreneur when combinations of innovations are carried out.
Groenewald (2010:55) states that the concept of corporate entrepreneurship was
formally defined and both theoretically and empirically developed in the works of
Burgelman and Miller (1983). Corporate entrepreneurship became a separate
research topic when Pinchott’s (1985) book on intrapreneuring in the mid 1980’s was
published. Christensen (2004:305) argues that corporate entrepreneurship is still a
concept in search of a clear definition. This is confirmed by Groenewald (2010:55)
that argued that the concept corporate entrepreneurship within existing business is
known under many different labels, examples of these labels are: corporate
entrepreneurship, internal corporate entrepreneurship, intrapreneurship, corporate
venturing, entrepreneurial management, strategic renewal and strategic
entrepreneurship.
Durkan (2005:6) concluded with a definition of corporate entrepreneurship within a
business. “Corporate entrepreneurship can be defined as a process that goes on
inside an existing business and that may lead to new business ventures, the
development of new products, services or processes, and the renewal of strategies
and competitive postures.” In other words it could be seen as a tool in practice for
19
business development, revenue growth, profitability enhancement and the pioneering
of the development of new processes, products and services.
2.3 NECESSITY OF CORPORATE ENTREPRENEURSHIP
Kuratko (2007:6) states that the 21
st
century linked corporate entrepreneurship to
business’ efforts to establish sustainable competitive advantages as the foundation
for profitable growth. Morris et al. (2008:81) further argued that corporate
entrepreneurship could be manifested in business through corporate venturing or
strategic entrepreneurship. Kuratko (2007:8) indicated that Tidd and Taurins (1999)
concluded that there are two sets of motives that drive the practise of internal
corporate venturing: leveraging; to exploit existing corporate competencies in new
product or market arenas and learning to acquire new knowledge and skills that may
be useful in existing product or market arenas. They argued when the overall motive
is leveraging, there are some specific reasons for a business to engage in corporate
venturing and this include (Kuratko, 2007:9):
• To exploit under-utilised resources and build a new business around internal
capabilities that remains idle for prolonged periods.
• To extract value from existing resources and build a new business around
corporate knowledge, capabilities or other resources that have value in product-
market arenas not currently being served by the business.
• To introduce competitive pressures onto internal suppliers and build a new
business that becomes an alternative supplier to existing supply resources.
• To spread the risk and cost of product development and build a new business
whose target market promises to be larger than that for which the core product to
be offered by the business initially developed.
• To divest non-core activities and build a new business to pursue business
opportunities that the business is in a favourable position to exploit and the
business has no strategic interest in.
20
Next, learning motives for corporate venturing will be discussed.
Learning motives could be broken down in three major types (Kuratko,
2007:10):
• To learn about the process of venturing as a laboratory in which the innovation
process could be studied.
• To develop new competencies and build a new business as a basis for acquiring
new knowledge and skills pertaining to technologies, products, or markets of
strategic importance.
• To develop managers and build a new business as a training ground for the
development of individuals with general management potential.
Antoncic and Hisrich (2004:539) indicated that corporate entrepreneurship tends to
be a good direct predictor of the businesses wealth creation, profitability growth as
well as the performance indicator of the business. Bhardwaj, Grawal and Momaya
(2007:131) support this statement and indicated that corporate entrepreneurship is a
tool that allows business rejuvenate and revitalise and create new value through
innovation, business development and renewal. They state that new value-creation
is possible through high levels of entrepreneurial activity.
Gaw and Liu (2004:5) indicated the following benefits of an intrapreneurial culture:
• The underlying culture will undergo profound changes as innovation becomes
part of a business’ values.
• Turnover of top talent will decrease as a result of employees realising the
business’ commitment to their ideas and work.
• New business units will take shape as innovation leads to new markets and
opportunities.
21
• Increased autonomy and empowerment of employees will diminish the need for
hierarchical business structures, leading to flatter and more innovation friendly
environment.
• The result of this evolution for the business is sustained competitive advantage
through a cycle of innovation and prepares the business to deal with industry
changes and shocks.
Morris et al. (2008:7) indicated that remaining competitive is very different from
achieving sustainable competitive advantage. The quest for competitive advantage
requires that business and the managers continually reinvent themselves and could
be derived from five key organisational capabilities that will be discussed in the next
paragraph.
Advantage derives from five key organisational capabilities (Morris et al.,
2008:8):
• Adaptability (ability to adjust on a timely basis to new technologies, customer
needs, regulatory rules and other changes in conditions without losing focus or
causing significant disruption of core operations and commitments).
• Flexibility (ability to design business strategies, processes and operational
approaches that can simultaneously meet the diverse and evolving requirements
of customers, suppliers, financiers, regulators and other key stakeholders).
• Speed (the ability to act quickly on emerging opportunities, to develop new
products and services more rapidly, and to make critical operational decisions
without lengthy deliberations).
• Aggressiveness (an intense, focussed and proactive approach to eliminating
competitors, delighting customers and growing employees).
• Innovativeness (a continuous priority placed on developing and launching new
products, services, processes, markets and technologies).
22
From the above literature review the necessity for corporate entrepreneurship for
business can be summarised as follows (Groenewald, 2010:103):
• Businesses that instil corporate entrepreneurship can gain and sustain
competitive advantage at all levels of business.
• Rejuvenate and revitalise existing business.
• Develop new products, services and processes.
• Pursue entrepreneurial opportunities.
• Create new business within existing business.
• Foster strategic renewal of existing operations.
• Improve growth and profitability.
• Increase financial performance and create value.
2.4 FOSTERING ENTREPRENEURSHIP IN A BUSINESS
Hisrich, Peters and Shepherd (2008:68) define an entrepreneurially fostering
environment as an environment that enhances organisational members’ perceptions
of entrepreneurial action as both feasible and desirable. Scheepers, Bloom and
Hough (2008:2) as obtained from Levitt (1999) acknowledge above statement,
commented that as energy is the basis of life itself and ideas the source of
innovation, so is innovation the vital spark of all human change, improvement and
progress. Therefore the capacity to innovate and act in entrepreneurial ways is vital
to organisational change. Antoncic and Zorn (2004:7) argue that one important
element that is beneficial to corporate entrepreneurship is business and management
support for entrepreneurial activities.
Hayton (2005:24) argues that fostering corporate entrepreneurship, demands a more
enlightened approach to management including decentralisation of authority,
participation in decision making, cooperation, avoidance of bureaucracy and
encouragement of Risk-taking and creativity.
Morris et al. (2008:43-46) identified six ways that entrepreneurship is fostered in
established businesses.
23
• Traditional research and development departments
Morris et al. (2008:43) indicate that businesses have research and development
departments that are staffed with people that are technically qualified, that work on
improving existing products and developing new products. Therefore, the
department make it easy for everyone in the business to escape the responsibility for
innovation. Bhardwaj et al. (2009:195) agree with above statement that acquiring
resources and capabilities, the division level executives lead organisations as a
stand-alone business. Therefore the focus is to overcome technical obstacles
through research.
Antoncic and Hisrich (2001:496) link the innovativeness dimension with technological
leadership, supported by research and development (R&D), in developing new
products, services and processes to differentiate the business from its competitors
and thereby developing unique sets of competencies within the business.
• Ad hoc venture teams
Senior management commits them to an opportunity or respond to an immediate
threat and put up a team of employees out of the corporate mainstream to come up
with specific innovations and therefore will accomplish a specific task and mission,
but will not produce sustained entrepreneurship (Morris et al., 2008:44).
• New venture divisions
Some organisations took the venture team concept further by creating new venture
divisions that are permanent units in a business established for breakthrough
innovation and for creating entirely new markets (Morris et al., 2008:44). Hitt et al.
(1999:147) argue that when its members come from different functions and top
management actively supports the team’s efforts, the collective talent of the new
venture team is found to be particularly effective and therefore the new venture
teams should be drawn from the entire talent pool, which will ensure the best
outcomes. Therefore, by separating these divisions from normal operations, will
abandon traditional theoretical assumptions about the business’s products,
24
customers, costs, technology and competitors (Tyreman & Spencer, 1983:516). The
challenge of these divisions are that new market opportunities must have huge
market potential that will be supported by the mainstream operating units (Morris et
al., 2008:44).
• Entrepreneurship from champions and the mainstream
Entrepreneurship could originate from any level in the organisation where employees
recognise opportunities, develop innovative concepts and try to sell it to business
management. If the opportunity is rejected by management this employees as the
champions will try to keep the idea alive and will try to adapt it into a form that
management will accept it (Morris et al., 2008:45).
• Acquisitions
Morris et al. (2008:46) argue that the key here is strategic fit on making acquisitions
that are related to core competencies of the business, or on acquiring skills,
technologies and customers that complement the strategic direction of the business.
The challenge with acquisitions is to instil the values and cultures of the business in
each new acquisition. Thompson et al. (2012:388) argue that acquisitions aim at
building a stronger portfolio of competencies and capabilities when a market
opportunity can slip by faster than a needed capability can be created and when
industry conditions, technology or competitors are moving at such a rapid clip that
time is of essence.
• Outsourcing innovation
Morris et al. (2008:46) state that a number of businesses are buying some of the
intellectual capital of other business, individuals and in effect outsourcing innovation
and state that this is a realistic path because of the significant infrastructure and
personnel cost associated with having the necessary in-house capabilities. Saetre
(2001:15) mentioned as adopted from Kanter’s (1985, 1988) four points that are
illustrated why innovation and intrapreneurship is at times difficult to achieve within
the framework of existing businesses. Firstly, the uncertainty and ambiguity
25
associated with the innovation process contrary to the purpose of the organisation
per se. Secondly, the intensity of the learning process and the rate with which
changes and adaptations must be made are often impeded by sheer organisational
inertia. Thirdly, the competition of resources, not only from other innovative efforts,
but also from the everyday functions of the organisation itself, draws attention away
from the innovation process. Fourthly, organisations are structured along functional
lines in order to gain efficiency, while successful innovation processes are frequently
dependent on interdisciplinary interaction.
To conclude it could be that all these approaches listed could be operating in a given
business with different roles and performance standards established for each
(Saetre, 2001:15).
Marcus and Zimmerer (2003:18) indicate that as corporate entrepreneurship
programmes provide opportunities for success, increasing future research could
provide an objective basis for determining the extent to which such programmes are
feasible and have the potential to be incorporated into organisational structures. It is
therefore important to focus on a framework identified in literature promoting
sustainable corporate entrepreneurship.
Next paragraph, the framework for sustainable corporate entrepreneurship as
developed by Ireland et al. (2006) will be discussed.
2.5 FRAMEWORK FOR SUSTAINABLE CORPORATE ENTREPRENEURSHIP
The framework for sustainable corporate entrepreneurship as developed by Ireland
et al. (2006:13) focus on how to create sustainable corporate entrepreneurship where
attention is given to the characteristics of internal work environment that supports
corporate entrepreneurship. These characteristics are triggers, structures, controls,
human resource management systems and culture. Morris et al. (2008:75) made a
very important observation that within business entrepreneurial orientation can be
expected to differ significantly among various divisions, units and departments.
Ireland et al. (2006:10) argue that a corporate entrepreneurial strategy is an
important path for a business to make it possible for employees to engage in
26
entrepreneurial behaviour, using knowledge as the foundation for continuous and
successful innovations. The results of a study conducted by Barringer and Bluedorn
(1999) as cited by Groenewald (2010:94), states that in determining the relationship
between strategic management and corporate entrepreneurship, a business’
entrepreneurial orientation is influenced by nature of its strategic management
practices. Scanning intensity is an important correlate of entrepreneurial behaviour.
A strong relationship exists between planning, flexibility and corporate orientation.
For the purpose of this study, the corporate entrepreneurship framework developed
by Ireland et al. (2006:10-17) is adopted for this research. In the following section the
corporate entrepreneurship process will be discussed. The framework is illustrated in
figure 2.1.
FIGURE 2.1: The corporate entrepreneurship process
Source: Ireland et al. (2006:14)
The following characteristics of an internal work environment that supports corporate
entrepreneurship will be discussed.
Designing a
CE Strategy
Recognising
Strategic
Triggers
Creating an Internal Environment to Support CE
Structure
• Horisontal over vertical
• Few layers
• Broader spans of control
• Decentralisation
• Cross-functional processes
• Less formalisation
• Open communication flow
• Sense of smallness
Controls
Human Resources Management Culture
Entrepreneurial
Performance
• Control based on “no surprises”
• Loose-tight control properties
• Resource slack
• Internal venture capital pools
• Emphasis on self-control
• Empowerment and discretion
• Mutual trust
• Open information sharing
• Jobs that are broad in scope
• Multiple career paths
• Extensive job socialisation
• Individual and group awards
• High employee involvement in
appraisals
• Longer-term reward emphasis
• Appraisal and reward criteria
include innovativeness and
Risk taking
• Entrepreneurial learning
• Balanced individual collective
emphasis
• Emphasis on excellence
• Emotional commitment
• Freedom to grow and to fail
• Emphasis on results over process
• Celebration of innovation
• Healthy dissatisfaction and a
sense of urgency
• Innovativeness
• Risk-taking
• Pro-activeness
27
2.5.1 Triggers of corporate entrepreneurship
Ireland et al. (2006:13) argue that interactions among organisational characteristics,
individual characteristics and some kind of participating event in the business’s
internal work environment and external work environment are the precursors of
corporate entrepreneurship in organisations and are labelled as triggers. Triggers
originate from inside or outside of organisations, but the greatest pressures for
entrepreneurial behaviour come from the external environment. Hornsby, Kuratko
and Zahra (2002:259) indicated that researchers have sought to identify some of the
key variables that can affect the businesses pursuit of corporate entrepreneurship,
including internal organisational factors such as: the company incentive and control
systems (Sathe, 1985) culture (Kanter, 1985), organisational structure (Covin &
Slevin, 1991) and managerial support (Stevenson & Slevin, 1991). Therefore
according to Hornsby et al. (2002:259), individually and in combination, these factors
are believed to be important antecedents of corporate entrepreneurship efforts,
because they affect the internal environment, which determines in and support of
entrepreneurial initiatives within an established company. Burgelman’s (1983:1349)
research confirmed that internal organisational factors influence the types of
corporate activities a company pursue. Therefore factors inside the business also
trigger entrepreneurial behaviour and could include the following examples:
directives from top-level managers, employee rewards, slack resources, tension
between competing sets of interests, or a major problem with quality or cost control
(Ireland et al., 2006:13).
External pressures could be diminishing opportunity streams, rapid changes in
technology, labour shortages, aggressive competition moves, changes in industry or
market structures and regulatory threats (Ireland et al., 2006:13). Guth and Ginsberg
(1990:7) confirmed with research the following:
• The impact of major environmental shifts, such as deregulation, can influences
changes in strategy in a non-random way, with organisations moving away from
one generic strategy towards other generic strategies.
• The more dynamic and hostile the environment, the more businesses will be
entrepreneurial.
• Industry structure affects opportunities for successful new product development.
28
• Both opportunities and problems stem from potential of the business and its
competitors in an industry to find new combinations of resources that lead to
competitive advantage.
Ireland et al. (2006:13) concluded that quick recognition of these triggers help
organisations to identify the need and value as well as the shape for the corporate
entrepreneurial strategy.
2.5.2 Structure
The framework (figure 2.1) indicates that corporate entrepreneurship flourishes when
organisational structures have a relatively small number of layers (Ireland et al.,
2006:14). A restricted number of layers results in a broader span of control which in
turn creates opportunities for employees to act entrepreneurially. With fewer
managerial layers, authority and responsibility are decentralised, and horizontal or
lateral interactions among employees are encouraged. Burns (2008:141) confirms
that the underlying logic of a traditional business structure is geared towards a
hierarchical process that directs work activities. Furthermore, according to Lotz
(2009:61), many levels of approval in a traditional business have the potential to stifle
innovations. Echols and Neck (1998:43) indicated that entrepreneurial structures
should be new and separately organised from the old and existing ways of a
business, with a specific focus for new projects stemming from executive authority,
prestige and accountability. Morris et al. (2008:183) argued that corporate
entrepreneurial efforts on the other hand are about creating new things and moving
in new directions and is therefore almost always in conflict with traditional structures.
2.5.3 Organisational controls
According to Ireland et al. (2006:15), controls create value when they simultaneously
provide the stability business need to exploit current competitive advantages and the
flexibility required for employees to behave entrepreneurially for the purpose of
beginning to form competitive advantages. Burns (2008:183) agrees that most
organisational control systems are aimed at eliminating risk and uncertainty and that
this is something the entrepreneurial business must tolerate to promote efficiency
and effectiveness, which can be at the expense of innovation. Kuratko et al.
29
(2002:278) argued that the core principle in developing entrepreneurial control
requires that managers need to give up control to gain control. These authors
believed that there must be a transparency of information and that there must be no
surprises, communicate information timelessly for all who need to know. Burns
(2008:184) agrees that above statement will encourage employees the way an
owner-manager will think and is build round six principles:
• Free access to all financial information that is critical to tracking the business
performance.
• Continuous and overt attempt to present this information to employees.
• Training process that encourages an understanding of this information.
• Employees learn that part of their job is to improve the financial result whatever
way they can.
• People are empowered to make decisions in their job based on what they know.
• Employees have a stake in the organisation’s success or failure.
Burns (2008:184) argues that the answer is a balance philosophy that successful
business performance comes from a dispersed and high level of ownership and a
commitment to, an agreed-upon objective. Ireland et al. (2006:15) agree that positive
controls are linked to performance measures, allow significant directions and are
focussed on generating and sharing of knowledge that allows employees and
managers to identify problems before they surface.
2.5.4 Human resource management systems
Montoro-Sanchez and Soriano (2011:8) indicated that human resource management
(HRM) and entrepreneurship areas have seldom been studied together, even though
HRM plays a key role in entrepreneurial businesses as the shaker and mover in
business development and growth. Hayton (2005:31) indicated that the traditional
model of HRM encourage matching employee contributions to organisational needs
and inducements, a more relevant perspective to corporate entrepreneurship would
be to encourage the building of relationships among employees, between employees
and the business and between employees and key organisational stakeholders.
Therefore these inter-relationships are necessary because they represent essential
30
channels for the flow of knowledge and information, which are the building blocks of
innovation and entrepreneurial opportunities. Ireland et al. (2006:15) state that with
corporate entrepreneurship, the goals of effective human resource management are
for employees to learn how to:
• Embrace creative and innovative behaviour.
• Take reasonable levels of risk.
• Use a long-term orientation to evaluate innovation-based possibilities.
• Focus on results.
• Work cooperatively with others.
• Tolerate ambiguity.
• Assume responsibility for change.
Dabic, Ortiz-De-Urbina-Criado and Romero-Martinez (2011:17) confirm that
successful corporate entrepreneurship is promoted by entrepreneurially-friendly
processes related to recruiting, selecting, training, developing and rewarding.
Furthermore, they indicated that training should be continuous, less structured or
standardised and focused on individualised knowledge required. These programs
must develop trainee’s tolerance for risk, embrace change as a source of individual
and organisational growth and learn realities of organisational politics so that they are
able to obtain sponsors for their innovation based projects.
Hayton (2005:31) argued that discretionary practises, such as incentive pay,
employee suggestion schemes and formal employee participation programs are
those practices which encourage employee commitment, cooperation, knowledge
sharing and voluntary, extra role behaviours. Therefore rewards for entrepreneurial
achievements must be emphasised in a form of financial gain and must be balanced
with recognitions for effective teamwork. The reason for this is that long-term
success is a function of individual’s efforts and the work of people collaborating to
synergistically use their knowledge to produce value-creating innovations.
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2.5.5 Organisational culture
According to Ireland et al. (2006:16), organisational culture is social energy that
drives or fails to drive an organisation and is a complex phenomenon that is felt or
experienced rather described in words. Kirby (2003:301) indicated that the guiding
principles in a traditional business is to not make a mistake, do not fail, do not take
initiative but wait for instructions and protect your back. In an entrepreneurial culture
the focus will be on the future rather them the past and the ability to develop and
transfer knowledge and produce an output (Hisrich et al., 2008:45). Ireland et al.
(2006:16) agree that entrepreneurially-intense cultures also place high importance on
being able to empower people in ways to allow them to act creatively and to fulfil their
potential. Authority and responsibility are decentralised to employees that are the
closest to the action to make decisions that are in the business best interest.
2.5.6 Conclusion
“The process of combining entrepreneurial behaviours (opportunity-seeking ones)
with strategic actions (opportunity-seeking within the context of a specific strategy) is
vital in designing and successfully using a corporate entrepreneurship strategy. The
ability for a firm to do these things results in a competitive advantage” (Ireland et al.,
2006:17).
2.6 DETERMINANTS FOR MEASURING SUSTAINABLE CORPORATE
ENTREPRENEURSHIP INTENSITY INTERNALLY
Corporate entrepreneurship (CE) and entrepreneurial intensity (EI) have been
emphasised by academics and in popular literature as essential survival strategies
for businesses in the new economy (Scheepers et al., 2007:240). According to
Birkinshaw (2003:3), corporate entrepreneurship refers to the development of new
business ideas and opportunities within large, established businesses and should not
be seen as a single event, but rather as part of the organisational culture of a
business. Ireland et al. (2006:26) state that entrepreneurial intensity is concerned
with the degree and frequency of entrepreneurship occurring within the business, as
well as the diagnosing of the internal work environment. This means that business’s
32
performance from the perspective of entrepreneurship at a point of time is shown by
its intensity score. Determinants that could assess the degree of entrepreneurship
are Innovativeness, Risk-taking and Pro-activeness and they added another
dimension, namely frequency of entrepreneurship, and called this phenomenon
entrepreneurial intensity (EI) (Morris & Sexton, 1996:6). Lumpkin and Dess
(1996:139-140) added two other dimensions namely Competitive aggressiveness
and Autonomy.
After understanding the business’ entrepreneurial intensity, it is important to
understand why the business has developed the current level of entrepreneurial
intensity. The determinants that indicate antecedents to corporate entrepreneurship
are: Management support, Work discretion; Autonomy, Reinforcement, Time
availability and Organisational boundaries (Scheepers et al., 2007:242). Hornsby
et al. (2002:269) identified with their research five factors (Management support,
Work discretion/Autonomy, Rewards/Reinforcement, Time availability and
Organisational boundaries) that are a parsimonious description of the internal
organisational factors that influence middle managers to foster entrepreneurial
activity within established businesses. Therefore the five determinants will assess,
evaluate and manage the business’s internal work environment in ways that support
entrepreneurial behaviour and the use of corporate entrepreneurial strategy.
2.6.1 Innovativeness
In the corporate entrepreneurship (CE) literature, Innovativeness is a predisposition
to engage in creativity and experimentation through the introduction of new products
(Rauch et al., 2009:763). Antoncic and Hisrich (2003:9) argue that the
Innovativeness dimension is broader than new product and services. Therefore
according to Jong, Parker, Wennekers and Wu (2011:5), Innovativeness also
include process-related innovations to bring new or improved production or marketing
methods or could apply to new kind of resources.
Mcfadezean, O’ Louglin and Shaw (2005:353) agree that Innovativeness reflects a
business’ tendency to engage in and support new ideas, novelty, experimentation
and creative processes that may result in new product and services. According to
33
Morris et al. (2008:53), business find that they must innovate more than the past due
to external forces, including the emergence of new and improved technologies, the
globalisation of markets (resulting in intensified competitive pressures), the
fragmentation of markets (resulting in intensified customer pressures), government
deregulation and dramatic social change.
According to Kuratko and Wesch (2001), adopdted by Oosthuizen (2006:136),
continuous innovation and an ability to compete effectively in international markets
are among the skills that are expected to increasingly influence corporate
performance in the twenty-first century’s global economy. Drejer (2006:143) stated
that there is a growing recognition that innovation has become the only sustainable
source of growth and competitive advantage. Morris et al. (2008:6) indicate that the
challenge to managers is one of creating an internal marketplace for ideas within
their businesses and encouraging employees to act on these ideas. The reality is
that innovation poses a large number of dilemmas for corporate managers as
indicated by Morris et al. (2008:58), as illustrated in table 2.1. Therefore it is
important to note that there must be a focus on best practices to overcome these
dilemmas.
TABLE 2.1: SIXTEEN DILEMMAS OF INNOVATION
1. Not all entrepreneurs are innovators, and not all innovators are entrepreneurs, but successful
entrepreneurship tens to involve continued innovation (in products, services, and process/methods).
2. Innovation is about the unknown. Management is about control. How do you control the unknown?
3. Innovation is often about breaking the rules. People who break rules don’t last long in organisations.
4. Successful innovation tends to occur when there are constraints, routines, and deadlines. There is a
need for both freedom and discipline, and the issue is one of balance.
5. Failure is likely if the company does not innovate. But the more the company innovates, the more it
fails.
6. An innovation succeeds because it addresses customer needs. Yet when you ask customers about
their needs, many do not know or cannot describe them to you except in very general terms.
7. Innovating can be risky. Not innovating can be more risky.
8. Innovation can be revolutionary or evolutionary. The costs, risks, and returns of both types differ, and
both require different structures and management styles.
9. A company that innovates is frequently making its own products obsolete when there was still profit
potential in those products.
10. Innovation requires supporting infrastructure to be successful, and the existing infrastructure is often
inadequate. However, these infrastructure needs may not become apparent until after the innovation is
developed.
34
11. While innovation is more technically complex and costly today, may breakthrough innovations do not
come from large companies or corporate R&D labs with sizeable budgets, but from individual inventors
and entrepreneurs.
12. People who design innovations typically seek to perfect their new product or service, making it the best
possible. But the marketplace often wants it to be “good enough”, not perfect. The additional time and
money necessary to make the innovation the “best possible” drive up prices beyond what the customer
will pay, and result in missed opportunity.
13. Technology-driven innovation often leads to dramatic new products that prove to be “better mousetraps”
nobody wants. Customer-driven innovation often leads to minor modifications to existing products or
“me-too” products meeting a competitive brick wall.
14. While typically associated with genius or brilliance, innovation is more often a function of persistence.
15. While innovation is sometimes associated with breaking the rules of the game, it frequently entails
playing an entirely different game.
16. Being first to market is not consistently associated with success, while being second or third
is not consistently associated with failure.
Source: Morris et al. (2008:58)
2.6.2 Risk-taking
The second dimension of corporate entrepreneurial intensity is Risk-taking. Jong et
al. (2011:7) state that Cantillon (1755) was among the first to define an entrepreneur
as a person who bears risk of profit or loss, Risk-taking is considered a fundamental
element of an entrepreneur. Lumpkin and Dess (2005:431) define Risk-taking as a
tendency to take bold actions such as venturing into unknown new markets,
committing a large portion of resources to ventures with uncertain outcomes and or
borrowing heavily. Jong et al. (2011:7) argue that entrepreneurs prefer moderate
rather than high risks, and try to manage or reduce risks as much as possible.
Burns (2005:16) agrees that Risk-taking involves a willingness to pursue
opportunities that have reasonable likelihood of producing losses of significant
performance discrepancies. The emphasis is not on extreme, uncontrollable risks,
but instead of risks that are moderate and calculated.
Therefore, it could be seen that there are a direct correlation between Innovation
and Risk-taking but in reality, it is a more complex relationship that are curvilinear,
shown in figure 2.2 (Morris et al., 2008:63).
35
Figure 2.2, indicated that risk is high when a business ignores new product and
service opportunities and engage in no or little innovations. Risk is also high when
business takes the opposite trait and come up with breakthrough innovations to
create new markets. Morris et al. (2008:62) argued that risk is lower and more
manageable when lots of trials and experiments are regularly pursued.
FIGURE 2.2: Relating innovations to risk
Source: Morris et al. (2008:63)
2.6.3 Pro-activeness
In the CE literature, Pro-activeness is an opportunity-seeking, forward-looking
perspective characterised by high awareness of external trends and events and
acting in anticipation thereof (Rauch, Wiklund, Lumpkin & Frese, 2009:761). Jong et
al. (2011:6) argue that Pro-activeness has been associated with pioneering
behaviour and initiative taking to pursue new opportunities and refers to the extent in
which organisations attempt to lead rather than follow in key business areas. Morris
et al. (2008:64) state that Miller (1987) associates Pro-activeness with
assertiveness as a dimension of strategy making and measures Pro-activeness in
three items: following versus leading competitors in innovation, favouring the tried
and true versus emphasising growth, innovation and development, and trying to
cooperate with competitors.
High
Low
RISK
Little to No
Innovative Activity
Home Run
Strategy
Lots of Trials and
Experiments / Balanced
Portfolio of Projects
INNOVATIVENESS
36
Therefore Pro-activeness could be seen as taking responsibility to implement
whatever is necessary to bring an entrepreneurial concept to fruition (Morris &
Kuratko, 2002:44). Oosthuizen (2006:83) stated that Pro-activeness is especially
effective at creating competitive advantages because it puts competitors in the
position of having to respond to successful initiatives. This is called first mover
advantage.
