Importance of Key Success Factors in Business - Report Example

The beer industry in many places around the world is very influential in the gross domestic product of nations. In South Africa a brewery company founded in 1880 currently called SAB is South Africa’s top brewery with a market share exceeding 90%. The company holds a de-facto monopoly which is one of many critical success factor related with the industry structure in which the company operates. The profile and the cultural characteristics of the main customers of a company is one of the most efficient ways to determine the behavioral patterns of the target customers. This report studies critical success factors by studying the case study of the South African Brewery (SAB). Since its inception the management of the company had a vision of future expansion and utilization of the most efficient mechanisms in order to obtain access to the capital and money markets and provide liquidity to the equity and commercial of the company was an early success factor for SAB. In 1892 the company converted into the public company South African United Breweries openly traded in the London Stock Exchange was the event that allowed the company to finance its operation and acquire capital whenever needed take advantage of market opportunities. The company immediately work to work and the creation of the public came simultaneously with the acquisition of a brewery. The smart strategies continued with this company and the exposure gained as an LSE player attracted a key investor which led to the formation of SAB in 1895. Another key historical event in SAB which was a major success factor was the latter acquisition of two other companies in South African beer business which enabled the company to control 90% of the alcoholic beverage market share in 1960. A company that controls 90% of a market basically is a company operating in a de-facto monopoly. In reality the company operates in oligopoly. An oligopoly is an industry with very few competitors participating in the marketplace. Since SAB control 90% there are powerful that the power they have over strategic decisions and entire industry provide the company the ability decision such as controlling the pricing, supply and demand of the supply chain in South Africa. That type of power enabled the company to become the player in this industry that serves the need of the customers and creates the trends in product offering that the minority players in the industry follow. A de-facto monopoly allows a company such as SAB to set a price for its product without worrying about the competition affect its pricing policy or the customers affecting the demand since this company operates at the point in the supply curve which optimizes its earnings independent of the demand in the marketplace. The company utilized concentrated growth strategy which paid lots dividends early in the company’s history. With the changes that come in the 1970’s and future decades the flexibility of the people of SAB provided the vision to diversify into other businesses. Diversification has been a critical success factor of SAB. Diversification is when a company complements its primary line of business with other business opportunities which may be related or unrelated to its core business. Diversification growth makes sense and is more efficient when good opportunities can be found outside the present business (Kotler, 2003). A logical opportunity SAB exploited in unrelated business which is part of supply chain of brewery business was in bottling companies. The company also moved from alcoholic beverages into the alcoholic beverage business with emphasis in the soda business. A critical success factor in the diversification strategy to achieve greater levels of growth was smart strategic alliances. A strategic alliance is an agreement between two or more individuals or entities which decide to share resources to work together in a specific project (Investopedia, 2008). SAB entered into a strategic alliance with the soda powerhouse Coca-Cola to form a merger company to distribute soda products in the South African marketplace. Despite moving to a diversification strategy SAB never forgot how it gain economic power and kept focused on its main line of business which is beer. In order for a company to achieve the type of success on an entire marketplace it must study the consumer behavior and cultural and socio-economical factors of the community in which operates. The South African people are a community that utilized the best economic model in the entire African continent which enabled this nation to be the richest African country. Early identification of an African economy with potential for future growth was a good initial move by the founder of the firm. The relative strength of the South African economy during the last three decades of the 20th century is associated with the diversification into other consumer goods and exploitation of other opportunities by SAB in South Africa. In 2007 the real domestic product per capita in South Africa was $11,192 (CultureGrams, 2008). In South Africa like in many other African countries the people very much enjoy festivals, nightlife, and cultural activities. Such activities are the type of cultural setting which leads to alcoholic beverage consumptions. South African enjoy dancing and a happy culture who are loyal to the branded beer products SAB offers and has provide to the society for over 100 years. Cultural customer targeting was a critical success factor for SAB. Along with the Coca merger SAB has also formed many other mergers which has helped the company accomplish its strategic objectives. The company utilized innovation in its marketing approaches and created a new soft drink with the catchy name Groovy which become a good seller in South Africa. The products offering of SAB attract a giant in the industry called Cadbury Schweppes to merge with SAB to increase market share in the soft drink industry. This move was a predecessor to the Cola-Cola move which position the company as an attractive entry strategy for Cola-Cola which later decided to merge with SAB. The company did not stay put and with its new partners that brought added knowledge and resources the aggressive management team of SAB also were able to gain access to the juice market in South Africa. A success factor that also positive influenced the company growth diversification strategy was the company’s strategic adjustment of creating a corporate culture associated with SAB becoming a mass marketer. As a mass marketer the company entered into the retail marketplace, a business which is very competitive and needs good marketing practices especially in terms of advertising. Advertising and the longevity of company’s core business allowed the company to maintain its 90% market share due to the branding focus created a barrier of entry for other companies which knew they could not compete with SAB superior knowledge of the South African beer market. The diversification strategy ended up solidifying the company’s main line of business because the executive team and the employees of the company acquired new skills and capabilities by dealing with other issues from other industries they now operated which enable them to extract the best practices from other industry and apply them to their main line of business to improve its operations. The concept just described is know in the research discipline as generic benchmarking. The business world has become a globalize environment that has force companies to think beyond its local market. An international vision is necessary to be able to exploit and capitalized on opportunities to make a business grow. The new world order involves a business spectrum in which companies are interconnected with the global marketplace in its supply chain function. Importing and exporting is part of the everyday language of multinational corporation. The South Africa Brewery was born over a hundred years ago and over the years it has been able to utilized strategies associated with a major international player prior to the globalization movement. The company kept buying up the competition and created a de-facto monopoly in the South Africa beer industry which still holds a market share of 90% of its local market. The company just as many other global players diversified its business into other markets to expand locally and internationally. The company was able to recruit Coca-Cola, one of the world largest players in the soft drink industry, due to the attractiveness of SAB intangible assets such as its dominating South African market share and the value of its human capital. There were numerous key success factors which SAB has implemented through its history which has enabled the company to become one of the largest companies in the South African territory. The key success factors that helped SAB become a powerhouse firm include sound cultural profiling, key merger and acquisitions, early concentrated growth strategy, a latter diversification growth strategy, becoming a global marketer, 90% market share in the beer industry and outstanding management and strategic decisions. References CultureGrams (2008). South Africa Country Profile. Available from [Accessed 26 January 2008]. Investopedia.com (2008). Strategic Alliance. Available from [Accessed 26 January 2008]. Kotler, P. (2003). Marketing Management (11th ed.). New Jersey: Prentice Hall. Read More