Carlsberg their “winning culture” strategy, the company aims

CarlsbergAssignment (draft – Q1)IntroductionThis assignment is based on Carlsberg and their proposed businessstrategy and corporate culture.

The assignment incorporates evaluation andanalysis of both aspects and connects them in a coherent manner.Carlsberg is amultinational company involved in the sales of food, beverages and tobaccoindustries. It’s main business activity is the production and sales of beersand its secondary activity involves wholesaling alcoholic and non-alcoholicbeverages such as ciders (Orbis, 2017). Ever since it’s launch in 1847 ,the company continued to stride forward and flourish, eventually affording themthe opportunity to make a global presence just after 21 years of launch(Carlsberg, 2017).

In 2000, the company merged with Orkla, a global consumergoods company, allowing Carlsberg to take over their largest Norway breweryPripps Ringnes (Orkla, 2000). The company set their global strategy oftransitioning into a global brand while meeting the local needs of consumer demandsthrough the acquisition of local brands in different markets (Meyer and ThuTran, 2006). Carlsberg is now one of the largest beer brewers in the world (Emerald, 2015).The company also restructuredtheir priorities through an internal review, which led to the creation of SAIL’22. The strategy is an attempt to improve the negative financial performanceof the company and drive further growth in developed and developing countries.As part of their “winning culture” strategy, the company aims to expand furtherinto Asia-Pacific and strengthen their established presence in Europe(Carlsberg Group, 2016a). Statistics for the beer & cider industry displaythat markets within the Asia-Pacific region is expected to flourish with anexpected CAGR of 5.

3% by 2020 (Marketline, 2016a). However, due to the erraticnature of the industry, this may change and reshape the industry structure.Macro-environment AnalysisPESTEL framework, in particular,political, economical and social factors has been used to analyse Carlsberg’smacroenvironment (Yeates and Wakefield, 2004).PoliticalThe beer industrysuffers from various levels of political implications, some of which includesthe regulation of taxation from federal and state governments across the world.The rise of craft brewers in the UK led to a tax break, which led toapproximately a fifth of their costs being reduced (Bounds & McClean,2016). This negatively impacts larger and international brewers such asCarlsberg as craft brewers receive slight advantage over them in the UK.Similarly, Russia also imposed excise tax on imported alcoholic products,resulting in Carlsberg only receiving approximately one fifth of its operatingprofit in 2017 from Russian production and sales (Wienberg, 2017).

The US, thenation with the least presence for Carlsberg, introduced Craft BeverageModernization and Tax Reform Act of 2017 on 30th January to further regulatethe domestic craft brewers and to “level the playing field” between domesticcompanies and their international counterparts (Brewers Association, 2017). EconomicalEurope as a whole is going through the Brexit process, which has animpact on many of the brewers due to the uncertainty and the increase in marketfluctuation in prices. Therate of inflation is increasing due to the accumulating probability offluctuation in strength of the british pound, as this may be the causality forcontinuous change in pricing strategies for consumer goods, including beerprices (Davies, 2017). As a result, Carlsberg, Carling and Budweiser recentlyraised the prices for their selection of beers, leading to a potential decreasein consumer demand. (The Times, 2017).Growing Change in Culture,Lifestyle & Preference (Social)Europe is known forits deeply integrated culture for the consumption of wine and beer on a dailybasis with meals and for general socialising, with beer being more prevalent inNorthern Europe and wine in Southern Europe such as Portugal (Silva et al.,2015).

While mainstream beers are declining, Craft beers have increased inreputation and preference in Europe, particularly in the UK (Chaudhuri, 2016).The industry grew by 8% in the UK over the last 5 years because consumerpreferences has shifted from strong beers to craft beers and light beers.Additionally, the change in preferences led to lower consumption of mainstreamalcoholic beers for craft beers (Daneshkhu and Whipp, 2016).On the other hand, US markets forboth mainstream and craft beers are declining.

Recent statistics show thatthere has been an increase in preference for both men and women to buy anddrink other forms of alcohol such as wine and spirits, leading to onlyby 50% of 2015 as recorded growth in 2016 (The Economist, 2017).  On the otherhand, Asian markets, particularly in India, are rapidly expanding for beerindustry. Preference of strong beers is still ingrained into the Indianculture, with the traditional view of men’s masculinity being associated withconsumption of beer (EuromonitorInternational, 2017). Women are now beginning to establish a drinking culturedue to the social aspect of the millennials, especially students, drinking beerand other alcoholic beverages while socialising (Euromonitor International,2017). This is transforming India’s traditional culture into a European/Westernstyle culture by incorporating alcoholic beverages into their social norms.However, political factors are affecting the beer sales volume in India. Aliquor ban on certain highways, imposed tax and monsoon season has causeddifficulties for beer and other alcoholic industries (Dsouza, 2017).

Additionally, countries with Islam as the primary religion is strict on theprohibition of alcohol with a wide range of alcoholic policies and excisetaxation to prevent the use of alcohol in the country (Kalema et al., 2016),further adding pressure on the industry. Industry (Competitor) AnalysisThe analysis will becarried out using Porter’s Five Forces (Appendix B) (Nemati and Barko, 2004). The global beer market’s total revenues were $494.

4bn in 2014, with anexpected $604.2bn in total revenues by 2019 through an accelerated growth ofCAGR 4.1% over the 5 years (Marketline, 2015).

