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Analysis of Molson's India Entry Strategy

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Lot of companies are following internationalization path in this globalized world, some are succeeding and some are not. My report critically analyse one such internationalization strategy of a well …

Lot of companies are following internationalization path in this globalized world, some are succeeding and some are not. My report critically analyse one such internationalization strategy of a well known beer brand.

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  • 1. This report is a result of my own work which was an integral part of my full time MBAprogram. Prior permission must be taken from the author before copying orreproducing this work.Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 1
  • 2. Molson Coors Brewing CompanyTheoretical Analysis of International StrategyAuthor: Deepak Shrivastava (imdshrivastava@gmail.com) Page 2
  • 3. Table of ContentsIntroduction ............................................................................................................................................ 5 Industry Overview ............................................................................................................................... 5 Market............................................................................................................................................. 5 Category .......................................................................................................................................... 5 Competition .................................................................................................................................... 5 Discussion on Industry’s Globalization ........................................................................................... 7 Company Overview ............................................................................................................................. 9 Products: ......................................................................................................................................... 9 Discussion On Company’s degree of globalization ....................................................................... 10Company’s Analysis and Internationalization strategy ......................................................................... 13 Capabilities Analysis .......................................................................................................................... 13 Drivers for internationalization......................................................................................................... 14 Market Selection ............................................................................................................................... 15 Country Analysis: India...................................................................................................................... 16 Industry Analysis ............................................................................................................................... 18Possible benefits and challenges with India strategy ........................................................................... 20 Possible Benefits ............................................................................................................................... 20 Possible challenges ........................................................................................................................... 20Conclusion ............................................................................................................................................. 22References ............................................................................................................................................ 23Appendix ............................................................................................................................................... 26Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 3
  • 4. Table of FiguresFigure 1: Top 10 Beer players in world 2011. ......................................................................................... 6Figure 2: Few large mergers and acquisition in recent past in Beer Industry ........................................ 6Figure 3: Consolidation of global beer industry ...................................................................................... 7Figure 4: Molson Coors in emerging markets. ...................................................................................... 10Figure 5: Revenue break-up per business unit ..................................................................................... 