Carlbergs Emerging Markets Strategy - Assignment Example

?Basically, there are various factors that shape the international business environment. For instance, factors such as economic, political as well ascultural differences that might exist between the parent company’s country and the country of the foreign operation may significantly impact on the operations of a particular organization in a different environment. Thus, organizations operating in foreign countries need to design an effective entry strategy that can enable it to operate viably in this environment. Against this background, this essay seeks to evaluate the question of how the international business environment influences the corporation’s business strategy and operations. This essay is based on the case study of Carlsberg and it seeks to establish the reasons for this company’s failure to enter China for the first time around the early 2000. The paper looks at how factors such as the difference between Western and Eastern values impact on the operations of an organization in a foreign country. In order to establish the reasons why Carlberg’s emerging markets strategy failed to materialise in China in the early 2000s, it is imperative to begin by giving the company’s historical background. According to the case study given, Carlsberg is the fifth largest brewing company in the world. The core business of this company is related to brewing, marketing and selling beer. The company was established in 1847 in Denmark. The company currently has more than 33 000 employees and it operates in more than 75 countries. Due to maturing and stagnation of western European beer markets, the company underscored to embark on the emerging markets strategy in order to capitalise on the opportunities available in emerging markets such as China. However, it has not been that rosy for the company during the early 2000s as it faced some challenges in a bid to establish itself as a force to reckon with in the Chinese market. The ownership structure of the organization contributed to the difficulties if faced in attempting to finance its operations. The Carlsberg Foundation was supposed to have a 51 % stake. The other factor that contributed to the challenges that were faced in the beer industry in the mid 2000s is the aspect related to rising production costs as well as increasing competition from wine and spirits. The other issue that contributed to challenges faced by breweries is related to consolidation of the industry where the number of actors significantly declined. The issue of consolidation significantly impacted on the endeavours by Carlsberg to penetrate the Chinese market. After entering into a 50/50 joint venture with a Thai company Chang Beverages Pte ltd, the newly incorporated market CAL faced fierce competition in the beer industry in the South East China. There were disagreements which made CAL to breach the contract and this attracted a heavy lawsuit against it. The other challenge that was faced by Carlsberg is that the people in the western part of China were very poor though they contributed about one third of the total population. However, Carlsberg’s presence in western parts of China was through joint ventures since it did not have a fully owned brewery. This greatly helped it to embark on its strategy to penetrate emerging markets. There are different factors that characterise Western vs Eastern business environments and it should be noted that these have an influence on the success of a brewery especially in an emerging market. For instance, the consumption patterns of beer in the Eastern market are booming compared to the European markets that that are now saturated. Economies in emerging markets such as China are strong and they significantly influence the behaviour of the consumers towards beer. According to Mintel report obtained from (http://www.mintel.com/press-centre/press-releases/882/china-beer-consumption-hits-the-50-billion-litre-mark-for-first-time-in-2011, 2012, China is the largest beer market in the world and research shows that the country’s beer market grew by 29% in volume terms in the five years to 2011 in order to reach 50 billion litres for the first time in 2011. This placed China on top of other countries such as the US, at 24 billion litres. Actors in this brewery industry must know that emerging markets such as China are lucrative for investment since they present a growing market for beer compared to other markets in the western countries that are mature and saturated. It is an added advantage to invest in a growing beer market than to invest in an already saturated market. Consumer behaviour of certain products is mainly shaped by their culture. For instance, the Chinese people treat beer as a social drink and they often consume it during their free time as a way of refreshing. They also drink beer when they are socialising with friends. Therefore, it can be noted that there are many steps that can be taken into consideration in order to penetrate foreign markets by other companies that originate from different countries. There are many factors about the host country that should be considered in order for the parent company operating in a foreign country to be effective in its business. Other aspects such as gender and age should also be taken into consideration when a foreign company intends to set business in other country. These factors significantly impact on the operations of the company in many ways. It can also be seen that cultural factors also impact on the endeavours by foreign companies to establish business in other countries. Foreign companies need to acknowledge the notion of cultural diversity when establishing businesses in other countries. In each country, it can be seen that there are different types of culture that shape the behaviour of the citizens living there. These cultural values need to be taken into account as they significantly contribute to the success or failure of an organization in another country. National culture has an impact on the employees’ work related values and attitudes (Robbins, 75). According to research by Hofstede, managers and employees vary in four dimensions of national culture and these have an impact on their operations. A good example can be drawn from China whose national culture is strongly oriented towards collectivism. This is a national culture attribute that describes a tight social framework in which people expect others in groups they are part of to look after them and protect them (Robbins, 75). China’s national culture is collectivist and this important aspect should be taken into consideration by any foreign company operating in a host country. The other aspect that should be considered by companies operating in the beer industry and intending to invest in other countries is related to the issue of lifestyle of the people in the host country. These factors play very important roles in determining the success or failure of the company in its operations since they directly influence the behaviour of the people in that particular country. According to the above mentioned report, it can be noted that older and wealthier are increasingly becoming consumers of premium beers and this has a bearing on the operations of a foreign company especially in a host country like China. Customers have different lifestyles and these significantly impact on their buying behaviour of a certain product. The notion of lifestyle also helps the company to segment its market so that it becomes easier for it to reach the targeted customers. Another important issue that can be considered when deciding to invest in international environments is related to the aspects of political as well as economic conditions obtaining in different countries. Countries that are characterised by political instability are not good to invest in since this can negatively impact on the viability of the company in its operations. It is therefore important for companies intending to invest in other countries to be fully aware of the political situation obtaining in that particular country so that they can operate viably. It is also important for these companied to establish the economic status of different countries before venturing into business in them. Countries that are characterised by volatile inflation rates pose many risks to business investors hence they should be wary of the economic conditions of a particular country. Works cited Mintel Press Release. “China beer consumption hits the 50 billion litre mark for first time in 2011.” http://www.mintel.com/press-centre/press-releases/882/china-beer-consumption-hits-the-50-billion-litre-mark-for-first-time-in-2011. June 2012. 12 November, 2012 Robbins Stephen. Organizational behaviour: Concepts, controversies and applications. Prentice Hall Englewood Cliffs: New Jersey. 1993. Print Read More