Industry Analysis for Heineken - Essay Example

INDUSTRY ANALYSIS FOR HEINEKEN By Location Introduction With the cutting edge technology that most business organizations have adopted today, is predictable that competition is stiffening each day in the business world. Specifically, the beer industry has seen some of the stiffest competition in the past decade. It is important to note that the beer industry is one of the most unique industries today. In the beer industry, the leading organizations keep growing as the smaller organizations keep fading, thus the uniqueness (Swinnen 2011, p. 67). In the world beer platform today, Heineken is considered as one of the organizations that has stayed in the competition and is here to stay. What therefore has been the key to success in Heineken? Well, it is the uniqueness of the marketing strategy and the industry analysis that has been adopted by Heineken over time. In a keen study of Heineken’s strategic platforms, one can simply notice why Heineken is destined for even a brighter future (Duetsch 2002, p. 78). This paper aims at analysing the beer industry, with reference to Heineken, being a key player in the industry. What makes the Heineken strategy unique and what are some of the marketing and analytical platforms pursued by this giant (Heineken) in the beer industry. AAKER Marketing Analysis David A. Aaker is credited for having come up with AAKER Marketing Analysis, a marketing strategy that puts emphasis and focus on the micro- external environment in which an organization operates. Most organizations today have adopted the AAKER Marketing Analysis in their market analysis, strategy so as to understand more their various immediate external environment (Bohrer 2007, p. 37). An analysis of the immediate external business environment is critical to the success of any organization. In the beer industry, specifically, Heineken has employed AAKER Marketing Analysis with the main aim of creating a competitive advantage over other industry players in the following ways: Analysis of the Market Size It is a policy at Heineken that any market ventured into must be fully exploited. In order to fully satisfy their customers, Heineken did their market analysis by first identifying the size of the market that they (Heineken) intended to operate into. In analysing the market size, Heineken put focus on the number of their consumers and potential consumers; followed the quantitative analysis with qualitative analysis of what can be the demands of those customers (Bohrer 2007, p. 43). With this analysis put into consideration, Heineken has been able to understand the needs of their customers, thereby working towards satisfaction of the same needs (Heineken N.V. SWOT Analysis 2014, p. 5). Analysis of the Market Trends The beer industry is highly dynamic and full of unpredictable occurrences. It therefore calls for the players in such an industry to be vigilant with every step that they make. Market trends is the description of the continuous upward and downward movement of market factors during a specific period of time. The market factors in this case can be: the volumes of sales, booms and recessions, the varying rates of exchange, the stability of the market size among others. Heineken, for instance, is one organization today that is known for constant and stable supply of their products no matter the demands of the market. The stability here has been achieved through proper understanding of the market trends as well as putting in place proper forecasting methodologies. Analysis of the Market Growth Rates Accuracy in forecasting is highly dependent on how well an organization retrieves the historical market data, analyses the data and use the results of the analysis to predict the future. Market growth rate information exists on how the market under study has been performing over some period in the past. It is the analysis of the growth rate of a particular market that an organization can predict on when to inject or not to inject products into the market. In the beer industry, for instance, market growth rate analysis has helped organizations to understand how attractive different market segments can be. Heineken, has segmented its market in the last decade based on the information gotten from the different market growth rates (Paley 2008, p. 88). Highly attractive markets are distinct to the unattractive markets. In the attractive markets, competition is a factor. Also, there exist incremental sales volumes, incremental market sizes and many more characteristics in attractive markets. Any organization would wish to trade in a market where their products won’t stay in stores. To combat the disadvantages experienced as a result of the attractiveness of the market, Heineken has used the segmentation strategy to edge competition. By segmenting their market into simpler ones, such as the focus on the African youth, Heineken has been capable to edge out their competitors. Heineken understands well when a market is stagnant or is depreciating in growth. In order to come up with the decisions on whether to stay or pull out of a market segment, Heineken focuses its research on the saturation of the market, how fast substitute products are emerging and the availability of the growth drivers in such particular markets. Getting extensive information about the market has led to Heineken either staying, staying partially or withdrawing all together form a particular market segment (Datamonitor: Heineken N.V 2010, p. 7). The European beer market for instance became saturated in the last decade. Most big beer organizations have taken the loyalty of the European market. In noticing the unattractiveness of the European market, Heineken put a lot of focus on other attractive segments such as the South American segment, the Asian and the African segment; with partial operations in the European segment (Viardot 2004, p. 88) The SWOT Analysis As well as understanding the external environments, organizations should as well understand their own internal environments if they are to succeed in any business hence the SWOT analysis. The SWOT analysis is an organizational, analytical tool that has been used for years by