SABMiller case study 2009.

SIAMAK MOULAEIFAR 20207133

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

whilst investing for growth in its international beer business. the competitive context and the macro environment factors of the company can be eva luated by using the PESTEL analysis. 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 wor ld trade up from economy to mainstream and premium brands. To analysis better understanding of the current position of SABMiller examination will be done regarding the ext ernal and internal environment of the company. economical and social factors. External analy i In order. Although the factors which are most identified from the case are political.The st tegi position that SABMiller has chosen to follow is to continue to p rotect and further develop its operations. Exhibits below summar ise SABMiller Group growth performance today. 3 . Both. to formulate an analysis of the external environment in which SABMiller is operating. an evaluation will be made in terms of industrial and competitive context.

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

Agein g population means less beer drinkers. Market dominance: SABMiller is the second l argest brew er in the world by volume. Vietnams and markets in Africa. Th e consumption of beer is directly related to disposable i ncome so th e purchasing of beer still remains highly fragmented. notably Brazil. such as Iran. It is well place to take advantage of growt h in some growin g market such as India. peopl e who are on a bud get tend to l ook out for the best deals and aren͛t specifically brand loyal whilst others tend to stick to one brand and as SAB beer is not well known i n parts of Europe and t he UK t here is a probl em of brand rec ognition. Price competition from substitute supermarket brands and promotional discounts y y y y y y 5 . STRENGTHS y Good gl obal coverage: SABMiller has operations spread th rou gh out th e globe. which is a major market for SABMiller. 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 addin g capability. Mexico. Oth er brewers lookin g internally to pay debt: In recent years SABMiller has not made a major acquisition unlike most of its competitors. United Arab Emiratis and Saudi Arabia . and c oul d result in a stronger c ompetitor in th e US. Carling. (2) Cost leadership. N o assets in key growth markets: In some key markets SABMiller still lack a presence. or to make investments in brew ers that may be stru ggling i n the current ec onomic climate. Tradin g dow n: SABMiller has managed to capture a high er perc entage of the premium lager growth from its rivals. This leaves it under represented in this key value regi on.Table below summarise SWOT analysis for SABMiller considering the external environment in brewing industry and strategic capability of the company. This does put SABMiller in a good position to look for growt h while assets are a lot cheaper than a year ago. In a period of consumers watchin g their spending this segment could be facing tou gh times in the future. It does have import regi on but these are limited in size. Good worldwide or ganisation with history and knowled ge of enterin g foreign markets successfully with a brewin g presenc e in 75 countries. Stron ger in US: in th e key US market th e combi nation of Molson C oors͛s and SABMiller͛s operation gives th em a stronger sec ond place against a dominant rival. china. Big brands are set to bec ome bigger. THREATS y Th e acq uisition of A n heuser-B usch by InB ev will introduc es several of the c ost improvements that InBev has devel oped over th e y ears. (3) Economies of scale and (4) Efficient distribution . Th e Middle East is marked out as a key area for non-alco holic beer. Thailand and several c ountries i n Asia Pacific. y OPPORTUNITIES y Weakeni ng ec onomic climate: SABMiller compared to some of the oth er major brew ers is well placed to make acquisitions of any divestments by ot her brew ers. Stella Artois. Foster͛s and Budw eiser. WEAKNESSES y Lack of assets in Western Europe: SABMiller has only lim ited operations in W estern E urope which produce beer.

4 16. Improved market reach and industry visibility. SAB believed that synergy could be created in number of ways such as. SAB reach new markets and grows revenues and earnings.2 in brewing industry. 1. this allowed SAB to establish SABMiller as strong no. 6 . Acquisition of Miller also expands marketing and distribution of SAB and giving them new sales opportunities. Shearing a brand name and Miller potential. with the acquisition of Miller Brewing Company the size and geographic reach of SABMiller plc changed dramatically from that of the former SAB plc.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.3 Source: http://www. Year 2002 2004 Beer volume (m HL) 70 138 Global brewers ranking 4 3 Market capitalisation ($ bn) 6. Gain a significant market share and improve its quality by acquiring Miller.257 2. SAB acquired Miller Company in July 2002. this is almost certainly the rationale for SAB¶s to acquire Miller. According to Johnson & schools (2008) an acquisition is where an organisation takes ownership of another organisation. 2.com The rationale and motivation One plus one makes three: this equation known as synergy in business strategy.747 6. Chart below provide summary of major changes. the financial summary before and after acquisition of Miller in Central America. this acquisition also help SAB to increase economics of scale.231 824 Source: SABMiller annual report 2003 3.499 624 2.sabmiller. 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. The Table below shows. Financial summary Turnover Sales volume (hls 000s) y y y 2003 514 US$m 2002 186 US$m Lager CSDs Other Beverage 1.

