Applied Administration Strategy of Boston Beer Company - Case Study Example

BOSTON BEER COMPANY HISTORY Company history and background Boston Beer Company began in the year 1983 with James Koch and Rhonda L. Kallman as the proprietors. The idea of forming Boston was born after Koch realized that there was a growth in sales of imported beer, which led to him resigning his luxurious job of management consultancy. Producing the first sales were very challenging but the company, began picking up after several attempts that include persuading bartenders to sample their product. There was massive efforts by the stakeholders, Boston eventually expanded it distribution channels to incorporate Washington DC and Chicago. This was part of the company’s expansion strategy. There was an expansion in the distribution when California’s pacific wine company also agreed to distribute Boston product (Boston Beer). The majority of the population was more absorbed into consumption of import beer making it a challenge to market local beer. This prompted a decision to allocate a huge budget to marketing which included use of Radio advertising. During the marketing, one of the strategies emphasized was concentrating on specific segment. The company produced quality product using only four ingredients, which were, hops, malt, yeast and water. Boston rose steadily winning various awards in the process and by 1994; it won the World beer champion. Ingenious strategies made the overall production to expand with employees’ figure also rising (Verbeke, 2009). Boston going public This change occurred between 1995 and 1996 being stimulated by the advancements that had been witnessed in the company. The company issued 3.1 million shares to the public. Boston retained 990000 shares out of the 3.1 million to be given to the company’s loyal customers. There was quick reaction from the customers who invested in the company leading to further improvements in the overall performance with both production and sales improving tremendously to figures never witnessed before in the company. Many emulators sprung up after witnessing Boston achievements with an intension of getting a share of the market. The main opponent was Boston Beer works that prompted Boston beer to sue the company but lost the case. Boston beer was not carried away by success by incorporating sales of the whole U.S small breweries. Despite steady success, the market for beer began to decline due to the health awareness campaign on the dangers of alcohol consumption. However, Boston meets the demand of its customers and there has never been a shortage. STRATEGY ANALYSIS A strategy can be said to a well thought out plan implemented to achieve some desired future results. Strategies are both short term and long-term based on when the need is to be achieved. Most companies come up with strategies aimed at increasing their market share and attaining competitive advantage above all players in the industry. Boston Beer Company has put in place strategies to help in achieving a higher stake in the industry. These strategies are known as the 4P’s (Greasley, 2008). Product strategy is the first one; it entails the enactment of three strategies that is product line strategy, product quality strategy and the packaging strategy. The product line strategy entails coming up with the needs of the market and developing products that satisfy the identified demands. Boston Beer Company has also ensured the needs of their customers are well met this is with regard to the vast product line by the company. The company’s products are produced under four brands namely: Samuel Adams, Angry Orchard, Alchemy, & Science and the twisted tea brands. With regard to the vast products, Boston Beer Company is rated as the largest in craft beer in the United States. In 2012 the company sold over fifty beers of the Samuel Adams brand, ten malt flavored malt beverages under the twisted tea brand, under Angry Orchard brand they sold five hard cider beverages and five beers were sold under the Alchemy Science brand, these sales are evident in their financial reports for the year. Product quality is crucial to any company to earn a huge market share over other players in the industry. It entails enhancement of the product desirability to ensure that it satisfies the customer’s needs (Boston Beer). Boston Beer Company has invested much in ensuring the quality of all the products is enhanced to ensure customer loyalty and satisfaction. The company has invested in over fifteen brew masters who are tasked with the whole production process ensuring that the quality of the beers and ciders is not compromised and that it meets the company’s standards in line with the “Freshness” label on all the products. In enhancing the quality of its products, the Company ensures that ingredients used are sufficient for example; two row varieties of barley are used for malt. Packaging is a crucial strategy too, it entails branding the product in such a way that it is appealing to the consumers (Johnson & Scholes, 2013). Packaging is based on perception hence an entity should always ensure that the packaging of all its products is done in a manner that it attracts the customers. Boston Beer Company has ensured that the packaging of its products is top notch. The packaging materials used are competitive in that the crowns used the shipping cases and the six-pack carriers used are uniquely designed to appeal to customers. Packaging is done differently depending on the region of sale. As seen product attributes is crucial to any organization as it entails the main strategy of any organization. Pricing is the second and most important strategy. This is because pricing is the most important factor that determines the profitability of an entity since prices determine the volume of sales, which in turn determines the profit of an entity. All other strategies are also supported by pricing in that, there is a cost in enhancing product quality, there is a cost in promoting the products, and there is a cost attached to distribution of products. Pricing is important since if set