SABMillers Africa Strategy - Essay Example

?SABMiller is one of the largest brewing companies in the world that since it was founded has seen quite a lot of success all over the world. In fact, this company is rated as the second largest brewing company in the world, with operations running in about 75 countries. While the company itself is in those who consume its products do not know many instances, its brands are quite popular among the consumers. In many of the African nations, in which it has businesses, the brands under SABMiller are often the most popular. SABMiller is a company that has throughout its history, displayed a high capacity for being able to manage and develop its brands to a high quality level that many of its rivals have rarely been able to match. This skilful management of its brands in different countries has enabled the company to become highly successful, as those who work for it receive a high level of training to ensure that the quality of its products is retained. The wide range of products that this company produces means that it has to hire and maintain a large workforce in order to be able to function effectively. Unlike other companies, SABMiller has since its founding, been extremely careful with the management of its staff, not only because of the need to make profit continuously, but also to further the good reputation that the company has always had. Because of the skill that SABMiller has been able to display in the production of its products in diverse countries, it has been able to achieve success on the international scene where other companies take years to achieve the same. One would claim that SABMiller’s success is based not only on the quality of the company’s products, but also on the strategies that it has been able to implement to make its operations successful. This company was founded as South African Breweries towards the end of the 19th century in South Africa, and for many years afterwards, the functions of this company were restricted to Southern Africa. This is because of the fact that this company had established an overriding position in the southern African market. However, in 1990 this company decided to venture into the European market, and in 1999, it managed to get listed in the London Stock Exchange, with the intention of raising enough capital to make acquisitions. It is in 2002 that the company was able to acquire Miller Brewing Company in North America, and with this acquisition, the company chose to change its name to SABMiller (Hobday, 2002). A series of hostile takeovers in Latin America and Europe saw the swift growth of the company, and this eventually brought it to its status as the second largest brewer in the world (Bruss 2002, p.10). The company’s innovation has ensured that it has remained at the top of the world’s brewing industry and an example that can be given of this innovation, is the recent introduction of Impala Cervejas, the first cassava beer that has been produced for commercial purposes in Africa (Appropriate Technology 2012, p.23). This company has about 70000 employees all over the world and its operations have, according to its 2012 records, it managed to bring in revenue of just over 21 billion dollars (Buck 2012, p.49). In Africa, the activities of SABMiller are conducted in 15 countries, all of which are in the Sub-Saharan region. This company has been dominant in the region for many years and because of this, its brands are well known by the people. The large customer base of SABMiller’s products has ensured that the company has been successful in the region and has creates a loyal market for its products (Peaple, 2012). A further 21 countries in Africa are enclosed all the way through a strategic alliance with the Castel group which has ensured that SABMiller has become the largest brewer in Africa, by market share, a feat that has not been achieved by any other brewing company on the continent. In addition to the brewing activities of SABMiller in Africa, it is under license from Coca-Cola to bottle soft drinks on behalf of the latter company, and it is involved in these bottling activities, directly or indirectly, in 24 African countries. The countries in Africa within which it operates are mostly poor countries that are struggling economically. The people of these countries, despite their poverty, have been loyal customers for decades of the various brands from SABMiller. Because of this, the company has come up with diverse strategies to not only expand its market share in the region, but also to ensure that it makes it products affordable to the people. SABMiller produces products for people of all the classes in the societies or countries within which they operate and this has ensured that it is able to cater for the different tastes of its customers, as evidenced in appendix 1. Before 2005, while many of the major issues that affect the brewing industry were being addressed by most of the companies in the market, SABMiller did not put much effort in doing so, within Africa. There was a huge deficiency in the region wide policy of the company, and this was mainly because of a lack of an overall strategy or action plan. This soon changed when the company came to acknowledge that it not only needed a global approach to its strategy, but that this approach was also to fit within the local African context, because this was the only way through which it would be able to remain competitive in the market. There was the realization among its management that as a global company had to address the problems that wee affecting it in the region in a way that was more consistent with its global strategy (SABMiller to Launch Bid for Harbin, 2004). There was increased pressure on those companies that were listed in the London Stock Exchange to take a direct hand in the development of a corporate social responsibility policy in the