T TT TUBMITTED TO: PROF. RASHMI MENON T T T SUBMITTED BY: PIYUSH GAUR (35)
LEARNINGS• Macro environmental influences, competitive structures of markets (chapter 2 Environment),• Organisational competences (chapter 3 Strategic Capabilities),• Stakeholder expectations (chapter 4 Expectations & Purposes).• How strategic options are formulated to respond to such demands (chapter 7 Directions & Methods of Development),• And the role and importance of environmental scanning (chapter 2 Environment)
CORPORATE OVERVIEW• SABMiller has shown a remarkable flexibility in its organisation and operations since its inception.• Its establishment in the Johannesburg gold fields was the result of the recognition of the huge market potential that the mining communities provided to the company.• Over the subsequent decades it came to dominate the beverage industry in South Africa and establish a very strong position in Southern Africa.• Parts of the development during this period showed a synergy management logic – acquiring wineries and glass manufacturers for example.• Yet, as growth was further constrained by the external environment, particularly by the sanctions campaign against apartheid,
Corporate Overview Contd:• This reduced the purely synergetic investment opportunities for the business both regionally and globally.• Consequently a shift from a corporate logic of synergy to one of portfolio management occurred with SAB acquiring the ownership of businesses as diverse as furniture and safety matches, Hotel & etc.• With the ending of apartheid a range of new growth opportunities opened up and initial opportunities were taken up in Southern Africa, markets which SAB already had considerable knowledge of.• The 1990s therefore saw SAB shift its corporate logic again to one of parental development and a renewed focus on the brewing business.
STRATEGIC POISITIONBusiness Environment• SABMiller is now operating worldwide.• Its growth has come through entering developing markets, acquiring businesses and brands, and growing them.• The strategy has seemed to yield healthy growth in the past in most of the markets in which it has entered.
SOUTH AFRICA• Original market for SABMiller• Company has experienced mixed fortunes• In 1992, Income of people spending on beverages & tobacco has fallen.• In 2001, Spread of AIDS/HIV.• In 2003, Volume increased by 1% on 2002, still 5% decline as compared to 1999.
AFRICA (OUTSIDE SOUTH AFRICA) & ASIA • Growth of 3.2% with strong performance from Tanzania. • In 2002, Soft drinks volume growth was 15.3%. • EBITDA growth in China was more than doubled year on year. • In India, Achieved Break Even in 1st Year. • Acquisition of Rochees Brewery in Rajastan. • Launch Castle Lager in Mumbai, Banglore & Delhi.
NORTH & CENTRAL AMERICANORTH AMERICA (2003)• US Beer industry affected by low consumer confidence, lacklusture economy, recent world events & poor weather.CENTRAL AMERICA (2003)• Decline in Sales & Operating margin.• Restructuring in business.• Merged back office operations across the region.
EUROPE• High profit with EBITDA growth of 39%.• Debowe, A new Brand successful launch with capturing 20% share in polish market.• International premium brand Pilsner Urquell perform well in export market of US, UK & Germany.• In Russia, Volume up by 9%, 27% growth in end of the year.• In Hungary, General price stability continued, assisting overall industry profitability.
STRATEGIC CAPABILITY• Competences in environmental scanning and developing strategic options.• Moving of corporate headquarters from London to Johannesburg in 1950.• The introduction of a non-discriminatory code of employment in 1978.• And the preparation of “complex defensive investment structures” for deployment in 1985 in response to economic sanctions.
• The emergence of the company onto the global market, particularly with the acquisition of Miller, has led to a reframing of what it means by parental development.• This indicates a competence that the company has had to develop as it moves forward into the 21st century.• Improve its abilities to manage the Western money markets, by putting its competence in terms that are understood in New York and London, and acquiring businesses in markets that interest it more.
• Company displays is a culture of flexibility amongst its managers.• SABMiller executives have faced a range of challenges from micro to macro levels.• They are unlikely to be fazed by the challenges of emerging markets and have maximised return on this competence and reinforced it within the business by their ventures in Eastern Europe and Asia.
• At the corporate level the company has developed competences in the acquisition of breweries that allow it to exercise the business-level competences that it has.• SABMiller has demonstrated strong value-adding parenting capabilities.• These have been particularly apparent, as in reducing inefficiencies in operations, including changing work practices in Miller; & value addition in marketing.• By the retention of existing brands in the breweries the company has acquired in the region.
STRATEGIC OPTION & EVALUATIONConsolidation:• Reducing the risks associated with the more developed markets – South Africa, Europe and the US• While ensuring as firm a base as possible in emergent markets (reducing risk in vulnerable regions/markets, improving efficiency further, etc.).• SABMiller has made its major Western acquisition it is not clear what further growth pressures may be put on the business by shareholders, though the risk would remain that if it fails to grow itself it may become a target for takeover.
PRODUCT DEVELOPMENT• New beer products and transference of beer products and brands between markets.• Launching new varieties of beer and developing existing varieties.• It has also been transferring brands across different markets and regions.• However, this too may not provide the company with the sort of growth that is now being expected of it and it may underestimate the importance of brand loyalty across the world.
• Market development/Africa, i.e. entering further countries and extending the penetration in existing countries.• This certainly builds on past competences and success, and is likely to be feasible.• But it is not clear how well this might meet expectations for growth.• Once highly promising markets such as Zimbabwe are looking extremely depressed now,• The threat of HIV/AIDS to economic growth and political instability in South Africa may also cause continent wide economic disruption.
MARKET DEVELOPMENT ASIA & EUROPE • Developing further the strategy already under way to enter developing markets outside Africa. • This builds strongly on the strategy that has been followed over recent years. • It seeks to apply the competences built up in African developing markets to developing markets elsewhere. • It has been largely successful because it provides an opportunity to improve efficiencies and introduce better brand marketing.
MARKET DEVELOPMENT WESTERN MARKET • Developing further presence in Western Europe and America. • While heavy expectations were put on SABMiller following its listing on the London Stock Exchange to acquire a major Western brewer. • The initial foray into the US market has been perhaps more trying than all anticipated. • While it appears at the time of writing that the company has succeeded in a turnaround of Miller.
DIVERSIFICATION• Move away from a reliance on brewing towards, for example, distribution and retailing (the company is already operating in hotels).• This would certainly seem to have the resources available to allow them to better utilisation.• But it could confuse their investors, who would see them slipping down the path of unnecessary diversification in areas where they have little competence.
JOINT VENTURE• A joint venture with a major Western brewer.• There is a case to be made for a joint venture with an established Western brewer.• The logic of such a joint venture, presumably, would be that SABMiller could bring to bear its expertise and position in developing markets to the benefit of the Western brewer,• The Western brewer could bring further entry points for SABMiller brands into Western markets.• Clearly this would build on existing competences and resources.
SELLBy one of the other major brewers.• Unlike most of the other major brewers (all Western), SABMiller offers a market presence to them and a set of competences that they do not have.• It would be a significant opportunity for a major brewer to obtain a substantial position around the world.• It might also be attractive to investors, who would see SABMiller realizing a healthy return for its shareholders.
RECOMMENDATIONS• It would be very unwise for SABMiller to jeopardize its skills or position in developing markets.• But it does seem to need to gain a greater presence in the West.