COMMUNITY SHOPPING CENTERS: What are they? & What management theory applies?

MANAGEMENT OF COMMUNITY SHOPPING CENTRES IN EMERGING ECONOMY AREAS: THEORY AND APPLICATION, SOUTH AFRICA

October 2012

(c) Copyright Tamlyn Jane Berold : Not to be used without prior permission 

ABSTRACT

This thesis examines the current application of AM, PM and FM to community shopping centres in emerging markets of South Africa. This research focuses on how the nature and dynamics of a community shopping centre in an emerging market differs to a conventional shopping centre. The central premise is that these centres require an integrated management application in order to achieve efficient and effective management. The AM, PM and FM literature lack a coherent framework that guides the practice of property management pertaining to community shopping centres in emerging markets. In addition, the empirical research from case studies, interviews and documentary evidence points to a lack of application of a holistic management approach and limited understanding of the theoretical roles of AM, PM and FM, particularly strategic and community facilities management, in integrating the strategic and operational objectives required of multiple stakeholders with conflicting objectives, in an environment with complex dynamics and frequent change. A key implication of the findings is that the development of the  FM function is necessary. The contribution of this socially-constructed theory allows for the resolution of several barriers to effective implementation of the management of shopping centres. Firstly, it proposes the coherent framework of  strategic FM, operational FM and community-based FM as effective and efficient management applications for the complex nature of community shopping centres. The researcher proposes the use of FM as an integrating mechanism between AM and PM, and a function for the management of people, processes and place within the context of community shopping centres. Moreover, that this enables the effective compliance and application of the KING III codes and integrated reporting requirements.

INTRODUCTION

This chapter introduces the focus area of the research and outlines an argument that creates the foundation for the ensuing chapters.  It begins by outlining the evolution of the research problem and its context within South Africa relating to emerging markets and community shopping centres. This is followed by a synopsis of the current thinking in the literature on Asset Management (AM), Property Management (PM) and Facilities Management (FM). The broad delineation of these three consonant bodies of knowledge lead to the research problem within the context of the management of community shopping centres in post-apartheid South Africa. The research philosophy and methodology flow from the problem context.  This is followed by the aims and objectives of the research, the research question, the research strategy and design, the scope of the dissertation, and the key assumptions made by the researcher at the outset.  Subsequently, the structure of the dissertation is described.

The hint of the research problem

The hint of the potential research problem began in 2011 during the due diligence study of several community shopping centres in South Africa, for and on behalf of a specialised retail, listed real estate fund. These properties were predominantly community shopping centres, based in emerging economies, which had fallen into a state of disrepair or became unsustainable to manage, due to previously ineffective management, resulting in the erosion of the value of the asset and hence the disposal of the property. This due diligence included the analysis of the reason for this ineffective management and how the asset could be rehabilitated and reinstated to provide a capital gain to investors through the application of an effective management model and through refurbishment. Part of this study entailed an investigation into the management structure that was applied to the retail property asset and explored its effectiveness within the context of the particular shopping centre. The study raised the initial question of, what management model should be applied to community retail centres in emerging economies to ensure effective and efficient management?

Subsequent to this an initial investigation was undertaken that specifically analysed the current management models offered by outsourced, large, national property management companies in South Africa, in the context of retail centres in emerging economies. This study established that the external property managers and the mainstream sector utilised and applied conventional management structures to community shopping centres. Hence, there was no development and innovation in the management model, which could be used in the application to a non-conventional shopping mall. 

These two early investigations hinted at the idea that perhaps the key to the management of these public assets lay within the AM, PM and FM body of knowledge at an operational, tactical and strategic level. It is within the context of these initial investigations outlined that the main aim at the outset of this research is derived.  Hence, the primary intention of this study is to investigate whether an integrated AM, PM and FM based methodology can be developed to create a management model for the management of community shopping centres in emerging economies.

1.3       Focusing on the research problem

The focus of the research problem requires the researcher to approach the problem from two different approaches. The first of these is purely contextual in terms of understanding the nature and trends in South African retail development and management. The second is in terms of the AM, PM and FM literature. In order to attain the principle problem within the research, a brief overview of the context of the beginning and evolution of retail centres in emerging economies in South Africa is presented, followed by a synopsis of the current thinking in AM, PM and FM literature.

1.3.1     Community shopping centres in the context South Africa

The advent of democracy in 1994 established South Africa as the leading force for economic revitalisation for Africa.   From 1994, the economy started to grow again as a result of improved optimism, the new political dispensation, and a series of initial policy reforms (Faulkner and Loewald, 2008). Policy was largely directed toward putting in place sustainable economic growth and securing the financing of social wages, public services and infrastructure. This led to change, where previously disadvantaged communities had the opportunity to flourish in the freedom and new democracy within South Africa. This resulted in economic growth and macroeconomic stability.

South African business had previously been frozen out of the global economy as a result of sanctions, however they were now able to commit to expansion and search for ways to maximise their profitability into the new extended market, and it was a time for fundamental strategic and operational shift in the economy and retail sector (Bruyn and Freathy, 2010).

Between 1996 and 1998, South Africa’s share of foreign direct investment (FDI) in the region rose to almost 40% of new foreign direct investment in Southern Africa (Soderbaum, 2004). The political transition to democracy allowed for the return to international respectability and therefore the opportunity for foreign direct investment and increased market access for foreign investors.

Retail companies began to build on regional economies of scale and pursue new sites of investment (Prinsloo, 2009). Access was available to this new foreign direct investment and an entrance was granted into international imports.  This gave retailers the opportunity to expand their market, range and offering. Advancements in technology further enabled retailers to procure goods overseas allowing for substantial savings through efficiency gains and cost reductions (Reardon et al., 2003).

This demand from retailers to expand, grow and invest in South Africa was echoed in the sentiments of consumers, who now had increased spending power due to their changing social and economic statuses.

 1.3.2 Consumer trends in ‘second and emerging economy’ areas

Several changes have occurred within the national consumer landscape.  Changes such as a rising black middle class and increased government support to the second economy has resulted in an ‘emerging economy’  and hence increased and sustained demand for commercial services in these areas (Demacon, 2010). An analysis of these changes are necessary to understand its impact on retail development, as well as the explanation of the terms ‘second economy’ and ‘emerging economy’  in the context of South Africa. 

In 2003 President Thabo Mbeki reintroduced the concept of South Africa having two economies into his policy discussions – the developed first-economy and the under-developed second economy. This ‘second’ economy was seen as a metaphor for socio-economic dualism, as a result of the legacy of apartheid.   The ‘first economy’ is defined as cutting edge and globally integrated, whereas the ‘second economy’ is marginalised, exists at the edges, consists of large numbers of the unemployed and does not benefit from the progress in the ‘first economy’ (RSA, 2006). From 2003 greater emphasis has been placed on implementing policy that intervenes to close the gap between these dual economies and curb poverty. These interventions have included social security interventions and social development programmes which have fuelled the upward movement of 500,000 households along the national living standards profile, as measured by the Living Standards Measure (LSM).[1] 

This has resulted in the upward movement amongst black South Africans in this ‘second economy’ which has resulted in an ‘emerging economy’ or the rising of the black middle class, who are predominantly in township and rural areas (Demacon, 2010). Per capita income has increased over the past eight years, following a positive trajectory, resulting in a shift in the economic pyramid since 2000. In South Africa today, consumers living in township and rural areas spend approximately R308 billion annually, representing 41% of the total consumer spend (Mokopanele, 2011). With this shift, consumers are becoming more informed about retail products and services and their changing lifestyles result in changing retail needs and habits.  This emerging second economy market shows tendency towards higher frequency of shopping, greater access to consumables and the demand for a shopping experience (DPRU, 2008).

In the last decade retailers have acknowledged this spending power and sustainable growth within the emerging economy areas that warranted further expansion and development. This demand for retail and consumables in the emerging markets has in the last decade seen the rapid expansion of shopping centre developments in areas with high growth prospects. The result being that between 1962 and 2009, 160 shopping centres were developed in township and rural areas of which 64.9% were developed post-1994, where a strong trend of building community shopping centres developed (Urban Landmark, 2011). These types of centres are in most cases built according to the profile and needs of the local residents and stakeholders.

1.3.3 Community shopping centres

As per the dictionary definition; a community is a social group of any size whose members reside in a specific locality and often have a common cultural or historical heritage (Oxford English Dictionary, 2012). A traditional definition of ‘community’ is adopted for this research, encompassing all individuals, groups and business enterprises that reside and work within a spatially bounded locality (Delanty, 2003). This group may share common characteristics or interests and is perceived to distinct itself from the larger society (Collins, 2012). Therefore the classification of a community centre, for the purposes of this study, is defined as a centre that caters to the requirements of the surrounding community. Foreman et al. (2003:91) describes a community centre as a ‘mid-sized centre which would offer a limited range of comparison goods in addition to the range of convenience goods’. Dawson (1983) indicates that a community shopping centre offers patrons a greater depth and range in terms of merchandise than a convenience centre.

