QUESTION 1 (32 Marks) Read the case study below and answer ALL the questions that follow. The choice architecture of the South African retail sector defined by intense competition and a vast array of offerings, should favour the consumer. However, this is not the case. South African retailers and consumers are under pressure as inflation rises and a weakening rand prompted the central bank to raise interest rates by 0.75 percentage points this year, increasing repayment costs for those with loans or mortgages. A retailer that wants to succeed in this changing environment has to competently address a number of strategic issues. Effective positioning significantly contributes to an organisations competitiveness and consequent success in any line of business. Edcon Holdings (Pty) Limited (Edcon) is the largest retailer of clothing, footwear, textiles (CFT) in Southern Africa, including top stationery and home ware brands as well as general merchandise to its CFT portfolio. Edcons trading brands include Edgars, Jet, Jet Mart, Boardmans, Legit, Prato, Edgars Active, Red Square, Temptations and CNA. The group has been in operation for more than 80 years and have expanded their footprint to include over 1, 400 stores through nine different formats. The Johannesburg-based group owned by Bain Capital Partners LLC opened its first store in Joubert Street, Johannesburg on 6 September 1929. The corporate strategy of the group is underpinned by four key levers: comparable store growth, new space growth, margin expansion and credit. Aiming to improve revenue by growing comparable store sales and increasing new space growth, the group has continued to roll out additional stores in South Africa and other African countries. The goal is to leverage the benefit of these increased volumes by improving the margin on sales. The strategic relationship with Absa Bank Limited (Absa) has enabled the group to offer credit to customers; this idea is thought to enhance customers access to the products. The corporate culture of the group is driven by the following imperatives: a constructive leadership style; an aspiration to remain an Employer of Choice, a critical focus on attracting and retaining employees from designated groups; incentivised customer-focused employees; a sustainable high performance environment; and an intertwining organisational growth with individual growth; and life-long learning. The culture of Edcon creates favourable conditions for effective employment equity implementation. Recently though, the group has been struggling with payment of bond and loan obligations. In a very recent development, Edcon received almost 80 percent bondholder support for a plan to defer cash-pay interest obligations to December to enable South Africas largest clothing retailer to focus on turning around its operations. Investors holding almost 80 percent of its $950 million dollar- and euro-denominated secured notes due March 2018 have backed the proposal. It needed support from at least 75 percent of them to make the moratorium binding on all bondholders, Bloomberg reported on April 12, citing two people who asked not to be identified because the information is private. A 30-day grace period ended on Thursday for a $45 million interest payment the company skipped last month, according to data compiled by Bloomberg. The deferral will allow the owner of the Edgars, Jet and CNA chains to postpone the payment of $110 million of bond and loan obligations, it said in the statement. The company got unanimous support from its revolving-credit facility and term-loan lenders, Edcon said. -I- 2 This payment deferral is yet another positive step in our ongoing strategic process linked to our operational turnaround, Chief Executive Officer Bernie Brookes, who joined the retailer last year, said in the statement. We will continue discussions with our lenders and bondholders to further optimize our capital structure in support of our long term growth. However, Standard & Poors issued a statement in 2016 that Edcons capital structure is unsustainable in the long term due to high debt and interest costs, the concentration of debt maturing in 2017 and 2018, and unhedged exposure to foreign-currency debt. Edcon employs over 20 000 permanent employees and a further 25 000 temporary staff who consider the group the best retail company to work for. Of its employees, Edcon states people, who are action-oriented, smart, exude dynamism and savvy, thrive in a diverse environment and exploit opportunities to grow and develop, and those who are passionate about customer service and are resilient in an environment of continuous change will flourish in a career at Edcon. The fact of the matter is that Edcon is likely to embark on a retrenchment of some of its workers as well as a disposal of some of its assets in the short- to medium-term in order to stay afloat. Employee morale is likely to have suffered a knock or two. The question as to how employees perceive the ongoing financial and strategic challenges of the group is anyones guess. Adapted from: https://www.bloomberg.com/news/articles/2016-04-15/edcon-gets-some-support-to-defer-110-million-of-bond-interest and http://www.edcon.co.za/careers-working.php You have been tasked with conducting a study to investigate employees perception of the impact of the groups indebtedness and financial distress on their job security. Please outline how you would go about conducting the evaluation with reference to the following: 1.1. Discuss the importance and aim of conducting this evaluation/research? (5 marks) 1.2. Identify THREE (3) Research Objectives and Research Questions that this evaluation will attempt to answer. (6 marks) 1.3. Discuss these aspects of your research design: (6 marks) State the Research Design you would follow? State the Research Philosophy underpinning your research, and state why. Indicate the Research Strategy you would follow, and why? 1.4.1 Briefly discuss the sampling methodology you would employ. Sampling Methodology: (5 marks) 1.4.2 Discuss the Method of Data Collection that you would employ. (5 marks) What method will be used to collect your data, and why? Name at least two advantages and disadvantages to this method. 1.4.3 Discuss the Method of Data Analysis that you would undertake. (5 marks) Discuss all of the considerations for data analysis; including what the unit of measurement is, how it will be analysed, and what methods of analysis will be used.