Case AnalysisSajjad Ali Shaikh5458 Khalid Yousuf3724 Baqi bullah3614 Farhan Aslam6036 Arsalan Liaqat4714

Executive summaryAnheuser Busch is one of the leading brands of beers. company was established in 1864 in St. Louis, Missouri, United States, Anheuser Busch has grown to be one of the worlds largest beer companies, Operating 12 breweries within and 15 breweries outside of the United States, It is best known for the worlds top two selling beers, Bud Light and Budweiser current market share of the company globally is 10.8.

Chinese Beer market is an increasing market with a huge potential. Ranked 1st for volume per year but 11th rank for litres per person. Low average price for beer. Huge foreign interest on this market but foreign investment usually failed. In 2004 company acquire Harbin brewery in china. Foreign companies tend to face problem as provincial regulation are there to protect local companies and furthermore to keep the tax revenues within province. Regulatory roadblocks were designed to keep tax revenues at home. Many recognized global brands were unable to make there mark because they didnt understand the customer taste and preference

Vision:Through all of our products, services and relationships, we will add to lifes enjoyment.

Mission:

Be the worlds beer company (Products and services; Self-concept)Enrich and entertain a global audience (Customers; Markets)Deliver superior returns to our shareholders (Concern for survival, growth and profitability)

Value: We believe in

Quality in everything we do. (Self-concept)Exceeding customer expectations. Trust, respect and integrity in all our relationships. (Philosophy)Continuous improvement, innovation and embracing change. (Philosophy)Teamwork and open, honest communication Each employees responsibility for contributing to the companys successCreating a safe, productive and rewarding work environment. (Concern for employees)Building a high-performing, diverse workforce. Promoting the responsible consumption of our products. Preserving and protecting the environment and supporting communities where we do business. (Concern for public image)

Strategic objectives:

Expansion production into China through acquisition of Chinese major beer companiesreposition its brand by catering to elite and create perception of being a premium brand increase ownership by 27% by year 2009expand there operation up to there central province in order to expand there market share In order to sustain growth and stability it needs to acquire smaller brands which would enable it to enhance its brand portfolio and expand its business under the umbrella of company name

Industry Analysis

The China beer industry is the worlds largest by volume. Total domestic volume in 2005 was 307 million hectoliters, up 10.2% vs. 2004. Excellent growth has continued in 2006 with officially reported domestic volume increasing 13% through September vs. the same period, prior year. Chinas per capita beer consumption in 2005 was 23.4 liters, which was slightly lower than the estimated global average of 24.8 liters. However, Chinas per capita consumption already surpasses that of Hong Kong (21.5) and Taiwan (21.1). China beer industry volume growth will slow.

IndustryThe chart below shows Chinas Top 10 brewers by output in the first half of 2006 and it specifies the foreign ownership of each Top 10 brewer, if any:

Foreign companies tend to face problem as provincial regulation are there to protect local companies and furthermore to keep the tax revenues within province. Regulatory roadblocks were designed to keep tax revenues at home. Many recognized global brands were unable to make there mark because they didnt understand the customer taste and preference which is clearly visible as they hold 0.5 percent of Chinese market.

PEST ANALYSIS Political and legalDecentralized power structureUnstated hierarchy of powerHigh tax on transportationBig power of the local and provincial authoritiesLogistics laws EconomicalImportant growth of China economy Huge and fragmented marketIncrease of urbanization rate

SocialLow income and standard of livingTechnologicalPoor level of infrastructureEnvironmental Development of urban areas Reduce emissions of carbon dioxide Recyclage of bottlesObligation to share technology and knowledge for foreign firms

Market Share In China

STRATEGIC GROUPS

Global Market

STRATEGIC GROUPS:

Porters Five ForcesThreats of new entrants:High barriers to entry:Fragmented market Distribution networksGovernment RegulationsEconomies of scale in marketing, production and distribution.

Rivalry (price competition has been decreasing):Increasing competition from imported beers (however, national brewers own part of these breweries).2,200 wholesalers and 560,000 retail establishments.Creative and enticing advertising by majors.Growing popularity of micro-breweries and other craft-beers.Alternative: expansion to super-premium beers and other segments with lower demand elasticity.

Substitutes:Growth in:Premixed drinksAlternative malt beverageAlternative non-alcoholic drinks (from juices to mineral water)However, beer remains the largest drink sector.

Buyers Bargaining Power:It changes from segment to segment, but in general:Low switching costsBrand loyaltyIncreasing health conscience

However, for craft-beers, which are perceived as having higher quality, these characteristics may not always hold.

Suppliers Bargaining Power:Most supplies come from competitive industries which are more fragmented than the beer industry.FarmersLabor (the case of unionized labor)The more consolidated supplier is that one supplying bottles/cans.

Key Success Factors

Low cost structure (Scale of economies and learning)Effective marketing & advertising strategy to expanded market shareSuccessful brand loyalty and recognitionProduct innovation and production efficiency (packaging and automation)International expansion to countries with increasing consumption trendsStrategic price increases and premium pricing

Driving ForcesMarketing innovation - thanks to a rather uniform character of the product, breweries are trying to find other possibilities of differentiation, which is based mainly on building the brand assisted by advertising.