In an emerging economy context, a community centre is located within a township or rural area and varies in size between 5 000m² and 30 000m². The size of the community centre would range from the classification, as per South African Council of Shopping Centres, from neighbourhood centres to large community/small regional centres dependent on the threshold population within the town or sub-region (SACSC, 2010).  The location of the centre is in the main town or rural community close to taxi facilities and the main road running through the village or town. The market characteristics are LSM 1 to 5 with a number of households in the catchment area of approximately 20 000 to 210 000 and a population of 100 000 to 560 000 (SACSC, 2010). These centres have been created due to the needs of the surrounding community and established on the basis that the centre provides for a decent quality of life and meets the social, economic and material needs of the community.

1.3.4 Policy and private sector role in retail development

A policy implemented to ensure socio-economic upliftment of second economy areas was the  Comprehensive Rural Development Programme (CRDP) by the Ministry and Department of Rural Development and Land Reform, dealing with the upliftment of rural communities through strategic investment in the relevant economic and social infrastructure and the belief that rural towns have to be revitalised to ensure that they can successfully serve as service centres of these rural economies (South African Government, 2009). Included in this strategic plan was improved economic infrastructure through rural shopping malls and effective support through providing spatial planning information and services to private institutions for development purposes. Government still believe that through facilitating local economic development, rural municipalities can play an important role in alleviating poverty and facilitating development in rural areas (South African Treasury, 2011). This has been implemented through the neighbourhood development partnership grant (NDPG) in 2006, whereby the public and private sector work in partnership to uplift the community through development. Private sector development has a strategic role to play in the attainment of social development and local economic development goals of local government.

In 2007, eThekweni Municipality studied rural planning and development of nodal development in rural areas. The study investigated nodal development in rural areas in order to provide local level services for the surrounding community and to generate social and economic activities. The intention is that the node becomes a ‘one-stop-shop’ for the rural community (Demacon, 2011). Hence land is released for development proposals by private investors and then sold under freehold tenure or leasehold. Through the implementation of these rural spatial plans and policies, opportunity has been opened up for commercial and retail development.

Consequently public policy and hence private sector and investment in these nodes has resulted in accelerated retail developments in townships and rural areas. Second economy areas have emerged as the new market for national retailers, especially supermarket chains. The progressive movement of retailer chains into previously untapped lower income markets has resulted in a substantial increase in shopping mall development (Urban Landmark, 2011). All these contributing factors have led to the rapid development and hence supply of shopping centres in post-apartheid South Africa. These community centres have had to be successful for the investors, yet also play an important role in generating urban agglomerations, thereby initiating urban renewal and the development for the node and its surrounding community (Urban Landmark, 2011). Through the development of these centres there have been several challenges for developers and investors in terms of formulating a shopping centre that responds to the needs of the consumers, retailers, community and transport infrastructure and networks.  Hence, there are several participants; the municipality, government, local council, the community, tenants, retailers, consumers, developers and investors who are integrally involved in the establishment of the centre. Several studies have been undertaken to establish the effects of these developments, however little is known about the application of management thereafter. To analyse this further an overview of the Asset Management, Property Management and Facilities Management is presented below, with specific focus on the current thinking of the application of this management to retail in emerging markets.

1.3.5 Defining AM, PM and FM

A common distinction in retail management is made between asset management, property management and strategic facilities management. Therefore, it is useful to explain them for the purpose of this research and to investigate whether any theory or relevant literature exists in relation to their integration and, more importantly, their application to retail in emerging economies.

i)          Asset Management (AM)

AM concerns the assessment of the shopping centre and the decision as to the type of investment, and changes or improvements required.  It is described by the British Standards specification as the systematic and co-ordinated activities and practices through which an organisation optimally manages its physical assets and their associated performance, risks and expenditures over their lifecycles for the purpose of achieving its organisational strategic plan (Woodhouse, 2007). AM is the basis for investment decisions and the management function in which change and improvement can be budgeted for.

Shopping centres in South Africa, have been developed and financed as assets by pension funds, listed funds, property companies and private owners. Howard (1997) identified that the retail and other property investment does offers long-term security and a reliable income stream to investors, through the leasing of the retail unit. Therefore in terms of retail asset management, the role of the asset manager is to ensure that the rental income streams remain steady and escalating and that the expenses remain low and that this is sustainable.

McAllister (2012:30) identifies the neglect of property asset management within the academic research community and the gaps in the current knowledge about AM specific to property. McAllister (2012) further identifies the confusion of the labels ‘asset management’ and ‘property management’ within the context of commercial property management, as there are no standard terms applied. It is argued that in its current context AM in practice is management at portfolio level involving managing the property managers, approval of major expenditure, major alterations, implementing acquisition and disposal strategies. In contrast, PM is often used to describe a role concerned with day-to-day functions such as service charge functions, tenant liaison, inspection and monitoring.

In the context of shopping centres, the workplace would be defined as the physical asset. However, McAllister (2012) notes that there is little empirical evidence or models of how the delivery of property asset management is structured and evaluation of different possible models. McAllister (2012) further argues that much of the published material about the operation of the property asset management sector has become increasingly obsolete and that there is an opportunity for further theoretical description, analysis and evaluation of contemporary approaches to delivering and procuring property AM.

ii)         Property Management (PM)

PM can be defined as the total care of the building during the operation stage. The extent of the management service will vary according to the building’s use, quality, size, location and age, the ownership profile, and the capability and strategy of the property management company itself (Baldwin, 1994). Property management can be summarised as the day-to-day management of the asset and tenants who add value to the asset. However, limited research has occurred on the day-to-day organisation of the shopping centres and the management of the relationship within it (Roberts et al., 2010:598). 

In developed countries, the practice of property management follows a traditional style, whereas in an emerging market, as the market expands and retail buildings develop, styles should evolve (Baldwin, 1994). Property management has evolved to become about also serving the users rather than the physical building and about being sensitive to changes in the economic environment through the implementation of contingency plans. This can therefore be challenging in newly developed markets and emerging economies (Hin Li, 1997).  Jack (1994) discussed that the development of an effective PM strategy requires the involvement of the facilities manager at all stages, in partnership with the organisation.

iii)        Facilities Management (FM)

FM, according to the International Facility Management Association, is defined as a profession that encompasses multiple disciplines to ensure the functionality of the built environment by integrating people, place, process and technology (IFMA, 2008). Facilities management looks at developing methodologies that encompass the human, physical, spatial, environmental and financial dimensions of buildings in an integrated way (Barrett and Baldry, 2003). FM is therefore viewed as an integrated approach to the maintenance, improvement and adaptation of the buildings of an organisation in order to support the primary objectives of that organisation and looks further into the future to ensure an efficient and effective building life-cycle (Barrett, 1995). Recently in South Africa, FM has emerged from its perceptions and practice of maintenance management to a multi-disciplinary management function (Michell, 2010).

Grimshaw (1999) and Price and Akhlaghi (1999) emphasise the need for FM as a discipline to attain a higher strategic level of management if the client is to extract best value from it. Strategic Facilities Management (SFM) is FM that anticipates change, the market, competitive reactions, opportunities and threats. Through SFM the retail asset is viewed as a dynamic asset rather than a static asset (Nieboer, 2003). Hence, it requires an understanding of the broader context (Jack, 1994). Jack (1994) argues further that SFM is the process which provides the structure for an effective partnership, between property management and top management, as the management of the property and support services will become fully integrated into the organisations management strategy. Alexander(1994) maintains that FM extends beyond the impact on buildings and recognises the local economy and community. Howard (1997) reiterates that when shopping centre management is property-led rather than customer-led conflict emerges. This has resulted in the emergence of Community-based Facilities Management (CbFM) as the involvement in the management of facilities and the delivery of services to reflect the community and environment in which they reside and operate (Alexander, 2006).

Howard (1997) states that there has been much written about the development of shopping centres from the perspectives of geography, public policy and property development. However there is a lack of analysis of the centre after the development and therefore its management.  Roberts et al. (2010:595) also reiterates that little research has appeared on the day-to-day organisation of the shopping centres and the management of the relationships within it. Hence, it is evident the current research and knowledge base of management of community shopping centres falls mainly within the paradigm of FM, as it considers both change and community. AM, PM and FM overlap and work together to ensure the complete optimisation of the efficiency and effectiveness of the asset, from the day-to-day management to portfolio decisions, to planning for the future and change. The literature does not however deal with AM, PM and FM of community shopping centres in the context of the emerging market of South Africa. There is however a level of resonance in the body of knowledge of  FM, CbFM and SFM in terms of the management of community shopping centres.

1.4       The research problem stated

It is evident that there exists a lack of critical foundation in AM, PM and FM theory that is applicable to shopping centres in South Africa. This has resulted in inadequate knowledge to be able to inform the application of the correct management model to community shopping centres in emerging markets. Hence, the research problem may be stated as:

There exists a lack of information in AM, PM and FM theory that is applicable to community shopping centres in emerging markets. Moreover, there has been insufficient theoretical information and effective application thereof to create integrated management structures and strategies applicable to the efficient and effective management of community retail assets, in emerging markets.

1.5       The research question

The research question posed at this point is:

i)       Can an integrated AM, PM and FM approach assist in creating an effective and efficient model for the management of community retail assets in emerging markets?

ii)      Is there a lack of development, innovation and improvement to the present management models, due to this lack of information?

iii)     What would be a preferable tentative, conceptual model?

1.6       Initial research premise:

At the early stage of the research there is an initial premise for this study, namely:

That the lack of information in AM, PM and FM theory that is applicable to community shopping centres in emerging markets has resulted in the inefficient and ineffective property management application, in the context of democratic South Africa. 

