Global Market Opportunities - Boston Beer Company - Case Study Example

BOSTON BEER COMPANY By Name Course Instructor Institution City/State Date : Boston Beer Company Boston beer Company was formed in the year 1984. Samuel Adams was an American patriot brewer. In honor of his contributions to the revolution of the beer company, his name was used as the beer brand. Currently, the Boston beer company is one of the largest native brewing Company in the USA (Maertz and Griffeth, 2004, p. 664). The company produces and sells a wide range of low alcoholic beverages to the citizens of the US and various other international markets. It has specialized in production of beers, malt beverages and hard cider products. Sam Adams is one of the several beer brands produced by Boston Beer Company and it is well known across many states. The mission statement states that “we want to change the way people think about beer”. The vision statement is “Change the world”. The strategic objectives include to base production on a health craft category growth and to provide quality to the consumers of their products. Moreover, there is developing Sam Adams into a leading international brand and building diversified international market for the product. For a company like Boston beer to survive in today’s competitive markets, it has to achieve a competitive advantage over the other companies with a similar production line. To achieve this any company is bound to exploit all the available options in the market. One of the important ways to achieve this is by carrying out an internal environment analysis of the company. The internal environment is made up of the innate competencies of the company and the organization’s interior systems and procedures (Maertz and Campion, 2004, p. 570). Moreover, it is crucial for the company to conduct this analysis to obtain a clear image regarding its characteristics. These characteristics include access to resources, its capabilities and the core competencies. The internal analysis also focuses on the company’s vision, mission and the strategies with regard to the general business objectives. Furthermore, the analysis facilitates the management in identifying the strengths and the weaknesses of the company. The end result, the company will have enough information for developing the required strategic alternatives. Consequently, this gives the company a head start in designing suitable strategies towards leveraging its strength and to add sustainable competitive advantage in the market. Value chain analysis is one of the methods used in assessing the internal environment of the company. The value chain analysis considers the company as a chronological process which involves activities that create value. It includes all the substantial and technical activities within an organization that add value to a product. The Boston Beer Company concentrates on the value chain because all customers demand some type of value from the beer they buy and use. Again the Boston Beer Company’s value chain helps the management to identify the separate activities and business processes carried out to plan, produce, market, distribute, and support their products and how well they will create value for the customers (Mano-Negrin and Kirschenbaum, 1999, p. 700). Just like in other businesses, the value chain of the Boston Beer Company consists of the primary activities that concentrate on creating the customer value and the support activities that seek to support the primary activities. The primary activities are divided into inbound logistics, operations, outbound logistics, sales and marketing, and consumer services. Each of these branches of the primary activities is involved in competing in any industry in the market. The other category is the support primary activities which are divided into procurement, technological development, human resource management, firm infrastructure or general administration. All these add value by way of important relationship with both the support activities and primary activities. Value Chain Analysis Does this activity offer a comp, advantage? Yes or no? In this column, bullet point the ways in which the company creates value for the customer for each value chain activity. Primary Yes/No How is value created for the customer? Inbound logistics No It deals with inputs, material handling, and warehousing and inventory control. Therefore, the value created is on the production process and storage. The beer produced by the company is said to be crafted in a unique way to meet a wide range of users and this creates value. Operations Yes This involves the plant’s operations, plant layout and design to minimize cost. In the long run, the customer benefits from low cost of the final products. Boston Beer Company has also achieved the objective of maintaining the customer’s value by maintaining their low prices for their alcoholic and non-alcoholic beverages. Outbound logistics Yes Value is created to the customer because outbound logistics deal with shipping to minimize damages on products. This ensures that the product reach the customers in good condition. Marketing and Sales Yes This adds value to customers since it deals with market segmentation according