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…
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Basically, there are various factors that shape the international business environment. For instance, factors such as economic, political as well as cultural 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’
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