10Figure 6: Molson Coors Basic Organizational structure. ....................................................................... 11Figure 7: AAA model analysis of Molson Coors strategy. ..................................................................... 12Figure 8: Resources and Capability analysis on Molson Coors. ............................................................ 13Figure 9: VRIO Analysis of Molson Coors. ............................................................................................. 14Figure 10: YIPs globalization framework............................................................................................... 14Figure 11: International Driver for Molson Coors................................................................................. 15Figure 12: CAGE Analysis between India and US. ................................................................................. 17Figure 13: Hofstede dimension of culture. ........................................................................................... 17Figure 14: Porters Diamond for India................................................................................................... 18Figure 15: Five Forces Analysis of Indian Beer Industry........................................................................ 19Figure 16: Web plot of five forces of Industry. ..................................................................................... 19Figure 17: Popular beer categeory in world. ........................................................................................ 26Figure 18: PEST Analysis on India. ......................................................................................................... 27Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 4
  • 5. IntroductionFriedman (2005) said “ The World is flat” but is the world really flat or is it the narrow vision ofFriedman with respect to outsourcing (Rugman and Oh 2008)? Levitt in 1983 said “Companies mustlearn to operate as if the world were one large market” but do really company have the knowledgeand capability to pursue this global strategy. Here in this report we see one of a global strategy andits analysis pursued by one of global top player in beer industry Molson Coors Brewing Company.Recently Molson Coors entered India by forming Join Venture with Cobra India by buying majority ofthe controlling stocks. This move raised curiosity and I decided to understand the motive and thepossible benefits or harm a company from US will get by making alliances with a relatively unknownbrand in India. I will try to deduce the possible drivers behind internationalization of Molson. Thesevarious analyses will be supported by appropriate frameworks on International business laid out byfamous academics.Industry OverviewMarketLet us start with an overview of industry. As per Euromonitor report total beer market as of 2011was about 244 billion litres and Beer is the largest selling category in Alcohol industry i.e. 78% withgrowth rate of 2% in 2011 and wine is second in rank. In terms of markets, Asia with 34% of totalbeer consumption is the largest market for beer by volumes with Western Europe as the secondlargest market (15%). However Europe is the largest market in terms of value about 25% of globalbeer sales by value. Majority of the mature markets like Europe and America have seen a negative orvery less growth in beer segment in recent year’s mainly due recession. There is lot of growthpotential in emerging markets like, China, Brazil, and India. China already account for approximately25% of the global market by volume (Euromonitor 2012).CategoryIn terms of beer category the largest selling beer is lager beer (Euromonitor 2011) and with in lagerbeer, economy category is the most favoured beer segment. The premium beer segment is mostlyfavoured in Asia Pacific region1 where as standard in western markets.CompetitionThe top 5 players in beer market have approximately 48% of market shares. Below are top10 marketleaders in beer industry and their respective market shares. The market is lead by the multinational1 More details of category and their growth can be seen in AppendixAuthor: Deepak Shrivastava (imdshrivastava@gmail.com) Page 5
  • 6. corporations and they are spread across the globe. Chinese firms are growing their power byconsolidation on their home markets and also recent expansion in foreign markets.Figure 1: Top 10 Beer players in world 2011.Source: Author complied from Euromonitor 2011, Global prospects for beer companiesIn last 10 years beer industry or entire alcohol industry has seen a lot of consolidation(Euromonitor,2011) i.e. lot of regional players are merging with small local or with other regionalplayers to become bigger and bigger. We have seen in past majority of the big players are a result ofbig merger at some point in time. Like Inbev bought Anheuser Bush to become number one player,Adoph Coors merged with Molson Canada, SAB buying Miller and so on. Below see few large M&Ashappened in Industry.Figure 2: Few large mergers and acquisition in recent past in Beer IndustrySource: Adapted from Euromonitor 2011, Global prospects for beer companiesAlthough most of the growth in this industry in 2011 was organic growth but still a lot of mergersand acquisition have been done with a reason to expand in new geographies (Euromonitor, 2011).Some of the recent merger and acquisition are the examples of this expansion. Japan’s Kirin HoldingAuthor: Deepak Shrivastava (imdshrivastava@gmail.com) Page 6