2.6.4 Competitive aggressiveness
Lumpkin and Dess (2001:433) state that Competitive aggressiveness refers to the
intensity of a business efforts to outperform industry rivals by a strong offensive
posture directed at overcoming competitors and may also be quite reactive as when
a business defends its market position or aggressively enters a market that a rival
identified. Barney (1991:99) argued that business create, acquire and leverage
resources to achieve sustainable competitive advantage. Christensen (2004:302)
agrees that the real challenge is to establish competitive advantage and the way to
accomplish that is through differentiation and continuous innovation, whether it is
related to the creation of new products and services, production, organisational
processes or business models.
Dess and Lumpkin (2002:445) confirmed with research that a strong competitively
aggressive stance gives a business the ability to be a decisive player in a field of
rivals and to act forcefully to secure or improve its position.
2.6.5 Autonomy
Lotz (2009:47) mentioned that Autonomy refers to the independent actions of an
individual or team in bringing forth an idea or a vision and carrying it through to
completion. Therefore Autonomy is essential to the process of leveraging a
business existing strengths, identifying opportunities and encouraging the
development of new ventures or improved business practises. Ferreira (2002:7)
argued that entrepreneurial participants, at the product or market level, will conceive
new business opportunities, engage in project championing efforts to mobilise
37
corporate resources for new opportunities and perform strategic forcing efforts to
create momentum for their development.
Burgelman (1983:1352) identified corporate entrepreneurship with autonomous
strategic behaviour that takes shape outside the current structural context, yet, to be
successful, it needs eventually to be accepted by the business and to be integrated
into its concept of strategy.
2.6.6 Determinants measuring the internal work environment
2.6.6.1 Management support
Scheepers et al. (2007:242) state that Management support capture the
encouragement and willingness of managers to facilitate and promote
entrepreneurial behaviour; including the championing of innovative ideas and
providing the resources people require to behave entrepreneurially. Kuratko,
Montago and Hornsby (1990:56) argue that these factors both individually and in
combination affect the organisational climate that moulds managers’ and employee’s
attitudes towards and interest in corporate entrepreneurship efforts. Furthermore
agreed support must derive from the highest level, be formulated into strategy and
then communicated through the organisation (Turner, 2002:45). Gaw and Liu
(2004:69) argue that direct support from senior management and middle managers
will be necessary for the intrapreneur to be successfully championing an idea.
2.6.6.2 Work discretion/autonomy
Ireland et al. (2006:27) state that Work discretion and Autonomy refers to top-level
manager’s commitment to tolerate failure, provide decision-making latitude and
freedom from excessive oversight and are willing to delegate authority and
responsibility to middle and lower level managers. According to Scheepers et al.
(2007:243), Autonomy refers to employees’ discretion and the extent to which they
are empowered to make decisions on the performance of their own work in the way
they believe is most effective.
38
Hornsby et al. (2002:257) state that middle managers lay the foundation for
employees in business to be innovative and take risks. Middle managers do this by
providing mostly (intrinsic rewards) that allow employees to experiment with and to
explore the feasibility. Floyd and Woodridge (1992) as adopted by Ikavalko and
Aalton (2001:2) argue that middle managers plays pivotal roles in championing
strategic alternatives to make business structures less resistant to change thereby
allowing corporate entrepreneurial strategies to flourish.
2.6.6.3 Reinforcement/rewards
Ireland et al. (2006:27) state that Reinforcement involves developing and using
systems that reinforce entrepreneurial behaviour, highlight significant achievements
and encourage pursuit of challenging work. Thompson, Peteraf, Gamble and
Strickland (2012:424) argue that financial incentives (combination of base-pay
increase, performance bonus, profit sharing plans, stock rewards, company
contribution to employee or retirement plans) generally head the list of motivating
tools for gaining wholehearted employee commitment to good strategy execution and
focusing attention on strategic priorities. Thompson et al. (2012: 424-425) state that
there are also successful businesses that use non-monetary incentives to enhance
motivation of employees and could include:
• Attractive perks and fringe benefits (College or tuition reimbursement, paid leave
to care for family members, recreational facilities, casual dress days, on-site child
care and flexitime).
• Give awards and other forms of public recognition to high performers and
celebrate the achievement of business goals.
• Invite and act on ideas and suggestions of employees.
• Create a work atmosphere in which there is a genuine caring and mutual respect
among workers and between management and employees.
• State the strategic vision in inspirational terms so that employees feel they are a
part of something very worthwhile in a larger social sense.
• Share information with employees about financial performance, strategy,
operational measures, and market conditions and competitors actions.
• Maintain attractive office space and facilities.
39
Turner (2002:184) agree with Thompson (2012) but add that the right people must be
encourage to act in the right roles with an entrepreneurial attitude to create value and
this must be founded in a reward system that is meaningful and motivating.
2.6.6.4 Timely availability/resources
Ireland et al. (2006:28) state that Time availability suggests evaluating workloads to
ensure that individuals and groups have the time needed to pursue innovations and
that their jobs are structured in ways that support efforts to achieve short and long-
term business goals. De Villiers-Scheepers (2012:410) agrees that time and
resource availability influences employees’ perceptions of the feasibility of
entrepreneurial behaviour, more specifically resource availability for entrepreneurial
activities. Therefore new and innovative ideas to thrive, individuals should have time
to incubate their ideas (Covin & Slevin, 1991:20).
Hornsby et al. (2002:258) argue that businesses should be reasonable in assigning
the workload of their employees and allow employees to cooperate on long-term
problem-solving. The reality of increasing work and time pressures may expose this
as a theoretical idea. Kuratko et al. (2005:704) agree that in entrepreneurial work
environments, employees should be allowed to conduct creative, entrepreneurial
experiments during a limited portion of their work time, the reality often falls short of
the ideal.
2.6.6.5 Organisational boundaries
Supportive business structure and Organisational boundaries provide
administrative mechanisms by which ideas are evaluated, chosen and implemented
(Hornsby et al., 2002:270). De Villiers-Scheepers (2012:411) argued that a
bureaucratic business structure leads to perceived boundaries, preventing
employees from noticing problems outside their own area of responsibility. Therefore
the business should be viewed from a holistic perspective as opportunities cut across
several functions.
40
2.6.6.6 Corporate entrepreneurial program
A corporate entrepreneurial program will assist staff in understanding corporate
entrepreneurship and what is expected from them. The following elements must be
included in the corporate entrepreneurial program: introduction to entrepreneurship,
entrepreneurial breakthroughs, creative thinking, idea development, process,
barriers, facilitators and triggers to entrepreneurial thinking, venturing planning
(Ireland et al., 2006:29).
2.7 CORPORATE ENTREPRENEURSHIP STRATEGY
Ireland et al. (2009:21) define corporate entrepreneurial strategy as a vision-directed,
organisational-wide reliance on entrepreneurial behaviour that purposefully and
continuously rejuvenates the organisation and shapes the scope of its operations
through the recognition and exploitation of entrepreneurial opportunity. Morris and
Kuratko (2002:150) argued that the comptempory business environment is
characterised by increasing risk, decreased ability to forecast, and fluid industry
boundaries that need an entrepreneurial mind-set that must unlearn traditional
management principles in order to minimise failure. The mind-set needs to create or
help shape its own environment by creating a strategic and entrepreneurial alertness
for it to survive the chaos, complexity and contradictions.
Sathe (2003:2) stated that strategic entrepreneurship is the integration of
entrepreneurial (opportunity seeking actions) and strategic (advantage seeking
actions) perspectives to design and implement entrepreneurial strategies that create
wealth.
Dhliwayo and Van Vuuren (2007:125) indicated that McGrath and MacMillan (2000)
outlined some of the characteristics of an entrepreneurial mind-set:
• Passionate seeking new opportunities.
• Pursue opportunities with enormous discipline.
• Pursue only the best opportunities and tightly link their strategy with the choice of
projects.
41
• Focus on execution, specifically adaptive execution when the best way to exploit
archives.
• Engage the energies of everyone in their domain (internally and externally).
Ireland, Hitt, Camp and Sexton (2001:510) state that effective integration of
entrepreneurial actions and strategic management actions facilitates a business’s
wealth-creating efforts. Groenewald (2010:115) argued that when entrepreneurship
and strategic management processes are integrated it will create synergy that
enhances the value of its outcomes.
2.7.1 Critical aspects related to corporate entrepreneurship strategy
According to Kuratko and Hodgetts (2007), as adopted by Groenewald (2010:119),
the following aspects that are recommended to develop a corporate entrepreneurial
strategy:
• Strategic vision must be clearly articulated by business leaders.
• Shared vision is critical for a strategy that seeks high achievement.
• Business must understand and develop innovation as the key element in their
strategy.
• Encouraging innovation requires a willingness not only to tolerate failure but also
learn from it.
• Structuring a corporate entrepreneurial climate by providing more information
sharing activities.
• An environment needs to be developed that will help innovate-minded people
reach their full potential.
• For business to promote innovation among their employers they must give careful
attention melding of individuals attitudes, values and behaviours with the
organisational factors, structures and rewards.
• Developing individual managers for corporate entrepreneurship through a
corporate entrepreneurial training programme.
• Developing venture teams that are self-directed and self-managing of a new
business.
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2.8 SUMMARY
The aim of this chapter was to introduce corporate entrepreneurship. This issues
addressed were the definitions and overview of corporate entrepreneurship, the
necessity of corporate entrepreneurship for business sustainability, a discussion on
the different conceptual frameworks applied in the field of corporate
entrepreneurship. The chapter included a framework for sustainability, with the
determinants indicated. The chapter was concluded with the final link namely
corporate entrepreneurship as strategy.
The true value of the literature review was to give an insight to the concept to create
sustainable competitive advantage through corporate entrepreneurship. Researches
confirmed the necessity of sustainable corporate entrepreneurship in the 21th
century due to the global entrepreneurial revolution in the free market economy.
Corporate entrepreneurship could be seen as a process that goes on the inside of an
existing business and that may lead to new business ventures, the development of
new products, services or processes and the renewal of strategies. It was also
confirmed that corporate entrepreneurship was not a new concept and that it is
known under different labels.
The quest for competitive advantage requires that business and managers
continually reinvent themselves through five key organisational capabilities:
adaptability, flexibility, speed, aggressiveness and innovativeness.
Entrepreneurship is fostered in seven ways in well-established business: through
research and development departments, ad hoc venture teams, new venture
divisions, entrepreneurship from champions and the mainstream, acquisitions,
outsourcing innovation.
The focus of the chapter was on the framework for sustainable corporate
entrepreneurship of Ireland et al. (2006) with specific focus on the determinants of
the internal work environment that supports corporate entrepreneurship. The
determinants that will lead to intensity of corporate entrepreneurship discussed were:
43
Innovativeness, Risk-taking, Pro-activeness, Management support, Work
discretion, Reinforcement, Time availability and Organisational boundaries.
A corporate entrepreneurial program must be implemented in a business to integrate
the sustainable corporate entrepreneurial framework with the determinants.
Elements that will be covered in such a program is: introduction to
entrepreneurship, entrepreneurial breakthroughs, creative thinking, idea
developing process, barriers, facilitators and triggers to entrepreneurial
thinking as well as venture planning.
The final link in this chapter was to confirm that corporate entrepreneurship must be
converted into strategy as pre-requisite for the successful implementation of an
integrated corporate entrepreneurial framework.
The next chapter will focus on the changing agricultural industry in South Africa, with
a specific focus on Senwes Limited retail division.
44
CHAPTER 3
OVERVIEW OF CO-OPERATIVES TO AGRI-BUSINESSES
3.1 INTRODUCTION
The evolution of South African agricultural co-operatives has to be viewed in the
context of the evolution of South Africa’s agricultural sector, the regulation and
eventually the deregulation of agricultural marketing in South Africa. The purpose of
this chapter is to provide such a historical context. Accordingly, this chapter will give
an overview of the agricultural industry, factors influencing the agricultural industry
will be discussed, and the focus will be on the overview of co-operative to agri-
businesses. Finally, an overview of Senwes Limited will be given with specific focus
on Senwes Village, Retail division.
3.2 OVERVIEW OF AGRICULTURAL INDUSTRY IN SOUTH AFRICA
Lotz (2009:153) states that South Africa does not have ideal conditions for agriculture
and this is confirmed by the fact that less than 12% of the land is arable of which only
22% can be regarded as high potential arable land. A critical factor is that South
Africa’s rainfall is spread unevenly throughout the country. Almost 1.5% of
agricultural land (1.3 million hectares) is under irrigation.
Factors such as weather conditions, commodity prices, input cost, stock levels,
consumption demand as well as exchange rates will continue as never before to
influence agricultural production in the country (South Africa, 2010:10). This could
influence the production of field crops to decrease further. South Africa (2011:1)
confirms that field crops decreased in 2010/2011, but that agricultural production was
in total more or less the same and is illustrated in figure 3.1.
45
Figure 3.1: Volume of agricultural production
Source: South Africa (2011:1)
The volume of ?eld-crop production re?ected a 4.5% decrease as a result of a
decline in the production of summer grains. Maize production decreased by 2 million
tons or 15% from the previous season, followed by wheat with 530 000 tons or 27%.
Sugar cane, on the other hand, showed an increase of 3.3%. Horticultural production
increased slightly by 0.2%, mainly because of increases in the production of
vegetables and citrus fruit. The production of potatoes increased by 134 834 tons or
6.8% and that of onions by 71 214 tons or 14.6%. Citrus fruit, speci?cally grapefruit
and lemons, increased by 31 744 tons or 5.9%. Animal production also increased
slightly by 1.8% as a result of increases of 3.6% (24 698 tons) in cattle and calves
slaughtered and 3.3% (47 000 tons) in poultry slaughtered.
According to BFAB (2012:9), the following production estimates are made for
production of field crops until 2015:
• Maize: The Crop Estimates Committee (CEC) indicated the higher current
maize price increased the farmer’s intent for the 2011/12 planting season with
9.2%. Weather conditions could still have a big influence. In the five years to
2014/15 maize production is predicted to expand by just 1.5%, while
consumption will grow by 16%.
• Poultry: Production growth of 19.8% is envisaged through to 2014/15, while
consumption will increase by over 23%.
46
• Wheat: The CEC indicated 28.7% increase in wheat production in 2010/11.
This follows a 27% fall in production in 2009/10. Positive growth of 35% is predicted
through to 2014/15, although this reflects a low starting point.
BFAB (2012:10) confirms that the demand for food in general is expected to grow
over the next decade mainly due to population growth, whilst in real terms world
commodity prices are likely to remain fairly stagnant at higher plateau compared to
the previous ten years from 2001 to 2011.
South Africa (2011:1) indicated further that the prices of producers of agricultural
products decreased on average by 4.3% from 2009/2010 to 2010/2011. This
resulted in a decrease in the gross income of producers for the year end 30 June
2011 to R131 699 million, compared with R132 199 million the previous year, a
decrease of 0.4%. The decrease in income can be contributed to a combination of
small increases in prices farmers received for their products, lower than expected
production and slow deliveries of maize (South Africa, 2011:2). The gross income of
field crops decreased by 12% to R27 610 million for the year ended 30 June 2011.
The gross farmer sector income is illustrated in figure 3.2.
Figure 3.2: Gross farmer sector income
Source: South Africa (2011:2)
47
BFAB (2012:12) suggested that commodity prices in 2012 are expected to remain
well above those of the previous year and this is due to the significant rise in world
prices and the current United States draught conditions, and this will have an impact
on local prices that will remain high in 2013. The real gross income is expected to
increase by 6.3% in 2012 and further 13% in 2013 and beyond 2013 the growth rate
are expected to be stagnant as local prices in real terms are expected to remain flat.
South Africa (2011:3) indicated further that the net farm income amounted to
R33 161 million for the 12 months ended on 30 June 2011, which is 18.3% lower
than the previous 12 months. The decline in net farming income is the result of the
decrease of 0.4% in gross farming income and an increase of 10.4% in expenditure
on intermediate production inputs and services, payments for salaries and wages
represented 12.1% of the total farming costs and interest paid to financiers amounted
to 4.9% of total farming costs. The net farm sector income is illustrated in figure 3.3.
BFAB (2012:14) indicated that real gross income is expected to increase by 6% in
2012, with a further increase of 7% expected in 2013. From 2014 it is projected that
the annual growth rate will be 1.4% and in 2014 there will be an initial decline,
followed by a recovery and gradual increase in real gross income till 2021.
PriceWaterhouseCoopers (PWC) (2011:2) indicated that farming in general remains
unprofitable as a result of the poor competitive position in which local producers find
themselves in relating to their overseas counterparts. Grain prices play an important
role in producer’s credit worthiness, with particular emphasis on repayment and
management capacity.
48
Figure 3.3: Net farm sector income (NFI)
Source: South Africa (2011:3)
According to PWC (2011:4), agri-businesses will concentrate mainly on maintaining
prosperity through cost and risk management and will also focus on retaining market
share.
3.3 AGRI-BUSINESSES SECTOR IN SOUTH AFRICA
An overview of the history of South African co-operatives will be viewed in context of
the evolution of South Africa’s agricultural sector.
3.3.1 Evolution of agri-businesses in South Africa
According to the Competition Commission (2006:27), South Africa’s co-operative
movement was born in 1900’s to provide commercial farmers with collective buying,
marketing and organisational power. It specifically focused on input supplies and
joint marketing of production. The co-operatives became very powerful, holding a
monopoly in key agricultural sectors, backed by access to finance through the Land
Bank (Bosman, 1927:301). The Marketing Boards regulated product prices
(Marketing Act 26 of 1927) until 1994 and made use of co-operatives as the single
marketing system of maize.
49
As a result of the regulating body and the single marketing system, the actual
activities of co-operatives tended to span all functions necessary to produce the
product, bring it to the market and included financing, storage, processing,
packaging, distribution, sales and exports (Serfontein, 1970:3). Producers in the
sub-sector had to be members of the co-operatives.
Furthermore, Ortmann and King (2007:42) confirmed the unique characteristics of
co-operatives:
• Co-operatives are owned and democratically controlled by their members and
not by outside investors.
• Co-operatives return surplus income to members in proportion to their use of the
co-operative and not as a result of their investment or ownership share.
• Co-operatives are not motivated by profit, but by providing a service to satisfy
members.
• Co-operatives exist solely to serve their members.
• Co-operatives pays taxes on income retained for investment and reserves.
Ortmann and King (2007:46) argued that the substantial cost of supporting
commercial farmers in terms of subsidies, price support, tax concessions and the
misallocations of resources caused by distorted prices were not sustainable. As a
result of political changes happening, it led to a series of reforms in 1980, including
the removal of subsidies and tax concessions and deregulation of agricultural
financing and marketing. These actions reduced the role of agricultural co-operatives
and made them less dependent on government support.
Therefore, according to Sexton and Iskow (1993:15), the Commity of enquiry’s
recommendation into the Marketing act of 1937 led to the Marketing of Agricultural
Product Act, (No 47 of 1996) that ended the state control of agricultural commodities
and resulted in the demise of the marketing boards (Philip, 2003:18). The implication
of the act was a material effect on co-operatives. Co-operatives no longer have the
privilege of being appointed as agents of various marketing boards thus losing their
monopoly powers, and are no longer involved in distributing government subsidies,
but they still provide short and medium credit to the farmers (Vink & Kirsten,
50
2000:13). Therefore, several co-operatives have converted to investor-oriented firms
(IOF’s) and some are listed on the Johannesburg Securities exchange (Piesse,
Doyer,Thirtle & Vink, 2003:197).
3.3.2 The effect of deregulation on the agricultural sector
According to the Organisation for Economic Co-operation and Development (2008:3),
the most important effects of the deregulation of the agricultural sector are:
• Opening of the agricultural sector increased exports with a result in growth of
revenues.
• Shifts in production of grain to livestock in marginal production areas and an
increase in intensive farming in high potential areas.
• Farmer involvement in risk management by means of storage, forward contracts
and diversification.
• Strengthening role of organised markets and producer responsiveness to price
signals.
• Establishment of new enterprises in agriculture and downstream food processing
sectors.
3.3.3 The effect of deregulation on agri-businesses
Lotz (2009:164) indicated that many co-operatives change to IOF’s after the
deregulation of the agricultural sector. The advantage for the agri-businesses is an
increase in external funds that could be used to expand business products and
services. On the financial side it includes crop insurance, the ability to hedge input
cost (such as diesel) and personal finance planning for the farmer. On the technical
side, it included precision farming techniques and access to cutting edge feed, plant
and seed technologies.
As result, the largest impact to the agri-businesses sector is that they now have to
position themselves as business driven competitors in a less controlled free market
and global trading environment (Van Rooyen, Esterhuizen & Doyer, 2000:12).
51
The next section (3.4) will give an overview of Senwes Limited that converted from a
co-operative to an agri-business. The discussion will include a discussion on the
trade side of the business, Senwes Village, Retail division.
3.4 SENWES LIMITED
3.4.1 Establishment of co-operative
The 15
th
of May 1909 marked the birth of Senwes when forty farmers met in
Klerksdorp to assemble the “De Centraal Westelijke Co-operative Landbouw
Vereeniging”. Their initiative was to establish an Agricultural association that could
focus on the handling, marketing and input provision of agricultural products
(Serfontein, 1970:3).
3.4.2 Conversion from co-operative to business
Apart from tiring years of drought in the eighties, the democratisation of South Africa
in 1994 soon moved the focus to agriculture. According to Van Eeden (2009:85),
land distribution and land issues and greater visibility of the population of the country
in the agricultural sector were aspects that made agricultural business reconsider
their position and future positioning in South Africa economy.
From 1995, agriculture was taken from a regulatory economy to a free market that
was already operational worldwide.
Formulation of a business was confirmed on 10 April 1997 and this step leads to the
transformation of virtually every department of Sentraalwes, which was known from
then on as Senwes. Senwes entered the business world in a new jacket as Senwes
public business that would compete in the free market system in the future.
By 1999, it was clear that it had become necessary to transform Senwes into more
focused business units, although still customer-directed, in order to enhance the
confidence of investors. The value of the traditional core businesses in Senwes was
regarded as of particular importance. However, the demands that a diversified
52
structure made on the expenditure side, compounded by the unsatisfactory income
performance of many subsidiaries, caused Senwes to move into a financial bind
since there was no other alternative than to negotiate the immense losses for a
considerable period of time (Van Eeden, 2009:126).
During the 2000 financial year, the industrial portfolio suffered great losses and the
lack of management capabilities and resources led to a loss of focus on core
businesses. The company experienced problems in performing within a free market
environment which was gaining momentum in the country. Senwes was losing
market share and the image of the company was tainted (Van Eeden, 2009:127).
During 2000, the value of Senwes’ shares had dropped from R4.50 to only R0.07 due
to significant losses made by various business units and subsidiaries which led to
shareholder activism. This all came to head at a shareholders meeting in Kroonstad.
The shareholders demanded the resignation of all the non-executive board members
(Anon., 2000).
By March 2001, the commercial banks formed a consortium against Senwes and
made several demands. Among others, it was demanded that Senwes’ level of
management had to be improved (as the Gemini Group had recommended in an
earlier investigation). Furthermore, investigations had to be lodged in certain critical
operational fields of the company and that business units had to be restructured and
rationalised. Despite the worsening financial situation of Senwes, the Land Bank still
supported the company. In April 2001, the company reported a loss of R468 million
due to significant debt write-offs and losses realised by divisions and subsidiaries.
Drastic steps had to be taken (Senwes, 2001).
The board appointed Johan Dique as CEO in August 2001 with the specific challenge
of turning the company around and recovering lost shareholder value. In total,
shareholder value of about R570 million was lost between 1998 and the financial
year which ended on 30 April 2002. The focus was on strengthening the traditional
core agricultural business and industrial optimisation rather than on managing the
many existing, diversified industrial investments. Furthermore, the cash flow of the
company also had to recover sufficiently to reduce the debt burden. A strategic plan,
53
called the value-creation and development strategy, was approved by the board and
Senwes started executing it with great success (Van Eeden, 2009:132).
Senwes continued divesting from underperforming business activities and the
focused turnaround and value creating efforts remained the primary drivers of the
recovery process of returning to the core businesses of Senwes as agricultural
company. The last two subsidiaries were sold only months later. By the end of the
2003 financial year, the total value lost amounted to about R1 billion (Van Eeden,
2009:133).
In May 2002 a group of business men and attorneys formed Landboulex and
convinced a number of smaller shareholders to sign a mandate giving Landboulex
the power to vote on their behalf at the Annual General Meeting. In reaction to this,
Senwes’ management held an extensive road show with shareholders during the
spring of 2002 with Johan Dique as the main representative (Anon., 2002).
The program of transformation, the turnaround and value creating strategy and
business plan were presented to the shareholders. Shareholders were requested to
give the process, which they had approved in October 2000, a fair chance. In the
midst of Landboulex’s continued attempts to take Senwes over, the vast majority of
Senwes’ shareholders rejected the onslaught and voted in support of Senwes’ Board
and executive management in November 2002. In June 2003, Senwes instituted
actions against its former auditors, PriceWaterhouseCoopers and some of Senwes’
former executive directors due to negligence concerning investment decisions and
losses realised in the past (Van Eeden, 2009:129).
On 23 January 2004, after the turnaround process had been completed (refer to
figure 3.4), a five year strategy was approved to reposition the Senwes group in
addressing the increasing demands of the changing socio-political milieu and highly
competitive economic and agricultural environment.
54
Figure 3.4: Successful completion of the turnaround strategy
Source: Van Eeden (2009:186)
The value development strategy, which was actively implemented from 2004, was
initially accompanied by uncertainty and instability due to external pressure of
especially investors. For the sake of optimising the industry, some members of the
personnel corps of Senwes were retrenched to reduce the personnel corps to 1,091.
During the turnaround phase of Senwes, about 25% of the departments were
restructured, of which about half were again built up after 2004 in order to enhance
growth in support of achieving the strategic goals of value-creation (Van Eeden,
2009:134).
Prominent focus was afforded to the value-creation objectives to benefit both the
shareholders and customers of the company as well as to improve the image of the
company, internally and in the public arena. These strategic objectives were:
• Developing of values for shareholders of the Senwes group.
• The negotiation of a black economic empowerment transaction (BEE).
• Alliances with strategic partners.
• More effective and more continuous application of corporate management.
• Attention to the development of business confidence and business success.
55
• Continued seriousness regarding the key role Senwes must fulfil among its
producers in the agricultural industry.
• The pursuance of long-term profitability to the benefit of all interested parties.
Among others, it includes growth in the share price and a focus on a constant
stream of dividends.
Senwes management focused on the continued development and growth of the
existing core businesses. The strategy was implemented in different phases over a
period of four financial years, from 2003 to 2006. Management launched the Senwes
Business Alignment Project in an effort to boost the morale of employees after the
rationalisation phase completed during the turnaround. The first traces of the
Senwes Business Alignment Project were already visible in 2003 and by 2006 it was
refined and applied further. An important aim of the project was to inform the young
management team and the personnel corps about the value development strategy in
such a manner that they could actively support and promote the strategy. The
introduction of the Senwes Intranet was aimed at using this communications tool to
support the alignment project. Amongst others, the business alignment project also
entailed that the skills of employees had to be improved (Van Eeden, 2009:137).
Senwes also required a viable strategy to transform Senwes and to accommodate a
more representative black group of employees in adherence to black economic
empowerment and employment equity regulations. At the stage, Senwes also
assumed a leadership role in the Agricultural Business Chamber (ABC) in formulating
a black economic empowerment (BEE) charter for the agricultural sector, referred to
as AgriBEE (Anon., 2004).
In December 2005, Senwes succeeded in negotiating and facilitating a BEE deal with
a consortium, consisting of the Royal Bafokeng Nation and Treacle Private Equity,
whereby the consortium acquired a 27.14% share in Senwes Ltd. By July 2008, the
BEE interest Senwes enlarged when Treacle Private Equity acquired a further 5.8%
of the shares issued. This implied that black shareholders owned 34.7% of the
shares of Senwes and it was said that Senwes had advanced furthest with regard to
black economic empowerment in the country (Van Eeden, 2009:139).
56
In 2006, Senwes was already on its way to rebuilding the company’s image from that
of a doomed organisation to one of a respected industry role player. The company’s
shares were sold at levels of about R3.00. Due to the turnaround process (2001-
2003) and followed by the value development process for shareholders (2004-2009),
the share price of Senwes increased from R0.30 in 2001 to constant levels above
R5.00 with a climax of R6.50 by 2008 (Van Eeden, 2009:190). By late 2008, Senwes
qualified for listing in all respects, namely financial achievement, systems, quality of
management and compliance with corporate management.
Large investments were made in intellectual capital with regard to grain marketing to
develop it in such a way that it would deliver the same profitability as the grain
storage function. There was a lack of such expertise in South Africa, but through
product innovation Senwes ensured that it was able to market the maximum grain
that entered its silos. A market share of over 80% was achieved in 2007. On 2
October 2008, the Trade Department became Senwes Village and the division
established two retail shops under the sub-brand Senwes Village and Village Grocer
(Van Eeden, 2009:140).
Since the beginning of 2007, Senwes have grown to be one of the leading role
players in the South African agricultural sector, with a grain storage infrastructure of
70 silos. The company had a storage capacity for 4.6 million tons of grain, which
made about 30% of the total national capacity (Senwes, 2011:28). Roughly 32% of
the grain and oil seeds of the country were produced in the geographical region of
Senwes. Retail stores were deployed in rural towns across the service area which
supported input distribution to producers throughout the region.
