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TABLE OF CONTENTS
Number Description of content Page
1 Introduction…………….……………………………….…..
Executive summary……………………………...………….
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Question 1……...………………………………..….……… 4
.1 Answering of question 1….…………….………..………… 4
. PEST Analysis…………………………………….……..… 4
. SWOT Analysis………………..………………….…..…… 6
.4 BCG Matrix…………….……………………………….….. 8
4 Question …………………………………………………..
4.1 Answering of question ………….………….…….…….....
5 Question ………………………………………….…..…... 14
5.1 Answering of question …………………………….…..…. 14
6 Bibliography…………….……………………………….…. 18
7 Appendixes…………………..………………………..…… 1
7.1 PEST analysis framework…………………………….…… 1
7. SWOT analysis framework………….………………..…… 1
7. SWOT analysis of SABMiller………..………………..….. 0
7.4 BCG growth-share matrix…………..…………………..…. 0
7.5 Product life cycle………………………………………..…. 1
7.6 Ansoff's matrix………………………………………..…… 1
7.7 Marketing mix (4 P's)…………………………………..…..
1) INTRODUCTION
SABMiller is the world's second largest brewer by volume of beer (10m hectolitres) and one of the world's largest bottlers of soft drinks (5m hectolitres). With 111 breweries in 4 countries with leading market positions in Central Europe, North and Central America, Asia, Africa and South Africa SABMiller is a major global player in the beverage industry.
Founded in South Africa in 185, SABMiller began expansion of brewing operations outside South Africa in 1. SABMiller have had their headquarters in London since 1.
Listed on London Stock Exchange since 1 and secondary listing on the Johannesburg Stock Exchange reporting its revenue in US$. SABMiller employs 8 thousand people world-wide and a turnover of US$ 4. billion. Between 001 and 00 SABMiller's sales grew by 15.5%.
SABMiller currently bottles 11 different brands of clear beer, sorghum beer, bottled water and soft drinks, and have other interest in hotels and gaming. Some of their better known brands of beer include Castle Lager, Castle Lite, Carling Black label, Castle Milk Stout, Sterling Light, Lion Lager and Redds. International brands of beer Amstel Lager, Heineken, Amstel Light and Hofbrau premium lager are produced and distributed under licence. Soft drinks include Coca-Cola, Powerade, Sprite, Fanta, Appletiser, Grapetiser, Just Juice, Valpre spring water.
SABMiller have an aggressive strategy to drive volume and productivity in major markets, optimise and expand established positions in developing markets, seek value-adding opportunities to enhance their position as a global brewer, grow their brands in the international premium beer segment and actively participate in the ongoing industry consolidation.
) EXECUTIVE SUMMARY
SABMiller are well placed in the global economy and continue to grow. Strategically, SABMiller are buying out or buying into competitive power avoiding mistakes of reducing customer choice by eliminating competition altogether. Along with these acquisitions and partnerships they are learning the differences between countries and continents. SABMiller have a platform for future rationalisation by slowing reducing options available to the consumer. This is necessary as the costs associated with a broad band of products are high. SABMiller are slowly loosing their identity as a South African based company and are now larger outside South Africa.
SABMiller's marketing strategy is based on promoting their well known brands aiming to increase their market share. This has backfired in South Africa as by concentrating on their own brands they have neglected brands that they brew and bottle under license. This has resulted in the loss of licensed premium brands, the fact that this is a growing market segment is not good news for SABMiller. SABMiller should be placing more emphasis on the premium brand market. SABMiller have been mainly investing in beer loving countries, in my opinion too quickly but the spin off is their own premium brand beers.
It is safe to say that to standardise rather than to adapt to a market is normally the better option. The costs associated with adaptation are normally too high. In SABMiller's case they have bought into areas where the product is adapted to that specific market place. The question now is will SABMiller start to standardise their vast product range worldwide? In my opinion SABMiller should slowly remove from the worldwide market, products that have low sales coupled with low profits. By standardising brands, worldwide volume would increase cost would be reduced. Providing consumers better value for their money.
) QUESTION 1
Analyse the current strategic position of SABMiller. (Include an in-depth evaluation of the internal and external variables that affect the company's market performance, as well as a comprehensive interpretation of its competitive advantage in the global beverage industry).
