External Macro Environment Pest And Scenarios

SABMiller has faced many challenges and problems for reaching the success and now they become one of the leading breweries in the world by acquiring many small scale breweries. It establishes a very strong position in the global market. During twentieth century SABMiller has faced serious political and racial problems, these causes restriction of South African business with international trading. In 1950, SABMiller moved its head office from London to Johannesburg as responding to business restriction.

SAB focused on dominating domestic beer production by acquiring their local competitors.

The y rationalised their production level.

They improved their distribution facilities.

In 1960 SAB acquired Stellenbosch Farmers.

In 1978 SAB published the code of non-discriminatory employment.

In 1993 SAB acquired Hungary’s largest brewery, Dreher.

In 1999 SAB decided to listing on the London Stock Exchange believing that it could elevate the company in a strong position.

SAB got the license to brew locally Guinness, Amstel and Carling Black Label.

They started to acquire many local breweries and they captured 99% of the market in South Africa. They invested their funds through joint ventures.

In 2002, SAB acquired Miller brewing company, a major brand in the US market. This acquisition had made the SABMiller to become second largest brewery company by volume in the world.

In 2005 SABMiller was set back to third position.

Then they reclaimed the second position by acquiring Grupo Empresarial Bavaria Brewery Company.

It was South America’s second largest brewer.

“SABMiller’s focus on emerging markets is a big reason that the No. 2 global brewer moved up four spots in Fortune’s 2010 World’s Most Admired Companies survey, to No. 3 among beverage companies. According to a new Deutsche Bank analysis, SAB has the most exposure of the top four global brewers over the next five years to the fastest-growing beer markets like China, India, and Colombia, where consumers are spending their newfound wealth. That helped SABMiller boost fiscal 2010 sales by 4% and profits by 1.5%, to $1.9 billion, even amid a recession. “They’ve been very aggressive to get a good position in some of the most interesting markets,” says Tom Pirko of Bevmark, an adviser to global drink companies.”

(Cendrowski, S. -26/7/2010,pp-18)

With the change in the racist system of apartheid makes SAB to expand the business opportunities in rest of the Africa. Then their business was horizontally integrated. They started to look for the opportunities to expand its business and their marketing level.

SABMiller also stepped into beverage sector

They also used their funds in hotels and gambling.

They also become the leading safety match manufacturer by acquiring Lion Match Company

Quality of beer in the less developed country was remained very poor. This gives the SABMiller an opportunity to develop its business by acquiring and taking share in the local small scale brewery industries and they increased the quality of the beer and retained their brand image across the world. SAB was invited by Tanzanian government, Zambia, Mozambique and Angola to invest in joint venture for developing the brewing industry.

Strategy

“Strategy is the pattern or plan that integrates an organisations major goal, policies and action sequences into a cohesive whole.”

(Richard, A., 2010, Module Notes, P.12)

i) Characteristics of Strategy

Associated with major issues

Impact on the whole organisation

Requires concentration of effort

Long term

(Richard, A., 2010, Module Notes, P.14)

SABMiller strategy

Creating a balanced and attractive global spread of businesses.

Developing strong relevant market.

Constantly raising the performance of the local business.

Leveraging our global scale.

Strategic Position of The South African Breweries In 2007

Business environment

Gives organizations their means of survival

Is also the source of threats

There are 3types of layers in environment

External macro environment

External micro environment

Internal environment

External Macro Environment- Pest And Scenarios

“An organization’s external environment consists of conditions that influence the intensity of competition”

(Witcher & Chau 2010:pg- 90)

Figure

(Richard, A., 2010, Module Notes, P.34)

PESTEL FRAMEWORK

“The PESTEL framework is a mnemonic used in strategic management to group macro-environmental factors to help strategies look for sources of general opportunity and risk”

PESTEL stands for

Political

Economic

Social

Technology

Environmental

(Witcher & Chau 2010:pg- 91)

“Scenarios are detailed and plausible views of how the business environment of an organisation might develop in the future based on key drivers for change about which there is a high level of uncertainty.

Scenario planning:

Considers plausible alternative futures

Does not attempt to predict the unpredictable

Enables subsequent strategy development and evaluation”

(Richard, A., 2010, Module Notes, P.35)

External Micro Environment- Porter’s Model

“5 analysis tools to help understand this environment:

Porter’s 5 forces of competition framework (industries and sectors)

Life cycle model (change of forces over time)

Cycles of competition (impact on competitive rivalry)

Comparative industry structure analysis (impact of time)

Market segmentation (disaggregating industries into specific markets)

Strategic group analysis (competitors and markets)

Key success factors (factors required to survive and prosper)

Opportunities and threats”

(Richard, A., 2010, Module Notes, P.36)

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Figure

(Rice, John F. july 2010)

Internal Environment

“Strategy should arise from matching company strengths to environmental opportunities, while combating threats and removing its weak links.”

Figure : (Richard, A., 2010, Module Notes, P.68)

Business Environment of SABMiller

After getting rid of the apartheid problem and also by acquiring Miller, SAB developed its business all over the country and they expanded beyond its business region all over the world. Now SAB enters onto world wide market.

SAB was eased by the political policies

They more focused on doing business with developing countries and underdeveloped countries.

