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  1. 1. XXXXXXX xxxxxxxx xxxxxxxxx xxxxxxxxxxxxxxxSTRATEGY : Strategic Growth Executive Summary
  2. 2. Content <ul><li>I. Industry Analysis </li></ul><ul><li>II. Strategy Formulation </li></ul><ul><li>III. Phase I Strategy </li></ul>
  3. 3. I. Industry Analysis <ul><li>xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx </li></ul><ul><li>Domestic beer market </li></ul><ul><li>xxxx beer industry overview </li></ul><ul><li>Environmental analysis </li></ul><ul><li>Segmentation of the industry </li></ul><ul><li>Competitive Forces </li></ul><ul><li>Key Factor Success </li></ul><ul><li>Strategy groups </li></ul>
  4. 4. 1. Competitive Domestic Market Losing domestic beer market share from domestics and imports
  5. 5. Maturing Domestic Beer Industry Introduction Emergence Maturity Decline Demand (units/year) Time
  6. 6. 2. Xxxxx Industry overview <ul><li>An increasing market with a huge potential </li></ul><ul><li>1 st rank for volume per year but 11 th rank for liters per person </li></ul><ul><li>Low average price </li></ul><ul><li>Huge foreign interest in this market but foreign investment usually failed </li></ul>
  7. 7. 3 . Environmental Analysis: <ul><li>Decentralized power structure </li></ul><ul><li>Unstated hierarchy of power </li></ul><ul><li>Big power of the local and provincial authorities </li></ul><ul><li>Important growth of China economy </li></ul><ul><li>Huge and fragmented market </li></ul><ul><li>Increase of urbanization rate </li></ul><ul><li>Low income and standard of living </li></ul><ul><li>Poor infrastructures </li></ul><ul><li>Development of urban aeras </li></ul><ul><li>Reduce emissions of carbon dioxide </li></ul><ul><li>Obligation to share technology and knowledge for foreign firms </li></ul><ul><li>High tax for on trasportation </li></ul>POLITICAL ECONOMICAL SOCIAL TECHNOLOGICAL ENVIRONMENTAL LEGAL
  8. 8. 4. Segmentation of the industry
  9. 9. 5. Competive Forces <ul><ul><li>The market is a large market </li></ul></ul><ul><ul><li>Substitutes depends on the 4 different regional location of customers </li></ul></ul><ul><ul><li>A very large growth potential </li></ul></ul><ul><ul><li>Average sale price is low </li></ul></ul><ul><ul><li>There is a growth in the target population and the rise in average income </li></ul></ul>S ubstitutes E ntry
  10. 10. Competive Forces (cont’d) <ul><ul><li>Average customers are poor, live in agricultural heartland and are extremely price conscious </li></ul></ul><ul><ul><li>No loyalty to any particular brand </li></ul></ul><ul><ul><li>Twice as much of consumed at home as is consumed in </li></ul></ul><ul><ul><li>Suppliers are quite fragmented </li></ul></ul><ul><ul><li>Between 500 and 1,000 firms manufactured beer </li></ul></ul><ul><ul><li>Foreign brewers are willing to pay high prices for even minority positions in local </li></ul></ul>Buyer Power Supplier Power
  11. 11. Competitive Forces (cont’d) Rivalry <ul><ul><li>There are no dominant national or international </li></ul></ul><ul><ul><li>There are only powerful regional </li></ul></ul><ul><ul><li>The top 5 firms in the industry generate 38% of the result of the market </li></ul></ul>
  12. 12. 6. Key Success Factors Key Factor of Success What do customers want? How does the firm survive competition? <ul><ul><li>Average customers : </li></ul></ul><ul><ul><ul><li>are poor </li></ul></ul></ul><ul><ul><ul><li>live in agricultural heartland </li></ul></ul></ul><ul><ul><ul><li>are extremely price conscious </li></ul></ul></ul><ul><ul><ul><li>consume beers at home </li></ul></ul></ul><ul><ul><ul><li>do not form any allegiances to particular brand. </li></ul></ul></ul><ul><ul><li>Highly Fragmented market </li></ul></ul><ul><ul><li>Consumers did favor well-known brands in public </li></ul></ul><ul><ul><li>Larger regional preferred to support smaller local brand </li></ul></ul><ul><ul><li>Foreign are willing to pay high prices for even minority positions in local breweries </li></ul></ul><ul><ul><li>Foreign investors have to follow some restrictions (interest charges) or establish presences through licensing agreements </li></ul></ul>
