Pestel Is The Primary Weapon Commerce Essay


PESTEL is the primary weapon to analysis the Marco economic environment, As show in the case study, part of the European countries which the beer consumption has been decreased nor high completive through these countries, as the result beer brewing operator has to consolidation through acquisition, the influence of Government involvement, change of political; economic; social - culture, technology; legal and environmental change, all these factors are fall into category PESTEL theory.

Political Issue:

European brewing operators are highly concern when comes to the Government political issue, Increase of Tax rate may caused high cost of production, as a result of high retail price.

Economic Issue:

Binge drinking shift sales from off - trade (beer consume at supermarket rather than in pubs or restaurants). The worldwide off-trade markets were increased since year 2000 of 63% to year 2008 of 67%. The off - trade market is also dominated by the large super market chains. Now supermarket shared at around 20% of the retail market.

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Economic recession in 2009 caused estimated 50 pubs shut down per week in United Kingdom.

Social and Culture Issue:

As peoples aware drinking caused bad human health and fitness, some of the beer companies released higher price non alcoholic beers, or beer with different kind of fruit flavoured to attract more consumers.

Technological Issue:

Today's advance technology brewing industries is able to manufacture more beer with lower cost for benefit of economic of scale, even technology can produce non alcoholic beers or different kind of fruit flavoured beer.

Environmental Issue:

The case study did not shown much on the environmental aspect, however it only stated that the packaging are only in glass and bottle, the beer companies should be used more recycle material and waste material as a keys area for packaging.

Legal Issue:

European Law are strictly against drunk driving, heavy fines and imprisonment applied, as of other countries, such as United State of America are less restriction on drunk driving.

1(ii) Porter's Five Force Analysis

Force 1: Threat of Substitution Products:

There are three major kinds of alcohol industries manufactures are Wineries; Distillers nor Beers, as the social culture drinking habits has been shifted, European are now more focus on more healthy drinks nor they looking for others substitution products, such as red wine or non alcoholic beers which as a result of decreased in original beer consumption.

Force 2: Power of Suppliers

Crown is one of the cans suppliers and Owens is the supplier of glass bottle, In United Kingdom there are only 3 companies to produce cans. The packaging suppliers will have more bargaining power due to limited suppliers in the global market.

Force 3: Power of Buyers

As there are substitution of beer; health awareness; consumers may changed their preference rather than beer, on the other hand the government tighten policy on drink driving, beer brewing companies shift sales to off - trade and consumers are now consume beer at the supermarket and benefit the retail market.

Force 4: Threat of new Competitors

Very low threat of new brewing company to enter into the European market, such as high capital investment; existing brewing companies has a large market segment; strong competition around the area and consumers loyalty of the local brands.

Force 5 Existing Rivalry:

In the early 21st century beer consumption was falling in the major European countries, while the other brewing companies is merging around the world, as a result super large brewing companies appear, such as A-b InBev has 20% of the global market segment.


Brewing companies should not use similar strategies or to against each other, companies can co-operate or through merging to enlarge the market segment. European brewing companies should concentrate on Asian market.

2 (a)

InBev (Belgium/Brazil)

InBev was founded in 2004, the company become a world leading brewer through acquisition and merger, in 2006 with a turnover of €13.3billion and holding at the first or second best seller positions in 20 countries.

The company strategy is to transform to the world largest brewing company, company aim is to acquisition the world famous brewer to build up a global network to enlarge its market segment.

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Greene King (United Kingdom)

The company expanded through acquisition, and now is the largest local brewer leader within the country, the company strategy is to focus only at the local retail sales with over 20% from the off trade market.

Tsingtao (China)

The company is more focus on the export market rather to build up local market segment, Tsingtao has only 13% of the China market but on the bright side the company has a long export history and accounting of more than 50% of the China's export market.

2 (b)

The Anheuser Bush InBex (Belgium)


Is the Global largest brewer own 50% market share in United State market.

Also brewing world best well known brand, such as Beck's; Budweiser and Stella Artois which contribution in marketing.

Centralize procurement coordination which lead to achievement of efficiency and cost saving.


Lack of innovation product,

As a world leading brewer, the company have lack of product differentiation.

Greene King (United Kingdom)


Greene King (United Kingdom)

Local leading Brewer with over 20% of the off trade market, brewing local famous brand beer, such as Abbot, IPA and Old Speckled Hen.

Loyalty of local consumer and with one eight of the retailer market, plus operating almost 2000 pubs.


The case study illustrates that the consumption in United Kingdom has been falling, during the recession of 2008 there were 50 pubs closed every week, The brewer should more concentrate on the export industries rather than operating the retail market.

Tsingtao (China)


Tsingtao's concentrate on export industry and now with around 50% of beer export, the company is manly focus on exports rather than become local brand leader and now Tsingtao sold to 62 countries.


As Tsingtao focus on export industry, the local market only maintain at 13% share, this figure must to seek for significant improvement.

Strategies, trends

Today generally there are two ways for breweries to handle competition, these two strategic trends are the "buy or die" and the "be unique" approaches. The first one means to become larger and larger through acquisitions and mergers to reach economies of scale and become dominant on the market, this way price wars can hardly be fatal. The second approach is for smaller companies which are not able or don't want to fight price wars; they aim for niches wanting to create something unique (exquisite taste, artful glasses). With this method they can operate with higher margins, they can be profitable despite being small.

World Health Organization. 2004 Global Status Report: Alcohol Policy.