Stella Artois Class Presentation - Harvard Case Review


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Stella Artois Class Presentation - Harvard Case Review

  1. 1. Group 2 Consulting Anton Fahme Kirill Kareem Sharon
  2. 2. Traces origins to 1366brewery in BrusselsBought out by masterbrewer in 1717Expansion in 1954 broughtLeffe and Dommelsch in19681987 Merger with anotherBelgian brewery to formInterbrew
  3. 3. Momentum in local marketpropelled Interbrew forinternational acquisitionsHungary, Croatia, Romania,Bulgaria and Canada inearly 1990’sLate 1990’s Ukraine,Dominican republic, China,Montenegro, Russia andKorea
  4. 4. • Momentum in local market propelled Interbrew for international acquisitions• Hungary, Croatia, Romania, Bulgaria and Canada in early 1990’s• Late 1990’s Ukraine, Dominican republic, China, Montenegro, Russia and Korea
  5. 5. 80 CountriesTop 10 markets account for 86% ofsales61% of Volume production came fromAmericas World’s beer market in 1998 Americas Europe Asia Pacific Africa Middle East 5% 0% 27% 35% 33%
  6. 6. Interbrew’s vision is to be within top3 beer producers in each of the keymarketsDeliver high quality beers.
  7. 7. Domestic markets are experiencingcontraction and declining salesHealth consciousness trendMarketing functions of Interbrew arenot attuned for global beer brandUncertainty with developing marketsin China and Russia
  8. 8. • 4th Company globally• Lessen dependence on Belgian and Canadian markets• Strengthen controlled brand’s positions• Local for local, decentralized administration
  9. 9. Traditional and sophisticated beerFlexibility of decentralizationFierce customer loyaltyIntended strategy Global brandunified campaignEmergent strategy Global brandthrough adaptable regional initialbranding
  10. 10. External environmentHow do politics affect us Alcohol tax, consumption restrictions Opening of Eastern European markets in early 2000’s Potential trade sanctions and tariffsEconomic trends Eastern European and Asian financial crisis of early 2000’s Rise of emerging economies
  11. 11. External environmentSocial factors Emergence of wine culture, especially in Australia and NZ Trend towards healthy life style: lite line of products Trend towards specialty products, microbrewInnovations Emergence of internet
  12. 12. External considerationsOpportunities that the environmentpresents Opening of Asian and eastern European markets Reduction of trade barriers Converging marketsThreats faced by the firms in the industry Growth of substitutes Declining sales in mature markets Strong competition
  13. 13. Where do we excel?Company’s performance is partiallyattributed to its: Strategic operations- cross fertilization Strategic sourcing Motivated employees Successful capacity utilization Diverse product line from premium to light beers
  14. 14. Are there other pressures?Suppliers power – medium Interbrew works with a limited number of high quality suppliers, increased power Offer raw materials that could be easily substituted, reduces powerBuyers power- moderate to high Costs nothing to switch A lot of close substitutesThreat of substitutes – medium Wine, cocktails, pilsner, lager
  15. 15. Threat of new entrants – high ratio offixed vs. variable costsRivalry- intense, Anheuser-Busch,Heineken, Carlsberg, littledifferentiation, high exit cost
  16. 16. Overall industry attractiveness Fragmented, top four players account for 22% of global volume Attractive in growth markets as well as mature markets 83 lpc in N. America, 79 in W.E., 29 in E.E. Growth of speciality and light beer segments
  17. 17. Value Chain Analysis Primary Inbound Logistics Partnerships with suppliers Outbound Logistics Economies of scale in distributionHandled differently according toregion, little standardization
  18. 18. Value Chain Analysis PrimaryOperations, Interbrew strong point Shifting production to more efficient facilities Cross fertilization of best practices Capacity utilizationMarketing and Sales Product quality and positioning Specialty Belgian cafes
  19. 19. Value Chain Analysis SecondaryGeneral Administration Benefits from economies of scaleHuman Resource management Employee suggestions Motivated owner-operatorsProcurement Great relationships with limited suppliers across the board
  20. 20. Firms Resources & Sustainable advantage Tangible Resources Wide range of locations Lean operations from efficient sitesKey strengths come from intangibleresources and organizationalcapabilities
  21. 21. Intangible ResourcesWide Portfolio Very different from its competitors Key acquisitions Presence in both developing and emerging markets Best practices from different sites can be applied across the boardDecentralized approach Allows flexibility despite portfolio size Handles different tastes Can shift and adjust product mixAccess to a vast supply network