too high it leads to decline in sales and also if prices are set too low then the customers might disregard the products since most customers assume that the price of a product reflects the quality of the said product (Ellis & Williams, 2009). Boston Beer Company set varying prices for their products depending on the type of product and the packaging involved a good example is one of Samuel Adams six-pack seasonal product whose retail price ranges between $8.00 and $9.00 and $2.00 to $6.00 if sold individually. However, pricing is done with regard to several factors such as the; variable and fixed cost, competition, the company’s objectives, the target customers and the company is positioning strategies (Boston Beer). The third strategy is the promotion strategy, which is also a strong determinant of volume of sales. It is the relaying of information regarding to a product to the existing and potential customers. This strategy aims at ensuring more customers purchase their product. Promotion also helps companies gain a competitive advantage over its competitors hence gaining a greater market share. Boston Beer Company has held rigorous campaigns aimed at promoting its products. Such programs include Freshest Beer Program, Octoberfest Campaign, and the Samuel Adams Living the American Dream program. Freshest Beer Program aims at assuring the customers of the quality of its products. This program is done in conjunction with domestic distributors since 2010. It ensures just-in-time production and as such proper planning, forecasting and cooperation of the whole production process is done ensuring the products do not overstay in the warehouses and also no shortages are experienced in the market, this is in line with the freshness label on the products. The company hired 330 employees in 2012 to ensure the Freshest Beer Program is implemented and the customers are aware of the same. The October fest is a country- wide program that brings together vendors and the winning participant gets to win a trip of two to the October Festival in Munich, Germany (Greasley, 2008). The Samuel Adams Brewing the American Dream program empowers small business owners with financing, exposure to the business world and networking opportunities ensuring they live the American dream (Verbeke, 2009). The company has also benefited much from word-of-mouth advertisement, the CEO, did not think the company would grow that fast as his five year brewing goals were attained in the first five months of his leadership (Loader, 2006). The fourth strategy is the place or distribution strategy. This strategy involves planning for the distribution channel to avail the products in as many markets as possible. It entails identifying new markets and existing markets, that have not been fully exploited and putting in place plans to ensure the products are availed to such markets. Boston Beer Company has invested on their distribution channels and in the process, new markets have been identified where the products have been marketed. The main market of the Company’s products remains to be United States though new markets have come up in; The Caribbean, The Pacific Rim, Mexico, Europe, Canada and Israel. The distribution channels of the company are made up of over 340 wholesalers who link up the retailers to the company. There are several recommendations that would help Boston Beer Company. The company should develop new product lines. This entails the expansion of the existing niche to accommodate all the possible customers. There are threats posed to the company and speedy measures ought to be taken for the company to maintain its position in the Beverages industry. There is a growing demand for wines, in 2010, a Gallup poll was conducted, and 51% of the respondents preferred beer while 24% preferred wine. However, in the past twelve months 39% prefer beer to 29% who prefer win. As seen, tides are fast changing and sooner than later the demand for wine will outdo that of beer hence the need for the company to invest in new wine products. Globalization is increasing rapidly and the world is becoming a global village. Many countries re opening up for international companies and the developing countries are quickly growing into middle-income countries. These changes bring about creation and opening up of new markets. The company should consider producing products for markets such as Africa and the ever-expanding Asian markets. They may also set production plants in such countries and this may help in cutting down the production and distribution costs (Ellis & Williams, 2009). As a conclusion, the beer industry is growing competitive though Boston Beer Company still ranks second in the craft beer industry. However, there is room for the company to expand the craft beer demand for their product and ensuring vigorous marketing of their products. Diversification remains the best escape route since there are growing markets for beer related products such as wine and this as seen through the current market trends could serve to be a gold mine for a myriad of companies who choose that route. Works Cited Top of Form Bottom of Form Top of Form Bottom of Form Boston Beer Company Profile - Yahoo Finance. (n.d.). Retrieved March 2, 2015, from http://finance.yahoo.com/q?s=SAMTop of Form Bottom of Form Top of Form Bottom of Form Ellis, J., & Williams, D. 2009. International business strategy. London [England: Pitman Pub. Greasley, A. (2008). Operations management. Los Angeles: SAGE Publications. Top of Form Bottom of Form Top of Form Bottom of Form Johnson, G., & Scholes, K. 2013. Exploring corporate strategy (7th Ed.). London: Prentice Hall Europe. Loader, D. (2006). Advanced operations management. Chichester, England: John Wiley.Top of Form Bottom of Form Top of Form Bottom of Form SWOT analysis: A tool for making better business decisions. 2008. Washington, D.C.: U.S. Dept. of Agriculture, Risk Management Agency. Top of Form Bottom of Form Verbeke, A. 2009. International business strategy: Rethinking the foundations of global corporate success. 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