to customer needs. Therefore, the company was able to provide the customers with more variety of flavor, color and other qualities of beers Service Yes Service ensures quick response to customer’s needs and emergencies. A quick response to specific customer needs is also another way in which the Boston Beer Company has managed to maintain value for their customers. According to a study carried out by American Journal of sociology, the popularity of Boston Beer Company was in part due to customer’s reaction against the brewers who lacked attention to new consumer preferences. Support: Yes/No How is value created for the customer? General Administration Yes The administration ensures smooth running of all departments in the plant. Therefore value is added to customers due to an efficient production process and quality management. Human resource management Yes This department deals with the hiring of quality employees who ensure high standard execution of tasks. The end result is quality production and distribution of products. The beer produced by the company is said to be crafted in a unique way to meet a wide range of users. Technology development Yes The introduction of up-to-date technology ensures quick and quality production. Moreover, there is added efficiency in quantity production to meet increasing demand. Therefore the customer’s value is maintained further by providing the customers with more variety of flavor, color and other qualities of beers. Procurement No Procurement only adds value to the businesses being involved in the buying of the products and selling to their customers. The value chain key activities for the Boston Beer Company include bottling and can filling, wholesale delivery and retailing. The company’s value chain system influences the price competitiveness of the Boston Beer Company. However, it has managed to administer this value chain hence gets ahead of competition. A business strategy is normally the coordination of the ways to achieve the set business objectives of a company. The Boston Beer Company’s management uses both the corporate-level and the generic business level strategies to run the business and maintain its competitive advantage. One of the business level strategies is the focus strategy (Mack, Nelson and Quick, 1998). The focus strategy enables the Boston Beer Company to exploit a market niche and differentiate their costs according to the needs of the customers. The company has concentrated to give the beer lover a better beer. This means that the manufactures focus on satisfying the customer. Another business lever strategy used by the company is the differentiation technique. This is where the company employs prestige, innovation and other features to produce beer that fits every class of customers (Mardanov, Heischmidt and Henson, 2008, p167). This strategy protects the Boston Beer Company from rivalry and further helps to promote brand loyalty. The main disadvantage of this strategy is that it has caused the emergence of imitations. On the other hand, there is the use of corporate-level strategies. The concentration strategy has seen the Boston Beer Company manage to geographically expand their manufacturing plants and also increase the range of products for instance the new plants at Pennsylvania and one in Ohio. Furthermore, the diversification strategy has always described the Boston Beer Company since tea was the initial product. This kind of diversification is referred to as concentric diversification (Maslach, 1998, p. 73). The domestic entry strategy has also enabled the Boston Beer Company to expand and easily take control of all their brewing operations. Despite the fact that competition has been aggressive, the Boston Beer Company has focused on expanding its operations through mergers and acquisition of plants and equipment. This has led to the Boston Beer Company acquiring some high-end beer makers through this expansion strategy. The main factor that helps the Boston Beer Company to maintain their competitive advantage is its beverages differentiation. The company has managed to maintain its unique product taste and at the same time the much required customer loyalty. Boston Beer Company has also managed to use a brand name that has been appreciated by many beer drinkers in the country and beyond. Furthermore, the prices of the Boston Beer Company’s products are better as compared to those of their prime competitors. In addition to the product differentiation, the Boston Beer Company enjoys its brand superiority by introducing a variety of beverages in several fashions that include hard ciders, seasonal beers and the iced teas. This investment in varieties and fashions of this company’s products is attributed to the market research and development that offers value to the customer’s needs of the alcoholic beverage. Their last competitive advantage is the established distribution channels. This channel allows convenient delivery of fresh beer to the beer drinkers within a short time. Even though the Boston Beer Company enjoys the said competitive advantage, there has always been the existence of various threats. Rivalry among other existing beer companies has brought about one of the highest competitive