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3.3 As we will not be able to adopt a similar model as the supermarkets, we will be forced to
reduce prices to attract customers, but again this will alienate other wholesalers and
supermarkets who will now see us as competitors, instead of suppliers, and they will stop

doing business with us; so at best, it may lead to ‘cannibalisation’ as the gain in sales at
our direct retail stores may be achieved at the expense of sales at the other supermarkets.

4. Introducing new technologies to reduce the level of cost-generating activities: Newco could
develop an extranet system which links to the inventory and sales systems at the major super
markets. It could manage deliveries and orders on behalf of its customers and would be able

to monitor inventory levels and customer demand, and thereby take responsibility for re-
ordering for the goods as required (JIT). We do not know what systems SABMiller has in place
for receiving, invoicing and collecting payment from its customers, but it is likely that

technology could help reduce costs here. For example, customers could use an electronic
data interchange (EDI) to raise paperless orders, and payments could be collected through
electronic funds transfers (EFTs).

Recommendation: Adopt strategy 4: introducing technologies to reduce the level of cost-generating
activities.

Justification: Strategy 1 means we will have to terminate our largest supermarket customer –Makro
and forfeit the positive contribution. Despite it being the least profitable, it is making a positive

contribution towards covering some fixed costs and could damage our credibility with other
supermarkets. Strategy 2 may be seen by the supermarkets as us tampering with their business and
a threat to the good CRM they have hitherto valued. Strategy 3 is financially sound but strategically

suicidal as it could lead to other supermarkets feeling we have become competitors instead of
suppliers; they would at best reduce shelf space for our products -and at worst, stop buying from us.
Strategy 4 is least intrusive on our customer relations and shelf space concerns and whilst strategy 1,
2, and 3 do not address the other concerns of inaccurate sales forecasting; strategy 4, if linked with a
proper ERP system such as SAP –which we are already considering, will go a long way to improve

the problems with our sales forecasting and could lock in and weaken the power of supermarkets over
Newco.

Actions
• Incorporate strategy 4 into the integration plans to rollout SAP as per priority 1 and take no further

action until the deal successfully closes.

4th Priority: Africa Direct Entry via Nigeria

This option to enter the African market organically, by directly setting up manufacturing operations in
Nigeria, with a down payment of US$400 million, should the SABMiller deal fail; and then grow it from

Developed by The CharterQuest Institute for 'The CFO Business Case Study Competition 2018'
www.charterquest.co.za | Email: thecfo@charterquest.co.za