Long-term industry growth rate In the decade between 1988 and 1998 the 10 largest brewers hardly arose from 35.8% to 37.6%. Over the last five years this development has accelerated strongly, the 10 largest increased by nearly 20% and have now 57% of the global market.

Cost efficiency The price of the beer does not grow respectively with the price of supplies, breweries are forced to develop more effective ways of operation.

CPM

Anheuser-BuschCRE (SABMiller)TsingtaoCritical Success FactorsWeight RatingScoreRatingScoreRatingScoreLow cost structure0.1540.630.4530.45Effective marketing0.140.420.240.4Successful brand0.1530.4530.4530.45Strategic price0.130.340.430.3Organizational Culture0.140.440.440.4Revenue Generation0.2530.754130.75International expansion0.1540.620.320.3TOTAL13.53.23.05

EFE (EXTERNAL ANALYSIS FACTORS)

KEY EXTERNAL FACTORSWEIGHTRATINGWEIGHTED SCOREOpportunities 1. Emerging pub culture and positive trend to premium beer0.0530.152. Increase brand loyalty0.240.83. Develop event sponsorships0.140.44. Growing economy coupled with large market potential 0.120.25. Micro-brewery marketing through additional partnership0.0520.1

Threats 1. Price sensitivity due to per capita income0.120.22. Poor infrastructure as an obstacle for efficient distribution system0.1520.33. Corruption and political interference from government0.0520.14. Unstable energy and fuel cost0.110.15. Lack of centralization in Chinas government0.110.1TOTAL12.45

IFE

KEY INTERNAL FACTORSWEIGHTRATINGWEIGHTEDSCOREInternal Strengths1. High level of Expertise in the beer industry coupled with financial strength 0.2040.802. Global reputation through brand recognition and uniqueness in taste0.0540.20 3. High level of operating efficiency and quality consistency 0.1540.604. Recruitment policy focusing on highly capable employees0.0530.155. Ability to select partners in joint-venture business 0.1030.30

Internal Weaknesses1. Language barrier and lack of understanding of culture0.1020.202. Lack of decentralization is an obstacle for expedient decision-making in regional market 0.0510.053. Limited brand awareness among Chinese beer consumers0.1020.204. Inability to distribute fresh beer across the country0.1010.105. Lack of emphasis on economy beer segment0.1010.10TOTAL1.002.70

TOWSStrengths- SHigh level of expertise in the beer industry coupled with financial strength High level of operating efficiency and quality consistency Ability to select partners in joint- venture businessWeaknesses- WLanguage barrier and lack of understanding of cultureLimited brand awareness among Chinese beer customersLack of emphasis on economy beer segmentOpportunities- OIncrease brand loyalty Develop event sponsorshipGrowing economy coupled with large market potentialSO Strategies Build beer factories in major Chinese markets (S1 , O3 ) Increase market share ( S 3, O2 )WO Strategies1. Increase brand recognition ( W 2, O 1, O2) Threats TPoor infrastructure as an obstacle for efficient distribution systemPrice sensitivity per capita incomeCorruption and political interference from governmentST Strategies Implement optimal production techniques to meet market requirements ( S2, T2 ) Develop partnership with local manufacturers ( S 3, T 3) WT Strategies Employ local managers ( W 1, T 3)Acquire small local beer manufactures ( W 3, T 1)

SPACE

Financial Strength ( FS) RatingsReturn on Investment6Leverage4Liquidity4Working Capital5Cash Flow5Ease of exit from market3Risk involved in business3 Total 30Industry Strength ( IS)Growth Potential4Profit Potential5Technological Know- how6Resource Utilization5Capital Intensity5Ease of entry into market2Productivity, Capacity utilization5 Total 32

Environmental Stability ( ES )Technological Changes-2Rate of Inflation-4Demand Variability-3Price range of competition products-4Barriers to entry into market-5Competitive pressure-5 Price elasticity of demand-3 Total -26Competitive Advantage ( CA)Market Share-3Product quality-1Product life cycle-3Customer loyalty-2Competitions capacity utilization-5Technological Know- how-1Control over suppliers and distribution-2 Total -17

FS Average is 30/7 = 4.29IS Average is 32/7 = 4.57ES Average is -26/ 7 =-3.71CA Average is -17/ 7 =-2.43Directional Vector Coordinates:x-axis: CA Average + IS Average=-2. 43 + 4.47 = 2.04y-axis: FS Average + ES Average=4.29-3.71= 0.58

SPACE Matrix

ISSUES FACEDFragmented MarketPrice warsRegulationsDistribution problem

Financial Ratios

CompanyIndustryS&P 500Quick Ratio (MRQ)0.570.571.12Current Ratio (MRQ)0.891.091.63LT Debt to Equity (MRQ)2.951.940.60Total Debt to Equity (MRQ)2.952.010.78Interest Coverage (TTM)6.256.5014.52

CompanyIndustryS&P 500Return On Assets (TTM)8.577.388.51Return On Assets - 5 Yr. Avg.9.478.468.02

Return On Investment (TTM)9.979.2412.13Return On Investment - 5 Yr. Avg.10.8510.3011.65

Return On Equity (TTM)60.5439.4020.38Return On Equity - 5 Yr. Avg.62.2343.3719.46

Alternative Strategies

Build beer factories in major Chinese markets Increase market share Develop partnership with local manufacturersAcquire small local beer manufactures to expand business and manage distribution