The year 2010 was earmarked by the resignation of the CEO, Johan Dique, as well
as Steven Alberts, the financial director. Both of them pursued new opportunities
after their successful terms as executive directors of Senwes. There were no
significant changes in the group structure during the 2010 financial year.
57
3.4.3 Senwes Limited current status
Francois Strydom was appointed CEO with Corné Kruger appointed as the new
financial director during the 2011 financial year. During the year, the Board
constituted a new investment committee, under the leadership of Steve Booysen,
former CEO of ABSA. There were no other significant changes in the group structure
of Senwes during 2011. Senwes group structure is illustrated in figure 3.5.
FIGURE 3.5: Senwes group structure
Sources: Senwes (2011:27)
In June 2011, the holding company SenwesBel, bought back the Senwes shares
held by the Royal Bafokeng consortium to increase its majority shareholding in
Senwes to 59%. Treacle, which is part of the Royal Bafokeng consortium, sued
SenwesBel and Senwes on ground that they contravened the Company Act (71 of
58
2008) in the acquisition of the Senwes shares. The case was dismissed by the
Northern Gauteng High Court in February 2012 and Treacle was ordered to pay all
legal fees of both the parties (Anon., 2012).
The 2011 financial period was challenging in terms of the environment, business and
the global economy and in which Senwes and its producers experienced both the
best and the worst of agriculture. Senwes’ performance during the first six months
was significantly lower than the previous year, but exceptional recovery was
demonstrated during the second semester in the wake of improved agricultural
conditions (Senwes, 2011).
Senwes’ 2011 financial performance reflected a net profit of R219 million, which was
an increase from 2010 in spite of a substantial decrease in turnover. Despite the
relatively poor input provision year, Senwes maintained its business base with an
EBITDA result of R471 million (2010: R455 million). The share price reached an all-
time high with a closing price of R10.20 at year-end. Senwes’ share price has
increased by R7.70 over the past 5 years while dividends of R3.14 per share were
distributed, thus creating shareholder wealth of R1,96 billion since 2007 (Senwes,
2011).
Figure 3.6: Turnover and net profit since becoming a public company
Sources: Adapted from information contained in Senwes’ annual reports
59
The core business of the Group, Senwes Grainlink, follows a dual growth strategy,
namely coupling with a large international grain trading partner and expansion of the
African footprint. Good progress was made in this regard during the year by the
establishment of a joint venture with the European operational arm of Bunge and the
establishment of a regional structure in Southern Africa.
Senwes today is one of the leading agricultural businesses in South Africa, focusing
on the provision of inputs for agricultural production, as well as market access to
grain produce (Senwes, 2011:32). This also strategically coupled with provision of
value added service, which include financing, agricultural technical services, logistics
and insurance.
Senwes business activities are predominantly in the North-West, Free State,
Gauteng and Northern Cape provinces of South Africa, with limited operations in
Western Cape. Senwes has established a presence in Malawi as part of its Africa
expansion strategy, with the focus in grain trading activities.
The market access side of the business provide storage and handling through a well
deployed silo infrastructure, which has a capacity of 4,6 million tonnes and
constitutes more than 25% of the total South African commercial storage capacity.
Senwes Grainlink is responsible for market access.
The input side provides all production inputs, mechanisation, production and asset
finance, through competitive value and service packages. Senwes Village division is
responsible for the input side of the business. Senwes Village division have a
strategic partner in the form of Senwes Credit that is responsible for the finance
activities. The operations overview could be schematic viewed in table 3.1
60
Table 3.1: Senwes operations overview
CREDIT EXTENSION INPUT SUPPLY MARKET ACCESS
SENWES CREDIT
SENWES VILLAGE,
RETAIL DIVISION
SENWES GRAINLINK
FOCUS AGRICULTUALLY FOCUSED SERVICES
NATURE OF
BUSINESS
• Financing of agriculturally
oriented inputs
• Financing of medium-
and long-term assets for
farming purposes
• Financing of marketed
grain through various
financing products
• Supply production inputs to
the agricultural producer
• Supply mechanisation
equipment, spare parts and
maintenance services to
the agricultural producer
• Supply a variety of
hardware and convenience
products
• Create market access for
the grain producer
• Procurement and
marketing of grain
• Handling and storage of
grain
• Logistical services for the
procurement and
distribution of grain
Sources: Senwes: 2009:4
3.4.4 Senwes Village
3.4.4.1 Nature of business
Senwes Village have two core business activities, retail and mechanisation. On the
retail and mechanisation side of the business the business structures are aimed at
providing agricultural producers with exclusive and competitive value and service
packages. The extension of relevant input cost financing also results in added-value
for producers. Mechanisation supply mechanisation and maintenance services to the
agricultural producer with regard to agricultural equipment. Retail supplies a variety
hardware and consumer products to the agricultural producers and general public.
3.4.4.2 Positioning
Deployed infra and - marketing structures and product ranges to service the producer
in respect of production inputs and mechanisation requisites through twenty six retail
stores, twelve mechanisation workshops, four fuel stations and four convenience
stores.
61
3.4.4.3 Strategic objective
Senwes Village strategic objective is to fulfil the role of preferred supplier of
production inputs and mechanisation to the agricultural producers with distinction.
3.4.4.4 Village - Operational profit after interest before tax
During the 2011/2012 financial year, the supply input division contributed to 18%
(R65m) of the organisation’s profit before tax (Senwes, 2011:23).
3.4.4.5 Future focus, prospects and expectations of Senwes Village (Senwes
2009:16)
Senwes Village will focus on the following strategic objectives:
• Successful roll-out of Senwes Village value proposition.
• Upgrading of strategic retail outlets.
• Improving service offering and value adding.
• Expanding the product range and improving the quality.
• Focusing on after sales service.
• Expanding market share.
• Expanding total product and service offering.
• Establishing new outlets in strategically important areas.
• Optimising stock levels and product ranges.
• Increasing risk management practices.
• Focusing on qualitative aspects of the business.
3.5 SUMMARY
An overview was given of the evolution of the South African co-operatives in the
context of the evolution of the South African agricultural sector, the regulation,
eventually the deregulation of the agricultural marketing in South Africa.
62
The overview of the agricultural industry in South Africa highlighted, that we do not
have ideal conditions for agriculture and that less than 12% of the land is arable of
which only 22% can be regarded as high potential arable land. Factors such as
weather conditions, commodity prices, input cost, stock levels, consumption demand
as well as exchange rates will continue as never before influences agricultural
production in the country.
South Africa’s co-operative movement was born in 1900`s to provide commercial
farmers with collective buying, marketing and organisational powers. They
specifically focused on input supplies and joint marketing of production. Co-
operatives became very powerful and they held a monopoly in key agricultural
sectors.
Agricultural Product Act (No 47 of 1996) ended the state control of agricultural
commodities and resulted in the demise of the marketing boards. The implication of
the act was a material effect on co-operatives. Co-operatives no longer have the
privilege of being appointed as agents of various marketing boards thus losing their
monopoly powers, and are no longer involved in distributing government subsidies.
They still provide short and medium credit to the farmers. Several co-operatives
have converted to IFO’s and some are listed on the Johannesburg Securities
exchange.
The deregulation had the following effects on the agricultural sector: Opening of the
agricultural sector, increased exports with a result in growth of revenues; shifts in
production of grain to livestock in marginal production areas and an increase in
intensive farming in high potential areas; farmer involvement in risk management by
means of storage, forward contracts and diversification; strengthening role of
organised markets and producer responsiveness to price signals; establishment of
new enterprises in agriculture and downstream food processing sectors.
The largest impact of the deregulation on the agri-business sector is that they now
have to position themselves as business driven competitors in a less controlled free
market global trading environment.
63
Senwes today is one of the leading agricultural businesses in South Africa, focusing
on the provision of inputs for agricultural production, as well as market access to
grain produce. This also strategically coupled with provision of value added service,
which include financing, agricultural technical services, logistics and insurance.
Senwes business activities are predominantly in the North-West, Free State,
Gauteng and Northern Cape provinces of South Africa, with limited operations in
Western Cape. Senwes has established a presence in Malawi as part of its Africa
expansion strategy, with the focus in grain trading activities.
Senwes Village have two core business activities, retail and mechanisation. On the
retail and mechanisation side of the business the business structures are aimed at
providing agricultural producers with exclusive and competitive value and service
packages. The extension of relevant input cost financing also results in added-value
for producers. Mechanisation supply mechanisation and maintenance services to the
agricultural producer with regard to agricultural equipment. Retail supplies a variety
hardware and consumer products to the agricultural producers and general public.
Senwes Village strategic objective is to fulfil the role of preferred supplier of
production inputs and mechanisation to the agricultural producers with distinction.
The tool that the researcher suggests to obtain the future prospects and strategic
objectives is through corporate entrepreneurship, specific the sustainable corporate
entrepreneurial framework of Ireland et al. (2006). It is further important to measure
the Senwes Village department managers and first line supervisors against the
determinants for corporate entrepreneurship in sections 2.7 and 2.8. The result
obtained will determine the readiness for corporate entrepreneurship.
The next section is of utmost importance for the Senwes Village division. The focus
will be on key retail success factors needed to be successful in the changing retail
environment for the 21st century, with a further focus on new retail trends.
64
CHAPTER 4
NATURE OF RETAIL
4.1 INTRODUCTION
Krafft and Mantrala (2006:13) indicated that the global business environment has not
been kind to retailers since 9/11 and a number of factors add to their challenges:
deflation, high unemployment, lower consumer confidence, accounting irregularities,
ethnic violence and higher oil prices. Retailers are rising to these challenges in
different ways and entrepreneurially launching new formats, while others are
remaining competitive by driving costs down by using sophisticated communication
and information systems to manage their business (Dunne, Lusch & Griffith, 2002:9).
Soni (2010:4) stated that if retailers do not respond quickly and in appropriate ways,
they will find themselves floundering and being forced to take a deep hard look at
their business. In order to remain viable they must understand the key drivers for
retail success.
In order to understand the changing environment of retail, a broad overview of the
nature of retail will be discussed, followed by an indication of the key retail success
factors that retailers must consider to adapt to the changing environment to stay
competitive and unlock value for their customers.
4.2 DEFINITION OF RETAIL
Berman and Evans (2010:4) define retail as the business activities involved in selling
goods and services to customers for their personal, family or household use and
include every sale to the final consumer. Retail is the final stage of the distribution
process. Kotler and Armstrong (2010: 394) agree that retailing includes all activities
involved in the selling of products or services directly to the final consumer for their
personal, non-business use. Kerin, Hartley and Rudelius (2007:310) argue that
retailing is an important marketing activity, where producers and consumers meet
through retailing actions, but also creates customer value and has a significant
impact on the economy.
65
Retailing’s economic value is represented by the people employed in retailing as well
as by the total amount of money exchanged in retail sales. Hammond (2007:16)
concludes that the world’s best retailers do things ‘simple’ and brilliantly: they
communicate simple ideas clearly, quickly and meet straightforward needs in simple
straightforward ways.
4.3 CHANGES IN RETAIL
Morganosky (1997: 269) states that retailing are constantly changing due to the fact
that customers are continually seeking new outlets and demanding more from
retailers they choose to patronise. Kim, Niehm and Jeong (2010: 133) agree that a
growing number of customers are looking for more than quality products at a low
price. They desire products that express their unique, personal identity.
Therefore, Sit, Merrilees and Birch (2003:2) indicated in their research that
customers crave innovation in all aspects of their lives that includes recreational
sport, restaurant environments, shopping environments and marketing campaigns.
Jack Morton Worldwide (2006:1) agrees that retailers and marketing units are
allocating more resources towards experiential strategies, which entail amplifying
brand’s experience into a set of tangible, physical and interactive experience. Ruvio
and Shoham (2007:704) argue that the customer want an interactive experience with
the different brands. Kim et al. (2010:134) agree that customers seek to have an
interactive environment where they could communicate with knowledgeable brand
representatives not only to gather information but also share their perspectives.
Engelland, Hopkins and Larson (2001:15) confirmed with their research that
customers have been shown not only to demonstrate a need for novelty and
uniqueness, but they also derive enjoyment from evaluating information, discovering
facts and examining functional product attributes in their decision making process.
Kim et al. (2010:140) confirm in their research that enjoyment is a major component
of recreational shopping and one of the key antecedents of attitude towards the
shopping channel.
66
Cox, Cox and Anderson (2003 251) indicated in their research findings the following
shopping pleasures indicated by customers that could change the retail environment:
• Customers want to mingle with other shoppers to stimulate their social interaction.
• Customers want to stimulate emotional responses through bargain hunting and
feel that they achieved a certain goal.
• They want to browse through retailers merchandise to gain information about
products without buying.
• Some shoppers may derive pleasure from the sensory aspects of the retail
environment, its sights, sounds and smells.
• Some shoppers just enjoy the status and authority of being pampered by retail
and sale staff.
Therefore according to Krafft and Mantrala (2006:49), the reasons for structural
adjustments of retail can be presented as a process linking changes in the micro and
macro environment to the response by retail managers.
4.4 TYPES OF RETAILERS
Kotler and Armstrong (2010:395) indicated that retailers can be classified in terms of
several characteristics, including the amount of service they offer, the breadth and
depth of their product lines, relative prices they charge, and how they are organised.
The most important types of retail stores will be presented in table 4.1. Berman and
Evans (2010:131-132) indicated aspects of strategy mixes of 14 store based retail
institutions, divided into food-orientated and general merchandise groups with
specific reason why they have customer support.
67
Table 4.1: Selected aspects of store-based retail strategy mixes
TYPE OF RETAILER LOCATION MERCHANDISE PRICES
ATMOSPHERE
AND SERVICES
PROMOTION
Convenience store Neighborhood
Medium width and low
depth of assortment;
average quality
Average to above
average
Average Moderate
Conventional
supermarket
Neighborhood
Extensive width and depth
of assortment; average
quality; manuf acturer,
private, and generic
brands
Competitive Average
Heavy use of
newspapers, f lyers, and
coupons; self -service
Food-based superstore
Community shopping
center or isolated site
Full assortment of
supermarket items, plus
health and beauty aids and
general merchandise
Competitive Average
Heavy use of
newspapers and f lyers;
self -service
Combination store
Community shopping
center or isolates site
Full selection of
supermarket and drugstore
items or supermarket and
general merchandise;
average quality
Competitive Average
Heavy use of
newspapers and f lyers;
self -service
Box (limited-line) store Neighborhood
Low width and depth of
assortment; f ew
perishables; f ew national
brands
Very low Low Little or none
Warehouse store
Secondary site, often in
industrial area
Moderate width and low
depth; emphasis on
manufacturer brands
bought at discounts
Very low Low Little or none
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Caters for complete grocery needs, along with f ill-in general merchandise.
They have expanded remodeled existing supermarkets and build
numerious new stores.
FOOD ORIENTED
Of fer greater customer convenience with more product lines and a greater
variety, with better prices.
Intense competition from food stores, with low prof it margins.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Low-priced private label brands, with prices 20-30% lower than supermarkets.
Growth of these store has not been anticipated, sales has f allen in
recent years.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Availibility of f ill-in items when a customer does not want to travel to a shop or
supermarket.
Areas saturated with stores traditional market shrank.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Customers like one-stop shopping and will travel to get there. Impulse sales are
high.
Quite popular with shoppers
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Customers shop at warehouse stores f or bulk buying at very low prices.
Customers do not like to shop in warehouse settings. Brands may
be temporarely or permantly out of stock.
68
TYPE OF RETAILER LOCATION MERCHANDISE PRICES
ATMOSPHERE
AND SERVICES
PROMOTION
Specialty store
Business district or
shopping center
Very narrow width and
extensive depth of
assortment; average to
good quality
Competitive to
above average
Average to excellent
Heavy use of displays;
extensive sales f orce
Traditional department
store
Business district,
shopping center, or
isolated store
Extensive width and depth
of assortment; average to
good quality
Average to above
average
Good to excellent
Heavy ad and catalog use,
direct mail; personal selling
Full-line discount store
Business district,
shopping center, or
isolated store
Extensive width and depth
of assortment; average to
good quality
Competitive
Slightly below
average to average
Heavy use of
newspapers; price-
oriented; moderate sales
f orce
Variety store
Business district,
shopping center, or
isolated store
Good width and some
depth of assortment;
below-average to average
quality
Average Below average
Use of newspapers; self-
service
GENERAL MERCHANDISE
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Feature popular brands of average to good quality merchandise at competitive
prices.
Competition f rom other retailers too rapid expantion of some
businesses, saturation of prime locations, number of consolidations
bankruptcies and liquidations.
Traditional department stores: Emphasis on customer service and
knowledgable sales staf f .
Must clarify their niche in the market place.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Customer shop at speciality stores as a result of knowledgeable sales staf f ,
variety within a give category, service policies, intimate store size and
atmosphere, lack of crowds, absence of aisles.
Fail to attract customers who are interested in one stop shopping f or
multiple product categories.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Department stores: Sells wide range of products (such as apparel,
f urniture, appliances) with no merchandise pre-dominating.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Inexpensive and popular priced goods and services.
Heavy competition from speciality stores and discounters, older
f acilities, items low prof it margin.
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Sources: Berman and Evans (2010:131-132)
Table 4.1 illustrated the fourteen types of retail stores and gave an overview of
each type according to its location, merchandise, prices, and atmosphere and
service it offers with its focus on promotions. The table focuses on the reason
why customers support a specific retail type of store, as well as current
industry problems it faces. With this in mind, the table will give a retailer a
holistic overview of types of retail stores.
TYPE OF RETAILER LOCATION MERCHANDISE PRICES
ATMOSPHERE
AND SERVICES
PROMOTION
Of f-price chain
business district,
suburban shopping strip,
or isolated store
Moderate width but poor
depth of assortment;
average to good quality;
lower continuity
Low Below average
Use of newspapers;
brands not advertised;
limited sales f orce
Factory outlet
Out-of -the-way site or
discount mall
Moderate width but poor
depth of assortment; some
irregular merchandise;
lower continuity
Very low Very low Little; self-service
Membership club
Isolated store or
secondary site
(industrial park)
Moderate width but poor
depth of assortment; lower
continuity
Very low Very low
Little; some direct mail;
limited sales f orce
Flea market
Isolated site, racetrack,
or arena
Extensive width but poor
depth of assortment;
variable quality; lower
continuity
Very low Very low Limited; self -service
Store selling close-outs, discontinued merchandise, irregulars, f irst quality
merchandise at low prices.
Evaluate retail expertise, investment cost, impact of existing retailers
that buy f rom them, response of customers.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Reduced prices by 40-50%, also a promise of new merchandise on regular
base.
Discontinuity of merchandise, poor management of companies,
insuf f icient customer service, shake out of underf inanced business.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Shoppers touch and sample items and they like to haggle over prices. Market shift towards online auction sales.
REASON FOR CUSTOMER SUPPORT INDUSTRY PROBLEMS
Price-conscious customers, who must be a member to shop there.
Allocation of company ef f orts between business and f inal consumer
accounts, lacking of customers interest buying at warehouse type of
store, potential saturation of market.
70
4.5 RETAIL MARKETING DECISIONS
Kotler and Armstrong (2010:402) argue that retailers are searching for new market
strategies to attract and hold customers as a result of service and assortments that
are looking more and more alike. Therefore service and product differentiation have
eroded amongst retailers and customers have become smarter and more price
sensitive, as they see no reason to pay more for identical brands, especially when
service differences are shrinking (Kerin et al., 2007:311).
Berman and Evans (2010:77) argue that retailers are now rethinking their market
strategies with specific focus on segmenting and targeting, store differentiation and
retail marketing mix.
4.5.1 Segmentation
Dunne et al. (2002:228) define segmentation as a method that retailers use to
examine, or break down heterogeneous consumer populations in smaller, more
heterogeneous groups based on their characteristics. Kotler and Armstrong
(2010:402) agree with this view point that retailers must first segment and define their
target markets and then decide how they will differentiate themselves in these
markets and until retailers define and profile their markets, retailers cannot make
consistent decisions about product assortment, services, pricing, advertising, and
store décor.
Kotler and Armstrong (2010:225) argue that effective segmentation require five basic
elements to be successful.
• The size, purchasing power and profiles of the segment must be measurable.
• Market segments are accessible and therefore can be reached and served.
• They are large or profitable enough to serve.
• Therefore, they are differentiable, conceptually, distinguishable and respond
differently to different marketing mix elements and programs.
• Finally, they must be actionable whereby effective programs can be designed for
attracting and serving these segments.
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4.5.2 Target market
According to Kotler and Armstrong (2010:225), a target market consists of a set of
buyers who share common needs or characteristics that a company decide to serve.
Therefore a target market is that segment of the market that the retailer decides to
pursue through its marketing efforts (Dunne et al., 2002:228). In this view target
market is customarily interpreted as a mechanism that allows businesses to take
advantage of customers (Anderson & Simester, 2001:316). Sawhney (1998:54)
emphasises that customers are becoming very sophisticated and are demanding
customised products and services to match their individual preferences and tastes.
Hunt and Arnett (2004:10) agree that the existence of product and service variety
could be a result of customers seeking variety in their own consumption and/or
different customers’ wanting different variants because tastes differ. Therefore
retailers in the same line of retail trade often pursue different target markets to gain
competitive advantage and make it important for retailers to identify there target
markets before they decide how best to reach the target market (Berman & Evans,
2010:71).
Dunne et al. (2002:228) argue that there are three criteria that exist if a target market
will be successfully reached:
• Firstly, the selected market segment should be measurable or able to be
described or able to be described using objective measures on which data are
available, such as age, gender, income, education, ethnic group or culture.
• Secondly, is the accessibility or degree to which the retailer can target its
promotional or distribution efforts to a particular segment? The key issues are
through what media the specific target could be reached?
• Finally, successful target market requires that the segment be substantial enough
to be profitable for the retailer.
“Retailers that select markets that are measurable, accessible and substantial will be
able to generate higher profit results” (Dunne et al., 2002:229).
72
4.6 STRATEGIC MODEL
Levy, Grewal, Peterson and Connely (2005:84) argued that retailing is a dynamic
enterprise and they propose a framework for investigating factors that motivate the
structure and evolution of retailing. They named the framework the Big-Middle and
were depicted in figure 4.1, and were defined as the market place in which the
largest retailers compete in the long run, for the reason that the largest number of
potential customers reside (Brown, Dant, Igene & Kaufmann, 2005:89). According to
Sheth and Sisodia (2002:10), retailers do not have to be in the Big-Middle to be
successful in the short run, those that become the largest, and by implication, the
most successful are drawn there overtime in their search for scale of economies,
increased revenues and incremental profits.
Figure 4.1: Retail Landscape
Source: Levy et al. (2005:85)
The model describes the evolution of the retail strategy based on two dimensions:
relative price, which depicted on the horisontal axis and relative offerings on the
vertical axis (Levy et al., 2005:85).
According to Krafft and Mantrala (2006:14) retailers fall into one of four segments:
Innovative, Big-Middle, Low-Price and In-Trouble. Therefore retailers occupying
Value
Big-Middle Segment
Innovative
Low-Price
In-Trouble
Exit
Retailing
High
Low
Low High
Relative Price
R
e
l
a
t
i
v
e
O
f
f
e
r
i
n
g
s
73
the innovative segment direct their strategies towards quality-conscious markets
seeking premium offerings. Low-Price retailers appeal to the price-conscious-
segment. Big retailers thrive because of their value offerings and In-Trouble
retailers are those who are unable to deliver high levels of value relative to their
competitors. The Big-Middle concept will be discussed in the next paragraph that
will indicate factors that create the structure and motivate the evolution of retailing.
4.6.1 Big-Middle segment
This Big-Middle segment focus on the largest segment potential base of customers
in the long-term by providing an innovative offering or low price or it could be both,
thus providing superior value to customers (Levy et al., 2005:85).
Large retailers have succeeded in leveraging their innovative-low price position to
transform their niche appeal to the mass market and they occupy an entirely different
position in the market place, achieved by offering innovative merchandise that are
broader and deeper and at reasonable prices (Krafft & Mantrala, 2006:17). Sheth
and Sisodia (2002:11) argue that these businesses become volume-driven and their
initial customer base simply cannot generate sufficient revenue to support their
desired growth and they become generalists.
Therefore these businesses successfully transformed themselves by transforming
their image by simply offering either innovative merchandise or low prices to an
image as a retailer that provide great value over a broader array of merchandise
(Brown et al., 2005:97). Gorton, Sauer and Supatpongkul (2011: 1624) indicated that
Wal-Mart and Target is examples of businesses in the Big-Middle segment.
Brown et al. (2005:100-101) as sighted by different authors suggested early and
current elements that will lead to the success in the Big-Middle.
Early elements that lead to the success in the Big-Middle segment
• Basic merchandise - Wingate and Brisco (1946) distinguished between mass
distribution of merchandise for which an active demand already exists and
launching new products which have to be sold to the ultimate consumer in order
74
that an active demand may come into being. Launching new products is the
innovative segment and not the big middle.
• Product standardisation - Baxter (1931) argued that by generating buying
economies and higher inventory turnover, retailers can obtain lower prices, more
sales.
• Frequently purchased goods - Baxter (1931) stated that this approach leads to
scale economies in purchase and high turnover at low margins.
• Focused inventory - Brown et al. (2005:100) indicated that focusing inventory on
products that are widely acceptable, but that do not appeal to customers in the
tails of a normal distribution of tastes, inventory turnover can be kept at a high
level; indeed an attempt to meet the requirements of the last 15% of customers,
will usually prove very costly.
• Direct purchases - Savitt (1999) stated to ensure inventory availability across the
entire system, early chain retailers purchased direct from producers.
• Skilled buyers - Beckmann and Nolen (1938) stated that due to the enormous
purchases compared, with non-chain retailers, chains developed training
programs to teach negotiating skills.
Brown et al. (2005:100) argue that logistics was earlier regarded as important, but
inventory management was perceived paramount. Therefore, currently modern
discounters like Wal-Mart, is trying the method to match inventory supply with
consumer demand by combining demand effectiveness with cost efficiency (Brown et
al., 2005:101).
Levy et al. (2005:87) confirm that above will be achieved through a high sophisticated
supply chain management system, innovation in technology and operations whereby
businesses realise their idealised goal of a seamless integration with suppliers,
manufactures, warehouses and stores.
Levy et al. (2005:87) conclude that businesses in the current situation will transform
to the Big-Middle segment through five primary value levers:
• Innovative merchandise.
• Technology.
• Supply chain management.
75
• Price optimisation.
• Store name/image.
4.7 STRATEGIC DRIVERS FOR RETAIL SUCCESS THROUGH VALUE
Levy et al. (2005:86) argued that retailers who successfully compete in the Big-
Middle provide a compelling value proposition to their customers and are able to
respond quickly to market changes and as a result customers in return become loyal
to the Big-Middle retailers partially because these retailers provide them with what
they need, what they are accustomed to, good service and excellent relationship
management programs.
Therefore retailers realise that being flexible and being able to adapt quickly to
changes in the marketplace are the key to survival (Brown et al., 2005:103). Central
to the ability to capitalise on new opportunities is the recognition of the importance of
managing elements of the offering that influences customer’s perceptions of value
(Thompson et al., 2012:195).
Berman and Evans (2010:28) argued that from the perspective of the manufacturer,
wholesaler and retailer, value is embodied by a series of activities and processes, a
value chain that provides a certain value for the customer. Therefore it is the totality
of tangible and intangible products and consumer attributes offered to customers
(Thompson et al., 2012:146). Berman and Evans (2010:28) state that value from
customer’s perspective is the perception of all the benefits from a purchase formed
by the total retail experience and therefore value is based on perceived benefits
versus price paid.
4.7.1 Value as meaningful concept for retailers
Berman and Evans (2010:29) state the following reasons why value is such a
meaningful concept for retailers:
• Customers must always believe that they get their money’s worth.
• A strong retail effort is required so that customers perceive the level of value
provided in the manner the business intends.
76
• Value is desired by all customers, but it means different things to different
customers.
• Customer comparisons for shopping prices are easy through ads and World
Wide Web. Thus, prices have moved closer together for different types of
retailers.
• Retail differentiation is essential so that a business is not perceived as a “me too”
retailer.
• A specific value / price level must be set.
In the next section a discussion on the key success factors for retail will be noted.
4.8 KEY RETAIL SUCCESS FACTORS
Jacobs (2007:11) argues that some authors or retail specialist place more
importance on certain key retail success factors than others, but in general all of
them agree upon a few basic factors which need to be in place to survive in the harsh
world of retailing. Gauri, Trivedi and Grewal (2008:257) agree that the key retail
success factors may help determine customer choice and shopping behaviour.
Baker, Parasuraman, Grewal and Voss (2002:120) confirmed in their research that
retail environments and atmospherics builds on environmental psychology and that
design, social setting and ambience influence costumer service quality perceptions
and shopping behaviour.
