Organizations Operating Within Influences Managerial Decision Commerce Essay

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The business environment that an organisation operates within influences managerial decision making and managers have to try to control this environment to lessen dependency risk. What are the main influences from the business environment and how might managers try to control the business environment to lessen the dependency risk?

1.0 Overview

1.1 Introduction

Brewing is the production of alcoholic beverages through fermentation. This is the method used in beer production, and also a process used to create wine and liquor. Beer is one of the world's oldest beverages and is recorded in the written history of ancient Egypt and Mesopotamia. There is archeological evidence showed that the beer brewing technique was used in ancient Egypt in the past 6000 years ago. Few thousand years later, brewing beer not only for own consumption but to sell and make profit, brewing industry is starting up. Brewery was built, which is a building or place that produces beer or a business which product and sale beer. The oldest brewery in the world still in operation is believed to be the Bavarian State-owned brewery Weihenstephan, found in the German city of Freising, which can trace its history back to 1040.

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The world brewing industry that stand the famous brewing company of Royal Grolsch, Carlsberg, Guinness stout, Heineken and other famous brand are starting up the businesses at early 18th century and the brewing industry starts to developed during early 19th centuries when major changes in agriculture, manufacturing, and transportation had a profound effect on the socioeconomic and cultural conditions in Britain. The changes subsequently spread throughout Europe and North America and eventually the world. Today, the brewing industry is a huge global business, consisting of several dominant multinational companies and many thousands of smaller producers ranging from brewpubs to regional breweries. More than 133 billion liters (35 billion gallons) are sold per year and producing total global revenues of $294.5 billion in 2006.

The brewing industry in Malaysia is two famous companies, Carlsberg brewery Malaysia Berhad and Guinness Anchor Berhad. Carlsberg brewery Malaysia Berhad was form at 1969, and the Guinness Anchor Berhad was form earlier than Carlsberg. Guinness Anchor Berhad was formed in 1989, with the merger of Guinness Malaysia Bhd and Malayan Breweries (Malaya) Sdn Bhd. Guinness Anchor Berhad operates the Sungei Way Brewery which started operations in 1969

1.2 Statistical growth chart of 10 years (RM 000)

The graph shows the net profit of both Carlsberg and Guinness Anchor.

The graph showed that past ten years of both companies. Back to the 1997, the Carlsberg was doing well and the net profit was higher than Guinness Anchor but ten years later there is a gap of both companies. The Carlsberg showed that going down by year to year but the Guinness Anchor is doing good and the graph showed going up. For net profit of 2007, Guinness Anchor is earning 112 Million while Carlsberg only earning net profit of 78 Million. There is different of 34 Million of both companies.

2.0 Competitor (Major Player)

2.1 Carlsberg brewery Malaysia Berhad

Carlsberg was founded in 1969. Dato' Lim Say Chong was appointed to the Board on 21 May 2003. Brewing industry in Malaysia has fewer competitors compare to the other countries. Brewing industry in Malaysia are facing the common problem is high duty charged towards the beers which they produce and resulted in the consumer price for domestic beer and stout products increasing significantly in the domestic market. This had narrowed the difference in price between per serving of beer and that of other alcoholic products such as wine and hard liquor. Apart from competition from other alcoholic products, the decline in the domestic duty paid beer and stout sales was due also to the increased levels of low priced imported beer products and smuggled beer and stout products.

The Malaysian brewery industry is however pleased that the Government did not increase the excise duty for beer and stout products during the 2007. Government Budget announcement and hopes that the relief given would stabilize the decline in the duty paid beer and stout market. Year 2006 was a challenging year for the Group and the Group's financial results reflect the lower market demand, impact of competition and the costs of restructuring and re-focusing the Group's business to meet the fast changing market environment.

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In order to capture major market share they have implemented few strategies marketing move such as launch the Carlsberg Extra Cold beer served at -1°C and was also the first to introduce Saaz Blonde and Bramley Wit beers, two exclusive super premium Carlsberg beers from the Jacobsen House Brewery in Copenhagen and Carlsberg Malaysia's Master Brewers were the pioneers to develop the Carlsberg Christmas Brew, a beer brewed with honey. To further enhance the packaging of Carlsberg Green Label, the "Clear Label Look" for pint bottles was implemented and distributed at premium entertainment channels. This is to create competitive advantage towards the products among the other products.

At the same time, they are also in corporate social responsibility by organizing charity shows, sponsoring fund raising activities for the development of schools through the Carlsberg. Top 10 Charity Road Shows and the Danish Royal Stout Charity Road Shows. The Group also continued its support to the Education Welfare and Research Foundation (EWRF) by sponsoring two main programmes to improve English amongst students in schools. During the year, the Group continued to focus its sports sponsorships with support for football, golf, rugby and basketball in order to sustain in the market for longer period.

The first achievement and also the largest advantage in Carlsberg is that they have launched "Carlsberg Extra Cold", a first of its kind dispenser that dispenses a glass of extra cold Carlsberg beer at -1°C to deliver the best beer and to share the best drinking experience with beer consumers.

