Anheuser Busch SWOT Analysis - Essay Example

?Anheur Busch SWOT Analysis About the company: Anheuser Busch Companies is the leading beer brewer. It produces the world’s largest selling beer brand i.e. the Budweiser and Bud Light. Anheuser Busch falls under the management of its corporate parent Anheur Busch InBev.Anheuser-Busch l started as a small brewery in 1860 in St Loius by Eberhard Anheuser. The company was a pioneer in introducing pasteurization to keep the beer fresh and also was the first to use refrigerated cars for transport of beer. The company's early innovations also included a network of railside ice houses to preserve the beer. It was in 1981, that this small firm became Anheuser-Busch International and currently owns 12 breweries in the US and 20 breweries outside the US. The flagship brand of the company is Budweiser which is brewed in 10 countries and has a global market. Other brands include Bud Light, Michelob Honey Lager, Michelob, Busch, Busch Ice and Bare Knuckle Stout. The presence and the strength of the company as continued to grow and it was the largest brewer in the United States in the year 2007. (Leone, 1995) The company's goals are to extend its position as the leading brewer internationally. This is perceived would be achieved by increasing its share in the domestic beer market and also extends its presence internationally. It is tapping thirsty markets internationally by using two pronged strategies for growth. These two pronged strategies include expanding the Budweiser brand globally and simultaneously strengthening equity partnerships with other large brewers around the globe. Since the company produced two thirds of all beer in the US, it could easily be assumed that the local market was saturated with Anheuser-Busch products. It was evident that the linear growth model that the company has been following for the last so many years will have to be stretched beyond the boundaries of the United States if the company has to make its presence felt. Section II- Strengths and Weaknesses Strength no 1: Cost effectiveness The company has adopted its strategies to revolve around its key strengths and opportunities. Its biggest strength lies in its ability to produce cost effective products by capitalizing on product development expertise within the company. It also used its substantial capital for equity investments and acquisitions. The tax laws and regulations caused it to change its prices to adjust for tax changes. The company is also not new to low cost packaging and production for new markets. It has a cost strategy for the economic segment and is an expert at using the value chain to assess the supply side of its production. Thus its two pronged or rather multiple pronged strategies were based on its core competencies. Equity investments include a $105 million investment to own 10% of Antarctica and to control 70% of Antarctica’s operations. It again involves the exchange of representatives on both the company's boards. This deal helps Anheuser-Busch garner a share from the huge Brazilian beer market which is growing at a rate of 15% annually. Besides the coalition and partnership, another move by Anheuser-Busch includes a licensing agreement for a new company. This will be a joint venture where Antarctica will brew Budweiser in Brazil. This joint venture is an example of production in the host country and will be 51% owned by Anheuser-Busch and 49% by Antarctica. This local production will maintain Budweiser quality standards and allow for more competitive pricing as importing costs and taxes will be eliminated. (Nelson, 2005) Here again, like in all global markets Anheuser-Busch capitalizes on its beer making excellence and combines it with the expertise and the reach of market leaders in the host countries. Normally a coalition results in the increased sales of products of both companies and a more competitive beer market which results in benefits for both suppliers and consumers. Strength no 2: Leading market Position Anheur Buscher also enjoys the leading market position in the industry. It kept its share of the market by extensive advertising and promotion and it off setted threats and weaknesses by investing in its core beer business. Its strategies also include also made use of its core competencies like managing numerous brands at the same time and developing a different alcohol rate lager. The ability of Anheuser-Busch to cooperate with the local companies is also unquestionable as it built suitable alliances. It also has the Research and Development knows how as the company possesses substantial capital and it is managed internationally. Weaknesses: Weakness no 1: Highly concentrated Market The market in which the company operates is highly concentrated. The competition is very tough and keeping up with the growing competition is a tough ordeal. It is important for Anheur Buscher to retain its competitive advantage by focusing on economies of scale while producing quality products. The deal is to bring down costs while fighting out competition and driving home. Weakness no 2: High dependence on whole sellers Another weakness of the company is its high dependence on whole sellers. These whole sellers exercise high bargaining powers and can take away profit margin from the organization. In its bid to counter the dependence on whole sellers Anheuser Busch should focus more on increasing sales via their own outlets instead of supplying and distributing extensively to whole sellers. Section III- Opportunities and Threats Opportunity no 1: Global opportunities in China There is a huge market for beer in China. The driving force for this is the huge population in China and the rising demand in the process. The company can capitalize on it by growing its operations in countries like China and Mexico. The company should enter into strategic deals with organizations over there and channelize sales in the process. It will allow the company to focus on its core competencies such as quality of the beer, its image and distribution networks. Quality of the beer can be enhanced by introducing the technology and the practices that it employs in the US. Opportunity no 2: Brand image improvement Another opportunity lies in the improvement of its brand image by using advertisements and promotions. An attractive image will be maintained by using advertisements to attract adult customers and promotional activities for which it is already known in the US. A supreme and efficient distribution network could be developed and used for its products which will allow for its products to be known throughout the country. A national supply and availability will lead to the path of the Budweiser being known and used nationally. Capturing the market in this way will automatically put the company's brands in premium and super premium segments of the beer industry. Threats : Rising Raw material prices and Industry consolidation The threat for the company lay in the rising raw material prices. Environmental pressures such as high inflation rate and rising oil prices have led to increase in raw material prices. There is a threat of bargaining power of suppliers. If the threat is not countered or rectified on an immediate basis, the company’s cost effective strategies would be rendered useless. There is also the threat emerging from industry consolidation for the company. The company needs to undertake efforts to counter these threats. Conclusion: Thus Anheuser-Busch is not just a brewer par excellence but an excellent strategist. Every move in new markets globally has been carefully selected to ensure growth and profit. This has obviously and inevitably resulted in increased sales and soaring profits giving it a 20% international market share (pre merger data). (Nelson, 1995) It combines its expertise and local company's market knowledge and supply sources. In all countries the company produces its own beer and holds equity investments in the leading companies. It also uses other company's expertise and combines it with its own best practices knowledge. It develops promotions, advertisements and provides administrative support to those coalitions and acquisitions. In countries where the market demand is very huge, it should acquire companies and takes the risk of setting up its own system entirely. 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