Business external analysis
Identify SABMiller's Strategic position:
In order to Identify the company's position; it is important to carry out its Business external analysis; it is also essential to identify its core competences and capabilities as well as stakeholder expectations in order to successfully identify the company's strategic position.
SABMiller's External Analysis:
In order to asses SABMiller's external analysis; I have constructed a PESTEL analysis (appendix 1); Porters 5 forces (appendix 2); THE BCG matrix (appendix 3) and its competition Analysis (appendix 4).
After conducting Porter's five forces of the Brewing Industry; I have found many interesting outcomes relating to SABMiller as the overall markets of the brewing industry aren't clearly attractive; its performance depends on the ability to expand its market share and exploit opportunities in the emerging markets. However, the brewing industry in growing markets, which SABMiller operates, is highly attractive but not for new entrants; it's especially attractive for the dominant players in the Industry; which in this case SABMiller is one of them. After analysing my Porter's 5 forces; it is conclusive that it would be extremely hard for new entrants to compete in these emerging markets due to the high dominance of the main competitors.
I have also observed other good points such as the low level of power within suppliers; however the power of suppliers is increasing especially in USA due to the rising costs of energy and Aluminium but in under developed countries; it is conclusive that SABMiller has the overall power of its suppliers; as it's an international brewer; finding suppliers wouldn't be a major issue.
Its Conclusive that the power of Buyers is very high; due to the end consumer having a growing number of choices from other brewers as there are no switching costs; the end consumer can choose any drink to have so it's up to the brewing companies to emphasise its targeted customers to drink its products.
It is also conclusive that the power of substitutes is low but it is significantly growing. Due to the modern consciousness of healthy living; low calorie beers and non alcoholic beverages are increasing in volume; this doesn't affect SABMiller as much compared to other brewers as the company it self produces alternative products to beer such as the low calorie versions; SABMiller has also recently entered wine and soft drinks market in Africa as I'm predicting more of this similar strategic activity will occur in other markets.
From the PESTEL; Porters 5 forces and the Competition Analysis; I am concluding that SABMiller operates in developing as well as matured markets. These markets include very "challenging" aspects which in the past has limited the threat of new entrants. These markets include very tough competition; as rivalry in the Brewing Industry is increasingly high. These markets tend to have a fragmented brewing industry and it is essential to have extensive capital and knowledge to setup a brewing enterprise.
In developed and more matured markets the industry is consolidated and dominated by a few, larger players. As such, these large companies, like SABMiller tend to own multiple brands with different market positions. In this market, it is much easier for competitors to launch rival products that compete directly on price and thus eroding market share. After analysing the company's competition; SABMiller has and still is experiencing this problem; For example in North America; especially recently where InBev has bought Anheuser-Busch; this has helped the dominant Brewer to enlarge a further space between themselves and SABMiller; which has affected the company's market share future plans deeply. SABMiller now has to come up with new innovative ideas to try and close the gap between them and A-B InBev.
The American Industry is the largest brewing market by value as rivalry is now more intense than ever; meaning more competitors are entering into a price war with SABMiller. This has become a huge threat for SABMiller; but it does also hold opportunities to weaken this threat down. For example the company has the opportunity to acquire more stakes in the Brazilian Market; or become the owner of China resources which is the largest brewer in China. Both these markets I have mentioned are matured yet and still hold many growing estimates.
After conducting a stakeholder analysis; I have come up with simple assessments that SABMiller had to make some strategic choices to please its key players. SAB's acquisition of Miller was largely due to the pressure from the London Stock Exchange. It is felt that SAB was at risk due to it's over reliance of soft currencies in certain market. This resulted in a poor performance in the London Stock Exchange in the year of 2000. Even though their core competences were elsewhere, SAB went on with the takeover to please the stakeholders. Media and analysts have come out with unfavourable reports on SABMiller. These particular stakeholders needed to be pleased. From my BCG Matrix; its conclusive that its' Western European operations are a 'dog' and SABMiller should ideally get out of the market as further investment will end up little positive results. But this won't be possible due to the investors' expectations of a market presence in Western Europe.
Internal Analysis: SABMiller's Core Competences:
Core Competences are the skills and abilities by which Resources are deployed through an Organisation's activities and processes such as to achieve competitive advantage in ways that others cannot imitate or obtain. (J.S.W. 8th Edition; p852: Glossary)
From the very beginning, SABMiller had developed unique competences in analysing its' business environment; meaning that the company expertises in analysing a market that is aiming to operate in. SABMiller's activities are heavily influenced by the political, social and legislative environmental factors within which it operates; meaning this has made the company proactive when dealing with macro factors.
SABMiller's South African culture has shaped the strategic development of the company. It is this culture, which makes their distinct capability of entering emerging markets less imitable. As highlighted in the case study, SABMiller's strategy represents a 'synthesis' of learning based on the historical developments of the company (J.S.W. 8th Edition; Case Study: SABMiller; McQuade, 2006).
Mapping out the early days in South Africa, SABMiller's strategy was flexible and responsive to the market. SABMiller acquired local brewing businesses to enable them to grow and overcome certain business restrictions through acquisition. SABMiller also expanded their portfolio to include wine, matches and the Sun City casino resort. When the political regime and the regulatory environment lifted, SABMiller developed three mega-breweries in South Africa. By being at ease in these types of challenging environments it enables SABMiller to aggressively grow and capture market share when arguably other firms would be paralysed by fear. Instead, SABMiller are able to scan their external environment and turn threats into opportunities. In doing so, providing a distinct set of capabilities, which is very difficult to imitate.
The tough African roots have given SABMiller the confidence and self belief to come up with solutions during tough conditions in developing markets. The company is also very experienced in dealing with very sensitive governments and local communities. These efforts also show that they are very flexible.
SAB used its expert management skills learnt from Africa, to turnaround Millers' fortunes. Traditional SAB system of employee performance rating was used in Miller. These efforts earned them the name turnaround specialists.
The parenting style of SABMiller adds value to the breweries. In the new markets they retain the brand, but transforming the business by adding quality and consistency to the beer. They develop the marketing, distribution productivity and capacity of the business.
SABMiller is highly experienced in acquisitions and takeovers. This competency gave them the confidence to take risks and takeover high profile targets like Grupo Empresarial Bavaria. As in the case of Miller, SABMiller added further value in to the company by bringing its own operating practices and management skills.
After conducting the company's analysis; it is conclusive that SABMiller has shown outstanding flexibility from its very origin. Its decisions during the apartheid period show a core competency in developing strategic choices and environmental scanning. The emergence of competitors in its prime markets is a case of concern. In future, SABMiller will have to face tough competition from its rivals; a glimpse was seen in the USA market. The key to SABMiller's success will be its strategic brand management and its brand portfolio.
SABMiller's generic strategy and core competences
The BCG Matrix mainly relates to the markets which SABMiller is currently operating in. These tools all relate to the brewing Industry; as it's the industry which relates and particularly affects SABMiller.
The chosen sequence for the analysis not only provides an insight into SAB's environment, but also facilitates assessing opportunities for the future, as most investors see a need for SAB to enter the developed market.
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