.1) To analyse the current strategic position of SABMiller I need to conduct an environmental scan which includes the following components
External analysis of SABMiller's current situation. (PEST)
Internal analysis of SABMiller's current situation. (SWOT) Appendix
Analysis of SABMiller's industry. (BCG Growth-Share Matrix) Appendix 4
The internal analysis can identify SABMiller's strengths and weaknesses generated by means of a SWOT analysis and the external analysis reveals opportunities and threats that are affecting SABMiller's performance in the market. A profile of the strengths, weaknesses, opportunities and threats is generated by means of a PEST analysis. An industry analysis can be performed using a BCG Matrix. This framework evaluates entry barriers, suppliers, customers, substitute products and industry rivalry.
I have chosen these three types of analysis as they are easy to apply and understand and give a good indication to SABMiller's strategic position in the global market place.
.) PEST Analysis
An analysis of the external environment is an important part of strategic planning, as it looks at the external macro-environment in which the firm operates. The PEST analysis fits into the environmental scan as shown in Appendix 1.
Using PEST data
To develop strategies that take into account the PEST data, we must apply the PEST theory. These factors are divided into four parts and are as follows;
Political.
Economic.
Social.
Technological.
Political Factors
Include government regulations and legal issues and define both formal and informal rules under which the firm must operate; these in SABMiller's case are as follows
South Africa's political stability, import taxes, company taxes, environmental regulations, employment laws, working week and the possible ban on alcohol advertising.
Economic Factors
Affect the purchasing power of potential customers and the firms cost of capital; these in SABMiller's case are as follows
The volatility of the exchange rate, high inflation rate, skill level of the workforce, slow economic growth and high interest rates.
Social Factors
Include the demographic and cultural aspects of the external macro environment. These factors affect customer needs and the size of potential markets; these in SABMiller's case are as follows
Consumers becoming heath conscious, consumers becoming safety conscious, consumers becoming career minded and the population growth coupled with age distribution and class structure.
Technological Factors
Can lower barriers to entry, reduce minimum efficient production levels and influence outsourcing decisions; these in SABMiller's case are as follows
Research and development, automation, technology improvements.
.) SWOT Analysis
An analysis of the internal environment is an important part of strategic planning. Environmental factors internal to a firm can be classified as, strengths (S) or weaknesses (W), and those external to a firm as, opportunities (O) or threats (T). Such an analysis of the strategic environment is therefore referred to as SWOT analysis.
The SWOT analysis provides information that is key in matching a firm's resources and capabilities to the competitive environment in which it operates. SWOT analysis fits into an environmental scan as shown in Appendix .
Strengths
A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage; these in SABMiller's case are as follows
Strong brand names, good reputation among customers, good distribution, strong sponsorships, global company second largest, investments in leisure activities and market driver in South Africa.
Weaknesses
The absence of certain strength may be viewed as a weakness; these in SABMiller's case are as follows
Drive alive campaign (drink drive is bad), high cost of product, and brewing brands under license.
Opportunities
The external environment analysis may reveal new opportunities for profit and growth; these in SABMiller's case are as follows
Change in customer focus, black orientated removal of trade barriers and become the largest brewer in the world.
Threats
Changes in the external environment may also present threats to a firm; these in SABMiller's case are as follows
Shift in customer taste away from SABMiller's products, cheaper competitive products and new regulations (alcohol limit, advertising).
Using SWOT data
To develop strategies that take into account the SWOT data, we must apply the SWOT matrix (Appendix ). The strategies are divided into four parts and are as follows;
S-O strategies pursue opportunities that are a good fit to the firm's strengths.
W-O strategies overcome weaknesses to pursue opportunities.
S-T strategies identify ways the firm can use its strengths to reduce its risks to external threats.
W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats.
.4) BCG Growth-Share Matrix
SABMiller's strategic position can be shown easily by dividing its business units or by dividing its product range up and allocating them into the four categories of the BCG matrix (Appendix 4). The BCG matrix then provides a framework for allocating resources among different business units or products. This then allows one to compare all units or products at a glance.
The elements of the BCG Matrix are as follows
Stars These are often self-financing products that enjoy high market share in a growing market. They may require investment to ensure continued success
Cash Cows These are cash generating products usually at the mature phase of the product life curve (Appendix 5). They enjoy high market share and require little investment to sustain their portion. Often they can be used as a source of finance for other projects.
Question Marks These are products that currently have only a low market share, but in a growing market. A decision whether to withdraw or invest to turn into a star is needed.
