Heineken Canada - Research Paper Example

Heineken Canada Operational Model Heineken uses several models in its operations. First, it uses organizational support model through which it aims at selling its services and products to external markets (global markets), businesses or the general public. Also, it uses market linkage model through which it aim at developing trade relationships with their customers, local firms, small producers and external market (Smit, 88). . Finally, Heineken uses service subsidization model through which it offers products and service to external markets and uses part of the revenue to fund social programs (corporate social responsibility) Company Evolution The story of Heineken started more than 140 years ago. It began in 1864 when Gerard Adriaan Heineken purchased a small brewery in Amsterdam. Since that time, the Heineken brand has been expanded by four generations of the Heineken family. The company has expanded throughout Europe and other parts of the world. Currently is brand is available in approximately every country on the planet and have more than 170 brands and 115 brewing plants in over 65 countries. It has an average number of workforces of 85,000 (Smit, 108). Life Cycle The product life cycle of Heineken can be divided into four major stages. • Introduction stage- this stage occurred several years ago. In this stage, the product experienced many challenges from already existing brands. The sales volume was really low. • Growth stage- here, the product was accepted in the market by the company’s customers. The sales volume or revenue showed a steep growth. The company currently enjoy over 15 percent market share in the global market. • Maturity stage- Heineken became a dominant player in both local and global market. Also, it has a substantial market share with stable volumes of sales. Heineken is currently in this stage of the life cycle. • Decline stage- this stage requires the company to be innovative to bring new dimensions and modifications of its products to maintain the sales graph. Growth Strategies Heineken has a strategically plotted acquisition policy to create commanding positions in key national markets. It tends to acquire major shares in national or local breweries that have strong national brands so as to have a good coverage of regional or national market (De, 59). Secondly, the company has a new top management structure aimed at driving and supporting growth as a global organization. It has also created a new mores stream Executive Board to connect operations, functions, and finance in a more effective way to create strengths for global functions and operating regions (Casillas, 290). Finally, Heineken believes in the delivery and concept of quality thereby creating benefit and value for Heineken as well as their reputation. These values help the company to do business successfully. Target Market Heineken mainly targets all adult consumers. However, its commercials portray its drinkers as successful, sociable, and fun revealing that it mainly targets successful middle-class men. It targets males from the ages of 22-35 particularly those who follow sports, like rugby because they completely support the Irish Rugby Heineken Cup. Nonetheless, nowadays Heineken also addresses the young in the population through differentiated mass market strategy. It also uses new packaging and a new format to attract women (Heineken website). Product Usage The products of Heineken Canada are used across the globe. Its products are widely used and enjoyed in most cultures and countries around the world due to its strong brand recognition. It has been successfully exported and distributed to every corner of the world (Heineken website). Purchasing Motivation Heineken has numerous purchase motivations that are encountered by their customers ((Smit, 90). • Functional motivation. Their customers seek to reduce time and effort that is devoted to making purchases. The company meets this by offering their products in retail stores that are convenient to customers. • Routine-loyal motivation. The company has customers who have chosen to remain loyal to a favorite store or brand to avoid risks of being disappointed by a purchase. • A relational motivation. The comp0any seeks to establish a close interrelationship with their customers. This makes them fell recognized as privileged clients (Jost, 85). Resources Heineken resources are tangible, intangible and management capability. Tangible: Heineken has invested so much in the infrastructure to ensure operation is working efficiently because plant and equipment are key to the production. It has breweries that use KHS Till plant technology (Heineken website). Intangible: Heineken has the most valuable brand name. They have built the name Heineken with premium brand. This has helped them to create a strong presence globally. The branding is a highly defensible competitive advantage that has brought strength to its expansion. Management capability: the company has implemented a new leadership competency model that outlines what is expected of all senior managers (Casillas, 290). Value Drivers Heineken Canada has several value drivers namely • Cutting-edge technology. Heineken has an advanced information technology security that has created opportunities for the company’s global business operations thereby increasing its connectivity and outside partners. Many of its breweries also use KHS Till plant technology which can process the output of over 140 kegs an hour. • Superior brand awareness. Heineken brand name is the most valuable asset of the company. It is a competitive advantage for the company thus bringing strength to its expansion. The company is able to stretch their production globally and add more money because of strong brand recognition. • Customer diversity. Heineken has a strong customer base due to its high-quality products. It owns and manages leading portfolio of beer brands in the world in terms of profitability and sales volume. • Human capital/ quality of the workforce. The company has a highly capable management team • Stable and increasing cash flow. The company has strong cash flows. Cost Drivers Several factors have caused changes in the cost of Heineken’s activities. Economy of scale The company has a machine that is able to perform activities more efficiently at larger volume thereby