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Introduction to InBev Breweries


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Date: Wed, 17 Feb 2010 Time: 2:11 AM

Executive summary

InBev brewing company is one of the largest brewing companies globally. The company has a mission values and a vision of ensuring that the consumers’ needs are met and it maintains its market share as well as the market position in the industry. The company has strategic objectives which consist of four pillars that are very useful in the company’s strategic management. They include: world class efficiency, winning the consumers at the point of connection, winning a brand portfolio and a targeted external growth. The company also has some local and global brands which are of very high quality. In the company’s industry environment the InBev Beer Company maintains a competitive position in the market place. (Inbev, 2007)

The company’s bargaining power of suppliers is very low and there is medium rivalry existing between the company’s competitors. The bargaining power of the buyers is very high and the barriers to new entries are also high. The threats of the substitute products are on the average. The company is also affected by the political, economic, sociological and the technological environments. On the other hand the company has some strength which gives it a higher market position but it is also faced with some threats and weaknesses. There are also many opportunities through which the company could take advantage of and maintain a leading position in the industry. (Inbev, 2007)

Introduction to InBev Breweries

  • Mission, vision and values

InBev is the leading brewer globally realizing over 13billion euros in its profits in the last fiscal year. The company has a very strong and a balanced portfolio and it holds the leading position in the markets industry more than any other brewer. The company has a key presence in both the developing and the developed markets and it is also very active in the fastest growing markets globally. The company’s headquarters is in Belgium and it has more than 88,000 employees worldwide. InBev brewing company has sales in over 130 countries and it works through six operational zones which are; northern America, central Europe, Western Europe Eastern Europe, Latin America south, Asia pacific and Latin America north. The company’s is creating enduring bonds with their consumers. Similarly the company has a dream people culture with a dream of being the best and the most profitable beer company worldwide. (Inbev, 2007)

The InBev Beer Company has a vision of ensuring that the company’s cost increases stay below the inflation rate. On the other hand the company’s goals is to ensure that the revenue growth is ahead of the volumes, and also that the organic volume growth is faster than the industry average. The company aims at being the best in its commitment in an ongoing challenge. One of the company’s values is that people make the difference and thus they are behind everything the company does and they also provide the company with the competitive advantage. In its values the company wants to attract the best people in the market since the best people attract more of the same. The company has a culture of ownership and a spirit of a team and individual responsibility whereby the company’s results are earned through disciplines execution and hard work without any short cuts. The company’s culture defines and also unites it wherever it does its businesses. Similarly InBev brewing company is a sales driven company and everything which the company does its geared towards its mission of creating enduring bonds with the consumers through the brands and the experiences which bring the people together. (Inbev, 2007)

  • Strategic objectives

InBev Beer Company has four pillars and its strategy mainly focuses on winning a brand portfolio, winning the consumers at the point of connection, world class efficiency and a targeted external growth. The company’s strategic objectives are facilitated by people and culture, innovation as well as the financial discipline. Similarly the company has a cost- connect- win strategy model with an aim of capturing the non-working money from within the company’s overall cost envelope converting it into working money thus directly supporting the company’s brands and the sales and marketing potential. (Inbev, 2007)

  • Products and services in the markets

The company’s brands are the foundation of InBev Beer Company and it is also the cornerstone of the company’s relationship with its consumers. The company has global brands, a portfolio which is the fastest growing in any major beer company globally. The company’s four global brands include; Stella, Leffe, Brahma and Becks. On the other hand the company has over 200 local brands. (Inbev, 2007)

Competitive position in the industry environment

InBev Beer Company entered the market in the year 2000 and it was licensed by Stella Artois before entering the market. In the company’s industry environment there are 13 European brands and they include tenets, Staropramen and also Peetermans Artois.

(Corporate Focus (2007): Reuters Financial Summary. Retrieved from: 

http://www.infinancials.com, accessed on 18th December 2007)

(Source: Bureau van Dijk- FAME database) (Source: Bureau van Dijk- FAME database)

(Source: Bureau van Dijk- FAME database) (Source: Bureau van Dijk- FAME database)

The competitive strategy analysis

  • Porters Five Forces Model

Barriers to new entrants

The barriers to new entrants in the industry are very high. This is because the market is very stable and also mature. Thus this gives the InBev Beer Company a competitive advantage since the market would not by highly flooded with new entrants who would tighten the competition. Similarly, the InBev Beer Company exercises high economies of scale. (Porter 1980)

The bargaining power of the suppliers

The InBev Beer Company has a very low bargaining power of suppliers. The company’s production is relatively simple and it also exercises high economies of scale thus affecting the bargaining power of the suppliers. (Porter 1980)

Rivalry between competitors

The InBev Beer Company’s rivalry between its competitors is average. This is because the company has a very stable structure and it also has a very large market share of approximately 84%. The company is also classified as one of the biggest five beer companies in the market. So as to strategically compete with its rivals the company has further increased its marketing and it has also adapted to new marketing strategies so that it can capture more customers in the market place. (Porter 1980)