  • 7. bought Schincariol in Brazil, SAB Miller bought Australian Fosters and etc. Below figure gives therepresentation of how fast the consolidation is taking place in alcohol industry.Figure 3: Consolidation of global beer industrySource: Adapted from Euromonitor (Feb 2010): Strategies for growth in an increasingly consolidated beer market.Discussion on Industry’s GlobalizationThe industries around the global are going global but how much global is your industry is difficultquestion to answer. Lot of literatures have been published on this and lot of debate is there on thisquestion. Grionld (1990 cited in Zeng 2005) says some industries are more global than others and inthose industries, industry (i.e. sector) factors are more important than country. Heston andRounwenhorst (1994 cited in Zeng 2005) and his followers argue in their research that countryfactors are more important than industry.Author like Rugman and Oh (2008) argue that businesses are going regional rather than global. Theirempirical study show that majority of the business is done in the famous triad region rather than theglobal. Ghemawat (2007) also support a similar fact that world is currently “Semiglobalized” ratherthan globalised. He also said assertively that “Most types of economic activity that can be conductedeither within or across borders are still quite localized by country” (Ghemawat, 2007, pp11)But question of whether beer industry faces the same fate or is it has its own path to follow, thedegree of internationalization is again difficult to measure. However few reports from Euromonitor(2012,2011) and Datamonitor(2011) say that beer still operates in “Local Global Market” and still inmajority of countries the local players are having the number one spot.Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 7
  • 8. Using the globalization scale used by UNCTAD i.e. Transnational Spread Index (Gillies, 1998), formeasuring the internationalization of a company, can be used to measure the internationalization ofthis industry as well (taking just top 10 players in account), but having that analysis is out of scopethis report.A research from Morgan Stanley done by Zeng in 2005 on degree of internationalisation of varioussectors of US industry shows that few companies moves tightly with the movement of their relatedindustry and few don’t. The company which has high reliance on region stays in region irrespectiveor movement of its supporting sectors movement. Beer Industry in a sector which is highlydependent on agricultural industry and as agricultural fairly immobile so does the Beverage industry.Looking to the industry with Ghemawat’s (2007) “AAA” Model we see that top firms like AB-Inv, SABMiller uses more of a adaptive and aggregation strategy than arbitrage. They tend to use Arbitragestrategy on regional basis. These players have many local brands in their portfolio which theyproduce and sell with the national or regional boundary hence they are using adaptive strategy. LikeSAB Miller has over 200 brands and one brand is “Haywards” (Euromonitor 2012) which is onlypopular in India. As per report from Jernigan (2009), most of the alcoholic beverages are consumedin the country in which they are produced.These players or in fact most of the top players have only few global brands which they sell andproduce globally to reach economies of scale as their aggregation strategy. For example Coors lightfrom Molson Coors, Budweiser from SAB Miller, Heineken and many others.As regional arbitrage strategy these companies produce few beer brands away from their homemarket in a new country (taking advantage of low cost of transportation or low cost of production)to export to near by regions or some are planning to make global sourcing decision. Like India is nowa global sourcing hub for Carlsberg Brewery2, Molson plans to use India and China as the productionhub for Asia region3Based on information available about the industry and its players we see that these companies arehaving multi-domestic or localization strategy (Peng 2009,pp 354).These studies show that beerindustry still operates in regional environment than global environment.2 IANS, 2008, Thaindian News [Online] http://www.thaindian.com/newsportal/business/carlsberg-to-make-india-its-global-sourcing-hub_100110069.html (accessed on 20th April 2012)3 Molson Coors Brewing Company 2011 [Online]http://www.molsoncoors.com/en/News/International/Corporate/2011/June/23/MOLSON%20COORS%20AND%20COBRA%20INDIA%20ANNOUNCE%20INDIAN%20JOINT%20VENTURE%20TO%20BREW%20AND%20MARKE thT%20COBRA%20BEER%20IN%20SOUTH.aspx (accessed on 20 April 2012)Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 8
