Strategy development at Lonrho Africa PLC
Abstract
Lonrho PIc was a large multinational having operated diverse businesses in Africa for many
years. There was no other London Stock Exchange listed group of similar size operating in
sub-Saharan Africa that comprised such a commercially and geographically diversified
business. In May 1998, Lonrho Africa de-merged from Lonrho Pic, which became a purely
mining operation, and has since been very successful. By mid 1999, it became apparent that
Lonrho Africa Pic could not survive on its own and the break up of the Group began in
earnest. Lonrho Africa's market value fell from £ 270 million in March 1998 to £ 20 million
in 2002. As revenues declined and in search for a core business, management tried a series of
radical changes while subsidizing the firm's large losses through working capital liquidations
and sale of property holdings.
This study sought to identify principal strategy development practices at Lonrho Africa and
how the company confronted business challenges. 15 respondents out of an identified group
of 24 senior executives were interviewed, representing a response rate of over 60%. The
study found that though there was a conscious attempt to find a core business by developing
strategies in a formal and rational manner, the company was in financial distress and
strategies were imposed by banks and other stakeholders to conform to covenants agreed with
banks.
From the findings of this study, it is recommended that further studies be conducted to explain
Lonrho Africa's big appetite for diversification. One may also study aspects of the leadership
vacuum created by the ouster of Tiny Rowland.
From a high of 900 operating companies during its day, Lonrho Africa today remains with
only 70 companies mainly in hotels. The hotels are still on sale.
Sponsorhip
The University of NairobiPublisher
School of Business