Internal Analysis of Sab Miller Company - Research Paper Example

Sab Miller Company Internal analysis of Sab Miller 2.1 Mission and Vision: SABMiller is a global leader with 200 beer brands and functioning in over 75 countries having seventy thousand employees. They excel in local brands and are building brand portfolios that satisfies the needs and wants of customers. They have budding businesses even in soft drink industry and are the world’s principal bottlers of the products from the Coca Cola Company. The mission and vision statement of the company is as follows: Analysis of Mission and Vision of the company The mission of SABMiller has always been to develop such world class products which will be the first choice for the consumers, to nurture the local and international brands. They have built upon a clear strategic direction. Their strategic priorities include creating a balanced and attractive global spread of businesses, they focus in developing strong, relevant brand portfolios that win in the local market, sustaining as well as increasing the profit levels of local businesses, and they even leverage their skills at a global scale. The vision of SABMiller is to be amongst the top 3 most admired beverage companies. This they believe can be achieved through investment of choice, employer of choice and partner of choice. 2.2 Corporate governance The corporate governance is maintained at high standards by the committed directors which they believe to be the base for carrying out their responsibilities effectively. They aim for providing the right leadership and control over the environment to produce the value and even sustain the delivery of value to the entire shareholder’s of the company. (Ahmed, 2008, pp. 23-25)The corporate governance structure of the company comprises of 15 boards of directors amongst which five are non-executive non-independent directors and six are independent non-executive directors, and two are executive directors Mr.Clark the chief executive and Mr.Wilson the chief financial officer of the company. The chairman of the company is Mr.Manser. The structure of the corporate governance comprises of non-executive chairman, managing director, and some committees like audit, nomination, remuneration, corporate accountability and risk assurance, accountability committee and the business units. (SabMiller, 2013) Analysis of Corporate Governance: The operations of the board is to set strategic objectives of the group, to determine different investment policies, sets upon performance criteria, and forwards the planning and implementation of those goals along with various policies including the various risk parameters. There are specific matters reserved by the board such as approval of the financial statements, the business strategy being adopted by the group, the plan for the annual capital expenditure, major capital projects, managing the various changes in the group’s management and control structure, various risk management strategy, material investments and disposals, implementing various sustainability and environmental policies, and other treasury policies. The board clearly governs through the elected board committees and monitoring the system. The board applies integrity, accountability and principles of good governance through all the activities it performs and each of its directors bring independence and judgment to the role. By such defined structure each member of the board are well aware of their responsibilities towards the company’s stakeholders and the board keeps a regular review over the performance and the core governance principles. The executive directors are responsible for proposing various and implementing operational decisions. The non-executive directors contribute in formulation of strategy, decision making, and forming policies with the help of their knowledge. The audit committee’s responsibilities being to review and challenge the financial statement before final submission to the board, review and examine well the risk management system and internal control environment systems within the group and then carrying out analysis of the group’s overview, to recommend to the board regarding the appointment and removal of external auditors, to check the effectiveness of the internal audit process through focus on charter, staffing, annual work plans, organizational and reporting structure (SabMiller, 2013). The remuneration committee is responsible for the approval and assessment of remuneration strategy for the group and the company’s operations for the short-based incentive plans this even includes determination of short-term and long-term incentives for all the executives across the group. The corporate accountability and risk assurance committee assists the board discharge its responsibilities in relation to the corporate social responsibility, corporate accountability, sustainable development, corporate social investment, and ethical commercial behavior. The EXCOM (executive committee) helps the Chief Executive to perform its duties as delegated to him by the board. EXCOM co-ordinates brand and operational execution, delivers strategic plans, sets budgets and financial reports. They ensure that there is effective internal control and effective risk management process throughout the group’s operations (Sarni, 2012, pp. 98-101). 2.3 BCG matrix The BCG matrix is an external analysis tool for a company to find out the relationship between the business growth rate or the market growth and the relative position or the market share of the company. In developed markets the industry is dominated by few larger players. SABMiller tend to own multiple brands with different market positions. In such market it is easier for rivals to launch products and compete directly on price and gaining more of market share. SABMiller is facing the same competition where InBev in North America has come up with Anheuser-Busch this has helped the dominant brewer to bridge more gap between them and the SABMiller. This has greatly affected the future market share plans of SABMiller and now more of innovative methods are required by the company to close the gap between them and A-B InBev. The American industry is the largest growing brewing industry and there are many rivals coming up who are entering into direct price competition with SABMiller. This