  • 9. Company OverviewMolson Coors Brewing Company have a history of over 100 years in brewing (Annual Report, 2012).The company is a result of a merger happened in 2005 and currently operates in 40 countries with65 products in its portfolio. The company operates in four major business segments Molson CoorsCanada, MillerCoors LLC USA, Molson Coors Brewing Company (UK) limited and Molson CoorsInternational for other countries. The major products in its portfolio are, Coors light, Coors, MillerLite, Molson Canadian, Carling (UK) Cobra (UK) and etc (Datamonitor 2011). It has acquired licenceto brew and sell Heineken, Amstel Light, Asahi & Asahi and Murphy’s in US. Company’s key marketsare US and Western Europe with 80% of the sales coming from these markets.Products:Molson has a diverse portfolio with of 65 strategic and partner brands but its inclination is moretowards the standard lager beer category. Company is 6th largest producer of standard lager(Euromonitor,2012) . Its signature brand includes Coors Light (ranked in Top 10 beer brand inworld), Coors, Molson Canadian, and Carling (UK). Coors light is the major brand for the companyand account for 51% of total beer sales. Coors light is a premium lager brand and company is usingthis brand to expand globally (Euromonitor, 2012).We can see the threat of globalization of industry is taken seriously by Molson Coors as in 2011company had the following growth strategy “our growth strategy: to grow profitably in our corebusinesses through brands and innovation; to grow in new and emerging markets; and when it meetsour strict shareholder return criteria, to grow through mergers and acquisitions.” (Annual Report,2011, pp24).The company has taken various steps to implement above strategies; the most important step takenwas extending its reach to emerging markets. Below figure shows the approach taken by company invarious emerging market.Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 9
  • 10. Figure 4: Molson Coors in emerging markets. thSource: Adapted from Molson Coors Brewing Company Annual New York Analyst/Investor meeting (accessed on 17 April2012)Here in this paper we will analyse Molson steps of moving to India with a Joint Venture with Cobrabrewing company. Before we start the analysis let us first see how much globalise in this firm.Discussion On Company’s degree of globalizationUsing transnational indices method let us try to see the degree of internationalization of MolsonCoors. Here I will only take foreign sales and number of countries as the factors, although Gillies,1998 in UNCTAD write that there are 4 factors4 of this calculation.Lets us first see how much revenue Molson Coors generates from its foreign sales. Below tablerepresents revenue data from each business unit. Business Segment Sales USD Percentage of total sales Canada 2067 0.19 US 7550 0.68 UK 1333 0.12 International 122.6 0.01 Total Sales 11072.6Figure 5: Revenue break-up per business unitSource: Author compiled using Molson Coors Annual Report 2011We can see only 32% of total sales is coming from its international business units as compared to68% from home country (i.e. US).4 4 Factors are: Foreign sales, number of employee in foreign country, foreign assets and number of countries.Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 10
  • 11. Molson has its operation in 40 countries (Annual Report 2011) hence the “network spread index”(UNCTAD, pp27) will be 40/1785 =0.25, thus the TSI will be .08 or just 8%. Gillies, 1998 says higherthe index value higher is the degree of internationalization of the firm (pp29). However this shouldbe check against the competitors to get a relative level. A quick of TSI with its partner company SABMiller (i.e. 32%6) shows that SAB Miller has high degree of internationalization.In order to combat the globalization threat Ghemawat 2007 said companies use either one orcombination of ‘As’ strategies i.e. Aggregation, Adaptation or Arbitrage. Looking closely to thestrategies we see that Molson uses all three Adaptation, Arbitrage and Aggregation strategies. Itstarts with Adaptive strategy but later it uses the knowledge or resource from adaptive strategy andimplements Arbitrage and aggregation strategies.Adaptive: Looking at the strategies so far used by the Molson Coors for international expansion, wesee clear evidence of using Adaptive strategy. Coors before merging with Molson bought leading