Group 2 Consulting Anton Fahme Kirill Kareem Sharon

Traces origins to 1366 brewery in Brussels Bought out by master brewer in 1717 Expansion in 1954 brought Leffe and Dommelsch in 1968 1987 Merger with another Belgian brewery to form Interbrew

Momentum in local market propelled Interbrew for international acquisitions Hungary, Croatia, Romania, Bulgaria and Canada in early 1990s Late 1990s Ukraine, Dominican republic, China, Montenegro, Russia and Korea

 Momentum in local market propelled Interbrew for international acquisitions Hungary, Croatia, Romania, Bulgaria and Canada in early 1990s Late 1990s Ukraine, Dominican republic, China, Montenegro, Russia and Korea

80 Countries Top 10 markets account for 86% of sales 61% of Volume production came from Americas
Worlds beer market in 1998
Americas Europe Asia Pacific 5% 0% 27% 33% 35% Africa Middle East

Interbrews vision is to be within top 3 beer producers in each of the key markets Deliver high quality beers.

Domestic markets are experiencing contraction and declining sales Health consciousness trend Marketing functions of Interbrew are not attuned for global beer brand Uncertainty with developing markets in China and Russia

 4th Company globally Lessen dependence on Belgian and Canadian markets Strengthen controlled brands positions Local for local, decentralized administration

Traditional and sophisticated beer Flexibility of decentralization Fierce customer loyalty Intended strategy Global brand unified campaign Emergent strategy Global brand through adaptable regional initial branding

External environment
How do politics affect us
Alcohol tax, consumption restrictions Opening of Eastern European markets in early 2000s Potential trade sanctions and tariffs

Economic trends
Eastern European and Asian financial crisis of early 2000s Rise of emerging economies

External environment
Social factors
Emergence of wine culture, especially in Australia and NZ Trend towards healthy life style: lite line of products Trend towards specialty products, microbrew

Innovations
Emergence of internet

External considerations
Opportunities that the environment presents
Opening of Asian and eastern European markets Reduction of trade barriers Converging markets

Threats faced by the firms in the industry

Growth of substitutes Declining sales in mature markets Strong competition

Where do we excel?
Companys performance is partially attributed to its:
Strategic operations- cross fertilization Strategic sourcing Motivated employees Successful capacity utilization Diverse product line from premium to light beers

Are there other pressures?

Suppliers power medium
Interbrew works with a limited number of high quality suppliers, increased power Offer raw materials that could be easily substituted, reduces power

Buyers power- moderate to high

Costs nothing to switch A lot of close substitutes

Threat of substitutes medium

Wine, cocktails, pilsner, lager

Threat of new entrants high ratio of fixed vs. variable costs

Rivalry- intense, Anheuser-Busch, Heineken, Carlsberg, little differentiation, high exit cost

Overall industry attractiveness

Fragmented, top four players account for 22% of global volume Attractive in growth markets as well as mature markets
83 lpc in N. America, 79 in W.E., 29 in E.E. Growth of speciality and light beer segments

Value Chain Analysis Primary

Inbound Logistics
Partnerships with suppliers

Outbound Logistics
Economies of scale in distribution

Handled differently according to region, little standardization

Value Chain Analysis Primary

Operations, Interbrew strong point
Shifting production to more efficient facilities Cross fertilization of best practices Capacity utilization

Marketing and Sales

Product quality and positioning Specialty Belgian cafes

Value Chain Analysis Secondary

General Administration
Benefits from economies of scale

Human Resource management

Employee suggestions Motivated owner-operators

Procurement
Great relationships with limited suppliers across the board

Firms Resources & Sustainable advantage

Tangible Resources
Wide range of locations Lean operations from efficient sites

Key strengths come from intangible resources and organizational capabilities

Intangible Resources
Wide Portfolio
Very different from its competitors Key acquisitions Presence in both developing and emerging markets Best practices from different sites can be applied across the board Allows flexibility despite portfolio size Handles different tastes Can shift and adjust product mix

