StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Case: European Brewing Industry - Essay Example

Comments (0) Cite this document
Summary
The change is as a result of the market domination by breweries with high power. That is the same case in Europe. The change in the European market has prompted several companies to…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER94.8% of users find it useful
Case: European Brewing Industry
Read TextPreview

Extract of sample "Case: European Brewing Industry"

European Brewing Industry Introduction Recently there has been a dramatic change in the competition of breweries in the global market. The change is as a result of the market domination by breweries with high power. That is the same case in Europe. The change in the European market has prompted several companies to use several strategies to remain relevant in the market.
PEST Analysis
The PEST analysis performed on the European Breweries proved and portrayed a positive image of the industry in terms of independence (Warburg 2000). Internal and external factors were considered when analyzing the industry as a whole. It focuses on the macro environment, and how these changes affect the industries (Dumbliauskaite, et al., 2010).
Political: Beer consumption could be at the decreasing edge in Europe due to the unending campaigns against driving when one is drunk. In as much as the campaigns are geared towards ensuring that people are safe, it has tremendously reduced beer consumption rate (L. Richmond 2000). This is because most people do not want to be caught on the wrong side of the law.
Economic: Beer consumption in Europe is known to be constantly high, but decreasing demands for beer are on progress while in other countries, the demand is rising (Dinkhoff, 2010). The increase in the demand for beer has been attributed to the increase in people’s economic status. Several people’s income is on the rise, and this puts them in a position to afford comfortably a bottle or two.
Social: The health risks and hazards associated with alcohol are risk; thus, beer consumption is becoming a concerning issue among the consumers (Spicer, et al., 2009). Several campaigns have been mounted by non-governmental organizations and social institutions. They strive to create awareness of the risks posed by excessive consumption of beer. In this case, some consumers have desisted from taking beer resulting to loss of some potential market.
Technological: Advancement in technology in the processes of beer production has made it easy and accurate. This is because sophisticated machines are used to produce large volumes of beer at a shorter period (C. H. Tremblay & V. Tremblay 2004).
Opportunities and Threats
            Beer consumption has proved to be a serious threat for the European governments. The increasing health researchers are all pointing towards beer as a potential cause of health problems to human health (L. M. Richmond & Turton 2004). The reports that are being given on accidents and violence concerning alcohol influence have led to negative campaigns against the European brewing industry (Sakamoto, 2012).
The opportunities are among the increasing demand of beer and alcohol related drinks and helps in a steady development of the economic crisis in the European countries (Kinsella, et al., 2008).
 Analysis of the five forces
Competition among the present firms is extremely high and unavoidable; thus, firms are forced to create ways in which they can curb the various competition challenges in the market (Witcher & Chau, 2010).
Threats of low penetration since some private companies are gaining access to the market control. Therefore, new breweries are predated and thus do not survive competition in the market (McKern 2003). Substitute and attractive products are also a challenge in the market, in that production of beverages that may replace the beer is swiftly penetrating into the market. The demand is also growing at a magnificent rate (Haberberg & Rieple, 2008).
Suppliers’ bargaining Power: The purchasing costs entailed in European brewing include the raw materials and the peripheral packaging materials. The companies that solute for the brewers are few in the region; thus, the existing ones dominate the market. This makes them raise their prices (Adams, 2006).
Consumers’ bargaining power: The consumers can bargain a lot in order for the brewers to make price changes. However, this can only work when the suppliers also co-operate since the beer prices depend on the price of the raw materials (Lewis & Young 2002). Chances are that the brewers may fall for their bargains. These are the strategies that are used to retain customers and attract more consumers.
 The European policy allows vertical integration in the production and distribution of alcohol. Through the means of contracts with beer points and pubs, vertical integration is incorporated. These kinds of agreements help to obstruct the entrance of new breweries in the market (Dumbliauskaite, et al., 2010).
The market behavior and structure help to investigate the integration of the vertical agreements in the beer industry in Europe. The market structure is the kind of market that the brewery firms operate (Witcher & Chau, 2010).
Within the brewery industry, an observance of the market behavior is a vertical arrangement where firms may decide to come together through technological processes, distribute, market, and combine for the economic processes. Breweries in Europe are using the strategy of vertical arrangements with bars and pubs. The authority to set the prices is determined by a common ground (Dinkhoff, 2010).
In the European brewery industry, there are two types of contracts. They include; loans agreements and lease agreements. Both forms of agreements have a sense of purchase contracts in them that ensure that the bars serve beer under their supervisions and to their benefit (Schmitt 2011).
