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MNN3701- ASSIGNMENT 2 - SEMESTER 2 (2018)
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MNN3701- ASSIGNMENT 2 SOLUTIONS - SEMESTER 2 (2018)
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ANNEXURE A: CASE SCENARIO (BOTH SEMESTERS)Please read the following case scenario before attempting the assignments. This case scenario applies to the
assignments in both Semesters 1 and 2 of 2018.
Case Scenario: GoldMart Holdings – growing forward sustainably
GoldMart Holdings (GMH) Limited was established as a food grocer in Bloemfontein, South Africa in
2005. Over the years, GMH has expanded to include a clothing department and beauty department. GMH
was born with sustainability as a key part of the GMH business strategy and “way of life” for the
organisation and its stakeholders.
GMH has made sustainability a key part of its business strategy and a “way of life” by integrating
sustainability into all business and decision-making processes. The corporate is committed to sustainability
and does its best to play its role in adhering to and achieving the goals and principles set out by the United
Nations. The broad strategy identified by GMH is labelled the GoldMart Awaken 2030 Project, which aims
to harness business and retail capabilities, to help meet the societal needs of South Africa going forward.
With sustainability at the centre of the GMH strategy, the corporate is working towards becoming a carbon-
neutral organisation. It aims to do this through new product development and innovations that drive growth
and through the continuous improvement in quality and service for consumers, using environmentally
friendly supply chain and procurement principles, as well as through the creation of new jobs.
Corporate strategy
The strategic steering committee is responsible for the decisions and activities required to make the
GoldMart Awaken 2030 Project strategy a reality; this includes the integration and application of various
drivers necessary to ensure the success of the strategies and the effective performance of GMH.
The GMH operations management department is directed by their corporate strategy. The aims of their
operations management include: continually striving to find methods to minimise their impact on the
environment; assuring the manufacturing of quality products to reduce returns and avoidable additional
processes; minimising any scrap or waste; and continually looking for and finding innovative ways for
responsibly disposing of any by-products and waste.
Performance objectives
At GMH, the executive directors ensure that they and their managers mobilise people, and lead their teams
across the business to achieve performance objectives that are derived from the strategic objectives of the
organisation; they ensure working conditions are safe, humane, healthy and non-discriminatory, and that
work-life balance, amongst other needs, are addressed
Page 1 of 13
, . This is well illustrated by looking at the example set by Harold, the business manager responsible for
GMH’s main warehouse, who portrays a high concern for people and production. Harold believes
achievement is attained by employees who are motivated and who happily pursue the goals of the
corporation. He considers all employees to be individuals who can think for themselves and will do the
right thing. He believes that commitment, trust and respect are key elements that will result in high
employee satisfaction and production. He also believes that if this type of environment is in place, GMH
will be in a better position to administer citizenship rights.
The executive directors believe in promoting inclusive and sustainable economic growth, employment and
decent work for all. One way of showing its care for society is by investing in the project Alive Creations,
which organises a mobile clinic to visit each of its stores annually – providing specific vaccinations and
healthcare to its employees, their families and the entire community in which it operates. GMH further fosters
contributions to society in the form of philanthropy and active engagement in the well-being of their
communities. They endeavour to train and develop their staff to better understand the responsibilities of their
organisations in society. To ensure fair remuneration, a 15% salary increase was awarded to all non-
managerial operational staff, with the added opportunity of receiving a yearly performance rewards.
The natural environment
GMH is sensitive to the world in which they operate, therefore they assess the impact their organisation’s
decisions and actions will have on the natural environment. GMH aims to achieve production processes that
are environmentally friendly, using “green” technology wherever possible, and recycling material and saving
energy. To ensure this, GMH regularly assesses, throughout all their business activities, the amount of land
that is required to provide the natural resources consumed by the populations concerned, and the amount
of land that is required to absorb the waste they generate.
GMH ensures that its products and services meet the needs of their customers; that their products are
safe and that any potential risks are openly and transparently communicated. GMH is fully aware of the new
type of consumer who is more informed, aware and demanding of responsibly sourced and environmentally
friendly products, and who prefers to buy products from corporates who are committed to minimising their
negative impact on society and the environment.