battles in the industry. The introduction of ‘Better Beers’ companies based in the USA have led to a drop in sales for the Boston Beer Company. This has further threatened the market share the Boston Beer Company enjoys (Macdonald, 2005, p. 78). The threat on new entrants in the beer industry has also threatened the demand for the Boston Beer Company’s products. This is because the new entrant companies bring about new specialty beers competition regionally. Therefore, the new entrants enjoy brewing beverages that aim the local tastes and with lower costs to consumers. Substitutes to beer have also caused a threat to the Boston Beer Company’s products. The major substitutes to beer include the wines and spirits. The introduction and promotion of these substitutes has seen the sales of beer significantly drop with time. The drop on sales of beers is attributed to the increasing market share of the wines and spirits. Bargaining power of suppliers is a force that elaborates on the amount of power that the suppliers have on an industry. In the case of beer industry, it is the power that the suppliers have on the beer industry. All businesses require a wide range of inputs that include; labor, services, raw materials and others. The cost of purchasing the suppliers influences the profits that will accrue from the business industry (McBey and Karakowsky, 2001, p. 45). In other words, the terms and conditions that are usually determined by the suppliers influence how transactions are made and thus they influence the cost of supplies. Finally, we have the customer’s bargaining power as a threat. Even though the Boston Beer Company enjoys a well established niche in the market, they compete on the basis of quality, taste and image unlike other major competitors who use prices (Locke, et al., 1990, p 67). However, due to the presence of substitutes and regional competition, the competitors threaten to take away the Boston Beer Company’s customer base. The Boston Beer Company has faced the dynamic environment of business and responded accordingly. That is, the company has devised various methods to deal with the general environmental factors in order to ensure continued profitability and the maintenance of the market share. The general environment consists of the demographics, social cultural, political, economical and technological factors. The demographics represent the gender, race and age in a population. The marketing department of the Boston Beer Company always faces the challenge of this factor whenever they are carrying out a promotion or direct marketing of their products (Miller, Katerberg and Hulin, 1979, p. 512). In the normal setting, it is believed that beer consumption is male-dominated. In most cases, the beer drinkers prefer the light beer to the domestic draft beer. Moreover, some people, both male and females, prefer low alcohol drinks. In the consideration of the demographical needs, the Boston Beer Company diversified on the range of the drinks produced to in order to satisfy all the customers who choose their products and attract new ones too (Lambert and Hogan, 2009, p. 116). Moreover, the aged beer drinkers prefer the diet beers. The Boston Beer Company has also responded to this need by producing a brand of sugar-free diet beer. Another general environment consideration is the social cultural factor. This considers the perception a society has on beer drinkers. Furthermore, it also considers the aspect of beer consumption by underage individuals. There has been a ban implemented in all states against selling any alcoholic drinks to individuals under the age of 21 years. In addition, the society condemns road accidents caused by drunk drivers. To respond to this factor, the Boston Beer Company has ensured an ongoing campaign to discourage underage drinking. This is done through extensive campaigns conducted by the company to encourage responsible drinking. The issue of driving while drunk also falls under the same campaign where the company urges the users of their alcoholic products to avoid driving after their consumption. The government has also not been left behind. There has also been the political pressure aimed at enhancing the existing laws and regulations made for the beer industry. The rules and regulations also target the needs of organizations and other interest groups. The rules aim at achieving the right procedure of production of beer and its marketing (Liden and Maslyn, 1998, p. 43). The rules further aims at regulating the licenses and taxes that affect the industry. The Boston Beer Company has responded to this by creating a good working relationship with the government and other interest groups. Boston Beer Company has ensured a good tax payment structure which ensures correct amounts of tax go to the government (Mishra, Bhatnagar and Deepti, 2010, p. 415). The company further ensures that all the production requirements are met by ensuring qualified personnel in addition to their state of the art production plants. The licenses to produce and distribute its products are also paid at the beginning of each financial year. The global factor deals with the involvement of the business activities outside the country’s borders. The involvement in