is a huge threat for the company but it has also got some opportunities to grasp like to acquire more stakes in the Brazilian market or to become the owner of China resources, the largest brewer in China. Both of these markets are matured and have growth estimates. From the stakeholders point of view there are certain key players to be pleased by the company. SAB acquired Miller due to the pressure from London stock exchange though they had their core competencies elsewhere. This decision was majorly due to over reliance of soft currencies in certain market. The Western European operations are a ‘dog’ and SABMiller should stop any further investment and exit from the market as any further investment will not result into any profitable venture for the company. But again this decision would not be easy for the company to execute as there will be expectations of the investors of a market presence in Western Europe. The investors see a need for the company to enter into the developed market (Grillo, pp. 50-54). 2.4 Organizational culture The culture for the employees in SABMiller is it is a place where employees are motivated to set targets that are really tough and challenging and to succeed in reaching those targets. The company believes in building such talents to go to the extra mile and being dissatisfied with the concept of average (Buchanan, 2010, pp. 33-35). The employees working with organisation takes accountability for all their actions and shares a sense of commitment, enjoyment and enthusiasm for the work they do. The organisation has a culture which is marked by restless desire to challenge the norm and has a pioneering enterprising spirit which underpins everything to do. Innovation is the key behind all the hard work of the people working in the organisation in order to constantly raise the bar (Lewis, 2012, pp. 53-54). The focus is on adding value and removing unnecessary bureaucracy. Employees working in the organisation are recognised for strong performance and rewarded according to their performance. The motivating factors in the organisation helps the people working to be enthusiastic are even have fun along with work (SABMiller India, 2013). SABMiller has a high performance and a high engagement work culture. Their culture reflects their success. It the way of working that defines their global identity, and has contributed towards the achievements of the company. The organisational culture of SABMiller not only defines the well being of the company but also portrays their challenging workplace. The culture of the organisation can be widely divided into four categories- Innovation is one of the pillars that form the culture of the organisation. There are great people working in the organisation generating new ideas and new ways of working where innovation is brought forth by the passion of the employees towards their work to constantly raise the bar. The second pillar is motivation; people are motivated in the organisation to always go for the extra hard work to become a leader and not to stay behind unlike some average performing people in other companies. The culture of this organisation is even to develop challenging spirits and a restlessness to become the best and succeed in performing the most challenging tasks. The last pillar is accountability wherein the people take the responsibility for all the actions they perform and work with full of enthusiasm and enjoyment (Oliver, 2011, pp. 456-458). 2.4.1 Organizational structure (The Official Board, 2013) The organisational structure of SABMiller is dividing into three main sections; the Chief executive officer has control over the functional directors and the regional managing directors. The functional directors are heads of areas Finance, supply chain/HR, corporate affairs, and legal/company secretarial and marketing departments. The finance head has control over the sub departments such as reporting, corporate finance, internal audit, strategic planning and treasury activities. The HR head has control over the sub departments of global technical, supply chain, talent management and performance management. The corporate affairs head has control over the M&A, IP, general counsel, company secretary ship, litigation activities. The marketing department head has control over the following sub departments of global brands, communication insight, innovation activities. The company current structure is segmented into four geographical regions with the current division of operations and department in Latin America, Europe, Africa and Asia. 2.5 Sab Miller Business System SABMiller has its operations on six continents in 60 countries and is brewing over 200 different beers. It was established in the year 1895 as Castle Breweries. SAB which stood for the south African breweries had laid down its foundation until 1990s on the south African market.SAB had acquired the Miller brewing group in 2002 after which it was known as the SABMiller and the main strategy behind the acquisition was the thought process of the company to acquire whatever they find is available. The world consumption rate of beer has grown from 22% in 1999 to over 28% in 2009. This increasing rate of consumption has shown growth in the company by acquiring interests in some of the emerging markets of South Africa, China, India and Eastern Europe. The result of the acquisition strategy of SABMiller has led to subsequent cost savings of the company and also increased the market growth rate of SABMiller (South Africa.info, 2014). 2.6 Sab Miller Resources Base The resources of business comprises of tangible and intangible resources which builds up the economic capital, nature capital and human capital. The intangible resources of SabMiller are the innovation, acquisition strategy, and the experience gathered by the firm over the years. The tangible resource is the infrastructure, human capital, and the various natural resources. SABMiller focuses on creating energy source from the agricultural waste. Treating the agricultural waste to generate bio-fuel required to manufacture breweries. Water is a very important resource for the company to produce the brewery. SABMiller has all its procurement done from Africa, Switzerland, Miami and Melbourne. It has entered into some strategic partnership with many different organisations to provide it with the resources necessary for the production (SABMiller, 2014). The patents and trademarks are the intangible resources of the company. Some other tangible resources are plant, equipment and property. The fossil fuel is used by the company to generate energy for the manufacturing process. 