Position of SABMiller - Essay Example

? No Module BHS0027 Word Count: 2451 Strategic Management Introduction: SABMiller is known to be one of the leading brewers in the world. There are more than 200 beer brands of this company. The company operates in around 75 countries with around 70,000 employees working across the world for the company’s production and delivery of not only beers but also soft drinks. The company also holds the position of the largest bottler for the products of Coca-Cola Company. The company has excelled in its products and in the way they try to satisfy the customers. The brands of the company include international beers such as Pilsner Urquell, Miller Genuine Draft, Peroni Nastro Azzurro, and Grolsch. Some of the local brands are also considered by the company that includes Aguila, Castle, Snow, Victoria Bitter, Miller Lite, and Tyskie. The company has been successful in creating its position in both the emerging as well as developed markets across the globe (Overview, 2012). The present study has been considered to make an environmental analysis of SABMiller. Environmental analysis involves identification of the environmental factors that can affect a company, and hence their nature and impact on the level of success of the company. Depending on such factors, if identified, a company would be able to consider measures accordingly such that any negative impact may be prevented. SWOT analysis, PESTEL analysis, application of Porter’s Five Forces are some of ways through which environmental analysis of a business can be done (Business Environment Analysis, n.d.) and these will be applied in the present study to have an understanding on SABMiller company. Position of SABMiller: SABMiller is older than the state of South Africa itself and has faced several challenges in determining the position that it currently holds. There were several business restrictions that SAB had to fight by ruling over the production of beer along with acquisitioning competitor companies and enhancing the facilities of production and distribution. The large brewing companies accounted for 17 percent of the market in the early period of the 1990s. However, by the year 2009, these companies have started accounting for around 45 percent of the market that reflects on the increasing competition. SABMiller has thus since 2010 considered strategizing more focusing in the impacts of the environmental factors (Johnson, 2010, pp.643-644). SABMiller’s operations in the present day may be represented through the following chart: Figure 1: Summary Scope of SABMiller Operation Today (Moulaeifar, 2009, p.2). SWOT Analysis: SABMiller: SWOT analysis is a technique that enables an understanding on the strengths, weaknesses, opportunities and threats of a business organization thereby allowing the business to consider measures accordingly for the benefits and success of the company. However, this technique makes the strategic planning of the business highly formal (Jacob, 2009, p.9). From the case study and other readings, the strengths, weaknesses, opportunities and threats of the company could be learnt. The strengths of the company are reflected through its operations that are spread across the globe, and taking advantages of locations like India, China, Vietnam, and African markets. The worldwide knowledge of the company is good in terms of entering new markets creating its presence. The market dominance of the company being the second largest brewer too adds to its strengths. In terms of value addition, cost leadership, economies of scale and efficient distribution, the company has a competitive advantage over other brewers. Also the company has a strong presence in the US (Johnson, 2010; Moulaeifar, 2009, p.5). The company’s weaknesses include lack of assets in Western Europe that limits the company’s operations in the region. Moreover SABMiller does not have any assets in the markets where there could be major growth for the company. Thirdly, the income level of individuals largely determines the level of sales and hence beer is still consumed mostly by the high income level. The threats of the company include other brewing companies being developed and acquisitioning smaller companies and making them larger in size. The company is also trading down that can pose threats to their future endeavors. Thirdly, other big companies can be expected to be larger and bigger in their operations. Moreover, with the population being ageing, their chances of consuming beer also lessen (Johnson, 2010; Moulaeifar, 2009, p.5). However the company has certain opportunities as well in spite of its weaknesses and threats. Firstly the weakening economic climate can be taken advantage of by the company. SABMiller has the opportunities to attempt for acquisitions of divestments considered by other companies or the company can make investments in other brewers as well that are facing tough times owing to the weak economic state. Secondly, the company has not considered any acquisitions in the recent years. This improves the position of the company enhancing its growth. Thirdly the company can try to focus on the Middle East countries like Iran, United Arab Emirates and Saudi Arabia where there is a huge demand for non-alcoholic beer (Johnson, 2010; Moulaeifar, 