The bargaining power of the buyers

In the InBev Beer Company the bargaining power of the buyers is relatively high. This is for the reason that the company has very large off trade distributors who also have a high bargaining position in the markets industry. The company has many buyers who are loyal to its local and global brands. (Porter 1980)

Threats of substitutes

InBev Beer Company has been facing threats from the substitutes of the beer industry. However the threat of the substitute goods for the company is medium. The substitute goods include the Wines and spirits, the Real ale, the Abstinent and also the Over iced cedars. (Porter 1980)

  • PEST analysis

Political

In the political environment, in 2007 June the UK government revised its strategy on alcohol drinks and this had an effect on the company. On the other hand there was a ban on smoking in the public places. Similarly the rates of the duties which are applicable by the beer strength are subjected to regular changes and this also affects the company’s operations. In addition to thus there has been further government intervention which has been made possible both in the UK and also the European Union levels in the industry. (Key Note Ltd 2007)

Economic

The economic issues which have been facing the company include the rate of inflation in the country which was up in the year 2006. There has also been a successive rise in the interest rates. The disposable income has also been reduced in its percentage increment. Another economic issue affecting the company is the UK market structure which is a model of oligopoly. There are very strong barriers for new entrants in the markets and this affects the company’s market share since there is a limitation on the number of the new competitors entering the markets. (Key Note Ltd 2007)

Sociological

The population growth is very slow and in some regions it is stagnant thus the company’s markets are limited to fewer people. On the other hand beer is predominantly drunk by the men and more females are living together in Belgium. Factors such as the aging population as well as the immigration affect the company’s sales. Similarly the consumers have different tastes and preferences in their beer choices. (Key Note Ltd 2007)

Technological

Technologically the company has adapted to newer and more advanced information technology. For instance it has implemented the table system and also the widget technology which has enabled the company to effectively meet the consumers’ needs.

  • SWOT analysis

Strengths

InBev Beer Company is in an industry which is very strong and which is also a business that is income generating. The company’s economies of scale are moving to a platform that is multinational. The company concentrates all its efforts on brewing unlike the other brewer companies. On the other hand since beer is now a standard consumer product which can be consumed at home the company’s sales are higher since there are more consumers. In the InBev Beer Company the beer strength lies inn its versatility and also its simplicity and thus the consumers accept the niche products and the mega brands.

Weaknesses

InBev Beer Company is faced with some legislative complexity in the brewing and distribution of its beer products. Similarly it is quite difficult or the company to export the traditional British ales. There are also some raised barriers to entry in the foreign markets. In the same way there is a weakened link between the brewers and the public houses. On the other hand the consumer image of the beer drinkers is still obviously masculine and the youth markets are willing to go with the non beer fashions. (Key Note Ltd 2007)

Opportunities

The InBev Beer Company has various opportunities. First and foremost the UK drinkers are very receptive to the company’s innovation and the company also has an opportunity for broadening its distribution. The deregulation will also allow the company’s beer to be sold more frequently as the multiple grocers stock the products of the market leader in their stores. (Key Note Ltd 2007)

Threats

The InBev Beer Company is faced with several threats which include the governments intervention in the beer industry, some pressure groups and the anti alcohol lobby and also the cross channel shopping trade. Similarly the company’s acquisition has put many beer brands in the UK at risk and also the focus on obesity has placed the company’s beer as a target. (Key Note Ltd 2007)

Strategic direction and methods of development

The super voyager strategy

The InBev beer company has adapted a super voyager strategy which focuses on the following four pillars. (Inbev, 2007)

  • The winning brand portfolio

The company seeks to win their consumers through their winning brand portfolio. For the InBev beer company the consumers come first and the company promises to create strong and enduring bonds with the consumers. This would allow the consumers to enjoy the company’s brands over and over again. One way through which the company will realize this goal is through its advanced assortment of its global and local brands. The company aims for the top line growth as well as strong brand equity. However this strategy is definitely on track with the company’s organic volume growth ahead of the industry over and over again. The company has achieved this as a result of the growth in its global brands and also its strong performance in its local brands in the countries of its operations. (Inbev, 2007)

  • Winning at the point of connection

The point of connection is the moment when the company’s consumers eventually make their choice of purchasing or even consuming the company’s brands. By utilizing the capabilities in the sales, distribution as well as merchandising the InBev beer company will win over the consumers at the point of connection. Winning the consumers at the point of connection entails building the company’s sales and also the production competencies, realizing the ideal supplier affiliation with the company’s consumers and also constantly the equity of the company’s brands. (Inbev, 2007)

