Strategic Analysis of Adnams Case - Report Example

Case study analysis: Adnams Plc Executive Summary Adnams is brewery business based in Suffolk in the UK that was established in 1872. The business was purchased by Loftus family in 1902 and ever since the company has remained undivided under the protection of these two families and its stakeholders. This case was ascertained to be a perfect example for analysis of organisational strategies and their respective components. Another reason for considering this case is that the company has undergone significant changes over the years since its inception as a result of competition, regulatory changes and industrial development. Under strategy analysis of the company, various essential factors have been evaluated such as core elements or core competencies of Adnams, key drivers of organisational change and success factors of Adnams. It was determined that the key factors that driving changes mainly comprises growing competition in the brewery industry and alteration in consumer preferences. The sole purpose of discussing these factors is to gain a brief idea of these components for better analysis of the company’s strategy(s). The strategies of the firm have been evaluated using Porter’s model of generic strategies. Adnams mostly focussed on cost leadership strategy since brewery business involves production of similar products by all competitors. However, long-term local connection led to brand differentiation for the company. Alongside, VRIO (Valuable, Rare, Imitable and Organisation) framework helped significantly in understanding the resource based approach. It was gathered that hardworking and dedicated workforce, continuous innovation and technological integration has made it possible for the company to achieve long term competitive advantage in the industry. 1(a). Core elements of the company Physical resource information Local association: Local association of Adnams with Southwold is one of its competitive advantages and is valued strongly by the firm. Beer brewery has a long history associated with Southwold which further support the brand image of the company. Additionally, Southwold has significant role in flavour development of Adnams products. Innovation: Innovation is an essential aspect of the company as consumer behaviour in the UK suggests that they have volatile attitude towards drinking. Besides, competition in the brewery industry is mounting at a rapid rate. Therefore, innovation in operational processes, offerings and marketing has helped the company in meeting consumer demand along with business viability (Adnams, 2014). Financial resource information Cost advantage due to local sourcing Profit making company with positive changes in turnover Investment in various associated business Human resource information Family connection: Adnams is run y two local families who established the legacy of brewery and stewardship thereof. The family connection of the company has contributed towards its brand reputation has prevented its sell out and consolidation. Additionally, the family involvement has resulted in development of illiquid shares which therefore prevent easy dilution. Consumer relationship: Adnams is significantly consumer focussed and their commitment is reflected in their products and services. Consumers are considered as a significant contributor in the growth of the company and the company makes sufficient efforts to attract and retain maximum consumers in terms of market share. Sustainability: Adnams is strongly committed towards its local communities and natural environment. The company ensure that its products and processes are eco-friendly and reflect conservation of water and energy (Adnams, 2014). 1(a). Core elements of the company Market share: The market share of the company in Suffolk food and beverage industry was 13.6percent in 2011. However, the company have only 0.2% shares in the UK industry (Adnams, 2011; 2013; Suffolk County Council, 2011; BBPA, 2014). It can be estimated from these data that the company has moderate scope of growth and investment as its revenue and market share is experiencing swift growth. Market competition between Adnams and its competitors: One of the important factors that led to modification in the business process and activities of Adnams is growing competition from various micro and macro breweries in the localities. The competition level in the UK brewery industry is growing at a rapid rate because of relatively low entry barriers, regulatory changes in taxation to allow distillation in breweries and global scale collaboration in the brewery industry (Turnbull James and Verity, 2013; Zokaei, et al., 2013). Competitors: In recent years, Suffolk has been overflowing with significant number of micro and macro breweries, namely, Bartrams, Brandon, Brewshed, Briarbank brewing company, Calvor, Cliff Quay, Green king and others. It was estimated that there are a total of 32 brewery businesses including Adnams in the Suffolk (Ratebeer, 2014). 