regions where they operated. One of the largest chunks of SABMiller’s business is in Africa and this is a region that could not be ignored. SABMiller came to the realization that it had to adopt a policy of corporate social responsibility in Africa as a strategy not only to give back to the local African communities, but also as a way to achieve popularity for its brands in the region (Langan 2011, 83). Many companies in the world have come to adopt corporate social responsibility as a means of promoting themselves. This is because of the realization by the public that these companies are making so much money from them than they are putting back into the society. Consequently, the public has come to have expectations from these companies to assume more responsibilities to them, since they make so much at the public’s expense. It is believed that these expectations will continue to increase in the future as these companies carry on expanding their activities all over the globe, and these expectations do not exclude Africa. Companies from diverse industries have come to adopt the theory of corporate social responsibility, which is an approach they use when they are dealing with the impact that their industrial activities have on the societies and environment, in which they are involved (Kahn 2011, 38). These companies have tried to do their best to ensure that the communities that are affected by their activities have been well compensated, and that their standards of living are higher than they were before. In addition, they have come up with environmentally friendly plans to ensure that their negative impact on the environment remains minimal. SABMiller has taken its role in social responsibility as a strategy in Africa extremely seriously and this has ensured that it contributes to the welfare of the communities within which it has operations (Malan 2005, 49). SABMiller has come to adopt a development framework with the intention of incorporating various priorities. Among the most important of these priorities if for the company to encourage responsible drinking among those, who consume its products (Lock 2005, 18). Furthermore, this company has come to be deeply involved in trying to find solutions to some of the environmental issues affecting Africa. Among the environmental issues which it has put priorities on are water conservation, the development of renewable sources of energy, carbon management, and the management of waste. The company has also come to be involved in such important social matters in Africa such as dealing with the HIV/AIDS epidemic, as well as the promotion of human rights for the African people (Matzopouloset al, 2012, 67). A stable community relationship as well as the need for transparency for the community has become one of the priorities, which SABMiller has chosen to undertake as part of its overall African strategy. Each of the priorities in its sustainable development framework is supported by a position paper that has been designed to help those in charge of operations what they have been able to achieve performance wise. The board of the company has made a decree that all the priorities that have been set by the company have to achieve at least the lowest level that can be attained. The company has set four levels of achievements for its priorities and its operations have to achieve at least the first level. The fourth level is representative of admired status, which is based on the best practice that the company’s operations have achieved. SABMiller has come up with various strategies to increase its sales in the African market and among these is the implementation of the Halve the Price of Beer strategy. This strategy was developed for reducing the price of beer so that more customers can be attracted to its brands. The reduction of the price of beer is a strategy whose intention was to ensure that the company utilized its large African customer base to maximize its profits (“SABMiller Refocuses on Sales”, 2010). It seems to have worked quite well because in the African beer market, the brands that belong to SABMiller are not only the most consumed, but they are also the cheapest that can be found. The large customer base that this company has managed to take in Africa has ensured that it has retained its dominance in the market, keeping even its closest rivals at bay. The reduction of the price of beer in the African market has been achieved using local ingredients as well as the inclusion of those products that were sold informally, such as traditional beer, into the formal market (England, 2011). This has ensured that the local people have a wide variety of products from SABMiller from which to choose, and this has guaranteed high sales for this company. SABMiller has created a strategy where it deals directly with the local farmers with the intention of acquiring the raw materials it needs from them. This is an arrangement that has come to bring plenty of benefits not only for the company, but also for the farmers as well instead. SABMiller has made it one of its strategies to guarantee farmers a market for their crops, which has ensured that the company receives raw materials for its products at fair market prices. Furthermore, the farmers involved receive good process for their crops and this has created an environment of confidence between them and the company (The Economist Intelligence Unit, 2012). Prices are often negotiated between the company and the farmers and it is only after the negotiations are done and the prices agreed upon that the transaction between them takes place. This has made the company a direct benefactor to the local economy of many of the countries within which it has operations. Not only has its strategy been able to provide farmers with security, but it has also helped to create jobs as well as prosperity for those who are directly involved with