Lal and Rao (1997:60) also demonstrated the importance of the characteristics of the
trading area, such as the population density, income, distance from the store for the
appropriate choice of a format and pricing strategy for a retailer.
Although there are many key retail success factors that affect customer’s perception
of value, major success factors will be discussed: store factors, service factors-
process, merchandise/product, price, promotion, supply chain management
and technology, financial performance, employee experience, and customer
service. Berman and Evans (2010:506) agree that these factors contribute to a
retailer’s image and it is the totality that forms the overall image. Figure 4.2 is a
schematic representation of the elements of the retail image.
77
Figure 4.2: The elements of the retail image
Source: Berman and Evans (2010:506)
4.8.1 Store factors
Krafft and Mantrala (2006:18) state that a key value driver at store level is developing
the right combination of format and retail environmental factors. Kotler and
Armstrong (2010:404) argue that the store’s atmosphere is an important element in
the retailer’s product arsenal and the aim is to create a unique store experience, one
that suits the target market and moves customers to buy. Berman and Evans
(2010:506) agree that creating and maintaining a retail image is a complex, multi-
step on-going process and the aim must be that a costumer must be able to
determine the following about a store in three seconds, its name, its line of trade its
claim to fame, its price position and its personality.
Therefore, according to Backstrom and Johansson (2006: 419), to conceptualise the
different aspects that may influence in-store experiences and store behaviour it have
been referred to as general dimensions such as atmospherics, design and social
dimensions. Kotler and Armstrong (2010:404) argue that atmospherics has been the
area that received the most attention and can be described as relating to factors in
the store environment that can be designed or manipulated in order to create certain
Merchandise
attributes
Customer
service
Target
market
Firm’s
positioning
Store
location
Pricing
Overall
Retail Image
Attributes of physical
facilities
Shopping
experiences
Community
services
Promotion tools
• Advertising
• Public relations
• Personal selling
• Sales promotion
78
emotional and behavioural responses from the customer. Hoffman and Turley
(2002:3) indicate that atmospherics are composed of both tangible elements (the
building, carpeting, fixtures, point of purchase decorations) and intangible elements
(colour, music, temperature, scents) that comprise of service experiences.
Backstrom and Johansson (2006:419) argue that positive store experience is crucial
in order to offer experiences rather than just product and services and they suggest
that atmosphere is of great importance specifically in a service context due to its
nature. Foxall and Greenly (2000:39) agree that by consistently seeking to control
and to add substance to the atmosphere of retail stores, retailers may influence
customers when they are evaluating what type of service and what type of products
they offer. Backstrom and Johansson (2006:417) as adopted from Spies, Hesse and
Loesch (1997) indicated that a positive atmosphere can lead to approach behaviours,
which implies that customers stay longer in the store and spends more money or that
the propensity of impulse buying increases.
Therefore, Kotler and Armstrong (2010:405) state that successful retailers
orchestrate every aspect of the customer’s store experience and that it confirms that
retail stores are more than simply assortment of goods. Store atmosphere offer a
powerful tool by which retailers can differentiate their stores from other competitors
(Backstrom & Johansson, 2006:420).
Gottdiener (1998:29) argues that while atmospherics is commonly used to describe
the rather intangible aspects of the store environment, store design is normally
applied to signify the more tangible elements present in the interior store environment
and may be used to reinforce the values associated with a specific brand name.
Design relates to store layout and display (Backstrom & Johansson, 2006:420).
Buttle (1984:104) described display as the design of the way in which articles are
presented in the store to facilitate and stimulate customer purchasing behaviour.
Kotler and Armstrong (2010:255) argued that the role of retail designers has
progressed from plain shoplifting to the provision of entertainment and inspiration to
customers.
79
The social dimension consists of all interactions (physical and emotional) customers
have with other members of society and with staff of the retailer (Backstrom &
Johansson, 2006:417).
Kelly and Hoffman (1997:408) argue that the mood or credibility of salespersons
seems to be important for good service encounters to occur and have also shown to
have a profound effect on customer’s loyalty to the store. Therefore, Kelly and
Hoffman (1997:423) state from a managerial perspective that it is extremely
important to manage the positive affect of service providers and this could be
accomplished through the recruitment and selection of employees who are more
likely to experience positive affect while on the job. Bitner, Booms and Mohr
(1994:95) suggested another viable means of managing employee and customer
affect is through the physical surroundings of the service organisation through a
service culture that will contribute to the establishment of a work environment that is
conducive to positive affect.
4.8.2 Service factors
Krafft and Mantrala (2006:19) indicate that given the time and effort that is invested
by retailers in attempts to attract customers into their stores, it is amazing that so
many retailers pay little attention to customer service. They state that it is common to
visit retail stores and see half-filled shopping carts abandoned by shoppers that got
tired of waiting for their turn at the checkout, or to see shoppers looking for a
particular item they want to purchase but have not because they can’t find a service
provider to assist or provide them with information (Krafft & Mantrala, 2006:20).
Fullerton (2005:100) argues that under a relationship marketing paradigm, customer
commitment, rather than service quality, is the prime driver of customer loyalty to the
service provider. Morgan and Hunt (1994:10) state that commitment is a complex
construct and is a psychological force that links the customer to the organisation with
which the customer does business. Allen and Meyer (1990:2) agree that the two
major components of commitment are affective commitment and continuous
commitment.
80
Therefore, according to Gundlach and Mentzer (1995:78), affective commitment in
the marketing relationship has been defined as a complex mixture of attitudinal
loyalty, involvement and attachment. Fullerton (2005:101) argues that the
development of social bonds between the customer and the organisation with which
the customer does business is an important stage in the development of commitment
in marketing relationships. Achrol (1997:56) argues that people develop affective
commitment for businesses to which they feel they belong. Therefore, Fullerton
(2005:101) agrees that if the marketing relationship is built on affective commitment,
customers maintain a relationship because they identify with and like the business
with which they do business.
The following elements are main drivers of good customer service and will establish
affective commitment (Levy et al., 2002:20):
• Level of convenience a particular store provides.
• Retailers must ensure that their store personnel are well trained to provide five
source of convenience:
- decision convenience, to provide customers with appropriate information so
that they can make informed buying decisions;
- access convenience, making sure that they know where merchandise is and
will assist the customer in finding it;
- transaction convenience, involving training to facilitate transactions such as
checkouts and returns;
- benefits convenience, helping customers to understand the benefits of the
product and services that will result in a more enjoyable experience and of;
- post benefit convenience, providing the training and empowerment to rectify
post purchase problems.
Levy et al. (2002:20) conclude that retailers that attend to aspects of customer’s
service can contribute to customer perception of value, resulting in a strong
competitive position.
81
4.8.3 Merchandise
Berman and Evans (2012:384) state that merchandising consists of the activities
involved in acquiring particular goods and/or services and making them available at
the place, time, prices and quantity that enable a retailer to reach its goals.
Olson (2007:1) stated that times have changed and customers will not be dictated to
any more due to the fact that customer tastes are more complex than ever before
and profitable life-cycles have shortened, requiring all-time quick turnarounds.
Jacobs (2007:32) agrees that retailers know that to stand out, they must offer unique
merchandise, a constant changing mix of unique and interesting merchandise should
be displayed in creative ways.
Retailers who excel in merchandise management do it in one of two ways (Grewal,
Krisham, Levy & Munger, 2007:25):
• Firstly, they concentrate in finding unique merchandise that appeal to their target
customers.
• Secondly, they can be certain that enough merchandise is where the customer
wants it.
Grewal et al. (2007:25) conclude that more product variety could lead to higher sales
levels, but retailers do not have the luxury of simply adding more inventories, where
productivity in merchandise management is essential to long-term viability.
4.8.4 Price
Grewal, Roggeveen, Compeau and Levy (2012:1) argue that in the face of radical
changes in the global market place (a worldwide recession, significant technological
turbulence) customers are not only changing their shopping behaviours but also their
value perceptions. Therefore retailers must respond appropriately by monitoring the
environment to identify changes, both expected and unexpected with the following
results (Grewal et al., 2012:1):
• Remain more in touch with customer preferences.
82
• Take advantage of opportunities created by new customer’s preferences.
• Enhance the value they offer to the customer.
Therefore, Levy et al. (2007:1) argue that most retailers do not use price as a basis
for achieving sustainable competitive advantage, because it is too easy for
competitors to copy a low-price strategy. Therefore retail managers have to consider
key factors, such as the customers, competition and government regulations and
then develop, implement and evaluate the appropriate pricing strategy and tactics.
Grewal, Ailawadi, Gauri, Hall, Kopalle and Robertson (2011:546) state that recently
retailers have employed sophisticated dynamic pricing models that use data from
internet purchases or company enterprise resources planning systems to set prices.
Nagle, Hogan, and Zale (2010: 9) agree that sophisticated dynamic pricing models
update prices frequently, based on changing supply or demand characteristics.
Kopalle (2010:117) argues that retailers must consider several factors when
developing an optimal dynamic retail pricing and promotional schedule namely: inter
and intra-category optimisation, market expansion and contraction effects, modelling
frameworks, model performance, the psychological aspects of pricing, objective
functions, optimisation, parameter estimation, product relationship and scalability.
4.8.4.1 Traditional retail pricing techniques
Levy et al. (2004:15) argue that retailers make pricing decisions on time-honoured
rules and in many situations apply fixed percentage onto their cost and this will also
apply for markdowns. Stores (2002) confirms that another rule-based approach that
is followed is to price merchandise above, below or at parity with the competition’s
pricing. Levy et al. (2004:15) state that retailers use a rule-based approach because
it is easy to calculate and implement, particular in multi-store chains.
(a) Weaknesses of retail based pricing
Levy et al. (2004:15) acknowledged the following weaknesses of retail based pricing:
83
• Most fundamental weakness is that none have anything to do with what
represents the optimal price or markdown. Price is based on what has happened
in the past, previous year or past week.
• The second problem with the way retailer’s price and markdown merchandise is
the system wide character of their decisions. Markdown could be implemented
through the whole chain of retail, but in certain region the demand could be
higher due to seasonal trends. The decision should be that there must not be a
markdown in that region.
• Most retailers do not find it prudent to use different prices in the same trade area,
because customers could become confused or worse disillusioned with integrity
of the retailer. Yet differential pricing in diverse trade areas particularly if they are
geographically isolated, can provide opportunities for increased gross profit
margins and more precise inventory control.
• Customers learn from past experience when merchandise will be placed on sale.
Such sale-savvy play havoc with retailers gross margins due to the fact that
customers wait for a sale.
The next paragraph will explain how retailers could maximise their profits through
retail pricing:
4.8.4.2 Critical components to be incorporated into retail pricing
Retailers are interested in maximising their profits and that is why they need to
understand how to price their merchandise optimally (Berman & Evans, 2010:481).
Next a discussion will follow on the other six factors that must be taken into account
to determine optimal prices.
4.8.4.2.1 Price sensitivity effects
At basic level, to determine an optimal initial or markdown price, the retailer must
assess it’s own-price elasticity to measure how sensitive demand is to price for a
84
given item over a period of time (Levy et al., 2004:16). Dodds, Monroe and Grewal
(1991:307) confirmed in their research that although price elasticity’s have a negative
sign, to suggest that an increase in price usually results in a decrease in demand, in
some situations, a decrease in price can lead to the perception of lower quality,
which decrease demand. Price-quality inferences are well documented in
behavioural pricing research and indicate that quality signals such as warranties,
store reputation, brand image must be incorporated (Srivastava & Lurie, 2004:117).
Furthermore, Sethuraman and Tellis (2002:55) argue that joint effects of advertising
and price promotions on price sensitivity and demand must be incorporated explicitly.
4.8.4.2.2 Substitution effects
Substitution effects, cross-price elasticity or cross-price effects of a brand refer to the
effect of a change in price of a stock keeping unit (SKU) on the demand for a
competing SKU (Besanko, Dube & Gupta, 2005:1). Bell, Chaing and Padmanabhan
(1999) note that almost 75% of customer response to promotions is due to brand
switching. Therefore, Levy et al. (2004:16) argue that if an SKU can steal market
share from a competing SKU, the retailer should evaluate the relative margins of the
two SKU’s before lowering the price of the target SKU. Hall et al. (2004:179) suggest
that retailers should adopt a category management approach to develop a pricing
strategy.
4.8.4.2.3 Dynamic effects of price promotions
Retailers often assume that sales (there is no promotion and when there is a
promotion offered) for a given SKU are independent of past pricing activity, but
according to Levy et al. (2004:17), evidence suggests that sales may be affected by
prior discounting activities. Winer (1986:250) research confirmed that consumer
behaviour demonstrated that customers evaluate retail prices for items relative to
certain internal benchmarks or reference prices. This is a result of retailers supplied
information that plays a prominent role in affecting these internal reference prices
and retail-supplied reference prices (Lichtenstein & Bearden, 1998:55). Kalwani,
Yim, Rinnie and Sugita (1990:251) argue that customer’s internal references prices
also can be influenced by past prices, brand promotion frequency and the type of
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store. Therefore, according to Levy et al. (2004:16), price promotions are likely to
affect customer reference prices or price expectations.
Anderson and Simester (2004:4) indicated that deeper price discounts in the current
period increased future purchases by first time customers (a positive long run effect)
but reduce future purchase by established customers (a negative long run effect).
4.8.4.2.4 Segment-based pricing effects
Binkley and Bejnarowicz (2003:27) argue that customers in different markets behave
differently with regard to their own and cross-price elasticity’s as well as how they
react to price changes. Therefore, by taking these differential factors into
consideration retailers can implement different price and promotion plans across
various markets (Levy et al., 2004:17).
Inman, Mcalister and Hoyer (1990:339) argue that in some categories, retailers may
be wasting profits by over discounting their merchandise in an effort to appeal to a
deal-prone segment, for which a small discount might be sufficient.
4.8.4.2.5 Cross-category effects
Good price and promotion optimisation software should be able to take into
consideration the effect of one category’s price level on another, particularly with
regard to substitute and complementary items (Walters, 1991:17). Therefore
considering a complete basket of goods simultaneously, a retailer may be in a better
position to optimise its price and promotion levels (Levy et al., 2004:17).
4.8.4.3 Implementing retail pricing
In developing and implementing effective pricing strategy several factors must be
taken into account.
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a) Market factors
Levy et al. (2004:18) indicated that retailers must consider market factors other than
profit maximisation such as minimum sales and margin requirements, as well as
price image. Berman and Evans (2010:481) agree that this is a significant
improvement over traditional pricing techniques, because price image explicitly
incorporates the relationship between actual price, perceived price, as well as
external competitive factors.
b) Grouping items
According to Dhar, Hoch and Kumar (2001:165), retailers, particularly these involved
with fast consumer goods, often realign their merchandising strategy to maximise
sales and profits of a category and they confirm that this process is known as
category management.
c) Continual learning
One of the problems with traditional methods is that retailers set prices on the basis
what has happened in the past and do not plan on what is likely to be in the
preceding weeks (Levy et al., 2004:18).
d) Psychological price thresholds and reference effects
Anderson and Simester (2003:97) state that shoppers in a grocery store do not
notice the last digit of a price, so retailers is free to round their price up to the nearest
nine or by example to R2, 99. Therefore, Levy, Chen, Ray and Bergen (2004:791)
agree that this tactic could increase sales by 3% with almost no increase in cost.
Kopallo, Rao and Assuncoa (1996:60) research suggests that dynamic pricing is
optimal when the positive impact of a gain on sales outweighs the negative impact of
a corresponding loss.
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e) Price change cost
Levy, Bergen, Dutta and Venable (1997:791) indicate that it is expensive for retailers
to change prices and therefore a price change cost must be built into any
optimisation model. They argue that if the cost of the changing price is greater than
the additional revenue projected from the price change, it makes more sense to leave
the price alone.
4.8.5 Supply chain
Krafft and Mantrala (2006:21) state that in time of slow or no sales growth, rising
expenses, management acumen in supply chain management can generate
significant profits straight to the bottom line. Therefore, according to Brown et al.
(2005:101), this involves efficient and effective integration of suppliers,
manufacturers, warehouses, retailers and transport intermediaries in to a seamless
value chain, so that merchandise are distributed in the right quantities, to the right
locations, at the right time, to minimize system wide costs, while satisfying the
service levels required by its customers.
4.8.6 Technology
Grewal et al. (2012:3) acknowledge that the economic environment is not the only
macro-level factor that defines consumer behaviour and that technological changes
associated with social and mobile localisation and personalisation have resulted in
vast disruptions in retailer marketing practices as well customer shopping practices.
Sorescu, Frambach, Singh, Rangaswany and Bridges (2011:3) state that many
changes are driven by an increasing presence of the internet in every minute, corner
of customer’s lives and that the ambiguity of Wi-Fi and 3G networks, as well as the
number of devices available to access these networks, ensures that customers can
quickly and easily access the internet, regardless of space, time or location.
Therefore, technology allows retailers to enhance customer perceptions of value by
leveraging opportunities through the integration of online, social, mobile, localisation
and personalisation technology (Grewal et al., 2012:5).
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Brown et al. (2005:97) state that retailers that excel in the Big-Middle use technology
that goes hand in hand with superior supply chain management and that these
retailers use technology throughout their supply chain. Kraft and Mantrala (2006:22)
indicated that most of the retailers collect sales data from the point of sale, but it is
what is done with the data collected that separates superior retailers from the rest.
There are retailers that use sales data to work closely with suppliers to plan
production and inventory replenishment.
Tajima (2006: 261) states that Wall-Mart use radio frequency identification
technology (RFID) to tag merchandise that will give them the following benefits:
• To locate mislaid products.
• To deter theft.
• To offer customer personalised sales pitches through displays mounted in
dressing rooms.
• Ultimately tags and readers could replace barcodes and checkout labour.
• Total labour warehouse cost could be cut by 3% through more efficient receiving,
shipping and exception handling.
Ko, Kim, Kim and Woo (2007:65) state that cutomer relationship management (CRM)
is a business philosophy and set of strategies, programs and systems that focuses
on identifying and building loyalty with retailers and most valued customers and that
purchase data is also the basis for advanced customer relationship management
programs (CRM). Reinartz and Kumar (2002:86) identified a number of advantages
of CRM:
• Increased profits.
• More customer relationships.
• More repurchase.
• Accurate customer information collected.
• Enhanced customer loyalty.
• Improved inefficiency customer management.
• Reduced cost of new customer acquisition.
• Greater ease in developing new products.
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• Increased sales by additional purchases.
• Reduced cost of direct marketing.
• Increased brand loyalty.
• Increased customer life time value.
4.8.7 Promotion
Grewal et al. (2011:45) indicate that retailers use past purchase history data to
customise promotions for individual customers, not just for customer segments and
they confirm that customised promotions are growing steadily in all retail channels.
Nelsin and Shankar (2009:70) state that the challenge is to access real-time
promotional effectiveness data that could help a business to tailor their offers and to
integrate customer and competitor responses immediately into their promotional
campaign designs.
Sales promotions are a marketing tool for retailers to increase sales to customers
and include a wide assortment of tools namely: coupons, contests, cent-off deals,
premiums, all of which has many unique quantities (Kotler & Armstrong, 2010:441).
Kraft and Mantrala (2006:345) agree that sales promotions play an important role in
marketing programs of retailers. Alvarez and Casielles (2005:57) argue that the
objective of a sales promotion will be reached to greater extent when it’s done
sporadically, when the customer does not expect it.
Ailawadi, Lehmann and Nelsin (2001) as adopted by Krafft and Mantrala (2006:346)
indicate that promotions in the 21st century are facing new opportunities and
challenges as technology plays an increasing part in retailing and include
technologies such as loyalty cards, electronic media at the point of sale, and
electronic shopping assistants are likely to have an impact on how retailers use
promotions.
4.8.8 Location
Kotler and Armstrong (2010:406) argue that retailers point to three critical factors in
retail success: location, location and location!! It is very important that retailers
select locations that are accessible to their target market and are consistent with the
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retailers positioning (Lin & Liu, 2012:591). Brown (1993:185) state that Huff (1963)
proposed that the probability that a customer patronise a certain shopping area, is
directly related to its size, inversely related to its distance from the customer, and
inversely related to the utility of competing shopping areas.
Li and Liu (2012:597) state that most stores today cluster together to increase their
customer pulling power and to give consumers the convenience of one-stop
shopping out of the central business district to suburbs due to consumer behaviour.
4.9 THE FUTURE OF RETAILING
Retailers operate in a harsh and fast changing environment, which offers threats and
opportunities, and a major challenge for retailers in emerging markets is the absence
of a well-developed and functioning retailing distribution network, mass media,
transportation and storage infrastructure (Goldman, Ramaswami & Krider, 2002:281).
Verhoef, Reinartz and Kraft (2010:247) agree that consumer’s demographics,
lifestyles and shopping patterns are changing rapidly and so are retail technologies,
and for retailers to be successful, retailers need to choose target segments carefully
and position themselves strongly by involving customers in developing innovations.
Dawar and Chattopadhyay (2002:457) state that the average customer in the
emerging markets tends to be price sensitive; however, the economic growth in
emerging markets is also creating a growing relatively wealthy middle class.
Futhermore, Reinartz et al. (2011:60) commented that the result of the up coming
middle class are creating attractive retail markets, which have lured major
international retailers such as Wal-Mart into these regions.
Burgess (2003:157) indicated that given the greater price sensitivity coupled with the
wide income disparity among individuals and households in emerging markets,
retailers are faced with the challenge of effective targeting different costumer groups
within these national markets. This will result in businesses to focus on the income
pyramid.
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As a result of the growth in emerging markets the focus is high on technology
innovativeness, as a consequence of skipping one or more generations of
technology, and the associated sunk infrastructure cost (Reinartz, 2011:60).
Retailers in emerging markets have to take the following retailing developments in to
consideration in their planning and executing of their competitive strategies to be
sustainable (Kotler & Armstrong, 2010:408-412):
• New retail forms emerge to meet new situations and customer needs, but the life
cycle of new retail forms is getting shorter.
• Growth of non-store retailing have abroad array of alternatives, including mail,
television, and phone and online shopping are increasingly as a result of
customers avoiding the hassles and crowds at malls by doing more of their
shopping by phone or computer.
• Retail convergence as a result of retailers that are increasingly selling the same
products at the same prices to the same consumers in competition with a wider
variety of other retailers. This will result in merging of customers, products,
prices.
• Competition between chain super-stores and smaller independent stores has
become particularly heated and the arrival of super-stores can quickly force
independents out of business.
• Global expansion of major retailers with unique formats and strong brand position
are increasingly moving into other countries. (Many are expanding to escape
mature and saturated home markets.)
• Retail stores as “communities” or “hangouts” as a result of the rise of number of
people living alone, working at home, or living in isolated sprawling suburbs,
there has been establishment, regardless of the service or product that they
offer, also provide a place for people to get together.
4.10 SUMMARY
Retail can be defined as business activities involved in selling goods and services to
customers, for their personal, family or household use and include every sale to the
final consumer. Retail is the final stage of the retail process.
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Retail can be presented as a process linking changes in the environment to the
response by retail managers.
Retailers can be classified in terms of several characteristics, amount of service they
offer, the breadth and depth of their product lines, relative to prices they charge and
how they are organised. The most important types of retail stores are: speciality
stores, department stores, supermarkets, convenience stores, discount stores, off-
price retailers and super-stores.
Retailers are searching for new market strategies to attract and hold consumers.
This is due to the fact that service and assortments are looking more and more alike.
Service and product differentiation eroded amongst retailers.
Customers have become smarter and more price sensitive. They see no reason to
pay more for identical brands especially when service differences are shrinking.
Retailers are now rethinking their market strategies with specific focus on
segmenting, targeting, store differentiation and retail marketing mix.
Retailers who compete successfully in the Big-Middle provides a compelling value
proposition to their customers and are able to respond quickly to market changes.
Customers in return become loyal to Big-Middle retailers partially because these
retailers provide them with what they need, what they accustomed to, goods and
service and excellent management programs.
From the perspective of the retailer value is embodied by a series of activities and
processes that provides a certain value for customers. Value from the customer
perspective is the perception of all the benefits from a purchase formed by the total
retail experience. This value is based on perceived benefits versus price paid.
Retailers place more importance on certain key success factors then others, but in
general agree upon few basic factors which need to be in place to survive in the
harsh world of retailing.
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Eight key success factors are mentioned in this document which is common in the
retail environment.
Firstly, the key value driver at store level is the developing, the right combination of
format and retail and retail environment factors. The goal of retailers is to create a
unique store experience, one that sends the target market and move customers to
buy.
Secondly, the focus of retailers must be on the service factors to attract and retain
customers.
Thirdly, retailers who excel in merchandise management do it in two ways:
• they find the merchandise that appeal to their target market;
• secondly they try to be certain that there is enough merchandise where the
customer wants it.
Fourthly, retailers must understand the price key success factor and principles as a
strategy to achieve sustainable competitive advantage.
In time of slow or no sales growth, rising expenses, management acumen in supply
chain management can generate significant profits straight to the bottom line.
The six factors are sales promotions that are a marketing tool for retailers to increase
sales to customers. Typical examples of retailer’s promotions are temporary price
reductions, features and displays. Advertising is becoming less effective,
communication through promotions reaches the customer at the place where most
purchase decisions are made.
The seventh key success factors point to three critical factors: location, location and
location!! It is very important that retailers select locations that are accessible to their
target markets and are consistent with the retailers positioning.
Retailers operate in harsh and fast changing environment, which offers threats and
opportunities. Consumer’s demographics, lifestyles and shopping patterns are
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changing rapidly and so are retail technologies. To be successful, retailers need to
choose their target segments carefully and position them strongly.
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CHAPTER 5
RESULTS AND DISCUSSION OF THE EMPERICAL STUDY
5.1 INTRODUCTION
The primary objective of this study is to assess the current corporate entrepreneurial
climate, as well as the compliance to key retail success factors within Senwes
Village, Retail division and to suggest a corporate entrepreneurial and retail
framework for the business. This chapter merges the literature study from chapter
two (corporate entrepreneurship) with the background of the agricultural
environment and the organisation in chapter three, with the literature review on
retail in chapter four. This is achieved by the empirical research conducted. The
assessment was done through the entrepreneurial climate questionnaire, constructed
by Lotz (2009), the entrepreneurial health audit of Ireland et al. (2006) as well as the
retail questionnaire and the questionnaire on perceived success of the business
(Lotz, 2009) (Annexure A). This chapter will cover the data gathering process,
survey responses, status of the entrepreneurial climate and perceived success, as
well as the compliance with key retail success factors in Senwes Village, Retail
division. A detail discussion will follow on the correlation between the constructs and
the demographical data.
5.2 GATHERING OF DATA
The electronic questionnaire was sent out by email, with a link to Monkey Survey and
the hard copies were sent by the internal mail system, with specific instructions on
how to complete and return it. The sampling method that was used for the study was
non-probability; subsequent sections below discuss the data gathering process in
detail.
5.2.1 Study population
The target population for this study was middle management, first line supervisors
and staff of Senwes Village, Retail division. A database of the study population was
obtained from the Senwes internal data system. The database consisted of 120
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employees at the specified division with specific knowledge of retail. The entire
population was targeted for the study.
Permission was obtained from Senwes Village, Retail division management to
distribute the questionnaires to the target population. Further permission was
obtained from the Assistant General Manager Information Technology, Mr Martin van
Zyl to electronically distribute the questionnaire via the email system to the specific
target sample, by using the Monkey Survey software.
5.2.2 Questionnaire used in this study
As mentioned above, the survey instrument used in this study was a standard
questionnaire developed by Ireland et al. (2006) and Lotz (2009). The retail section
of the questionnaire was developed by the researcher from the literature review. The
purpose of the questionnaire was to determine the entrepreneurial climate,
assessment of the business against the perceived success variables, as well as the
compliance to key retail success factors.
The questionnaire uses a five-point Likert scale as measurement tool and
respondents have to indicate the degree of agreement or disagreement with a
specific statement. The following scale was used to measure the respondents’
agreement or disagreement with the statement under study: 1 = Strongly disagree,
2 = Slightly disagree, 3 = Neither agree nor disagree, 4 = Slightly agree and
5 = Strongly agree.
The questionnaire was divided into five sections:
Section A: Corporate entrepreneurial orientation consists of five constructs that
measure the business entrepreneurial orientation. Section A of the questionnaire
covers the five constructs included Autonomy, Innovativeness, Risk-taking, Pro-
activeness and Competitive aggressiveness.
Section B: Corporate entrepreneurial climate consists of six constructs that measure
the entrepreneurial climate of the internal business environment in order to determine
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the readiness of the culture for entrepreneurship internally. The six constructs
included are: Management support, Work discretion, Rewards/Reinforcement,
Time availability, Organisational boundaries and Specific climate variables.
Section C: Key retail success factors consist of nine constructs that measure the
business compliance to these key retail success factors. The nine constructs that
are included are: Segmentation/Target market, Store factors, Service factors -
process, Merchandise/Product, Price, Supply chain, Technology, Promotions
and Location.
Section D: Perceived success determinants of the business consist of four
constructs that measure the perceived elements of success. The four constructs that
are included are: Financial measures, Process measures, People development,
and Future success (long-term).
