Coors: A Move into the UK Brewing Industry - Assignment Example

Running Header: COORS: A MOVE INTO THE UK BREWING INDUSTRY Coors: A Move into the UK Brewing Industry Introduction The famous adage that “the only constant thing in this world is change” is true even in the business landscape. Business organisations are often faced with challenges and opportunities which call for necessary strategic changes. These changes are often in response to the different factors and variables in the companies’ external environment. As evidenced by various real world examples, firms often adopt to threats and opportunities in their respective surroundings by modifying their strategies. This can include introduction of new products, conquering new markets, revamping the value chain, coming up with a new pricing strategy and others. It is irrefutable that the brewing industry and its market in UK have significantly changed over the years. It should be noted that most of the common assumptions and preconceptions of manufacturers about their distribution channels and consumer preferences are now obsolete. Thus, Coors Brewers Ltd. (Coors) needs to institute a change of strategic directions in order to account for these important developments and trends. This report generally aims to identify the various future strategic options for Coors. The first section will conduct an environmental scanning which will examine the different changes in the market of the business organisation. Secondly, this report will briefly outline its recommendations on how Coors can further enhance its performance by using its strengths and core competence to take advantage of the opportunities in the UK market. These will be conducted through the use of strategic management tools specifically the Ansoff Matrix. Identifying the Changes in the UK Market The market for alcoholic drinks is a very important sector in the UK market. It should be noted that the brewery sector generates more revenue than the other large industries like clothing, motor vehicles, tobacco, and confectionary. However, there has been a decreasing trend in alcohol consumption within UK households. It also noted that the traditional beer consumption in public houses is now overshadowed by the increasing consumer preference to consume brewed products at home as this is perceived to be more socially acceptable. The major trends in the UK brewing industry are identified as follows: “there is a growing female and mixed group influence; going to a public house is a leisure activity; consumption is often driven by occasion and events in both on-and off-trade; premium beers are becoming an important sector; there is wide choice of outlets; and there is a wide choice of brands.” In addition, it should also be added that breweries which compete with Coors are now dismantling their previously owned public house estates. The younger generation also has the inclination to lagers which is a high profit segment for brewers. These diversions from the traditional market conditions posts many strategic options for Coors and other players in the UK alcoholic drinks market. The Ansoff Matrix The Ansoff’s Matrixis a tool in strategic management which is utilised in order to aid in deciding the product and market growth strategy of a company. After its publication in the Harvard Business Review in 1957 in an article entitled, ‘Strategies for Diversification,’ this strategic management tool has gained wide popularity and recognition in the marketing world. Ansoff Matrix is specifically useful for business organizations which have growth objectives. Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets. Four strategies are generally prescribed—market penetration, market development, product development and diversification. Market penetration is a company’s strategy which aims to serve current market with its existing products. With this growth strategy, the company aims to increase revenue without altering its product or turning to new markets. The company does this by more aggressive marketing efforts, increased promotion or repositioning the brand. Market development is offering new markets with existing products. This is often done in mature markets where the company seeks new users for its current products or the business organization founds a profitable market which is not currently served. Marketing the product to new regions or exporting it in other countries. Product development is offering new products to current market. This happens when business organization has a new product offering which suits the market it currently serves. Example of this is a computer manufacturer who is always updating its product by adding product features. Diversification is offering new products to new markets. This growth strategy is classified into two namely, related and unrelated diversification. Related diversification happens when the company chooses to offer a new product with a new market inside the same industry while unrelated diversification refers to operating in a new sector. Strategic Options for Coors Brewers Limited It should be noted that the success and even mere survival of a business organisation lies on its ability to respond to the larger environment that it operates. Each of the changes in the market environment which are identified above posts opportunities and challenges for Coors. These new developments and trends necessitate new sets of strategies. This section will identify the major strategic options that the business organisation can take in response to the changes in the UK market. 1. Take advantage of the female drinking population by offering their current product line or new products which are especially tailored for them. One of the most important changes in the UK brewing industry is the larger participation and influence of women on drinking activities. It should be noted that alcoholic drinks are traditionally addressed only to men and not to women. This trend posts an opportunity for Coors as it presents a new market and a possibility of introducing a new product. Coors can either employ a market development or diversification strategy in order to capture this growing segment. Thus, Coors can devise a market development strategy by offering its current products to women or create a new product which is especially suited to the taste and preference of women. This related diversification strategic move is likely to be profitable as it shows its special concern and attention for the women drinkers. 