stella artois class presentation - harvard case review

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Stella Artois Class Presentation - Harvard Case Review

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  • 1.Group 2 Consulting Anton Fahme Kirill Kareem Sharon

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. Momentum in local marketpropelled Interbrew forinternational acquisitionsHungary, Croatia, Romania,Bulgaria and Canada inearly 1990sLate 1990s Ukraine,Dominican republic, China,Montenegro, Russia andKorea 4. Momentum in local market propelled Interbrewfor international acquisitions Hungary, Croatia, Romania, Bulgaria andCanada in early 1990s Late 1990s Ukraine, Dominican republic,China, Montenegro, Russia and Korea 5. 80 CountriesTop 10 markets account for 86% ofsales61% of Volume production came fromAmericas Worlds beer market in 1998Americas Europe Asia Pacific Africa Middle East5% 0% 27% 35% 33% 6. Interbrews vision is to be within top3 beer producers in each of the keymarketsDeliver high quality beers. 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. 4th Company globally Lessen dependence on Belgian andCanadian markets Strengthen controlled brandspositions Local for local, decentralizedadministration 9. Traditional and sophisticated beerFlexibility of decentralizationFierce customer loyaltyIntended strategy Global brandunified campaignEmergent strategy Global brandthrough adaptable regional initialbranding 10. External environmentHow do politics affect usAlcohol tax, consumption restrictionsOpening of Eastern European markets inearly 2000sPotential trade sanctions and tariffsEconomic trendsEastern European and Asian financial crisisof early 2000sRise of emerging economies 11. External environmentSocial factorsEmergence of wine culture, especially inAustralia and NZTrend towards healthy life style: lite line ofproductsTrend towards specialty products,microbrewInnovationsEmergence of internet 12. External considerationsOpportunities that the environmentpresentsOpening of Asian and eastern EuropeanmarketsReduction of trade barriersConverging marketsThreats faced by the firms in the industryGrowth of substitutesDeclining sales in mature marketsStrong competition 13. Where do we excel?Companys 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. Are there other pressures?Suppliers power mediumInterbrew works with a limited number of highquality suppliers, increased powerOffer raw materials that could be easilysubstituted, reduces powerBuyers power- moderate to highCosts nothing to switchA lot of close substitutesThreat of substitutes mediumWine, cocktails, pilsner, lager 15. Threat of new entrants high ratio offixed vs. variable costsRivalry- intense, Anheuser-Busch,Heineken, Carlsberg, littledifferentiation, high exit cost 16. Overall industry attractiveness Fragmented, top four players account for 22% of global volume Attractive in growth markets as well as mature markets83 lpc in N. America, 79 in W.E., 29 inE.E.Growth of speciality and light beersegments 17. Value Chain Analysis Primary Inbound Logistics Partnerships with suppliers Outbound Logistics Economies of scale in distributionHandled differently according toregion, little standardization 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. 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. Firms Resources & Sustainable advantage Tangible Resources Wide range of locations Lean operations from efficient sitesKey strengths come from intangibleresources and organizationalcapabilities 21. Intangible ResourcesWide PortfolioVery different from its competitorsKey acquisitionsPresence in both developing and emergingmarketsBest practices from different sites can beapplied across the boardDecentralized approachAllows flexibility despite portfolio sizeHandles different tastesCan shift and adjust product mixAccess to a vast supply network 22. Organizational CapabilitiesMakes strategic acquisitionsAbility to leverage knowledgeFocus on growth markets with longterm volume growth potentialCost savings gained by purchasingand then rationalizing operations 23. Industry life cycle by region 24. Industry by product category holder 25. Intellectual CapitalHuman CapitalSpread globallyCultural, local and economy knowledge and expertiseStructural CapitalBreweries around the worldBrand equityRelational CapitalConnected to customers around the worldBeer Cafe 26. Corporate Strategy OPERATIONSBRANDSMARKETSINTERBREW TRIANGLE 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. Operational StrategyCross fertilizationSharing of best practices between sitesEmployee propositionsImprovement linked to employee motivation nottechnical performanceCapacity UtilizationClose overproducing facilities and open under-producingStrategic SourcingSelecting small number of suppliers 29. Brand StrategyAcquisition of existing brewers, ingrowth mature marketsIdentify brands, typically specialtyproducts and them a regional basisacross a group of markets 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. Economies of scopeCore CompetenciesMERGERS AND ACQUISITIONSSharing ActivitiesDecentralized Management StructureMarket Power4TH Largest beer company in the worldHouses beers from 80 countriesVertical IntegrationStrategic sourcing 32. Portfolio Management on Regional Level 33. Portfolio Management on Regional LevelBrewery : Manchester, England Founded: 1853 34. Portfolio Management on Regional Level 35. Portfolio Management on Regional Level Brewery : Namur, BelgiumFounded: 1152 36. Portfolio Management on Regional Level 37. Portfolio Management on Regional LevelBrewery : Prague, Czech RepublicFounded: 1869 38. Portfolio Management on Regional Level 39. Portfolio Management on Regional LevelBrewery : Hoegaarden, Belgium Founded: 1445 40. BCG MATRIXSTAR QUESTION MARKRelative Growth RateSouth Asia Central & Eastern Europe America CASH COWDOGS Relative Market Share 41. Motivation for Global ExpansionIncrease size of potential marketsReduce costs of R&D and operationExtend life of a productOptimize physical location for everyactivities in firms value chainRisks:Political & EconomicCurrency FluctuationManagement Issues 42. Motivations for Global Expansion 43. Motivations for Global Expansion 44. Entry Modes of GlobalExpansion 45. Means to Achieve Diversification Global Approach Mergers & Acquisition -Speed -Valuable resources -Consolidation and Scale -LeveragePotential Limitations:ExpensiveManagers ego andcreditabilityCultural issues 46. Joint Venture Enter new markets Reduce costs in the value chain Develop and diffuse new technologies Potential Limitations: Partner issues Control issues 47. Factors Affecting a NationsCompetitiveness Is the nations 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. Alternatives Continue with Stella Artois Inadequate marketing experience Old fashioned image Alcohol level inconsistence in differentmarkets Shift emphasis on Labatt Little exposure outside North America 25% Decline in sales after Labatt Icepeaked 49. Alternatives No global brand, differentiation oflocal beers Leverage core competencies andstructure Consistent with acquisition strategy Cross cultural sharing and regional branddevelopment Embrace Belgian Beer cafes franchise 50. Alternatives Promote Interbrew as a globalbrand Similar to no global brand, could be usedas a tool to achieve it Emphasize and develop light beer asa category 51. Now we open the floor for questions 52. Today Interbrew no longer exists after 2major mergers with AmBev and laterwith Anheuser Busch forming thebiggest beer company in the worldAnheuser-Busch InBev

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