1.7       The research aims and objectives

The research investigates the theory and application of AM, PM and FM theory and management. Embedded in this are the following research objectives:

i)       To establish to what extent community retail in emerging markets of South Africa, differs in its nature and dynamics, to conventional shopping centres;

ii)      To determine the application of the management thereof;

iii)     To establish the extent to which AM, PM and FM theory is understood and applied; and,

iv)     To develop and propose a tentative, conceptual model for the management of community shopping centres in emerging markets, in South Africa.

1.8       The research methodology

The above objectives will be achieved by adopting the following research method:

i)   A literature review of matter pertinent to this study.

ii)  Selected case studies to determine the nature and dynamics of the shopping centre and the management structure applied. The data collection within these case studies will entail:

a.   Face-to-face interviews with professionals within participating companies to establish the extent of theory and application;

b.   The collection of both photographic and documentary evidence of the cases under investigation;

c.   An investigation into the applied property management practice within the cases under investigation;

d.   Analysis and interpretation of the data collected under investigation; and,

e.   Conclusions with specific reference to the developed and proposed tentative, conceptual model for the management of community shopping centres in emerging markets in South Africa.

1.9       The research strategy and design

The methodology adopted and design needs to allow for exploration and an experiential understanding of the interactions within shopping centres in the emerging markets of South Africa.  The research objectives are therefore to obtain a deep understanding of the context, dynamics and stakeholders as well as an understanding of the current management models applied to community shopping centres in emerging market.  The research needs to ascertain if these are efficient and effective, strengths, weakness and the perceptions of the stakeholders and management companies.  This will provide a qualitative base to describe the phenomena and dynamics within a community shopping centre and therefore explain the current management practices applied, and the management model required. In light of the research problem and the intrinsic focus on the stakeholders’ objectives, requirements and perceptions of the shopping centres and their management the study has an inherent qualitative bias. In order to fully understand the complexities inherent in the management of shopping centres in the emerging markets of South Africa, empirical research is needed to analyse cases and establish emergent themes. Hence, the research philosophies of constructivism and interpretivism underpin this research.  In this instance, case study research is the most appropriate research strategy. A more detailed discussion and justification for the specific design of the research protocol and the research techniques utilised in the fieldwork is presented in Chapter Three of this document.

1.10     Scope and limitations

The case studies will be drawn from a listed property fund that specialises in emerging market retail assets, specifically community shopping centres. Hence, the study will be limited to cases identified during the course of a due dilligence study by this particular fund.

1.11     Thesis structure

The research report will be structured as six chapters. The research study began with the ‘hint of the research problem’ as documented in this chapter. The outline of this initial thinking, as documented in Chapter One, was followed by a brief literature analysis of the three main spheres of property management and the current context of retail in South Africa. An analysis of the context of South African retail history and development, trends and consumers, legislations and demand for retail and supply is discussed.  The literature that applies to AM, PM and FM was researched to gain an understanding of the principles and practices that underpin the current thinking and practice.

A critical review of the post democratic retail environment in South Africa and the literature relating to general management theory, AM, PM and FM in general and the property industry in particular, are documented further in Chapter Two. In addition, this chapter details the evolution of the contextual and theoretical framework for this study. This chapter largely addresses the question: What is the theory from which the applications are drawn?

After obtaining an understanding of the contextual and theoretical framework that underpins the research, the researcher can further validate and support the research question posed in Chapter One. Chapter Three therefore requires a deeper understanding of research philosophy, research methodology, research design and techniques to research the questions that are being posed.

Chapter Four describes the case study protocol and fieldwork that explores the research questions and the specified research objective in more detail. Moreover, it presents the within-case analysis and the emergent themes resulting from the fieldwork.

This is followed by Chapter Five, which comprises the analysis and interpretation of the cross-case study data. It formulates the core categories and the substantive theory in terms of AM, PM and FM. To conclude the study, Chapter Five further presents these theoretical propositions, draws conclusions and discusses the relevance of this research to the context of community shopping centres in post-apartheid South Africa. In doing so recommendations for a tentative management model are made. This is followed by the conclusions of the research in Chapter 6.

CHAPTER 2:

CONTEXTUAL AND THEORETICAL FRAMEWORK

2.1  Introduction

Chapter One outlined the research problem and the research question. This chapter will develop the contextual and theoretical framework, which will create the theoretical platform from which the research problem and research question can be examined. 

The stated objectives of this research are to establish the nature and dynamics of South African community shopping centres in emerging markets. This requires an understanding of the centres creation, delivery and dynamics, within the context of emerging market communities.  In addition, an understanding of general management theory and the current theories and practices of AM, PM and FM are needed in order to outline the contextual and theoretical framework for the research. To this end, the chapter begins by outlining the contextual framework for the study in terms of the nature of community shopping centres in the emerging market in South Africa. This is followed by an overview of the key literature that underpins AM, PM and FM. 

2.2 The contextual framework: A South African community shopping centre

The contextual framework creates an image of the nature and dynamics of community shopping centres. In doing so it is necessary to explain the history and nature of the emerging economy in in South Africa. In addition, the dynamics of a community retail centre and the objectives of the role-players and stakeholders of the shopping centre are outlined from a theoretical stance.

2.2.1    Nature and dynamics of emerging market retail in South Africa

In the decade prior to 1994, South Africa experienced the worst period of economic growth in its history (Faulkner and Loewald, 2008). Growth variable decline was caused by trade and financial sanctions in opposition to the apartheid government and this political instability and increased uncertainty resulted in declining investment (Faulkner and Loewald, 2008).  Since the advent of democracy in 1994, retail in South Africa has succeeded in growing and evolving with the changes that democracy has brought. Over the preceding 18 years, the freedom that came from this allowed the people, business’ and government to thrive and grow (Du Plesses and Smit, 2006). Prudent fiscal policy and sound macroeconomic management have been critical factors in creating an environment conducive to overall economic growth and more specifically, retail growth (Lundahl and Petersson, 2009). Government has played a strategic role in rebuilding previously disadvantaged communities and environments, as the basis for a democratic and integrated society (DPLG, 1998). This has been executed through policy implementation and development.

During apartheid, the African working class and rural areas were dispersed due to the spatial dislocation policies of the time.  Separate and vastly unequal public services contributed to geographically isolated communities with low education levels and little means for self-generated economic development (Faulkner, 2008). In 1994, the first democratic government faced the enormous political and societal task of transforming South Africa from a nation that only knew segregation, marginalisation, and exclusion to one based on cohesion, inclusion, and opportunity (Faulkner, 2008). The focus was on restoring political, economic and social consolidation. The government focused on integration, through development in these previously disadvantaged communities with policy implementation plans such as the Community Rural Development Programme (CRDP), Rural Development Framework (RDF), Integrated Development Plan (IDP) and Neighbourhood Development Programme (NDPG). Rural development policies included improved economic infrastructure and this mandate included rural shopping malls (RSA, 2012).

i)         Nodal development of community shopping centres

The policy framework of the post-1994 South Africa allowed government and municipalities to support the creation of commercial nodes. Drawing from the Integrated Development Plan and with the Rural Development Framework (RDF), rural spatial plans focused on adopting nodal development as a key principle in establishing highly accessible and concentrated facilities.  A nodal development is defined as a development that takes place in response to a particular focus or hub, for example a transport interchange, a particular industry, or a shopping centre in township and rural areas (Adatia, 2010).

Shopping centres in emerging economy areas represent critical building blocks of nodal development (Demacon, 2010). Urban Landmark (2011) research states that some views are that these shopping centres play an important catalytic role in generating urban agglomerations, thereby initiating renewal and the development of vibrant town centres. It can also be argued that as shopping centres are usually the first non-residential type of development to occur in a developing node, they are seen to play an important role in the economic growth of an area (Urban Landmark, 2011). Urban Landmark describes shopping centres in emerging economies as a way of creating mixed, sustainable neighbourhoods, while at the same time making the development of a centre, as a source of intensive economic activity, possible. The node becomes a one-stop-shop for rural communities and the way is opened for commercial and retail development (Ethekweni Municipality, 2007).  Musil (2011) echoes these sentiments, that in many communities, the shopping centre has been embraced and functions as either a centre of retail commerce, a centre for the community, or both.