Dogs - These are a drain on finances with low market share and growth. Should usually divert, but may be necessary to retain, to keep a presence in a particular sector.
Using the BCG Matrix
For this exercise I have decided to concentrate on SABMiller's four core business activities, namely SA Beer, International Beer, Soft drinks and Hotel and Gaming.
SA Beer can be categorised as a cash cow. Here SABMiller have the largest market share and the market is mature. They require little investment to maintain their market share and thus funds can be channeled to a star.
International Beer can be categorised as a star. Although these businesses might not have a large market share, the market itself is large. Investment in these areas would result in capturing a larger portion of the market and would turn these businesses into cash cows.
Soft Drinks can be categorised as a cash cows or dogs. The reason for this is they generate 0% of total turnover with little investment. SABMiller own 74% interest in Amalgamated Beverage Industries and mainly bottle soft drinks under license. More investment is required to turn SABMiller into a true soft drinks manufacturer.
Hotels and Gaming is a question mark or a dog. Generating only 5% of total turn over, I do not believe it is a core business activity. The argument against this would be that this activity is used primarily for distribution of SABMiller's bottled products.
4) QUESTION
Evaluate the marketing strategy of SABMiller in context of the market characteristics of the South African and international markets.
4.1) Ansoff's matrix (Appendix 6) provides four different growth strategies or opportunities that are available for growth. Like the SWOT analysis the Ansoff's matrix is easy to understand and analyse. The growth strategies are as follows
Market Penetration - the firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share.
Market Development - the firm seeks growth by targeting its existing products to new market segments.
Product Development - the firms develops new products targeted to its existing market segments.
Diversification - the firm grows by diversifying into new businesses by developing products for new markets.
Selecting a Product-Market Growth Strategy
The market penetration strategy is the least risky since it leverages many of SABMiller's existing resources and capabilities. In a growing market, simply maintaining market share will result in growth, and there may exist opportunities to increase market share if competitors reach capacity limits. However, market penetration has limits, and once the market approaches saturation another strategy must be pursued if the firm is to continue to grow.
Market development options include the pursuit of additional market segments or geographical regions. The development of new markets for the product may be a good strategy if SABMiller's core competencies are related more to the specific product than to its experience with a specific market segment. Because a firm is expanding into a new market, a market development strategy typically has more risk than a market penetration strategy.
A product development strategy may be appropriate if SABMiller's strengths are related to its specific customers rather than to the specific product itself. In this situation, it can leverage its strengths by developing a new product targeted to its existing customers. Similar to the case of new market development, new product development carries more risk than simply attempting to increase market share.
Diversification is the most risky of the four growth strategies since it requires both product and market development and may be outside the core competencies of SABMiller. Diversification may be a reasonable choice if the high risk is compensated by the chance of a high rate of return.
Market Segmentation
The division of a market into different homogeneous groups of consumers is known as market segmentation. Rather than offer the same marketing mix to vastly different customers, market segmentation makes it possible for firms to tailor the marketing mix for specific target markets, thus better satisfying customer needs. Not all elements of the marketing mix are necessarily changed from one segment to the next. For example, in some cases only the promotional campaigns would differ.
A market can be segmented by various bases, and industrial markets are segmented somewhat differently from consumer markets, I have decided to concentrate on the consumer market.
Consumer Market Segmentation
A basis for segmentation is a factor that varies among groups within a market, but that is consistent within groups. One can identify four primary bases on which to segment a consumer market
Geographic segmentation is based on regional variables such as region, climate, population density, and population growth rate.
Demographic segmentation is based on variables such as age, gender, ethnicity, education, occupation, income, and family status.
Psychographic segmentation is based on variables such as values, attitudes, and lifestyle.
Behavioural segmentation is based on variables such as usage rate and patterns, price sensitivity and brand loyalty.
The optimal bases on which to segment the market depend on the particular situation and are determined by marketing research, market trends, and managerial judgment. SABMiller have these segmentation's covered through alliances. They have successfully formed alliances in 5 mainly developing countries and through lessons learnt in South Africa, improved the process by which beer is brewed to produce beer that is the same as brewed in South Africa. The advantage of this is being able to market a beer that has good standing, differently. SABMiller have been able to piggy back on their most popular brands to reduce costs and increase turnover. This process has had the advantage of gaining market acceptance, before developing or diversifying their product range.