UKbeer brand in 2001 to enter UK market7. Similarly Coors bought Molson Canada to enter Canadianmarket and later formed Molson Coors. Now it has formed a joint venture by buying majority ofcontrolling stake in Cobra India to enter India. Molson Coors have 65 brands but its brand Coorslight is currently sold across different countries. Majority of its brands stay in their nationalboundaries (Molson Canadian in Canada, and many other regional brands Annual Report, 2011,pp3).Molson Coors organizational structure also suggests that Molson uses more of adaptive strategies.Its business units are divided as per geographical area rather than global function (see beloworganization structure of Molson Coors). Peng (2009, pp356), says that firms with localization ormulti-domestic strategy have organizational structure divided as per geography. Molson Coors Brewing Company Molson Coors Brewing Molson Coors Molson Coors Canada MillerCoors LLC USA Company (UK) Limited InternationalFigure 6: Molson Coors Basic Organizational structure.Source: Compiled by Author using Annual Report 20115 178 countries as per UNTCAD for Network spread index6 SAB Miller operate in 75 countries (Annual Report 2011) and has 78% of revenue coming from foreignoperations.7 BBC News 2001, Carling Sold to US brewer[online] http://news.bbc.co.uk/1/hi/business/1726850.stm(accessed on 20th April 2012)Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 11
  • 12. Aggregation: Once Molson has acquired a brand in any country for example Carling in UK and gainedthe knowledge, then it sells this Carling to other countries, like Ukraine (in 2011) to find new marketand to reach economies of scale. Similarly we can see it is selling its American brand Coors light tonew markets like Sweden (in 2008), Russia (in 2010) and Dominican Republic (in 2011). We also seeits partnership with E&J Gallo Winery8 (California, USA) to reach economies of scope. Company haslimited brand presence in Premium lager segment hence it partnered with other companies exampleAsashi (from China), Heineken and others (Annual Report 2011, pp3-4) for US market to gain theeconomies of scope.Arbitrage: We see very few strategies that can be categorised as Arbitrage strategies, I will onlycategorise them as regional base strategy rather than global strategy. For example buying up CobraIndia production unit for producing beer for South Asia rather than global (don’t forget India is thelargest producer of alcohol in the world). This step has a future benefit of using Indian productionunit to serve global customer rather than just regional customer.We still see large degree of adaptive strategies in Molson Coors. Below graph is the graphicalrepresentation of the points discussed earlier. Arbitrage 4 3 2 1 0 Adaptation AggregationFigure 7: AAA model analysis of Molson Coors strategy.Source: Author compiled using Ghemawat (2007): Managing Difference, Harvard Business Review, pp9.After looking at the degree of globalization of Industry analysis let us try to assess the company andthe move it had taken to implement the growth strategy.8 Datamonitor (2011), Company Profile: Molson Coors Brewing Company [Online] Available from: thhttp://360.datamonitor.com/Product?pid=121CB525-1758-45BC-B50E-142610E64F1A (accessed on 20 Apr2012)Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 12
  • 13. Company’s Analysis and Internationalization strategyCapabilities AnalysisPeng 2009 argues that companies gain a competitive advantage over other rival firms because of itsunique resources and capabilities (pp64-65). These capabilities and resources view give detailanalyses of value adding resources. Below figure shows resources and capabilities view of MolsonCoors. Tangible Resources and Capabilities Generated 900 million cash from operating activities. And has cash available for any long term planning.Financials 1/3rd of shares are owned by the family. 12 Brewing and Packaging plants, 3 distribution warehouses, 1 malting facility and various administrative offices. Additionally Molson have got tie up with many partners in various part of world to use their production andPhysical warehouses. Company hold several patents related to beer dispensing systems, packaging, and certain other innovations.Technological Advance packaging techonogy in place majority of the brewing facility Company have strong network of distributor in US and UK. It also has strong network of suppliers using contracts.Organizational It manages 21 brewers across the global. Intangible Resources and Capabilities Company has very experienced managerial team in place. It has outsource majority of administrative work including HR.Human Resource With recent cost cutting program company has reduced the work force. Company is known for it innovative low calorie products. It is also known to have lot of innovation in packaging