Because GMH is sensitive to customer needs, their products are sold at a relatively high price as they are
new and unique products using environmentally friendly material and “green” technology. Due to the higher
than normal profit margin, GMH is able to recover the research and development costs of manufacturing the
product. GMH has identified a market that is willing to pay the higher price, partly because new inventions
such as environmentally friendly products offer a message as well as prestige. The price is high enough,
allowing competitors the opportunity to enter the market. Once there are competitors in the market, GMH
will gradually reduce the price.
GMH ensures that their suppliers adhere to environmental, social and governance (ESG) standards; they
also ensure that they are treated fairly and ethically. Recognising the need to operate sustainably, within the
confines of environmental limits, GMH has an ESG rating and continuous assessment system for
prospective and current suppliers. GMH integrates environmental thinking into supply chain management,
including product design, material sourcing and selection, production processes, delivery of the final product
to the consumer, as well as endof-life management of the product after its useful life.
The company expects suppliers to apply certain standards to manage their impact on the environment
regarding the materials they use, production processes, waste, scrap, packaging, disposal of the end
product and anything that might have an impact on the environment, as well as being compliant to relevant
industry standards.
Page 2 of 13
,GreenCoastal Project
GMH provides support and financial assistance to 20 small suppliers in the rural, under-served north coast
of KwaZulu-Natal, with their GreenCoastal Project. These suppliers receive training that covers best
practices in technical and management skills. In addition, GMH helps to identify other opportunities for these
suppliers to grow their small businesses.
In 2016, GMH was searching for the right supplier to come on board with their biggest beauty range. To
help them choose the right supplier during the selection process, GMH used their ESG rating system for
suppliers and short-listed those suppliers who were B-BBEE certified and compliant. AJH Beauts was
selected as the new supplier, based on the outstanding results they obtained in the assessments. In
February 2017, upon evaluating AJH Beauts’ performance, GMH became aware that the supplier had
deceitfully used people to pretend that they had a higher BBBEE rating than they actually had. The Board
of Directors called for an urgent meeting to discuss this unfortunate and important issue.
Conducting profitable business
GMH protects the investment capital of their shareholders and ensures an adequate return on their
investment. They respect the rights of shareholders, and provide them with timely information on the
performance of the organisation. GMH strives to prevent any moral wrongdoing, acts responsibly and
ensures good governance at all times. With this transparency, Johan, from the finance department was not
able to “get away” with his unethical practices at GMH. Johan was suspected of wrongdoing, and despite
him denying the allegations, Steven and his internal auditing team were asked to conduct a thorough
investigation. The results of the audit left the GMH Board of Directors no choice but to dismiss Johan on
account of lying and fraud.
GMH acts responsibly, building and maintaining the trust of their stakeholders, thus ensuring that the
organisation delivers on the social, environmental and financial dimensions of the organisation. GMH sees
its relationship with stakeholders as an imperative to its success as a retailer. The corporate therefore
illustrates morally sound ways of conducting profitable business where there is interdependency between
social responsibility and all departments of the corporate. To reach such an ideal position, corporates need
to involve their stakeholders in the manner in which they operate their business. GMH even sees the natural
environment as a stakeholder, advocating for the welfare and protection of wildlife and habitation, where
required, in their business practices.
The company abides by laws and regulations as determined by government; they pay taxes; they provide
inputs to government in terms of the technical, economic, financial or political importance for framing
appropriate policies; they take up governmental projects and contracts; offer their leaders to assist
government and work on different governmental committees. Furthermore, GMH acknowledges the
changing roles of corporates and governments as well as between corporates and governments. The
corporate does its best to administer citizenship rights for all its stakeholders where possible. GMH stays
abreast of any recent shifts in business-society relations, where it takes over many of the roles and actions
which may have previously been associated with government.
