SABMiller Strategy with Marks and Spencer - Case Study Example

SABMiller Strategy with Marks and Spencer Contents SABMiller Strategy with Marks and Spencer Contents 2 Question 3 Strategies of SABMiller 4 Conclusion 6 Reference 8 Question SABMiller has enjoyed major growth by becoming a global business. Would this strategy be equally successful for M&S (Mark and Spencer)? SABMiller was the second largest brewer in the world with its acquisition of American brewer miller in the year 2002 and group Empresarial Bavaria in 2005. SABMiller had a wide range of its product. It portfolio ranges from international brands to local brands. Some of the international brands include Pilsner Urquell, Miller genuine draft, Peroni Nastro Azzurro and Grolsch and its local brand portfolio comprises of Aguila, Miller Lite, snow, Castle Lager and Tyskie. In spite of being a global brand analyst felt that its profits were in soft currencies, thus any devaluation of currencies would lead SAB to a major downfall. Also the need of its existence in developed markets was felt. In 1999, SAB got listed in the London Stock Exchange with a motive to compete with other brewers so that it can open up opportunities around the world. But the company faced problem as its share price lost 15% in 2000. But SAB was able to overcome the challenges and succeeded in acquiring brands like Miller Brewing Company and become the second largest brewery in the world. The company continued its acquisition and gradually SABMiller stock became the best performer in the world competing with the world’s biggest brewer. SABMiller adopted the strategy of international expansion as well as of market penetration. With the acquisition of some world know brewers it had become the second largest company in brewers. According to Graham Mackay, there would be a shift towards the global beer brands and consumer preference for premium beer and also a consolidation in the industry where SABMiller could invest in assets in the developed and emerging countries. During a period, the acquisition seems to be out of the scenario, the opportunities were less as compared to the early stage. The large deals got fewer and ABInbev had become the largest brewer. But this incident did not affect much the growth of SABMiller. The company strategy focused on the short term, medium term and long term growth. Strategies of SABMiller The short term goal is mainly to concentrate on the company’s strong and established operations in countries like South Africa, Europe and Central America as these are the markets with a future in organic growth. While planning for the medium goal, the company emphasises more on big acquisition which are potential to produce a sustainable profits. And for the long term, SABMiller have been building positions on the emerging countries like China and India, as they are capable of generating high revenue. Thus the chairman believes that this strategy differentiates the company from its competitors (SABMiller, 2004). As per the analysis, the company resources, diversification and its brand name are the strength of the organisation. Weak brand recognition in emerging country and strong market competition represented its weakness. The management should concentrate on improving its position in the foreign markets. The changing trends of the consumers can pose a threat to the company. With the introduction of new advertisement, the threat can be reduced. The company opportunities lay in the increased presence over the internet, in emerging markets like Europe, Central Asia, foreign investment etc. Marks and Spencer is a retail based organisation which deals in clothing, foot wears, home furnishing, gifts and has a chain of about 294 retail stores in United Kingdom. The retail business experienced success in terms of delivery of high quality and of high reliability of brands which helped it to earn more profits and market share. The company followed a strategy which was already tried, tested and was a trusted recipe unlike SABMiller which concentrated on innovations. Marks and Spencer followed some fundamental principles which stated to offer its customers a high quality, attractive merchandise and well designed brands at affordable prices, to encourage the suppliers to use the modern techniques, provide friendly service, improve the efficiency of its business and build in good relation with suppliers, customers with whom Marks & Spencer deals with. The company was able to follow this fundamental principle. All the retail outlets of Marks and Spencer plc were identical, which lead to consistency in the image and its standard of products. But the company did not allow it s managers to respond to the local needs of the customers. It was believed that the company had its own world of operation. But SABMiller always concentrated more on the needs and requirements of its customers and respected their customers. Thus SABMiller stood ahead of M&S in terms of serving its customers. The chairman and the CEO of Marks and Spencer, Sir Richard Green bury, also followed the fundamental principles of the business. During the tenure of Greenbury, Marks and Spencer plc held more than twice the market share compared to other retail business thus the changes in the mode of operation were less and the strategies adopted remained unchanged. A survey on the customer satisfaction showed a decrease in the satisfaction level, the store did not have any fitting rooms, accepted no credit