Who is Ready to Wow Investors - Term Paper Example

AB InBev PLC Value Chain Analysis Organisation Profile Anheuser-Busch InBev has an historical presence in the beer industry that can be traced back to Den Horen in Leuven, Belgium, which has been brewing since 1366 with Stella Artois being the popular brand at the time (AB InBev, 2014). The continued growth of the company has seen its breweries grow up to 140 breweries that are based in six geographic zones for easier supply of their brands in a global scale (Yahoo Finance, 2014). AB InBev incorporated in 1977 is one of the major beer producing companies that supply its brands in many parts of the world. A number of mergers and acquisitions over the years have seen AB InBev increase its production, market and distribution of about of its beer 200 brands that include the popular global brand Budweiser Beck’s. In addition to brands such as Stella Artois, Klinskoye, Bud Light, Leffe Hoegaarden, Skol, Jupiler, Brahma, Quilmes, Harbin, Sedrin, Michelob, Sibirskaya, Chernigivske and Korona (Reuters, 2014; Solitro, 2013). The company’s production and distribution is based on a division of its brands into global, multi-country and local beer in order to take advantage of different tastes of its customers based on geographical and regional presence. The beer brands produced by AB InBev has been further been categorized into premium brands, mainstream, and sub-premium brands to take care of the economic aspects of their customers (Reuters, 2014). 2. Strategic theory This essay explores value chain analysis of AB InBev PLC that will provide a clear perspective on how the company achieves maximum process effectiveness. Therefore, this analysis will rely on key aspects of the value chain hypothesis introduced by Porter where the main activities under review will cover inbound logistics, operations, outbound logistics, marketing and sales, and service, which are all essential components in the operations of a company in the beverage industry (Porter, 2008). The importance of this value chain analysis is to find out how AB InBev PLC creates its competitive advantage and shareholder value that can only be attained through measures that ensure the cost of providing their products remains low. This is in order to generate a profit margin in addition to identifying and making assessment of competency in core areas of the company (Woodside, 2009). 3. Application of strategic choice model/s to the chosen industry sector a) primary activities Inbound Logistics (Suppliers) Inbound Logistics for any company covers all the necessary activities that take place to ensure uninterrupted supply of the necessary inputs and raw materials the company needs for a smooth production process (Dagoon, 2005). To have a have control over the supply of raw materials, AB InBev PLC has undertaken measures to cut down on the number of suppliers the various regions of operations. Through this initiative, the company hopes to develop closer ties with the suppliers, which will result in lower prices of raw materials, and better service in addition to making sure the company is not dependent on a single supplier (United States Securities And Exchange Commission, 2012). In terms of energy and water requirements to run the various breweries, AB InBev PLC depends on electricity that is acquired nationally while water is tapped locally from municipal water systems and private wells. Price instability in the energy sector has resulted in the decision to use natural gas as the main fuel for the plants. This approach of balancing between fuel and electricity has enabled the company strike a balance in energy requirement, as they are able to get adequate supplies of both sources of energy to conduct their business (United States Securities And Exchange Commission, 2012). Outbound Logistics Outbound logistics is another important aspect of value chain analysis as it targets how finished products get to the potential customer (Ross, 2004). Different regions have distinct distribution networks depending on patterns of consumption, market structure, and concentration of customers based on regions, regulation in different countries, and structure of retail sector. AB InBev PLC also depends on third-party wholesalers or distributors while also having direct distribution option in some markets such as Belgium. AB InBev PLC prides itself in being a customer-driven organization, therefore, the company has different policies for transportation based on the realities in existing in different geographical points all aiming at customer satisfaction. Marketing and Sales To improve sales, AB InBev PLC has realised the importance of brand promotion in business success (Woodside, 2009) introduced the “focus brands” strategy that target specific brands that they will invest the more resources in terms of finances, human resource and attention. This initiative has targeted a number of global brands, multi-country brands in addition to a