Product Differentiation Strategy
A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Because of the products unique attributes, if suppliers increase their prices the firm may be able to pass along the costs to its customers who cannot find substitute products easily.
SABMiller succeed in a differentiation strategy by having the following internal strengths
Access to leading scientific research.
Highly skilled and creative product development team.
Strong sales team with the ability to successfully communicate the perceived strengths of the product.
Corporate reputation for quality and innovation.
According to Johann Nel Human Resources Director of SAB plc, what drives differentiation between our competitors and us is the quality of our people.
The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes. Differentiation associated with this would be competitors copying packaging or competitors designing a similar product and marketing it on a similar basis. SABMiller are themselves guilty of this. If we take a look at Hunters Gold that captured a market segment that needed to be filled, after the event SABMiller combated this by launching a similar product called Redds. The risk associated with being second versus the risk of not combating the differentiation would mean total loss of sales to the targeted market.
Marketing Mix
The major marketing management decisions can be classified in one of the following four categories commonly referred to as the 4 P's of marketing (Appendix 7)
Product
Price
Place (distribution)
Promotion
They are the variables that marketing managers can control in order to best satisfy customers in the target market
The product is the physical product or service offered to the consumer. In the case of physical products, it also refers to any services or conveniences that are part of the offering.
Product decisions include aspects such as function, appearance, packaging, service, warranty, etc.
Price decisions should take into account profit margins and the probable pricing response of competitors. Pricing includes not only the list price, but also discounts, financing, and other options such as leasing.
Place (or placement) decisions are those associated with channels of distribution that serve as the means for getting the product to the target customers. The distribution system performs transactional, logistical, and facilitating functions.
Promotion decisions are those related to communicating and selling to potential consumers. Since these costs can be large in proportion to the product price, a break-even analysis should be performed when making promotion decisions. It is useful to know the value of a customer in order to determine whether additional customers are worth the cost of acquiring them.
5) QUESTION
The debate on standardisation versus adaptation continuous. Critically analyse this statement in relation to SABMiller's multi-domestic / global marketing concept.
5.1) The decision to standardise or adapt your product depends on the market place you are either in or attempting to enter. These decisions are not easy and require the understanding of the target market. As discussed in segmentation and the 4 P's, understanding what the customer's wants and needs is important.
Due to the fact that SABMiller is the leading bottler in Africa and has a variety of well known brands in their portfolio, standardisation would be the most cost effective route to follow. By standardising on the contents and marketing the product with a different image or packaging cost of entering African countries can be kept to a minimum. This can also be the case for an international market, SABMiller were successful in launching Lion Lager under the name He Shi in China, contents Lion Lager different branding and packaging. Sprite was named Kin in Korea.
Entry to an international market are often more difficult. Identifying markets can be thought of as a process whereby you find your customers, or your customers find you. Finding your customers requires an active search. Advertising is used to stimulate demand. Once you have determined that a profitable market exists, there are a number of questions that should be considered. How will the companys international marketing be handled, by in-house staff or through outside assistance/agents? What kind of foreign representation should be used, direct or indirect? This is where SABMiller chose to have vested interests in other breweries and have direct representation in international markets.
Exporting requires the identification of markets appropriate for your product and targeting them systematically. To be successful, you must assess the potential of these markets through market research. Market research helps identify market opportunities in global markets and also helps find prospective customers. The importance of market research cannot be understated and the process itself is important when performing market research.
Before deciding to make changes to your product you should evaluate whether you should standardize your product or you should adapt it to conform to one (or a few) markets.
There are three alternatives for product standardisation versus product adaptation
Make no special provisions for international markets, but rather identify markets and then chose products that require little or no modification.
Adapt to local conditions in each and every market (multi-domestic approach)
Incorporate differences into a regional or global strategy that allows for local differences in implementation.
Factors Encouraging Standardisation
Economies strong in product R&D
Economies that have a high scale of productivity
Economies with infrastructure to support marketing.
Factors Encouraging Adaptation
Government and regulatory influences
No tariff barriers
Customer characteristics, expectations, preferences (Japanese are not overweight so Diet Coke is marketed for figure maintenance, not weight-loss)
Culture
Competitive offerings
Climate
Profitability
Market Opportunity
Cost of Adapting is low
Changes involved in adaptation
Language, legal, and cultural differences may require you to consider the need for product changes. Such changes may include product design, branding, labelling, packaging, and service arrangements. For example awareness of religion and custom - animal fats must be replaced with vegetable in Islamic countries and India. Branding a product in some countries (Korea and Mexico for example) encourage the use of native words. Some countries have bilingualism labelling requirements, Canada - French and English, Belgium - French and Flemish, Finland - Finnish and Swedish. European Community directives have been phasing in a requirement for recyclable packaging.