2009, p.5). SABMiller: PESTEL Analysis: While SWOT analysis considers the internal factors associated with a business, PESTEL analysis includes the external factors that are required to be understood for a business to operate successfully. These include the political, economic, social, technological, environmental and legal factors that might have some impacts on the performances and achievements of a business. Considering the case of SABMiller, studies reveal that the political, social and economic factors are mostly influential on the functions and performances of SABMiller Company (Moulaeifar, 2009, p.3). Considering the political environment, the strategies of the company requires huge political compassion since lots of dealings are associated with the governments, partners, local communities working for the company, and the employees. These include several acquisitions as well that the company has undergone. For instance, in countries like Denmark, beer cannot be bought by law since canned beers are not allowed due to environmental reasons that cause a threat for the company. Moreover there are continuous changes in the laws and regulations affecting the foreign as well as domestic operations. Changes in competitions, pricing and global market shares also affect the alcoholic business environment. The company’s entry into new markets also largely depends on the political and economic conditions of the state (Moulaeifar, 2009, pp.4-12). Economically the effects arise from the direct linkage of the consumption of beer among the population and the level of income. With conditions like the global recession, the economy of any country gets affected thus affecting the level of purchase of products like beer. However with the conditions regaining their normalcy, there is an increase in the consumers that proves to be an opportunity for SABMiller. Again with overcapacity in the markets of beers, oversaturation might prove to be threats for the company. These factors reflect on the huge impact of the economic environment on the company’s results. Social conditions also have a major impact on the operations of SABMiller. Consumers believe foreign beers to ensure higher quality. Healthier lifestyles are on the other hand practiced by many that can reduce their consumption of beers creating threats for the company. With greater awareness and gain of knowledge people are now more concerned about the health effects of beer and are turning more towards nutrition filled products realizing the negative effects of alcohol. However, it has been found that beers are sold more through the supermarkets that proves to be an opportunity for the company (Moulaeifar, 2009, pp.4-12). SABMiller and Porter’s Five Forces: The five forces as explained by Michael Porter assist in determining the intensity of competition of any product in the market and hence understand the position of a business organization against its competitors. These forces include New Entry, Rivalry, Substitutes Availability, Suppliers and Buyers (Jacob, 2009, p.9). The analysis of these factors thus allows a company to realize its position in the market and perform accordingly considering the necessary measures. New Entrants: Although the challenging markets that SABMiller performs in did not allow many competitors to enter earlier, however in the recent times, with the markets being developed, there few large companies that are entering these markets and thus the competitions and rivals for SABMiller are gradually rising (Porter’s Five Forces Analysis of SABMiller, 2012, p.2). Suppliers: SABMiller being the second largest brewer in the world they have the ability to influence their reach globally benefiting from the economies of scale. The bargaining power of the suppliers in this regard is not expected to be to very high (Porter’s Five Forces Analysis of SABMiller, 2012, p.2). Buyers: The Company has its focus in diversifying the risks by spreading its operations in different countries. Thus if one country fails to perform well, the operations and performances in the other countries balance the profits and losses for the company (Porter’s Five Forces Analysis of SABMiller, 2012, p.2). Substitutes: Depending on the level of income, there are possibilities that consumers may switch to other brands that are cheaper in comparison to the products of SABMiller. Moreover there are in the recent years few larger companies entering the market thus providing the consumers with greater number of choices creating threats for the company (Porter’s Five Forces Analysis of SABMiller, 2012, p.2). Competitors: Considering the developed countries the competitions in the brewing industry have been found to be higher in comparison to the conditions in the developing countries. There are some companies whose strategies are also similar to that of SABMiller and have the potential and targets of spreading their operations in the markets thus increasing the number of competitors and hence the competition for SABMiller (Porter’s Five Forces Analysis of SABMiller, 2012, p.2). The Current Four Strategies of SABMiller: The four strategies that SABMiller has currently focused on include: (1) Creating a balanced and attractive global spread of businesses; (2) Developing strong, relevant brand portfolios in the local