1(b). Key drivers of change (ESTEMPLE) Environmental drivers Impact in range (A) -5 to +5 Probability of factor (B) Potential (AxB) Economic: Development of tourism, agriculture and food and beverage industry in the UK. Growth in the brewery industry (Suffolk County Council, 2014). Decline in demand as a result of recession and changing consumer preference (BBPA, 2006). The economic factors will support growth of Adnams. Contrastingly, declining demand can affect its business significantly. (+3) The impact appears to have high probability 80% 2.4 Social: Pubs in the UK are place of socialisation and cultural indulgence. Social environment of the industry makes positive contribution towards its growth (BBPA, 2006). Strong cultural indulgence at Suffolk Contribution of local and social roots in growth and overall development of Adnams (Suffolk County Council, 2014; Adnams, 2013). (+4) Already existing to a great extent 60% 2.4 Technological: Rapid growth of hard and soft technology sector in Suffolk (Suffolk County Council, 2014). Technological intensiveness of brewery industry (BBPA, 2006). Strong technological integration at Adnams (Adnams, 2013). (+4) Already existing to a certain extent 70% 2.8 Environmental: Increased inclination towards sustainable practices such as local sourcing, power conservation and so on (BBPA, 2006). Responsible business practices Lighter bottles and other supportive green practices. Waste management (Adnams, 2013). (+4) Already in existence but probability for further development is high 85% 3.4 Media: Product promotion through traditional as well as digital media in the UK brewery industry (BBPA, 2006). Traditional media sources at Adnams such as banners, and advertising campaigns. Online company website (Adnams, 2013). (+3) Already in existence but probability for further development is very high 88% 2.64 Political: Business growth as a result of modification in government policies regarding cut in excise duty. Health guidelines by government. Changing consumer’s purchasing behaviour as a result of ongoing recession and economic slowdown (BBPA, 2006). Adnams is expected to experience growth and earned increased revenue due to reduction in excise duty. Health and legal issues associated with drinking habit can affect its business. (2) The likelihood of occurrence of both the contrasting factors is 50%. 2.5 Legal: Food safety and fair trade practices, (Suffolk County Council, 2014). Legislations from EU that direct pubs and restaurants to maintain track of quantity of drink Ban related to driving after drinking A number of regulations related to bottle recycling and waste management (BBPA, 2006). Sustainable practices at Adnams (Adnams, 2013). (-1) Already in existence but probability for further development is relatively high 75% -0.75 Ethical: Supporting responsible drinking among consumers Discouragement to practices such as underage drinking and drunken driving (Ethical Corporation, 2012). Adnams ensures that it business has no negative impact on local communities and environment (Adnams, 2013). (+4) High likelihood 90% 3.6 1(b). Key drivers of change (Porter’s five force) Forces Comment Evaluation Competitive rivalry Moderate demand Strong rivalry between micro and macro breweries Existence of large competitors High Threat of new entrant Reduction in excise duty resulted in increase in new entrants Moderate Threat of substitute Every brewery is producing similar products (beer and distilled alcohol) High Buyer’s power Brewing industry is significantly dependent on consumers Changing consumption pattern High Supplier’s power Strong supply chain Committed suppliers for each brewery Greater choices to firms Low 1(b). Key drivers of change (Most important factors) Factor Impact mode Impact size Timescale Probability Buyers’ Power Changing preference of consumers and their inclination towards healthier choices Mass scale impact 10-12 months High Political and legal aspect Ban on drinking and driving, restriction on binge drinking, waste management and food safety Moderate impact 15-20 months High 1(c). Critical success factors What do customers want? Little information in this regard has been discussed in the case Possibilities include serving of non-alcoholic beverages along with alcoholic beverages, new food items on the menu, competitive pricing, friendly staff and healthy ambience. What do competitors do? Economies of scale, regulatory advantages such as lower tax and duties, product diversification, new marketing strategies and wide variety of offerings What might we expect CSFs to be in this industry? Introduction Growth Maturity Decline Critical success factor 1. Local roots 2. Product innovation 3. Firm’s reputation and marketing capabilities 1. Extensive marketing campaign 2. Variety in offering 3. Product branding 1. Cost leadership 2. High quality product and services 3. Corporate citizenship 1. Capacity management 2. Sustainability practices 3. Const minimisation 2. Key business strategy (s) of Adnams The business strategies of Adnams have been examined in this paper using Porter’s generic strategies. Porter has suggested three broad strategies that take into account various offensive and defensive strategies, namely, differentiation, cost leadership and focus strategy. Cost leadership: For being cost leader, an organisation requires developing strategies that will reduce its average cost per unit with respect to that of the rest of the industry. Achieving cost leadership in operations and production require resources along with skill. It