Another advantage is 1st brewery in Malaysia to implement an open "brewed-on-date" coding on Carlsberg Green Label products to indicate freshness and quality. By this I mean that Carlsberg brews beer but do not keep them for a long period. Carlsberg keeps freshness in their product in order to reach customer's satisfaction. In my opinion, every consumer demand freshness and quality products. In addition, Carlsberg is 1st in Asia to launch a stout blended with Ginseng which is called Royal Stout Ginseng where Carlsberg do care for consumer's health and the ginseng Carlsberg utilize is high quality and tested.

2.2 Guinness Anchor Berhad

Guinness Anchor Berhad (GAB) was formed in 1989, with the merger of Guinness Malaysia Berhad and Malayan Breweries (Malaya) Sdn Bhd, whose parent companies were Malayan Breweries Ltd (the present Asia Pacific Breweries Ltd) and Guinness Overseas Ltd (GOL). GOL is owned by Diageo Plc, the world's leading premium drinks Group with an outstanding collection of brands across spirits, wine and beers. Following the merger, GAB was listed on the main board of Kuala Lumpur Stock Exchange during the same year.

GAB operates the Sungei Way Brewery which started operations in 1965. Located in Selangor, the brewery occupies a land area of 23.72 acres and oversees Tiger, Guinness, Heineken, Anchor Smooth, Anchor Strong, Kilkenny, Anglia Shandy and Malta in the country. GAB is the first and only brewery in Malaysia to receive the Hazard Analysis Critical Control Point (HACCP) certification and ISO 9001:2000 Quality Certification from Malaysia's Ministry of Health. Today, GAB is the clear market leader of the Malaysian beer and stout industry, with 55% of the market share.

Malaysia currently ranks the second highest in the world, after Norway, in terms of beer and stout duties and the industry pays RM1 billion in duties to the Government every year. The major threats facing by the GAB company in Malaysia is high government tax towards the product. Every year the government increases the level of tax for brewing industry in Malaysia and it makes the brewers to mark up the price and this is bringing down the level of purchase among the consumers. So the Malaysian brewery industry is however pleased that the Government did not increase the excise duty for beer and stout products during the 2007. Government Budget announcement and hopes that the relief given would stabilize the decline in the duty paid beer market. Year 2006 was a challenging year for the Group and the Group's financial results reflect the lower market demand, impact of competition and the costs of restructuring and re-focusing the Group's business to meet the fast changing market environment.

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GAB in order to capture the brewing market in Malaysia they implemented few marketing strategies such as The Winning Blend - People, Brands and Performance where market share; They have a great team of capable, hardworking and dedicated people; where they have winning brands in Tiger, Guinness , Heineken and Anchor; and they are delivering solid returns to our shareholders. From what they are had is a winning blend of people, brands and performance. Another advantage is Maintaining Our Momentum where attained market leadership, objective now is to maintain their momentum, and again grow our market share, volume and profit. In doing so, they will continue to deliver value to all our stakeholders. GAB has varieties of beer among the other competitors. So this is where consumers can enjoy varieties of beers and different beers have their own taste and different quality.

3.0 SWOT Analysis of Carlsberg and GAB

3.1 Carlsberg brewery Malaysia Berhad

In term of strength, Carlsberg is well established for 160 years from it home country, Denmark. This company expands their brewing business through out the world including expanding their business in Malaysia at 1969. The Carlsberg has rewarded a crown by the Royal warrant at 1904, this honor awards only for firm and individual to being deemed well establish, economic solid and well reputed to the country.

Weaknesses of the Carlsberg Company are government interference of the tax control of the alcoholic beverage. Price of beer and liquor products increasing year by year due to tax factors. In addition, compared to GAB, Carlsberg is lack of winning brands in terms of product range.

In term of opportunities, Firstly, Carlsberg can extend its business by introducing more products. Secondly, the Group was given an opportunity to invest in Taiwan. The beer market in Taiwan is estimated to be four times larger that in Malaysia. Carlsberg as a foreign imported beer brand in Taiwan would be supplied by the Group. Export sales of the Group are expected to increase in tandem with the Carlsberg sales performance in Taiwan.

In term of threats, government interfered in tax control. Recently global fuel price gone drastically and this has given negative impact to the all industry. Inflation has taken place in all most of the countries in the world. For example, beer and liquor products are not necessities consumptions. Therefore, the inflation will bring down the purchasing power in consumers. Due tax factors that increases beer and liquor product prices, smuggling crimes increases as well.

3.2 Guinness Anchor Berhad

The strength of the Guinness Anchor Berhad (GAB) Company is the joint venture of the winning brands companies such Guinness, Tiger, Anchor and Heineken. This is the strong competitive advantage for GAB to win market share against it competitor in Malaysia which is Carlsberg. For the current market, GAB is winning 55% of the malt liquor market share.

GAB and Carlsberg shared the same weaknesses which are government interference of tax control. In addition, compared to Carlsberg, GAB is lack of and needs improvement in terms of innovation in bottle dress. Why? Because Carlsberg have competitive advantage which is the green label bottle that capture in consumer mind that when consumers think of green bottle, they will think of Carlsberg.

In term of opportunities, GAB can actually attract more consumers to reach better market shares by maintaining and improves the existing products to gain influential image in consumer's mind.

In term of threats, GAB suffered the same threat as Carlsberg. Inflation does lower the purchasing power in consumers. Smuggling crimes increase due to tax increase factors.