Corona in the Global Beer Industry - Case Study Example

 I. What are the dominant business and economic characteristics of the global beer industry? The global beer industry is an industry that has high startup costs, and where organic growth is limited, that is why during the past several years, mergers and consolidations have been made, which has resulted in just a number of top producers among the world, both because of high capital requirements for a player's operations, and economies of scale is vital in order to remain profitable. Essentially, the global beer industry grows organically up to a certain extent. II. What do you see as the key success factors for firms in the global beer industry? The key success factors for firms in the global beer industry includes good distribution strategy as well as good marketing strategy. Since a beer is not consumed because of its taste, crafting a solid marketing strategy that would focus more on the consumers as to the image of the beer, creates a demand for it and strengthens the brand. Then companies have good distribution systems in order to make the beers available to consumers. III. What does a strategic group map of the global beer industry look like? How strongly is Grupo Modelo positioned in the industry? How favorably does it compare with its closest Mexican rival FEMSA? How favorably does Grupo Modelo’s position compare to that of Heineken? The strategic group map of the global beer industry with dimensions such as beer quality and market volume, Grupo Modelo would be on the lower right side, Heineken at the upper right side, with the rest of the industry at the middle. Grupo Modelo is positioned in the industry with its escape positioning. This has given the company an edge over its rivals in the US market. However, at the global market its positioning is quite shaky as this image is not embodied in the global brand as a global strategy. In terms of local operations, Grupo Modelo fares better than FEMSA as apparent in its market share. Internationally, FEMSA does not fare as good as Grupo Modelo as FEMSA has failed on its international venture. In comparing the positioning of Grupo Modelo to Heineken, Grupo Modelo has a positioning that targets a wider market, as it is based on the image that is associated with it, in contrast to Heineken's premium claims which is more based on taste. Because taste is not the most important attributes that beer and non-beer drinkers put premium on, Grupo Modelo's positioning is on a stronger ground. IV. What are the resource strengths and weaknesses of Grupo Modelo? What competencies and capabilities does it have that its chief rivals don’t have? What market opportunities does Grupo Modelo have? What threats do you see to the company’s future well being? What conclusions can we draw from the SWOT analysis for Grupo Modelo? Grupo Modelo's strengths include the company's marketing prowess as well as its distribution system. Its weakness includes its lack of solid offering to the market in terms of the quality of beers to compete against those of its rivals. Grupo Modelo's success lies in its good marketing and distribution system. However, if the consumers' preferences or lifestyles have changed and suddenly these beer drinkers put premium on the taste more, then it can be a threat to the company. The company's exposure to fluctuating exchange rates can also pose some threat as regards its profitability. Also, the merger from its major competitors abroad is a huge threat to the company, if these two can combine their resources to win the market share over it. From the SWOT analysis we can conclude that Grupo Modelo has matching competencies and capabilities to seize the opportunities, although it must be prepared for threats which are really significant, and could affect the company adversely. V. What is your assessment of Grupo Modelo’s financial performance and financial condition from Exhibit 6 in the case? Is the company in good financial shape? Why or why not? Please use the financial ratios in Table 4.1 in Chapter 4 to develop calculations in support of your assessment of the company’s financial performance. The company is growing well, and looking at the company's return on equity is high at 13.9% and increasing. The operating efficiency ratio is also high, as the ratio of net income to sales is at 14.7%. The company's asset turnover ratio is very high as well at 63.44%; meaning it is very efficient in employing its assets. It has a very low debt-to equity ratio, which lessens the risks of default associated with the firm due to its conservative debt policy. All in all, the financials of Grupo Modelo are strong because of its profitable operations and sound financial policy. VI. Is competition in the global beer industry best characterized as global or multi-country? Why? Which type of international strategy discussed in Chapter 7 is Grupo Modelo using in its international operations? How does this compare to the strategies of FEMSA and Heineken? What are the strengths and weaknesses of Grupo Modelo’s international strategy versus those of its main rivals? Yes, the competition in the global beer industry is international, not global. Grupo Modelo's strategy vary from each country. Its success in the US is dependent on its 'fun in the sun' campaign, which is its positioning in that market. As a global brand, it does not take a global positioning strategy that would distinguish it from competitors. FEMSA on the other hand is consistent with Heineken's global positioning strategy—which makes them good partners. The major strength of Grupo Modelo's international strategy is that it is through to the heart of the consumers'; it answers an insight. Its weaknesses include the lack of uniformity for it to be known for something as a global brand; this is more costly for the company because it does not benefit from the economies of scale that a global strategy can bring, like those of its rivals. VII. Based on your analysis of the global beer industry and Grupo Modelo’s situation, what problems and issues does the company’s top management need to address? Which ones are top priorities? Which are low priorities? How concerned should Grupo Modelo be about the potential merger between InBev and Anheuser-Busch? The major issues that the top management needs to address include the threat of the potential merger of the two global beer companies. With such a large scope of operations and resources, the company may find it hard to compete against them in other target areas for growth. In line with this, the company needs to strengthen its positioning with strong a global strategy if it plans to enter new markets. This can also ensure that the company benefits from the economies of scale, which could add to its profitability. Since the global beer industry's organic growth is limited, it is important for the company to adopt measures to ensure its survival, such as adopting a global versus an international strategy as well as strengthening its hold in the US market. VIII. What actions would you recommend to Carlos Fernandez to help Grupo Modelo sustain or improve its competitive position, especially its international operations, and its long-term financial performance? Carlos Fernandez should first consider adopting a global approach to doing business. That means, defining a strong positioning strategy for the brand, as well as identifying global market segments for its products. By utilizing a global positioning strategy, the company can benefit from economies of scale especially in the field of advertising. With a well-defined global target market profile, the company can find similar markets in terms of culture that could best respond to the image that it offers in its marketing efforts. That way, it can earn a lot more revenues abroad, while keeping the costs down, and having huge retained earnings amount that could influence its long-term performance in the future. If the company can also resort to other cheaper modes of entry other than export, such as foreign direct investment especially if the market is too big like in the US, benefits would be greater too. Read More