According to Som, A. (n.d.), the beer industry was given birth in as early as the 14th Century yet looking back, there have been many tremendous changes in the trends of the beer industry across the globe starting that century until today. During the 1990s, major global beer brands began its expansion to other countries outside its national borders. In Belgium for instance, the company Interbrew expanded to 110 countries. This trend was mainly due to the fact that startup costs of a brewery are quite expensive that the brewery companies needed to exploit other market sources to penetrate in order to maintain the cash flow.
A decade after, the trend in company consolidations, acquisitions and mergers arose which led to only a small number of major global players in the beer industry. For instance, in 2004, the Belgian company Interbrew merged with the Brazil-based company called AmBev in order to create the world's biggest brewing company. Years after, other top playing beer brands also merged with one another in order to compete with other consolidated global beer brands (Som, A. n.d.).
B. Discuss how Modelo's international expansion was made possible through strategic partnerships with experienced distributors in local markets.
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Modelo's international expansion plans were successfully achieved through creating a healthy yet profitable competition among its chosen distributors. When Modelo penetrated the American beer market, it chose Barton Beers Ltd to be its main distributor given its being the largest beer importer in the country. Shortly after, Modelo chose Gambrinus Inc to be another distributor in order to cover the other half geographical area that the first distributor wasn't able to cover.
The expansion strategy through the adoption of various distributors indeed worked on the part of Modelo since all the marketing and advertising initiatives and responsibilities were passed on to these distributors and the sole role of Modelo was its manufacturing. Also, since these two major distributors tapped two different geographical areas, Modelo was able to successfully and profitably penetrate the American beer market (Som, A. n.d.).
C. Identify and discuss the next foreign market that Modelo should enter and with what strategy.
In the case study article, Carlos Fernandez, the Chairman of the Board of Grupo Modelo stated that the future of the Modelo brand is indeed to go international. There is no other strategy that the company must adopt in order to sustain its continuously increasing sales but to go on and continue capturing local markets and competing with local brands in the different markets around the world. It cannot rely on its main market, the Mexican beer market, as its source of growth and profitability because of its high volatility which speaks of its highly unstable economy (Som, A. n.d.).
This leaves Modelo no choice but to secure and acquire a different market, preferably a huge market as the United States in order to tap. Based on this case study by Som, A. (n.d.) the China market surpassed the US beer market in 2003 in terms of beer consumption per capita. This is actually one great opportunity for Modelo to explore since the China beer market may prove to be a highly profitable market as well (Som, A. n.d.).
In penetrating the China beer market, Modelo must utilize the same expansion strategy it utilized with the US beer market. Modelo must position its brand, Corona, as a beer brand competing with other local beer brands available in China. But this would not prove to be an easy task for Modelo since it is not familiar with the Chinese culture (Som, A. n.d.).
Hence, it needs to localize Modelo and its beer brand, Corona by tapping on various distributors from the different regions or geographic areas of China. Similar to what it did when it expanded in the US, Modelo must acquire the biggest beer distributors in China in order for these distributors to be the ones to import and distribute locally, the Modelo beer brand. Basically, these distributors will be the ones in charge of the marketing and advertising including the packaging and pricing strategies for Corona in order to successfully market the brand in China (Som, A. n.d.).
D. Discuss the challenges that Modelo faces from its competitor InBev, and how it might respond strategically to the industry giant.
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In 2007, Modelo experienced a purely organic growth as a by-product of its international expansion strategies and building of strategic partnerships and alliances with local distributors where the brand is present. But as the beer market became more and more saturated and the presence of local competitors surged at a high rate, Modelo found itself losing against its major rival competitors like InBev which allotted a relatively high media budget for its marketing. With the Modelo company standing today at the losing end, the only way in order to continue its survival is through the formation of alliance with Anheuser-Busch, an American beer company. Ironically, this was suggested by InBev's chief executive, but it makes a lot of sense for Modelo to make that strategic move in order to stay in the competition.
E. Discuss whether or not Modelo should explore diversity its business. If so, what business should it enter and why?
In the beer industry, all major players are expected to experience certain periods of challenges and defeats. But, there are always ways to revive and stay on top of the competition by consciously allowing the company to be flexible enough to adapt to the situation. It would be a very wise move for Modelo to stick to its current line of business and maintain its existing product portfolio.
Nevertheless, engaging in a consolidation process or merger process would also be a very sound and strategic move since Modelo's line of business ever since it started has always been in the beer business. The beer market is all about marketing and people do not drink beer as it is but it is the idea or the marketing concept formed in their minds that compel them to buy it and drink it. Modelo still has a very huge potential to come back and stay on top of the competition and changing its business may prove to be a rather unwise and dangerous move for the company.