Shopping centre development in these nodes therefore serves as a way of creating an integrated, sustainable community while at the same time making the centre a node of intense economic activity. The Rural ABM (2011) states that its objectives and desired outcomes of the intervention of nodal developments are the delivery of basic service and promotion of local economic development.  Therefore, many initiatives have been established to aid the successful development of nodal commercial developments. The Training for Township Renewal Initiative (TTRI) is an example of this. It is a partnership between the National Treasury (Neighbourhood Development Programme), South African Cities Network (SACN), the Department of Cooperative Governance (Urban Renewal Programme), the Development Bank of Southern Africa (DBSA), and Urban LandMark. TTRI aims to promote, encourage and support township development and renewal in South Africa through the training of township managers and practitioners (National Treasury, 2010). Demacon (2010) states that within the previous decade, shopping centres have created 29,400 permanent jobs and contributed in excess of R90 million annually to the fiscal economy through rates and taxes thereby acting as a catalyst for economic opportunities.

ii)         South Africa’s ‘emerging market’

Since the advent of democracy in 1994, there has been an upward movement by the second economy, resulting in South Africa’s emerging market of consumers. The emerging market now constitutes 59% of South Africa’s middle income group, of which 53% live in townships (Demacon, 2011).  Demacon (2011) further argue that the factors that have contributed to the rise of the second economy are: the freedom that came with democracy; public and private sector development; and, the social grant system implemented by government.  Demacon Market Studies (2011:4) states that the social security system has stimulated the upward movement of about 500,000 households from the bottom to higher tiers of the economic pyramid. The Income and Expenditure Survey (IES) of 2008 showed that over one-third of South African income came from social grants and these grants represent a major monthly income source for more than 12 million people (Demacon, 2008). It is anticipated that this rising middle income segment will increase to about 22 million people over the next 20 years (Demacon, 2011). This change and growth specific to previously disadvantaged communities has changed the profile of the South African consumer base. Consumers are now experiencing financial stability and have become resilient to economic change. This has resulted in higher levels of demand and expectation (Demacon, 2011). Emerging market areas are characterised by a very active retail market, the market in these areas has flourished for very specific reasons, including under-supply and increase in demand as this market continues to grow and emerge. As a result, consumers require greater commercial and economic facilities to fulfil their needs, retailers require sites to expand their market share and developers are looking at an untapped market ready for commercial development.

iii)        Shopping centre development and growth

From 1994, the South African economy began to grow again due to optimism, new political freedom and stability and a series of new monetary policy reforms. The Ministry of Finance obtained an international credit rating which provided several benefits. In particular, it indicated South Africa’s re-emergence in international capital markets, benchmarked debt, local banks were able to apply for stand-alone ratings and hence increase their access to international capital and alternative sources of funding became available to domestic capital markets (Rustomjee, 2006). Consequently, domestic commercial banks began to face competition from foreign lenders and debt became available at competitive rates.  In 1996, inflation was lowered which reduced the real cost of capital and promoted investment by the private sector. In 2000, a new monetary policy framework was instituted which assisted in targeting inflation, this resulted in lower interest rates in 2001 (Faulkner and Loewald, 2008).  This gave rise to an increase in investment growth rates and heightened activity in sectors such as the built environment (Faulkner and Loewald, 2008). The policy reforms assisted in reducing the cost of capital and lowered the hurdle rate which allowed private investment projects to become feasible and hence the property market was growth orientated (Faulkner and Loewald, 2008). These factors contributed to the availability of private sector lending and the opportunity for developers to obtain debt funding at competitive rates and hence feasibility to achieve required yields.

To ensure the development feasibility of a centre, commitments have to be received by retailers for approximately 60% to 80% prior to construction (Urban Landmark, 2010). National tenants, tenants who have several stores with national retail exposure, have the ability to pay the rent regardless of the success of the particular store in the centre, due to their national exposure. Therefore, shopping centres in emerging markets have on average 70% to 75% national tenants (Demacon, 2011). Competition for retail chains to expand their footprint and optimise their share of this new untapped market has resulted in a substantial increase and drive in the development of shopping centres. Retailers were prepared to commit, which subsequently made developments and investment in the emerging market both feasible and possible.

Since the late 1990s, private sector-led investment in these areas has become evident, and South African townships have emerged as the new market for national retailers, especially for national supermarket chains (Demacon, 2011:17). The South African supermarket sector is highly consolidated in the hands of four main chains: Shoprite-Checkers, Pick ‘n Pay, Spar and Woolworths. Business Day (2002) notes that supermarkets were not allowed to locate into townships before the end of apartheid, and after that they were focused until the early 2000’s on consolidating business in urban areas. These urban and first economy areas became saturated and supermarket retailers and general retailers needed to expand their market share (Reardon and Weatherspoon, 2003).

Developers then started to shift their focus to the emerging economy areas. As the first economy market became competitive and saturated by investors, developers and retailers, they looked towards this emerging or second economy. The first economy became the minority and the emerging market became the focus for expansion and investment. From 1962 to 1994, 40 shopping centres were developed in emerging economy areas, resulting in 408,848m² of retail floor space. From 1995 to 2009, 76 formal shopping centres were developed, resulting in an additional 1,261,854m² of retail space (Demacon, 2009).

A strong trend of building community centres developed (Demacon, 2011:8) and the sector started to become more complex in terms of its size, type and characteristics. It is argued that the role of the initial stakeholders in a community retail development is to ensure that the retail model fits into the context of the area and community (Urban Landmark, 2011). Urban Landmark (2011:52) state that ‘one should recognise that successful and sustainable shopping centre development depends on inputs from, and interaction between, a number of role-players besides developers and investors…the role of the local municipality, provincial government, tribal authorities, tenants, NGOs and local communities’.  The municipality plays a pivotal role in guiding the development of shopping centres to ensure that the objectives of the community and government are met. Their involvement is to ensure that the processes and systems work effectively and efficiently (Demacon, 2010). This includes creating a regulatory framework, processing approvals and initiating engagement with the community to ensure it benefits from the development. 

Therefore due to government policy, debt finance, private pursuit of commercial opportunities and the demand of the emerging economy, shopping centres were developed as commercial nodes for the community, investors, retailers and for economic and social development. The historical context of the community in which the shopping centre stems has a direct influence on its nature and the requirement of keeping many stakeholders at heart. It is therefore necessary to further define the dynamics of the shopping centre after its development. This entails a definition of the roles of a community shopping centres and the objective of the stakeholders.

2.2.2    Functions and stakeholders of emerging market retail in South Africa

The International Council of Shopping centres (2004) defines a shopping centre as a group of retail and other commercial establishments that are planned, developed, owned and managed as a single property.  Pitt and Musa (2008) outline the role of shopping centres as an investment, a place of business, and a property.  Howard (2011) supports this view by defining shopping centres as a concern of both a property, and a business.  Through identifying the nature of the functions specific to a community shopping centres, and in turn assessing the dynamics of the stakeholders, this will establish how a community shopping centre differs from a traditional shopping centre. Stakeholders of the community shopping centre are discussed in further detail, on a theoretical level. A stakeholder by definition is any group, or individual who can affect, or is affected by the achievement of the organisations objectives (Preble, 2010). Donaldson and Preston (1995) argue that the interests of all stakeholders are of intrinsic value, and each group merits consideration.

i)          The shopping centre as an investment

Van Dommelen et al. (2007) propose that the investors aim is a return on investment in order to obtain the desired profit. The intention is to invest in, and purchase shopping centres due to their fairly predictable income that is generated from the leases that have payments and escalations that are fixed for relatively long periods, usually between 1 to 10 years (Urban Landmark, 2011).  The shopping centre is therefore developed or purchased as an investment asset.  This asset requires finance and it is therefore either financed by equity from the shareholders and investors, or debt from financial institutions, or a mix of both. The investors and shareholders provide this funding, or taking on the risk of debt, where the objectives are in obtaining a percentage of this income, which is subsequently distributed. The financial institutions objectives are to ensure that the loan is repaid, allowing the interest to be received.

Pitt and Musa (2008) argue that the core objective is to lease these business premises for a profit, with the objective of obtaining maximum return on investment.  The income stream of the shopping centre is generated through the leasing of retail units (Howard, 1997). Howard (1997) argues that the sole value of a shopping centre is therefore its rental income and all decisions are based on the maximisation of this income. The measurement of the performance of the centre as an investment is based on the profit through income and hence distributions and the growth in the assets’ value.

ii)         The shopping centre as a business

Howard (2011:270) argues that the business value of a shopping centre lies in its rental values and hence the value of the relationship between tenant and landlord. Therefore leasing or marketing the space and managing the tenants and tenant mix become a main concern to the business of managing shopping centres. Rental paid by the tenants covers the centres operating expenses and provides income for the investors.  The rentals are either based on the contractual commitment of the lease, pertaining to a set rate per square metre of gross lettable area. The rental may also be structured based on a set rental plus an additional turnover rental, which is calculated on a percentage of the retailer’s profit. This encourages the investors to ensure that the tenants are achieving profitable margins. Retailers are the drivers behind shopping centre development and the key client of the shopping centre as a business.

There are two types of differentiated retailers, namely: national retailers and independent retailers.  National tenants are described as tenants that are listed or have national exposure. Urban Landmark (2010) argues that a national retailers objective is to create value for its shareholders and this is achieved through growing earnings through increasing sales and expansion. The Edcon 2010 Annual Report highlights that one of their key business strategies is to expand their base of retail stores. Edcon further state that this strategy is integral in their ability to increase sales, profitability and cash flow. Therefore the retailer’s objective is to increase their shareholders’ wealth by growing the value of the share price through growing turnover and expanding the number of stores. Independent tenants are described as regional or local tenants that are owned and run as an individual business. The objectives of these tenants is therefore to obtain sustainable profit and turnover.

iii)        A shopping centre as a property

RICS (2012) states that the management of a property is therefore the inter-relationship of the management of the business and of the property. For the rental revenue paid, the tenants require the fulfilment of certain conditions, as per the lease agreement.  These include maintenance of the building, municipal services, safety, security and cleaning. Hence, the centre needs to be managed to ensure that the property is optimised to ensure that the tenants requirements are fulfilled and that it provides satisfactory business premises from which the tenants can trade. It also needs to ensure that the expenses are managed, to ensure that maximum income is achieved. By renting in the community shopping centre retailers pay for not only the space they occupy but the ‘agglomeration effect’ that results from creating a commercial node (Howard, 1997).  Consequently, for the centre to be successful as a business premise for the tenant, it needs to ensure that there is an optimal tenant mix to create this agglomeration.  The agglomeration effect also considers the footfall and customers that are drawn to the centre.

iv)        A shopping centre as a social and economic node

Howard (1997) discusses the view that shopping centres play many roles for: the developer, the owner, the tenant, the shopper but proposes that it also plays a role for the ‘citizen’. In the context of a community shopping centre in an emerging market the additional user and concern, would be that of the community. A community shopping centre in an emerging market therefore fulfills the additional role of an economic and social node for the community.  It can be argued that these centres have been created due to the needs of the surrounding community and established on the basis that the centre assists in providing quality of life through meeting the social, economic and material needs of the community. It is imperative to recognise the role the community plays in the development of the centre as well as their requirements and expectations of the centre. Demacon (2011:58) argues that ‘engagement with local communities upfront is critical to the success of retail centres in emerging economy areas to ensure participation, buy-in and involvement’. The community therefore needs to be identified as a crucial and important stakeholder.