the international markets has led to the Boston Beer Company improving on its already near-perfect distribution channels in order to conveniently reach its customers abroad. This response has enabled the company to maintain its international market share and competitiveness against the domestic alcoholic products (Mitchell, et al., 2001, p. 1107). The economic factors include the inflation rates and the rising costs of raw materials. The Boston Beer Company has responded to this through an increase in the wide range of their products in order to increase sales and eventually the revenue. The company has also produced expensive beer brands that target the high-rated individuals and this helps in ensuring profitability and hence sustainability of the company’s operations. Finally, the technological factor specifically deals with the mechanisms of production in the plants. Technology determines the both the rate and the quantity of production within a given time. The Boston Beer Company has responded to this by installing modern production facilities in their plants. The modern machines and animated production processes ensure quantity and quality production of the beers. I would recommend the use of a combination of strategies to Boston Beer Company. The combination of the low cost and differentiation strategies would make it hard for rival companies to imitate. It also helps to provide a unique value to customers and with an efficient manner. The Boston Beer company should also consider the use of the overall price strategy. This is where the company ensures that all its returns are above average. This helps it to protect its products revenue against the effects of the competitors in the market. Furthermore, this strategy protects the company against powerful buyers (Mitchell, Holtom, Lee and Graske, 2001, p. 103). The overall advantage of the strategy is the power the company gains in dealing with the powerful suppliers and other substitute products. This strategy ensures the maintenance of the competitive and the sustainable advantage that the Boston Beer Company has. The use of the integrated low cost and differentiation strategy should also be considered by the Boston Beer Company. This is where the company will be able to increase its adaptability tactics in the newly exploited markets and to the dynamic general environmental factor changes. Furthermore, the company will also be in a position to assimilate new skills to improve further to their production processes. Bibliography Liden, R. C., and Maslyn, J. M., 1998. Multidimensionafity of leader-member exchange: An empirical assessment through scale development. Journal of Management, 24(1), 43. Locke, E. A., Latham, G. P, Smith, K. J., Wood, R. E., and Bandura, A., 1990. A theory of goal setting and task performance: Prentice-Hall Englewood Cliffs, NJ. Macdonald, L. A. C., 2005. Wellness at work: protecting and promoting employee health and wellbeing: CIPD Publishing. Mack, D. A., Nelson, D. L., and Quick, J. C., 1998. The stress of organisational change: A dynamic process model. Applied Psychology, 47(2), 219-232. Maertz, C. P, and Griffeth, R. W., 2004. Eight Motivational Forces and Voluntary Turnover: A Theoretical Synthesis with Implications for Research. Journal of Management, 30(5), 667-683. Maertz Jr, C. P, and Campion, M. A., 2004. Profiles in Quitting: Integrating Process and Content Turnover Theory. Academy of Management Journal, 47(4), 566-582. Mano-Negrin, R., and Kirschenbaum, A., 1999. Push and pull factors in medical employees' turnover decisions: the effect of a careerist approach and organizational benefits on the decision to leave the job. International Journal of Human Resource Management, 10(4), 689-702. Mardanov, I. T., Heischmidt, K., and Henson, A., 2008. Leader-Member Exchange and Job Satisfaction Bond and Predicted Employee Turnover. Journal of Leadership and Organizational Studies, 15(2), 159-175. Maslach, C., 1998. A multidimensional theory of burnout. Theories of organizational stress, 68–85. McBey, K., and Karakowsky, L., 2001. Examining sources of influence on employee turnover in the part-time work context. Career Development International, 6(1), 39-48. Miller, H. E., Katerberg, R., and Hulin, C. L., 1979. Evaluation of the Mobley, Horner, and Hollingsworth model of employee turnover. Journal of Applied Psychology, 64(5), 509-517. Mishra, K., Bhatnagar, S., and Deepti., 2010. Linking emotional dissonance and organizational identification to turnover intention and emotional well-being: A study of medical representatives in India. Human Resource Management, 49(3), 401-419. Mitchell, T., Holtom, B., Lee, T., and Graske, T., 2001. How to Keep Your Best Employees: Developing an Effective Retention Policy and Executive Commentary. The Academy of Management Executive (1993-2005), 15(4), 96-109. Mitchell, T. R., Holtom, B. C., Lee, T. W., Sablynski, C. J., and Erez, M., 2001. Why people stay: Using job embeddedness to predict voluntary turnover. Academy of Management Journal, 44(6), 1102-1121. Lambert, E., and Hogan, N., 2009. The Importance of Job Satisfaction and Organizational Commitment in Shaping Turnover Intent: A Test of a Causal Model. Criminal Justice Review, 34(1), 96-118. Read More