P. 1
SAB Miller

SAB Miller

|Views: 4,626|Likes:
Published by siamemol

More info:

Published by: siamemol on Dec 12, 2010
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOCX, PDF, TXT or read online from Scribd
See more
See less

05/12/2014

pdf

text

original

SABMiller case study 2009.

SIAMAK MOULAEIFAR 20207133

1

(The SAB Miller. 2008) 2 ¡   US$ 25. an organisation¶s strategic capability (resource and competent) and the expectations and influence of stakeholders. The strategic position of SABMiller in 2009 Understanding the strategic position is concerned with identifying the impact on strategy of the external environment. The group¶s brands include premium international beers such as Miller Genuine Draft. (Johnson & schools & Whittington.129 million EBITA Source: www.000 employees 210 million hectolitres of l ger sol .com The purpose of this report is to discuss the strategic position of SABMiller in 2009 (SWOT analysis). 2009) Exhibit below provides a summary scope of SABMiller operation today.Introduction: SABMiller (SAB) plc is the second largest brewers in the world with brewing interests or distribution agreements in over 75 countries across six continents.sabmiller. (Below figures refer to year ended 31 March 2009) 200 + br n s owne US$ 4. the SABMiller acquisition strategy in particular the acquisition of Miller in 2002 along with issues rose in acquisition. Peroni Nastro Azzurro and Pilsner Urquell.302 million group revenue ¡   ¢ Almost 70. as well as an exceptional range of market leading local brands also SABMiller is one of the world¶s largest bottlers of Coca-Cola products. It will also set out to recommend a strategic development plan for future.

3 . an evaluation will be made in terms of industrial and competitive context. to formulate an analysis of the external environment in which SABMiller is operating. several acquisitions in last few years have given them a wide geographical spread which allows them to capture new growth in developing markets and v alue growth as consumers around the world trade up from economy to mainstream and premium brands. Exhibits below summarise SABMiller Group growth performance today. External analy i In order. the competitive context and the macro environment factors of the company can be evaluated by using the PESTEL analysis. Although the factors which are most identified from the case are political. economical and social factors. Both. To analysis better understanding of the current position of SABMiller examination will be done regarding the external and internal environment of the company. whilst investing for growth in its international beer business.The st tegi position that SABMiller has chosen to follow is to continue to p rotect and further develop its operations.

(See appendix A) Economicall . Internal Anal sis (SWOT) To further investigate the strategic position of SAB. Furthermore.Politicall . Globalization: companies operating in such an industry usually tend to establish strong presence worldwide. 4 . in most emerging markets. It can be seen that there are two major trends in the brewing industry: 1. local communities and the workforce. (See appendix B) Social conditions have also played a major role in the development of SABMiller¶s products across these markets. and efficient distribution. Stacey (2000) maintains that the environmental opportunities are only potential opportunities unless the firm can employ resources to take advantage of them. ( SABMiller operates in 75 countries across six continents) 2. the competitive context of the macro environment should also be examined. Therefore it is crucial to evaluate environmental opportunities in relation to the organisations strengths and weaknesses in terms of resources. partners. culture and the environment in which it operates. a better look into its internal environment can be explored by using SWOT analysis. Mergers and acquisitions: mergers and acquisitions are of the most important tools which organizations use in order to achieve globalization. consumption of beer is directly related to the level of disposable income at consumer level. SABMiller¶s strategy demands a great political sensitivity in dealing with governments. The SABMiller competitive position could be considered in near monopoly that has been achieved due to competitive advantages SABMiller has. considering several acquisitions made by SABMiller. low prices. these competitive advantages mainly are: economies of scale. (See appendix C) Moreover.

