Asahi Breweries, Case Study - Group 7

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    ASAHI BREWERIES EXPANSION PLAN

    A Case Study by Group 7:

    Yogesh Rajadhyax

    Dinesh PatelB.P. Sharma

    Kosuru Ramesh

    Sajesh T.VGanesh. R

    20 th October 2012

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    CASE FACTSASAHI BREWERIES had a very conservative market, depended too much on

    personal relationships, malfunctioning of their management control system,

    retrenchments and distrust among employees. All these changed when Mr. Murai

    and his successor, Mr. Higuchi came in as President.

    Mr. Murai has Administrative style followed more of the corporate strategy. He

    formulated an explicit company credo and created functional task forces, which are

    Corporate Identity Introduction Team and Total Quality Control Introduction Team.

    During his tenure, the company was able to think of a new image and a new taste

    Asahi draft.

    Mr.Higuchi has Entrepreneur style followed more of the economic strategy. Sales

    was his responsibility. He involved in the launching of the Asahi draft and the super

    dry with Focussed cost leadership ( i.e. Innovation & volume )

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    CASE FACTSASAHI BREWERIES, being an innovator in the beer industry, has introduced and

    captured a very large segment of the dry beer market resulting in sales growth of

    71.9% in 1988 while the industry grew only 7.6%. Asahi cannot supply further the

    requirements of its distributors resulting in shortages.

    In order to expand its production capacity, the company should invest more on

    manufacturing equipment and systems to maintain its quality, construct buildings,hire more employees and provide them with training programs depending on the

    companys market research.

    The characteristics of the beer industry were divided into 2 kinds lager beer & draft

    beer.The lager beer is more traditional and richer in taste while the draft beer was

    gradually growing and lighter in taste. The two were quite similar in their production

    processes, except that lager beer was heat pasteurized and draft was not.

    Asahis dry beer was classified under draft beer.

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    Growth Strategies - 3 options

    First, to maintain the present capacity at 880,000 kilolitres.

    Second, to expand from 880,000 kilolitres to 2,100,000 kilolitres.

    Third, to expand from 880,000 kilolitres to less than 2,100,000 kilolitres depending

    on the market.

    It is recommended that the company expand its production capacity from

    880,000 to 2,100,000 kilolitres

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    FINANCIAL RATIOS

    Page 5

    0

    0.2

    0.4

    0.6

    0.8

    1

    1.21.4

    Current Ratio

    Current Ratio

    0

    5

    10

    15

    20

    25

    Asahi Kirin Sapporo Suntory

    Return On Equity

    Return OnCapital Employed

    Gross ProfitMargin Ratio

    012345

    6789

    Total AssetsTurn Over

    Fixed AssetTurn Over

    05

    101520253035

    4045

    Asahi Kirin Sapporo Suntory

    Price Earnings Ratio

    Price EarningsRatio

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    MARKETING STRATEGYValue based marking

    Business to Consumer (B2C)

    UnderstandingValue of

    CustomerCreating Value Delivering Value

    1. Tapping theuntapped area

    2 Strengthening alldistributions channels /suppliers3 Launching newinnovative products

    1 Changing corporateimage

    2 Promotions andfocus onadvertisements (11%)3 Improvement inefficiency of dealers &supply chain.

    1 Introduction of newtaste - SUPER DRY 2 Reputation.3Continous qyalityimprovement to fulfillcustomers need.

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    ATTRIBUTE MAPPING

    0

    1

    2

    3

    4

    5

    6

    Availability Price Quality Reputation Location Service Taste

    Asahi

    Kirin

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    SWOT Analysis

    Strength Weakness

    Dominant Market Position Poor Liquidity Position

    Wide Product Portfolio Limited Geographical Location

    Opportunities Threats

    Partnerships & Acquisitions Trends in Control of AlcoholicBeveragesGrowth in Global Spirits

    Market Stringent Govt. Regulations

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    THREAT FROM COMPETITORS1 KIRIN called board meeting to decide to launch of new beer

    to retain the leadership in the market2 To strengthen the Distribution and retailer channels3 Sapporo launched new draft beer FUYU MONOGATARI

    with new sensational taste

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    Page 11

    CASH FLOW ANALYSIS

    1987 1988 1989 1990

    1 Fixed Assets 89.324 150.924 238.924 353.324

    2 Net Working Capital 12.346 20.746 32.746 48.346

    3 Revenues 345.1 545 780 1000

    4 Depreciation 5 8 15 305 Profit before tax 9.4

    6 tax

    7 Profit after tax 2.5 4.8 6 7

    8 Initial outlay 101.67 70 100 130

    9 Operating cash flow 7.5 12.8 21 3710 terminal cash flow 0

    11 net cash flow 94.17 57.2 79 93

    12 Share holder equity 79.85 103.18 136.52 179.85

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    Page 12

    NET PRESENT VALUE

    YearCashFlow

    DiscountFactor

    PresentValue

    Investment Equity Debt

    8.0% 5.2%

    1987 -94.17 1.00 -94.17 103.55 79.85 23.7

    1988 -151.37 0.94 -142.62 70 23.33 46.67

    1989 -230.37 0.89 -204.51 100 33.33 66.67

    1990 -323.37 0.84 -270.49 130 43.33 86.67

    DEBT EQUITY RATIO Considered as 2:1, since 100bntaken as equity from market.

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    Page 13

    FINANCIAL RATIO

    Year Cash Flow Return onEquity

    Return on CapitalEmployed

    1987 -94.17 3.1 0.91988 -151.37 4.7 2.8

    1989 -230.37 4.4 2.2

    1990 -323.37 3.9 2.1

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    FUTURE SUGGESTED STRATEGIES COUNTER PLAN1. Product Punch

    2. Sufficient stock availability to be maintained and makemore solid supply & distribution chain

    3. Reduction in overhead and contingencies4. Add new flavors to the market taste The Super Dry within

    6 months5. Different sizes of packings of same brand6. Shopping Happy Hours 7. Appointment of semi dealer chain who will work on

    commission basis. (Till product stabilization)8. Min stock balance status ( at central godown ) to supply to

    shortage zone.

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    Thank You.