The Aspect of Beer Industry - Case Study Example

Strategic Management Case Study-Adnams Author’s name Institutional affiliation Strategic Management Case Study-Adnams Introduction The rising taste and preferences for beer in the UK has made the beer industry to be transformed into a new image (Middleton Rodger & MacCulloch 2008). Additionally, the perception and the opinion that had clouded the UK about the fact that small scale brewery firms produce a beer that is dark and overloaded with so much flavor, and is only found in pubs that are gloomy is slowly changing (The Guardian, 2015). Moreover, this changing opinions can be attributed to the tactical decisions as well as the marketing genius that has exposed the potential and capability that exists in craft brewing. For instance, Heineken is one of the beer firms that have revolutionized the beer industry with its large scale production of high quality craft beer and wine. One challenging aspect of beer industry revolves around the ability and potential of small-scale beer industries to sustain their competitive advantage. Adnams being a mid-sized brewery business in the UK, it has made itself relevant in the industry by venturing into hotels and pubs in surrounding areas of Norfolk and Suffolk (Middleton Rodger & MacCulloch 2008).Under the guidance of Andy Wood, Adnams is believed to have experienced a historical journey that has been coupled with some success and challenges as well (Adnams Southwold, 2013). It is therefore through this challenges that Adnams developed into the unique company in the brewing industry in the UK by embracing some strategies. Therefore, through its unique strategic management, focus, and cost leadership, Adnams is one of the most celebrated mid-sized brewery firms in the UK. Theoretical underpinning for analysis, justification and evaluation of the model choice, and identification of key issues It is known that for any organization to realize a competitive edge in the market, it must see to it that its strategic management strategies hold a very strong position in the market. In other words, Adnams has ensured that it is well endowed in this aspect owing to the fact that it has very clear measures and tactics that has enabled it to discuss and evaluate its competitive strategy in terms of strategic issues like brand value, its core competencies, its innovation and leadership, and the value of its brand and its decision-making. Addionnaly, Adnams has ensured that it is different from other companies which explain why a good strategy can be able to propel a company to have a competitive edge (Middleton Rodger & MacCulloch 2008). Because the primary determinant of Adnams profitability revolves around the attractiveness of the beer industry in which it operates, its position in the industry also plays a very important role. In other words, even if the beer industry in the UK is generating low revenues as compared to other industries, then the optimal position of Adnams, as well as its target market segment, will enable it to generate superior returns. Moreover, Adnams has realized this by leveraging its powerful areas or rather strengths. According to Michael Porter, the strengths of any company revolve around differentiation and cost advantage. In other words, the model that can be used in analyzing the strategic management of Adnams is Porters Generic Strategies since it will see to it that its analysis is done in a broader perspective that involve focus, differentiation and cost leadership (The Guardian, 2015). Furthermore, Adnams has ensured that it possess a competitive edge by ensuring that its products are unique through the differentiation strategy, and its production costs are lower through its cost strategy hence making Porters generic strategies essential in the analysis of Adnams strategic management. Porter’s generic strategy can enable the company to evaluate itself against other industry forces as shown in the figure1below Generic Strategies and Industry Forces Industry Force Generic Strategies Cost Leadership Differentiation Focus Entry Barriers Ability to underprice acts as a barrier to entry Strong customer loyalty can prevent other firms from entering in the market Focusing establishes core competencies that can prevent other firms from entry Buyer Power Ability to provide reduced price levels to powerful buyers. Customers possess low bargaining power due to substitutes unavailability Large buyers have less bargaining power due to few alternatives. Supplier Power Better insulated from suppliers who are powerful Pass the extra cost incurred to customers Suppliers have high bargaining power due to low volumes, However, a differentiation-focused firm passes the extra charge to suppliers. Threat of Substitutes Can employ low price levels to fight competition against substitutes. Customer's become loyal to the product uniqueness hence preventing potential competition Core competency and specialized products protect the firm against substitutes. Rivalry Better able to foster completion based on price. Brand loyalty to help keep loyal customers from rivals. Rivals cannot at any one point meet the differentiation-focused consumer demands. Table 1: Generic strategies and industry forces. Source: QuickMba.com: http://www.quickmba.com/strategy/generic.shtml However as much as porter’s generic strategies are important in this analysis, it is acknowledged that a significant requirement of porters cost leadership strategy is the fact that it needs a heavy capital investment upfront. In other words, For Adams to be at bay with cost leadership, it must ensure that it purchases a more modern and largest plant in the industry in which it is operating (The Guardian, 2015). Another short coming of this model is its reliance on the level of experience to underprice the risky level of competition. In this case, this model believes that the market leader can be able to lower or underprice a commodity’s competition because of the company’s lower costs due to its cumulative experience. However, because underpricing is very easy to imitate, then this strategy may not be appropriate in the long-run. Moreover, according to this model, it is assumed that a cost leader has no way of ignoring differentiation. Apparently, differentiation can only be beneficial if it helps promote the policy of cost reduction. On the contrary, cost reduction cannot be practiced by any firm especially in cases that involve discretionary costs owing to the fact that these costs determine the