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SBCS ID: 48491
UNIVERSITY OF GREENWICH BANNER ID: 000640734
COURSE SUBJECT: MANAGING STRATEGY
ASSIGNMENT: Case Study 4- SABMiller
LECTURER : LINUS DIDIER
Consumption of beers is linked to consumers¶ disposable income and the changing taste of consumers (Mcquade.1. Governments across the world may seek ways to regulate alcohol consumption due to the effect it has on consumers¶ minds and also due accidents that occur when too much is consumed. South African Breweries (SAB) Limited became SABMiller in 2002 when it took over Miller Brewing Company. 2007). However there is more people becoming health conscious because of the effects that alcohol has. SAB¶s strategy demands a great political sensitivity in dealing with government. Scholes and Whittington. This would affect the sale of beers in such countries which would affect SAB¶s strategic position. the US¶s second largest beer maker company. SABMiller may be at a good strategic position due to the perception that foreign beers are of a higher quality than local beers and also because of the organisation being the second largest brewer by volume in the world (Mcquade. Legal considerations should also be taken into account when stating the strategic position of SABMiller such as tax laws and environmental laws in foreign and domestic regulations to decide whether they would benefit from operating in such markets if the costs of operation such as high taxes are greater. Economically. local communities and the workforce due to the acquisitions (Mcquade. partners. Politically. Understanding the strategic position of SAB as at 2007 is concerned with the impact on strategy of the external environment. SABMiller may have the competitive advantage in such country from increased sales. the acquisition to form SABMiller in 2002 made the organisation the second largest in the world which placed them at a competitive advantage over other rivals. 2007). 2007). In order to understand SABMiller¶s current position. Where there is an increase number of consumers and consumer spending increases. Technologically. a PESTEL analysis needs to be done to analyse the external environment it operates. 2009). SAB¶s strategic capabilities and competences and the expectations and influence of stakeholders (Johnson. Socially. SABMiller needs to be aware of changing technology to enhance its production and distribution system and reduce cost by engaging in research and development so as to maintain their competitive advantage over rivals. which would decrease its strategic position as people become more aware of health implications. SABMiller faced high regulations in India which lead to less immediate success in terms of profits (Mcquade. 2007) which enhances its brand and strategic position. .
2007). The firm must acquire competent staff and the necessary resources to market their products in order to maintain a global strategic position and boost its image. 2007). SABMiller¶s strength includes market dominance of being the second largest brewer by volume in the world and its ability to gain competitive advantage in growing markets in countries including Africa. and not being able to operate in other major markets such as Brazil and Mexico. Its operational capability to both expand globally and locally is a strength and capability that cannot be easily copied. 2007) which leads to economies of scale as cost would be decreased. which adds to the branding of its product as well (Mcquade. .SAB¶s strategic position would further be discussed using a SWOT analysis to summarize the key issues from the business environment and the strategic capability and competence of SABMiller that may impact on strategy development (Johnson et al. SABMiller may need to acquire the resources and competence from workers in order to produce at a cheaper cost so as to decrease its prices to maintain a good strategic position. 2007). 2009). Capacity expansion. which can lead to lowering of cost through efficiency from workers. flexibility of the production facilities and new distribution systems is another resource capability (Mcquade. 2009). Another weakness of SABMiller was its lack of brand recognition in London which (Mcquade. Strategic capabilities is the resources and competences of an organisation needed for it to survive and prosper. 2009). Management initiative to hire a local fire brigade to ensure beer production during a breakdown in water supply shows the competence and human resource capability the firm has. Other strengths include SABMiller having the resources and competency to operate in the premium brand internationally and having over 6000 trained licensed taverners in business skills (Mcquade. (Johnson et al. Resources can either be tangible or intangible and competencies can be described as the skills and abilities by which resources are deployed effectively through an organization¶s activities and processes (Johnson et al. SABMiller¶s weakness comes from the basis that consumption of beer is linked to disposable income. hence people in budgets may choose to purchase based on prices rather than brand. India and China. Its strength also includes management value creating and innovative competency which is valuable resource.
