QUESTION ONE

$[40]$

Read the extract, then answer the questions that follow:

Capturing lower$-$income consumers: A look at Pep's model in Africa.

South African$-$based Pepkor, which owns a number of global retail brands across three continents, recently sold a controlling $92\mathrm{.}34\%$ interest to retailer and manufacturer of household goods Steinhoff, for R$62\mathrm{.}8$bn $($US$$5\mathrm{.}64$bn$).$ During the financial year ending $30$ June $2014,$ Pepkor reported revenues of R$38\mathrm{.}2$bn $($$$3\mathrm{.}43$bn$),$ with its operations in South Africa and neighbouring countries contributing $63\%$ of this. Operations in the rest of the continent contributed $5\%.$

One of Pepkor's most well$-$known brands is clothing and footwear retailer Pep, which operates in $11$ African countries, including its home market South Africa. Pep primarily targets lower to middle$-$income consumers. According to Pepkor Africa's managing director, Charl Cronje, Pep has an aggressive expansion plan for the continent. He currently oversees Pep's portfolio in six countries $-$ Mozambique, Malawi, Zambia, Zimbabwe, Angola and Nigeria $-$ and has recently visited East Africa to explore expansion opportunities.

According to Cronje, one of Pep's strategies is to keep its brand as consistent as possible across all markets. "Whether you see Pep in Lagos, Luanda, Lusaka, or Parow $($Cape Town$),$ you have the same brand positioning, same corporate ID$,$ same store layout, and mostly the same product offering."

Questions:

$1\mathrm{.}1$ In what ways do Pep adapt its store formats to suit local market conditions and consumer shopping behaviours? Substantiate with practical examples.

$1\mathrm{.}2$ Discuss three different inventory management strategies that you think are appropriate to be employed by Pep stores.

$1\mathrm{.}3$ Discuss the balance between minimizing stockouts and excess inventory to optimize overall supply chain efficiency. Relate your points to Pep.