Report 1: Strategy FormulationDavid Arraya, Kevin Gardner, Trenton Jackson,
Brad Orr
Anheuser-Busch◦Beer
Budweiser Busch Michelob Natural Light
◦Non-Alcoholic Beer◦Energy Drinks◦Specialty Malt
Beverages
◦Domestic beer, International beer, packaging, and entertainment markets
◦ Largest brewery in the U.S. (48.8% of beer sales)
◦ 4th largest brewery in the world
The Chinese Beer Industry◦Dominant Firm’s
Tsingtao China Resource Enterprises
Beijing Yanjing Group
◦Key’s to Success Gaining vast market share Establishing presence with
brand name and low prices
VISION• Through all over our products, services and
relationships, we will add to life’s enjoyment
MISSION• Be the world’s beer company• Enrich and entertain a global audience• Deliver superior returns to our shareholders
External Environment◦ Economic
Huge population Low per capita beer
consumption Highest beer volume
consumption in the world
Rising income levels
◦ Social “Pub” culture emerging Price conscious
consumer
◦ Political Bureaucratic
government Beer taxed heavily
◦ Technological Old, out-of-date beer
manufacturing plants
◦ Ecological Pollution and waste a
growing concern in China
Focus on employees
State objective of how they intent on becoming the best beer company in the world
Reflect corporate social responsibility
Value-Chain Analysis (Market) Problem is market, not businesses
◦ Large, fragmented, and traditional
In order to gain a competitive advantage, the businesses must focus on Primary Activities◦ Inbound Logistics◦ Outbound Logistics◦ Marketing and Sales◦ Service
ResourcesTangible Assets Production facilities Harbin Brewery Established suppliers Financial resourcesIntangible Assets Brand recognition Company reputation Accumulated experienceOrganizational Capabilities Global distribution coordination - World-class distribution
network
Strengths Access to capital Brand recognition Acquisition of Harbin Brewery and interests in Tsingtao Experienced and solid management teamWeaknesses Foreign competitor Taste for local brands Large investmentCompetitive Advantage Leadership in Northwest China (Harbin) Creation of large production facilities
Present Ranking Force Threat
Level
#1 Threat Substitute Products High
#2 Threat Threat of Entry High
#3 Threat Rivalry Among Competitors Moderate
#4 Threat Buyers Low
#5 Threat Suppliers Low
Future Ranking Force Threat Level#1 Threat Rivalry Among Competitors High#2 Threat Buyers Moderate#3 Threat Substitute Products Moderate#4 Threat Threat of Entry Low#5 Threat Suppliers Low
Ranking Company Name Competitive Advantage
#1 Tsingtao Market Consolidation
#2 China Resource
Enterprises Low-cost Leader
#3 Beijing Yanjing
Group Advanced Distribution
Used financial statements and ratio analysis to compare Anheuser Busch’s past years and the competitive market
Increase in sales from 2075.9 million to 2115.3 million dollars from 2003 to 2007, which is above the industry average
Profitability
Boston Beer
Coors Brewing
Anheuser Busch Industry
Gross Margin %
54.9 40.2 35.1 51.4
Net Profit Margin %
5.6 8.6 8.7 11.7 Sales % (vs year ago qtr)
10.9 4.5 7.9 7
Return on Equity %
15.5 7.9 59.7 28.1
Liquidity
Current Ratio
3 1 0.9 1 Receivable Turnover
16.2 8.6 21.9 18.4
Leverage
Leverage Ratio
1.4 1.9 5.4 3.1
Activity
Inventory Turnover
8.4 10.7 15.3 9.3
Market Fragmentation◦500-1000 brewing firms in China◦No dominant leader in the market
Symptoms from Core Issue◦ Price wars◦Decreased profits◦Buyer power
“Harbin brewery is committed to increasing its market share in Northeast China, becoming the dominate market share holder within the next 10 years”
Major Premises Acquisition of
competition will create “trench warfare” between regional powerhouses
Foreign Investment will continue
Scenarios Best Case - Harbin will
become dominate market player
Worst Case - Harbin will be bought by another powerhouse
Most Likely Case - Harbin will grow by 10% and remain the 4th largest brewer in China
Continued acquisition of companies in China to gain market share
Offer lower cost products to compete with the largest segment of beer drinkers.
Build CSR
SBUsBudweiser Family of Beers Harbin Premium
Beers
GENERIC STRATEGY Low-Cost Leadership ◦Need to penetrate traditional market◦Want to get the product in the minds of the consumer
GRAND STRATEGIES◦Market development - Bring Harbin to the rest of
China◦ Innovation - mainly through advertising◦Horizontal integration - acquisition of smaller
breweries
Growth through horizontal integration◦Very feasible◦Will allow Anheuser-Busch to establish presence
in other regions of China◦Anheuser-Busch has the financial capital to carry
out this option◦Will increase market share
Thank You and Remember to Drink Responsibly
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