  13. 13. <ul><ul><li>The market is the largest in the world </li></ul></ul><ul><ul><li>It’s still possessed the largest growth potential </li></ul></ul><ul><ul><li>In, the population and the natural resources presented opportunities </li></ul></ul><ul><ul><li>xxxxx Culture is emerging in the cities </li></ul></ul><ul><ul><li>The population is increasing in the cities </li></ul></ul><ul><ul><li>No dominant national or international </li></ul></ul><ul><ul><li>Politics make the rules on the market and help some brewers (privatization plans…) </li></ul></ul>Key Success Factors (cont’d)
  14. 14. 7. Strategic Groups (cont’d) National Wide Product Range Geographical Scope Regional Narrow xxxxEntreprises xxxxx Xxxx Group xxx xxxx Group
  15. 15. <ul><li>Many of the foreign brewers had started to target </li></ul><ul><li>the economy segment, indeed the </li></ul><ul><li>consumer is price conscious. Competition is intense </li></ul><ul><li>North : saturated market </li></ul><ul><li>East : greatest promise for growth in Per </li></ul><ul><li>capita consumption </li></ul><ul><li>Mid : Low capita income and the slowest </li></ul><ul><li>growth market </li></ul><ul><li>South : the next hot beer market </li></ul>Strategic Groups (cont’d)
  16. 16. <ul><li>Premium witnessed a higher rate of growth </li></ul><ul><li>Improving standard of living in the bigger cities </li></ul><ul><li>National Strategy: Expand its presence in east and south of by increasing its market share in these two regions. Higher investment in premium segment </li></ul>Strategic Groups (cont’d)
  17. 17. II. Strategy Formulation <ul><li>xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx </li></ul><ul><li>Focus on the industry life cycle </li></ul><ul><li>Evolution of the life cycle over the life cycle </li></ul><ul><li>Scenario 1 </li></ul><ul><li>Scenario 2 </li></ul><ul><li>Scenario 3 </li></ul><ul><li>Optimal Scenario </li></ul>
  18. 18. The industry life cycle Introduction Emergence Maturity Decline Demand (units/year) Time
  19. 19. Evolution of the life cycle over the life cycle End of Growth / Beginning of Maturity Demand - Mass market - Increasing demand Technology - Improvement of product composition Products - Commoditization - New products Manufacturing - Harbin achieved 90% capacity utilization - Consolidation Trade - Increasing demand imported brewing barley Competition - Bloody competition - Profits fall Key Factors of Success - Brand local presence - Price & Cost Management - Foreign Direct Investment
  20. 20. The market 2001 2002 2003 2004 2005
  21. 21. A fragmented market 2001 2002 2003 2004 2005
  22. 22. Drawing scenarios Buyer power <ul><li>Scenario 1 </li></ul><ul><li>Increasing gap between highest and weakest revenues </li></ul><ul><li>East strategy VS West strategy </li></ul><ul><li>Standard lager segment renunciation </li></ul><ul><li>Focus on Prenium and Economy segments </li></ul>Threat of new entry <ul><li>Increased interest for standard lager segment </li></ul><ul><li>Generating a new demand </li></ul>Looking for market leadership
  23. 23. Drawing scenarios (cont’d) Threat of substitution <ul><li>Scenario 2 </li></ul><ul><li>Increased interest for wine </li></ul><ul><li>Decrease of standard lager sales </li></ul><ul><li>Favorising the development of new products </li></ul>Threat of new entry <ul><li>Uniqueness of service </li></ul><ul><li>Specialist knowledge </li></ul>Supplier power Become a leader in a niche market
  24. 24. Drawing scenarios (cont’d) Threat of substitution <ul><li>Scenario 3 </li></ul><ul><li>Suppliers are growing slower than the demand </li></ul><ul><li>Shortage of xxxx </li></ul><ul><li>Competitors </li></ul>Supplier power Adaptation / Reconversion Buyer power <ul><li>Sensitiveness to differences between competitor </li></ul><ul><li>Cost of changing </li></ul>