reducing costs of operation. As a result, Heineken has been able to increase the volume of their beer production. This enables them to earn higher profit per job. Learning The company has implemented several new initiatives to increase their employees' knowledge and skills. For instance, leadership competency model has reduced costs over time thus increasing efficiency. Vertical integration Heineken makes some of its bottles used to package beers in-house thus being able to reduce expenses and costs associated with outsourcing. Corporate- level Strategy Heineken has strategically plotted its acquisition policy to build commanding positions in key national markets. It tends to acquire major shares in national or local breweries that have strong national brands so as to have a good coverage of regional or national market. Also, it uses central support and benchmarking programs in order to improve sales, distribution policies, and local marketing. Heineken also integrates the acquired breweries according to standards set at corporate level to promote cost savings in the form of transport and import duties thus gaining competitive advantage (De, 59). Finally, the company aims at diversifying its operations. It owns a global portfolio of more than 170 beer brands. It has more than 115 brewing plants in over 65 countries. Business – level strategy Heineken uses the differentiation strategy so as to make themselves unique and distinct from other companies. The differentiation strategy helps them to produce products and services that are highly valued and unique. Heineken has non-price attributes that make their customers be willing to pay a premium. They use unique advertising and marketing campaigns to attract their customers and make them be loyal to their brand thereby making sure that they continue purchasing their products (De, 59). Functional- level strategy Heineken has created a new more streamlined Executive Board in order to connect operations, finance, and functions in a more effective way. The company has also instituted a new top management structure so as to drive and support growth and operations. This new structure ensures faster decision making (De, 109). Heineken maintains large R&D expenditures to achieve its long-term ambitions by accelerating the introduction of new products (innovations) into the market. International Strategy Heineken endeavors to attract, develop and retain international markets. It has organized the company into five territories divided into regional operations that include The Americas, Western Europe, Central and Eastern Europe, Asia-Pacific and Africa and the Middle East (Casillas, 290). It has 115 brewing plants in over 65 countries. The company uses transnational strategy as the brewing plants brew both local brands and Heineken brand. It seeks to balance the aspiration for efficiency with the desire to adjust to local preferences within numerous countries (De, 59). Value Chain Analysis The company distributes its products globally. The products are stored in warehouses that are strategically placed all through so as to minimize shipping costs to the stores. Its products are also offered in retail stores which are convenient to customers. Its distribution companies have installed a series of highly sophisticated terminals at the dealer to permit the delivery of orders in real time in line with the system of just in time (JIT). This reduces the volume of incoming materials as well as the problems caused by insufficient suppliers (Casillas, 291). Competitive Analysis The beer industry I very competitive and it is one of the world’s most competitive industries. The rivalry among the existing competitors is very strong. Competition to gain new market share is very intense due to the low switching costs of consumers. In fact, it may be depicted as “survival of the fittest” because most of the previous companies have gone out of the business and the surviving ones tend to control their costs, develop new strategies, invest money in marketing and be innovative. Heineken is a top competitive international business, and it has been rated both an international brewer and second largest brewer by revenue in the world (Casillas, 292). Competitive Value Chain Analysis Firm structure: the company is structured like holding company. Management: the management of the company is run by the Executive Board. It has Regional president for the five regions. Human resource management: Heineken is able to develop leaders by exposing its leaders to a wide range of businesses, with responsibility. The employees are allowed to take prudent risks as they try to improve their leadership and business skills. The company focuses on leadership management so as to ensure a smooth succession through its most senior management level thus giving it a competitive advantage. Technology development: The worldwide operations of Heineken rely heavily on information systems. The company outsources its information technology infrastructure, processes, and IT risk monitoring processes (Casillas, 290). Effectiveness of Strategies The strategies adopted by Heineken Canada have been very effective. First, its total cost management (TCM) has resulted to a huge cost reduction for the past five years. This has resulted into savings in fixed cost spending as well as marketing and selling expenses and raw materials and packaging costs. Second, the acquisition of Latin American markets and FEMSA has substantially strengthened its position thus increasing its market share in Brazil and Mexico. Work cited Casillas, José C, Francisco J. Acedo, and Ana M. Moreno. International Entrepreneurship in Family Businesses. Cheltenham [etc.: Edward Elgar, 2007. Print. 263 De, Kluyver C. A. Fundamentals of Global Strategy: A Business Model Approach. New York, N.Y.] (222 East 46th Street, New York, NY 10017: Business Expert Press, 2010. Internet resource. Heineken website: retrieved from: http://www.theheinekencompany.com/age-gate?returnurl=%2F Jost, P J. The Economics of Motivation and Organization: An Introduction. Cheltenham: Edward Elgar Publishing, 2014. Internet resource. Smit, Barbara. The Heineken Story: The 'lager' Than Life Tale of the World's Bestselling Beer. , 2014. Internet resource. The Heineken global strategies: retrieved from: https://prezi.com/49y4ysmbsyd8/the-heineken-global-strategy/ Read More