The industry therefore isshowing a moderate growth for increased profitability and attractiveness foroutside firms. This presents opportunities for new entrants, particularly craftbrewers, to disrupt the industry and create more pressure on the establishedfirms including the incumbents (Inbev, Heineken, Carlsberg, etc). However, theoligopolistic structure of the industry creates difficulty for smallercompanies to efficiently compete as they could become acquisition targets ifseen as a threat by Carlsberg and other larger competitors in the industry(Factiva, 2017). For example, Carlsberg acquired several local breweries in Chinadue to the country’s favourable economic growth (Grave, Vardiabasis and Yavas,2012) and to increase their revenue streams, but also reducing localcompetition in the process. This also directly relates to the company’sstrategy of expansion in Asia-Pacific (Carlsberg Group, 2016a), showing thatthe company is looking to increase their economies of scale to match InBev andHeineken through M&As.Mergers & acquisitions gained prominence in the 1970s and wereperceived as a “low-cost method of increasing market share” (Gisser, 1999).

Theindustry has since consolidated into an oligopolistic market structure, withpowerhouses like Anheuser-BuschInBev, SABMiller, Heineken, and Carlsberg controlling the industry witha combined market share of 48.3% of the industry. This corresponds toapproximately half of the entire industry (Marketline, 2016c), showing intensecompetition for dominance between the four.

However, InBev’s recent acquisitionof SABMiller (Daneshkhu, 2016) could change the industry structure into a nearmonopolistic structure. Additionally, Carlsberg possesses lower revenueearnings compared to the others (Marketline, 2016b), despite the company’ssubstantial regional presence in Europe and Southeast Asia with significantmarket shares in countries Laos (96%) and China (58%), reducing the bargainingpower of consumers (Marketline, 2017). However, the rise of craft beers is setto increase the competition and intensify the rivalry as consumers see them asalternatives to mainstream & international beers with a more “distincttaste and quality” (Allied Market Research, 2017). Additionally, theavailability and prevalence of wine and spirits indicates low switching costsfor consumers (Aquilani et al., 2015), implying that there is an increase in threatfrom substitute products, leading to an increase in bargaining power for thebuyers. Furthermore, prices for raw materials are increasing, particularlythrough excise taxes and bans such as the Russian ban on wheat exports(Terazono, 2017).

This led a rise in costs for brewers as wheat is often usedin the brewing process, even though barley is the traditional choice (Gonçalveset al., 2014). This moderately increases supplier bargaining power as they willhave to raise the costs of wheat and similar ingredients to match their costs,thus leading to a lack of choices for brewers to choose from.

Evaluating Carlsberg’s Business StrategyCarlsberg has been attempting to ‘glocalise’ their products to the localpopulations within Europe and Asia for a while, but they made it their strategyin 2014 with their all-new ‘Thirst for Great’ strategy (Carlsberg Group, 2014).However, SAIL ’22 was established in March 2016. Carlsberg re-vitalized andadopted ‘winning culture’ in order to create and implement a team-based culturearound the workplace. This was an attempt to reverse the negative financialperformance in the past and deliver a positive performance while deliveringvalue to the shareholders.

This includes a new performance management systemand a high ethical standards (Carlsberg Group, 2016a). This shows that thecompany is attempting to reduce internal production costs and increaseproductivity and efficiency through these new performance measures. Using Bartlett’s & Goshal’s model (Appendix A), Carlsberg is in the multinational aspect of thematrix with very high local responsiveness and low global integration. Thecompany adopts acquisition to secure ownership of local brands to drive themarket share within local markets and become highly responsive to localconsumers (Gru?nig & Morschett, 2016). This clearly connects them toglocalisation.

The company also recently joined forces with Microsoft by usingtheir 365 product as a key IT initiative to connect with the global companyworkforce, creating a Carlsberg Supply Company (CSC). As part of the ‘GloCal’strategy, the aim is to increase global and cost efficiencies (Microsoft,2017). However, Carlsberg is not fully reaching glocalisation. Glocalisation isthe combination of globalisation and localisation. While globalisation focuseson delivering a one-size-fits all product to all markets around the globe,localisation emphasises on products meeting individual local market criteria (Porto and Alonso Belmonte, 2014). Carlsberg’smain method of achieving a global expansion has been through mergers , where a diverse range of brands and local breweries are acquired(Rozensweig & Lang, 2013).

This created a strong brand portfolio, whichboosted their regional presence (Marketline, 2016b). However, the company’score brand has been weakened as a result of increased competition by globalbrands such as Budweiser and Heineken (Euromonitor International, 2017). Theconcept of glocalisation suggests that products must stay true to their basicform but adapted to local taste. Carlsberg’s M of local brands is more ofa localisation strategy because their core brand value strength is decreasingas a result of mainly being focused on local breweries and not the companybrand. For example, researchsuggests that millennial are shifting from premium beer to craft beers (EuromonitorInternational, 2017).

According to the company’s ‘exhaustive consumerresearch’, the millennials are their key drivers, and they are losingpreference of ‘standard and premium lager’ (Whitlock, 2016). As a result,Carlsberg’s premium product Carlsberg Export is being re-branded with the aimof re-connecting millennial consumers and strengthening their core brand (Hosie, 2016).

x

Hi!
I'm Mary!

Would you like to get a custom essay? How about receiving a customized one?

Check it out