Strategic Management - Analysis of Marstons PLC - Case Study Example

Strategic Management Assignment Two Table of Contents Analysis of Marston’s PLC 3 Ansoff Matrix 3 5 Forces Model 6 Bargaining Power of the Suppliers 6 Bargaining Power of the Buyers 6 Threat of Substitutes 6 Threat of the New Entrants 7 Threat of Rivalry 7 SWOT Analysis 8 Strategic Recommendation 8 Conclusion 9 References 10 Appendices: 12 Figure 1: Porter’s Five Force Model 12 Figure 2: Ansoff Matrix 12 Introduction Marston’s PLC was developed in the year 1890 under the name of Wolverhampton & Dudley Breweries PLC, which was formed by the amalgamation of the three major breweries operating in the area. During the year 2007, the company in order to promote pubs across the UK has changed its name to the Marston’s PLC. Marston’s PLC has been operating with over 2000 pubs and five breweries producing distinctive local beer i.e. ales. In the present day context, the company operates around 2100 bars and pubs situated across Great Britain, which comprises of leased, franchised, tenanted and managed pubs. Marston’s is to exploit and develop it business operations with better competitive improvements (Marston’s PLC, n.d.). The company has been operating effectively since the year 2009 with a £16.4m profit, which extended to £68.8m by the year 2011. However, the company faced a huge loss in the financial year 2012 but recovered in the year 2013 with a profit of £58.6m. The company’s overall performance has been quiet well since its incorporation (Marston’s PLC, 2013). Considering the above-discussed facts, the essay elaborates on the various strategic models that are being used by the company for sustainable growth and competitive advantage. Analysis of Marston’s PLC Ansoff Matrix The structure of the Ansoff matrix consists of the four major constraints depending on the product and market which include penetration of the market, extension of the market, diversification and new products. Marton’s focused on extending its existing market of beer. In order to do so the company is concentrated on increasing sales by familiarizing new products like the craft beer, as craft beer is mostly demanded in the UK market segments. The company with the new trends of developing the craft beer has been setting up and developing breweries throughout the country and accordingly diversified it business operations. The company has also been developing the new products with the intention of meeting the expectation of customers for developing a better competitive position (Luxinnovation G.I.E, 2008; Marston’s PLC, n.d.). Moreover, the company has been focused majorly on new product development, depending on their present strategy of customer satisfaction(Appendices Figure 2). Additionally, the mentioned strategy of the company has been decided based on the different macro changes made by the government. Correspondingly, major macroeconomic changes have been identified in term of the political, economic, social and technological changes. These major changes are identified to be in the following major way. The UK beer market has been experiencing a mortifying growth during the last few years. There are various political, economic, social and technological reasons that are contributing to the decline of the UK bear market. Global recession has been one of the major causes of the decline in the volume of the beer market that has constrained the consumer’s savings pattern. However, the historic trend suggests that the inclination of the consumers has been more towards quality than quantity. The profit and loss statement of Marston’s PLC reflected that the overall UK beer market has been deteriorating. The different legislation passed by the government of the UK to minimize the consumption of beer has been a decrementing cause for the fall in the consumption of beer. The legislations policies that include tax duty, strict legislation on drinking driving and binge drinking are also accountable for the decline in the beer market. However, Marston’s has been catering services pretty well even in the falling market trend. This could possibly be for their superior quality of service (Euromonitor, 2014; Marston’s PLC, 2013; Quain, n.d.). Price has a negative effect on the alcohol consumption of the UK market. However, the consumption of beer has been observed to be inelastic irrespective of the price rises. The economic assumptions suggest that the wine market is more elastic than the beer market in the UK. Since, Marston’s is dealing in the beer sector only the effect of the inflation has been quiet lower than the other sectors dealing in hard drinks (Marston’s PLC, 2013; Collis & et. al., 2010; Quain, n.d.). The ageing demographic profile of the UK works as a backlog for the growth of the beer market. Availability of a wider range of alcoholic products increases the availability of product substitutes. The notion of drinking less but drinking good quality of alcohol also suggests the drift of the demography from quantity to quality (Quain, n.d.). The