2.7 Sab Miller Activity System The activity system of SABMiller is to create innovative techniques to manufacture the best of the products possible and create a value creation starting from the first step of the supply chain that is to procure the raw materials from its suppliers and deliver the product to the end user. The different department of the organisation carries out a thorough analysis at every level to maintain the brand equity. SABMiller has even developed a model through which even the manufacturing process can be carried out even if there is a scarce of natural resources as the natural resources like energy and water are the important factors in production of breweries.(Richard, 2008, pp. 98-100) This model will help SABMiller to carry out is activities even when there is less availability of the resources and the demand in the market is more. The supply of Sab Miller will never show a regrowth even if there is scarce of natural resources in the future. 2.8 The Value Chain of Sab Miller Value chain of any company should be responsible and efficient to result business benefits such a reduced costs, more secure long term relationships which will give a competitive edge to the firm as well as make it a sustainable enterprise over long run, and improved quality. The value chain of Sab Miller proactively engages all smallholder farmers through partnerships and also encourages in sourcing the local agriculture wherever possible. It even focuses on developing the capabilities in local suppliers of the materials. It establishes relationships with small scale entrepreneurs to distribute and act as retailers for the products of Sab Miller. It even uses economic impact multiplier studies to optimise well the local economic impact. This value chain even encourages the suppliers to well aware of certain important sustainable development aspects such a water management and human rights. A more defined value chain model for the enterprise is as follows- The model comprises of the smallholder farms, the packaging is taking care of local support and proper training is imparted for the brewing and bottling department. The distribution and retail is taken care of by the small scale entrepreneurs with whom Sab Millers have a strategic partnership. The main objective through this value chain model is to create some sustainable economic opportunities for people, and the development of these suppliers helps the organization in terms of market opportunities, product innovation, and improved and secure supply chain quality. The main focus of the company is to provide a sustainable development and creating various opportunities for the different departments that make up the value chain. SABMiller aims at responsibly sourcing the resources. They have strategic partners to take care of the marketing and distribution channel at the local market. At each level SABMiller has involved the people who are well aware about the market and the techniques but due to lack of opportunities could not explore their experience (Acquinas, 2006, pp. 89-91). Their experience benefits the company by getting labour at cheap cost; on the other hand the opportunity which was lacking in the market is given by the company. So it benefits the suppliers as well as the company in equal way. 2.9 Products Offering and positioning among competitors SABMiller Plc. is the second largest brewing company ion the world. The company is also into the bottling business of Coca cola. The major brands of the company include Fosters, Millers Brewing Company, Peroni Nastro Azzurro, Grilsch and Pilsner Urquell. The company also has many local brands including Castle Eager which is the most popular beer in Africa. The company also owns brands like Cerveceria Nacional and Miller Coors. The global beers of SABMiller include the popular international beers like Miller Genuine Draft, Tyskie, Grolsch and Peroni Nastro Azzurro. Other than these, SABMiller has more than 150 local brands which are leading brands in their respective markets. Also, the company has its bottling operations established in 15 countries across the globe. The major competitors of SABMiller Plc. in the brewery industry include Asahi Breweries Ltd., Carlsberg A/S, Anheuser-Busch InBev SA/N, Heineken etc. The company has a strong position in the brewery industry, especially in the South African and the United States markets. The industry is characterized by high concentration and low switching cost (Jobber, 2012, p.115). But SAB Miller is sound in terms of capabilities, value and resources to facilitate continuous innovation and maintain competitive advantage within the industry. The company is using innovative ideas and adapting to local tastes to penetrate the emerging markets like China which are indicated to have great potential for development in the coming few years. 2.10 Outside-in perspective The brewing industry in which SABMiller operates is a highly attractive industry for the existing market share holders, but the market is not attractive for new entrants (Pride and Ferrell, 2011, p.44). Because the brewing industry is a highly concentrated industry which is dominated by the major players like Carlsberg, SABMiller etc., it will be difficult for other new companies to establish themselves in this market. But SABMiller is highly equipped in its resources and capabilities and has positioned itself as a very strong player in the industry. The power of suppliers is very high in the brewing industry across the globe, especially in the markets of the United States. The company is in an advantageous position related to the suppliers as it is an international brewing company, it has sufficient resources and capabilities to find and maintain suppliers to make the business profitable and high performing. The more matured and developed markets in the brewing industry are dominated and consolidated by major large players. Therefore, SABMiller being one of the largest brewing companies owns a number of different brands to cater to the needs of the different customer segments. As such they use their resources to position the different brands in the market to achieve a wide range of objectives and a higher percentage of the market share. The company is continuously innovating in terms of product, packaging and the employment of resources to create value and maintain originality in the brands (Kotler and Keller, 2006, p.15). The company operates in both the emerging markets as well as the developed markets which make it necessary for the business to employ its resources and capabilities for creating high value and innovativeness in its products as well as brand perception in the minds of the consumers (Henry, 2008, p.90). 