rate of sales rather than being determined by it (The Guardian, 2015). Besides, differentiation strategy may not be successful in the long-run because of imitation and changes in preferences and tastes of customers. Part 2 strategic analysis and model application Porter’s generic strategies are universally acknowledged as ways a company may adopt to have a competitive edge. Because Adnams is operating in an industry that is well endowed with other well-established beer industries like Heineken Uk Ltd, Molson Coors Brewing, it has managed to make itself relevant in the industry by venturing into hotel and pub industry while focusing on a particular target segment in the market and at the same time improving the quality of its product through continuous innovation (The Guardian, 2015). The need to establish a competitive edge that ensures that it obtains the much-needed revenues and sales more than its potential competitors is one of the reasons why Porters generic strategies is significant to Adnams. The strategic management of Adnams can be analyzed using porter’s generic strategies as shown below Cost leadership strategy It is accepted that this generic aspect requires a company to be producing at a much lower cost than its competitors in industry for a given quality level. In Suffolk, Adnams has ensured that beer remains one of the primary products in its production line. It is believed that beer existed in Suffolk since the year 1345 .Therefore, to remain relevant as far as cost leadership is concerned, Adnams set up some inns around Suffolk so as to be a leader on all fronts. Additionally, Adnams was able to sell its goods and services at either a mean industry prices so as to realize profits as compared to its competitors, or it underpriced its prices in some of the Southfold inns so as to gain a larger market share. Apparently, incase other companies engage in a price war, the cost strategy employed in some inns can see to it that a firm can maintain some level of net revenues while its competitor's sale at losses (The Guardian,2015). Therefore, any firm that employs a cost leadership strategy should be targeting a broader market. Adnams achieve this by venturing into Adnams Hotels: The Crown and the Swan, which are commanding prime positions in Southwold. Adnam has ensured that it possess cost advantage by seeing to it that its production process efficiency is improved, accessing materials that are low on cost, optimal outsourcing as well as avoiding costs that are meaningless. In fact, Adnams is one of the few companies that have established connection with Suffolk hence making it remain relevant as a cost leader. Adnams benefit from cost leadership strategy because it possesses some internal strengths. Some of this strengths include; first, they have easy access to the required capital in making a significant investment in assets of production which may represent a very large barrier to entry that most companies may not overcome (The Guardian, 2015). Second, high expertise level in the engineering of manufacturing processes that is backed by a new visual identity that was launched in the year 1999 by Simon Loftus. Third, most of the members of Adnams are in possession of relevant skills necessary in product design needed for the efficient manufacturing of products evidenced by the launch of a new product design named “Beer from the Coast” (Adnams Southwold, 2013). Finally, Adnams firm boasts of a distribution channel that is more efficient. However, this strategy may not be a better strategy, in the long run; it is important to note that, brewery companies may as well employ a cost strategy. In other words, as the level of technology advances, the existing competition may be able to offset the production abilities hence eliminating the case of competitive advantage (The Guardian, 2015). Besides, some companies that are targeting narrow markets and following a focus strategy may realize a much lower cost and as a group, they may be able to obtain a significant market share as compared to Adnams. Differentiation strategy When it comes to a differentiation strategy, companies can develop their product in such a way that it offers a unique attribute that is most valued by customers and in the process, it is perceived to be the best as compared to other competing products. It is known that the perceptions and attitude of Uk Consumers towards beer and drinking habits are in most cases volatile (Middleton Rodger & MacCulloch 2008). In this case, therefore, the market environment of UK is very challenging to comprehend. For instance, competitors switches and moves regularly, rules and legislative regulations also changes even climate and weather conditions changes. To keep pace with this aspect of the market, Adnams had to innovate and differentiate its products. In this case, in the year 2011, through innovation and differentiation, Adnams stood out in the market with its unique, interesting as well as season changing a variety of splendid ales coupled with good wines (The Guardian, 2015). Additionally, the value that is added by the product uniqueness permitted Adnams to charge a premium price value for it. In other words, the premium price is assumed to cover the high costs incurred in adding value to the product. In such case, if Adnams’ suppliers happen to increase the price of the product, then it can offset this costs by passing the extra charge to its customers since they cannot easily find substitutes for this unique product. This is well supported by the head of Hotels Mrs. Mary, who is in charge of breakfast services in Adnams Swan Hotel. She made sure she innovated a prototype in the Swan Hotel, which blended well with the sale of beers (CBI, 2016). Southfold town is acknowledged as a seasable town that is based in an areas that is well-endowed with natural beauty and rich in wildlife (Adnams Southwold, 2013). Additionally, the town itself can be said to have a touch of great charm. In other words, the landscape of this town offers much to the reputation, image and flavor of Adnams business unique products hence elevating the business beyond the others. Besides, Adnams and its image are closely related to the Suffolk and Southwold environment which plays a very crucial role in the differentiation of its products (CBI, 2016). It is argued that Adnams succeeded in its differentiation strategy because its staff members have developed a sense of belonging and whenever they are asked to attend to something, they always do it to