Industry Sustainability Forum
GMH fosters a culture of debate. Each year, GMH hosts an Industry Sustainability Forum. In
2017 the theme was “2030: Growing forward sustainably”, serving as a platform to discuss and brainstorm
the role of the industry in achieving certain sustainable development goals by 2030. A number of views
regarding sustainability were raised in a forum debate
Page 3 of 13
, Two broad views emerged. Refilwe, the Human Resources Director at GMH, believes that human capital
cannot be substitutable to the multitude of processes applicable to natural capital, which is vital to human
existence. While Samantha from a competing firm, JK Chambers, considers natural and human capital as
substitutable with each other. Most executives at JK Chambers believe that corporate citizenship is a
discretionary activity for corporates that make a choice to put something back into the community, with a
specific self-interest for their corporation.
After the debate, GMH realised that JK Chambers uses the United Nations logo without actually adhering
to the principles laid down by the United Nations Global Compact.
A more heated debate followed, about a coffee bean supplier in West Africa that uses hi-tech organic
farming methods. However, this farm endorses child labour because it is culturally, practically and lawfully
acceptable in their country. One argument was about supporting suppliers who employ children in areas
where children need to help their parents to make a living. Refilwe argued that it is wrong, however, others
found ways to justify it. Refilwe then presented a number of questions to the forum group, to help provide
clarity when making any seemingly difficult decision. The questions include: 1) Under these circumstances,
can this be applied universally? (In other words, will it be acceptable if other people do this?) 2) Does the
action treat humanity fairly? 3) Would other people make the same choice if they were in this situation? (In
other words, would you feel comfortable if your deed was the headline in tomorrow’s newspaper?).
Following the questions, Refilwe then emphasised the relationship between the law and ethics, after a
colleague presented the argument that buying from suppliers in a country where child labour is lawfully
condoned, should therefore be acceptable. Refilwe pointed out that while children, a cheap source of labour,
may be very profitable, it denies these children the right to be children, and the right to an education.
GMH illustrates the critical role business can play in achieving the ultimate goal of sustainable
development.
Source: Lecturer’s own compilation, based on a fictitious organisation.
Answer all the questions.
Read the case scenario in Annexure A and answer questions 1 to 40.
1. The _______ is the governance framework which GoldMart Holdings should follow.
1 King I Report
2 King III Report (pages 136-139)
3 Cromme Code
4 Sarbanes-Oxley Act
2. The King II Report on Corporate Governance is concentrated on the principles of _______.
1 accuracy, reliability, risk assessment and assurance
2 discipline, transparency, responsibility and accountability (page 137)
3 transparency, accountability, responsibility, integrity and honesty
4 citizenship, sustainability, stakeholder engagement and responsible investment
Page 4 of 13
, QUESTIONS 3 AND 4
Match the definition in Column B with the correct principle of corporate governance in Column A.
Column A Column B
Principle Definition
3. Transparency (option 2 – 1 Overall involvement of top management in order to ensure that the
pages 138-139) organisation is managed according to sound values and a code of ethics.
2 Informing all stakeholders of the financial state of the organisation thus
providing assurance of a profitable organisation.
4. Integrity and honesty (option 3 3 Create a sense of trust among all role players and establish a positive
– pages 139-139) organisational environment for employees and investors.
4 Indicates that all employees are responsible for the individual actions
which contribute to the success of an organisation.
5. Harold practices a(n) _______ leadership style, according to Blake and Mouton’s leadership grid.
1 Team (119-120)
2 country-club
3 impoverished
4 middle-of-the-road
QUESTION 6
Match the responsibilities with regards to risk management in Column B with the respective responsible role-player
in Column A.
Column A Column B
Role-player Responsibilities
(a) Steven (pages 141-142) (i) Develops a system to relate the risks to GoldMart Holdings’ capital level.
(ii) Sets broad-based policies and develops GoldMart Holdings’ risk appetite
and culture.
(b) Harold (pages 141-142) (iii) Assists in the implementation of a framework for internal control and
governance.
(iv) Manages risk incidents and loss events and the lessons learnt.
(v) Provides assistance in training employees to meet the challenges
associated with risk and provides valueadding services during the
risk-management process.
1 (a) – (i) (ii); (b) – (iii) (v)
2 (a) – (ii) (iv); (b) – (i) (v)
3 (a) – (iii) (v); (b) – (ii) (iv)
4 (a) – (v) (i); (b) – (ii) (iv)
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