The questionnaire concludes with Section E that records the respondents
demographical information. Here respondents have to indicate their Age group,
Gender, Race, Highest academic qualification and Management level in the
organisation.
5.2.3 Confidentiality
Confidentiality of all respondents were assured, by submitting the questionnaires
anonymous. This resulted in that no respondent could be identified.
5.2.4 Statistical analysis of data
The Statistical Consultancy Services of the North-West University: Potchefstroom
Campus was approached for assistance in the analysis of the collected data. The
data was analysed using Statistica 10 (Statsoft, 2011). The analysis used both
descriptive and inferential statistics. The validity of the questionnaire was assessed
by calculating the Cronbach alpha coefficients.
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5.3 RESPONSES TO THE SURVEY
The survey was distributed via email and the internal mail system to the target
population. Table 5.1 illustrates the response rate.
Table 5.1: Rating of survey.
Details Number Percentage
Questionnaires distributed 120 100%
Questionnaires received 78 65%
Questionnaires analysed 78 65%
Reminders were sent by email to the target population to remind them of the due
date for completion of the questionnaire. A total of 78 questionnaires were received
over a period of 30 days. This represented a response of 65 percent of these, 12
respondents did not complete the demographical section (In the tables this data will
be noted as missing). Four questionnaires were received after the deadline and
were not analysed. The final ratingof questionnaires that were analysed were 65%.
5.4 DEMOGRAPHIC INFORMATION OF RESPONDENTS
Section E of the questionnaire captured the demographic information of the
respondents. Recorded were the age group, gender, race, highest academic
qualification and management level in the division.
5.4.1 Age group classification of respondents
The results of the age group classification of the participating respondents are
presented in table 5.2.
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Table 5.2: Age distribution
Age group Number Percentage
? 29 6 7%
30 - 39 21 26.9%
40 - 49 16 20.5%
50 - 59 22 28.20%
60+ 1 1%
Missing 12 15.3%
TOTAL 78 100%
The age of the respondents presented above indicated that 7% of the respondents
are younger than 29 years, and only 1% of the total grouping being older than 60
years. The majority of the respondents (75.6%) fall within the 30 to 59 years age
group. A total of 12 (15.3%) respondents did not indicate their age group.
5.4.2 Gender of respondents
Table 5.3 depicts the results of the gender of participants in this study.
Table 5.3: Gender information
Gender Number Percentage
Male 47 60.3%
Female 19 24.4%
Missing 12 15.4%
TOTAL 78 100.0%
From the 78 respondents that participate in the study, 47 (60.3%) are male and 19
(24.4%) are female. A total of 12 (15.4%) respondents did not indicate their gender.
Males thus out number their female colleagues.
5.4.3 Racial group classification of respondents
Respondents were requested to indicate their racial group. Table 5.4 depicts the
race distribution of the respondents.
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Table 5.4: Race distribution
Race group Number Percentage
Black 9 11.5%
White 50 64.1%
Coloured 7 9.0%
Indian 0 0%
Missing 12 15.4%
TOTAL 78 100%
The majority of the respondents 50 (64.1%) were white, while 16 (20.5%) were non-
whites. A total of 12 (15.4%) respondents did not indicate their race group.
5.4.4 Highest academic qualification achieved by respondents
Respondents were requested to indicate their highest academic qualification. Table
5.5 illustrates the highest academic qualification of the respondents.
Table 5.5: Highest academic qualification achieved
Qualification Number Percentage
Lower than grade 12 6 7.7%
Grade 12 31 39.7%
National Certificate 13 16.7%
National Diploma 6 7.7%
3 Year degree 4 5.1%
Post graduate qualification 6 7.7%
Missing 12 15.4%
TOTAL 78 100%
Table 5.5 indicates the largest group of respondents 31 (39.7%) are represented by
people with a grade 12 qualification. A total of 6 (7.7%) respondents have not grade
12 qualifications. If diplomas, degrees and post graduates are grouped together,
then 29 (37.2%) of the respondents have attained a tertiary academic qualification. A
total of 12 (15.4%) respondents did not indicate their qualification.
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5.4.5 Distribution of management / staff level
The objective of this question was to determine the distribution of the management /
staff level of respondents. The information will be used to correlate the relationship
between the level of management / staff and corporate entrepreneur’s behaviours
and compliance to key retail success factors. Table 5.6 presents the management /
staff level of the respondents in this study.
Table 5.6: Management / Staff level
Level Number Percentage
Snr Middle Management 5 6.4%
Middle Management 32 41%
First line Supervisor 15 19.2%
Staff 14 17.9%
Missing 12 15.4%
TOTAL 78 100%
Table 5.6 indicates that the majority of respondents in this study (32; 41%) were
derived from middle management level. Five (6.4%) respondents were derived from
senior middle management level. Fifteen (19.2%) respondents were derived from
first line supervisory level, with 14 (17.9%) from staff level. A total of 12 (15.4%)
respondents did not indicate their management level.
5.5 RELIABILITY OF THE QUESTIONNAIRE
Welman et al. (2010:9) state that quantitive researchers focus more on reliability, that
is, consistent and stable measurement of data as well as replicability. Raimond
(1993:55) agrees that reliability is concerned with the findings of the research and
relates to credibility of the findings.
Morse, Barette, Mayan, Alson and Spiers (2002:15) state that reliability could be
determine by using the internally consistency method. Therefore, the Cronbach
coefficient alpha is a measuring instrument of internally consistency (Welman et al.,
2010:147). Cortina (1003:103) states that if a construct yields a large alpha
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coefficient, then it can be concluded that a large portion of the variance in the test
results for the construct is attribute to general and group factors. Kent (2007:142)
agrees that the coefficient varies between 0, for no reliability, to 1 for maximum
reliability and that value of 0.6 is acceptable, although 0.7 is preferred to indicate a
higher level of reliability.
Table 5.7 indicates the Cronbach alpha coefficients of the constructs measuring
Entrepreneurial orientation, Entrepreneurial climate, Retail and Perceived
success of the business.
Table 5.7: Cronbach alpha coefficients per construct
Section A: Corporate entrepreneurial orientation
constructs
Cronbach
alpha
1. Autonomy 0.718
2. Innovativeness 0.865
3. Risk-taking 0.673
4. Pro-activeness 0.800
5. Competitive Aggressiveness 0.627
Section B: Corporate entrepreneurial climate constructs
1. Management support 0.875
2. Work discretion 0.862
3. Rewards/Reinforcement 0.731
4. Specific climate variables 0.757
Section C: Key retail success factor constructs
1. Segmentation/Target market 0.814
3. Service factors - process 0.909
4. Merchandise/Product 0.767
5. Price 0.693
Section D: Perceived success constructs
1. Financial measures 0.794
2. Process measures 0.852
3. People development 0.814
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The results of Section A of the questionnaire, as indicated in table 5.7, suggest that
the instrument used in this study to assess entrepreneurial orientation within Senwes
Village, Retail division has acceptable reliability, as only two constructs had a lower
alpha coefficient than 0.7. The constructs of Risk-taking and Competitive
aggressiveness will however not be discard based on research of Kent (2007:142).
Section B of the questionnaire results obtained from the study indicated in table 5.7
that the instrument used in this study to assess the entrepreneurial climate within
Senwes Village, Retail division, has acceptable reliability, as the two constructs had
lower alpha coefficients than 0.7.
As indicated in table 5.7, the results of Section C of the questionnaire, suggest that
the instrument used in this study to assess the compliance to key retail success
factors within Senwes Village, Retail division, has not acceptable reliability as six of
the nine constructs had lower alpha coefficients of 0.7.
The results of Section D of the questionnaire, as indicated in table 5.7, suggest that
instrument used in this study to assess perceived success within the business, has
acceptable reliability, as only one construct had a lower alpha coefficient than 0.7.
5.6 ASSESSMENT OF THE QUESTIONNAIRE
The detail assessment of the questionnaire will be discussed in this section.
5.6.1 Variables measuring corporate entrepreneurial orientation
The results of the empirical research can now be scrutinised as the reliability of the
questionnaire has been verified. Lotz (2009) identified five constructs that assess the
entrepreneurial orientation in an organisation. Using the Likert scale, five items for
Autonomy, nine items for Innovativeness, five items for Risk-taking, four items for
Pro-activeness, and four items for Competitive aggressiveness were put to
respondents, resulting in a total of twenty seven statements.
Respondents had to indicate their degree of agreement or disagreement with each
statement (1 = Strongly disagree, 2 = Slightly disagree, 3 = Neither agree nor
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disagree, 4 = Slightly agree, 5 = Strongly agree). Thus a higher number representing
agreement with the statement suggests that the statement perceived tot be true.
Likewise, a low number representing disagreement with the statement, suggest that
the statement is perceived to be untrue.
Levine, Stephan, Krehbiel and Berenson (2008:219) state that the normal distribution
is the most common continuous distribution used in statistics. They indicate further
that the normal distribution has several important theoretical properties:
• It is bell shaped in its appearance.
• Its measures of central tendency (mean, medium and mode) are equal.
• Its interquartile range is equal to 1.33 standard deviation. (It means that the
middle 50% of the values are contained within an internal of two thirds of a
standard deviation below the mean and two-thirds of standard deviation above
the mean) and has an infinite range (- ? < x < ?).
The findings of the survey are ranked from highest to lowest mean value and are
shown in table 5.8 below.
Table 5.8: Results of corporate entrepreneurial orientation
NO CONSTRUCT n x s
2 Innovativeness 78 4.010 0.673
4 Pro-activeness 72 3.833 0.862
5 Competitive aggressiveness 71 3.538 0.759
1 Autonomy 78 3.476 0.758
3 Risk-taking 72 3.277 0.716
TOTAL 74 3.626 0.753
Table 5.8 indicates that an average mean of 3.626 was recorded considering all five
constructs measuring entrepreneurial orientation and an average standard deviation
of 0.753. The constructs which scored the highest agreement to the presence
thereof in Senwes Village, Retail division are Innovativeness ( x = 4.010), Pro-
activeness ( x = 3.833) and Competitive aggressiveness ( x = 3.538).
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The constructs that scored the lowest and indicated a relative negative sentiment
were Autonomy ( x = 3.476) and Risk-taking ( x = 3.277). The number of
respondent’s feedback differs from construct due to the fact that respondents did not
complete all the statements and this resulted in excluding data from this study and
could be depicted in table 5.8 labelled under n.
Table 5.8 indicated the mean values across the constructs ranked from the highest to
the lowest. As there are no norms in interpreting a Likert scale, for the purpose of
this study, it is assumed that a score greater than three out of five is an indication of
a positive inclination towards the statement.
From this assumption it is evident that the middle management, first line supervisors
and staff had a positive sentiment to all the constructs measuring entrepreneurial
orientation, i.e. these were Innovativeness, Pro-activeness, Competitive
aggressiveness, Autonomy and Risk-taking.
5.6.2 Variables measuring corporate entrepreneurial climate
Ireland et al. (2006) identified six constructs that assessed the entrepreneurial
climate in the organisation. Using the Likert scale, 19 items for Management
support, 10 items for Work discretion, six items for Rewards/Reinforcement, six
items for Time availability, seven items for Organisational boundaries and 30
items for Specific climate variables. The constructs Time availability and
Organisational boundaries were excluded for statistical analysis due to very low
Cronbach alpha coefficients of (0.294) and (0.481) respectively, as discussed in
section 5.5.
Table 5.9 presents the results of the mean analysis of the constructs determining
entrepreneurial climate in the business.
106
Table 5.9: Results of corporate entrepreneurial climate
NO CONSTRUCT n x s
3 Rewards/Reinforcement 69 3.679 0.726
6 Specific climate variable 68 3.442 0.388
2 Work discretion 69 3.175 0.828
1 Management support 69 2.916 0.615
TOTAL 69 3.303 0.639
Table 5.9 indicates an average mean of 3.303 was recorded and an average
standard deviation of 0.639. The constructs which scored the highest (strongest
agreement to the preference thereof in Senwes Village, Retail division) are
Rewards/Reinforcement ( x = 3.679), Specific climate variable ( x = 3.442) and
Work discretion ( x = 3.175).
The construct that scored the lowest and indicated a neutral sentiment was
Management support ( x = 2.916). Table 5.9 indicated the mean values across the
constructs ranked from the highest to the lowest. As there are no norms interpreting
a Likert scale, it is assumed that a score greater than three out of five is an indication
of a positive inclination towards the statement.
From this assumption it is evident that the middle management, first line supervisors
and staff had a positive sentiment towards Rewards/Reinforcement, Specific
climate variable and Work discretion.
5.6.3 Variables measuring key retail success factors
A total of nine constructs were identified that assessed the compliance to key retail
success factors.
107
Table 5.10: Results of key retail success factors
NO CONSTRUCT n x s
3 Service factor 67 3.646 0.991
4 Merchandise/Product 67 3.493 0.804
5 Price 67 3.333 0.553
1 Segmentation/Target market 67 3.216 0.925
TOTAL 67 3.422 0.818
Table 5.10 indicates an average mean of 3.422 was recorded and an average
standard deviation of 0.818. The constructs with the highest agreement are Service
factor ( x = 3.646), Merchandise/Product ( x = 3.493), Price ( x = 3.333) and
Segmentation/Target market ( x = 3.216). From this assumption it is evident that
middle management, first line supervisors and staff had a positive sentiment towards
Service factor, Merchandise/Product, Price, Segmentation/Target market.
5.6.4 Variables measuring perceived success in business
Lotz (2009) identified four constructs that assessed perceived success in the
business. Using the Likert scale, 3 items for Financial measures, 3 items for
Process measures and 3 items for People development were used in this
research.
Table 5.11 presents the results of the mean analysis of the constructs determining
perceived success of the business.
Table 5.11: Results for perceived success of the business
NO CONSTRUCT n x s
1 Financial measures 66 4.409 0.688
2 Process measures 66 4.111 0.845
3 People development 66 3.575 1.032
Table 5.11 presents the result of the analysis on perceived success of the business
from highest to lowest mean scores.
108
Financial measures ( x = 4.409) and Process measures ( x = 4.111) obtained the
highest mean results. People development ( x = 3.575) obtained the weakest
mean.
Financial measures with a mean of ( x = 4.409) is interpreted that Village
respondents perceive positive financial growth and performance within the business.
The construct with the lowest score was People development ( x = 3.575) and that
indicated that Village respondents perceive employees committed to the business.
5.7 RELATIONSHIP BETWEEN CORPORATE ENTREPRENEURIAL
ORIENTATION CONSTRUCTS AND DEMOGRAPHIC VARIABLES
An empirical analysis was done to determine the effect of demographical variables
on the entrepreneurial orientation constructs measured by the questionnaire.
Therefore, quantitive tests need to be preformed to verify whether any observed
influence of demographic variables is significant enough to be discussed further. In
order to test for statistical significance, the two sample t-test was used. The results
of the t-test are p-values and d-values.
Simple conservative approach was used for the study by applying the t-test.
According to Levine et al. (2008:337), a p-value is the probability of getting a test
statistical equal or more extreme than the sample result, given that the null
hypothesis is true. Therefore, they state that a small p-value indicates a low
probability of equal means and therefore indicates statistical significance.
Levine (2008:539) argues that a smaller p-value than 0.05 is considered as sufficient
evidence of a statistically difference.
According to Govender (2010:88), in order to overcome the effect of the sample size
on the p-value, the d-value was also calculated. The d-value is employed to test the
practical significance of a standardised difference between the means. The effect
sizes which held to signify practical significance are presented in Table 5.12.
109
Table 5.12: Classification of d-value
d-value Interpretation
> 0.8 Large effect
0.5 to 0.8 Medium effect
0.2 to 0.5 Small effect
Source: Govender (2010:88)
5.7.1 Relationship between corporate entrepreneurial orientation constructs
and the gender of respondents
Demographical information was captured in section E of the questionnaire and is
analysed in this section. The analysis was done to determine if there is a significant
difference between the evaluations based on the mean scores of male and female
respondents with regard to a specific construct. Table 5.13 below indicates the
relationship between the five constructs measuring entrepreneurial orientation and
the demographic variable gender, with mean ( x ) standard deviation (s), t-test (p) and
effect sizes (d).
Table 5.13: The relationship between gender and the constructs
MALE FEMALE
NO
CONSTRUCT n x s n x s
p d
1 Autonomy 47 3.434 0.768 19 3.484 0.806 0.818 0.06
2 Innovativeness 47 4.044 0.709 19 3.953 0.692 0.632 0.13
3 Risk-taking 47 3.191 0.774 19 3.494 0.567 0.085 0.39
4 Pro-activeness 47 3.787 0.881 19 4.039 0.596 0.185 0.29
5 Competitive aggres-
siveness
47
3.489
0.753
19
3.570
0.763
0.216
0.34
Table 5.13 above indicates that there are no significant statistical differences (p <
0.05) between gender of respondents for the constructs used in this study to
measure entrepreneurial orientation.
110
5.7.2 Relationship between corporate entrepreneurial orientation constructs
and the management level of respondents
This analysis determines if there is a significant difference between the evaluations
based on the combined mean scores of the middle management and first line
supervisors and staff. Table 5.14 below illustrates the results of the t-test and effect
size analysis.
Table 5.14: The relationship between management levels and the corporate
entrepreneurial orientation constructs
MIDDLE
MANAGEMENT
FIRST LINE
SUPERVISOR /
STAFF
NO
CONSTRUCT
n x s n x s
p
d
1 Autonomy 37 3.502 0.680 29 3.379 0.885 0.538 0.14
2 Innovativeness 37 4.177 0.609 29 3.816 0.764 0.043 0.47
3 Risk-taking 37 3.313 0.772 29 3.234 0.682 0.666 0.10
4 Pro-activeness 37 3.945 0.760 29 3.750 0.873 0.344 0.22
5 Competitive
aggressiveness
37 3.547 0.772 29 3.586 0.756 0.838 0.05
As indicated in table 5.14, there are statistical significant (p < 0.05) differences in the
evaluation between middle management and first line supervisors/staff with regard to
the Innovativeness (p = 0.043) construct measuring entrepreneurial orientation.
Table 5.14 shows that with regard to the calculation of effective sizes, the result can
be summarised as follows. The variable management level of the respondents has a
medium effect (d < 0.50) on Innovativeness (d=0.47).
The result indicates practically significant difference (with a medium effect) between
the perception of middle management and first line supervisors/staff regarding
Innovativeness. The result also indicates that first line supervisors/staff are
practically significant more positive about Innovativeness, in comparison with middle
management.
111
5.7.3 Relationship between corporate entrepreneurial orientation constructs
and highest academic qualification level of the respondents
The analysis determines if there is a significant difference between the evaluations
based on the combined mean scores of staff with a grade 12 and lower academic
qualification and tertiary academic qualification. Table 5.15 below illustrates the
results of the t-test and effect size analysis.
Table 5.15: The relationship between highest academic qualification levels and
the entrepreneurial orientation constructs
GRADE 12 AND
LOWER
TERTIARY
ACADEMIC
QUALIFICATION
NO
CONSTRUCT
n x s n x s
p
d
1 Autonomy 37 3.378 0.752 29 3.537 0.803 0.414 0.20
2 Innovativeness 37 4.063 0.667 29 3.961 0.747 0.569 0.14
3 Risk-taking 37 3.432 0.620 29 3.082 0.818 0.062 0.43
4 Pro-activeness 37 3.932 0.789 29 3.767 0.847 0.421 0.19
37 3.756 0.695 29 3.319 0.778 0.021 0.56 5 Competitive
aggressiveness
As indicated in table 5.15, there are statistical significant (p < 0.05) differences in the
evaluation between staff with a grade 12 and lower academic qualification and staff
with a tertiary academic qualification with regard to the Competitive
aggressiveness construct (p = 0.021).
Table 5.15 shows that with regard to the calculation of effective sizes, the result can
be summarised as follows. The variable qualification of the respondents has a
medium to large effect (d > 0.50) on Competitive aggressiveness (d=0.56).
The result indicates practically significant differences (with a medium effect) between
the perception of staff with a grade 12 and lower academic qualification and staff with
a tertiary academic qualification regarding Competitive aggressiveness. The result
also indicates that staff with a grade 12 and lower academic qualification are
112
practically significant more positive about Competitive aggressiveness, in
comparison with staff with a tertiary academic qualification.
5.8 RELATIONSHIP BETWEEN CORPORATE ENTREPRENEURIAL CLIMATE
AND DEMOGRAPHIC VARIABLES
An empirical analysis was done to determine the effect of demographical variables
on corporate entrepreneurial climate, as measured by section B in the questionnaire.
The statistical significance as discussed in section 5.7 was used for the assessment
of corporate entrepreneurial climate of the business.
5.8.1 Relationship between corporate entrepreneurial climate and the gender
of respondents
Table 5.16 indicates the relationship between the factors measuring the corporate
entrepreneurial climate of the business and gender of the respondents, with the
mean ( x ) standard deviation (s), t-test (p) and effect sizes.
Table 5.16: The relationship between gender and the corporate entrepreneurial
climate of the business
MALE FEMALE
NO
CONSTRUCT n x s n x s
p
d
1 Management support 47 2.869 0.633 19 3.016 0.618 0.389 0.23
2 Work discretion 47 3.196 0.719 19 3.052 1.093 0.609 0.13
3 Rewards/Reinforcement 47 3.712 0.730 19 3.622 0.781 0.669 0.12
4 Specific climate variables 47 3.451 0.413 19 3.433 0.343 0.860 0.04
The results in table 5.16 indicated no statistical significant difference (p < 0.05) in the
mean values between the perceptions of male and female middle managers and first
line supervisors and staff. Female respondents rated two of the four variables more
positive than the male respondents.
113
5.8.2 Relationship between corporate entrepreneurial climate and the mana-
gement level of respondents
Table 5.17 indicates the relationship between the factors measuring organisational
climate of the business and the management level of respondents, with mean ( x ),
standard deviation (s), t-test (p) and effect sizes (d).
As indicated in table 5.17, there are statistical significant (p < 0.05) differences in the
evaluation between middle management and first line supervisor/staff with regard to
the Work discretion (p = 0.041).
Table 5.17: The relationship between management level and the corporate
entrepreneurial climate of the business
MIDDLE
MANAGEMENT
FIRST LINE
SUPERVISORS/
STAFF
NO
CONSTRUCT
n x s n x s
p
d
1 Management support 37 2.891 0.684 29 2.936 0.557 0.772 0.07
2 Work discretion 37 3.348 0.648 29 2.903 0.986 0.041 0.45
3 Rewards/Reinforcement 37 3.738 0.708 29 3.620 0.786 0.530 0.15
4 Specific climate variables 37 3.495 0.426 29 3.382 0.343 0.239 0.26
Table 5.17 shows that with regard to the calculation of effective sizes, the result can
be summarised as follows. The variable management level of the respondents has a
medium effect (d < 0.50) on Work discretion (d=0.45).
The result indicates practically significant difference between the perception middle
management and first line supervisors/staff regarding Work discretion. The result
also indicates that first line supervisors/staff are practically significant more positive
about Work discretion, in comparison to middle management.
114
5.8.3 Relationship between corporate entrepreneurial climate and the highest
academic qualification level of respondents
Table 5.18 indicates the relationship between the factors measuring organisational
climate of the business and the qualification level of the respondents, with mean ( x ),
standard deviation (s), t-test (p) and effect sizes (d).
As indicated in table 5.18, there are statistical significant (p < 0.05) differences in the
evaluation between staff with a grade 12 and lower academic qualification and staff
with a tertiary academic qualification with regard to the Specific climate variables (p
= 0.010).
Table 5.18 shows that with regard to the calculation of effective sizes, the result can
be summarised as follows. The variable qualification of the respondents has a
medium to large effect (p > 0.50) on Specific climate variables (0.59).
Table 5.18: The relationship between highest academic qualification levels and
the corporate, entrepreneurial climate of the business
GRADE 12 AND
LOWER
TERTIARY
ACADEMIC
QUALIFICATION
NO
CONSTRUCT
n x s n x s
p
d
1 Management support 37 3.007 0.609 29 2.789 0.640 0.167 0.34
2 Work discretion 37 3.191 0.835 29 3.103 0.852 0.675 0.10
3 Rewards/Reinforcement 37 3.680 0.791 29 3.695 0.682 0.934 0.02
4 Specific climate variables 37 3.552 0.409 29 3.310 0.331 0.010 0.59
The result indicates practically significant difference between the perception of staff
with a grade 12 and lower academic qualification and staff with a tertiary academic
qualification regarding Specific climate variables. The result also indicates that
staff with a grade 12 and lower academic qualification are practically significant more
positive about Specific climate variables, in comparison with staff with a tertiary
academic qualification.
115
5.9 RELATIONSHIP BETWEEN KEY RETAIL SUCCESS FACTORS AND
DEMOGRAPHICS
An empirical analysis was done to determine the effect of demographical variables
on key retail success factors as measured by section C in the questionnaire. The
statistical significance as discussed in section 5.7 was used for the assessment of
key retail success factors.
5.9.1 Relationship between key retail success factors and the gender of
respondents
Table 5.19 indicates the relationship between the factors measuring the compliance
to key retail success factors of the business and gender of the respondents, with the
mean ( x ), standard deviation (s), t-test (p) and the effect sizes.
Table 5.19: The relationship between gender and key retail success factors
MALE FEMALE
NO
CONSTRUCT n x s n x s
p
d
3 Service factor 47 3.683 0.881 19 3.572 1.022 0.681 0.11
4 Merchandise/Product 47 3.191 0.783 19 3.431 0.874 0.707 0.10
5 Price 47 3.666 0.566 19 3.251 0.526 0.434 0.20
7 Technology 47 3.680 0.467 19 3.807 0.396 0.274 0.27
The result indicated no statistical significant difference (p < 0.05) in the mean values,
between the perceptions of male and female respondents. Female respondents
were on average more positive towards the variables.
5.9.2 Relationships between key retail success factors and the management
level of respondents
Table 5.20 indicates the relationship between the factors assessing compliance to
the key retail success factors of the business and the management level of
respondents, with mean ( x ), standard deviation (s), t-test (p) and effect sizes (d).
The result indicated no statistical significant difference (p < 0.05) in the mean values
116
between the perceptions of middle management and first line supervisor / staff
respondents.
Table 5.20: The relationship between management level and the key retail
success factors
MIDDLE
MANAGEMENT
FIRST LINE
SUPERVISOR /
STAFF
NO
CONSTRUCT
n x s n x s
p
d
3 Service factor 37 3.736 0.973 29 3.543 0.844 0.391 0.20
4 Merchandise/Product 37 3.567 0.799 29 3.400 0.815 0.407 0.21
5 Price 37 3.407 0.578 29 3.238 0.514 0.215 0.29
7 Technology 37 3.788 0.384 29 3.626 0.511 0.162 0.32
5.9.3 Relationship between key retail success factors and the highest
academic qualification level of respondents
Table 5.21 indicates the relationship between the factors measuring compliance to
key retail success factors and the highest academic qualification level of the
respondents, with mean ( x ), standard deviation (s), t-test (p) and effect sizes (d).
Table 5.21: The relationship between highest academic qualification levels and
compliance to key retail success factors
GRADE 12 AND
LOWER
TERTIARY
ACADEMIC
QUALIFICATION
NO
CONSTRUCT
n x s n x s
p
d
2 Service factor 37 3.773 0.822 29 3.495 1.019 0.237 0.27
4 Merchandise/Product 37 3.474 0.770 29 3.517 0.859 0.839 0.05
5 Price 37 3.397 0.510 29 3.252 0.603 0.305 0.24
7 Technology 37 3.695 0.521 29 3.744 0.340 0.652 0.09
The results in table 5.21 indicated no statistical significant difference (p < 0.05) in the
mean values between the perceptions of respondents with a grade 12 and lower
academic qualification and respondent with a tertiary academic qualification.
117
5.10 RELATIONSHIP BETWEEN PERCEIVED SUCCESS AND DEMOGRAPHIC
VARIABLES
An empirical analysis was done to determine the effect of demographical variables
on the perceived success of the business, as measured by section E in the
questionnaire. The same test of statistical significance discussed in section 5.7 was
used for the perceived success of the business.
5.10.1 Relationship between perceived success factors and the gender of
respondents
Table 5.22 indicates the relationship between the factors measuring perceived
success of the business and gender of the respondents, with mean ( x ), standard
deviation (s), t-test (p) and effect sizes (d).
Table 5.22: The relationship between gender and the perceived success of the
business
MALE FEMALE
NO
CONSTRUCT n x s n x s
p
d
1 Financial measures 47 4.383 0.742 19 4.473 0.547 0.587 0.12
2 Process measures 47 4.092 0.850 19 4.157 0.856 0.779 0.08
3 People Development 47 3.567 0.965 19 3.596 1.209 0.926 0.02
The result indicated no statistical significant difference (p < 0.05) in the mean values
between the perception of males and females. Female respondents were on
average mere positive towards the variable.
5.10.2 Relationship between perceived success factors and the management
level of respondents
Table 5.23 indicates the relationship between the factors measuring the perceived
success of the business and the management level of respondents, with mean ( x ),
standard deviation (s), t-test (p) and effect sizes (d).