SAB strategy behind acquisition of miller brewing company: Acqu i£ in¤ (u nd ¥£-¦§ lued) § ssets in d evelopin¤ / e ¨erging m© rkets Building loca l m arket sca le a nd lea dership around a portfolio of (loca l) mainstream brands ecur in g r o u te-to m arket con tr ol  Drivin g op era tion a l and cost leadership Enhancing industry conduct and pricing 7 . the other motives behind the acquisition of Miller was to createa lot of benefits to SAB such as. Speed of entry: by acquiring Miller in 2002 SAB made quick successful entering to US market (USA ± Wor ld¶s largest profit pool . furthermore the benefit of having Phillip Morris as a supportive long -term shareholder. 5. strong cash flow.4. By acquisition of Miller SAB has achieved to establish an excellent global business network. 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. Additionally. which without doubt satisfies stakeholders¶ expectations. By doing so. the company increases its turnover and its profits.

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

9 .2008 Iran 27)5% Saudi Arabia 12)9% United Arab Emiratis 8. 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 . and generate rapid growth in markets such as Iran. (2) Cost leadership.  A$ q %i& ition/mer' er of ZamZam cola in IRAN( y 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 -a lcoholic beer. In these primarily Muslim countries. United Arab Emiratis and Saudi Arabia. p119) Chart below illustrate strategic development for SABMiller:  Stret  Opportunity and strengths 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 whic h is the ability to sustain and improve  in 4 areas  (1 Value adding capability. y  Opport itie! y The Middle East is marked out as a k ey area for non alcoholic beer. (Johnson & schools & Whittington 2008. Western image they carry. such as Iran.environment and the strategic capability of an organisation that are most likely to impact on strategy development. or to make investments in brewers that may be struggling in the current ec onomic climate. (3) Economies of scale and (4) Efficient distribution. Weak ening economic climate " SABMiller compared to some of the other maj or brewers is well placed to make ac#uisitions of any divestments by other brewers. consumers are starting to choose for non-a lcohol beer over standard soft drinks. United Arab Emiratis and Saudi Arabia.4% Source: Euromonitor international Global Alcoholic Drinks April 2009. This does put SABMiller in a good position to look for growth while assets are a lot cheaper than a year ago. due to the fashionable.

This report has also discussed the strategic position of SABMiller in 2009 (SWOT analysis). this opportunity allows SABMiller to produce non alcohol beer in cheap labour country such as IRAN and export them to western markets. Diage1 5. in Western markets such as Spain where low-/non-alcohol beer has shown strong growth historically due to stricter drink-driving laws. 2009) y y Chart below shows the leading five players in non-alcohol beer. Also. It has also set out to recommend a strategic development plan for future. y Geographically good Middle East coverage: ZamZam cola has operations spread throughout the Middle East.y The experience and skills SABMiller has can decrease the high risks of implementing these strategies. (Euromonitor international Global Alcoholic Drinks. The strong growth forecast in Muslim countries such as Iran. 2008) Conclusion: This research project has given the operational activities of the SABMiller (SAB) plc. Hei0eke0 2. while gearing itself up for the number one position. Also good shipping access through Persian Gulf to Europe. 1. ( The ZamZam. Therefore acquisition of ZamZam cola provides competitive opportunity for SABMiller to compete with big player such as Heineken and Inbev. the SABMiller acquisition strategy in particular the acquisition of Miller in 2002 along with issues rose in acquisition. 10 . This allows SABMiller to fully consolidate its position in both the developed and developing economies. ZamZam 4. It is well place to take advantage of growth in some growing market such as United Arab Emiratis and Saudi Arabia. I0Bev Source: Euromonitor international Global Alcoholic Drinks 2009. Grup1 Mah1u-Sa0 Miguel 3. Saudi Arabia will continue as these countries are less affected by the downturn.

Available at: http://ezproxy. Whittington. R.aspx [Accessed 1 Dec 2009]  Euromonitor International.2008. 2000.2009.tvu. prentice hall  Euromonitor International .  Stacey. G.tvu.com/ [Accessed 1 Dec 2009] at: Sustainability and environmental theory ʹ globalization ʹ principles of governance ʹ situational ethic ʹ 11 .2009.ac.SABMiller.uk:2100/Portal/ResultsList. Global Alcoholic Drinks. Scholes.8th edition.ac.sabmiller.Exploring corporate strategy. Available http://ezproxy. K.aspx [Accessed 1 Dec 2009]  www. SABMiller plc.References:  Johnson.com Annual report 2002 Annual report 2003 Annual report 2008 Annual report 2009 Available at: http://www. Harlow: Financial Times Prentice Hall.uk:2100/Portal/ResultsList. Strategic management and organisational dynamics: the challenge of complexity. eds.

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

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

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