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South african breweries achieving growth in the global beer market

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Get Access South African Breweries Essay Sample South African Breweries SAB is an international company committed to achieving sustained commercial success, principally in beer and other beverages, but with strategic investments in hotels and gaming. The company was founded in 1895 in response to the demand by gold miners in the Johannesburg region.

No wonder why the new beer was well received! Cross-holding was a form of capitalization for SAB because the local capital markets were drying up due to the international boycott of the country.

  • Because in the beer market as a whole a race for consolidation had begun, another advantage of the merger would be an increase in the global market share;
  • We will distribute our beer products within a week of production in all of our facilities in Eastern Europe;
  • Cross-holding was a form of capitalization for SAB because the local capital markets were drying up due to the international boycott of the country;
  • Leadership style 1 Ensuring that the rewards for successful champions are large and visible and that people who champion an unsuccessful idea are not punished or sidelined but rather encourages them to try again;
  • A culture that focuses on employee development is creating a win-win for the organization;
  • Leadership style 3 Taking special pains to foster, nourish, and support people who are eager for a chance to try turning their ideas into better ways of operating.

The fall in consumption is attributed to a number of factors, including the bad South African economy. To what extent is a global strategy or a multinational strategy effective in the brewing industry? There are two basic alternative strategic orientations in every industry -a multinational strategy and a global strategy.

The strategies a beer company uses to compete in foreign markets have to be situation-driven -cultural, demographic, and market conditions vary significantly among the countries of the world. The following chart has been designed to portray the pros and cons for a beer company in deciding for a multinational or a global strategy: There are four key factors that drive an industry toward globalization: In the case of the beer industry the market needs are not homogeneous as there is a wide variation of taste and prices, there hardly is a global customer, the international product life cycle is not a major factor, and on top of all that, the distribution channels are very much local, and vary on a country-to-country basis.

In the case of the beer industry the economies of scale in manufacturing and distribution are regional or national, not global. The learning curve is not a factor, and although country costs differ, it is not a traded product. The development costs are low, and sourcing efficiencies are unlikely at global level. Logistics not favorable for global strategy.

In the case of the beer industry the transport costs only affect super-premium imports.

Product details

Communications may create some brand awareness spillover but otherwise it is not a factor. Government policies make new foreign entry and investment easier. Technology change is pushing up minimum economic size in manufacturing, but still below national levels.

In the case of the beer industry the competitive factors are: The bottom line is that in the beer industry it is not ideal to follow a global strategy cross-border standardization, rationalization, integration.

But it should be driven toward global companies.

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  2. One was employee aptitude. We will partner with restaurants to create exclusive Carlsberg signature dishes as well as be the exclusive imported brands in restaurants.
  3. Recommendation The most important aspect for SAB is to get access to equity and debt for growth, due to currency instability in South Africa. They are optimizing the creation of wealth to provide security but providing fair rewards and recognition for the contributors of all stakeholders.

Companies cannot be either purely global or not global. What resources and competencies can SAB use to improve local breweries that it acquires? Its core competencies are brand building and people management. It offers high quality products, stays close to its customers, and especially has the necessary competencies to operate successful in emerging markets.

All these competencies can be used to improve the acquired local breweries.

Case Study of South African Breweries.

The company can add value to the distribution strategies of local operations by introducing cost control and relationship marketing, since it knows how to build lean enough distribution channels. But even more important are its intangible assets.

The company has a high goodwill and the necessary management skills to improve the internal structure of the acquired companies. Consumers prefer local brands, and due to difficulty of storing and transporting the product, most beer is bought, sold, and drunk locally. Therefore SAB can add additional value to the acquired companies by using its brand building expertise and its approach in giving each emerging market consumer its own local, emotional, passionate brand.

  • By doing so the company can lower the risk of being taken over by a competitor;
  • Its core competencies are brand building and people management.

Furthermore, the acquisition of local breweries, in contrast to new market entries, includes the advantage of lower investment costs and avoids bureaucratic hurdles. In this particular case, physical scale alone is no longer a competitive advantage.

SAB could bring its experience from emerging markets in a merger. As a countermove, the company aims for a partner with a stable currency cash flow to improve its access to equity and debt for growth. Because in the beer market as a whole a race for consolidation had begun, another advantage of the merger would be an increase in the global market share.

On the other hand, a merger could also result in several disadvantages: The partners first have to build mutual trust and have to cope with cultural differences. The process of the merger can lead to slow decision-making and high coordination costs, and it is likely that the focus is put on this process instead of the operations.

South African Breweries - Achieving Growth in the Global Beer Market

And the main challenge is to find the right partner. For a successful merger it is important to choose a partner that shares the same values and vision. Ideally, both sides benefit from the merger. An American company would be very interesting due to the strong currency and the huge market volume. Anheuser-Busch, which is the largest brewer in the world, probably has no interest in a merger, whereas Miller number 3 has almost the same market volume as SAB number 4. This could be an additional advantage for a merger because the two partners are in a way equally powerful.

A potential partner is Scottish Newcastle, which is looking for partners as well because the company has to expand abroad due to the strong regulations in the UK. But based on this, it is questionable if it is strong enough to be an interesting partner for SAB.

Therefore, the company is not an interesting partner for SAB.

South African Breweries Essay Sample

Interbrew, the number six producer in the world, could be an interesting partner when it comes to market volume because both partners could reach their goal of improving the position in the ranking of the Top 10 Global Breweries. However, because income is directly related to beer consumption, rich markets are considered to have reached their capacity and therefore they are no longer attractive in terms of growth potential. Then, emerging markets are a good option when targeting minor beer producers.

Some emerging economies like Mexico, China, and countries in Southeast Asia are growing in a rather fast manner, hence increasing the income of its inhabitants. However, when targeting takeovers in emerging economies, other problems may arise. Although the growth potential is big, the supply of materials, like cans or bottles, could be a problem, since it is not likely to be multiple suppliers in the region. The success of the brewery is highly dependent on continued economic growth, factors that are exogenous to the company.

Consolidation of a small brewery is also dependent on infrastructure improvements, such as roads, electronic communication technology, vehicles, etc.

SAB has been in operation for more than a hundred years, and the company knows its business to the core. SAB has a proven success trajectory in the beer industry, and it has evolved through good and bad times. Because South Africa is an emerging market, and SAB has managed south african breweries achieving growth in the global beer market grow organically despite of world blockade during Apartheid, the amount of experience and knowledge developed through the years is an advantage to SAB.

SAB can open subsidiaries in other emerging markets with increased potential for beer consumption growth. In doing so, SAB may avoid the instability factors that arise from acquisitions and mergers.

  1. By comparison a company like Anheuser-Busch had a conservative approach to risk and international expansion. It would use this experience to adapt more easily than its competitors to conditions in developing countries.
  2. Therefore, the company is not an interesting partner for SAB. To what extent is a global strategy or a multinational strategy effective in the brewing industry?
  3. Implementation Problems An unanticipated burst in the European beer market could overload our production capabilities.
  4. The teaching objectives are.

By growing organically SAB is able to focus further in its home market, balancing internationalization and South African interests.

However, the disadvantages of organic growth need to be considered. As we mentioned before, pride in the local beer is important in most countries, and therefore producing beer abroad for consumption in the market where it is produced is a risky business. Organic growth in a third world country has the additional disadvantage of low access to capital. Recommendation The most important aspect for SAB is to get access to equity and debt for growth, due to currency instability in South Africa.

By doing so the company can lower the risk of being taken over by a competitor. More essays like this: