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HOUSSIN Alexandra
GHERARDI Aurélie
LEMAIRE Charlotte

Strategic Management:
Global forces and the Western European brewing industry

analysis and a five forces analysis. What do you conclude

a. PESTEL analysis
October 7th, 2011

1) Using the data from the case, carry out for the Western European brewing industry a PESTEL

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.

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b. The 5 forces analysis

Within the western countries the beer market has become more stagnated. Europe has the largest
demand for the beer market, and has the largest beer consumption per head. Besides, while the beer
market is declining the wines and liquors market is exploding.

Acquisition fever is shaking the brewing industry, where brewery companies try to fight against the
market’s deceleration of those last year. Besides, the raw materials prices are increased
considerably.

Acquisition and strategic alliances have occurred as the leading brewers battle to control the market.
There is a global pressure for consolidations have let emerge four largest companies: InBev (Belgium,
Brazil), SabMiller (United Kingdom), Anheuser-Bush (American) and Heineken (Netherland).

This acquisition race can be justified by the importance of the scale economy for the companies:
when two companies merge, they gather both supply chains then they are able to benefit from a
leverage effect, thus decrease the raw materials cost.

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Potential entrants to the brewing industry face many difficult barriers to entry. The bigger brewers of
the industry have fantastically achieved great economy of scale. Another of the weakening forces to
new entrants is the already strong brand recognition realized by existing firms. 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.

Furthermore, the beer industry is faced against an immense amount of substituted for its products.
This is mostly from other alcoholic beverages such as wines and liquors; nonetheless, non alcoholic
beverages still play a role in taking away market share in the general beverage industry.

The growing buyer’s power and the high competitiveness is likely to hurt small competitors. The
brewer industry is hypercompetitive who create a condition of constant disequilibrium and change.

c. 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, brewers in this industry must make their products readily available or
accessible to their customers (market on-trade, 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.

- Efficient distribution channels:

Cost of distribution in this industry need to be logically looked at. It firms in this industry carry
significant costs from distribution which are then reflected in their prices to customers, then
customers will choose the competition.

2) For the three breweries outlined above explain :

a. How these trends will impact differently on these different companies

he direction of the first brewery company in this article, Anheuser-Bush InBev is a multiband
strategy. Its trend is to become bigger and bigger to compete with another companies of brewing
sector.

The firm multiplied acquisitions, licensing and strategic alliances the last decade. The company has
now practically 300 brands. Its strategy aims at building strong global brands in order to gain weight
against competitors.

The second brewing company Greene king is quite similar in terms of organisation. It has expended a
series of acquisitions as well. However, it is more targeted on pubs and restaurants. The company
bets on high quality beer. This focused strategy aims at creating exclusivity and privilege.

Finally, the Chinese brewery, Tsingtao encourages the sales volume to compete.

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 b)

Over the long term, the strategy of the Belgium brewery will give credibility and power with
suppliers. Efficiency gains will increase thanks to central coordination of purchasing which allow
economies of scales. However, this is the opposite with the UK brewery, which promote high value
and prices.