HOUSSIN Alexandra GHERARDI Aurélie LEMAIRE Charlotte Strategic Management: Global forces and the Western European brewing

industry October 7th, 2011

1) Using the data from the case, carry out for the Western European brewing industry a PESTEL analysis and a five forces analysis. What do you conclude a. PESTEL analysis Pestel analysis provides a comprehensive list of influences of the possible success or failure of particular strategies. In particular politics highlight. Pestel’s framework consists in the analysis of different categories such as; political, economic, social, technological, environmental, legal. It is important to analyze how these factors are linked together.

Political

•Governement's fight against drunken drinving •Increasing awareness of the effects of alcohol on health

Social

•Ostility of the binge drinking •Increasing wine popularity •Demand for premium product: high import rate. •For instance : Netherland (+481%), Belgium (+170%), Danemark (+300%) •High demand of new kind of beer (flavoured taste...)

Economic

•Cut-price offers in the off trade sector •On trade market suffers from the rise of the off trade •Domination of supermarket's big chain (Tesco, Carrefour) •Development of private label from discount supermarket (Lidl, Aldi)

Legal

•European commission fight against price fixing •In 2004Kronenbourg and Heineken were fined by the European Commission for price fixing agreement

1

Brazil).Aggressive price cut Buyers: . Anheuser-Bush (American) and Heineken (Netherland).Diversification in brands . Acquisition and strategic alliances have occurred as the leading brewers battle to control the market.. SabMiller (United Kingdom). There is a global pressure for consolidations have let emerge four largest companies: InBev (Belgium.Non-alcoholic beverages Within the western countries the beer market has become more stagnated. Besides.Wines become more and more popular . analcoholic beers.b.High prices of the raw materials Competitive Rivalry: . Acquisition fever is shaking the brewing industry.Lots of different offers (flavoured taste. and has the largest beer consumption per head. the raw materials prices are increased considerably.) Substitutes Products .High compitiveness of the brewery market .Imporant rise of the importantion . while the beer market is declining the wines and liquors market is exploding. The 5 forces analysis Potential entry : Economies of scale achieved by larger brewers (weak) Brand recognition among existing firms (weak) Strong realtionships between existing brewers and wholesalers (weak) Suppliers: . where brewery companies try to fight against the market’s deceleration of those last year. Europe has the largest demand for the beer market. Besides. 2 ..

3 . Efficient distribution channels: Cost of distribution in this industry need to be logically looked at. Furthermore. The bigger brewers of the industry have fantastically achieved great economy of scale. Its strategy aims at building strong global brands in order to gain weight against competitors. The brewer industry is hypercompetitive who create a condition of constant disequilibrium and change. thus decrease the raw materials cost. Anheuser-Bush InBev is a multiband strategy. Potential entrants to the brewing industry face many difficult barriers to entry. nonetheless. This is mostly from other alcoholic beverages such as wines and liquors.This acquisition race can be justified by the importance of the scale economy for the companies: when two companies merge. c. they gather both supply chains then they are able to benefit from a leverage effect. Another of the weakening forces to new entrants is the already strong brand recognition realized by existing firms. It firms in this industry carry significant costs from distribution which are then reflected in their prices to customers. The company has now practically 300 brands. This brand recognition is a hard achievement to combat for new entrants because they face putting their products on the market with no name or word of mouth at all. licensing and strategic alliances the last decade. The growing buyer’s power and the high competitiveness is likely to hurt small competitors. The firm multiplied acquisitions. Its trend is to become bigger and bigger to compete with another companies of brewing sector. non alcoholic beverages still play a role in taking away market share in the general beverage industry. Conclusion From this analysis we can conclude to different key success factors of brewing industry: Availability of product to customers: In order to remain competitive. and market off-trade) Innovation of new products: The development of new products that may create a new demand or retain repeat customers is always a key to success when in competition with others companies that do the same. the beer industry is faced against an immense amount of substituted for its products. 2) For the three breweries outlined above explain : a. then customers will choose the competition. How these trends will impact differently on these different companies he direction of the first brewery company in this article. brewers in this industry must make their products readily available or accessible to their customers (market on-trade.

b) Over the long term. the Chinese brewery. it is more targeted on pubs and restaurants. However.The second brewing company Greene king is quite similar in terms of organisation. However. 4 . This focused strategy aims at creating exclusivity and privilege. The company bets on high quality beer. It has expended a series of acquisitions as well. which promote high value and prices. Tsingtao encourages the sales volume to compete. Efficiency gains will increase thanks to central coordination of purchasing which allow economies of scales. the strategy of the Belgium brewery will give credibility and power with suppliers. this is the opposite with the UK brewery. Finally.

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