cards and ignored the loyalty card schemes. The employees, customers, the mangers, and the investors lost confidence upon him and thus he was replaced by Stuart Rose during 2004. He was seen as an inspiration and positive appointment by the investors. But Rose followed a strategy which was under promising and over delivering in terms of expectations. He did not express confidence over his investors and continued to project humility. This is a major reason why the company, Mark and Spencer was not a global success like SABMiller. The investors, customers and the employees trusted the Chairman and the company. But Rose believed in five core values which would bring him back Marks and Spencer’s customers. They are value, quality, innovation, service and trust. Applying these values Rose was able to acquire Per Una for 125 million, developed supply chain which reduced the unnecessary cost, the company went for market penetration, and upgraded the stores. The staff were given training and created a can do attitude among the employees. After a struggle the strategy adopted by Rose paid off as the Company reported an increase in sales and the share price rose to 400p barrier and the apparel section were heralded of being fashionable and stylish. According to analysts, M&S had ignored the dynamism of the market place; its organisational culture was not successful which was the reason of its failure was in 1990s. Today the company is making efforts to keep up with time so that they can get back the position (Johnson, et.al, 2011, p.657). Conclusion SABMiller focused on the mergers and acquisition in order to become the global brand. The company had acquired many big brands which lead it to become the second largest brewer company in the world. Thus SABMiller adopted the strategy of international expansion through mergers and acquisition and also by market penetration. It had acquired some big international brands. Marks and Spencer a retail business did not have a long term strategy which led the company lose its market share. The share price of M&S dropped drastically during 2008 and continues to operate at a low market price till date. M&S could not go into acquisition because of financial instability; it could acquire only a handful of companies. Thus, the strategy followed by SABMiller of mergers and acquisition would not be successful for M&S. M&S depended on its old rules which did not allow it to introduce new products which led to lose its market share. SABMiller with its presence felt globally was one of the top most brands in the country. Marks and Spencer possessed a range of resources which proved to be the competitive advantage in retailing. The following figure shows how the resources gave it a competitive advantage (Collis & Montgomery, 2008). Figure 1: Competitive Advantage of M&S (Source: Collis & Montgomery, 2008) The internal structure of M&S was also not stable. The CEO of the company took a long term approach and realised it latter that the fundamental principles needs to be changed. The main fault was it lacked a long term strategy unlike SABMiller which followed its long terms, medium term and short term strategy to become a global business. With globalization the company has an opportunity to go global and improve and expand its business. The company can consider more of overseas suppliers which would add on to be cost advantage and use of technology to gain a competitive edge over its competitors. Despite of international expansion the company still suffered certain setbacks which inhibited the growth of sales. M&S made mistake in terms of target audience, promotional needs and other marketing variables. However, M&S has improved its marketing strategy and is performing well in countries where it operates. Marks and Spencer has adopted the franchise strategy and had become the leading retailers in UK with an annual sale of 8 billion and more than 60,000 employees worldwide. It has opened 450 stores in about 30 countries (Marks and Spencer, 2011). The year 2007 was marked as a successful year for M&S as the company tied up with Amazon and inaugurated an online store which earned the company revenue of 100million by the end of 2007 (Marks and Spencer, 2011). M&S also improved its clothing and contributed to fashion and style to all the section of population (Worth, 2007). Therefore M&S can operate in emerging countries and open more of franchise so that the company can grow and survive during its hard times. SABMiller adopted the strategy of building positions in emerging countries like India and China, which helps it to differentiate with the rest of its competitors. Reference Collis, D.J. & Montgomery, C.A. (2008). Competing on Resources. [Online]. Available at: http://hbr.org/2008/07/competing-on-resources/ar/1. [Accessed on November 3, 2011]. Johnson.et.al. (2011). Exploring strategy: text and cases. Prentice Hall. Marks and Spencer. (2011). International franchise. [Online]. Available at: http://www2.marksandspencer.com/thecompany/our_stores/world.shtml. [Accessed on November 3, 2011]. SAB Miller. 2004. Our strategy for growth. [Online]. Available at: http://www.sabmiller.com/files/reports/ar2004/Chief+Execs+review/Our+strategy+for+growth/index.html. [Accessed on November 2, 2011]. Worth,R. (2007). Fashion for the people: a history of clothing at marks and Spencer. [Online]. Available at: http://jdh.oxfordjournals.org/content/20/3/267.extract. [Accessed on November 3, 2011]. Read More