Roulac (1994) notes two dynamics of a shopping centre. Firstly, that it is subject to on-going change from economic forces, demographic trends, shifting consumer preferences and aggressive retailer strategies. Secondly, that the role of ‘place’ influences the nature of retail economic activity.  Musil (2011) further argues that the adaptability of shopping centres to meet current community influences, preferences and trends is crucial to the success of the cente as a social and economic node. This highlights the importance of sustainability and adaptability of the shopping centre.

Through the understanding of the contextual framework of the development of community shopping centres and the dynamics of shopping centres, an initial assessment of the objectives and expectations of stakeholders and centre functions can be deduced. Figure 1 depicts a model against which the theoretical framework can be applied and analysed.

Figure 1: A commununity shopping centre - percieved functions and stakeholders

(Adapted from Howard,1997; Demacon, 2010;2011; National Treasury, 2010)

2.2.3    Setting the scene: Community shopping centre management

It is evident, through the identification of the nature and dynamics specific to a community shopping centre in an emerging market, that there are several stakeholders and conflicting objectives involved in the management of the centre. Howard (1997) discusses the relationships with regards to shopping centres and their management. Howard (1997) further emphasises that there is a conflict in the property-led approach and the customer-led approach and calls for synergy and integration amongst stakeholders. The property-led approach is based on the shopping centre as an asset and investment and the customer-led approach is based on the centre as a place and service. Howard (1997) contends this this results in inefficient and ineffective management. Gibson (1994) discusses the importance of a balance required as to which aspects will have priority in a specific decision as there are inherent conflicts in the different sets of objectives of stakeholders.

Preble (2005) claims that for this analysis to be effective it must be pushed further to examine the precise expectations of all stakeholders and to what extent these objectives and needs are being met. This involves assessing each stakeholder’s expectations, needs and demands on various issues and identifying performance gaps in the management of these relationships and the fulfilment of these expectations, needs and demands.

Having outlined the contextual framework for community shopping centres in the emerging market in South Africa, it raises the question of to what extent does AM, PM and FM take the dynamics and nature of community shopping centres and the emerging market into account? This creates the foundation for the theoretical framework that underpins this research.

2.3 The theoretical framework: Management application  

The purpose of this section of the chapter is to provide an outline of general retail property management theory and the theory of AM, PM and FM management models that are applicable to the management of shopping centres. In doing so it will ask the question, to what extent does this theory apply to community shopping centres in emerging markets?

It begins by defining general management theory, strategic management practice, in particular stakeholder management. Thereafter it outlines the management theory that applies to each discipline, the scope of what each management practice entails and the key models that exist in the literature of AM, PM and FM. At the end a broad overview leads to the consideration of its application to community retail in South Africa’s emerging market and the development, or lack of development, pertaining to shopping centre management.

2.3.1     General management theory

Jack (1994) defines management as the professional and effective deployment of resources, being totally accountable for results which are measurable. Goodpaster (1991) outlines management as having a contractual duty to manage the firm in the interests of the stakeholders and simultaneously management has a moral duty to take other stakeholders into account.  Then (2003) argues that a proactive property management model necessitates a constant two-way dialogue between strategic management and operational management.  

i)          Operations and strategic management

Joshi et al. (2003:353) describes operations management as ‘a functional field of management that is seen as the alignment of the strategic objectives across all levels that impact performance’. Hrebiniak and Joyce (1984) and Then (2003) suggest that a successful implementation strategy depends on the integration of strategic management decisions into the operational management process, hence the development of short-terms operating objectives that relate to long-term strategic plans.

Jack (1994) defines strategic management as the purpose for which a direction is set over the long term and therefore requires an understanding of the broader context.  Best et al. (2003) defines strategic planning as anticipating and managing change. Strategic management therefore plans for actions that may affect stakeholders in order to create the future environment. Strategic management can be further defined as implementing, executing and monitoring the strategic goals of an organisation in order to reaffirm the business model or suggest change.

Clearly, in order to apply a successful management model it is crucial to manage stakeholder’s expectations and the agreed objectives. This will enable strategic objectives to be formulated through the understanding of the context and relationships that are important to the success of the shopping centre.  The strategic objectives will then influence and form the process and control to be implemented at an operational level. South African JSE requirements enforce that all listed companies comply with annual integrated reporting, in line with the King III code and triple bottom line reporting. This requires all listed property companies to implement annual stakeholder assessments and stakeholder management strategies into their operations as part of the sustainability reporting standards requirements.

ii)         Stakeholder management

Mitchell et al. (1997) explains that for more than a decade the stakeholder management approach has been a powerful heuristic device that has been used to broaden managements vision of its roles and responsibilities beyond the profit maximisation function, through understanding the context and its stakeholders.   A stakeholder by definition is any group or individual who can affect, or is affected by, the achievement of the organisations objectives (Preble, 2010). Stakeholder management is therefore described as the process of  managing and integrating the relationships and interests of shareholders, employees, customers, suppliers, communities and other groups in a way that ensures the long-term success of the firm. Mitchell et al. (1997) in discussing the stakeholder approach, further defines stakeholder theory as the way in which to articulate the management of the stakeholders in a systematic way that allows for an integrated approach to strategic decision making, by satisfying multiple stakeholders simultaneously. Freeman and McVea (2011) believe that traditional management approaches favour key stakeholders and that this is only appropriate in a stable environment.  However, in a world of change and environmental shift, the integration of the interests of all stakeholders must be integrated into the core objectives of the company and the relationship must be managed in a coherent and strategic fashion.

Preble (2005:414) proposes that an organisation and its managers must ‘use the process of recognizing and adopting a stakeholder perspective and pursuing proactive stakeholder management techniques as it will materially advance the functioning of their organization as they develop an improved and on-going fit to an ever-changing external operating environment’. Thus Preble (2005) proposes a systematic process that entails the initial identification of the stakeholders. As discussed in the contextual framework, Preble (2005:409) identifies primary stakeholders: shareholders and investors; public stakeholders: governments and communities; and secondary stakeholders: those who influence or affect, or are influenced or affected by, the organisation. This requires an in-depth analysis and research based on the precise expectations of all stakeholders and to what extent these objectives and needs are being met. It further explores the general nature of the stakeholder claims. It determines the performance gaps by defining the stakeholder’s expectations, conducting performance audits, revealing gaps and exploring stakeholder influence strategies. The process defines stakeholder attributes through prioritising stakeholder demands. This is determined through the identification of the stakeholder salience, whereby the theories of power, legitimacy and urgency are used to assess the strategic importance of various stakeholders. These principles are summarised by Mitchell et al. (1997:860-862) in Table 2 below. Power is described as the ability of those who possess power to bring about the outcomes they desire (Salancik and Pfeffer, 1974). The further definition of power therefore is coercive (force or threat), utilitarian (material or influence) or normative (influences). Legitimacy is described as a generalised perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values and beliefs. Mitchell et al. (1997) describes the bases of legitimacy as individual, organisational and societal. Urgency is described as the degree to which stakeholders claims call for immediate attention. Urgency is therefore based on the following two attributes: time sensitivity, which is the degree to which managerial delay in attending to the claim or relationship is unacceptable to the stakeholder; and criticality, which is the importance of the claim or the relationship to the stakeholder.