118
Table 5.23: The relationship between management level and perceived success
of the business
MIDDLE
MANAGEMENT
FIRST LINE
SUPERVISOR/
STAFF
NO
CONSTRUCT
n x s n x s
p
d
1 Financial measures 37 4.540 0.573 29 4.241 0.791 0.093 0.38
2 Process measures 37 4.288 0.703 29 3.885 0.964 0.054 0.42
3 People Development 37 3.693 1.004 29 3.425 1.064 0.302 0.25
As indicated in table 5.23, there are no statistical significant (p < 0.05) differences in
the evaluation between middle management and first line supervisor/staff.
5.10.3 Relationship between the perceived success of a business and the
highest academic qualification level of respondents.
Table 5.24 indicates the relationship between factors of perceived success and the
qualification level of the respondents, with mean (x), standard deviation (s), t-test (p)
and effect sizes (d).
Table 5.24: The relationship between highest academic qualification levels and
perceived success of a business
GRADE 12 AND
LOWER
TERTIARY
ACADEMIC
QUALIFICATION
NO
CONSTRUCT
n x s n x s
p
d
1 Financial measures 47 4.342 0.775 29 4.494 0.560 0.360 0.20
2 Process measures 37 4.0901 0.859 29 4.137 0.842 0.821 0.06
3 People measures 37 3.648 0.971 29 3.482 1.114 0.528 0.15
The result indicated no statistical significant difference (p < 0.05) in the mean values
of respondents with a grade 12 and lower academic qualification and respondents
with a tertiary academic qualification. Respondents with a grade 12 and lower
academic qualification were on average more positive towards the constructs.
119
5.11 SUMMARY
The empirical research done in this chapter was of a quantitive nature, as it consisted
of a survey questionnaire. The questionnaire was used to measure the Corporate
entrepreneurial orientation (five constructs), Entrepreneurial climate (six
constructs), Key retail success factors (9 constructs), and Perceived success
(four constructs) at Senwes Village, Retail division. The constructs were based on
the discussion in the literature review chapter 2 and 4. The data gathering process
response to the survey and demographical information of the respondents was
discussed.
Cronbach's alpha coefficient values were used to determine the internal consistency
among items in the questionnaire. Two constructs of entrepreneurial orientation
alpha values were less than 0.70 and were not discarded from this study due to
(Kent, 2007:142) that indicated a result of 0.6 as acceptable. This indicates a
relatively high level of internal reliability of the research instrument. Two constructs
of corporate entrepreneurial climate alpha values were less than 0.70 and were
discarded from this study due to the fact that their results were below 0.6. This
indicates a high level of internal reliability of the research instrument. Five constructs
of the key retail success factor alpha's value were less than 0.7 and were discarded
from this study. This indicated low level of research reliability of the instrument. Only
one of the constructs of perceived success of the business obtained a Cronbach
alpha values were less than 0.7 and was discarded from this study, indicating a
relatively high level of internal reliability of the research instrument.
It was conducted that corporate entrepreneurial orientation and corporate climate are
prevalent in Senwes Village, Retail division as the average mean was 3.626 and
3.303 respectively. From perceived success of the business assessment, it was
determined that Financial measures, Processes measure, and People
development are relatively strong in the business, Future success is the weakest.
The p-value and effect size (d-value) were used to determine statistically significance
and practical significant respectively of the constructs and demographical properties.
120
In the following chapter conclusions will be drawn from the findings discussed in this
chapter and recommendations will be made on how to foster a corporate
entrepreneurial framework that will be prevalence for compliance of key retail
success factors and perceived success of the business.
121
CHAPTER 6
CONCLUSIONS AND RECOMMENDATIONS
6.1 INTRODUCTION
The Senwes 2020 strategy is based on building a company that creates value for all
of its stakeholders on a sustainable basis. The company vision is to be an admired
agri-business and achieve the status of:
• Preferred investment.
• Preferred employer.
• Preferred supplier.
• Preferred partner.
• Preferred citizen.
Senwes 2020 vision is driven by the need to grow as well as the mitigation of risk,
given the maturity of the business and the market in which it operates. The strategic
direction is targeted at diversification across the agricultural value chain (Senwes,
2012:20).
Strydom (2012) stated that in the food-value chain active consolidation on the
primary production level is taking place at a rapid rate and on the other hand a strong
component of international competitiveness is becoming a reality, with multi-national
role players positioning them globally (Senwes, 2012:21). The consumer also
requires a shorter, simpler and cheaper supply chain and wants to participate in
deliberations regarding the end product.
In order for Senwes to be successfully positioned as an intermediary, it is evident that
change is essential and unavoidable. Therefore, Senwes business platform has to
be enlarged, scale of volume must be added, geography and trade mark has to be
addressed.
122
Therefore to address the need for a changing business environment
recommendations will be made and illustrated in a proposed integrated corporate
entrepreneurial framework (refer to section 6.3).
The final chapter on the assessment of corporate entrepreneurship, perceived
success and retail within Senwes Village, Retail division comprises of two main
sections. In the first section of this chapter, conclusions will be drawn on the results
of the literature study and findings of the empirical study. The section will begin with
establishing reliability of the instruments used in examining the Cronbach alpha
coefficients. Thereafter, conclusions will be drawn on the demographical information
of the respondents, assessment of corporate orientation and climate, compliance to
key retail success factors and perceived success of the business.
The second section of the chapter will be to indicate recommendations on a
corporate entrepreneurial framework within Senwes Village, Retail division. This
section will conclude with an evaluation of the achievement of objectives and to
indicate suggestions for further research.
6.2 CONCLUSIONS
Conclusions will follow the basic structure of the questionnaire, by firstly assessing
the reliability of the survey by evaluating the Cronbach alpha coefficients, thereafter
the basic demographic information will be addressed, after which the five constructs
measuring corporate orientation will be evaluated. This will be followed by evaluating
the six constructs measuring corporate climate. Next, the nine constructs measuring
the compliance to key retail success factors will be evaluated. Finally, the four
constructs measuring perceived success of the business will then be evaluated.
6.2.1 Reliability of the corporate entrepreneurial climate and retail
questionnaire
Welman et al. (2010:9) state that quantitive research focus more on reliability that is,
consistent and stable measurement of data as well as reliability. Morse et al.
(2002:15) indicated that reliability could be determined by using the internally
123
consistency method. Welman et al. (2010:147) confirmed that the Cronbach alpha
coefficient is a measuring instrument of internal consistency.
Kent (2007:142) indicated that the Cronbach alpha coefficient varies between 0, for
no reliability to 1 for maximum reliability and that the value of 0.6 is acceptable,
although 0.7 is preferred to indicate a higher level of reliability.
Following the results of the survey two constructs measuring entrepreneurial
orientation, Risk-taking (0.673) and Competitive aggressiveness (0.627), obtained
a Cronbach alpha coefficient below 0.7. Based on the criteria of Kent (2007:142) all
five constructs can therefore regarded as being reliable, and the results could be
statistically analysed.
Two variables from section B of the questionnaire, measuring corporate
entrepreneurial climate, obtained a Cronbach alpha coefficient well below 0.7. For
the purpose of this study the variables Time availability and Organisational
boundaries with Cronbach alpha coefficients of (0.294) and (0.481) respectively,
were excluded from the analysis due to the criteria of Kent (2007:142).
Five variables from section C of the questionnaire, measuring key retail success
factors obtained a Cronbach alpha coefficient well below 0.7. For the purpose of this
study the variables Store factors (0.511), Price (0.693), Technology (0.584),
Supply chain (0.093), Promotions (0.435) and Location (0.133) will be excluded
for the purpose of this study.
Based on the criteria of Kent (2007:142) four of the nine constructs could be
regarded as reliable and the results of these constructs in section C could be
statistically analysed.
Only one variable from section D of the questionnaire, measuring perceived success
of the business, obtained a Cronbach alpha coefficient below 0.7. For the purpose of
this study the variable Future success (long term) which obtained a coefficient of
(0.372) was discarded from the analysis. A lower score might be attributed to
respondent lack of understanding the questions.
124
Owing to the fact that the Cronbach alpha coefficient values exceeding 0.7 were
recorded on three of the constructs measuring corporate entrepreneurial orientation,
four constructs measuring corporate entrepreneurial climate, three constructs
measuring key retail success factors and three constructs measuring perceived
success of the business, it is concluded that the research instrument used in this
study to assess corporate entrepreneurial climate and retail within Senwes Village,
Retail division has acceptable reliability.
6.2.2 Demographical information
Demographical information of respondents was obtained regarding age, gender,
race, highest academic qualification and management level. From the
demographical data received, 12 out of 78 respondents did not complete their
demographical data. This data were excluded from the study. The following general
conclusions are drawn regarding demographic information.
The majority of middle management and first line supervisors/staff are
between the ages of 50 to 59 years. As obtained (21; 26.9%) of the
respondents are between the age of 20 to 39 years, and the respondents
between the age of 40 to 49 years are (16; 20.5%). The finding indicated that
the majority of middle management and first line supervisors/staff are younger
than 49 years of age.
The normal retiring age according to Senwes company policy is 60 years and
this is a concern due to the fact that the middle management and first line
supervisors/staff in the 50 to 60 age range are 23 (29.20%) respondents. This
finding suggests that the business must focus on succession planning to fill
the gap of knowledgeable resources that will be lost when their retirement
start.
Middle management and first line supervisors/staff, who responded to the item
on race, were white 50 (64.1%). This indicates that transformation is needed
to comply with the demographic status of the region.
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The largest group of 40 (47.4%) of the respondents have a grade 12 and
lower academic qualification, where as 29 (37.18%) of the respondents have a
tertiary academic qualification. This could indicate a lack of knowledge
needed to understand the changing business environment and the actions
needed to respond to change and this could have a negative impact on
corporate entrepreneurship and retail.
Detailed conclusions on the relationship between selected demographic variables
and corporate orientation and climate, key retail success factors and perceived
success of the business are presented in section 6.3.
6.2.3 Conclusions on corporate entrepreneurial orientation
A rating of three on the five point Likert scale is regarded, for the purpose of this
study, as an average rating. The average mean of all the constructs measuring the
entrepreneurial orientation at Senwes Village, Retail division was 3.422 which could
be regarded as a just above average response. For the purpose of this study, mean
responses of x < 3 are interpreted that the construct has a lower prevalence in the
business and needs development.
A mean response of x > 3 is interpreted as being evident in the business and must
be maintained and sustained in corporate entrepreneurial orientation. Based on the
results in chapter 5, it indicate that the constructs for corporate entrepreneurial
orientation has a strong presence in Senwes Village.
Conclusion for each individual construct is:
6.2.3.1 Innovativeness
Mcfadzean et al. (2005:353) indicated that innovativeness reflects a business
tendency to engage in and support of new ideas, novelties, experimentation and
creative processes that may result in new product and services. The construct,
Innovativeness received the highest rating with a mean of 4.010 meaning that the
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participating respondents in general slightly agree with the statements measuring the
construct.
It seems that respondents feel that Senwes Village, Retail division place a strong
emphasis on innovation with a continuous result of new innovative products, services
and processes. Respondents have the belief that Senwes Village, Retail division
belief that innovation is a necessity for the business future, with the focus on
continuous innovation.
6.2.3.2 Pro-activeness
Rauch et al. (2009:761) state that in the corporate entrepreneurial literature, Pro-
activeness is an opportunity seeking, forward looking perspective characterised by a
high awareness of external trends and events and acting in anticipating thereof.
The construct, Pro-activeness, obtained a rating of an average mean of 3.833
implying that the respondents slightly agree with the statements of the construct.
This implies that respondents agree that Senwes Village, Retail division continuous
monitor market trends and identity future needs for customers by often introducing
first new products, services and processes.
6.2.3.3 Competitive aggressiveness
Lumpkin and Dess (2001:433) state that Competitive aggressiveness refers to the
intensity of business efforts to outperform industry rivals by a strong offensive
posture directed at overcoming competitors and may also be quite reactive as when
a business defends its market position or aggressively enters a market that a rival
identified.
The construct, Competitive aggressiveness, obtained the third lowest rating ( x =
3.538). This suggest that respondents slightly agree that Senwes Village, Retail
division is very aggressive and intensely competitive, to combat industry trends that
may threaten the survival of the business or competitive position.
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6.2.3.4 Autonomy
Lotz (2009:47) states that Autonomy refers to the independent actions of an
individual or team in bringing forth an idea or a vision and carrying it through to
completion.
The construct, Autonomy, obtained a rating with a mean of 3.476. This implies that
respondents slightly agree that they have Autonomy in their work. They imply that
they have the authority to be creative; they are allowed to make decisions and have
the flexibility to resolve problems.
6.2.3.5 Risk-taking
Lumpkin and Dess (2005:431) define Risk-taking as a tendency to take bold actions
such as venturing into unknown new markets, committing a large portion of
resources to ventures with uncertain outcomes and or borrowing heavily. Jong et al.
(2011:7) argue that entrepreneurs prefer moderate rather than high risks, and try to
manage or reduce risks as much as possible.
The construct, Risk-taking, obtained a rating with a mean of 3.277. This implies that
respondents were neutral and did not agree or disagree with the statements
regarding Risk-taking. This imply that the business do not favour Risk-taking, even
if it is calculated risks. This could be as a result of negative outcomes of investments
in the history of the business, as well as regulatory factors such as corporate
governance. The respondents also felt that the term "risk taker" is not considered a
positive attribute for employees of this business. Taking this response rates into
consideration Senwes Village, Retail division will have to develop an action plan to
enhance the tolerance for risks.
6.2.4 Conclusions on corporate entrepreneurial climate
The five point Likert scale was also used to assess how middle management and first
line supervisors/staff perceived the corporate entrepreneurial climate within Senwes
Village, Retail division. Initially, six constructs of corporate entrepreneurial climate
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were tested, where of, the constructs Time availability and Organisational
boundaries were excluded from this study due to very low Cronbach alpha
coefficients of (0.294) and (0.481) respectively, as discussed in section 5.5.
The average mean score of the four remaining constructs included in this study are
3.303. The average mean of all the constructs measuring entrepreneurial climate
within Senwes Village, Retail division can be regarded as a just above average
score. This implies that the remaining constructs of corporate entrepreneurial climate
are present in Senwes Village, Retail division but needs development to be
sustainable in the business.
Conclusions for each individual construct are:
6.2.4.1 Rewards/Reinforcement
Ireland et al. (2006:27) state that Reinforcement involves developing and using
systems that reinforce entrepreneurial behaviour, highlight significant achievements
and encourage pursuit of challenging work. The construct,
Rewards/Reinforcement, obtained the highest mean score, with a mean value of
3.679. This mean value suggest that respondents slightly agree with the statements
regarding Rewards/Reinforcement.
The respondents suggest that they are getting recognition from their superiors for
work well done. They also imply that there is a lot of challenge in their work.
6.2.4.2 Specific climate variables
The construct, Specific climate variables, obtained the second highest rating with a
mean value of 3.442. This suggest that the respondents was neutral and that they
did not agree or nor disagree with the statements regarding the construct.
The respondents indicated with the rating of the construct that they are uncertain that
the business created a culture, climate, process and structure to promote
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innovativeness. This construct is important for developing and sustaining corporate
entrepreneurship in the business. The suggestion would be to determine role and
responsibility and authority of each job level regarding corporate entrepreneurship to
develop a program rectifying this gap. This is also an important aspect that the
steering committee on excellence must take into consideration if they need creative
and responsive suggestions on improving the internal work environment. This will
have a further impact on the implementation of intervention in the business.
6.2.4.3 Work discretion
Ireland et al. (2006:27) state that work discretion and autonomy refers to top-level
managers commitment to tolerate failure and to provide decision making latitude and
freedom from excessive oversight and are willing to delegate authority and
responsibility to middle and lower level managers.
The construct, Work discretion, obtain an average mean value of 3.175. This
indicates a neutral rating, suggesting that they do not have the autonomy in their own
work place. This implies work by rule. This could hamper a culture of innovativeness
for improving work environment. Senwes Village, Retail division operates within rigid
policies and procedures and does not easily tolerate rule bending.
6.2.4.4 Management Support
Scheepers et al. (2007:242) state that Management support capture the
encouragement and willingness of managers to facilitate and promote
entrepreneurial behaviours including the championing of innovative ideas and
providing the resources people require to behave entrepreneurially.
The construct, Management support, obtained the lowest rating with an average
mean of 2.916. This implies a low or neutral rating to the statements of the construct.
Furthermore, this implies that the respondents indicated that management do not
encourage innovativeness by not creating a support structure.
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6.2.5 Assessment of compliance to key retail success factors
Nine constructs were identified in assessing the compliance to key retail success
factors. The constructs with very low Cronbach alpha coefficients were discarded:
Supply Chain, Promotions and Location, Store factor, Technology.
The five point Likert scale were also used. The constructs that were included in this
study was Service factor, Merchandise/Product, Price and Segmentation/Target
market.
Key retail success factors obtained on average mean of 3.422, that imply that it is
prevalent in Senwes Village, Retail division.
6.2.5.1 Store factor
Kraft and Mantrala (2006:18) state that a key value driver at store level is developing
the right combination of format and retail environmental factors. Kotler and
Armstrong (2010:404) argue that store atmosphere is an important element in the
retailer's product arsenal and the aim is to create a unique store experience, one that
suits the target market and moves the customers to buy.
The construct, Store factor obtained the highest rating with an average mean of
3.901. This imply that respondents indicated that the construct is important for retail
in Senwes Village, Retail division and indicated that Senwes Village, Retail division
comply to this construct. This could be as a result that Senwes upgraded some of
the branches, with other branches that was renovated by the Corporate service
department. The branches were also merchandised to better the flow of the
customer shopping experience.
6.2.5.2 Technology
Grewal et al. (2012:3) argue that the economic environment is not the only macro -
level factor that defines consumer behaviour and that the technological changes
associated with social and mobile localisation and personalisation have resulted in
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vast disruptions in retailer marketing practices as well as customer shopping
practices.
The construct, Technology, obtained the second highest average score with an
average mean of 3.717. Respondents indicated that they slightly agree that the
construct is important for retail in Senwes Village, Retail division and that the division
must incorporate Technology in their retail business. Respondents indicated also
Technology, that are not yet efficient or implemented, that must be investigated and
that is important for Senwes Village, Retail division.
The efficiently of the Supply chain management and effective integration of
suppliers and transport intermediaries.
Electronic shelve labelling that must be used to improve pricing methods in the
shop pricing methods in the shop.
Village could differentiate themselves if new technology is used to improve
service and product levels to customers like customer relations management
system.
Village must use nano-technology in identifying customers.
Village must implement e-retail to expand its geographical footprint.
This indication of Technology that must be investigated will be discussed at the
recommendation section of his chapter.
6.2.5.3 Service factor
Kraft and Mantrala (2006:19) argue that given the time and effort that is invested by
retailers in attempts to attract customers into the stores, it is amazing that so many
retailers pay so little attention to customer service. They state that it is common to
visit retail stores and see half filed shopping carts abandoned by shoppers that got
tired of waiting for their turn at the checkouts, or to see shoppers looking for a
particular item that they want to purchase but have not because they can't find a
service provider to assist or provide them with information.
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The construct, Service factor obtained an average mean of 3.646. This indicates
that the construct is important for Senwes Village, Retail division and slightly agree
that they comply with the construct.
There were two statements that obtained a ratingof three and were the lowest
scored.
Staff is well trained to help customers understand the benefits of product and
services.
Staff is well trained and empowered to rectify post purchase problems.
Above will be discussed in the section recommendations.
6.2.5.4 Merchandise/Product
Berman and Evans (2012:384) state that merchandising consists of the activities
involved in acquiring particular goods and/or services and making them available at
the place, time, price and quantity that enable a retailer to reach its goals.
Olson (2007:1) states that time have changed and customers will not be dictated to
any more due to the fact that customer tastes are more complex than ever before
and profitable life-cycles have shortened, requiring all-time quick turnarounds.
The construct, Merchandise/Product, obtained a rating of an average mean of
3.493, which indicate a neutral response towards the statements regarding the
constructs.
The respondents imply that they did not agree nor disagree that the merchandise
appeal to the target market and they were also uncertain that the product range are
wide and deep enough.
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6.2.5.5 Price
Grewal et al. (2012:1) argue that in the face of radical changes in the global market
place (a world wide recession, significant technological turbulence) customers not
only changing their shopping behaviours but also their value perceptions.
The construct, Price, obtained a rating with mean value of 3.333. The respondents
imply that they did not agree or nor disagree that they know the pricing methods used
in Senwes Village, Retail division. This could be because pricing is a centralised
function of the Procurement section at Senwes Village, Retail division head office.
6.2.5.6 Segmentation/Target market
Dunne et al. (2002:28) define segmentation as a method that retailers use to
examine, or break down heterogeneous consumer populations in smaller, more
heterogeneous groups based on their characteristics.
The construct, Segmentation/Target market, obtained the lowest mean value of
3.216. This indicates a neutral response, suggesting that they did not agree or
disagree with the statements regarding the construct. Segmentation is an important
construct in retail to determine the business Target market and to determine what
products and services to offer that could satisfy the needs of the customers.
6.2.6 Assessment of perceived success of the organisation
The five point Likert scale was also used to assess how middle management and first
line supervisors/staff perceive the success of the business. Initially, four factors
indicative of business success were tested in order to serve as dependent variables
being influenced by corporate entrepreneurship climate. The factors, Future
success, had to be discarded due too a low Cronbach alpha coefficient.
The average mean response of the tree constructs is 4.031. This indicated that
middle management and first line supervisors/staff perceived the success of the
business positively.
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6.2.6.1 Financial measures
The construct, Financial measures, obtained an average mean rating of 4.409. The
respondents indicated with this response the business has experienced growth in
turnover, growth in profits and growth in market share over the past few years.
6.2.6.2 Process measures
With a mean rating of 4.111, this construct was ranked second of the three business
success variables evaluated. Respondents slightly agree with the statements that
the competitive position, effectiveness (doing the right things) and the efficiency
(doing things right) of the organisation has improved over the past few years.
6.2.6.3 People development
The mean rating of the construct, People development was 3.575 and is ranked the
lowest of the three perceived business success constructs. Middle management and
first line supervisors/staff slightly agree with the statements of this construct. They
indicated that employees are a valuable asset to the business and that the morale of
the employees has improved over the last few years. They also agree that
employees are committed towards the business.
6.2.7 Relationship between selected demographic variables and corporate
entrepreneurial orientation and climate, key retail success factors and
perceived success
The demographic variable gender, management level and highest academic
qualification will be correlated with the constructs measuring corporate orientation,
corporate entrepreneurial climate, key retail success factors and perceived success
of the business.
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6.2.7.1 Relationship between gender and corporate entrepreneurial orientation
constructs
The results indicated no statistical significant difference (p < 0.05) in the mean value
between the perceptions of male and female respondents with regard to any of the
corporate entrepreneurial orientation constructs. Female respondents were more
positive regarding the entrepreneurial orientation constructs when compared to their
male colleagues.
6.2.7.2 Relationship between gender and corporate entrepreneurial climate
constructs
Overall, male respondents are more positive regarding corporate entrepreneurial
climate constructs than their female colleagues. The results indicated no statistical
difference (p < 0.05) in the mean values between the perceptions of male and female
middle management and first line supervisors/staff.
6.2.7.3 Relationship between gender and key retail success factors.
The results indicated no statistical significant difference (p < 0.05) in the mean
values, between the perception of male and female respondents. Overall, female
respondents were on average more positive towards the key retail success factors.
6.2.7.4 Relationship between gender and perceived success of the business
Female respondents were on average more positive towards perceived success of
the business as their male colleagues. The result indicated no statistical significant
difference (p < 0.05) in the mean values between the perception of male and female
respondents.
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6.2.7.5 Relationship between management levels and corporate orientation
constructs
The study indicated that the difference between the mean value of corporate
entrepreneurial orientation and management level is statistical significant regarding
Innovativeness (p > 0.043). The variable management level of the respondents has
a small effect (d < 0.50) on Innovativeness (d=0.47). The result indicates a
practically significant difference between the perception of middle management and
first line supervisors/staff regarding Innovativeness. The result also indicates that
first line supervisors/staff are practically significant more positive about
Innovativeness, in comparison to middle management.
6.2.7.6 Relationship between management levels and corporate entrepreneurial
climate constructs
Overall, the result indicated that first line supervisors/staff are practically significant
more positive about Work discretion, in comparison to middle management. The
results indicate that there are statistical significant (p < 0.05) differences in the
evaluation between middle management and first line supervisors/staff regard to the
Work discretion construct with a p-value of 0.041.
The variable management level of the respondents has a small effect (d < 0.50) on
Work discretion (d = 0.45).
The result indicates a practically significant difference between the perception of
middle management and first line supervisors/staff regarding Work discretion. The
result also indicates that first line supervisors/staff are practically significant more
positive about Work discretion, in comparison to middle management.
6.2.7.7 Relationship between management levels and key retail success factors
The result indicated no statistical significant difference (p < 0.05) in the mean values
between the perceptions of middle management and first line supervisors/staff.
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6.2.7.8 Relationship between management levels and perceived success factors
There are an indication of statistical significance (p < 0.05) in the evaluation between
middle management and first line supervisors/staff with regard to the construct,
Process measures with a p-value of 0.054.
The variable management level has a small effect (d < 0.50) on Process measures
with a d-value of 0.42.
The result indicated practically significant difference between the perception between
middle management and first line supervisors/staff regarding Process measures.
The result overall indicates that first line supervisors/staff are practically significant
more positive about the construct Process measures, in comparison to middle
management.
6.2.7.9 Relationship between qualification and corporate entrepreneurial orientation
constructs
Overall, there are statistical significant (p < 0.05) differences in the evaluation
between staff with a grade 12 and lower academic qualification and staff with a
tertiary academic qualification with regard to the construct. Competitive
aggressiveness with a p-value of 0.021.
The variable highest academic qualification of the respondents has a medium to
large effect (d > 0.50) on Competitive aggressiveness (d = 0.56).
The result indicates that staff with a grade 12 and lower academic qualification are
practically significant more positive about the construct, Competitive
aggressiveness, in comparison with staff with a tertiary academic qualification.
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6.2.7.10 Relationship between highest academic qualification and corporate
entrepreneurial climate
Senwes Village, Retail division respondents result indicated a statistical significant (p
< 0.05) differences in the evaluation between staff with a grade 12 and lower
academic qualification and staff with a tertiary academic qualification with regard to
the construct, Specific climate variable (p = 0.010).
Regarding the calculation of effective sizes, the variable highest academic
qualification of the respondents illustrated a medium to large effect (d > 0.50) on the
construct, Specific climate variable with d = 0.59.
Senwes Village, Retail division staff with a grade 12 and lower academic qualification
are practically more positive about the construct, Specific climate variable, in
comparison with staff with a tertiary academic qualification.
Furthermore, the result indicates a practically significant difference between the
perception of staff with a grade 12 and lower academic qualification and staff with a
tertiary academic qualification regarding the construct Specific climate variables.
6.2.7.11 Relationship between highest academic qualification level and key retail
success factors
The results obtained from the empirical study indicated no statistical difference
(p < 0.05) in the mean values between the perception of respondents with a grade 12
and lower academic qualification and respondents with a tertiary academic
qualification.
Overall, the results indicated that staff with an academic qualification of grade 12 and
lower are more positive regarding the constructs, than staff with a tertiary academic
qualification.
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6.2.7.12 Relationship between highest academic qualification level of respondents
and perceived success
The result overall indicate that staff with a tertiary academic qualification are more
positive than staff with a grade 12 and lower academic qualification regarding
perceived success of a business.
Furthermore, the result indicated that there is no statically significant difference
between the mean values of the staff with a grade 12 and lower academic
qualification and staff with a tertiary academic qualification.
6.3 RECOMMENDATIONS
It is evident that from the conclusions made on the five constructs of entrepreneurial
orientation, six constructs of entrepreneurial climate, nine constructs of retail and four
constructs of perceived success that entrepreneurial orientation exist in Senwes
Village, Retail division, but that the corporate entrepreneurial climate must be
developed to support the entrepreneurial orientation that will have an impact on the
key retail success factors and perceived success of the business.
Furthermore it was evident what key retail success factors were indicated as
necessary for Senwes Village, Retail division and that certain key retail success
factors aught to be addressed to create a sustainable business environment.
Positive results on the perceived success of the business affirm that the environment
for corporate entrepreneurship is very positive and fruitful.
From the literature study it was evident that to foster and create an corporate
entrepreneurial climate, demands a more enlightened approach to management
including decentralisation of authority, participation in decision making, evidence of
bureaucracy and encouragement of Risk-taking and creativity (Hayton, 2005:24).
In chapter three, with the time of the study, micro and macro environmental changes
in the agricultural business environment as described in chapter three supported the
need for a change in corporate entrepreneurial climate within the business.
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The challenge for Senwes Village, Retail division as a business will be as indicated
by Groenewald (2010:103) to:
• In still corporate entrepreneurship to gain and sustain competitive advantage.
• Rejuvenate and revitalise existing business.