and designing.Innovation It also has excellent marketing skills and branding skills. Its key brands posses lot of brand value. Our Brew program for uniting the employees.Reputation High focus on reducing negative beer print.Figure 8: Resources and Capability analysis on Molson Coors.Source: Compiled by author using Peng 2009, pp65-66 and Annual Report 2011The above analysis will help in analysing few capabilities which give Molson Coors a competitiveadvantage. Johnson et al 2011 and Barney 2002 cited in Peng 2009 suggest that capabilities whichpasses all four criteria’s i.e. Valuable, Rarity, Imitable and Non substitutable (VRIN, Johnson et al2011) or Valuable Rare Imitable Organization (VRIO, Barney 2002) are the capabilities which give anyfirm a sustained competitive advantage (Peng 2009,pp72).A quick check with these criteria shows that there are few capabilities which pass these tests andusing these capabilities company can gain competitive advantage.Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 13
  • 14. Costly to Exploited byCapabilities Valuable ? Rare? Imitate? Organization?Innovative designers for Packaging Yes No Yes YesCompany culture to support innovation Yes Yes Yes YesInnovation capabilties in producing low calorie beers Yes Yes Yes YesMarketing Skills and branding skills Yes No Yes YesManagerial experience Yes No Yes YesAbility to maintain long term parterships Yes No Yes YesFigure 9: VRIO Analysis of Molson Coors.Source: Compiled by author using The VRIO Framework, Peng 2009, pp72, Annual Report 2011, Molson Coors Overview[Online] http://www.molsoncoors.com/~/media/Molson%20US/en/PDFs/About%20Us/MCBC%20Overview%20- th%2004092012 (accessed on 19 April 2012)Another debate whether these capabilities are transferrable to international markets or are thesecapabilities cross-boarder capabilities (Peng, 2009, pp81). We will see in later section whether thesecapabilities will give any advantage to Molson in India.Drivers for internationalization.Every organization has drivers or motives behind its internationalization. As per YIP 1989 there arevarious drivers for globalization in an industry. Below figure shows various drivers of globalization.Figure 10: YIPs globalization framework.Source: Adapted from Ning 2012 Lecture slides 2: Global Environment Analysis.Out of these four drivers I see that market driver, cost driver and competitive drivers are maindrivers for Molson Coors. Below is the detailed description of the drivers.Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 14
  • 15. Figure 11: International Driver for Molson Coors.Source: Compiled by author using Yip 1989: Global Strategy … In a world of Nations? And Euromonitor 2011, Beer in India,Global Performance and prospects for beer, Strategies for growth in an increasingly Consolidated Global Beer Market.As per Johnson et al 2011 YIP framework help company to decide the scope of internationalization(pp269). We see from the figure Molson Coors move to globalization has multiple driver and strongreason to move to a country like India. While major reason is still the cost but global competition hasalso pushed Molson to take this step.As already discussed in previous section big player like SAB-Miller, AB-InBev have already startedusing the regional arbitrage strategy for their performance and hence any delay from Molson willbuild up the pressure of globalisation.Market SelectionInternational expansion never comes without the risks or threats of differences between the culture,society, values and beliefs. Many theorists have described various frameworks for selecting anyinternational market. Hollensen (2011, pp263) described Market screening model for selectingmarket and Anderson and Buvik (2002, pp349-350) also described systematic and non-systematicapproaches for market selection.Ghemawat(2001) also suggested that while selecting any country don’t just look at geographicdistances, he suggested to consider four dimensions of distances which a company should analyseAuthor: Deepak Shrivastava (imdshrivastava@gmail.com) Page 15
  • 16. i.e. Cultural distance, Administrative distance, Geographic distance and Economic distance (CAGEAnalysis, pp1). He has also said that more the country differs from other more the risk company hasto bear in order to enter foreign market (pp1).We cannot deduce from given data whether Molson Coors has used any framework to select themarket? or this move is the result of extending old partnership with Cobra9.Country Analysis: IndiaMacro analysis of country shows that India offers lot of advantages to the businesses (See the PESTanalysis in Appendix).It is the 4th largest GDP in real growth in the world and being ranked 5th interms of FDI attraction (CIA World Factbook 2011). It has a huge market potential with a growingmiddle class with a growing income at a rate of 10% per year (Euromoney 