Table 1: Sorting of rationale for stakeholder identification and nature

(Adapted from Mitchell et al., 1997)

Power	Stakeholder Dominant	The firm is dependent on the stakeholder: Stanford memo, 1963-"those groups without whose support the organization would cease to exist" (cited in Freeman & Reed, 1983, and Freeman, 1984) Freeman & Reed, 1983: 91-Narrow: "on which the organization is dependent for its continued survival" Bowie, 1988: 112, n. 2-"without whose support the organization would cease to exist" Nasi, 1995: 19-"interact with the firm and thus make its operation possible"
		The stakeholder has power over the firm: Freeman, 1984: 46-"can affect or is affected by the achievement of the organization's objectives" Freeman & Gilbert, 1987: 397-"can affect or is affected by a business" Savage et al., 1991: 61-"have an interest in the actions of an organization and ... the ability to influence it" Carroll, 1993: 60-"asserts to have one or more of the kinds of stakes in business"-may be affected or affect ... Starik, 1994: 90-"can and are making their actual stakes known"-"are or might be influenced by, or are or potentially are influencers of, some organization"
	Firm Dominant	The stakeholder is dependent on the firm:  Langtry, 1994: 433-the firm is significantly responsible for their well-being, or they hold a moral or legal claim on the firm.
		The firm has power over the stakeholder:  Freeman & Reed, 1983: 91-Wide: "can affect the achievement of an organization's objectives or who is affected by the achievement of an organization's objectives" Freeman, 1984: 46-"can affect or is affected by the achievement of the organization's objectives" Starik, 1994: 90-"can and are making their actual stakes known"-"are or might be influenced by, or are or potentially are influencers of, some organization" Brenner, 1995: 76, n. 1.-"are or which could impact or be impacted by the firm/organization"
	Mutual Power-Dependence Relationship	The firm and stakeholder are mutually dependent: Rhenman, 1964-"are depending on the firm in order to achieve their personal goals and on whom the firm is depending for its existence" (cited in Nasi, 1995) Ahlstedt & Jahnukainen, 1971-"driven by their own interests and goals are participants in a firm, and thus depending on it and whom for its sake the firm is depending" (cited in Nasi, 1995)
Legitimacy	Contractual relationship	The firm and stakeholder are in contractual relationship: Cornell & Shapiro, 1987: 5-"claimants" who have "contracts" Carroll, 1989: 57-"asserts to have one or more of these kinds of stakes"-"ranging from an interest to a right (legal or moral) to ownership or legal title to the company's assets or property" Freeman & Evan, 1990-contract holders Hill & Jones, 1992: 133-"constituents who have a legitimate claim on the firm ... established through the existence of an exchange relationship" who supply "the firm with critical resources (contributions) and in exchange each expects its interests to be satisfied (by inducements)"
	Claim	The stakeholder has a claim on the firm: Evan & Freeman, 1988: 75-76-"have a stake in or claim on the firm" Alkhafaji, 1989: 36-"groups to whom the corporation is responsible" Carroll, 1989: 57-"asserts to have one or more of these kinds of stakes"-"ranging from an interest to a right (legal or moral) to ownership or legal title to the company's assets or property" Hill & Jones, 1992: 133-"constituents who have a legitimate claim on the firm ... established through the existence of an exchange relationship" who supply "the firm with critical resources (contributions) and in exchange each expects its interests to be satisfied (by inducements)" Langtry, 1994: 433-the firm is significantly responsible for their well-being, or they hold a moral or legal claim on the firm Clarkson, 1995: 106-"have, or claim, ownership, rights, or interests in a corporation and its activities"
	Risk	The stakeholder has something at risk: Clarkson, 1994: 5-"bear some form of risk as a result of having invested some form of capital, human or financial, something of value, in a firm" or "are placed at risk as a result of a firm's activities"
	Moral	The stakeholder has a moral claim on the firm: Evan & Freeman, 1988: 79-"benefit from or are harmed by, and whose rights are violated or respected by, corporate actions" Carroll, 1989: 57-"asserts to have one or more of these kinds of stakes"-"ranging from an interest to a right (legal or moral) to ownership or legal title to the company's assets or property" Langtry, 1994: 433-the firm is significantly responsible for their well-being, or they hold a moral or legal claim on the firm Clarkson, 1995: 106-"have, or claim, ownership, rights, or interests in a corporation and its activities" Donaldson & Preston, 1995: 85-"identified through the actual or potential harms and benefits that they experience or anticipate experiencing as a result of the firm's actions or inactions"
	Interest	The stakeholder has an interest in the firm: Carroll, 1989: 57-"asserts to have one or more of these kinds of stakes"-"ranging from an interest to a right (legal or moral) to ownership or legal title to the company's assets or property" Savage et al., 1991: 61-"have an interest in the actions of an organization and ... have the ability to influence it" Carroll, 1993: 60-"asserts to have one or more of the kinds of stakes in business"-may be affected or affect ... Clarkson, 1995: 106-"have, or claim, ownership, rights, or interests in a corporation and its activities"
Urgency	Critical	Ownership- the stakeholder's possession of firm-specific assets, or those assets tied to a firm that cannot be used in a different way with-out loss of value (Hill & Jones, 1992; Williamson, 1985), making it very costly for the stakeholder to exit the relationship;
		Sentiment- as in the case of easily traded stock that is held by genera-tions of owners within a family, regardless of the stock's performance
		Expectation- the stakeholder's anticipation that the firm will continue providing it with something of great value (e.g., compensation and benefits in the case of employees); or

Van Dommelen et al. (2007) assert that in order to establish a management model for an organisation, it is necessary to establish the ‘measurements’ in order to create a ‘made-to-measure’ flexible style of FM to assist in the optimisation of profit. This creation of a management model which acknowledges stakeholder theory then allows for monitoring and control by continually checking stakeholder positions, evaluating strategic progress and through conducting social and environmental audits. Post et al. (2002:98) emphasise that ‘the capacity of a firm to generate sustainable wealth over time, and hence its long-term value, is determined by its relationships with critical stakeholders’. A stakeholder approach emphasises active management of the business environment, relationships and the promotion of shared interests; and it is the task of balancing and integrating multiple relationships and multiple objectives (Freeman and McVea, 2001). Berman et al. (1999) argue that stakeholders can have an impact on whether or not managers achieve their objectives and therefore stakeholders should be managed instrumentally, if profits are to be maximised.

Berman et al. (1999) recently derived a strategic stakeholder management model, which rests on the premise that organisations will address stakeholder concerns when they believe that doing so will enhance financial performance. Frooman (1997) presents empirical support for the concept of enlightened self-interest, that business and societal interests are closely intertwined. Freeman (1984) argues that stakeholders have intrinsic value and, as such, ought to be treated as ends in themselves and not just as a means to an end.  Donaldson and Preston (1995) concur that the interests of stakeholders are of intrinsic value and that each group merits consideration.

Berman et al. (1999) argue that adopting a stakeholder view results in rethinking the managerial tools adopted by companies.  Berman et al. (1999) further argue that success needs to be assessed through a holistic and comprehensive stakeholder framework.

Jensen (2001:308) argues that stakeholder theory will fail if competing firms are behaving so as to maximise value, as it is not in essence value creating, but that it will identify measures for success. Jensen (2001) contends that short-term value-destroying actions are made in the name of value creation. In essence Jensen (2001) discusses the ability of stakeholder management to allow organisations to think more generally and creatively about how its management models incorporate all stakeholders in order to obtain long-term value and sustainability through appropriate applications, structures and performance measurement.

Tencati and Perrini (2006) argue that a company creates value when it adopts a managerial approach, which is sustainability orientated.  Tencati and Perrini (2006:298) define this sustainability as being ‘fully aware of its responsibilities towards the different stakeholders’. Schaltegger and Burrit (2005:189) describe corporate sustainability as ‘a broad approach that includes various characteristics, in particular relating to the contextual integration of economic, environmental and social aspects’.

The review of stakeholder management as a management tool, provides information on an efficient and effective management strategy pertaining to community retail assets. It considers the dynamics, nature, history, community, context and market of the centre through a holistic analysis of the stakeholder’s requirements and needs. The importance of stakeholder management is that it incorporates the essence of sustainability in the management of community shopping centres in a dynamic and emerging market. It is crucial to ensure that all stakeholders objectives are fulfilled in order to ensure longevity and loyalty to the shopping centre, which will provide long-term income returns and sustainability. As the context and macro-economic environment in the emerging markets of South Africa are changing and shifting it is crucial that the strategic management and stakeholder relationships are developed and maintained.

2.3.2    Property management theory

The theory of AM, PM and FM management models that are applicable to the management of shopping centres are reviewed.  In doing so it will ask the question, to what extent does this theory apply to community shopping centres in emerging markets? Thereafter it assesses the management theory that applies to each discipline, the scope of what each management practice entails and the key models that exist in the literature of AM, PM and FM. At the end a broad overview leads to the consideration of its application to community retail in South Africa’s emerging market and the development, or lack of development, pertaining to shopping centre management.

i)          Asset Management (AM)

The Oxford English Dictionary defines AM as the active management of the financial and other assets of a company, in order to optimise return on investment (OED, 2012).  The Institute of Asset Management (IAM) describes asset management as the management of physical assets and as playing a key role in determining the operational performance and profitability of industries that operate assets as part of their core business.  RICS (2010) describes AM as the alignment of the property asset to the company’s business strategies.  It further describes the role of the asset manager as responding not only to the requirements of the organisation, but rather takes all requirements of the business into account and tries to deliver the optimal solution in terms of the organisations overall operational and financial goals and objectives.

Theun (1996) describes the management roles involved in AM as strategic management in providing strategic direction and operational management, and in the management of the structures and processes.  In doing so AM can ensure that there are the appropriate facilities and the appropriate service performance applied and monitored to ensure satisfaction both strategically and operationally.  RICS (2012) supports this theory on AM, describing the objectives of AM as fulfilling the business objectives and the operational objectives.  The business objectives would be defined as AM policy and strategy which would be implemented through delivery and resource allocations.  The operational objectives would be defined as the financial, operational and delivery management which support service delivery.