Costs due to Adaptation
Increased operations costs due to the need for additional personnel, market research, additional shipping and insurance costs. Market entry costs which include tariffs, taxes.
The key question is, is a market large enough to recover costs for product adaptations, if not it can choose to limit its export activity to products that require only minimal changes to existing domestic products to satisfy export market needs and regulations. If SABMiller feels confident that market research indicates the export profit potential is large enough to recover product adaptation costs, it can choose to design products specifically for export or re-engineer existing products.
In both cases advertising plays a key role. In order to ensure that your product is reaching the targeted market segment it must be advertised in a way that appeals to the relevant customer. Like tobacco advertising alcohol is becoming more of a focus area to ban the use of adverts.
In an effort to bolster South Africas 010 World Cup bid, the Government has moved to allay fears of a proposed ban on alcohol advertising. Castle Lager recently agreed to put R10-million into the countrys bid campaign, but only after Sports Minister Ngconde Balfour assured the sponsors parent company, SA Breweries (SAB), that he would do his best to protect their sponsorship. Source Sunday Times, May 5 00.
Advertising bans are inevitable, and because of this new ways to bring SABMiller's products to the market need to be found. Strategies need to be formed prior to 010.
6) BIBLIOGRAPHY
Peter Doyle. Marketing Management and Strategy third edition.
Parsons, Leonard J. Marketing Management second edition.
Hutt, M. Business Marketing Management. Fourth edition.
Seibert, Joseph C. Concepts of Marketing Management.
http//www.thestar.co.za/index.php?fSectionId=7&fArticleId=18
http//www.biz-community.com/Article.aspx?c=8&l=16&ai=1015
http//www.biz-community.com/Article.aspx?c=1&l=16&ai=1
http//www.btimes.co.za/8/105/survey/survey.htm
http//www.geda.co.za/future/carb.html
http//www.fortune.com/fortune/investing/articles/0,15114,754,00.html
http//www.quickmba.com/marketing/product/lifecycle/
http//www.quickmba.com/strategy/matrix/bcg/
http//www.quickmba.com/strategy/matrix/ansoff/
http//www.quickmba.com/strategy/pest/
http//www.quickmba.com/strategy/swot/
http//www.quickmba.com/strategy/global/
http//free.financialmail.co.za/coulsononair0/coulsab.htm
http//www.sabmiller.co.za
7) APPENDIXES
PEST Analysis Framework
7.1) Appendix 1
Environmental Scan
/
Internal Analysis External Analysis
/
Micro environmental Macro environmental
|
PEST
SWOT Analysis Framework
7.) Appendix
Environmental Scan
/
Internal Analysis External Analysis
/ /
Strengths Weaknesses Opportunities Threats
|
SWOT Matrix
SWOT Matrix (Internal)
7.) Appendix
Strengths Weaknesses
Opportunities Strong brand names, good reputation among customers, good distribution, strong sponsorships, global company second largest, investments in leisure activities and market driver in South Africa.
Change in customer focus black orientated, removal of trade barriers and become the largest brewer in the world. Drive alive campaign (drink drive is bad), high cost of product, and brewing brands under license.
Change in customer focus black orientated, removal of trade barriers and become the largest brewer in the world.
Threats Strong brand names, good reputation among customers, good distribution, strong sponsorships, global company second largest, investments in leisure activities and market driver in South Africa.
Shift in customer taste away from SABMiller's products, cheaper competitive products and new regulations (alcohol limit, advertising).
Drive alive campaign (drink drive is bad), high cost of product, and brewing brands under license.
Shift in customer taste away from SABMiller's products, cheaper competitive products and new regulations (alcohol limit, advertising).
BCG Growth-Share Matrix
7.4) Appendix 4
Product Life Cycle
7.5) Appendix 5
Ansoff's Matrix
7.6) Appendix 6
Existing Products New Products
Existing
Markets
Market Penetration
Product Development
New
Markets
Market Development
Diversification
Marketing Mix
7.7) Appendix 7
Product
Place
Target
Market
Price
Promotion
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