Anheuser Busch and Harbin Brewery Group of China - Essay Example

The Industry Environment The beer industry within China is largely fragmented with many small and regional players occupying the market space. It must be noted that the large local players in China capture around 38% market share whereas rest of the market is served by the local small beer producers. The margins are lower within the industry and bigger player in the industry largely work on the basis of joint ventures with the international players. The demographic analysis of the industry would suggest that the different players in the market have different market positions in the four main regions of China with each dominating at certain regional level.

It is because of this fact that no particular local player emerged as the leading national beer producer in the country. The government intervention in the market is not up to that extent as normally considered by outside players.Since the industry experience very small margins and mushrooming of the low cost producers of regional level therefore there is a greater threats of substitutes for AB to enter into the market. As discussed in the case that no international beer brand has been able to make in-roads into Chinese Consumers subtly suggest the level of strong presence of substitutes developed according to the taste buds of the local consumers.

The lack of market space for the leading beer brands of the world suggest that the substitutes have strong presence in the market and pose a greater threat.Threats of Substitutes: The threats of substitutes are from moderate to High. If the basic use of beer is just to quench the thirst of the consumer than the threats of substitution can be high however since Chinese consumer prefer to have some level of liquor in it therefore the scope of substitutes get bigger as wine and liquor products also become direct substitutes of our products.

Barriers to Entry and ExitIt has been the strategy of Chinese government to allow the entry into the Chinese Market through the formation of Joint ventures with the local companies in order to help the local players to gain technology and management expertise. Thus the biggest barrier to the entry into the market is the fact that companies looking for making in-roads into the Chinese Markets have to find local players to pair with as they themselves cannot start the sort of Greenfield projects.

The current experiences in the Chinese Market suggest that the companies that have brought in foreign capital in the country has been not been able to sustain in the longer run therefore they have to look for the local players to take over their stakes in the market. Lack of Market information and improperly prepare exit strategies are probably the biggest barriers to exist in Chinese Market.Internal Capabilities of the firmStrengths and WeaknessesProbably the greatest strength of AB was its strong brand image in the world markets however within Chinese Markets due to lack of brand popularity, companies tend to lag behind this.

Further, Harbin enjoys the lowest advantage within the Chinese Markets as compared to the other local players in the market. This will help them to better position their product however their greatest internal weakness probably lays in their plant age and the workforce which Harbin is using to produce besides handicapped by the not so good distribution channels to serve the larger population of consumers.