• Develop new products and services.
• Pursue entrepreneurial opportunities.
• Create new business within existing business.
• Foster strategic renewal of existing operations.
• Improve growth and profitability.
• Increase financial performance and create value.
The recommendations are discussed by means of an integrated framework that
Senwes Village, Retail division can use to establish and enhance corporate
entrepreneurship that will have an impact on the compliance to key retail success
factors with an impact of perceived success of the business. This integrated
framework is presented in figure 6.1.
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Figure 6.1: An integrated framework for corporate entrepreneurship
TRIGER
EVENTS
STRUCTURE
CONTROLS
HUMAN RESOUCE
MANAGEMENT
CULTURE
ENTREPRENEURIAL ENTREPRENEURIAL
ORIENTATION CLIMATE
SUSTAINABLE SUCCESS OF
AGRI - BUSSINESS
6.3.1 Trigger events
Ireland et al. (2006:13) argue that interactions among organisational characteristics,
individual characteristics and some kind of participating event in the business's
internal work environment and external work environment are the precursors of
corporate entrepreneurship in organisations and are labelled as triggers. Triggers
originate from inside or outside of the organisation, but the greatest pressures for
entrepreneurial behaviour come from the external environment.
EXTERNAL
ENVIRONMENT
INTERNAL
ENVIRONMENT
KEY RETAIL
SUCCESS FACTORS
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Guth and Ginsberg (1990:7) confirmed with research the following external triggers:
The impact of major environmental shifts, such as deregulation, can influences
changes in strategy in a non-random way, with organisations moving away
from one generic strategy towards other generic strategy.
The more dynamic and hostile the environment, the more business will be
entrepreneurial.
Industry structures affect opportunities for successful new product
development.
Both opportunities and problems stem from potential of the business and its
competitors to find new combinations of resources that lead to competitive
advantage.
Ireland et al. (2006:13) concluded that quick recognition of these triggers help
organisations to identify the need and value as well as the shape for corporate
entrepreneurial strategy. More specifically, agri-businesses are faced with a number
of triggering events (refer to section 3.2) that may be solved through innovative
processes and ideas.
Factors such as weather conditions, commodity prices, input cost, stock levels,
consumption demand as well as the exchange rates will continue as never before
influence agricultural production in the country, with direct influences on the agri-
business (refer to section 3.2) and will require innovative product, services and
processes to face these challenges.
Senwes Village, Retail division strategic objective is to fulfil the role of preferred
supplier of product inputs and mechanisation to the agricultural producers with
distinct (refer to section 3.4.4.3). In order for Senwes Village, Retail division to
achieve this strategic, goal it must constantly monitor the external environment by
tasking the Committee for the Centre of excellence to investigate new trends in the
market, possible political and regulatory policy changes, new technologies,
competitor moves, best practices in the agri-business sector internationally and
nationally. This information must be used as strategic business intelligence that must
143
be available for divisions in the creation of strategy in time to react on external and
internal changes in the business environment.
6.3.2 Establishing a corporate entrepreneurial orientation and climate
It is important to create a corporate entrepreneurial climate that will enhance the
exploitation of trigger events. The following recommendations are presented
regarding structure, culture, human resource practices and control mechanisms to
develop a corporate entrepreneurial climate.
Structure
Corporate entrepreneurship flourishes when organisational structures have a relative
small number of layers that will result in a broader span of control which in turn
creates opportunities for employees to act entrepreneurially (Ireland et al., 2006:14).
Furthermore, according to Lotz (2009:61), many levels of approval in traditional
business have the potential to stifle innovations. Echols and Neck (1998:43)
indicated that entrepreneurial structures should be new and separately organised
from the old existing ways of a business, with specific focus on new projects
stemming from executive authority, prestige and accountability.
Therefore, it will be important for Senwes to have the committee for the centre of
excellence that could identify opportunities centrally for corporate entrepreneurship
and communicate opportunities to the relevant divisions for investigations for
possible business development. The divisions in turn must create a structure to have
the capacity and knowledge to investigate possible business developments and to
conclude with a business plan. An innovative divisional structure can only be
successful if it has the authority in decision making, the capacity and resources to
investigate opportunities and to implement business plans. Senwes Village, Retail
division must investigate its current structure to determine its capacity and resources
exist to fulfil its obligation to be corporate entrepreneurial.
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Controls
According to Ireland et al. (2006:15), controls create value when they simultaneously
provide the stability business need to exploit current competitive advantages and the
flexibility required for employees to behave entrepreneurially for the purpose of
beginning to form competitive advantages. Kuratko et al. (2007:78) agreed that the
core principle in developing entrepreneurial control requires that managers must give
up control to gain control.
The recommendation will be to create an owner-manager control environment
through its employees as indicated by Burns (2008:184) and it is build round six
principles:
Free access to financial information that is critical in tracking business
performance.
Continuous attempt to present this information to employees.
Training process that encourages an understanding of this information.
Employees learn that part of their job is to improve the financial result when
ever they can.
People are empowered to make decisions in their job based on what they
know.
Employees have a stake in the organisations success or failure.
Hayton (2005:31) indicated that the traditional model of human resource
management encourages matching employer contributions to organisational needs
and inducements, a more relevant perspective to corporate entrepreneurship would
be to encourage the building of relationships among employees, between employees
and the business and between employees and key stakeholders.
The recommendation to the agri-business is to measure its goals for corporate
entrepreneurship against Ireland et al. (2006:15) learning objectives from an effective
human resource management system that include the following elements:
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• Embrace creative and innovative behaviour.
• Take reasonable levels of risk.
• Use long-term orientation to evaluate innovation - based possibilities.
• Focus on results.
• Work co-operatively with others.
• Tolerance ambiguity.
• Assume responsibility for change.
Dabic et al. (2011:17) confirm that successful corporate entrepreneurship is
promoted by entrepreneurially-friendly processes relating to recruiting, selecting,
training, developing and rewarding.
Organisational culture
Kirby (2003:301) indicated that the guiding principle in a traditional business is not to
make a mistake, do not fail, do not take initiative but wait for instructions and protect
your back. In an entrepreneurial culture the focus will be on the future rather than the
past and the ability to develop transfer knowledge and produce an output (Hirsch et
al., 2008:45).
Senwes Village, Retail division must determine if an organisational culture for
corporate entrepreneurship exists within the business specific to authority and
responsibility that are decentralised to employees that are the closest to the action to
make decisions that are in the business best interest.
The next section will focus on the determinants for corporate orientation within the
business and will focus on Autonomy, Innovativeness, Risk-taking, Pro-
activeness and Competitive aggressiveness to enhance a corporate
entrepreneurial climate within Senwes Village, Retail division.
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6.3.3 Corporate orientation
The empirical research in chapter 5 confirmed that corporate orientation is relatively
present in Senwes Village, Retail division with an average mean result of 3.626 (refer
to section 5.6.1). The corporate orientation determinants necessary to assess the
fostering of an entrepreneurial climate as determined in the empirical study (refer to
section 5.6) are Innovativeness, Pro-activeness, Competitive aggressiveness,
Autonomy and Risk-taking. However, it is important to strengthen constructs of
corporate orientation that received a ratingof an average mean value less than 3.5.
Therefore detailed recommendations will only be made on Autonomy and Risk-
taking.
6.3.3.1 Autonomy
Lotz (2009:47) mentioned that Autonomy refers to the independent actions of an
individual or team in bringing forth an idea or vision and carrying it through to
completion. Therefore Autonomy is essential to the process of leveraging a
business existing strengths, identifying opportunities and encouraging the
development of new ventures or improved business practices. Therefore, it reflects
that managers/first line supervisors should communicate clear objectives and tasks
to employees, in such a way that it allows employees the freedom to pursue a
number of different approaches to perform their tasks. It allows employees the
freedom to approach problems in ways that make the most of their expertise and
their creative thinking.
6.3.3.2 Risk-taking
Lumpkin and Dess (2005:431) define Risk-taking as a tendency to take bold actions
such as venturing into unknown new markets, committing a large portion of
resources to ventures with uncertain outcomes. Jong et al. (2011:7) state that
entrepreneurs prefer moderate rather than high risks, and try to manage or reduce
risks as much as possible. The emphasis is not on the extreme uncontrollable risks,
but instead of risk that are moderate and calculated.
147
Senwes Village, Retail division staff should know what are their boundaries within
their work environment regarding taking calculated risks. This implies that a
delegation of authority must be set for different staff levels to know the boundaries for
calculated risks. Mistakes within the set boundaries must be tolerated and viewed as
part of the learning process. A reward system should be implemented for
Innovativeness that will lead to positive outcomes for Senwes. Furthermore, it is
important to implement a management system to ensure that mistakes and failures
are documented and made available for all employees to use as learning
opportunities.
6.3.4 Corporate entrepreneurial climate
The results obtained from the empirical study in chapter 5 (refer to section 5.6.2)
indicated that an average mean of 3.303 was recorded for entrepreneurial climate.
This imply that the corporate entrepreneurial climate is present in Senwes Village,
Retail division, but has to be developed to make it an active and a sustainable
management tool. Constructs that were identified to enhance the corporate
entrepreneurial climate are Rewards/Reinforcement, Specific climate variable,
Work discretion and Management support.
The detailed focus will also be on constructs that obtained an average mean less
than 3.5. Therefore detailed recommendations will be made on Management
support, Work discretion and Specific climate variable.
6.3.4.1 Management support
Scheepers et al. (2007:242) state that Management support capture the
encouragement and willingness of managers to facilitate and promote
entrepreneurial behaviour, including the championing of innovative ideas and
providing resources people require to behave entrepreneurially. Turner (2005:45)
states that support must derive from the highest level be formulated into strategy and
then communicated through the organisation.
148
This literature review confirm the discussion on Risk-taking (refer to section 6.3.5.2)
that stated that there must be a formal policy on corporate entrepreneurship in
Senwes Village, Retail division. This will include policy, procedure, formal
communication structures, how to list innovations, scale of incentives that could be
obtained for positive outcomes.
6.3.4.2 Work discretion
Ireland et al. (2006:27) state that Work discretion and Autonomy refers to top-level
managers’ commitment to tolerate failure, provide decision-making latitude and
freedom from excessive oversight and is willing to delegate authority and
responsibility to middle and lower managers. Hornsby et al. (2002:257) state that
middle managers lay the foundation for employees in business to be innovative and
take risks. Middle managers do this by providing (intensive rewards) that allows
employees to experiment with and to explore the feasibility.
The importance of the role of middle management as mentor group for the process of
corporate entrepreneurship is acknowledged. To obtain the best result from the
middle management group is to put them through corporate entrepreneurial training
that includes how to foster and implement an entrepreneurial climate in the work
place as mentor. After the training mentors will be evaluated in the workplace to
determine how theoretical knowledge obtained is put into practices. Mentorship must
be part of their bonus system.
6.3.4.3 Specific climate variables
Ireland et al. (2006:16) agree that entrepreneurially intense cultures also place high
importance on being able to empower people in ways to allow them to act creatively
and to fulfil their potential. Authority and responsibility are decentralised to
employees that are the closest to the action to make decisions that are in the
business best interest.
149
The question to answer is how to create an environment in Senwes Village, Retail
division where employees could manage and be creative in their work environment
as well as to manage their succession and development plan?
This involves basic human resource management principles of selecting the right
people for the job, training and performance appraisal with a link to succession
planning. People must be hired that have a passion for a specific position in a
company. Employees must determine through their job description their role and
task. They must be mentored, trained and evaluated to determine if they are
competent. Formal appraisal must be done on a quarterly basis to measure the
competency level of staff and to identify interventions for incompetence and
succession planning discussion must be done with the formal appraisals.
Authority and responsibility could now be decentralised to staff that are declared
competent. They will be in a situation to best take decisions in the place of work that
is the closest to the action.
6.3.5 Key retail success factors
Kotler and Armstrong (2010:402) argue that retailers are searching for new market
strategies to attract and hold customers as a result of service and assortments that
are looking more and more alike. Therefore service and product differentiation
eroded among retailers and customers have become smarter and more price
sensitive, as they see no reason to pay more for identical brands, especially when
service differences are shrinking (Kerin et al., 2007:311).
Therefore recommendations will focus on certain key retail success factors that were
determined in the empirical study in chapter 5 (refer to section 5.6.3) with an average
mean value less than 3.5. This includes the following constructs:
Segmentation/Target market, Price and Merchandise/Product.
Senwes Village, Retail division respondents indicated that the following key retail
success factors must present to differentiate them from competitors: Store factors,
150
Technology, Service factors, Merchandise/Product, Price and
Segmentation/Target market.
6.3.5.1 Segmentation/Target market
Dunne et al. (2002:228) define Segmentation as a method that retailers use to
examine or break down heterogeneous consumer populations in smaller, more
heterogeneous groups based on their characteristics. Kotler and Armstrong
(2010:402) agree with this view point that retailers must first segment and define their
target markets and then decide how they will differentiate themselves in these
markets and until retailers define and profile their markets, retailers cannot make
consistent decisions about product assortment, services, pricing, advertising and
store decor.
Respondents indicated in the empirical study in chapter 5 that Senwes Village, Retail
division does not know their target market. The recommendation is that Senwes
Village, Retail division must determine its segment of business with specific focus on
determining their target market. Effective segmentation could be done by
determining five basic elements (Kotler & Armstrong, 2010:225):
The size, purchasing power and profiles of the segment must be measurable.
Market segment are accessible and therefore can be reached and served.
They are large and profitable enough to be served.
Therefore, they are differentiable, conceptually, distinguishable and respond
differently to different marketing mix elements and programs.
Finally, they must be actionable whereby effective programmes can be
designed for attracting and serving these segments.
Dunne et al. (2002:229) confirm that retailers that select markets that are
measurable, accessible and substantial will be able to generate higher profit results.
151
6.3.5.2 Price
Grewal et al. (2012:1) argue that in the face of radical changes in the global market
place (a world wide recession, significant technological turbulence) customers are
not only changing their shopping behaviours but also value perceptions. Therefore
Senwes Village, Retail division must respond appropriately by monitoring the
environment to identify changes, both expected and unexpected with the following
results:
Remain more in touch with customer preferences
Take advantage of opportunities created by new customer preferences
Enhance the value they offer to the customer.
Senwes Village, Retail division must also investigate the implementation of
sophisticated dynamic pricing models that will update prices frequently, based on
changing supply or demand characteristics.
6.3.5.3 Merchandise/Product
Berman and Evans (2012:384) state that Merchandising consist of the activities
involved in acquiring particular goods and/or services and making them available at
the place, time and quantity that enable a retailer to reach its goals. Olson (2007:1)
states that time have changed and customers will not be dictated to anymore due to
the fact, that customer tastes are more complex than ever before and profitable life-
cycles have shortened, requiring all-time quick turnarounds.
Senwes Village, Retail division will excel in merchandise management if they:
Concentrate in finding unique merchandise that appeal to their target market.
The depth and length of the merchandise appeal to their target market with the
focus on availability.
152
6.3.5.4 Further recommendations
In addition to the recommendations made above, the following recommendations
should be considered to foster a corporate entrepreneurial climate in Senwes Village,
Retail division:
• Senwes must implement succession planning to fill the gap of knowledgeable
resources that will be lost due to retirement.
• Employment equity must be implemented to balance the male to female ratio in
the business.
• Transformation is needed in the business to comply with the demographic status
of the region. This could influence the businesses BEEE status that might
influence future business opportunities.
• To understand the changing business environment and how to react to change,
knowledgeable resources are needed and this could be obtained through an
establishment of a learning culture in the business.
• To investigate the efficiency of the supply chain management and the effective
integration of suppliers and transport intermediaries.
• To investigate the implementation of electronic shelve labelling that must be used
to improve pricing methods in the retail stores.
• Village could differentiate themselves if new technology is used to improve
service and product levels to customers like customer relations management
system.
• Village must use nano-technology in identifying customers to protect customers
and employees of fraudulent transactions.
• Village must implement e-retail to expand its geographical footprint.
• Staff must be trained to gain product knowledge to help customers understand
the benefits of product and services.
• Staff must be trained and empowered to rectify post purchase problems and
thereby enhance customer service.
The above recommendations focus on the efficiencies revealed from empirical study.
It should however be noted that focus must also be kept on those constructs that
153
were rated relatively high by middle management and first line supervisors/staff. It is
therefore also recommended that the positive variables must be reinforced.
6.4 ACHIEVEMENT OF OBJECTIVES
The measurement of success of this study is based upon achievement of the primary
and secondary objectives, as presented in 1.3 of this study.
6.4.1 Primary objective
The primary objective of this study is twofold: Firstly, to assess the determinants of
corporate entrepreneurship and retail in an agri-business in South Africa and
secondly to propose an integrated framework to facilitate the process of establishing
and maintaining corporate entrepreneurship and retail within the specific agri-
businesses in South Africa. The primary objective was achieved by realising the
secondary objectives of this study.
6.4.2 Secondary objectives
The secondary objectives, which support the primary objectives, are listed below
together with an evaluation of whether they were achieved:
• To determine what is meant by corporate entrepreneurship and corporate
entrepreneurial strategy by means of a literature study.
• To describe the link between innovation and corporate entrepreneurship.
• To obtain insight into the phenomena of retail by means of literature review.
• To obtain an understanding of Senwes retail division within the agricultural
industry in South Africa.
• To assess the determinants of corporate entrepreneurship and retail within the
specific agri-business.
• To assess perceived success determinants within the business.
• To propose an integrated framework to assist in establishing and maintaining
corporate entrepreneurship and retail in a specific agri-business.
154
The first secondary objective namely, to determine what is meant by corporate
entrepreneurship and corporate entrepreneurial strategy by means of a
literature study, was achieved through a literature review on corporate
entrepreneurship was done in chapter 2.
The second secondary objective namely, to describe the link between innovation
and corporate entrepreneurship was achieved, in section 2.6.1 where innovation
and link to corporate entrepreneurship was discussed.
The third secondary objective was to obtain insight into the phenomena of retail
by means of literature review, was achieved through a literature review on the
nature of retail was done in chapter 4.
Chapter 3 also addressed the fourth secondary objective to obtain an
understanding of Senwes retail division within the agricultural industry in
South Africa. Chapter 3 provided a literature overview of the history from co-
operatives to agri-business and gave an insight to the current and future situation of
the agricultural industry in South Africa. A specific focus in this chapter was given to
the history of Senwes Limited as well as an overview of Senwes Village, Retail
division.
The fifth secondary objective namely, to assess the determinants of corporate
entrepreneurship and retail within the specific agri-business was achieved, by
the assessment of the questionnaire that analysed the determinants of corporate
entrepreneurship and retail in Senwes Village, Retail division. This was done in
section 5.6.
The sixth secondary objective to assess perceived success determinants within
the business was achieved by analysing the perceived success factors for a
business in section 5.6.
Chapter 6, figure 6.1 addressed the seventh secondary objective namely, to
propose an integrated framework to assist in establishing and maintaining
corporate entrepreneurship and retail in a specific agri-business was achieved
155
by a proposed integrated corporate entrepreneurial framework within a specific agri-
business retail division.
6.5 SUGGESTIONS FOR FURTHER RESEARCH
Based on the findings of the study, the following suggestions are put forward for
consideration pertaining future research on corporate entrepreneurship and retail in
the agricultural industry.
This research is confined to only one agricultural business, specific to the Senwes
Village, Retail division; it should be done in other agricultural retail businesses
nationally. A further suggestion is to include the customer perception also in further
studies to obtain a balanced picture of corporate entrepreneurship and retail.
There would be a benefit from expanding the study to a larger population, as this
would enable higher level statistics like exploratory factor analysis to be preformed.
Similar studies to date focused on corporate entrepreneurship within the agricultural
sector or a specific agri-business. No evidence was find where studies incorporated
corporate entrepreneurship with retail in the agricultural environment. A study needs
to be performed on corporate entrepreneurship with the focus on retail, with customer
perceptions included in the South African agricultural environment in order to assess
the success, obstacles, improvements and consequences experienced.
6.6 SUMMARY
This chapter concludes the study on a proposed corporate entrepreneurial framework
for Senwes Village, Retail division. Conclusions drawn from the empirical research
results, as presented in chapter five, was discussed.
The Cronbach alpha coefficients established the reliability of the items testing each
construct, after which demographics of gender, managerial level and highest
academic qualification was discussed. Thereafter the five constructs measuring
corporate orientation was discussed, followed by a discussion of the four constructs
156
measuring corporate entrepreneurial climate, a discussion followed on the seven
constructs measuring retail and then the discussion was concluded with the three
constructs that measure perceived success of a business in relation to the results of
the empirical study.
Middle management and first line supervisors/staff of Senwes Village, Retail division
felt the most positive regarding the following corporate entrepreneurial orientation
constructs: Innovativeness ( x = 4.010), Pro-activeness ( x = 3.833) and
Competitive aggressiveness ( x = 3.538).
The constructs that middle management and first line supervisors/staff had a
negative sentiment were Autonomy ( x = 3.476) and Risk-taking ( x = 3.277).
Of the variables measuring corporate entrepreneurial climate within Senwes Village,
Retail division, middle management and supervisors / first line supervisors/staff felt
most positive about Rewards/Reinforcement ( x = 3.679), Specific climate variable
( x = 3.442). Middle management and first line supervisors/staff had a negative
sentiment about Work discretion ( x = 3.175) and Management support ( x =
2916).
Variables measuring retail within Senwes Village, Retail division, respondents
responded stronger about Store factor ( x = 3.901), Technology ( x = 3.717),
Service factor ( x = 3.646). Respondents had a negative sentiment about
Merchandise/Product ( x = 3.493), Price ( x = 3.333) and Segmentation/Target
market ( x = 3.216).
According to the results obtained from this empirical study conducted, the variables
measuring perceived success of the business, middle management and first line
supervisors/staff felt very strongly about all of the variables that included Financial
measures ( x = 4.409), Process measures ( x = 4.111) and People development
( x = 3.575).
Various demographical variables were found to influence perceptions regarding the
presence of the items of corporate entrepreneurial orientation, climate and retail, as
157
well as perceived success of a business. These variables were tested for statistical
significant variances in perceptions, and there was no notable difference in the
perception found.
Section 6.3 dealt with recommendations and practical ways which corporate
entrepreneurship and retail could be enhanced in Senwes Village, Retail division.
This was illustrated through a proposed integrated framework for corporate
entrepreneurship.
The chapter concludes by addressing the achievement of all of the objectives and
makes recommendations on possible future research that could be undertaken
based on this study.
158
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177
ANNEXURE A: CORPORATE ENTREPRENTEURIAL CLIMATE AND RETAIL
QUESTIONNAIRE
CORPORATE ENTREPRENEURIAL
CLIMATE & RETAIL QUESTIONNAIRE
CONFIDENTIAL
Note: All responses are confidential and neither the individual nor the
organisation would be identified in any report or release.
Copyright © reserved
Code number:
178
CORPORATE ENTREPRENEURIAL
CLIMATE & RETAIL QUESTIONNAIRE
Dear Senwes Village respondent
Corporate entrepreneurship and Retail is becoming increasingly important for the
competitiveness of Senwes Village as we face dynamic competition unleashed by
globalisation as well as by local competitors. Internal environmental factors play a
crucial role in translating entrepreneurship into performance. The intensity and
climate of corporate entrepreneurship in Senwes Village will have a direct impact on
the key success factors necessary for retail.
Senwes Village is becoming the Agricultural market leader in South Africa. The role
of senior, middle management and first line supervisors and staff therefore becomes
crucial as the responsibility lies with them to be more entrepreneurial to adapt to the
changing business environment and to comply with key retail success factors that will
result in moving the bottom line.
Very little to no research has been conducted on corporate entrepreneurship and
retail in the Agricultural retail sector in South Africa. Corporate entrepreneurship in
Senwes Village should therefore emphasise the establishment of business models,
processes and structures in the corporate retail sector so as to increase the level of
corporate entrepreneurship and compliance with key retail success factors. The
focus of this research study is on senior, middle and first line management and staff
in Senwes Village with specific focus on the retail division.
This questionnaire attempts to measure the corporate entrepreneurial climate
as well as the conformance to key retail success factors in your department in
order to determine whether it is conducive to foster a corporate entrepreneurial
and retail spirit.
The survey is divided into four sections:
Part A is the corporate entrepreneurial orientation questionnaire.
Part B is the corporate entrepreneurial climate questionnaire.
179
Part C is the retail questionnaire.
Part D is the perceived success of the business questionnaire.
Part E consists of biographical information.
Your contribution is highly valued and appreciated.
Please complete every question / statement to ensure the validity and reliability of the
study.
GENERAL INSTRUCTIONS
All questions must be answered by ticking (X) or highlighting the relevant block.
Use the following key to indicate your preference:
Please select the number which best describes your opinion about a specific
question or statement. In the example beneath, the respondent slightly agreed to the
statement listed.
S
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A03
My manager helps me to get my work done by removing
obstacles in my way.
1 2 3 X 5
SCALE TERM USED
5 Strongly agree
4 Slightly agree
3 Neither agree nor disagree
2 Slightly disagree
1 Strongly disagree
180
SECTION A: CORPORATE ENTREPRENEURIAL ORIENTATION
This section consists of 27 statements. Please indicate to what extent you agree
or disagree with each statement. Please mark the applicable block with a cross
(X).
S
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A01
I have enough autonomy in my job without
continual supervision to do my work.
1 2 3 4 5
A02
Our business allows me to be creative and try
different methods to do my job.
1 2 3 4 5
A03
Employees in our business are allowed to make
decisions without going through elaborate
justification and approval procedures.
1 2 3 4 5
A04
Employees in our business are encouraged to
manage their own work and have flexibility to
resolve problems.
1 2 3 4 5
A05
I seldom have to follow the same work methods
or steps while performing my major tasks from
day to day.
1 2 3 4 5
A06
Our business regularly introduces new services/
products/ processes.
1 2 3 4 5
A07
Our business places a strong emphasis on new
and innovative products/services/processes.
1 2 3 4 5
A08
Our business has increased the number of
services/products offered during the past two
years.
1 2 3 4 5
A09
Our business is continually pursuing new
opportunities.
1 2 3 4 5
A10
Over the past few years, changes in our
processes, services and product lines have
been quite dramatic.
1 2 3 4 5
A11
In our business there is a strong relationship
between the number of new ideas generated
and the number of new ideas successfully
implemented.
1 2 3 4 5
A12
Our business places a strong emphasis on
continuous improvement in products/service
delivery/processes.
1 2 3 4 5
181
A13
Our business has a widely held belief that
innovation is an absolute necessity for the
business’s future.
1 2 3 4 5
A14
Our leaders seek to maximise value from
opportunities without constraint to existing
models, structures or resources.
1 2 3 4 5
A15
When confronted with uncertain decisions, our
business typically adopts a bold posture in
order to maximise the probability of exploiting
opportunities.
1 2 3 4 5
A16
In general, our business has a strong inclination
towards high-risk projects.
1 2 3 4 5
A17
Owing to the environment, our business
believes that bold, wide-ranging acts are
necessary to achieve the business’s objectives.
1 2 3 4 5
A18
Employees are often encouraged to take
calculated risks concerning new ideas.
1 2 3 4 5
A19
The term “risk-taker” is considered a positive
attribute for employees in our business.
1 2 3 4 5
A21
Our business is very often the first to introduce
new products/services/processes.
1 2 3 4 5
A22
Our business typically initiates actions which
competitors respond to.
1 2 3 4 5
A23
Our business continuously seeks out new
products/processes/ services.
1 2 3 4 5
A24
Our business continuously monitors market
trends and identifies future needs of customers.
1 2 3 4 5
A25
In dealing with competitors our business
typically adopts a very competitive “undo-the-
competitor” posture.
1 2 3 4 5
A26
Our business is very aggressive and intensely
competitive.
1 2 3 4 5
A27
Our business effectively assumes an
aggressive posture to combat industry trends
that may threaten our survival or competitive
position.
1 2 3 4 5
A28
Our business knows when it is in danger of
acting overly aggressively (this could lead to
erosion of our business’s reputation or to
retaliations by competitors).
1 2 3 4 5
182
SECTION B: CORPORATE ENTRENEURIAL CLIMATE
This section consists of 78 statements. Please indicate to what extent you agree or disagree with
each statement. Please mark the applicable block with a cross (X).
S
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B01
My organisation is quick to use improved work
methods.
1 2 3 4 5
B02
My organisation is quick to use improved work
methods that are developed by workers.
1 2 3 4 5
B03
In my organisation, developing one’s own ideas
is encouraged for the improvement of the
corporations.
1 2 3 4 5
B04
Upper management is aware and very receptive
to my ideas and suggestions.
1 2 3 4 5
B05
A promotion usually follows from the
development of new and innovative ideas.
1 2 3 4 5
B06
Those employees who come up with innovative
ideas on their own often receive management
encouragement for their activities.
1 2 3 4 5
B07
The “doers on projects” are allowed to make
decisions without going through elaborate
justification and approval procedures.
1 2 3 4 5
B08
Senior managers encourage innovators to bend
rules and rigid procedures in order to keep
promising ideas on track.
1 2 3 4 5
B09
Many top managers have been known for their
experience with the innovation process.