the company. SABMiller, in this strategy, has also indirectly done its social responsibility, because it has helped local farmers improve their productivity and enterprise as well as growing crops for improving their food security. This strategy has ensured that both the company and the local economy have been able to benefit from it. One of the strategies that have enabled the success of this company in Africa has been its ability to find very good people to work for it on the ground. This means that the employees of this company are well trained, promotable, and diverse and committed, creating an environment where it is able to provide the best service to its customers. To achieve this, SABMiller has had to create some extremely good employee policies, which have worked to gain their confidence. One of the main reasons for its success has been its ability to bring potential employees into its employ, because this has ensured that it has a dedicated workforce working for it (“SABMiller Releases….” 2011). SABMiller is one of the biggest employers in Africa and its workers are some of the best paid on the continent. This fact shows just how powerful and influential the human resource department of this company has become because despite being in an environment where one would not expect to find a sufficient workforce, SABMiller retains the best of them. This is the reason why many of its current and former employees have had good reason to name this company as their employer of choice. The pay that its employees receive is some of the best on the African market and this has ensured that SABMiller retains the services of some of the best and most knowledgeable people. This is something that its rivals have yet to achieve and this is among the reasons why SABMiller is still at the top of the African brewing industry. In the developing countries, especially in Africa, there is a tendency by the multinational corporations, which have operations there, not to involve any of the stakeholders in their major decision making process. These companies are instead only accountable to their shareholders because the other groups are not sufficiently well developed to have any major influence. This, however, is not the situation with SABMiller throughout its long history in the African brewing market. The company has created diverse means of consultation to ensure that all of the decisions that its management makes are made in the best interests of not only the company but the people they directly affect as well. The people or parties that SABMiller often consults include governmental organizations, trade unions, buyers and suppliers of products, the societies involved as well as the employees of the company involved. Because of its good social responsibility status in Africa, SABMiller has been able to improve relations with outside actors. This has ensured that it has been able to catch the attention of better workers as well as increasing the current workers’ inspiration, morale, dedication and loyalty to the company. The various strategies that have been put in place by SABMiller in Africa have worked towards the promotion of the image of this company in the region. Not only have they done so, but they have also been able to create an environment that is conducive, within which the company has been able to and will continue to operate. Critical assessment of the Strategies Like most multinational companies, SABMiller has put into place a number of strategies to ensure that it dominates the market in Africa. Thus, apart from its serious venture in South Africa, it has also managed to identify other countries where it foresees thriving business prospects. According to the managing director of the company in Africa, Bowman, there are imminent business prospects in Africa and this includes expanding the facilities in Ghana and Uganda (Buck 2012, p.43). The expansion in the two countries will be part of the $260 million that has been initiated for further investment in the continent. The managing director of the company has indicated that since Uganda has demonstrated a positive improvement in its economy, SABMiller is optimistic the country’s beer consumption will consequently increase. In Ghana too, there has also been a realization that with the prospective oil in the country, there is likelihood of an increment in the country’s economic status that will also lead to increased consumption of alcohol. This shows that the company has employed the use of economic growth to inform its decision making on which country to invest in further. SABMiller has realized that with the increasing economic base, there is excess money in the economy that can be spent on its products. The company therefore gives priority to the thriving economies or those with the potential to thrive in pursuit of their agenda in the end. The other strategy that has been put in place by the company in order to dominate the African market is the realization that in most parts of Africa, consumption of beer is considered a luxury and most of the alcohol are still home made in what they consider informal. Imported beer and its commercialization are not well developed in Africa and in most countries, such as Botswana for example, commercialized beer and alcohol is not dominant while the informal and local ones dominates the market (Buck, 2012, p.46). The strategy is then to make the people develop an interest in the commercialized beer with the hope that it will increase the sales in the country and in the continent. It is then construable that the company is striking a high notch that most other companies would dare not do. It has also come to the realization of the company that doing business in Africa is faced with several challenges including the infrastructural challenges. It has cited that heavy traffic in the continent is a hurdle that jeopardizes the prospects of