2011),Porter (1980,pp73) also explains firms can gain significant competitive advantages by highly localisedprocess which can be achieved by greater understanding of these distances we talked about.Ghemawat’s CAGE analysis with respect to India shows that India is not only geographically distantfrom US or Canada but it is distant in all the 3 aspects of framework (detailed analysis can be seenbelow). These differences add to the complexity of the relationship or risk of investment by thecompany.9 Coors and Cobra had partnership for UK distribution since 2009:http://www.molsoncoors.com/en/News/International/Corporate/2011/June/23/MOLSON%20COORS%20AND%20COBRA%20INDIA%20ANNOUNCE%20INDIAN%20JOINT%20VENTURE%20TO%20BREW%20AND%20MARKE thT%20COBRA%20BEER%20IN%20SOUTH.aspx (accessed on 16 April 2011)Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 16
  • 17. Figure 12: CAGE Analysis between India and US.Source: Author compiled using Ghemawat 2004, Distance Still Matters. pp5Cultural and societal differences can also be seen using Hofstede five dimensions of culture cited in(Peng 2011, pp103). We can see that India and USA are different in all the five dimensions ofcultural aspect. RankingCountry Power Distance Individualism Masculinity Uncertainty Avoidance Long Term OrientationIndia 77 48 56 40 61US 40 91 62 46 29Figure 13: Hofstede dimension of culture.Source: Adapted from Hofstede cited in Peng 2009: Global Strategic Management, pp103Basic analyses of these models tell that Molson has to put a lot of effort in managing thesementioned differences. One of the three actions suggested by Peng (2011, pp114) to effectivelymanage the culture is to expand knowledge or strengthen the cross-cultural intelligence. UsingPeng’s recommendation, I think Molson has effectively exploited one of its competitive advantage(i.e. maintaining strategic partnerships) mentioned earlier. Molson Coors had strategic partnershipCobra UK since 2009 and now it has extended it with Cobra India. Cobra beer has a strongknowledge of Indian culture and other aspects of society hence using this Molson will be able tobridge these cultural, administrative, ethical and economic gaps.Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 17
  • 18. As per Bruce Kogut cited in Johnson et al 2009, companies can improve their value chain network bytaking locational advantage of the country. Michael Porters theory of “The competitive advantage bynations” explains how the companies can analyse various locational factors using Porter’s Diamondto design competitive strategies.Figure 14: Porters Diamond for India.Source: Compiled by author using Porter’s Diamond in Johnsan et. al 2011 Exploring Strategy, pp270Industry AnalysisAbove analysis of India (Alcohol industry) explains that India offers huge potential market andattractive market to grow but various government laws and taxation policies make it tough forcompanies to gain the advantage. Not only government but also various industry forces create lot ofpressure or barriers for a company to grow. Below five forces analysis of the Indian beer industryshows the intense rivalry, various threats from new entry, substitute and power of supplier andcustomers. Looking at the analysis it is not a easy path to follow to improve global supply chain.Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 18
  • 19. Figure 15: Five Forces Analysis of Indian Beer Industry.Source: Compiled by author using Porter’s Five Forces framework from Peng 2009, Global Strategic Management,pp36,Euromonitor 2011, Alcohol Drinks In India, Beer In India, MCX India(2011): MCXMetal & Energy, Barley [Online] thhttp://www.mcxindia.com/SitePages/ContractSpecification.aspx?ProductCode=BARLEY (accessed on 04 Mar 2012)IAPA(2011): Alcohol Atlas of India.[Online] http://www.indianalcoholpolicy.org/alcohol_atlas_download.html (accessedon 04th Mar 2012)The quick web plot of the five forces shows that there is a lot of pressure from suppliers, threat fromsubstitute and intense rivalry due to big local firm. Molson Coors have to find the strategies to fightthese problems we see here.Figure 16: Web plot of five forces of Industry.Source: Compiled by author using description is figure 15 above.Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 19