  • World class efficiency

The InBev beer company refers to the world class efficiency as doing business the company’s way. The company mainly focuses on various initiatives which include the optimization program for the voyager plant that is stimulating an actual step-change in the company’s brewery performance. The world-class efficiency also involves the raising of the status for the company’s procurement process. This will further allow the company to maximize its purchasing power thus allowing it to gain the best results when it is purchasing a whole range of goods and services such as the media and IT. Similarly the company is optimizing its network of the breweries and also sharing its best practices all of which will eventually lead to a more incorporated business in the industry. The world class efficiency has also has a very crucial element which is the zero based budgeting. The zero based budgeting is a tool which assists the company in prioritizing and controlling its costs. This element has been introduced in all the zones in which the company operates. This concept is very simple but implementing it is much more difficult, however the employees of the InBev brewing company have adapted to the zero based budgeting and it has become their lifestyle. (Inbev, 2007)

  • Targeted merger acquisitions

In the targeted external growth InBev brewing company is focusing on merger acquisitions. Since the company’s goal of external growth is further strengthening its position in the development markets and continues maximizing its opportunities in the high growth markets. The company’s recent acquisition is in line with the targeted external growth strategy for instance the company’s acquisition of the Chinese’s based Fuian Sedrin. (Inbev, 2007)

There are three critical enablers and supporter of the four pillars and they include; people and culture, innovation and financial discipline.

Innovation- innovation underpins the company’s four pillars. The company seeks to combine its technological know-how with the market understanding which is unparalleled so that it can develop a healthy pipeline of innovation an example of the company’s innovation in the delivery of exciting choices for the consumers is the perfect draft. The perfect draft is a system that combines the high quality appliances with the preferred consumers’ brands of beer in the light metal tubs. This allows the delivery of a great taste and experience of the draught beer as one relaxes in the comfort of their homes. (Inbev, 2007)

People and culture- in the InBev beer company the people lead the way and they also represent the company’s competitive advantage which is very important. The company has a belief that great people build the greatest companies. The company has a culture of ownership, a disciplined execution and a focus on the results. The company believes that people will make better decisions if they act and also think like the owners. The company’s teams are focused on the basis of achievable and stretched targets. Also built on the company’s principle of ownership is the company’s target setting, the company’s flowing system as well as the company’s compensation model. (Inbev, 2007)

Financial discipline – the company’s financial discipline strengthens the super voyager strategy and it ensures that the company has the right metrics with a proper attention on tracking its performance. Similarly the financial discipline allows for an effective management in the use of the resources which includes the capital structure and the invested capital. (Inbev, 2007)

The proposed strategic direction

The proposed strategic direction will allow the company to introduce new brands from the Eastern Europe into the markets in the industry. This will also lead the company to diversify into other drinks markets. On the other hand the company will target the female population highly as well as the aging population. Similarly the company will also license with the other beer producer brands. (Inbev, 2007)

Strategic outcomes

Through the company’s proposed strategic direction InBev Beer Company has gained and also maintained its market share in the European markets since its inception. The company has also achieved a consistent global profit growth since there has been a poor financial performance in the UK markets.

Strategic management models

Conclusion and recommendations

The strategies which are pursued by the InBev beer company are successful and the strategic choices which have been made by the organization in the recent past are suitable for the company’s external environment. For the InBev beer company to become more competitive in the beer industry it should adapt new strategies. The company should be more innovative in its beer brands since the consumers are more receptive to the innovation. Similarly the company should adapt more strategies sales and marketing strategies which will allow beer to be sold more frequently thus taking advantage of the deregulation. (Inbev, 2007)

Reference:

Key Note Ltd, (2007): Market Report 2007, Breweries & the Beer Market,

Snap data International Ltd, (2007) UK Beer 2007,

Corporate Focus (2007): Reuters Financial Summary. Retrieved from:

http://www.infinancials.com, accessed on 18th December 2007

Dutra, Felipe (CFO), (2005) Inbev Ambev – Investor Day. Retrieved from;

http://www.inbev.com/pdf/investors/4_8_1/050922_InBev_Overview.pdf, accessed on 18th December 2007

Inbev (2007): Vision & Strategy. Retrieved from:

http://www.inbev.com/about_inbev/1__3__0__visionandstrategy.cfm. Accessed on 18th December 2007

Inbev (2007): Corporate Citizenship, Retrieved from;

http://www.inbev.com/citizenship/2__cr_at_inbev.cfm, Accessed on 18th December 2007

Inbev (2007): Dream, People, Culture,  Retrieved from;

http://www.inbev.com/about_inbev/1__9__0__dream_people_culture.cfm, Accessed on 18th December 2007

Inbev (2007): Our Company, Retrieved from; 

http://www.inbev.com/about_inbev/1__1__0__ourcompany.cfm, Accessed on 18th December 2007

Inbev (2007): Cost, Connect, Win. Retrieved from; 

http://www.inbev.com/about_inbev/1__10__0__cost_connect_win.cfm,

Accessed on 18th December 2007

Office of National Statistics (2007): Ageing: 16% of the population are aged 65 or over.  Retrieved from; http://www.statistics.gov.uk/cci/nugget.asp?id=949, Accessed on 18th December 2007

Financial Times (2007): Global Overview: Interest Rates Take Centre Stage. Retrieved from; http://www.ft.com/home/europe, Accessed on 18th December 2007

http://www.imbev.com

 

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