Analysis of Fosters Group in the United Kingdom - Case Study Example

Fosters Group: An analytical report Company: Foster’s Group Countries in which company has international operations: United States of America, United Kingdom, Singapore and others. Country selected for report: United Kingdom. Contents Contents 1 Summary of report 2 Introduction 2 POLITICAL, ECONOMY ENVIRONMENT 3 Political, economic, social, regulatory and legal aspects 3 Business environment 5 Emerging opportunities and threats 5 Conclusion 7 References 8 References 8 Summary of report The following report will look into the working of the corporation “Foster’s Groups” in the economy of United Kingdom. The report will analyse various factors that affect the working of the company in the foreign markets. The focus is on ensuring that the main issues that are being faced are established and effective solutions are developed, so as to ensure growth. The main concerns that have been looked into by the report are: Demand in parliament for raising of prices of alcohol in the country and the effect it will have on the sales of the company; Tough competition in the market that is faced by the company; Slow growth of the new wine section in the European markets due to the already well established domestic companies; and The risk that is being faced by the company due to the changes that are occurring in the international economy. These are the main areas that will be focused upon in the report to ensure that various demands of the company in the market can be addressed. Introduction The main aim of the report is to look into the various challenges that are being faced in the foreign markets due to various social economic and political changes. The focus will also be at understanding and comprehending the overall impact that the changes are giving on the foreign investment in UK. The main methodology that has been used when developing this report is quantitative but there are also elements of qualitative research. The paper will make use of articles that have been published, along with the information that has been handed out by the government in the country (Duffy, John and Hopkins, Ed 2005). The basis of the research that was conducted in the paper was both, on the basis of the already existing literature. The information that will be gathered will include the literature accessed from books, and articles from various journals and newspapers. POLITICAL, ECONOMY ENVIRONMENT Political, economic, social, regulatory and legal aspects One of the most significant factors that has to be considered when developing the foreign direct investment in an economy is to ensure that the political and the legal environment of the industry is sound and secure. When the company invested in the economy of United Kingdom, it was a safe and secure investment due to the fact that the European Union’s rate of alcohol consumption is the highest in the world, where over 55 million people drink harmful levels of alcohol (European Public Health Alliance, Online). In the case of the Foster’s Group and its direct investment in the economy of UK, it has to be realised that overall social and political challenges in the economy are increasing. There has been observed that there is a high level of political tension in the country due to the increasing levels of alcoholics in the society. In the year of 2007, it was observed that the government in the country and the industry collaborated to ensure that there were extra regulations so that the drinkers could be made more aware of the risks of investing into drinking (European Public Health Alliance, Online). This could have been harmful for the overall sales and profits of the company, but sales have not fallen short in the past. In the current scenario, it has been seen that the overall rates of consumption of alcohol is high in the society, and this ensures that the protection of the investment in the economy of the country. The laws under European Union allow the products of alcohol to be duty free and tax free to a certain limit and this has helped ensure that the sales in the European countries are higher than in other countries where there is tax duty imposed on the transportation of alcohol. But there are a number of social movements and legal challenges that can develop in the future that can and will have a direct impact on the overall sale of the product of the company in the market. Concern has been raised in the parliament due to the rise of the consumption of alcohol in the society and they believe that the prices should be increased to ensure that irresponsible drinking is reduced (Martin D, 2010). If this is an act that is implemented in the country then the overall sales of the company would reduce in the market. This in turn would have an adverse affect on the profits that the company gains from the direct foreign investments made in the market. The companies in the industry, including Foster’s Group has tried to ensure that there are measures taken to tackle this. They have tried to ensure that there is responsible advertisement of the products so that the social concern is addressed. Also there can be programs undertaken to ensure that there is greater amount of social awareness of the ill effects of drinking, allowing the company to gain a social footing in the economy of the country while also allowing it to gain benefits that the such programs receive from the government of UK. Another cause of concern that the company has to focus upon to ensure that its foreign investment in the country is safeguarded is to ensure that it can mitigate the losses in revenue due to the ban in smoking that has imposed in Scotland. It was seen that after it was banned in 2007, the overall section in the north saw a reduction of alcohol intake by 6 % in comparison to London’s 4 %. Paul Waterson, who was the then chief executive of the Scottish Licensed Trade Association pointed out to this loss of revenues that was being faced by the alcohol industry (Alcohol Policy UK, Online, 2011) and said that “Our own results show turnover figures among our membership are down by 11 per cent. Our figures and yesterday's results confirm that the smoking ban is badly hurting our businesses, no matter what the politicians say.” Thus, it is important that this concern also be addressed to ensure that the returns on the direct foreign investment be secured. Business environment Emerging opportunities and threats One of the most significant factors that affect the performance of the investment in the region that needs attention is the competition that is being faced in the economy by the company. There are a number of other competitors in the field that the company has to compete with in order to ensure that it can carve a space out for itself and secure a consumer base. This has led to an increase in the overall cost of production of the company which it has to bear today. The company has ensured that it develops a new image which is more local in the economy so as to ensure that sales are pitched higher, where they have appointed Adam and Eve, an ad company, to undertake its overall marketing to ensure that a larger consumer base is ensured (Fosters beer advert reflects Aussie mentality, Online). This is important especially since the company has also tried to establish its own wine section and is trying to ensure that this too gets introduced in the UK markets. The competition for this is very high as it Europe already has a well established market and manufacturers for wine established and building a niche for itself in this section would be difficult for the company (Das Aurindom 2008). Another important factor that has to be realised when one is looking at the investment in UK is the hit that the company and its profits will take due to the slump in the economy as a result of the international economic depression and turmoil. It has to be realised that although it does not have a direct impact on the company and its working, the slump in the market will have an effect on the sales of the products and the demand in the market for alcohol and other merchandise leading to a greater fall in the overall sale of the products of the company. It thus becomes important that the sales be ensured in the company through effective marketing so that there is a greater amount of awareness in the market is established. Also a wide survey should be carried out to ensure that the market trends be understood and realised so that the needs of the market are established and the manufacturing in the company is carried out in an effective and efficient manner. Conclusion Thus, in conclusion it can be said that the working of the company needs to be evolved to accommodate the demands and the needs of the economic and socio-political trends in the country of UK so that the foreign investment that has been made is protected. Also the added advantage of being a brewer and seller gives the company an added advantage in a region which does not have any traditional beer brewer and this should be utilized by the company to gain advantage in the foreign market and ensure safe returns on the direct foreign investments made. References References European Public Health Alliance, Online Alcohol Industry fails to comply with self regulations, accessed at http://www.epha.org/a/3887 on August 31, 2011. Alcohol Policy in UK, Online, Alcohol industry news: UK drink companies worst for complying with advertising standards; NUT calls for ban on sports sponsorship; smoking ban hits beer sales in Scotland, accessed at http://www.alcoholpolicy.net/2007/04/industry_news.html on August 31 2011. Das Aurindom 2008; Project Report 2008, Marketing Mix Analysis & Brand Extension Proposal for major national and international beer brand, P/MN/R/08/149, Page 123 Duffy, John and Hopkins, Ed 2005, Learning, Information and Sorting in Market Entry Games: Theory and Evidence, Games and Economic Behavior 51, 31-62 Fosters beer advert reflects Aussie mentality, Online, accessed at http://www.marketdraytonadvertiser.com/2010/11/02/fosters-beer-advert-reflects-aussie-mentality/ on August 31, 2011 Martin D, 2010 Binge drinkers prop up alcohol industry: sales ‘would fall by 40%’ if we all drank responsibly, Daily Mail, January 8th, 2010. Read More