Amadi-Echendu et al. (2010:14) defines the scope of AM as covering a wide variety of areas including general management, operations and management of the financial and human capital aspects.  Amandi-Echendu et al. (2010) summarises the objectives of AM as:

·         Strategic management:                      Asset life cycle and analysis

·         Operational management :                 Asset utilisation

·         Tactical management:                        Asset maintenance

If one therefore analyses AM in the context of property, in particular shopping centres, AM would look at managing the centre to ensure optimal performance for the company and its business objectives.  Olaeye (2011) describes the role of AM in property as generating value for the investors’ investments through rental income of the properties, and through appreciation in the value of the properties over time.  Howard (2007:270) describes maximising the shareholders’ value as a corporate goal, which is obtained via maintaining and increasing the value of the shopping centre. This is achieved through ensuring that the rental income streams remain steady and escalating and that the expenses remain low and that this is sustainable.  At the same time that value is extracted it must be ensured that the property value is retained through effective maintenance and repair for effective use and preservation of the asset value.

This therefore includes the practice of portfolio benchmarking, evaluation and optimisation and hence the theory of Portfolio Management is utilised and applied. Souza (2010) describes Portfolio Management as involving the measurement of the performance of the overall portfolio relative to the benchmark and therefore helps identify differences between actual portfolio performance and market performance. Souza (2010) further explains that this involves an in-depth analysis of the current and future performance of the assets. This evaluates the asset based on future financial performance. This establishes whether the asset will underperform the benchmarks in the future and hence which assets should be developed, held or sold.

Through looking at the functions of AM and how it would integrate with PM and FM, RICS (2012) illustrates a three level hierarchy.  It looks at AM as an organisations strategic alignment and direction, whereas PM is viewed as critical to the delivery of the portfolio through day-to-day management.  Howarth (2006) believes that AM lies at the level of corporate management, as it looks at management from a strategic level, in order to match future capabilities to a future environment, in order to achieve a defined outcome. RICS (2012) supports this view, viewing AM as a corporate activity which focuses on business first and the property asset second.

Amadi-Echendu et al. (2010) believes that definitions of AM tend to be broad in scope, covering a wide variety of areas including general management, operations, production, financial and human capital aspects.  McAllister (2012) agrees that much of the published material about the operations of property asset management in the sector has become increasingly obsolete and that there is an opportunity for further theoretical description, analysis and evaluation of contemporary approaches to delivering and procuring property asset management.

Therefore in terms of the application of management principles in the context of community shopping centres in emerging economies, AM manages the interests of the primary stakeholders; the investors and shareholders, however does not account for the secondary and public stakeholders.  It does not take into account the context, the environment and the integration of the economic, environmental and social aspects of these centres in their current markets. It can therefore be argued that there exists a lack of information and critical foundation within AM pertaining to community shopping centres.

ii)         Property Management (PM)

Property management is defined by RICS (2012:16) as ‘the day-to-day activities which keep the facility operational and the management of services being efficiently delivered to ensure that the facility meets the requirements of customers’. RICS (2012) refers to two areas of management: providing management of the properties and delivering on a portfolio basis; and, the day-to-day management which involves the organisation of the churn, facilities management, risk management, procurement, security, and maintenance. Fisher and Lentz (1990) support this view that the responsibility of the property manager is to enhance the business value, through the successful management of the tenant mix, leases, building maintenance, operations and promotions. Goliath (2010) presents PM as an operating process, which includes; income management, expense management and budgeting. Musa and Pitt (2009) state that the expectation of the professional property managers is to optimise the return from the property resource, extend the productive life of the building and preserve and enhance the capital value of the centre. PM’s focus is on operational decision making, with the core objective of fulfilling the requirements of the organisation and maintaining the work environment for tenants. It is clear that there are no definitive boundaries in the roles and responsibilities of the PM function. In theory it overlaps with the functions discussed in AM.  However, property managers need to respond to the needs of the tenants and customer, whilst instituting the strategic objectives of the organisation or asset manager.

In developed countries, the practice of PM follows a traditional style (Baldwin, 1994) whereas in an emerging market, as the market expands and retail buildings develop, styles should evolve. This can therefore be challenging in newly developed markets and emerging economies (Hin Li, 1997).  Jack (1994:4) proposes that the development of an effective PM strategy requires the involvement of the FM at all stages, in partnership with the organisation. Alexander (1994) states that research studies at the University of Reading identified considerable room for improvement in the PM arena.

In reviewing the literature available in PM it is evident that there are no theoretical applications or theories applicable to shopping centres. The literature of AM and PM overlap in roles and responsibility and hence it is not clear as to the theoretical application required. This results in a lack of a critical foundation and a lack of information as to its application in emerging markets.

Based on theoretical information, PM is geared to the fulfilment of investors, owners and the tenants’ requirements. In theoretical practice, it does not take into consideration the macro-economic factors or the roles of the customers and community. There is a lack of theoretical knowledge pertaining to property management  and it is not clearly defined which stakeholders the practice of PM should fulfil. The practice of PM can be summarised as the all-encompassing management of the property.

iii)            Facilities Management (FM)

The term facilities is described as the buildings and services provided for occupants and customers (Jack,1994). The initial concept and practice of the management of these facilities (FM) emerged as the private sector required that costs related to the facility were reduced and the quality of the facility improved (Alexander,1994). The profession of FM grew and developed further with the growth of technology and the change it created in the functionality of the facility for its users. The role of FM became focused on re-structuring and re-assessing the building as a workplace. Becker (2007:108) distinguishes FM as the ‘fundamental concern with buildings-in-use’.  Becker (2007) further describes FM as being about the planning, design and management of buildings and their associated building systems, equipment and furniture to enable and enhance the organisations ability to meet its fundamental business objectives in a rapidly changing world and is thus a management rather than a technical function. Nutt (2000) describes the objectives of FM as providing better infrastructure and support to a business and its operational objectives, the effective management of facility resources and services in providing a functional property that supports the operations, business and individuals.

Chotipanich (2004:364) describes FM as a ‘key function in managing facility resources, support services and working environment to support the core business of the organisation in both long and short-term’. FM therefore developed as an integrating framework, involving the dialogue between strategic management and operational management, resulting in a proactive model (Then, 1999). Chotipanich (2004) describes the operational function as supporting the basic routine, whereas the strategic function looks at issues such as facility planning, improvements and developments. Then (1999) further describes that this proactive model establishes channels of communication that inform strategy based on the changing dynamics of the context and the external market and its likely implications on the operational asset. Then (1999:467) argues that the key role in FM is its ability to act as an informed interface, where overlapping concerns between strategic management and operational management exists, and provide ‘the optimum solution to apparent conflicting goals seen in isolating from either perspective’. This idea of seeing FM as an integrating mechanism for an organisation is  illustrated in Figure 2.

Figure 2. Justification for FM as an integrating mechanism         (Source: Then,1999)

Therefore FM theory is the basis for corporate real estate management, it has evolved as a mechanism for the integration and alignment of a companies strategic direction to the facilities operations. As discussed in the contextual framework, the core objective of a shopping centre is to provide a return on investment and profit to the investors and shareholders. Moreover, this requires the support of the non-core objectives, such as providing a well maintained and functional property. FM in the context of a shopping centre is viewed as a form of management whereby cost savings can be achieved on non-core areas that do not negatively affect the running of the centre (Pitt and Musa, 2007).  As illustrated in Figure 3, Then (1999:466) describes the two roles within FM, firstly, being concerned with ‘facilities provision’ and secondly, the concern of ‘facilities support services management’.  Facilities provision is described by Then (1999) as being concerned with providing an appropriate building required to achieve the core business objectives and hence strategic management, whereas the facilities service management involves the on-going management and servicing of the building in use or operational management. It illustrates FM as the interface between the core business and the non-core support services, therefore acting as an interface between overlapping concerns (Then, 1999).

Figure 3. Critical interfaces within FM  (Source: Then,1999)

The model depicted in Figure 3 and created by Then (1999) also illustrates three levels which take into consideration the differing functions and objects of the commercial property. Described by Then (1999:468) as the ‘estate level, corporate level and building level’ of an asset, a property, and a facility. The estate level concerns the strategic intent in terms of management of the portfolio, the corporate level concerns the building as a working asset to fulfill the strategic objectives for the organisation and the building level concerns meeting the user’s requirements on an on-going basis (Then, 1999).  The model further illustrates the dynamic capabilities of FM to allow for the review of the strategic relevance against the competitive realities of the environment within which it operates, while at the same time measuring operational management effectiveness and efficiency (Then, 1999). The model links the business function to the supporting management functions through FM.

Pitt and Musa (2007:203) argue that the shopping centre industry is evolving to a model that demands a more direct ‘added value and genuine strategic contribution’. They further argue that a property such as an office can be offered a total FM solution because it is considered an operational property rather than an investment property. However, as the nature of a shopping centre is considered according to its investment value, property and a facility for tenants and customers, therefore it should be optimised for the core benefit of the investor (Pitt and Musa,2007).

a) Second generation FM: People, Process, and Place

van Dommelen et al. (1990) argue that a focus on only the financial and technical aspects of a facility is narrow-minded and does not show any awareness or understanding of social, ethical and other aims and values intrinsic to a facility. Further developments and approaches to FM have therefore emerged in response to this and this became known as a second generation of FM. Rondeau et al. (1995:3) describe FM as being central to the management and coordination of ‘people, process, and place’. Alexander (1996) also refers to FM as encompassing the integration of people, technology and support services in order to achieve the objectives of a company. McGregor (2000) argues that this concept of FM is the consideration of the inter-relationship between the physical resource, the supporting infrastructure, and the users of the facility. Barrett (2000:423) proposed a framework model for FM that illustrates the relationship and divisions between the strategic FM and operational FM, which considers the total and local environments. This model is depicted in Figure 4.

