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Anheuser Busch. Case Analysis. Sajjad Ali Shaikh 5458 Khalid Yousuf 3724 Baqi bullah 3614 Farhan Aslam 6036 Arsalan Liaqat 4714.
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Case Analysis Sajjad Ali Shaikh 5458 Khalid Yousuf 3724 Baqi bullah 3614 Farhan Aslam 6036 Arsalan Liaqat 4714
Executive summary • Anheuser Busch is one of the leading brands of beers. company was established in 1864 in St. Louis, Missouri, United States, Anheuser Busch has grown to be one of the world’s largest beer companies, Operating 12 breweries within and 15 breweries outside of the United States, It is best known for the world’s top two selling beers, Bud Light and Budweiser current market share of the company globally is 10.8.
Chinese Beer market is an increasing market with a huge potential. Ranked 1st for volume per year but 11th rank for litres per person. Low average price for beer. Huge foreign interest on this market but foreign investment usually failed. In 2004 company acquire Harbin brewery in china. Foreign companies tend to face problem as provincial regulation are there to protect local companies and furthermore to keep the tax revenues within province. Regulatory roadblocks were designed to keep tax revenues at home. Many recognized global brands were unable to make there mark because they didn’t understand the customer taste and preference
Vision: • Through all of our products, services and relationships, we will add to life’s enjoyment.
Mission: • Be the world’s beer company (Products and services; Self-concept) • Enrich and entertain a global audience (Customers; Markets) • Deliver superior returns to our shareholders (Concern for survival, growth and profitability)
Value: We believe in… • Quality in everything we do. (Self-concept) • Exceeding customer expectations. • Trust, respect and integrity in all our relationships. (Philosophy) • Continuous improvement, innovation and embracing change. (Philosophy) • Teamwork and open, honest communication • Each employee’s responsibility for contributing to the company’s success • Creating a safe, productive and rewarding work environment. (Concern for employees) • Building a high-performing, diverse workforce. • Promoting the responsible consumption of our products. • Preserving and protecting the environment and supporting communities where we do business. (Concern for public image)
Strategic objectives: • Expansion production into China through acquisition of Chinese major beer companies • reposition its brand by catering to elite and create perception of being a premium brand • increase ownership by 27% by year 2009 • expand there operation up to there central province in order to expand there market share • In order to sustain growth and stability it needs to acquire smaller brands which would enable it to enhance its brand portfolio and expand its business under the umbrella of company name
Industry Analysis • The China beer industry is the world’s largest by volume. Total domestic volume in 2005 was 307 million hectoliters, up 10.2% vs. 2004. Excellent growth has continued in 2006 with officially reported domestic volume increasing 13% through September vs. the same period, prior year. • China’s per capita beer consumption in 2005 was 23.4 liters, which was slightly lower than the estimated global average of 24.8 liters. However, China’s per capita consumption already surpasses that of Hong Kong (21.5) and Taiwan (21.1). China beer industry volume growth will slow.
Industry • The chart below shows China’s Top 10 brewers by output in the first half of 2006 and it specifies the foreign ownership of each Top 10 brewer, if any:
Foreign companies tend to face problem as provincial regulation are there to protect local companies and furthermore to keep the tax revenues within province. Regulatory roadblocks were designed to keep tax revenues at home. Many recognized global brands were unable to make there mark because they didn’t understand the customer taste and preference which is clearly visible as they hold 0.5 percent of Chinese market.
PEST ANALYSIS • Political and legal • Decentralized power structure • Unstated hierarchy of power • High tax on transportation • Big power of the local and provincial authorities • Logistics laws • Economical • Important growth of China economy • Huge and fragmented market • Increase of urbanization rate
Social • Low income and standard of living • Technological • Poor level of infrastructure • Environmental • Development of urban areas • Reduce emissions of carbon dioxide • Recyclage of bottles • Obligation to share technology and knowledge for foreign firms
STRATEGIC GROUPS High CRSB Tsingtao Yanjinj In-Bev Led Market Share Harbin Chongpi Other Local Brew Low Few Product Range Many
: STRATEGIC GROUPS
Porter’s Five Forces • Threats of new entrants: • High barriers to entry: • Fragmented market • Distribution networks • Government Regulations • Economies of scale in marketing, production and distribution.
Rivalry (price competition has been decreasing): • Increasing competition from imported beers (however, national brewers own part of these breweries). • 2,200 wholesalers and 560,000 retail establishments. • Creative and enticing advertising by majors. • Growing popularity of micro-breweries and other craft-beers. • Alternative: expansion to super-premium beers and other segments with lower demand elasticity.
Substitutes: • Growth in: • Premixed drinks • Alternative malt beverage • Alternative non-alcoholic drinks (from juices to mineral water) • However, beer remains the largest drink sector.
Buyer’s Bargaining Power: • It changes from segment to segment, but in general: • Low switching costs • Brand loyalty • Increasing health conscience • However, for craft-beers, which are perceived as having higher quality, these characteristics may not always hold.
Suppliers’ Bargaining Power: • Most supplies come from competitive industries which are more fragmented than the beer industry. • Farmers • Labor (the case of unionized labor) • The more consolidated supplier is that one supplying bottles/cans.
Key Success Factors • Low cost structure (Scale of economies and learning) • Effective marketing & advertising strategy to expanded market share • Successful brand loyalty and recognition • Product innovation and production efficiency (packaging and automation) • International expansion to countries with increasing consumption trends • Strategic price increases and premium pricing
Driving Forces • Marketing innovation - thanks to a rather uniform character of the product, breweries are trying to find other possibilities of differentiation, which is based mainly on building the brand assisted by advertising. • Long-term industry growth rate –In the decade between 1988 and 1998 the 10 largest brewers hardly arose from 35.8% to 37.6%. Over the last five years this development has accelerated strongly, the 10 largest increased by nearly 20% and have now 57% of the global market. • Cost efficiency –The price of the beer does not grow respectively with the price of supplies, breweries are forced to develop more effective ways of operation.
FS Average is 30/7 = 4.29 • IS Average is 32/7 = 4.57 • ES Average is -26/ 7 =-3.71 • CA Average is -17/ 7 =-2.43 • Directional Vector Coordinates: • x-axis: CA Average + IS Average • =-2. 43 + 4.47 = 2.04 • y-axis: FS Average + ES Average • =4.29-3.71= 0.58
FS Aggressive Conservative (2.04, 0.58) IS CA -3 -2 -1 1 2 3 Competitive Defensive ES SPACE Matrix
ISSUES FACED • Fragmented Market • Price wars • Regulations • Distribution problem
Alternative Strategies • Build beer factories in major Chinese markets • Increase market share • Develop partnership with local manufacturers • Acquire small local beer manufactures to expand business and manage distribution