In vertical integration, the factors considered include; the competitors and in what manner they conduct their business. This enables competing companies to focus on the target areas. In this cases; the merchants purchase the brew directly from the brewers as retailers and create a channel of distribution and hardly do the consumers get it directly from the brewers. Bars can purchase directly from their brewers or beer merchants (Welford, 2012). In as much as beer consumption in within homes and from the supermarkets has increased, the consumption through the caterers is still fifty percent of the total consumption of the brews (Hechavaria, 2005).
The diagram below shows the chain of vertical arrangements in European breweries
Barley Farmer
Grain Merchant
Malting plant and other inputs
Brewery
Retail
Beer Merchant
Catering
Consumer
Theories of Vertical Integration
Chicago school theories of vertical integration
This was developed and implemented in the Chicago schools, and it evaluated the effects of vertical arrangements on competition. Traditionally, the vertical integration has been based on two models named; monopoly leverage model and the successive monopoly model or model of double marginalization. These models helped the Chicago school model to enhance their model on vertical integration. For instance, the monopoly leverage model argues that an organization with a monopolistic market would not have the urge to try and create another monopolistic market (Spulber, 2011).
The successive monopoly model lies on the effect of integration between a downstream monopolist and one that is upstream. It shows that the vertical arrangement is successful and causes improvement to the welfare. In these cases, vertical integration causes both consumers and the firm to have notable improvements (Hill & Jones, 2012).
Opportunities of Vertical arrangements include:
It provides a way of economic access by smaller forms of brewers. This is then delivered to consumers and enables swift competition with the national brewers (Wilson 2005).
It enables brewers to practice and implement proper managerial tactics together with those at the retail level.
It provides an effective way of providing facilities of tenancy to the retailers.
It enables the brewers to control the draught beer that is in for distribution.
They work towards increasing harmonization and standardization in the economies of scale (ARC Advisory Group, 2004).
Challenges of vertical arrangement
Vertical agreements result in the exclusion of some parties.
It also comes in as a barrier in the penetration of new people into the market of pub running.
It decreases competition in the market since the businesses are reduced.
Conclusion
The vertical strategy used by European brewing companies is extremely effective. This is because it enables them to have a share of the market despite its competitive nature (Katsigris & Thomas 2006). However, in order to stay in the market for long and remain relevant, European brewing companies should seek ways to improve the successive monopolistic market style.
References
Adams, W. J., 2006. Beer in Germany and the United States. Journal of economic Perspectives, 20(1), pp. 189-205.
ARC Advisory Group, 2004. The Globalization of the Brewing Industry :A new competitive Landscape. s.l.:s.n.
Dinkhoff, M., 2010. UK Beer Industry Analysis: Porter`s Five Forces. Munich: GRIN Verlag.
Dumbliauskaite, M., Becker, H. & Marechal, F., 2010. Utility Optimization in a Brewery Process Based on Energy integration methodology. s.l.:s.n.
Haberberg, A. & Rieple, A., 2008. Strategic Management: Theory and Application. London: Oxford University Press.
Hechavaria, D., 2005. globalization of Beer. [Online]
Available at: http://voices.yahoo.com/the-globalization-beer-9816.html?cat=22
[Accessed 15 10 2012].
Hill, C. W. & Jones, G. R., 2012. Strategic Management: An Integrated Approach, Mason, Ohio: Southern Western Cengage Learning.
Katsigris, C. & Thomas, C., 2006. The Bar and Beverage Book, New York: Wiley.
Kinsella, S., Spinks, S. & H, P., 2008. Vertical Agreements:The regulation of distribution practices in 34 Jurisdictions Worldwide. s.l.:GLOBAL COMPETITION REVIEW.
Lewis, M.J. & Young, M.L.T.W., 2002. Brewing, New York: Springer.
McKern, B., 2003. Managing the Global Network Corporation, New York: Routledge.
Richmond, L., 2000. The Brewing Industry: A Guide to Historical Records (Studies in British Business Archives) A. Turton, ed., Manchester: Manchester Univ Press.
Richmond, L.M. & Turton, A., 2004. The Brewing Industry: A Guide to Historical Records, Manchester: Manchester Univ Press.
Sakamoto, J., 2012. Organisational Construction and Internationalisation. Paris, s.n., pp. 1-14.
Schmitt, C., 2011. Brewing Industry Analysis, Munich: GRIN Verlag.
Spicer, J., Thurman, C. & Walt, J., 2009. Intervention in the Modern UK Brewing Industry. s.l.:Palgrave Macmillan.
Spulber, D. F., 2011. Journal of Economics & Management Strategy, New York: Wiley Periodicals Inc.
Stone, M. & McCall, J., 2004. International Strategic Marketing: A European Perspective. New
York: Routledge.
Swinnen, J. F. M. & Herck, K. V., 2010. How the East Was Won: The Foreign Take-Over of the Eastern European Brewing Industry. s.l.:s.n.
Tremblay, C.H. & Tremblay, V., 2004. The U.S. Brewing Industry: Data and Economic Analysis, Cambridge, MA: The MIT Press.
Twells, A., 2011. The reinvention of Beer Industry. s.l.:s.n.
Verboven, F., 2009. Efficiency enhancing or anticompetitive vertical restraints? Selective and exclusive car distribution in Europe. Cambridge University Press.
Warburg, U., 2000. The European Brewing Industry, Warburg: UBS Warburg.
Welford, R., 2012. Business Strategy and the Environment. New York: John Wiley & Sons.
Wilson, R.G., 2005. The dynamics of the modern brewing industry since 1800, New York: Routledge.
Witcher, B. J. & Chau, V. S., 2010. Strategic Management: Principles and Practice. Hampshire: Cengage Learning EMEA. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Case: European Brewing Industry Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
Retrieved from https://studentshare.org/miscellaneous/1608565-case-european-brewing-industry
(Case: European Brewing Industry Essay Example | Topics and Well Written Essays - 500 Words)
https://studentshare.org/miscellaneous/1608565-case-european-brewing-industry.
“Case: European Brewing Industry Essay Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/miscellaneous/1608565-case-european-brewing-industry.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Case: European Brewing Industry