different organizations in understanding their own Strengths and Weaknesses which describe the internal environments of the organizations. Moreover, organizations have to understand the factors provided by the external environments in the form of Opportunities and Threats (Viardot 2004, p. 132). The following discussion puts into focus how the SWOT analysis has been used by organizations in the beer industry; specifically the Heineken: Strengths: Strengths those factors within the organization over which the organization itself has the power of control over. Some of the internal strengths in organizations may include the human resources, the leadership, the structure of the organization and the financial resources. Being an industry of giants, most organizations in the beer industry have exploited their internal environment. Human resource today has become the epicentre of competition in attractive industries today. Heineken has put in place measures to fully motivate and satisfy their human resource. Generally, with a satisfied human resource, innovation and eventual market leadership are inevitable. Weaknesses: organizational weaknesses involve those organizational factors in the internal environment that literally have led to the organization not achieving some of their objectives. An analysis of the beer industry reveals Heineken as one organization that has a centralized organizational structure. The centrality of the structure has proven a liability to Heineken since the flow of information has been hindered to a greater extent. Most organizations in the beer industry, just like Heineken, have adopted the centralized structure hence the constant market trends. Threats and Opportunities: threats and opportunities from the external factors in the business environment in which organizations operate. Based on the discussion herein, one can notice that the threats in the beer industry today is anchored around the attractiveness of the industry. Competition has been a factor to reckon with in the beer industry. Analysts cannot forget that the beer industry as well provides organizations with some of the best operational opportunities. The beer industry is one characterized by enthusiastic consumers. It is an opportunity for organizations dealing with beer in that; with good marketing strategies put in place, beer will sell anywhere in the globe (PR 2013, n.p) The PESTLE Analysis (Macro- Environment) PESTLE is simply an acronym for organizational environmental factors, thus; Political, Economic, Social, Technological and Legal factors. All the PESTLE factors may contribute to either growth or failure of an organization. The PESTLE factors emanate from the external environments- both the micro-external and the macro- external environments. All organizations understand that they do not operate in vacuums. There are people existing around any organizational set up. Also, the people around organizations have expectations about the organization and hence the importance of the PESTLE analysis to organizations (Gammelgaard, & Dörrenbächer 2013, p. 95). Organizations in the beer industry basically operate in large markets segmented depending on the attractiveness of each market. Heineken for instance is an international organization, thus operating in multiple countries with multiple and varying needs. To excel in the industry, Heineken has done its best in conforming to the demands of each segment be they political, social, economic, technological or legal. One can attest to the fact that Heineken is one of those organizations which are minimally involved legal battles. Proper analysis of the external environment reduces costs to the organizations in terms of fines or customer loyalty considering the social demands. Porter’s Value Chain Michael Porter in 1962 came up with a value chain that basically aimed at reducing the costs of production to organizations. To date, most organizations have adopted the policy by Porter. In his research, Porter’s main aim was to find a way through which organizations would realize outputs that are corresponding to the inputs without incurring losses. Porter noticed that organizations needed to make clear their value chains, hence the simplification to primary and support activities along the value chains (Munching 1997, p. 233). In the beer industry, the application of the Porter’s value chain is evident. Most organizations in beer are the primary producers of the products and so, these organizations have integrated primary activities such as the logistics in and out, operations, the services offered, marketing and sales together with support activities: purchasing, human resource management, development in technology and infrastructure, all of which are geared towards reducing production costs as well as enhancing efficiency. Organizations such as Heineken understand well their value chains, thus market leadership (Paley 2008, p. 76) The Product Life Cycle Analysis In marketing, the period between production and the actual consumption of the product are very essential to organizations. By determining the lifespan of products, organizations stand a good chance of satisfying the needs of their customers in time. Product life cycle analysis has been employed in the beer industry extensively. One of the reasons behind the product analysis is the continuous changes in the market set up. Organizations in the manufacturing industries try to put products as close as possible to their customers so as to maintain the customer loyalty. Heineken in this case has integrated vertically and advertised extensively to put customers closer to the products all the time (Boswijk Et Al 2007, p. 223). Conclusion A success in marketing may lead to the eventual success of an organization. Based on the assertions of this paper, the beer industry is one of the most competitive industries there are. Complete focus to one marketing strategy may lead to the eventual failure of an organization. The success of Heineken as has been witnessed in this paper is highly anchored around the capability of Heineken to pursue multiple marketing strategies as opposed to most of their competitors. 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