2.11 Strengths and Weaknesses of Sab miller A SWOT analysis of Sab Miller is done to understand the internal as well as the external factors which affect the performance and functioning of the company. Strengths: Brand Image: SABMiller is the second largest brewery company in the globe. The brand image is very strong with a number of products launched under its various portfolios to cater to a wide array and variety of consumers throughout the world. International Presence: The Company has been an established player in the developed countries. It is also expanding its operations extensively in the developing countries with an aim to tap the potential markets. The product portfolio of the company is internationally recognized and acts as core strength for the business. Environmental consciousness: SABMiller is renowned for its efforts to give back to the society. The CSR activities of the company are innovative and highly beneficial for the society and the planet. Resources: The resources and capabilities of the company add up to the strengths of the company. The company has a strong base of resources that facilitates its operations across the world and also provides the opportunity to expand the business in newer markets. Diversification: The diversification process of SABMiller is extremely innovative and beneficial. The company has diversified its core business into a number of alliancing business lines and has been successful in each of them. Especially The Lite Beer product range has been extremely successful in many countries of its operation including South Africa and the United States. Weaknesses: No dark beer segment: SABMiller focuses on premium beer and light beer and does not have a dark beer segment in its product portfolio though many consumers prefer dark beer over light beer. Use of preservatives: The use of preservatives in the brewing processes often make a perception of the brand to be inferior than other strong contenders lie Budweiser, Heineken and Carlsberg. Also, there is a common perception of the brand as a mass producing brewing company. Opportunities: Emerging markets: SABMiller can concentrate on expanding its operations to the emerging markets like Central Asia, China etc. Partnerships: The ability to consolidate with other companies in the brewing industry and buying smaller breweries can be considered as other major opportunities for the business. Internet: Focusing on effective advertising and promotion through the internet in this era is another potential opportunity for the company. Foreign investment: SABMiller can use the foreign investments as a beneficial opportunity to expand their business processes which would be highly beneficial in the light of globalization. Threats: Taxations and Regulatory policies: The changing regulatory policies for the brewery and liquor markets are posing threats for the operations and profitability of the company. The increase in the government taxation rates on breweries and liquor manufacturer and marketers may lead to a decrease in the profitability of the company. Competition: The competitive level in the brewery industry has increased to a high level. The industry is saturated with a number of major players holding chunks of market share. Competition from substitute beverages like cold drinks and fruit juices are increasing with people becoming more health conscious. Changing consumer demands: The preferences of the consumers are changing with the availability of a number of options from the different liquid brewing companies. Price wars: The brewing and liquor industry is characterized by price wars in which the major players compete to provide better value products at lower prices. The price wars act as threat to the company as this may lead to a decrease in the margin of the company (Carpenter and Sanders, 2009, p.451). 2.12 VRINE Model The VRINE analysis of SABMiller is done to understand how the company can gain competitive advantage and perform better through emphasizing on the five factors of value, rarity, imitability, non-substitutability and exploitability (Kotler, 2001, p.16). Value: SABMiller has high brand value and innovation factor associate with the company which ensures that more value is created for the customers. The resources of the company help to gain competitive advantage. The physical resources have lesser value, the financial and human resources have high value. Rarity: The rarity factor of the company is medium. The resources used are unique and expensive. Also, SABMiller has resources and capabilities which are heterogeneous in nature. The physical resources are rare whereas the financial and human resources have low rarity factor. Imitability: The resources and capabilities of SABMiller are less prone to imitability as the cost to imitate these resources is very high and the resources exist in shorter supply chains. Non substitutability: The Company has distinctive capabilities which are difficult to substitute. The capabilities and resources including financial, organizational and human resources are flexible and unique. Exploitability: SABMiller is a strong company with respect to its capabilities and resources. The company is in a position to exploit its physical, financial as well as human resources to draw benefits for the business. References Ahmed, S., Gilkar, N., and Darzi, J., 2008. Organizational Behaviour. New York: Atlantic Publishers. Aquinas, P., 2006. Organization Behaviour. New Delhi: Excel Books India. Borzel, T. A., 2013. Business and Governance in South Africa. Africa : Palgrave Macmillan Buchanan, D., and Hucznski, A., 2010. Organizational Behaviour. New Jersey: Pearson. 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