  25. 25. Optimal scenario Reward Profile Risk Profile H H L Scenario 1 * Scenario 2 * Scenario 3 * Poor Optimal
  26. 26. III. Phase I Strategy <ul><li>xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx </li></ul><ul><li>Scope & strategic objectives </li></ul><ul><li>Unique resources </li></ul><ul><li>Sources of competitive advantage </li></ul><ul><li>Functional strategies </li></ul><ul><li>Development Mode </li></ul><ul><li>SWOT Analysis </li></ul><ul><li>Risk factors </li></ul><ul><li>Phase I Recomendation </li></ul>
  27. 27. 1. Scope & strategic objectives National Wide Product Range Geographical Scope Regional Narrow xxxxxxxxxxxxxEntreprises Xxxxxxc xxxxxxxxxx Xxxxxxxxxxxx Group Xxxxxx xxx xxxxxxxGroup
  28. 28. Scope & strategic objectives (cont’d) <ul><li>Scenario 1 </li></ul><ul><li>Increasing gap between highest and weakest revenues </li></ul><ul><li>East strategy VS West strategy </li></ul><ul><li>Standard lager segment renunciation </li></ul><ul><li>Focus on Prenium and Economy segments </li></ul>Looking for market leadership Reminder
  29. 29. Scope & strategic objectives (cont’d) <ul><li>East VS West </li></ul><ul><ul><ul><ul><ul><li>A strategy based on locations and revenues </li></ul></ul></ul></ul></ul><ul><li>Competing in two opposite segments </li></ul><ul><ul><ul><ul><ul><li>Impose a double brand image </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Strategic use of media & distribution network </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Brands Top 3 within the next 5 years </li></ul></ul></ul></ul></ul>
  30. 30. 2. Unique resources <ul><li>Human Resources: </li></ul><ul><ul><li>Mix of local people and international decision makers </li></ul></ul><ul><li>Intangible resources: </li></ul><ul><ul><li>Technology: producing cheaper than competitors </li></ul></ul><ul><ul><li>Reputation: xxxxx is the 4 th beer drunk in xxxxx </li></ul></ul><ul><li>Tangible resources: </li></ul><ul><ul><li>Financial: international group financial capital </li></ul></ul><ul><ul><li>Physical: Presence with acquisition of xxxxxxx group </li></ul></ul>
  31. 31. Unique capabilities <ul><li>Knowledge and Know-How for breweries as a well-known international company </li></ul><ul><li> Managing several brands </li></ul><ul><ul><ul><li>Developing different alcohol rate lager </li></ul></ul></ul><ul><ul><ul><li>Ability to build sustainable alliances with other breweries of distributors (ability to work with local people) </li></ul></ul></ul>
  32. 32. 3. Sources of competitive advantage <ul><li>For economy lager: </li></ul><ul><li>Cost advantage </li></ul><ul><ul><ul><li>substantial capital </li></ul></ul></ul><ul><ul><ul><li>low cost for production and packaging </li></ul></ul></ul><ul><ul><ul><li>know-how in beverage marketing </li></ul></ul></ul><ul><ul><ul><li>For premium lager: </li></ul></ul></ul><ul><ul><ul><li>Differentiation advantage </li></ul></ul></ul><ul><ul><ul><li>Know-how in branding beers </li></ul></ul></ul><ul><ul><ul><li>R&D department sustained by the international group </li></ul></ul></ul>
  33. 33. 4. Functional strategies <ul><ul><ul><li>Cost strategy for the economic segment </li></ul></ul></ul><ul><ul><ul><li>Using the Value Chain to identify differentiation potential on the supply side </li></ul></ul></ul>
  34. 34. Cost Strategy for the Economic Segment Not high quality of bottles and packaging Defect free products. No wide variety. Produce cheaper than competitors. Use of xxxx distribution network Marketing on know-how, no creation effort, keep the same sales service as the standard segment No Service