markets; (3) Constantly raising the performances of local businesses; and (4) Leveraging the company’s global scale (Johnson, 2010). The company’s global spread of their businesses allows them to gain benefits and the company has its focus to further increase their operations both in the developing and the developed countries. The brand portfolios are considered by the company in the manner that they satisfy the needs and demands of the customers as well as trying to target newer segments of consumers based on the drinking occasions. The company also strategizes to continuously improve their operations and performances focusing on maintaining their reputation as well. Also, the company tries to integrate the available skills and resources towards enhancement of their values to the company (Strategic Priorities, 2012). SABMiller’s Delivery of the Strategies: SABMiller effectively makes use of its corporate team and risk assurance team towards their progress and performances such that the company successfully achieves their planned strategies. This includes their building strong businesses in the local areas that assist in improving their local economic state. SABMiller tries to achieve this state through providing their consumers with high quality products. The focus of the company is largely on adding values to the company such that their economic growth as well as social development can be enhanced, intending to bring in long term returns for the company. Sustainable development has been obtained by the company to be their integral manner of business performance. Alcohol responsibility, water and development of the enterprises are the three major areas of sustainable development that the company is most focused into (Overview from our board, 2012). One of the main drivers of the company’s growth is the increasing number of consumers from the emerging and developing countries. With this, SABMiller has realized that they require focusing on factors outside their internal functions as well in order to secure their supplies of water, energy and agricultural commodities. Thus a number of partnerships have been built by the company with the governments as well as non-governmental business organizations in the industry that has enabled the sustainable development for the company. Also, the company has been focusing on the societal challenges that arise owing to the people who do not understand the need to avoid alcohol abusive acts and harm themselves or their lives that are now given sincere concern by the company as well. SABMiller has significantly considered the need to win sustainably thereby trying to focus on operations that can benefit individuals through obtaining jobs as well (Overview from our board, 2012). Figure 2: Beer Growth Trends by Volume % (Global beer market trends, 2012). The trends in the growth and development in the markets of beer have been found to remain unchanged as far as 2011 records reflect. The emerging markets have been found to be the most important sources of increasing sales of the beer products. On the other hand developed markets presented lesser demands from the consumers owing to worsened conditions of the economy and altering trends of consumers. Thus brand development, innovation and ability to counterfeit successful partnerships were considered to be the most important measures by SABMiller in order to manage the current trends (Global beer market trends, 2012). Considering Ansoff matrix that enables an understanding of the product and market strategies of a business organization (Jacob, 2009, p.9), it can be said that SABMiller has its focus on planning such strategies that can enable the company to take advantage of the emerging and developing countries and select brands that can satisfy the demands of the consumers. The strategy of the company includes further investments in market-facing, and activities that are associated with the brands. These primarily consider all those activities and measures that get in touch with the mindset of the consumers, the retailers, the government as well as the community (Strategic Priorities, 2012). Conclusion and Recommendations: From the above study a detailed understanding on the operations, strategies and performances of the SABMiller Company could be achieved. As far as the core competencies, the resources, and the strategies of the company are concerned, SABMiller can be understood to be in a good position and can further enhance its operations and performances through encouraging targets in the right segments of consumers. As it has been obtained that the emerging and developing countries are more advantageous for the brewing industry as far as the recent trends are concerned, hence SABMiller need to focus on these countries more than the developed countries that are more affected by the external factors with the demands being reduced. However the company needs to consider all the external factors that might have some impact on the results of the company. Thus with all the strategies in plan, these factors and the increasing level of competitions need to be given significant considerations by SABMiller in order to succeed and stay in the minds of the consumers along with gaining new customers for their brands. 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