Decentralized approach

Access to a vast supply network

Organizational Capabilities
Makes strategic acquisitions Ability to leverage knowledge Focus on growth markets with long term volume growth potential Cost savings gained by purchasing and then rationalizing operations

Industry life cycle by region

Industry by product category

holder

Intellectual Capital
Human Capital
Spread globally Cultural, local and economy knowledge and expertise

Structural Capital
Breweries around the world Brand equity

Relational Capital

Connected to customers around the world Beer Cafe

Corporate Strategy
OPERATIONS

BRANDS

MARKETS

INTERBREW TRIANGLE

Strategy Objective
Underlying Objectives
Consolidate the company position in mature markets Improve margins through higher volumes of premium and specialty brands

Rationalize
Worlds major markets would each end with just 2 or 3 major players

Fundamental Objective
Increase shareholder value

Operational Strategy
Cross fertilization Sharing of best practices between sites Employee propositions Improvement linked to employee motivation not technical performance Capacity Utilization Close overproducing facilities and open underproducing Strategic Sourcing Selecting small number of suppliers

Brand Strategy
Acquisition of existing brewers, in growth mature markets Identify brands, typically specialty products and them a regional basis across a group of markets

Market Strategy
Increase global volume of beer production and reduce their dependence on Belgium and Canada Establish and manage strong market platforms Decentralization corporate structure Mature markets greater efficiencies in production, distribution and marketing Growth markets build significant positions & concentrate on long-term volume growth potential

Economies of scope
Core Competencies
MERGERS AND ACQUISITIONS

Sharing Activities Market Power

Decentralized Management Structure

4TH Largest beer company in the world Houses beers from 80 countries

Vertical Integration
Strategic sourcing

Portfolio Management on Regional Level

Portfolio Management on Regional Level

Brewery : Manchester, England Founded: 1853

Portfolio Management on Regional Level

Portfolio Management on Regional Level

Brewery : Namur, Belgium Founded: 1152

Portfolio Management on Regional Level

Portfolio Management on Regional Level

Brewery : Prague, Czech Republic Founded: 1869

Portfolio Management on Regional Level

Portfolio Management on Regional Level

Brewery : Hoegaarden, Belgium Founded: 1445

BCG MATRIX
STAR Relative Growth Rate QUESTION MARK
South Central & Eastern Europe America Asia

CASH COW Relative Market Share

DOGS

Motivation for Global Expansion

Increase size of potential markets Reduce costs of R&D and operation Extend life of a product Optimize physical location for every activities in firms value chain
Risks: Political & Economic Currency Fluctuation Management Issues

Motivations for Global Expansion

Motivations for Global Expansion

Entry Modes of Global Expansion

Means to Achieve Diversification Global Approach

Mergers & Acquisition
-Speed -Valuable resources -Consolidation and Scale -Leverage Potential Limitations: Expensive Managers ego and creditability Cultural issues

Joint Venture
Enter new markets Reduce costs in the value chain Develop and diffuse new technologies Potential Limitations: Partner issues Control issues

Factors Affecting a Nation's Competitiveness

Is the nations business governing favorable and what are the nature of domestic rivalry?

Does the nation have favorable Factors of Production that supports the beer industry? Presence/Absence of Suppliers & related industry such as wineries, and Distilleries that are globally competitive?

Is there Demand for beer?

Alternatives
Continue with Stella Artois
Inadequate marketing experience Old fashioned image Alcohol level inconsistence in different markets

Shift emphasis on Labatt

Little exposure outside North America 25% Decline in sales after Labatt Ice peaked

Alternatives
No global brand, differentiation of local beers
Leverage core competencies and structure Consistent with acquisition strategy Cross cultural sharing and regional brand development Embrace Belgian Beer cafes franchise

Alternatives
Promote Interbrew as a global brand
Similar to no global brand, could be used as a tool to achieve it

Emphasize and develop light beer as a category

Now we open the floor for questions

Today
Interbrew no longer exists after 2 major mergers with AmBev and later with Anheuser Busch forming the biggest beer company in the world Anheuser-Busch InBev