was observed at Adnams that the company has moderately skilled employees who are significantly committed towards the company. Process innovation as well contributes towards cost efficient management at Adnams (Murray, 1988; Adnams, 2011; 2013). Differentiation: Differentiation strategy enables a firm to develop products that deliver competitive advantage for the respective firm in a given industry. Differentiation can be developed in terms of marketing strategy, product design and brand, technologies and other features. In the brewery industry, the scope of differentiation is very limited as almost all companies produce more or less similar products. The only aspect of this strategy that has been incorporated in Adnams’ business strategy is brand differentiation (Murray, 1988; Adnams, 2011; 2013). Focus strategy: Focus strategy has very limited scope as it approaches only a specific buyer group, geographical market or product segment. Considering the growing competition in the brewery industry, this strategy was considered inappropriate for the firm (Murray, 1988). 3. Resource and capabilities of Adnams The VRIO framework was proposed by Barney for resource based analysis of a firm’s competitive advantage (Barney, 1991; Chapman, 2011). Valuable: Barney discussed that a resource is considered valuable if it can be deployed to increase market share of the company or to improve cost effectiveness of the firm. The most valuable resource within the firm is the company’s workforce, which is highly motivated and committed towards the organisation. Rare: In context of Adnams, the rare capabilities are undeniable commitment of the employees towards the organisation, company’s involvement with locals and innovative practices. With respect to Adnams, the company brand image and market share are intangible resources that its competitors lack. Imitable: In brewery business, resources such as technologies, technical knowledge and processes are almost similar and consequently, highly imitable. However, Adnams has advantage that it has a strong brand reputation and image especially due to prolonged existence in the industry. Organisation: This aspect of the framework suggests that an organisation should be capable of exploring the benefits of the resources it possesses. It was observed that the company has employed these resources to develop competitive advantage over other competing companies in the industry (Barney, 1991; Chapman, 2011). Conclusion Adnams was observed to be a strong survivor in the competitive environment of brewery industry and it can be expected that the company will be able to adapt future changes associated with the industry in a swift manner. However, the company should make effort to forecast potential future changes and align its business strategies accordingly. In this regard, a list of SWOT factors can be discussed: Strength: Competitive pricing strategy, brand reputation, workforce and functional capabilities Weakness: Limited financial resources Opportunity: Product diversification and developing new consumer base Threat: Increasing competition and change in consumer preference Reference list Adnams, 2011. Annual report 2011. [pdf] Adnams. Available at: [Accessed 25 November 2014]. Adnams, 2013. Annual report 2013. [online] Available at: [Accessed 25 November 2014]. Adnams, 2014. Our history. [online] Available at: [Accessed 19 November 2014]. Barney, J.B., 1991. Firm resources and sustained competitive advantage. Journal of Management, 17(1), pp. 99–120. BBPA, 2014. The Beer Story: Facts on tap. [pdf] BBPA. Available at: [Accessed 25 November 2014]. Bourne, M. and Bourne, P., 2011. Handbook of corporate performance management. New Jersey: John Wiley & Sons. Chapman, R.J., 2011. Simple Tools and Techniques for Enterprise Risk Management, Second Edition. New Jersey: John Wiley & Sons. Murray, A. I., 1988. A contingency view of Porters “generic strategies”. Academy of management review, 13(3), pp. 390-400. Ratebeer, 2014. Suffolk breweries. [online] Available at: [Accessed 19 November 2014]. Suffolk County Council, 2011. Suffolk’s Local Economic Assessment 2011 [pdf] Suffolk County Council. Available at: [Accessed 25 November 2014]. Suffolk County Council, 2014. Business. [online] Available at: [Accessed 25 November 2014] Turnbull James, K. and Verity, J., 2013. Adnams- a living company. [online] Available at: [Accessed 19 November 2014]. Zokaei, K., Lovins, H., Wood, A. and Hines, P., 2013. Creating a Lean and Green Business System: Techniques for Improving Profits and Sustainability. UK: CRC Press. Ethical Corporation, 2012. Stakeholder Engagement. [online] Available at: [accessed 25 November 2014]. BBPA, 2006. Thirty years of environmental improvement from 1976-2006. [pdf] BBPA. Available at: [accessed 25 November 2014]. Bibliography Allen, R. S. and Helms, M. M., 2006. Linking strategic practices and organizational performance to Porters generic strategies. Business Process Management Journal, 12(4), pp. 433-454. Grant, R. M., 1991. The resource-based theory of competitive advantage: implications for strategy formulation. Knowledge and Strategy, pp. 3-23. Klein, A., 2011. Corporate culture: its value as a resource for competitive advantage. Journal of Business Strategy, 32(2), pp. 21-28. Read More