number of local brands that have the high growth potential based on the analysis of respective consumer group (Warc, 2009). On marketing as an important aspect that improves the company’s sales, AB InBev PLC has developed the “value-based brands” approach, which analyses why consumers prefer certain brands with a view of strengthening such aspects as authenticity, ambition and friendship that will establish a relationship between the company’s brands and consumers. The importance of establishing value-based brands for the company is the determination of brands that need re-launching or in some cases development of new brands through reallocation of finances on need basis (Joseph, 2013). Mergers and Acquisitions The history of Anheuser-Busch InBev can be traced back to 1366 when Den Hoorn commenced its operation in Leuven and to 1860 entry of Anheuser & Co brewery, into the United States beer industry. The first mergers that led to a string of mergers over history is that of Artois with headquarter in Leuven and Piedboeuf of Jupille both located in Belgium resulting creation of Interbrew. The merger led to other similar ones in Belgium in the following years leading to the second phase of mergers that began in 1991 (Business History, 2008). In 1991, Interbrew began a second chapter of mergers concentrated on spreading its influence in other countries and regions. The company therefore commenced its ambitions in the Hungarian brewery industry, which was followed by further activities in the Canadian industry in 1995 when Interbrew took control of Labatt Breweries. Further merger took place in the Russian brewery industry through the announcement in 1999 that Interbrew will from then onwards be working with Sun to brew in Russia. The joint venture announced in Russian was then followed by the 2000 acquisition of Bass and Whitbread based in the United Kingdom (Fleury, A. and Fleury, M., 2011). More acquisition was still in store in the new millennium as Interbrew entered the German beer industry in 2001 through the acquisition of Diebels. Further mergers and acquisitions were conducted in 2001 involving Interbrew with Gilde Group, Beck’s & Co. and Spaten Breweries to further increase the brewer’s global presence (Fleury, A. and Fleury, M., 2011). Even as these mergers and acquisitions were taking place, Interbrew was still run as a family owned enterprise, which changed in late 2000 when its Initial Public Offering took place. From that point, Interbrew was converted to a publicly owned company with its share being traded on the Belgian Euronext stock exchange. After the Initial Public Offering, the company continued with its quest to expand when in 2002 it entered the Chinese beer industry through acquisition of Zhujiang Brewery and K.K. Brewery. However, 2004 was the year that came with major change for the company due to amalgamation of Interbrew and AmBev to form a new entity called InBev. InBev continued with the pace set by its parents when in 2006, the company made its first acquisition under the new name by taking over the Fujian Sedrin brewery situated in China. This acquisition propelled InBev into the third brewer in the Chinese industry which is the biggest in the world (Business History, 2008). The latest change of name took place in 2008 through amalgamation the company with another major Anheuser-Busch resulting in the current brewer-Anheuser-Busch InBev (Allen, 2012; BBC, 2009). AB InBev has continued with the legacy established since the days of Interbrew by its own mergers as seen in that of Modelo popular for the Corona beer brand (Schoenberg and Forden, 2013; Biers, 2013). Service AB InBev has a service system based on the different geographical regions that their breweries operate. b) Support Activities Organizational Structure The AB InBev organizational structure has the chief executive officer at the top of the company power structure. Under the chief executive officer are zone presidents for different geographical regions such as Latin America South, North America, Asia pacific, Latin America North, Mexico and Europe. The chief executive officer is assisted in the running of the company’s executive officers (AB InBev, 2014). Control Systems InBev has control systems that are supervised by the board of directors and the executive board of management in order to create and sustain sufficient internal controls and risk management systems. The company’s internal control systems have been designed to offer a guarantee that set goals and objectives on then efficient effective continuity of operations, provision of dependable financial analysis in addition to ensuring the company observances the industry’s laws and regulations (Anheuser-Busch InBev, 2011). AB InBev recognizes the risks that might hinder its operations such as having independent suppliers who might not have loyalty to the company therefore posing risks to smooth supply of raw materials. The company also recognizes the danger posed by