An empirical study into the impact of HIV & AIDS on the Lewis group's market

Wentzel, Willem Jacobus Erasmus (2004-12)

Thesis (MBA)--Stellenbosch University, 2004.

Thesis

ENGLISH ABSTRACT: Why should the Lewis Group be concerned about HIV/AlDS? The answer is quite simple. HIV/AIDS poses a clear and present danger to the twin rationales on which businesses like the Lewis Group are based. The rationales are low-cost labour for own and supply chain purposes, and fast-growing markets. This research focuses more towards the latter and presents a review of the current literature and attempts to estimate the impact of HIV/AIDS on the group's market. Literature on the subject is surprisingly limited (Bloom & Mahal, 200 I: 10) and often dated seen in the light of the fact that it is one of the most oppressing issues in the Southern African business arena today. Amidst a rather slow awakening in the private sector to the effects of HIV/AlDS on markets a lot of resources and time are being spent on research in this area. Although the scope of this research does not encompass the full impact of the epidemic on the company, it provides insight into an area on which very little is known yet. Companies have a high level of control over, and information, about their employees but significantly less about their customers} hence the reason for the use of hypothesising and adopting a tailor-made methodology to quantify prevalence rates and vulnerability. This paper is therefore not a complete assessment of impact of the disease on the group as a whole. AlDS is a bottom line issue for most companies as it impacts on production costs and consumer markets (Ellis & Terwin, 2003: 55). A number of "doom-and-gloom" merchants have come forward with doomsday estimates about the impact of the epidemic on business. As a result, the extent of the problem might have been overstated by some. This sparked a lot of the debates that resulted in many different opinions which have caused a lot of uncertainty. This research will attempt to clarify these issues and fonnulate an unbiased opinion as of the impact of the company. The HIV/AIDS problem is sti ll gathering momentum and prevalence rates are still on the rise. There is currently no cure for HIV / AIDS and chances look diminutive that there will be one within the next decade. If prevention programmes had been successful, this report would never have been written. The problem is aggravated by the fact that the core modes of HN transmission are deeply rooted in social behavioural patterns, value systems and traditional and cultural beliefs. This makes it hard to imagine that the spread of the epidemic will decrease and eventually stop soon (Goldstein, Pretorius, Stuart, 2003). As we are entering a phase where the number of AIDS-related deaths is starting to rise rapidly, it is important to gain sufficient insight into the effect of the disease, especially now that infonnation is becoming more available in the public domain (McClintock & Truen, 2003: 3). AIDS primarily kills young and middle-aged adults during their most productive years. This section of the population is the major source of demand for goods and services. The macro-economic impact of this is expected to influence demand for goods, especially durables, and services. This is aggravated by slower population growth rates that will further slow down the demand for certain goods and services (McClintock & Truen, 2003: 3). HIV/AIDS must be managed proactively. In order to assess and manage this risk, management must have a clear understanding of nature and extent of the risk (Ellis & Terwin, 2003: 1). The Bureau for Economic Research did a survey in 2003 on the impact of HIV/AIDS on business in South Africa. It found that only 8 percent of retail companies surveyed have assessed the impact of the disease on their consumer base (Ellis & Terwin, 2003: 30). A possible reason might be because companies want to see proven input and exit strategies for HIV/AIDS contributions. These are not yet possible for HN/AIDS (Barrett & Ruggie, 2004: 5). The HlV/AIDS prevalence rates estimate for the Lewis Group revealed significantly lower prevalence rates than the national averages. Nevertheless, HlV and AIDS prevalence rates for 2004 are estimated 16.5 percent and 2.5 percent respectively. HIV-prevalence is expected to increase to 17.1 percent and AIDS to 4.7 percent by 2009. There are a number of interventions and strategic responses the company can consider to mitigate the risks entrenched in these estimates. Recommended strategic responses include diversification of profit generators into the higher income group market, focus on areas of growth and building the Lewis Group's brands. It is generally believed that good and responsible corporate citizenship will benefit from involvement in community and charitable projects. The belief is that customers can become predisposed towards the company and that the group can gain goodwill from new and existing customers. It is therefore clear that there are remedies the company can consider to manage and mitigate its risks. It is, however, possible for the company to emerge stronger, more efficient and more competitive if the right responses are implemented.

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