Case Analysis

Sajjad Ali Shaikh 5458

Khalid Yousuf 3724
Baqi bullah 3614
Farhan Aslam 6036
Arsalan Liaqat 4714

Executive summary
Anheuser 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 1
st
for volume per year but 11
th

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
success
Creating 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 companies
reposition its brand by catering to elite and create
perception of being a premium brand
increase ownership by 27% by year 2009
expand 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.

Industry
The 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 legal
Decentralized power structure
Unstated hierarchy of power
High tax on transportation
Big power of the local and provincial authorities
Logistics laws

Economical
Important growth of China economy
Huge and fragmented market
Increase of urbanization rate

Social
Low income and standard of living
Technological
Poor level of infrastructure
Environmental
Development of urban areas
Reduce emissions of carbon dioxide
Recyclage of bottles
Obligation to share technology and knowledge
for foreign firms

Market Share In China

Market
Share
Product Range
High
Low
Many Few
CRSB
Tsingtao
Yanjinj
In-Bev Led
Harbin
Chongpi
Other
Local Brew
STRATEGIC GROUPS
Global Market
Ot hers, 43.00%
Scot t ish&
Newcast le,
3.30%
Int erbrew, 8.40%
SABMiller,
8.90%
Anheuser-Busch,
10.80%
Grupo Modelo,
2.80%
Coors, 2.6
Kirin, 2.20%
Heineken, 7.60%
Ambev, 4.70%
Carlsberg, 5.70%
STRATEGIC GROUPS
:



Porters Five Forces
Threats of new entrants:
High barriers to entry:
Fragmented market
Distribution networks
Government Regulations
Economies 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 drinks
Alternative malt beverage
Alternative 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 costs
Brand loyalty
Increasing 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.
Farmers
Labor (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 share
Successful brand loyalty and recognition
Product innovation and production efficiency
(packaging and automation)
International expansion to countries with increasing
consumption trends
Strategic price increases and premium pricing

Driving Forces
Marketing 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-Busch CRE (SABMiller) Tsingtao
Critical Success Factors
Weight Rating Score Rating Score Rating Score
Low cost structure
0.15 4 0.6 3 0.45 3 0.45
Effective marketing
0.1 4 0.4 2 0.2 4 0.4
Successful brand
0.15 3 0.45 3 0.45 3 0.45
Strategic price
0.1 3 0.3 4 0.4 3 0.3
Organizational Culture
0.1 4 0.4 4 0.4 4 0.4
Revenue Generation
0.25 3 0.75 4 1 3 0.75
International
expansion
0.15 4 0.6 2 0.3 2 0.3
TOTAL 1 3.5 3.2 3.05
EFE (EXTERNAL ANALYSIS FACTORS)
KEY EXTERNAL FACTORS WEIGHT RATING WEIGHTED SCORE
Opportunities
1. Emerging pub culture and
positive trend to premium beer
0.05 3 0.15
2. Increase brand loyalty 0.2 4 0.8
3. Develop event sponsorships 0.1 4 0.4
4. Growing economy coupled
with large market potential
0.1 2 0.2
5. Micro-brewery marketing
through additional partnership
0.05 2 0.1
Threats
1. Price sensitivity due to per
capita income
0.1 2 0.2
2. Poor infrastructure as an
obstacle for efficient distribution
system
0.15 2 0.3
3. Corruption and political
interference from government
0.05 2 0.1
4. Unstable energy and fuel
cost
0.1 1 0.1
5. Lack of centralization in
Chinas government
0.1 1 0.1
TOTAL 1 2.45
IFE
KEY INTERNAL FACTORS WEIGHT RATING WEIGHTED
SCORE
Internal Strengths
1. High level of Expertise in
the beer industry coupled
with financial strength
0.20 4 0.80
2. Global reputation through
brand recognition and
uniqueness in taste
0.05 4 0.20
3. High level of operating
efficiency and quality
consistency
0.15 4 0.60
4. Recruitment policy focusing
on highly capable employees
0.05 3 0.15
5. Ability to select partners in
joint-venture business
0.10 3 0.30
Internal Weaknesses
1. Language barrier and lack
of understanding of culture
0.10 2 0.20
2. Lack of decentralization is
an obstacle for expedient
decision-making in regional
market
0.05 1 0.05
3. Limited brand awareness
among Chinese beer
consumers
0.10 2 0.20
4. Inability to distribute
fresh beer across the
country
0.10 1 0.10
5. Lack of emphasis on
economy beer segment
0.10 1 0.10
TOTAL 1.00 2.70


TOWS
Strengths- S
1. High level of expertise in the
beer industry coupled with
financial strength
2. High level of operating
efficiency and quality
consistency
3. Ability to select partners in
joint- venture business
Weaknesses- W
1. Language barrier and lack of
understanding of culture
2. Limited brand awareness
among Chinese beer customers
3. Lack of emphasis on economy
beer segment
Opportunities- O
1. Increase brand loyalty
2. Develop event sponsorship
3. Growing economy coupled
with large market potential
SO Strategies
1. Build beer factories in major
Chinese markets (S1 , O3 )
2. Increase market share ( S 3, O2 )
WO Strategies
1. Increase brand recognition (
W 2, O 1, O2)
Threats T
1. Poor infrastructure as an
obstacle for efficient
distribution system
2. Price sensitivity per capita
income
3. Corruption and political
interference from government
ST Strategies
1. Implement optimal production
techniques to meet market
requirements ( S2, T2 )
2. Develop partnership with
local manufacturers ( S 3, T 3)
WT Strategies
1. Employ local managers ( W 1,
T 3)
2. Acquire small local beer
manufactures ( W 3, T 1)
SPACE
Financial Strength ( FS) Ratings

Return on Investment 6
Leverage 4
Liquidity 4
Working Capital 5
Cash Flow 5
Ease of exit from market 3
Risk involved in business 3



Total 30
Industry Strength ( IS)


Growth Potential 4
Profit Potential 5
Technological Know- how 6
Resource Utilization 5
Capital Intensity 5
Ease of entry into market 2
Productivity, Capacity utilization 5

Total 32
Environmental Stability ( ES )


Technological Changes -2
Rate of Inflation -4
Demand Variability -3
Price range of competition products -4
Barriers to entry into market -5
Competitive pressure -5
Price elasticity of demand -3


Total -26

Competitive Advantage ( CA)


Market Share -3
Product quality -1
Product life cycle -3
Customer loyalty -2
Competitions capacity utilization -5
Technological Know- how -1
Control over suppliers and distribution -2


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

SPACE Matrix
Aggressive
Conservative
1
Competitive
Defensive
2 3 -3 -2 -1
(2.04, 0.58)
FS
ES
IS
CA
ISSUES FACED
Fragmented Market
Price wars
Regulations
Distribution problem

Financial Ratios
Company Industry S&P 500
Quick Ratio (MRQ) 0.57 0.57 1.12
Current Ratio (MRQ) 0.89 1.09 1.63
LT Debt to Equity (MRQ) 2.95 1.94 0.60
Total Debt to Equity (MRQ) 2.95 2.01 0.78
Interest Coverage (TTM) 6.25 6.50 14.52
Company Industry S&P 500
Return On Assets (TTM) 8.57 7.38 8.51
Return On Assets - 5 Yr.
Avg.
9.47 8.46 8.02
Return On Investment (TTM) 9.97 9.24 12.13
Return On Investment - 5 Yr.
Avg.
10.85 10.30 11.65
Return On Equity (TTM) 60.54 39.40 20.38
Return On Equity - 5 Yr. Avg. 62.23 43.37 19.46
Alternative Strategies

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