volatility in the raw material prices, energy and water due to the changes in climate of various regions in the world. Competition from other beer producers is part of the risk factors that the company seeks to counter given the need to protect the profit margins and avoid making any losses in operations due to reduced market shares (AB InBev, 2011). Technological changes are also part of the risk factors as the company seeks to take advantage of new and emerging trends so as to de ahead of its competitors. Anticipation of consumer preferences and tastes is essential to sustainable markets since lake of foresight into future market trends might result in loss of customer base. The above risks and many others that are experienced in the beer industry have made AB InBev to strengthen its internal control systems in anticipation of any risk in order to come up with contingency plans. These internal control systems have been modelled on the demands of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) while AB InBev’s financial reporting is also based on EBM (AB InBev, 2011). Human Resource Management The company that community economic benefit will translate to the company’s wider success bases human resource recruitment and development for InBev on the belief. Therefore, the company recognizes the need to tap into the local skills when employing up to the manager position. The company’s global employment policy is to always seek employees from the local areas especially those who reside near the company’s operations with the aim of cutting down costs of hiring and maintain the workers. An employee will only be assigned to a different location when the local skill does not meet the necessary skills required for a given post based on the established International Mobility Policy. Through this undertaking, InBev has a vision of creating diversity of various teams working for the company (AB InBev, 2011). To establish the company’s employment policy in specific geographical regions, InBev relies on the laws and employment policies of the home and host country. The company has also put in place conflict resolution mechanisms that are based on host and home country laws that are handled by the International Mobility and Corporate Legal Department of the company (Navaresse, 2012). 4. Conclusion From the above value chain analysis, AB InBev has been able to take the leading position in the global beer industries by taking part in different mergers and acquisitions in various regions of the world. Even as the company establishes its operations globally, various measures such as sourcing for employees from local markets have enabled it maintain a low cost of production and distribution. References AB InBev. 2014. Anheuser-Busch InBev Company Profile. Available at: http://www.ab-inbev.com/go/about_abinbev/our_company/ab_inbev_company_profile.cfm [Accessed: 16 January 2014]. AB InBev. 2011. People and Community. Leuven, Belgium: Anheuser-Busch InBev NV/SA Allen, J. 2012 The Beliefs that Built a Global Brewer. 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Available at: http://www.marketingweek.co.uk/news/ab-inbev-to-boost-marketing-spend/4005853.article [Accessed: 16 January 2014]. Navaresse, D. 2012. How Engaged Employees Can Ensure Local Success of a Global Sustainability Strategy. . Available at: http://www.sustainablebrands.com/news_and_views/jul2012/engaged-employees-local-success-global-sustainability [Accessed: 16 January 2014]. Reuters. 2014. Anheuser-Busch InBev SA (BUD). Available at: http://www.reuters.com/finance/stocks/companyProfile?symbol=BUD [Accessed: 16 January 2014]. Porter, M. E. 2008. On competition. Boston: Harvard Business Press. United States Securities and Exchange Commission. 2012. Available at: http://www.barchart.com/plmodules/?module=secFilings&filingid=8543776&type=HTML&popup=1&override=1&symbol=BUD#D330420D20F_HTM_TOC [Accessed: 16 January 2014]. Ross, D. F. (2004) Distribution: planning and control: managing in the era of supply chain management. New York: Springer. Schoenberg, T. and Forden, S. 2013. AB InBev Wins U.S. Approval for $20.1 Billion Modelo Deal, bloomberg.com Available at: http://www.bloomberg.com/news/2013-04-19/ab-inbev-u-s-file-agreement-in-court-on-modelo-acquisition.html [Accessed: 16 January 2014]. Solitro, J. 2013. Anheuser Busch InBev SA is Ready to Wow Investors. Available at: http://www.fool.com/investing/general/2013/10/29/the-king-of-beer-is-ready-to-wow-investors.aspx [Accessed: 16 January 2014]. Warc. 2009. A-B InBev looks to "focus brands" Available at: http://www.warc.com/LatestNews/News/ArchiveNews.news?ID=25538 [Accessed: 16 January 2014]. Woodside, A. G. (Ed.) (2009) Business-to-business brand management: theory, research and executive case study exercises. Bingley, West Yorkshire: Emerald Group Publishing. Yahoo Finance (2014) Anheuser-Busch InBev SA/NV Company Profile. Available at: http://biz.yahoo.com/ic/47/47435.html (Accessed: 16 January 2014). Read More