2. Strengthen positioning by more intensive aggressive and intensive marketing efforts. It is apparent that alcoholic drinks are showing deviation from the common preconception that these products are homogenous. Customers are now showing preference for premium brands. The only way that Coors can battle head on with other product offerings of competitors as well to avoid cannibalization of its goods is through an intensive marketing effort. Coors should be able to highlight the quality of its alcoholic drinks relative to its competitors. It can do this by placing advertisements on televisions, billboards, and even magazines. The company can also emphasize of the different qualities of its product offerings. For instance, premium brands like Grolsch should have a different positioning than Carling which is an everyday mainstream lager brand. Coors should also recognise that beer is now primarily used for household celebrations. With this, advertisements should not only show scenes of men having a session but focus on showing beer as a special drink made to celebrate and to socialise with other people at home. 3. Boost the consumption of beer by changing the negative connotations and perceptions associated with it. It should also be noted that there are negative connotations given to beer such as being “a chemical product in factories, session drink, unhealthy drink, poor partner for food, and a male drink.” This puts the UK brewing industry into a very appalling situation considering that individuals are now becoming more and more concern about their health. The misconception that beer is a unhealthy drink which can harm the consumers in the long run should be eliminated. These factors, which gives alcoholic products bad image in the society to the detriment of manufacturers, can be overcome by a more aggressive and intensive efforts which primarily includes the health benefits of beer. In its advertisements, Coors can also focus on the benefits which can be derived from beer consumption. Specifically, beer if consumed in moderation is very nutritious because it lacks the disease causing cholesterol and fat plus it is rich in minerals like calcium, potassium, phosphorus and B vitamins. Beer also has relaxing effect on the body which helps in the reduction of stress. It also helps individuals to get a better sleep while preventing heart disease and improving blood circulation (Health Benefits of Beer 2002). These health benefits are not only seen to eliminate negative preconceptions but encourage beer consumption among consumers of all age groups. With this, Coors can choose to come up a product line of healthier beers which are lower in calories. 4. Encourage beer consumption by introducing new uses of alcoholic beverages. In a mature industry like the UK brewing sector, players often take strategic moves to boost purchases and consumption by introducing new uses of the product. In this case, Coors can increase its revenue by opting to inform customers about the different uses of beer in the market. Together with marketing the health benefits of alcoholic drinks, this is seen to alleviate the declining purchases. Beers can be marketed as marinades for meat like beef. It should be noted that this process not just tenderizes the meat but also adds flavor to it. Beer has also widely been used in Western Europe cuisine as substitute for water in soups and stocks, as batter in fried foods, and as a spice to gravies (Health Benefits of Beer 2002). Coors can also market beer for hair as it has the cleansing property which eliminates the chemicals and other elements left by shampoos as well as repair damaged hair. Recommendation and Conclusion This report believes that in order to cope with the rapid evolution and change in the market, Coors needs to revamp its strategies and pursue a different strategic direction. The business organisation’s survival is in its ability to tailor and execute strategies in response to the different strategies. Analysing the different strategic options presented above, this paper highly supports that with the resources that Coors have in its hand, it will be efficient if the company chooses to capture the women drinkers by creating a special product or product line for them, intensify its advertising effort, and promote the health benefits of beer. This report believes that the current brewing industry is not yet ready for the new uses of beer. Should Coors want to take this strategic option, it will be better if it will be able to create a product which is specially designed for cooking or washing the hair. Coors should give the population of drinking women attention. With the popularity and wide acceptance of alcoholic beverage consumption in women, it is expected that this segment will grow. The business organisation can profit much from being the first one to take advantage of these drinkers. It is irrefutable that men and women have different preferences and tastes, necessitating the creation of new products for them. This customisation will allow Coors to deliver more value to its customers. This is also expected to attract women who are non-drinkers because there is a brand especially made for them. Intensive marketing and advertising will be significant as it helps the organisations build its image in the UK market as well as strengthen its position in the mind of the customers. Coors should intensify its efforts in capturing the health conscious individuals by continuing its strategy of changing the market perception. T he company should also recognise the growth of off-trade consumption by creating advertisements which shows that their beers are used for celebrations and socializations at home However, this report also recommends that the company still focus on its partnerships with on-trade dealers. Even though the number of beer revenue from this distribution channel, Coors should still opt to use this marketing channel for its benefit. However, as public houses are now seen as a place for leisure and not as a place to drink, Coors should focus on offering “lighter” brands on this channel. In order to improve the performance of Coors, it also needs to focus on improving its capital structure. It should be noted that the organisation is highly leveraged with debt. It should be noted that debt is a riskier financing as it gives obligations to the business organisation to pay interests (Keown et al 2005). In order to get rid of likely problems of insolvency, it should try to look into other sources of financing which is equity. The company should be able to lower the proportion of debt on its balance sheet relative to its equity in the long run. Bibliography De Wit, B. & Meyer R (2004). Strategy: Process, Content, and Context. International Edition: Thomson Keown, A.J., Martin, J.D., Petty, J.W., and Scott Jr., D.F (2005). Financial Management principles and applications, Pearson/Prentice Hall International Edition, 10th Edition. Health Benefits of Beer. (2002). Retrieved 05 December 2006, from http://nd.essortment.com/beerhealthbene_rryq.htm Thompson, A. & Strickland , J (2002). Strategic Management. 3rd ed. New York McGraw-Hill Read More