Closing Case – The United States Beer industry
1) Why has the United States brewing industry become more concentrated over the last two decades?
I think that there is a couple of reason for this trend in the United States. One thing is that the consumption of beer has been slowly declining, in order to raise in market share, companies are having to think of ways to take customers away from other companies. This would lead to the rise in market share for some companies and the decrease or closer of over companies. Another risen is advertisement. Larger companies are able to spend $0.40 per case of beer on advertisement. Smaller companies can’t spend that much on advertisement.
2) Analyze the competitive structure of the industry using Porter’s five forces model.
• Risk of entry by potential competitors: New micro brewing companies have low barriers of entry, because they do not rely heavily on brand loyalty or economies of scale. Mass market brewers are faced with higher barriers to entry because of brand loyalty of customers and absolute cost advantages.
• Intensity of rivalry among established firms: new customers are always entering the market as they become legal age, so mass market brewers try to appeal to them to get their business, minimizing the competition to take other companies competitors. Demand has also been growing, making them less competitive.
• Bargaining power of buyers: this is low for mass market brewers because there is a large number of buyers available for High microbrewers.
• Bargaining power of suppliers: the brewing industry has medium to low bargaining power of suppliers.
• Threat of substitutes: there is a threat because there are other alcoholic beverages that can be a direct substitute for beer, such as spirits and wine.
3) What are the implications of the evolving competitive structure in the brewing industry for the profitability and strategy of a smaller mass-market firm in the industry?
Small mass market companies in the brewing industry are looking
I think that there is a couple of reason for this trend in the United States. One thing is that the consumption of beer has been slowly declining, in order to raise in market share, companies are having to think of ways to take customers away from other companies. This would lead to the rise in market share for some companies and the decrease or closer of over companies. Another risen is advertisement. Larger companies are able to spend $0.40 per case of beer on advertisement. Smaller companies can’t spend that much on advertisement.
2) Analyze the competitive structure of the industry using Porter’s five forces model.
• Risk of entry by potential competitors: New micro brewing companies have low barriers of entry, because they do not rely heavily on brand loyalty or economies of scale. Mass market brewers are faced with higher barriers to entry because of brand loyalty of customers and absolute cost advantages.
• Intensity of rivalry among established firms: new customers are always entering the market as they become legal age, so mass market brewers try to appeal to them to get their business, minimizing the competition to take other companies competitors. Demand has also been growing, making them less competitive.
• Bargaining power of buyers: this is low for mass market brewers because there is a large number of buyers available for High microbrewers.
• Bargaining power of suppliers: the brewing industry has medium to low bargaining power of suppliers.
• Threat of substitutes: there is a threat because there are other alcoholic beverages that can be a direct substitute for beer, such as spirits and wine.
3) What are the implications of the evolving competitive structure in the brewing industry for the profitability and strategy of a smaller mass-market firm in the industry?
Small mass market companies in the brewing industry are looking