sole reason of the success of Marston’s can be observed to be the elegance of service and quality of the product provided. To maintain their sustainable growth in the downtrend market scenario can only be possible by catering to the needs of the customers (Marston’s PLC, 2013). The demand for the new flavoured beers and the decline of the old pattern of drinking has emerged as a huge challenge for the beer companies catering business in the sector. The introduction of the chilled ale beers has also catalyst the requirement of the technological development in the markets. The tendency of the people to pay more for the quality of the product has also catered the requirement for the development of the technology to meet the expectations of the customers. Marston’s with their new developed warehousing and brewing techniques has been successfully in meeting the needs and satisfaction level of the customers (Marston’s PLC, 2013; Quain, n.d.). However, while considering the Ansoff matrix the major consideration of the company has been focused towards the diversification strategy of penetrating new market with their existing product line. Subsequently, with the above the main consideration has been focused on diversification of their product with value added features in order to float well in the existing market. 5 Forces Model The major constrains of the strategy have also been dependent on the following factors. The alcohol market of UK is majorly determined by factors such as prospective contestants, suppliers, buyers and substitutes of products. Bargaining Power of the Suppliers The suppliers in the beer market mostly constitutes of the people who are supplying the brewing materials. Owing to the low concentration in the suppliers market and the absence of the close substitutes of the traded article, the suppliers have huge bargaining power as well as control in the market segments (The Write Pass Journal, 2014; Carlisle, n.d.; McCaig, n.d.). Bargaining Power of the Buyers The buyers in the beer market of the UK constitutes of distributors, retailers as well as direct consumers. The distributors control prices owing to the concentration in the UK market. In this context, the final consumer however does not have any bargaining power in the market (Wilkinson, 2013; Carlisle, n.d.). Threat of Substitutes There is a close competition among the different categories of alcohol available in the UK market segments. Wine and rum among others act as a major competitor for the beer production companies. Additionally, substitutes of the beer products on the basis of flavour and types also raise competition for the beer companies (Fogarty, 2008; Carlisle, n.d.). The major concern for the beer market is the different quality of the product available on the market and the preferences of the consumers in consuming beer products that are of better quality can be a threat to the other products of the same brand (Quain, n.d.). Threat of the New Entrants Threat of the new entrants in the market is dependent on the consumer’s tastes and preferences. The consumption of imported beer or craft beer is more in comparison to the consumption of the local beer. This could be majorly analysed from the consumer’s tendency to incline towards quality even at a higher cost. With the inclination of the consumer preferences towards crafts beer, the threat of new entrants in the UK beer market is quiet prominent (Carlisle, n.d.). Threat of Rivalry The threat of rivalry in the UK beer market sector is very high. Owing to the increased market concentration and the huge demand of the product, the interdependence of the market has raised substantially. In case of a fall in the demand of beer in the overall UK market, the rivalry among the industry is likely to increase (Carlisle, n.d.). Marston’s with the assistance of backward and forward integration techniques is able to develop own set of farms and brewing centres all over the UK. The company has developed own line of enhanced production to meet the requirement of the customers relating to enhanced and better quantity of craft beer. In this context, the company has been successful in mitigating the number of threats from both the external and internal forces in order to implement the future strategic option of diversification (Marston’s PLC, n.d.). SWOT Analysis Marston’s has been operating through huge number of franchises, which aided in catering to the needs of the customers. The company provided services through four major divisions that include managed pubs, tenanted pubs, leased pubs and franchises. The company has owned series of breweries operating in various places of the country. Depending on the above discussion the major strength, weakness, opportunity and threats are provided hereunder. Strength Weakness By the customer satisfaction strategy of the company the company would be able to differentiate their product from the other products that are selling in the market (Marston’s PLC, 2012) With the introduction of the new product and the new development of the beer