  • 20. Possible benefits and challenges with India strategyAbove analyses help not only to understand the possible challenges in entering the industry but alsohelp company to formulate necessary strategies. Michael porter cited in Peng (2009, pp44) suggeststhat there are 3 generic strategies using which companies can over come the five competitive forces.  Cost leadership  Differentiation  FocusPossible BenefitsMolson move to India can be categorized as a move to implement cost leadership. The low cost ofproduction in India (using Cobra’s production plant), low distribution cost in India (Cobra alreadyhave excellent Indian and international export network10). Molson can exploit these networks andhuge production unit to improve its global supply chain in ling term or regional distribution in Asia inshort term.The joint venture with Cobra can provide architecture, access and efficiency i.e. value creationadvantages (Ning 2012). As already discussed, Cobra already has production plants and strong tieswith lot of supplier and distributors in India (especially in South India). Molson by acquiring Cobrahas gained the access to these advantages. Cobra not only have production unit in India but alsohave presence in the Indian market11. Cobra’s strong international export ties and award winningpremium Cobra brand will be valuable assets for Molson.Possible challengesAs already identified Indian government and society put lot of threats to Alcohol industry (Detailedpolicy and intervention can be found in IAPA website12). The government strict stand on notliberalizing the alcohol consumption is a big threat. Considering the few capabilities which MolsonCoors has we see that its capability of innovative marketing campaigns and getting brand recognitionusing advertisement. We see this capability cannot give Molson Coors an advantage here in Indiawhere any kind of marketing and promotion of alcohol is banned.10 Cobra started exporting beer from India in 1990 and now export beers to 40 countries. Molson Coors (2009),[Online]http://www.molsoncoors.com/en/News/United%20Kingdom/Corporate/2009/June/06/Molson%20Coors%20UK%20and%20Cobra%20announce%20formation%20of%20new%20joint%20venture.aspx (accessed thon 19 April 2011)11 Cobra India has 0.5% of market share in India, Euromonitor 2012, Beer In India pp10.12 http://www.whoindia.org/LinkFiles/Mental_Health_&_substance_Abuse_alcohol_atlas6.pdfAuthor: Deepak Shrivastava (imdshrivastava@gmail.com) Page 20
  • 21. Another capability of making innovative low calorie beer will not give advantage as the market forlight beer in India is still underdeveloped and Indian customer prefer strong beer which will continueto rise in coming years(Euromonitor 2011).Another capability of creating innovative package design can also take a back seat here as in Indiastill glass bottle and cans (trend started recently, Euromonitor 2011) are used across the Industryand more over these creative designs cannot be promoted as advertisement.We see that few of these capabilities are not cross-boarders capabilities (Peng 2009, pp81) or arenot transferrable to give competitive advantage.Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 21
  • 22. ConclusionMolson Coors brewing company move to India to implement their growth strategy has both positiveand negative side of it. Molson Coors analysis tells us that it has got more than 100 years ofexperience in this industry and has got lot of knowledge in merger and acquisition and makingstrategic partnerships. We also saw that it has got few capabilities which give it a sustainablecompetitive advantage but the question of cross border capabilities is where Molson has to put lotof effort.We saw India is really a thriving market and for being a global payer one cannot afford to lose thisopportunity. The growth of India is what everyone in attracted to but it has its own downside due togovernment and society. These factors are clearly identified in various frame works. Molson movewith Cobra is to take advantage of its old strategic partnership. This can give Molson a lot ofadvantage and can help them to overcome few of the challenges. This partnership will also help tofill the gaps and will give them capabilities which they are missing.Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 22
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  • 26. AppendixFigure 17: Popular beer categeory in world.Source: Adapted from Euromonitor International 2012, Global Performance and prospects for beer, [Online] Available from:http://www.euromonitor.com/global-performance-and-prospects-for-beer/report (accessed on 1st Mar 2012Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 26
  • 27. Figure 18: PEST Analysis on India.Source: Author 2012 complied from Federal Research Division: The Library of Congress American Memory (2004). CountryProfile: India, [Online] Available from http://lcweb2.loc.gov/frd/cs/profiles/India.pdf (accessed on 1st Apr 2012),Datamonitor, 2011. India Country Profile, [Online] Available from: http://360.datamonitor.com/Product?pid=8D107C29- stBD3D-4077-AC9C-E12672375C88 (accessed on 1 Mar 2012] and Dr. Sarma JVM (2002), Asian Development Bank , AnOverview of State Tax System In India: Other than Sales Taxation, [Online]Available fromhttp://www.adb.org/documents/reports/consultant/tar-ind-4066/govtbudget/sarma.pdf [accessed on 16th Apr 2012]Author: Deepak Shrivastava (imdshrivastava@gmail.com) Page 27