It is well place to take advantage of growth in some growing market such as India. It does have import region but these are limited in size. such as Iran. In a period of consumers watching their spending this segment could be facing tough times in the future. Good worldwide organisation with history and knowledge of entering foreign markets successfully with a brewing presence in 75 countries. Carling. Ageing population means less beer drinkers. (2) Cost leadership. Big brands are set to become bigger. Foster s and Budweiser. (3) Economies of scale and (4) Efficient distribution . Stronger in US: in the key US market the combination of Molson Coors s and SABMiller s operation gives them a stronger second place against a dominant rival. Stella Artois. Mexico. United Arab Emiratis and Saudi Arabia . people who are on a budget tend to look out for the best deals and aren t specifically brand loyal whilst others tend to stick to one brand and as SAB beer is not well known in parts of Europe and the UK there is a problem of brand recognition. Trading down: SABMiller has managed to capture a higher percentage of the premium lager growth from its rivals. This leaves it under represented in this key value region. This does put SABMiller in a good position to look for growth while assets are a lot cheaper than a year ago. Thailand and several countries in Asia Pacific. Other brewers looking internally to pay debt: In recent years SABMiller has not made a major acquisition unlike most of its competitors. which is a major market for SABMiller. STRENGTHS y Good global coverage: SABMiller has operations spread throughout the globe. y OPPORTUNITIES y Weakening economic climate: SABMiller compared to some of the other major brewers is well placed to make acquisitions of any divestments by other brewers. WEAKNESSES y Lack of assets in Western Europe: SABMiller has only limited operations in Western Europe which produce beer. The consumption of beer is directly related to disposable income so the purchasing of beer still remains highly fragmented. The Middle East is marked out as a key area for non-alcoholic beer. or to make investments in brewers that may be struggling in the current economic climate. and could result in a stronger competitor in the US. THREATS y The acquisition of Anheuser-Busch by InBev will introduces several of the cost improvements that InBev has developed over the years. notably Brazil. No assets in key growth markets: In some key markets SABMiller still lack a presence. Price competition from substitute supermarket brands and promotional discounts y y y y y y 5 . Vietnams and markets in Africa. Market dominance: SABMiller is the second largest brewer in the world by volume. china. y y y y y Competitive advantages: SAB has a competitive advantage which is the ability to sustain and improve in 4 areas: (1) Value adding capability.Table below summarise SWOT analysis for SABMiller considering the external environment in brewing industry and strategic capability of the company.

Chart below provide summary of major changes. this acquisition also help SAB to increase economics of scale.The acquisition of Miller in 2002 Acquisitions are often made as part of a company¶s growths strategy whereby it is more beneficial to take over an existing company¶s operations and niche compared to expanding on its own. SAB reach new markets and grows revenues and earnings. Year 2002 2004 Beer volume (m HL) 70 138 Global brewers ranking 4 3 Market capitalisation ($ bn) 6. this allowed SAB to establish SABMiller as strong no.257 2.747 6. which gave SAB company access to a larger market by allowing them to operate with greater geographical reach (US market) as well as shearing back office system. this is almost certainly the rationale for SAB¶s to acquire Miller. The Table below shows. SAB believed that synergy could be created in number of ways such as. Financial summary Turnover Sales volume (hls 000s) y y y 2003 514 US$m 2002 186 US$m Lager CSDs Other Beverage 1.com The rationale and motivation One plus one makes three: this equation known as synergy in business strategy. SAB acquired Miller Company in July 2002.4 16. 1. Gain a significant market share and improve its quality by acquiring Miller. Shearing a brand name and Miller potential. 2. Improved market reach and industry visibility.499 624 2. According to Johnson & schools (2008) an acquisition is where an organisation takes ownership of another organisation.3 Source: http://www.2 in brewing industry. with the acquisition of Miller Brewing Company the size and geographic reach of SABMiller plc changed dramatically from that of the former SAB plc.231 824 Source: SABMiller annual report 2003 3. 6 . Acquisition of Miller also expands marketing and distribution of SAB and giving them new sales opportunities.sabmiller. the financial summary before and after acquisition of Miller in Central America.

which without doubt satisfies stakeholders¶ expectations. strong cash flow. Additionally. an improved credit profile with a significantly lower cost of capital and the ability to continue to participate in ongoing consolidation of the global beer market. 5. the other motives behind the acquisition of Miller was to createa lot of benefits to SAB such as. furthermore the benefit of having Phillip Morris as a supportive long -term shareholder. Speed of entry: by acquiring Miller in 2002 SAB made quick successful entering to US market (USA ± World¶s largest profit pool . By doing so.lued) ssets in developin / e erging m rkets ¤ § ¦ £¥ ¤ £ © Building local market scale and leadership around a portfolio of (local) mainstream brands ¨ § 7 . By acquisition of Miller SAB has achieved to establish an excellent global business network.4. the company increases its turnover and its profits. SAB strategy behind acquisition of miller brewing company: ecuring route-to market control Driving operational and cost leadership Enhancing industry conduct and pricing  Acqui in (und .