1 2 3 4 5
B10
Money is often available to get new project ideas
off the ground.
1 2 3 4 5
B11
Individuals with successful innovative projects
receive additional rewards and compensation
beyond the standard rewards system for their
ideas and efforts.
1 2 3 4 5
B12
There are several options within the organisation
for individuals to get financial support for their
innovative projects and ideas.
1 2 3 4 5
B13
People are often encouraged to take calculated
risks with ideas around here.
1 2 3 4 5
183
B14
Individuals risk takers are often recognised for
their willingness to champion new projects,
whether eventually successful or not.
1 2 3 4 5
B15
The term “risk taker” is considered a positive
attribute for people in my work area.
1 2 3 4 5
B16
This organisation supports many small and
experimental projects realising that some will
undoubtedly fail.
1 2 3 4 5
B17
An employee with a good idea is often given free
time to develop that idea.
1 2 3 4 5
B18
There is considerable desire among people in
the organisation for generating new ideas
without regards for crossing departmental or
functional boundaries.
1 2 3 4 5
B19
People are encouraged to talk to employees in
other departments of this organisation about
ideas for new projects.
1 2 3 4 5
B20
I feel that I am my own boss and do not have to
double check all of my decisions with someone
else.
1 2 3 4 5
B21
Harsh criticism and punishment result from
mistakes made on the job.
1 2 3 4 5
B22
This organisation provides the chance to be
creative and try my own methods of doing the
job.
1 2 3 4 5
B23
This organisation provides the freedom to use
my own judgement.
1 2 3 4 5
B24
This organisation provides the chance to do
something that makes use of my abilities.
1 2 3 4 5
B25
I have the freedom to decide what I do on my
job.
1 2 3 4 5
B26
It is basically my own responsibility to decide
how my job gets done.
1 2 3 4 5
B27
I almost always get to decide what I do on my
job.
1 2 3 4 5
B28
I have much autonomy on my job and am left on
my own to do my own work.
1 2 3 4 5
B29
I seldom have to follow the same work methods
or steps for doing my major tasks from day to
day.
1 2 3 4 5
B30
My manager helps me get my work done by
removing obstacles and roadblocks.
1 2 3 4 5
184
B31
The rewards I receive are dependent upon my
innovation on the job.
1 2 3 4 5
B32
My supervisor will increase my job
responsibilities if I am performing well in my job.
1 2 3 4 5
B33
My supervisor will give me special recognition if
my work performance is especially good.
1 2 3 4 5
B34
My manager would tell his/her boss if my work
was outstanding.
1 2 3 4 5
B35 There is a lot of challenge in my job. 1 2 3 4 5
B36
During the past three months, my work load kept
me from spending time on developing new
ideas.
1 2 3 4 5
B37
I always seem to have plenty of time to get
everything done.
1 2 3 4 5
B38
I have just the right amount of time and work
load to do everything well.
1 2 3 4 5
B39
My job is structured so that I have very little time
to think about wider organisational problems.
1 2 3 4 5
B40
I feel that I am always working with time
constraints on my job.
1 2 3 4 5
B41
My co-workers and I always find time for long-
term problem solving.
1 2 3 4 5
B42
In the past three months, I have always followed
standard operating procedures or practices to do
my major tasks.
1 2 3 4 5
B43
There are many written rules and procedures
that exist for doing my major tasks.
1 2 3 4 5
B44
On my job I have doubt of what is expected of
me.
1 2 3 4 5
B45 There is little uncertainty in my job. 1 2 3 4 5
B46
During the past year, my immediate supervisor
discussed my work performance with me
frequently.
1 2 3 4 5
B47
My job description clearly specifies that
standards of performance on which my job is
evaluated.
1 2 3 4 5
B48
I clearly know what level of work performance is
expected from me in terms of amount, quality
and timelines of output.
1 2 3 4 5
185
B49
This company definitely rewards employees who
take calculated risks and innovate.
1 2 3 4 5
B50
Jobs in this company tend to be broadly defined
with considerable discretion in how tasks are
performed.
1 2 3 4 5
B51
In this company, employees can pursue multiple
career paths.
1 2 3 4 5
B52
This company tries hard to develop the creative
potential of employees.
1 2 3 4 5
B53
Annual performance appraisals in this company
include an evaluation of employee
innovativeness.
1 2 3 4 5
B54
Around here, it seems like there is more concern
with process than with performance.
1 2 3 4 5
B55
This company does a good job of balancing
incentives for individual initiative with incentives
for team collaboration.
1 2 3 4 5
B56
If you are not innovating on the job, you cannot
get ahead in this company.
1 2 3 4 5
B57
An overly bureaucratic structure takes away
from our ability to be entrepreneurial in this
company.
1 2 3 4 5
B58
Our company is organised in a way that
encourages managers to “micromanage”
employees and projects.
1 2 3 4 5
B59
We have too many levels of management in this
company.
1 2 3 4 5
B60
I would characterise the company structure as
being highly flexible.
1 2 3 4 5
B61
A rigid chain of command limits our ability to
experiment with new ideas.
1 2 3 4 5
B62
Red-tape and slow approval cycles are problems
in this company.
1 2 3 4 5
B63
Managers in this company strongly believe in
delegating decision-making responsibility.
1 2 3 4 5
B64
Controls are very tight in this company; we tend
to count every dollar and every hour.
1 2 3 4 5
B65
Senior management focuses on eliminating any
slack within budgets.
1 2 3 4 5
B66
Once budgets are finalized and accepted, they
are difficult to revise.
1 2 3 4 5
186
B67
The lines of command clearly allocate authority
and responsibility to each business
unit/department.
1 2 3 4 5
B68
The organisational structure is very clearly
defined and delineated.
1 2 3 4 5
B69
In this company, employees have a lot of say in
how things are done.
1 2 3 4 5
B70
Ours is a culture that rewards the tried and the
true.
1 2 3 4 5
B71
This is a company that celebrates innovative
achievements.
1 2 3 4 5
B72
We have a culture that strongly discourages
failure.
1 2 3 4 5
B73
There is a sense of urgency in this company
regarding the importance of change and
innovation.
1 2 3 4 5
B74
This company subscribes to the motto “if it ain’t
broke, don’t fix it”.
1 2 3 4 5
B75
Innovation and risk-taking are core values in this
company.
1 2 3 4 5
B76
Lines of command clearly allocate authority and
responsibility to each business unit/department.
1 2 3 4 5
B77
New ideas tend to receive quick go/no go
decisions from management in this company.
1 2 3 4 5
B78
The company’s environment encourages people
to talk openly with others about ways to improve
the firm’s operations?
1 2 3 4 5
187
SECTION C: RETAIL
This section consists of 54 statements. Please indicate to what extent you agree or disagree with
each statement. Please mark the applicable block with a cross (X).
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C01
Village Profile their markets (Age, gender, income,
education, culture and buying preferences are
known).
1 2 3 4 5
C02
The target market (Village customer) needs for
products and services are satisfied
1 2 3 4 5
C03
Customer profiled data are used to stock retail
shops.
1 2 3 4 5
C04 Village know their target market. 1 2 3 4 5
C05
Village creates a unique store experience for
customers.
1 2 3 4 5
C06
Retail environment are designed to have a unique
shopping flow (shopping flow).
1 2 3 4 5
C07
Customers perception of value are heavily
influenced by their perception of a store’s look and
feel (music, colour, scent and crowding could have
an impact on overall experience).
1 2 3 4 5
C08
Store that offers a pleasant shopping experience
will result in greater spending.
1 2 3 4 5
C09
Store atmosphere will differentiate Village from
their competitors.
1 2 3 4 5
C10
Village branch management pay attention to
customer service.
1 2 3 4 5
C11 Village staff pays attention to customer service. 1 2 3 4 5
C12 Checkout points enhance customer service. 1 2 3 4 5
C13
Staff is well trained to provide customers with
appropriate information so that they could make
informed buying decisions.
1 2 3 4 5
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C14
Staff is well trained making sure that they know
where merchandise is and will assist the customer.
1 2 3 4 5
C15
Staff is well trained to facilitate transactions such
as checkouts and returns.
1 2 3 4 5
C16
Staff is well trained to help customers understand
the benefits of products and services.
1 2 3 4 5
C17
Staff is well trained and empowered to rectify post
purchase problems.
1 2 3 4 5
C18
Our customers always believe that they get their
money’s worth at Senwes Village
1 2 3 4 5
C19 Our merchandise appeal to the target market. 1 2 3 4 5
C20
Enough merchandise is where the customer wants
it.
1 2 3 4 5
C21
Our merchandise differentiates Village from its
competitors.
1 2 3 4 5
C22 More product variety leads to higher sales levels. 1 2 3 4 5
C23
Senwes Village product range is wide and deep
enough
1 2 3 4 5
C24
Village staff knows the pricing methods that are
applied.
1 2 3 4 5
C25 Prices are based on what happened in the past. 1 2 3 4 5
C26
Differentiated pricing systems apply in different
geographical areas.
1 2 3 4 5
C27
Village pricing methods differentiate us from the
competitors.
1 2 3 4 5
C28
Price sensitivity affects are taken into account to
determine optimal or markdown pricing.
1 2 3 4 5
C29
Promotional pricing must be limited to formal
promotion activities centrally driven from Head
office.
1 2 3 4 5
C30
Promotional pricing must be decentralised to
branch level.
1 2 3 4 5
C31
Price and promotional software must be used to
determine optimal prices.
1 2 3 4 5
C32
Village consider market factors other than profit
maximisation when setting prices.
1 2 3 4 5
189
C33
Village sets prices on what is going to happen in
markets or market trends.
1 2 3 4 5
C34
Psychological pricing methods could lead to better
profit margin (eg: Retailers will round price till the
nearest nine (R2, 99).
1 2 3 4 5
C35
Village built price change cost into its price
optimisation model.
1 2 3 4 5
C36
Customers agree that Village is value for money
retailer.
1 2 3 4 5
C37
Supply chain management can generate
significant profits to the bottom line.
1 2 3 4 5
C38
Our Supply chain management are efficient and
effective in the integration of suppliers and
transport intermediaries so that merchandise are
distributed in the right quantities, right locations,
right time, to minimise system cost, while satisfying
service levels required.
1 2 3 4 5
C39
Village use sales data of POS to improve its
proposition to its customers.
1 2 3 4 5
C40
Sales data are used to work closely with suppliers
to plan inventory management.
1 2 3 4 5
C41
Sales data are used to improve customer relations
management.
1 2 3 4 5
C42
Electronic shelve labelling must be used to
improve pricing methods in the shops.
1 2 3 4 5
C43
Village could differentiate themselves if new
technology is used to improve service and product
levels to customers like an Customer relations
management (CRM) system.
1 2 3 4 5
C44 SAP technology is a retail friendly system. 1 2 3 4 5
C45
Village must invest in other retail technology other
than SAP.
1 2 3 4 5
C46
Village must use nano-technology in identifying
customers.
1 2 3 4 5
C47
Village must implement e-retail to expand its
geographical foot print.
1 2 3 4 5
C48
Sales promotions are a marketing tool for Village to
increase sales.
1 2 3 4 5
C49 Advertising is becoming less effective. 1 2 3 4 5
190
C50
Communications through promotions reaches the
customer at the place and time most purchase
decisions are made.
1 2 3 4 5
C51
Village uses different forms of price promotions
effective and efficient, such as temporary price
reductions, coupons, displays and other POS
material.
1 2 3 4 5
C52
Technology such as loyalty cards, electronic media
at POS, electronic shopping assistant will have an
impact how retailers use promotions.
1 2 3 4 5
C53
Village retail locations are accessible to the target
markets and are consistent with its positioning.
1 2 3 4 5
C54
Village retail stores must cluster with other retail
stores to give consumers the convenience of a one
stop shopping.
1 2 3 4 5
191
SECTION D: PERCEIVED SUCCESS OF THE BUSINESS
This section consists of 11 statements. Please indicate to what extent you agree or disagree with
each statement. Please mark the applicable block with a cross (X).
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D01
Our business has experienced growth in the
turnover over the past few years.
1 2 3 4 5
D02
Our business has experienced growth in profit
over the past few years
1 2 3 4 5
D03
Our business has experienced growth in market
share over the past few years.
1 2 3 4 5
D04
The competitive position of our business has
improved over the past few years
1 2 3 4 5
D05
The effectiveness(doing the right things) of our
business has improved over the past few years
1 2 3 4 5
D06
The efficiency ( doing the right things) of our
business has improved over the past few years
1 2 3 4 5
D07
In our business, employees are viewed as the
most valuable asset of the business.
1 2 3 4 5
D08
Our employees are highly committed to our
business
1 2 3 4 5
D09
The moral (job satisfaction) of our employees has
improved over the past few years.
1 2 3 4 5
D10
The image (stature) of our business, relative to our
competitors, has grown over the past few years.
1 2 3 4 5
D11
During difficult economic periods, investments in
research and development/innovative projects
continue and no significant financial cuts are
made.
1 2 3 4 5
192
SECTION E: BIOGRAPHICAL INFORMATION
The following information is needed to help with the statistical analysis of data for
comparisons among different interest groups. All your responses will be treated
confidentially. Your assistance in providing this important information is
appreciated.
Please mark the applicable block with a cross (X).
E01 Indicate your age group ? 29 30 - 39 40 - 49 50 - 59 60+
E02 Indicate your gender Male Female
E03 Indicate your race Black White Coloured Indian
E04
Indicate your highest academic qualification
Lower than Grade 12
Grade 12
National certificate
National diploma
3-year degree
Post graduate qualification
E05 Indicate your management level Snr Middle
management
(Job Grade 16
upwards)
Middle
management
(Job Grade 12- 15)
First Line
supervisory
level
(Job grade till 11)
Staff – (Job Grade till 10)
THANK YOU VERY MUCH FOR YOUR VALUED INPUT.
193
ANNEXURE B: CORPORATE ENTREPRENEURIAL ORIENTATION
CONSTRUCTS
Items measuring corporate orientation the latent constructs
AUTONOMY
Autonomy A01
I have enough autonomy in my job without continual supervision to do
my work.
Autonomy A02
Our business allows me to be creative and try different methods to do
my job.
Autonomy A03
Employees in our business are allowed to make decisions without
going through elaborate justification and approval procedures.
Autonomy A04
Employees in our business are encouraged to manage their own work
and have flexibility to resolve problems.
Autonomy A05
I seldom have to follow the same work methods or steps while
performing my major tasks from day to day.
INNOVATIVENESS
Innovativeness A06 Our business regularly introduces new services/ products/ processes.
Innovativeness A07
Our business places a strong emphasis on new and innovative
products/services/processes.
Innovativeness A08
Our business has increased the number of services/products offered
during the past two years.
Innovativeness A09 Our business is continually pursuing new opportunities.
Innovativeness A10
Over the past few years, changes in our processes, services and
product lines have been quite dramatic.
Innovativeness A11
In our business there is a strong relationship between the number of
new ideas generated and the number of new ideas successfully
implemented.
Innovativeness A12
Our business places a strong emphasis on continuous improvement in
products/service delivery/processes.
Innovativeness A13
Our business has a widely held belief that innovation is an absolute
necessity for the business’s future.
Innovativeness A14
Our leaders seek to maximise value from opportunities without
constraint to existing models, structures or resources.
RISK-TAKING
Risk-taking A15
When confronted with uncertain decisions, our business typically
adopts a bold posture in order to maximise the probability of exploiting
opportunities.
194
Risk-taking A16
In general, our business has a strong inclination towards high-risk
projects.
Risk-taking A17
Owing to the environment, our business believes that bold, wide-
ranging acts are necessary to achieve the business’s objectives.
Risk-taking A18
Employees are often encouraged to take calculated risks concerning
new ideas.
Risk-taking A19
The term “risk-taker” is considered a positive attribute for employees in
our business.
PRO-ACTIVENESS
Pro-activeness A21
Our business is very often the first to introduce new
products/services/processes.
Pro-activeness A22 Our business typically initiates actions which competitors respond to.
Pro-activeness A23
Our business continuously seeks out new products/processes/
services.
Pro-activeness A24
Our business continuously monitors market trends and identifies future
needs of customers.
COMPETITIVE AGGRESSIVENESS
Competitive aggressiveness A25
In dealing with competitors our business typically adopts a very
competitive “undo-the-competitor” posture.
Competitive aggressiveness A26 Our business is very aggressive and intensely competitive.
Competitive aggressiveness A27
Our business effectively assumes an aggressive posture to combat
industry trends that may threaten our survival or competitive position.
Competitive aggressiveness A28
Our business knows when it is in danger of acting overly aggressively
(this could lead to erosion of our business’s reputation or to retaliations
by competitors).
195
ANNEXURE C: CORPORATE ENTREPRENEURIAL CLIMATE CONSTRUCTS
Items measuring corporate entrepreneurial climate the latent constructs
MANAGEMENT SUPPORT
Management support B01 My organisation is quick to use improved work methods.
Management support B02
My organisation is quick to use improved work methods that are
developed by workers.
Management support B03
In my organisation, developing one’s own ideas is encouraged for the
improvement of the corporations.
Management support B04
Upper management is aware and very receptive to my ideas and
suggestions.
Management support B05
A promotion usually follows from the development of new and
innovative ideas.
Management support B06
Those employees who come up with innovative ideas on their own often
receive management encouragement for their activities.
Management support B07
The “doers on projects” are allowed to make decisions without going
through elaborate justification and approval procedures.
Management support B08
Senior managers encourage innovators to bend rules and rigid
procedures in order to keep promising ideas on track.
Management support B09
Many top managers have been known for their experience with the
innovation process.
Management support B10 Money is often available to get new project ideas off the ground.
Management support B11
Individuals with successful innovative projects receive additional
rewards and compensation beyond the standard rewards system for
their ideas and efforts.
Management support B12
There are several options within the organisation for individuals to get
financial support for their innovative projects and ideas.
Management support B13
People are often encouraged to take calculated risks with ideas around
here.
Management support B14
Individuals risk takers are often recognised for their willingness to
champion new projects, whether eventually successful or not.
Management support B15
The term “risk taker” is considered a positive attribute for people in my
work area.
Management support B16
This organisation supports many small and experimental projects
realising that some will undoubtedly fail.
Management support B17
An employee with a good idea is often given free time to develop that
idea.
196
Management support B18
There is considerable desire among people in the organisation for
generating new ideas without regards for crossing departmental or
functional boundaries.
Management support B19
People are encouraged to talk to employees in other departments of
this organisation about ideas for new projects.
WORK DIRECTION
Work discretion B20
I feel that I am my own boss and do not have to double check all of my
decisions with someone else.
Work discretion B21 Harsh criticism and punishment result from mistakes made on the job.
Work discretion B22
This organisation provides the chance to be creative and try my own
methods of doing the job.
Work discretion B23 This organisation provides the freedom to use my own judgement.
Work discretion B24
This organisation provides the chance to do something that makes use
of my abilities.
Work discretion B25 I have the freedom to decide what I do on my job.
Work discretion B26 It is basically my own responsibility to decide how my job gets done.
Work discretion B27 I almost always get to decide what I do on my job.
Work discretion B28
I have much autonomy on my job and am left on my own to do my own
work.
Work discretion B29
I seldom have to follow the same work methods or steps for doing my
major tasks from day to day.
REWARDS/REINFORCEMENT
Rewards/Reinforcement B30
My manager helps me get my work done by removing obstacles and
roadblocks.
Rewards/Reinforcement B31 The rewards I receive are dependent upon my innovation on the job.
Rewards/Reinforcement B32
My supervisor will increase my job responsibilities if I am performing
well in my job.
Rewards/Reinforcement B33
My supervisor will give me special recognition if my work performance is
especially good.
Rewards/Reinforcement B34 My manager would tell his/her boss if my work was outstanding.
Rewards/Reinforcement B35 There is a lot of challenge in my job.
197
TIME AVAILABILITY
Time availability B36
During the past three months, my work load kept me from spending
time on developing new ideas.
Time availability B37 I always seem to have plenty of time to get everything done.
Time availability B38 I have just the right amount of time and work load to do everything well.
Time availability B39
My job is structured so that I have very little time to think about wider
organisational problems.
Time availability B40 I feel that I am always working with time constraints on my job.
Time availability B41 My co-workers and I always find time for long-term problem solving.
ORGANISATIONAL BOUNDARIES
Organisation boundaries B42
In the past three months, I have always followed standard operating
procedures or practices to do my major tasks.
Organisation boundaries B43
There are many written rules and procedures that exist for doing my
major tasks.
Organisation boundaries B44 On my job I have doubt of what is expected of me.
Organisation boundaries B45 There is little uncertainty in my job.
Organisation boundaries B46
During the past year, my immediate supervisor discussed my work
performance with me frequently.
Organisation boundaries B47
My job description clearly specifies that standards of performance on
which my job is evaluated.
Organisation boundaries B48
I clearly know what level of work performance is expected from me in
terms of amount, quality and timelines of output.
SPECIFIC CLIMATE VARIABLES
Specific climate variables B49
This company definitely rewards employees who take calculated risks
and innovate.
Specific climate variables B50
Jobs in this company tend to be broadly defined with considerable
discretion in how tasks are performed.
Specific climate variables B51 In this company, employees can pursue multiple career paths.
Specific climate variables B52 This company tries hard to develop the creative potential of employees.
198
Specific climate variables B53
Annual performance appraisals in this company include an evaluation of
employee innovativeness.
Specific climate variables B54
Around here, it seems like there is more concern with process than with
performance.
Specific climate variables B55
This company does a good job of balancing incentives for individual
initiative with incentives for team collaboration.
Specific climate variables B56
If you are not innovating on the job, you cannot get ahead in this
company.
Specific climate variables B57
An overly bureaucratic structure takes away from our ability to be
entrepreneurial in this company.
Specific climate variables B58
Our company is organised in a way that encourages managers to
“micromanage” employees and projects.
Specific climate variables B59 We have too many levels of management in this company.
Specific climate variables B60 I would characterise the company structure as being highly flexible.
Specific climate variables B61 A rigid chain of command limits our ability to experiment with new ideas.
Specific climate variables B62 Red-tape and slow approval cycles are problems in this company.
Specific climate variables B63
Managers in this company strongly believe in delegating decision-
making responsibility.
Specific climate variables B64
Controls are very tight in this company; we tend to count every dollar
and every hour.
Specific climate variables B65 Senior management focuses on eliminating any slack within budgets.
Specific climate variables B66 Once budgets are finalized and accepted, they are difficult to revise.
Specific climate variables B67
The lines of command clearly allocate authority and responsibility to
each business unit/department.
Specific climate variables B68 The organisational structure is very clearly defined and delineated.
Specific climate variables B69 In this company, employees have a lot of say in how things are done.
Specific climate variables B70 Ours is a culture that rewards the tried and the true.
Specific climate variables B71 This is a company that celebrates innovative achievements.
199
Specific climate variables B72 We have a culture that strongly discourages failure.
Specific climate variables B73
There is a sense of urgency in this company regarding the importance
of change and innovation.
Specific climate variables B74 This company subscribes to the motto “if it ain’t broke, don’t fix it”.
Specific climate variables B75 Innovation and risk-taking are core values in this company.
Specific climate variables B76
Lines of command clearly allocate authority and responsibility to each
business unit/department.
Specific climate variables B77
New ideas tend to receive quick go/no go decisions from management
in this company.
Specific climate variables B78
The company’s environment encourages people to talk openly with
others about ways to improve the firm’s operations?
200
ANNEXURE D: RETAIL CONSTRUCTS
Items measuring key retail success factors the latent constructs
SEGMENTATION/TARGET MARKETING
Segmentation/Target marketing C01
Village Profile their markets (Age, gender, income, education, culture and
buying preferences are known).
Segmentation/Target marketing C02
The target market (Village customer) needs for products and services are
satisfied
Segmentation/Target marketing C03 Customer profiled data are used to stock retail shops.
Segmentation/Target marketing C04 Village know their target market.
STORE FACTORS
Store factors C05 Village creates a unique store experience for customers.
Store factors C06
Retail environment are designed to have a unique shopping flow (shopping
flow).
Store factors C07
Customers perception of value are heavily influenced by their perception of
a store’s look and feel (music, colour, scent and crowding could have an
impact on overall experience).
Store factors C08
Store that offers a pleasant shopping experience will result in greater
spending.
Store factors C09 Store atmosphere will differentiate Village from their competitors.
SERVICE FACTORS - PROCESS
Service factors - process C10 Village branch management pay attention to customer service.
Service factors - process C11 Village staff pays attention to customer service.
Service factors - process C12 Checkout points enhance customer service.
Service factors - process C13
Staff is well trained to provide customers with appropriate information so
that they could make informed buying decisions.
Service factors - process C14
Staff is well trained making sure that they know where merchandise is and
will assist the customer.
Service factors - process C15 Staff is well trained to facilitate transactions such as checkouts and returns.
Service factors - process C16
Staff is well trained to help customers understand the benefits of products
and services.
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Service factors - process C17 Staff is well trained and empowered to rectify post purchase problems.
MERCHANDISE/PRODUCT
Merchandise/Product C18
Our customers always believe that they get their money’s worth at Senwes
Village
Merchandise/Product C19 Our merchandise appeal to the target market.
Merchandise/Product C20 Enough merchandise is where the customer wants it.
Merchandise/Product C21 Our merchandise differentiates Village from its competitors.
Merchandise/Product C22 More product variety leads to higher sales levels.
PRICE
Price C23 Senwes Village product range is wide and deep enough
Price C24 Village staff knows the pricing methods that are applied.
Price C25 Prices are based on what happened in the past.
Price C26 Differentiated pricing systems apply in different geographical areas.
Price C27 Village pricing methods differentiate us from the competitors.
Price C28
Price sensitivity affects are taken into account to determine optimal or
markdown pricing.
Price C29
Promotional pricing must be limited to formal promotion activities centrally
driven from Head office.
Price C30 Promotional pricing must be decentralised to branch level.
Price C31 Price and promotional software must be used to determine optimal prices.
Price C32
Village consider market factors other than profit maximisation when setting
prices.
Price C33 Village sets prices on what is going to happen in markets or market trends.
Price C34
Psychological pricing methods could lead to better profit margin (eg:
Retailers will round price till the nearest nine (R2, 99).
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SUPPLY CHAIN
Supply chain C35 Village built price change cost into its price optimisation model.
Supply chain C36 Customers agree that Village is value for money retailer.
TECHNOLOGY
Technology C37
Supply chain management can generate significant profits to the bottom
line.
Technology C38
Our Supply chain management are efficient and effective in the integration
of suppliers and transport intermediaries so that merchandise are
distributed in the right quantities, right locations, right time, to minimise
system cost, while satisfying service levels required.
Technology C39 Village use sales data of POS to improve its proposition to its customers.
Technology C40
Sales data are used to work closely with suppliers to plan inventory
management.
Technology C41 Sales data are used to improve customer relations management.
Technology C42
Electronic shelve labelling must be used to improve pricing methods in the
shops.
Technology C43
Village could differentiate themselves if new technology is used to improve
service and product levels to customers like an Customer relations
management (CRM) system.
Technology C44 SAP technology is a retail friendly system.
Technology C45 Village must invest in other retail technology other than SAP.
Technology C46 Village must use nano-technology in identifying customers.
Technology C47 Village must implement e-retail to expand its geographical foot print.
Technology C48 Sales promotions are a marketing tool for Village to increase sales.
Technology C49 Advertising is becoming less effective.
PROMOTIONS
Promotions C50
Communications through promotions reaches the customer at the place
and time most purchase decisions are made.
Promotions C51
Village uses different forms of price promotions effective and efficient, such
as temporary price reductions, coupons, displays and other POS material.
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Promotions C52
Technology such as loyalty cards, electronic media at POS, electronic
shopping assistant will have an impact how retailers use promotions.
LOCATION
Location C53
Village retail locations are accessible to the target markets and are
consistent with its positioning.
Location C54
Village retail stores must cluster with other retail stores to give consumers
the convenience of a one stop shopping.
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ANNEXURE E: PERCEIVED SUCCESS CONSTRUCTS
Items measuring perceived success factors the latent constructs
FINANCIAL MEASURES
Financial Measures D01
Our business has experienced growth in the turnover over the past few
years.
Financial Measures D02 Our business has experienced growth in profit over the past few years
Financial Measures D03
Our business has experienced growth in market share over the past few
years.
PROCESS MEASURES
Process Measures D04
The competitive position of our business has improved over the past few
years
Process Measures D05
The effectiveness(doing the right things) of our business has improved
over the past few years
Process Measures D06
The efficiency ( doing the right things) of our business has improved over
the past few years
PEOPLE DEVELOPMENT
People Development D07
In our business, employees are viewed as the most valuable asset of the
business.
People Development D08 Our employees are highly committed to our business
People Development D09
The moral (job satisfaction) of our employees has improved over the past
few years.
FUTURE SUCCESS (LONG-TERM)
Future success (Long-term) D10
The image (stature) of our business, relative to our competitors, has grown
over the past few years.
Future success(Long-term) D11
During difficult economic periods, investments in research and
development/innovative projects continue and no significant financial cuts
are made.
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