Using the Ansoff Matrix (1988). Shareholder expectations for SABMiller are for growth and acquisitions may be a quick way of acquiring this growth. SABMiller could seek to gain a higher market share from its existing beer products by providing it in every country rather than seeking to venture into new markets such as in the premium beer segment. 2009). 2007) who have to defend their market share. Market development is another strategy which SABMiller can adopt as this involves offering existing products to new markets (Johnson et al. 2. follow regulations and laws to satisfy socio/political stakeholders and providing jobs for employees within its operations.Stakeholder expectations also indicate SAB¶s strategic position. The firm could also expand on their premium beers to export to new geographical areas by changing the packaging to suit the environment it wants to operate to promote branding. However this may lead to increased competition from rivals such as Anheuser. The product can be manufactured to suit the taste of that market such as using less alcohol content. A last strategy of the Ansoff matrix is diversification which Johnson et al (2009) defines as a strategy that takes an organization away from both its existing markets and its . 2009). They may also have the strategic capability to fulfil the firms¶ four strategic priorities to satisfy stakeholder expectations. SABMiller could launch new alcohol products such as wine which would create a new product to an existing market. Political pressure from certain countries may put SABMiller at a disadvantage where that economy promotes domestic companies rather than foreign companies for acquisitions which decrease its strategic capability. However this could lead to value destruction due to increase management cost. there is a range of strategic options that SAB can use. 2009). The firm can seek growth from international markets that they currently do not exist based on an analysis and regulations of the region they want to operate. which can lead to price wars.Bush (Mcquade. higher level of coordination and the inability of the firm to judge if the firm has a poor performance level. Another strategy based on the Ansoff Matrix is product development which is where SABMiller would deliver modified or new products to existing markets (Johnson et al. SABMiller can use the market penetration strategy which is where it would gain market share of its existing products (Johnson et al. However there is the risk of consumers not accepting the product and also the cost of this change may not outweigh the benefits.
where stakeholders may not be able to accept such a strategy if the return or benefit is not worthwhile to them. Market development is where the company enters further countries and extends the penetration in existing countries. This certainly builds on past competences and success making it suitable. It has also been transferring brands across different markets and regions. resources and competences to do so. However it may not be acceptable as it may not meet expectations for growth due to the threat of HIV/AIDS in the African countries (Mcquade. Market Penetration may be suitable due to pass success of the firm increasing market share through acquisitions and its ability to exploit its superior resources and competences such as management expertise. This adds to the company¶s growth that is now being expected of it which may be acceptable as it can generate a return. 2007) and the stakeholders unwilling to take the risk to not benefitting from returns from this investment . This may be feasible due to SABMiller¶s competence in developing efficient operations and acquisition of Miller which made the company the second largest in the world. SABMiller could face growth pressures and there is the risk that if it fails to grow it may become a target for takeover or lose its reputation and branding image. 3. The company has been launching new varieties of beer and developing existing varieties such as the premium beers. The SFA framework can be used to evaluate each of the strategic options used from the Ansoff Matrix. However there is also acceptability. and is likely to be feasible due to having the resources and competences.existing products. 2007). SABMiller can invest more into this segment which is different from its known market segment to benefit from further growth through joint ventures. The firm currently has a diversified investment into hotels and gaming (Mcquade. suitable to the company to sustain its strategic position and feasible as it may have the skills. Product development is the new beer products and transference of beer products. Once it has the financial capacity. However.
Wiley. The New Corporate Strategy. H. Pearson Education Limited. feasible and acceptable to the organisation and its stakeholders. 2007). . REFERENCE Ansoff. Johnson. (2009). Product development may be the alternative strategy SABMiller can pursue as it would be suitable. G. R. Nevertheless. This is feasible since the firm may have the resources available to allow them to do this. Scholes. However a mixture of all the strategies can enhance the strategic position of the organisation once it has the capability to do so. SABMiller. but investors may not accept this seeing it as unnecessary diversification in areas where they have little suitability and lack the competence. However this is not the strategic focus of the company and may not be acceptable due to the risk involved in the investment. Fundamentals of Strategy.Diversification is SABMiller moving away from a reliance on brewing towards other industry such as the present hotel and gaming industry (Mcquade. it might be tempting in terms of future growth requirements. A. Prentice Hall Mcquade. (1988).I. (2007). K and Whittington.
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