International Sustainable Business: Brewing

...., Armstrong, G., Saunders, J., and Wong, V. (1996) Principles of Marketing. 2nd European Edition. England: Prentice Hall. Porter, M. E. (1998) Competitive Strategy. New York: Free Press. Reed, R., Lemak, D. J., and Mero, N. P. (2000) ‘Total quality management and sustainable competitive advantage.’ Journal of Quality Management, Vol. 5 (1): 5-26. SIBA (2010) Local brewing industry report 2010 [online] Available from http://www.siba.co.uk/forms/SIBALocalBrewingIndustReport2010a.pdf (Accessed 19th June 2011). Slater, S. F., Weigand, R. A., Zwirlein, T. J. (2008) ‘The business case for commitment to diversity.’ Business Horizons, Vol. 51 (3): 201-209. Talke, K., Salomo, S.,...
8 Pages(2000 words)Essay

Mountain Man Brewing Co

...first Mountain Man Brewing Co. Problem ment: Mountain Man Beer Company started experiencing decliningsales, which could eventually challenge the company’s existence. This is mainly because MMBC served only one product, the Mountain Man Lager, which sustained competition from various other bigger players in the market by creating a defensible customer segment; this product was mostly preferred by the blue-collar customers in Eastern Central of the United States. MMBC had to look for new ways to sustain their sales and improve profitability. Alternative One: Improve market share of Mountain Man Lager by entering new markets outside East central region of the US. Pros Cons The already established brand of Mountain Man Lager...
4 Pages(1000 words)Essay

Case Analysis on Hornell Brewing

...?Case Analysis ________________ Read through the case. In the table below, identify twenty relevant stakeholders and their stakes. Case 5: Inside Canada, China Asserts Itself Stakeholders Stakes Stakeholders Stakes 1. Chinese investors Financial, Legal 11. SEC Legal, Regulatory 2. Canadian representatives Financial, Job Security, Legal 12. Government Legal, Social 3. Canadian customers Financial, Legal, Social 13. Environmentalist Legal, Social 4. Canadian environment Legal, Social 14. Canadian public Legal, Social, reputation 5. Canadian competitors Financial, Market 15. Academe Social, Reputation 6. Native Americans Financial, Legal, Reputation 16. The Local Community Financial, Market...
3 Pages(750 words)Essay