  35. 35. Using the Value Chain to Identify Differentiation Potential on the Supply Side High quality of components & materials Defect free products. High quality of the beer Use the distribution Network of xxxxxxx Effort on advertising. Building brand reputation on quality. Sales department management. Invest in marketing department Customer technology support. Enhance cultural advantage
  36. 36. 5. Development Mode for the Economic Segment <ul><li>Alliances </li></ul><ul><ul><li>Alliance with XXXXXXXX </li></ul></ul><ul><li>Acquisitions </li></ul><ul><ul><li>Acquisitions of small local brewers </li></ul></ul><ul><li>Internal development </li></ul><ul><ul><li>No particular internal development </li></ul></ul>
  37. 37. Development Mode for the Premium Segment <ul><li>Alliances </li></ul><ul><ul><li>No alliance </li></ul></ul><ul><li>Acquisitions </li></ul><ul><ul><li>Acquisitions of xxxxxxx </li></ul></ul><ul><li>Internal development </li></ul><ul><ul><li>Development of the paper and bottles production department </li></ul></ul><ul><ul><li>Development of the marketing department </li></ul></ul>
  38. 38. 6. Internal strategic factor analysis summary (IFAS) 3.45 1 Total Weighted Score 0.05 1 0.05 Lack of social responsibilities 0.05 1 0.05 Dependent on regulatory and legislation changes 0.05 1 0.05 Vulnerable to currenct exchange rate fluctuations 0.45 3 0.15 Weaknesses Multiple ownership changes since 2001 - Target 0.8 4 0.2 Gets raw materials from internall sources 0.6 4 0.15 Packaging operations allows cost advantage 1 4 0.25 Vast resuources to take risks 0.45 3 0.15 Strengths Industry leader with dominant market share Weighted Rating Weight Internal Strategic Factors
  39. 39. 6. External factor analysis summary (EFAS) 2.8 1 Total Weighted Score 0.025 1 0.025 Shortage of malt 0.075 1 0.075 Foreign investors have to follow some restrictions 0.3 2 0.1 No loyalty to any brand 1 4 0.25 Loss of Competitors Threats 0.3 2 0.15 Rapidly growing population 0.05 1 0.05 No loyalty to any brand 0.45 3 0.15 Gain of market share of foreign brands 0.6 3 0.2 Premium Market Growing       Opportunities Weighted Score Rating Weight External Strategic Factors
  40. 40. 6. SWOT Matrix * To adjust policies and procedures regarding derivatives and hedging in the event of potentially negative foreign currency exchange * To continue dominating market share thanks to competitive advantages and extensive advertising     WT Strategies ST Strategies   Threats * To reinvest in core business to improve the performance of AB * To adjust prices to offset taxes * To develop our product on 2 segments: premium + economy * To increase equity investment on China market     WO Strategies SO Strategies   Opportunities       EFAS Weaknesses Strengths IFAS  
  41. 41. 7. Risk factors   1 3 2 Total Risks The company has to make more efforts to understand Chinese customers and encourage them to find habit in xxxxxxxx beers   X   * No brand attachment for the customer         Customer Relationship Risks     X   * Increase in beer excise taxes or other taxes will impact demand and financial return The company's top managers have to care about the authorities to avoid high taxes and restrictions X     * Influences of authorities         Tax Risks The company has to be sensitive to the local people and outsiders. They will co-cummunicate   X * Obligation to make alliances to work with local people: it could create conflicts or misunderstanding         Development Risks       X * Increased competitive pressures may reduce revenues and increase costs The company's staff has to make more efforts to maintain sustainability of the activity   X X *Many Competitors         Market Risks Strategic Objectives L M H Risk Factors
  42. 42. 8. Phase I xxxxxx Recommendation <ul><li>Xxxxxxxxxxxxx </li></ul><ul><li>Xxxxxxxxxxxx </li></ul><ul><li>Xxxxxxxxxxxx </li></ul><ul><li>Xxxxxxxxxxxxx </li></ul><ul><li>Xxxxxxxxxxxxxx </li></ul><ul><li>Xxxxxxxxxxxxx </li></ul><ul><li>Xxxxxxxxxxxxxx </li></ul><ul><li>xxxxxxxxxxxxxxxxxxxxxxxxxx </li></ul>