  22. 22. Organizational CapabilitiesMakes strategic acquisitionsAbility to leverage knowledgeFocus on growth markets with longterm volume growth potentialCost savings gained by purchasingand then rationalizing operations
  23. 23. Industry life cycle by region
  24. 24. Industry by product category• holder
  25. 25. Intellectual CapitalHuman CapitalSpread globallyCultural, local and economy knowledge and expertiseStructural CapitalBreweries around the worldBrand equityRelational CapitalConnected to customers around the worldBeer Cafe
  27. 27. Strategy ObjectiveUnderlying ObjectivesConsolidate the company position in mature marketsImprove margins through higher volumes of premium and specialty brandsRationalizeWorlds major markets would each end with just 2 or 3 major playersFundamental ObjectiveIncrease shareholder value
  28. 28. Operational Strategy Cross fertilizationSharing of best practices between sites Employee propositionsImprovement linked to employee motivation nottechnical performance Capacity UtilizationClose overproducing facilities and open under-producing Strategic SourcingSelecting small number of suppliers
  29. 29. Brand StrategyAcquisition of existing brewers, ingrowth mature marketsIdentify brands, typically specialtyproducts and them a regional basisacross a group of markets
  30. 30. Market StrategyIncrease global volume of beer production andreduce their dependence on Belgium and CanadaEstablish and manage strong market platformsDecentralization corporate structureMature markets – greater efficiencies in production,distribution and marketingGrowth markets – build significant positions &concentrate on long-term volume growth potential
  31. 31. Economies of scopeCore CompetenciesMERGERS AND ACQUISITIONSSharing ActivitiesDecentralized Management StructureMarket Power4TH Largest beer company in the worldHouses beers from 80 countriesVertical IntegrationStrategic sourcing
  32. 32. Portfolio Management on Regional Level
  33. 33. Portfolio Management on Regional Level Brewery : Manchester, England Founded: 1853
  34. 34. Portfolio Management on Regional Level
  35. 35. Portfolio Management on Regional Level Brewery : Namur, Belgium Founded: 1152
  36. 36. Portfolio Management on Regional Level
  37. 37. Portfolio Management on Regional Level Brewery : Prague, Czech Republic Founded: 1869
  38. 38. Portfolio Management on Regional Level
  39. 39. Portfolio Management on Regional Level Brewery : Hoegaarden, Belgium Founded: 1445
  40. 40. BCG MATRIX STAR QUESTION MARKRelative Growth Rate South Asia Central & Eastern Europe America CASH COW DOGS Relative Market Share
  41. 41. Motivation for Global ExpansionIncrease size of potential marketsReduce costs of R&D and operationExtend life of a productOptimize physical location for everyactivities in firm’s value chain Risks: Political & Economic Currency Fluctuation Management Issues
  42. 42. Motivations for Global Expansion
  43. 43. Motivations for Global Expansion
  44. 44. Entry Modes of Global Expansion
  45. 45. Means to Achieve Diversification Global Approach Mergers & Acquisition -Speed -Valuable resources -Consolidation and Scale -Leverage Potential Limitations: Expensive Manager’s ego and creditability Cultural issues
  46. 46. Joint Venture Enter new markets Reduce costs in the value chain Develop and diffuse new technologies Potential Limitations: Partner issues Control issues
  47. 47. Factors Affecting a Nations Competitiveness Is the nation’s business governing favorable and what are the nature of domestic rivalry?Does the nation have Is there Demand forfavorable Factors of beer?Production thatsupports the beerindustry? Presence/Absence of Suppliers & related industry such as wineries, and Distilleries that are globally competitive?
  48. 48. Alternatives• Continue with Stella Artois – Inadequate marketing experience – Old fashioned image – Alcohol level inconsistence in different markets• Shift emphasis on Labatt – Little exposure outside North America – 25% Decline in sales after Labatt Ice peaked
  49. 49. Alternatives• No global brand, differentiation of local beers – Leverage core competencies and structure – Consistent with acquisition strategy – Cross cultural sharing and regional brand development – Embrace Belgian Beer cafes franchise
  50. 50. Alternatives• Promote “Interbrew” as a global brand – Similar to no global brand, could be used as a tool to achieve it• Emphasize and develop light beer as a category
  51. 51. Now we open the floor for questions
  52. 52. Today• Interbrew no longer exists after 2 major mergers with AmBev and later with Anheuser Busch forming the biggest beer company in the world Anheuser-Busch InBev