Question $1(25$ marks$)$

Read the case study below and answer the questions that follow.

ETHICAL MISCONDUCT

Ford

The siblings of Reshall Jimmy, who died when his Ford Kuga burst into flames in

December $2015,$ are planning a class action lawsuit against the motor company.

During January $2017,$ over a year after the death of Reshall, the motor manufacturer

announced a safety recall of Ford Guga models with $1,6-$litre engines that were

produced between $2012$ and $2014.$ Not only did the company take more than a year

to apologise to the family for Reshall$$s death, but they have yet to admit that a fault in

their vehicle caused it to combust. Ford has delayed taking action on Kuga vehicles

reported to be a danger on South African roads. In the United States, Ford Escape

models, the equivalent of the Kuga in South Africa, were recalled as early as $2012.$

African Bank investments

In August $2014,$ African Bank Investment Limited $($Abil$)$ shares were suspended on

the JSE and the underlying business was put under curatorship by the South African

Reserve Bank $($SARB$).$ The Myburgh Report that analysed the reasons for Abil$$s

collapse made some very uncomfortable findings. Financially speaking, what had led

to the bank$$s collapse, was making insufficient provision for bad debts and engaged

in unsustainable lending. Behind all that was the CEO, Leon Kirkinis, who believed

too much in his own abilities, and a board that failed to exercise the necessary care

and skill in overseeing what he was doing. The Myburgh Report found that Kirkinis

had an overwhelming influence over the board and the operations of the bank.

Essentially, no one questioned him. The starkest example is that he unilaterally

decided to buy Ellerines for R$9,1$ billion without conducting proper due diligence or

obtaining full board approval.

Steinhoff

In $2017,$ the Steinhoff share price collapsed by more than $90\%,$ wiping out nearly R$10$

billion in shareholder value in about three days, following the resignation of the

company$$s CEO, Markus Jooste, after news that German prosecutors were

investigating the company for alleged massive accounting fraud. Steinhoff is listed on

both the Johannesburg Stock Exchange and the Frankfurt Stock Exchange.

Source: Ehlers, T & Lazenby, K$.2021.$ Strategic Management. Southern African

concepts and Cases. $3$rd ed$.$ Pretoria: Van Schaik Publishers.

$1\mathrm{.}1$ The King Report II of $2002$ provides clear guidelines on minimum standards of

corporate governance. Outline these guidelines and evaluate whether the

organisations in the case study adhered to these guidelines by providing one

example from any of the case studies for each of these guidelines. $(21)$

$1\mathrm{.}2$ Differentiate between the focus points of the King II Report of $2002$ and King I

Report of $1994$ on Corporate Governance. $(4)$

$$STADIO Assignment $2024$ Semester $1$ MAN$400$ Management Practice IV

Page $4$ of $6$

Question $2(25$ marks$)$

Read the case study below and answer the questions that follow.

Industry life cycle of the cellular industry

The South African telecommunications industry provides a good example of the

industry life cycle. In $1993$ the telecommunications regulator licensed two operators

to commence operations, namely Vodacom and MTN$.$ In the early phase of

development, operators focused on rolling out their networks to achieve national

coverage. Prices were high and cellular phones were a luxury item with some status

attached to them. As subscriber numbers grew exponentially, prices began to drop,

and more and more packages were introduced. The focus shifted to the development

of distribution channels. In $2001$ the regulator licensed a third operator $$ Cell C $$ and

in $2009$ Telkom SA entered the market with Telkom Mobile $($and the $8$ta brand$)$ after

selling its share in Vodacom.

As the market for prepaid cellular service is now nearing maturity, prices are still

declining $($some prepaid packages are even sold below cost$).$ Considerable

consolidation has occurred, with Vodacom and MTN integrating forward and acquiring

a number of service providers. With the introduction of number portability where

customers can now retain their number no matter who their cellular operator is$,$

operators have to focus even more on customer retention. In a further development,

after $2005($following new industry regulation$)$ mobile operators have expanded

horizontally, offering a much broader range of ICT services and solutions in a bid to

secure more revenue from existing customers.

Currently there is very sharp focus on providing mobile and fixed data services. During

the same period, fixed$-$line telephone subscriptions declined as customers

increasingly migrated to cellular telephony, while fixed broadband subscriptions grew

sharply and then stabilised around $2014.$

Source: Louw, L and Venter, P$.2017.$ Strategic Management. Cape Town: Oxford

Press.

$2\mathrm{.}1$ Explain the characteristics of maturing industr