market the company’s strategies for the development of customer base will be hampered (Marston’s PLC, 2013) Opportunity Threat With the enhanced consumer satisfaction the major opportunity could be identified to be the brand loyalty of the consumers (Marston’s PLC, 2012) With the new entrants and the penetration in the market, the company has a huge chance of facing backlogs in order to the outflow of the consumers (Quain, n.d.) Strategic Recommendation The competitive advantage of the company has been elite locations, which attracts potential customers successfully. The effective strategic planning of the company with respect to tastes and demand in order to meet the requirement of the present customers has been its main strength. The company has efficiently separated business operations under two heads in order to manage both tenanted and leased business effectively and accordingly, focused on the long-term lease agreements. The operational and managerial development through different plans as well as strategies might also assist the company to identify and function in accordance with market opportunities. The company in order to meet the maximum sales turnover in a declining market is required to focus on the expectations of customers for better satisfaction of customer. In this respect, the company is required to develop products and/or services on the basis of the needs of customers, so that business operations can be conducted with better competitiveness. In this respect, based on the analysis of the Ansoff matrix, the company with the assistance of diversification strategy might be able to penetrate new markets successfully through existed products with added features. Conclusion The beer market of the UK is at its maturity level and is identified to be facing a trend of the decreasing market demand. In this respect, the turnover of the beer companies has been observed to be declining. The major threats that Marston’s face are from the macro economic factors that have been affecting the management of the company in conducting operations with better effectiveness. The company has been successful in meeting the needs of the customer on the basis of needs or preferences of the customers. The company also faces challenges from the entry of the new entrants. Considering this it can be observed that the due to the concentration of the market, the company has been facing challenges for the availability of substitute products. Additionally, the company faces the major weaknesses from the management of larger number of franchises and leasehold sectors. Pertaining to the same the company has been practising good operation and managerial skill to utilize market opportunities to the maximum. Through proper implementation of business models and effective strategic policies, the company might be able to develop a better competitive position in the UK beer market. References Carlisle, S., No Date. Competitive Variable Model – Porter’s Five Forces. Strategic Plan, pp. 10-20. Collis, J., & et. al., 2010. Econometric Analysis of Alcohol Consumption in the UK. HMRC Working Paper, Vol.10, pp. 6-12. Euromonitor, 2014. Trends. Beer in the United Kingdom. [Online] Available at: http://www.euromonitor.com/beer-in-the-united-kingdom/report [Accessed July 5, 2014]. Fogarty, J., 2008. The Demand for Beer, Wine and Spirits: Insights from a Meta-Analysis Approach. AAWE Working Paper, No. 31, pp. 3-20. Luxinnovation G.I.E, 2008. Structure of the Ansoff Matrix. Ansoff Matrix= The product/market grid, pp. 1-2. Marston’s PLC, 2013. Five Year Record. Annual Report, pp. 55-60. Marston’s PLC, 2013. Revenue, Profit and Dividend Growth. Preliminary Results for the Period Ended 5 October 2013, pp. 6-10. Marston’s PLC, 2012. Marston’s. Marston’s PLC Annual Report, pp.11-20. Marston’s PLC, No Date. History & Heritage. About. [Online] Available at: http://www.marstons.co.uk/about/Heritage.aspx [Accessed July 5, 2014]. Marston’s PLC, No Date. Where We Operate. About. [Online] Available at: http://www.marstons.co.uk/about/weOperate.aspx [Accessed July 5, 2014]. McCaig, R., No Date. Consolidation in the World Brewing Industry. Canadian Malting Barley Technical centre, pp. 1-20. Quain, No Date. Draught Beer Quality – Challenges and Opportunities. Products. [Online] Available at: http://www.red-ts.com/images/products/ebc%20slides.pdf [Accessed July 5, 2014]. The Write Pass Journal, 2012. Porter’s Five Force Analysis. Strategic Analysis (SWOT, PESTEL, Porter) of Premier Inn (Whitbread Plc). [Online] Available at: http://writepass.com/journal/2012/12/strategic-analysis-swot-pestel-porter-of-premier-inn-whitbread-plc/ [Accessed July 5, 2014]. Wilkinson, J., 2013. Buyer Power Definition. Buyer Bargaining Power (one of Porter’s Five Forces). [Online] Available at: http://strategiccfo.com/wikicfo/buyer-bargaining-power-one-of-porters-five-forces/ [Accessed July 5, 2014]. Appendices: Figure 1: Porter’s Five Force Model Sources: (The Write Pass Journal, 2012) Figure 2: Ansoff Matrix Source: (Luxinnovation G.I.E, 2008) Read More