Competitive analysis of a business firm - Assignment Example

Download file to see previous pages... Introduction The company selected for the project is Anheuser-Busch Companies, Inc. It is a brewing company of America and operates in 13 breweries in the country. The company is based in St. Louis, Missouri. Apart from packaging and brewing operations, the company also engages itself in agricultural operations, recycling operations as well as manages subsidiary owned property. The company supplies its products through a network that involves 500 independent wholesalers as well as 13 wholly state owned enterprises (Anheuser-Busch, 2012). The successful business organizations understand the purpose of value creation for the existing employees, customers and the investors. They are also aware that the interests of the groups are inter-related. Sustainable value should be created for all the three groups simultaneously. From the point of view of the customers, value creation means availability of products and services that are useful to them. From the perspective of the employees, value creation means treating all employees in a respectful fashion and involves themselves in the decision makings while value creation for the investors means obtaining high returns on their investments (Holland, 2001, p. 3). The mission of a certain company should be defined in terms of the primary value adding activities. Therefore, it is of utmost interests for the managers to devote time to analyze the dynamics of value creation. But managers tend to take decisions that systematically reduce the long term possibility of the firm to create value. They tend to define the interests of the organizations narrowly and this view was reinforced by the financial accounting systems (O'Malley, 1998). It is possible for business to create value in the following ways: reducing the transaction costs (for consumers / producers) reducing the costs of producers changing the perceptions of perceived benefits The firms offer some advantages where the transaction costs are lower. Market transactions involve the use of real resources such as time and search costs as well as drawing up and enforcing contracts. Economies of scale can also crop us if the market transactions involve the use of real resources. The common ownership of the resources of production are sometimes less costly than a series of arrangements with independent contractors when there are specialized assets and expertise involved (Forbes, 2012). The factors driving value creation The history of the selected company is one of success as well as innovation. There has not been any real growth in the product market of the company in the time period under consideration in the graph above but the company faired particularly well in the stock market. In the last decade the domestic demand for beer went flat. The year 1996 marked the year where the company was able to create substantial value. In that year only 55 of the total produced in the company were sold outside United States. In the two year period of 1996 to 1998, the invested capital of the company grew by about 1.9 billion dollars. The enterpris3 value of the company grew by around 13.4 billion dollars (Arnold and Shockley, 2002, pp. 1-6). The estimated enterprise value of the company is shown in the graph below. The value of the company’s assets in place grew only slightly over the excess of capital invested. This indicates low growth of the existing market. The real value creation can be observed in the generation of 10 billion dollars worth of growth options for the company. In ...Download file to see next pagesRead More