trying to adapt an organic SAB culture to previous Miller culture would be difficult challenge for Norman Adami the head of Miller. The case study revealed. focuses on preparing the company for the assumption of the new firm rather than on current operations. case study reveals miller¶s culture is routinely rated all staff at the highest level whereas SAB¶s culture is making clear that employee who consistently scored unsatisfactorily would be dismissed. previously head of its Beer South Africa. finance and culture problems. Therefore. First issue involves the high turnover levels of the Miller¶s management after the transaction took place. SABMiller appointed Norman Adami. its share price of the company had dropped from 530 pence on the day of acquisition of Miller to 456. to increase the probability of a successful acquisition.Issues rose in acquisition There are the two most common problems when acquiring another company. the shear price of acquire inevitably drops on the announcement of acquisition but in a properly valued acquisition. acquisition will contribute more value to business. Recommend a strategic development SWOT Analysis (also known as TOWS analysis) is a powerful technique for structuring high-quality strategic development. that does not have to be true. SWOT summarises the key issues from the business 8 . in the beginning of the new management¶s attention. 1. 2. the acquiring organization must overpay for the target company in order for the transaction to happen. synergy value is not as much as the premium price as a result.5 pence. the acquiring firm purchases the acquired firm (Target Company) for a market price plus a premium which means. that in the first full year of SABMiller operating Miller.6bn) to acquire Miller but. Therefore. This statement establish that SAB paid premium price (US$3. Finance Typical acquisitions. However. Furthermore. Culture Along with the financial problem acquisitions can have negative impacts on the firm's management and overall culture. According to Folklore. both SAB and Miller need to have similar cultures. as head of Miller. SABMiller must be work more efficient until.

In these primarily Muslim countries. This does put SABMiller in a good position to look for growth while assets are a lot cheaper than a year ago. and generate rapid growth in markets such as Iran. Opport y itie A q i ition/mer er of ZamZam cola in IRAN ( % Justi i ati n behind the acquisiti n of ZamZAm cola concerning SFA: y According to Euromonitor International report on non-alcohol beer (2009) The Middle East is marked out as a key area for non -alcoholic beer.environment and the strategic capability of an organisation that are most likely to impact on strategy development. (2) Cost leadership. (Johnson & schools & Whittington 2008.   y     # !  9 . p119) Chart below illustrate strategic development for SABMiller:   Opportunity and strengths Stre t y Good worldwide organisation with history and knowledge of entering foreign markets successfully with a brewing presence in 75 countries Competitive advantages S B has a competitive advantage which is the ability to sustain and improve in 4 areas (1 Value adding capability. ) ) " y Weakening economic climate SABMiller compared to some of the other major brewers is well placed to make ac uisitions of any divestments by other brewers. (3) Economies of scale and (4) Efficient distribution. such as Iran. United Arab Emiratis and Saudi Arabia.2008 Iran 27 5% Saudi Arabia 12 9% United Arab Emiratis 8. ' & $ The Middle East is marked out as a key area for non alcoholic beer. or to make investments in brewers that may be struggling in the current economic climate. due to the fashionable. consumers are starting to choose for non-alcohol beer over standard soft drinks. y In terms of Market strategic development it¶s the time for acquisitions and mergers as in recent years SABMiller has not made a major acquisition unlike most of its competitors. Growth Markets for Non-alcohol Beer 2003 . Western image they carry.4% Source: Euromonitor international Global Alcoholic Drinks April 2009. United Arab Emiratis and Saudi Arabia.