In Asia and much of Europe , brewing was highly fragmented

This fragmentation gives the opportunity to SAB to expand its business.

Concentrated in acquiring or having a share in the local stronghold brewery.

Upgrading the quality and consistency to create a beer for the healthy profit regions.

An optimum brand portfolio gives us a better marketing proposition

Dealing with sensitivity and political issues

North America

Miller lite brand grown continuously.

Company growth maintained year on year.

In order to protect brand image they priced their product price more than its competitors.

nitial success of miller was based on price-cutting response from the market leader.

But it makes inability to company on raising the costs.

But still its b usiness remains strong and it is benefiting from its three years of investment.

Europe

It had excellent year with the best performance of Poland, Russia and Romania.

Czech improved his productivity and increased its shares.

Acquired Topvar brewery for strengthening the market position in Slovakia.

Russia and Romania expanded their capacity by increasing the volumes well ahead of their markets.

South Africa

SABMiller business in Africa was well established.

SABMiller introduced new sales and distribution system for meeting the current demands.

SABMiller dominated the domestic beer production market.

Even though it gives more profit there was serious impact of HIV/AIDS which adversely affects the production level.

Asia

SABMiller withdrawn his attempt to take over of Harbin Brewery in china.

Chinese beer market growing at 6-8% per year.

China is the costly market to operate in and margins are tiny.

In India, at starting the volumes are grown slowly but due to restriction and regulation in volume production and pricing ,it was unsuccessful.

Vietnam was one of the fastest growing beer market in the world

USA

By acquiring Miller Brewing company, a major brand in the developed market, SAB becomes second largest brewer company and becomes as SABMiller.

Even this acquisition has many own problems.

James Williamson commented:” SAB bought it because they needed a mature cash cow”.

Its market share value also dropped to some extent.

After that SABMiller introduced the traditional SAB system of rationalization of the employees.

Latin America

After merging with Grupo Empresarial Bavaria, SABMiller makes Latin America the 2nd largest profit source after South Africa.

Growth of the business level in Colombia, Peru, Ecuador and Panama was increased.

Even though the Bavaria businesses are profitable they still wanted to apply SABMiller’s operation practices.

Honduras and El Salvador increased their growth in soft drinks.

Strategic Capability

Strategic capability is about providing products/services to customers that are valued, and some enabling resource issues include:

Resource availability, internal/external?

Requirement for unique resources to meet a critical success factor?

Resource threshold/inadequate resources?

(Richard, A., 2010, Module Notes, P.60)

“Strategic capability can be related to three main factors:

The resources available

The competence with which the organisation’s activities are undertaken

The balance of resources, activities, and business units”

(Richard, A., 2010, Module Notes, P.67)

Strategic Capability of SABMiller

During twentieth century SAB competed with the serious external environment problem of racist policy apartheid. They moved their head office from London to Johannesburg.

After that they focussed in dominating the domestic beer production.

SAB published a code of non-discriminatory employment.

After releasing from the apartheid problem, SAB aims to develop its business beyond its traditional region.

Emerging onto the global market

In 1994 SAB was invited to participate in joint venture with Tanzanian government.

In 1999 SAB moved his listing on the London Stock Exchange(LSE)

Directors of SAB thought that this would put SAB in the strong position.

In 2002 they acquired miller and 2nd larget brewer.

In 2005 SABMiller acquired Grupo Empresarial Bavaria, South America’s 2nd largest brewer.

Stakeholder Expectations

Stakeholder satisfaction was one of the priorities of SABMiller while implementing the strategy.

Consolidation

Acquisition and merging with the companies was successful for the SABMiller in past.

If they follow the same strategy without changing the strategy for the future, SABMiller cannot be successful like past by without adapting to current trend.

Major risk for SABMiller in South Africa is Threat of HIV/AIDS.

Product and development

SABMiller’s product was very much successful in past because of quality and unique brand image.

For to be in successful in future means SABMiller has to come up with development of new products in to the market

Market Development -Africa

During 20th century SAB dominated the African market in the beer production.

For the future it won’t be that much easy for SAB to o business due to environmental problems and impact of HIV/AIDS.

Market Development -Asia/E.Europe

In China their market was costlier to operate and margins are tiny.

In India there was some restriction in volume of production and pricing.

Vietnam is one of the fastest growing beer manufacturers.

To be developed as a successful manufacturer in Asia, SAB must come up with good management strategy.

Market Development -Latin America

Latin America was the 2nd largest source of profit for the SABMiller.

They can be successful as the past if they follow SAB strategy or the strategy which is suited in the modern trend.

Diversification

It was the key strategy that SABMiller adopted to cop up with the different market.

Diversification can be done in future by making use of their past experience.

Joint Venture

It was another strategy which helped to make their presence in different markets.

Joint venture is also possible in future as they mastered the act of acquiring different breweries.

Strategy that South African Brewers should follow

SABMiller has to concentrate on the developing market for maintaining the success in the future.

SABMiller has to increase the brand portfolio by acquiring more breweries around the world.

The lessons learnt from Africa should be implemented in every market

SABMiller should maintain well designed global strategy that would give a competitive advantage in the global market.