The Mountain Man Brewing Company

...?BUSINESS REPORT: MOUNTAIN MAN BREWING COMPANY of Contents Contents 2 Executive Summary 3 Market Report 4 The Business Case 4 Recommendations 6 Marketing and Positioning 9 Conclusion 10 References 11 Executive Summary Mountain Man Brewing Company is faced with challenges related to the marketing of its new Mountain Man Light brand without having a negative impact on the traditional Mountain Man Lager brand. The traditional beer registered a lot of success in the market due to the fact that the market considers it to be an authentic, high quality and tough brand. Nonetheless, its success in the market is demonstrating a decline since the introduction of the new product. As a result, Chris Prangel, the company’s new manager is faced... in the...
8 Pages(2000 words)Essay

Foster's Beer Strike Brewing

...News Review (Foster's Beer Strike Brewing) In the recent past, Australian media was abuzz by the news related with the industrial dispute at Fosters'. The simmering discontent amongst workers acquired serious proportions when last week the Foster's employees voted in favour of strike action against their employer (LaborNet, 2007). This appears a clear indication on the part of workers towards stepping up of their fight to win a union collective agreement. While on the one hand the Unions appear all set for the industrial action, presenting a united face with the claims that up to 200 employees are supporting the action, the company on the other hand has started picking holes in the...
5 Pages(1250 words)Case Study

Strategic Management: European Automobile industry

..., not quotations. Conserve space by using abbreviations; express numbers as digits. Review of recent performance and medium term growth strategy for Munchener AG for 2006-2010 Your Title Goes Here TGood evening, ladies & gentlemen. I am very happy to welcome you all to this meeting, which has been convened to take stock of our company's performance during the year ended 30th September, 2005. What follows is an overview of the larger context of the European market, followed by a road map for the next 5 years, with special emphasis product range, Research & Development, Marketing, on based on a detailed analysis of the market trends and the company' unique strengths, and assess the financial commitments...
8 Pages(2000 words)Speech or Presentation

International Brewing Industry

...INTEGRATED CASE STUDY - THE INTERNATIONAL BREWING INDUSTRY GROUPE DANONE AND BRASSERIES KRONENBOURG EXAM NO: Table of Contents Page/s Executive Summary 3 List of Tables 2 List of Figures 2 List of Charts 2 Aims/Terms of Reference 4 1. Introduction 4 1.1 Structure of the Danone Group 4 2. Planning Process and Leadership Style 6 2.1 Targets set for Brasseries Kronenbourg by Danone 6, 7 2.2 Profitability of the Danone Group Subsidiaries 7 3. Brasseries Kronenbourg - "Key Success Factors" 8, 9 4. Brasseries Kronenbourg's Marketing Strategy 9 4.1 Life Cycle 9 4.2 Product, Place, Promotion, and Price (4P's) 9, 10 5. Overall... on the...
11 Pages(2750 words)Case Study

Strategic Management: European Automobile industry

...leader in automobiles recognised by consumers and the industry in Europe and worldwide for excellence in technology, quality, and product range. The Business Climate We have been operating under an extremely trying and challenging business environment. During the last several years, the automobile industry worldwide and European markets in particular have been witnessing high levels of competition, with little signs of real growth in terms of volume of sales, revenues, and profit margins. This has forced automobile companies to offer better value for money to the customers, squeezing prices and profit margins in the process. This was particularly so in case of...
7 Pages(1750 words)Essay

The European Airlines Industry

... The European Airlines Industry The European airlines industry is undergoing turbulence as the macro-environment analysis suggests. Three airlines went bankrupt in 2001 but all there were the low-cost budget airlines. This calls for an analysis of the macro-environment. Macro-environment analysis Political/legal The government brought about changes in the regulations and freed the European airline market from competition, pricing and services. This led to exploitation by the budget carriers who priced their products much below those of the national airlines. Changes in legislation and opening up of the skies, led to the creation of a new segment of flyers - it created a new market for the budget airlines. Thus deregulation led... to...
9 Pages(2250 words)Essay

UK Brewing Industry Characteristics

...in the UK, though offsales are increasingly important. Vertical Integration Similar to Germany, but unlike majority of European countries, the British brewing industry is very heavily vertically integrated. British competition law allows breweries to own public houses and other retail outlets for beer and to ‘tie’ the outlet by permitting only their own beer to be sold on the premises. This vertical integration is the source of most government concerns over beer supply, culminating in the Monopolies and Mergers Commission (MMC) Investigation of 1986-89 and the resultant Beer Orders, whose outcomes are further discussed below. A succeeding European Commission...
51 Pages(12750 words)Term Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Case: European Brewing Industry for FREE!

Contact Us