the business in the continent. In that regard, it has developed its own unique strategies to overcome all these challenges in order to make business boom. For instance, SABMiller has initiated self-power plants, which are expected to run their machines making them not to depend on other facilities beyond their control. In addition to this, they have also made it possible to source for their own water and treat it for their own use. They have also encouraged farmers to produce local sorghum that is used for making certain brands of beer, and this makes taxation cheaper (England 2011, p.54). On means of delivery, the company being realistic to the transport problems in the African countries, has resorted to use of unconventional means of transport in the continent where the use of wheelbarrows are also applied to increase the extent of delivery of beer to the final consumers. Moreover, the company has also engaged in other activities like in Ghana, Bowman admits that they have been faced with number of challenges in the country from some of the seasoned rivals like those of Diageo and Heineken. The managing director confirms that they have been struggling with making profit and in response; it has brought into the market a product called Chibuku (England 2011, p.61). This product is resulted from sorghum and maize; moreover, it has been designed to sell half price of the common beer and this has shifted the demand of the beer from those of the competitors to SABMiller. Other ways of attracting the customers through packaging has also led to the market increase of the SAB’s products from 28% to 38% in the last three years (England 2011, p.54). This confirms that the company is headed in the right direction and needs to expand its market share with vigour. Recommendations Having known the fundamental economic importance of Africa, the company needs to partition Africa into its weaknesses and strengths. In this regard, SABMiller needs to enumerate those countries that are likely to demonstrate strength in the consumption of their products. In this regard, it will be able know areas in which their products will thrive. The company also needs to note the strengths of its competitors in the market and deal with it appropriately. Like in the identification of the adjustment that needs to be done for it to match or even surpass its competitors. More of these will cut them an edge in the market and widen their scope tremendously. Finally, given the SABMiller influence in Africa, especially in the sub-Sahara region, there is the potential of almost half of the continent with its products. This should also go in tandem with further development of the status of its current firms in the individual countries where it is already well established. The need for market expansion should form the cornerstone of the company because everything is hinged on the sales of the product. Without the sales, nothing, not even expansion can take place, and this must be coupled with aggressive expansion of the market for the products. References Bruss, J. 2002, "SABMiller becomes second-largest brewer", Beverage Industry, vol. 93, no. 6, pp. 10-10. Buck, J. 2012, "Master Brewer Buys a Round", Barron's, vol. 92, no. 43, pp. 49-50. Appropriate Technology. 2012. Cassava beer turns farmers into businessmen in South Sudan, vol. 39, no. 1, pp. 23-24. England, A. 2011, "SABMiller tries fresh approach in a new territory", FT.com. The Economist Intelligence Unit. 2012. From lumps to lager; Beer in Africa, London, United States, London. Hobday, N. 2002, "SABMiller still thirsty for deals", The Daily Deal. Kahn, M. 2011, "The fall of the Wall, the rise of the BRICs and the new Scramble for Africa", Foresight : the Journal of Futures Studies, Strategic Thinking and Policy, vol. 13, no. 3, pp. 38-49. Langan, M. 2011, "Private sector development as poverty and strategic discourse: PSD in the political economy of EU-Africa trade relations", The Journal of Modern African Studies, vol. 49, no. 1, pp. 83-113. Lock, G. 2005, "SABMiller funds children's alcohol education", Third Sector, , no. 367, pp. 18-18. Malan, D. 2005, "Corporate Citizens, Colonialists, Tourists or Activists? Ethical Challenges Facing South African Corporations in Africa", The Journal of Corporate Citizenship, no. 18, pp. 49-60. Matzopoulos, R., Parry, C.D.H., Corrigall, J., Myers, J., Goldstein, S., London, L., Bampoe, V., Clancy, A., Sugarman, M., Liden, J., Lansang, M.A., Gilmore, A.B. &Fooksa, G. 2012, "Global Fund collusion with liquor giant is a clear conflict of interest/Response from the Global Fund/Global Fund needs to address conflict of interest", World Health Organization. Bulletin of the World Health Organization, vol. 90, no. 1, pp. 67-9; discussion 70. Peaple, A. 2012, SABMiller's Emerging Challenge, New York, N.Y., United States, New York, N.Y. SABMiller Refocuses on Sales, Marketing 2010, New York, N.Y., United States, New York, N.Y. "SABMiller Releases Half-Year Results Interviews with CEO and CFO", 2011, Food and Beverage Close - Up. SABMiller to Launch Bid for Harbin 2004, , New York, N.Y., United States, New York, N.Y. Appendix 1 Country (Brewery) Brand Botswana brewery (Botswana) Chibuku Shake Shake HansaMarzen Gold Canarias Brewery (Canary Islands) Dorada Tropical South African Breweries (South Africa) Carling Black Label  Castle Lager Castle Lite · Castle Milk Stout  Hansa  HansaMarzen Gold HansaPilsener Delta Corporation Zimbabwe (Zimbabwe) ? Eagle Lager ? Castle Lager ? Golden Pilsner ?Bolingers Lager ? Zambezi Lager ? Lion Lager ?Chibuku Opaque Beer Mozambique brewery (Mozambique) ? 2M ?Lauretina Clara ?LauretinaPreta ?Manica ? Impala Cervejas (cassava-based beer) Nile brewery (Uganda) ? Chairman's Extra Strong Beer (ESB) ? Nile Special Lager Tanzanian breweries (Tanzania) ? Kilimanjaro 2 ?Balimi Content Adapted from http://en.academic.ru/dic.nsf/enwiki/7515605 Read More