this opportunity allows SABMiller to produce non alcohol beer in cheap labour country such as IRAN and export them to western markets. Saudi Arabia will continue as these countries are less affected by the downturn. y Geographically good Middle East coverage: ZamZam cola has operations spread throughout the Middle East. 1. The strong growth forecast in Muslim countries such as Iran. I Bev 0 Source: Euromonitor international Global Alcoholic Drinks 2009. It has also set out to recommend a strategic development plan for future. Hei eke 2. in Western markets such as Spain where low-/non-alcohol beer has shown strong growth historically due to stricter drink-driving laws. Diage 5. Also good shipping access through Persian Gulf to Europe. (Euromonitor international Global Alcoholic Drinks. the SABMiller acquisition strategy in particular the acquisition of Miller in 2002 along with issues rose in acquisition. This allows SABMiller to fully consolidate its position in both the developed and developing economies. while gearing itself up for the number one position.y The experience and skills SABMiller has can decrease the high risks of implementing these strategies. It is well place to take advantage of growth in some growing market such as United Arab Emiratis and Saudi Arabia. This report has also discussed the strategic position of SABMiller in 2009 (SWOT analysis). 10 . Therefore acquisition of ZamZam cola provides competitive opportunity for SABMiller to compete with big player such as Heineken and Inbev. Grup Mah u-Sa Miguel 3. ZamZam 1 0 1 0 1 0 4. Also. ( The ZamZam. 2008) Conclusion: This research project has given the operational activities of the SABMiller (SAB) plc. 2009) y y Chart below shows the leading five players in non-alcohol beer.

K.aspx [Accessed 1 Dec 2009]  www.uk:2100/Portal/ResultsList.ac.  Stacey. Whittington. Strategic management and organisational dynamics: the challenge of complexity.2008.tvu.com/ [Accessed 1 Dec 2009] at: Sustainability and environmental theory globalization principles of governance situational ethic 11 . G.SABMiller. Scholes.References:  Johnson.tvu. Available at: http://ezproxy.8th edition. Harlow: Financial Times Prentice Hall. 2000.Exploring corporate strategy. Global Alcoholic Drinks.com Annual report 2002 Annual report 2003 Annual report 2008 Annual report 2009 Available at: http://www. Available http://ezproxy. SABMiller plc. R.sabmiller. prentice hall  Euromonitor International .2009. eds.uk:2100/Portal/ResultsList.ac.aspx [Accessed 1 Dec 2009]  Euromonitor International.2009.

and how well they are able to strategic business alliances with local packaging firms and infrastructure enhancements to production facilities.(opportunity/threat) Changes in the alcoholic business environment. (opportunity) Overcapacity within the beer industry. taxation requirements. Consumers are now increasing their normal habits.(opportunity) Increase in number of Consumers. including changes in accounting standards.(threat) Appendix B: Economical Last year the economy was strong and nearly every part of it was growing and doing well. (opportunity) Super markets and pub are offering great deal and discount to consumers which have a huge impact on sales. These include. Most economists loosely define a recession as two consecutive quarters of contraction. and eating out at restaurants. distribution equipment and technology. car shopping. things changed. which economic and political conditions. However. affecting the propensity to drink beer in restaurants. without limitation.Appendix A: Political Beer sold in cans is not a general feature throughout Europe. going to the high streets. As researching for new products would cost less the European brewing industry will sell its products for less and the people will spend as they would get cheap products from European brewing industry. new tax laws and revised tax law interpretations) and environmental laws in domestic or foreign regulations. this has resulted in it becoming a saturated market (threat) 12 . or negative GDP growth. sales Governments are campaigning strongly against drunken driving. competitive product and pricing pressures and their ability to gain or maintain share of sales in the global market as a result of action by competitors. (threat) Changes in laws and regulations.e. beer cannot be purchased in Denmark by law.(opportunity/threat) Their ability to penetrate developing and emerging markets. (opportunity) also depends on acquire or form make necessary networks. .(threat) Due to low interest rates it can use the borrowing on research of new products or technology. this is due to environmental reasons i. (including tax rate changes. pubs and bars.

(threat) There is increasing awareness of the effect of alcohol on health and fitness. (opportunity) 13 .(threat) Consumers from the ages of 37 to 55 are also increasingly concerned with nutrition. Since many are reaching an older age in life they are becoming more concerned with increasing their longevity. This has affected the European brewing industry in that many are switching to non-alcohol product. The need for bottled water and other more convenient and healthy products are important in the average person¶s dayto-day life.Appendix C: Social Foreign beer is perceived to be of higher quality. Though in their country of origin it may be perceived as an ordinary beer. This will continue to affect European brewing industry by reducing the demand overall and in the healthier drinks. bottled water and diet colas instead of beer and other alcoholic drinks. (opportunity/threat) Many people are practicing healthier lifestyles.(threat) More beer is sold through supermarkets in Europe.

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->