Figure 4: The generic FM model (Source: Barrett, 2000:423)

Then (1999:469) describes FM’s dynamic role as meeting the ‘business challenges that confront the organisation it is supporting, as an enabler’. In addition, in the long term it’s role is in building upon ‘an aspiration to continuously add value by providing appropriate and innovative facilities solutions’ and responding to challenges through optimising the balance between people, physical assets and technology.

There have been several developments in FM and the scope and practice of FM has taken on a holistic and integrated approach to management, in its theory and practice.  Chotipanich (2004) expresses the key factors in FM, categorised into two groups: internal factors, which include organisational characteristics, facility features, and business sector; and external factors which include economic, social, environment, legislation and regulation, local culture and context. This second generation FM ecompasses FM integrated at three levels of management; strategic, operational and tactical. Operational FM is the concern of the day-to-day operations and maintenance of facilities or the management of the non-core support services such as cleaning, security and maintenance (Langston and Lauge-Kristensen, 2002). The tactical activites concern the on-the-ground monitoring and management of performance of the facility (Langston and Lauge-Kristensen, 2002). SFM is the management of the alignment of the facility with the corporate goals (Langston and Lauge-Kristensen, 2002). In terms of retail property this is an important consideration in the management of the facility and in achieving maximum performance of the asset. Unlike commercial real estate management considerations, retail has an extended stakeholder component of the customer, the community and the macro-economic factors that affect them. In addition, it needs to consider issues such as the context, demographic trends and the state of the economy or country. This means fulfilling the expectations and requirements of all stakeholders who affect and are affected by the shopping centre, rather than merely the operational and strategic objectives of organisations.

b) Third Generation FM: Community and environment

Alexander (2006:250) argues that ‘facilities management adds value, not only by increasing economic viability but also delivering social and environmental benefits’. Moreover, Alexander (2006) argues that although the existence of these benefits have been increasingly acknowledged across some stakeholder groups, such as investors, developers, occupiers, public authorities and everyday users, they must also be extended to the community and society. Therefore, third generation FM adds an additional consideration to the management of facilities, which is the social and community context in which these facilities operate. 

Nutt (2004) echoes the concept of the link between built environments, its public and business purpose, its human use, the value and performance.  Third generation FM therefore includes the locality, economics and the community. Nutt (2004) suggests that perhaps the dominance of the business imperative and shareholder value will be balanced in the future by the re-alignment of FM with the public interest. Alexander (2006:250) argues that FM should be ‘extended beyond the impact on individual organisations and buildings, to recognise the full contribution that facilities make to the local economy and community’.

This led to the development of community-based facilities management (CbFM). Alexander and Brown (2006:250) introduce and define the concept of CbFM, which provides ‘a socially inclusive approach to the management of facilities’ and the adoption of sustainable business practices. Wilson (2005) suggests CbFM as dealing with the long-term presence of built assets in a community.  Alexander and Brown (2006:250) describe FM as responding to ‘the need to understand the changing context for facilitates management practice and to recognise the growing importance given to the issues of sustainability, from all stakeholders perspectives’ and this is done through FM not only offering economic value but offering social and environmental benefits. Alexander and Brown (2006) argue that benefits are seen by major stakeholders but that they need to be as far reaching as the community and society.

Alexander and Brown (2006) further discuss the role of CbFM resulting in the development of social initiatives that would assist in fufillment of instituting sustainable social and environmental change in local communities through:

·         The identification and salience amongst stakeholders

·         The creation of an enabling environment

·         Achieving balance between social and environmental values; and,

·         Quality of life and fulfillment of the communities expectations.

In September 2009, the King III Code was released in South Africa, in order to enforce the principles of corporate governance (King, 2009). This ensured that organisations integrate good governance processes into their operational processes. This is applied through annual reporting on how the company has both positively and negatively affected the economic life of the community in which it operated during the year under review (King, 2009).  Integrated reporting is now required by all listed companies, listed on the Johannesburg Stock Exchange (JSE). This report is used to communicate with the stakeholders as to how the board has applied their mind to how the company has developed a strategy to fulfil stakeholders’ expectations and requirements into the years ahead, in a way that is sustainable and responsible. The investor, the pension fund and its trustees, have to draw inference that the business is sustainable in the long-term and how the company is behaving as a responsible corporate citizen (King,2009). 

King (2011) argues that these issues need to be ‘monetised’ by companies as they are critical to sustainability and society.  Alexander and Brown (2006: 251) refer to the concept of ‘place, work and folk’ in FM as being the crucial link to people, planet and profits in triple bottom line reporting and hence illustrates the salience of the FM function in listed companies.

With regards to the development of FM trends, FM is viewed as the integrator and CbFM focuses on the application of sustainability. FM professionals believe that FM will play an important role in Corporate Social Responsibility (CSR) and in the sustainability of property.  At the 2012 European Facility Management Conference, the Chairman of EuroFM stated that FM professionals were experts in the influence of the built environment over people and defined FM as ‘a way of integrating people, planet and profit with technology as a linchpin. The days are over where facility management was associated only with a caretaker’s job. The facility manager is not a building engineer anymore’ (EFMC, 2012).  Therefore FM is seen as a tool of sustainable business practice, where being financially and socially responsible means achieving healthy profits while considering the impact of people and the environment (EFMC, 2012).

Pitt and Musa (2007) argue that there is no universal approach to managing facilities, as all organisations have differing needs. However, understanding these needs is the key to effective FM which is measured in terms of providing best value. Therefore it is crucial for a company to understand its stakeholders and the stakeholder requirements and expectations and in turn the obligations required of FM practise. FM has developed from the first generation of theory which focused merely on the building and ensuring the quality of facilitites for users, to an integrated view on the buildings effect and requirements for all stakeholders and extend into the community and environment.

Therefore the review of literature pertaining to FM provides information that could inform efficient and effective management strategies applicable to community shopping centres. The literature on FM provides a critical foundation for the inclusion of the community and the environment, which could assist in its effective application to the emerging market context, as well as compliance with the King III Code.

2.3.3      Management requirements for emerging market retail in South Africa

The stakeholder management approach has been a powerful empirical device that has been used to broaden managements vision of its roles and responsibilities beyond the profit maximisation function, through understanding the context and its stakeholders (Mitchell et al., 1997). On consideration of the theory of property management practices, the practices of AM and PM have not developed or evolved to include an integrated approach to stakeholder management. AM theory involves the management of the financial performance of the fund and hence aims to fulfil the requirements of the investors.  FM theory is the most comprehensive in terms of stakeholder fulfilment and the theory pertains to the integrated management of stakeholders and of the strategic, operational and tactical considerations. As Freemand and McVea (2011) argue, traditional management approaches favour key stakeholders and this is only appropriate in a stable environment.It is necessary to ensure that management deals with these stakeholders needs and the dynamics of the emerging market environment. This approach should then be effectively structured in the management application to take cognisance of all stakeholders.

In conclusion, it can be said that there is a lack of theoretical literature pertaining to AM, PM and FM and the application to shopping centre management. There is also a lack of theoretical development in AM and PM. However, in the last decade there have been several developments in the theory and application of FM practice more specifically SFM and CbFM, which provide coherent frameworks for the management of several stakeholders and the conflicting function of community shopping centres in emerging markets.

2.4 Concluding thoughts

This chapter has developed the contextual and theoretical framework for this research as a basis for examining the research problem and the research question both conceptually and via theoretical analysis.  The current literature pertaining to AM and PM provides insufficient theoretical information and effective application to create an integrated management structure and strategy fundamental to efficient and effective management. This lack of information applicable to community shopping centres in emerging markets results in inadequate knowledge to be able to inform the application of the correct management model for community retail. The theory and literature which does exist and will assist in applying management principles to the dynamic and context of a shopping centre is the integrating function of FM.

The contextual and theoretical framework documented in this chapter provides the foundation for the development of the philosophical and methodological framework for the research on stakeholders, management application, and the nature and dynamic of shopping centres in the emerging markets of South Africa. In terms of the research journey undertaken, it is necessary at this point to question the research philosophy, strategy, design, methodology and techniques most appropriate to the defined research problem context. The following chapter discusses and defends the philosophical and methodological framework employed in this research.

FOR A FULL COPY OF MY THESIS, FINDINGS, PERMISSION AND FURTHER INFORMATION PLEASE CONTACT ME AT tbcopson@gmail.com.

[1] The LSM index is an internationally recognised instrument designed to profile a market in terms of a continuum of progressively more developed and sophisticated market segments. The LSM system is based on a set of marketing differentiators, which group consumers according to their standard of living, using criteria such as degree of urbanisation and ownership of assets (mainly luxury goods). Essentially, the LSM system is a wealth measure based on standard of living, rather than income alone. The market segmentation continuum is divided into ten LSM segments, where LSM 1 signifies the lowest living standard and LSM 10+ signifies the highest living standard (SAARF, 2000)