perfection and issues between them are solved internally. Additionally, Adnams possess a highly creative and skilled product development team that ensures continuous innovation (CBI, 2016). However, as much as this strategy is important, changes in the tastes and preferences of the company’s customers coupled with imitation by competitors may act as a challenge in the long-run. Focus strategy It is universally accepted that companies use focus strategy to focus on narrow market segments and in the process, tries to realize either differentiation or cost advantage. The assumption that is employed in this strategy is that the demands of a particular segment can be serviced in a better way by concentrating entirely on it (In Gammelgaard, In Dörrenbächer & Edward Elgar Publishing, 2013). Adnams has ensured that it makes use of this strategy by focusing on Suffolk, Norfolk and its surrounding areas using its close family connections. Besides, its internal connections have made people be proud of associating with Adnams. As a result, Adnams boasts of a high level of customer loyalty which discourages other potential competitors from engaging in competition with it directly (CBI, 2016). Furthermore, because of Adams’s narrow focus on Suffolk, Norfolk and its environments like Southwold, it possesses lower volumes which make it have a very minimum supplier bargaining power (Adnams Southwold 2013). However, this strategy may not guarantee success because of rising cases of imitation coupled with changes in the target market segments (Adnams Southwold 2013). Besides, it is argued that it may be easier and cheap for a broad-market company that is a cost leader to modify its product so as it may compete directly (CBI, 2016). Apparently, other competing companies that also employ a focused approach may be better placed to modify and curve their market sub-segments that they may be able to serve in a much better way. Adnams tries as much as possible to establish connections with its customers most especially through its production line of wine. In other words, the greener wine business in Suffolk acted as a platform for better things in the Adnams business when Simon Loftus took over the leadership. It is believed that Simon Loftus idea in regards to wines ensured that the distance between the company and its customers/suppliers was shorter and more focused (Adnams Southwold, 2013). In so doing, Adnams was among the first merchants to bring the Grower wine in the wine merchants hence elevating it beyond other beer industry pack in terms of profile. Recommendations It universally accepted that this generic strategies are not normally compatible with each other. In other words, given the fact that Adnam has tried to realize a competitive advantage on all these fronts by employing all this strategies, then it is obvious that it may not be able to get an advantage in the long-run. For instance, Adnams has tried to be unique by venturing into a number of hotels and pubs; then this might not work in the long run because other companies may as well decide to venture into the same activities as them. Therefore, if Adnams want to be successful in the long-run, it must, therefore, select and employ one of the postulated generic strategies .Moreover, if Adnams wants to be successful through the employment of multiple strategies, then it must try as much as possible to establish some separate business entities for each different strategy (Kossowski, 2007). . However, one critical issue is the fact that adoption of one single generic strategy might not be necessarily the best owing to the fact that some customers always tries to find multi-dimensional satisfactions like a combination of style, quality, convenience, price, and taste. Therefore, Adnams should be able to establish a way of differentiating its products in a way that other companies may not be able to imitate them and in the process, evolve with the changing customer dynamics. Conclusion Adnams is believed to have experienced a historical journey that has been coupled with some success and challenges as well. Using porter’s generic model, it is evident that, Adnams has been a success in the brewery industry due to its focus, leadership and differentiation strategies. However, employment of this strategies may not work well in the long run because of the changing preferences and tastes of consumers, imitation and most especially the changing attitudes and perceptions of UK consumers. Additionally, it is also known that firms that engage in a focus strategy and succeed can produce a wider range of product development capabilities to a narrow segment of the market that are aware of. For instance, there have been some cases where some companies faithfully employed a single strategy but ended up suffering whenever a new company entered the market with a product that meets the needs and demands of customers even if it’s of low quality. Therefore, Adnams should, therefore, ensure that its strategic management is established in such a way that it evolves with the changing tastes and preferences of its customers and in the process, no competitor can be able to imitate it. Reference list Adnams Southwold, (2013).Adnams becomes the first UK brewery to carbon foot print bottled beer range. Retrieved from: http://adnams.co.uk/about/news/company-news/doing-the-right-thing/adnams-becomes-first-uk-brewery-to-carbon-footprint-bottled-beer-range/ CBI, (2016).Adnams-Sustainability hits the bottle. Retrieved from: http://www.cbi.org.uk/media-centre/case-studies/2009/04/adnams-sustainability-hits-the-bottle/ Goldman, G., & Nieuwenhuizen, C. (2006). Strategy: Sustaining competitive advantage in a globalised context. Cape Town: Juta.Top of Form In Gammelgaard, J., In Dörrenbächer, C., & Edward Elgar Publishing. (2013). the global brewery industry: Markets, strategies, and rivalries. New Horizons in International Business Kossowski, A. (2007). Strategic management: Porter's model of generic competitive strategies - theory and analysis. München: GRIN Verlag GmbH. Lyons, B. (2009). Cases in European competition policy: The economic analysis. Cambridge: Cambridge University Press. Middleton, K., Rodger, B. J., & MacCulloch, A. (2008). Cases and materials on UK and EC competition law. Oxford: Oxford University Press. The Guardian, (2015).Brewer Adnams keeps up with craft boom with more beers. Retrieved from: http://www.theguardian.com/business/2015/aug/04/brewer-adnams-keeps-up-with-craft-boom-with-more-beers Bottom of Form Read More