Anheuser-Busch Case Analysis - 1

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Anheuser-Busch must redefine its corporate strategy to create a strategic fit for the entire company, as it currently is not exercising enough tradeoffs to sustain a competitive advantage. A-B does hold a unique and valuable position, but must be cognizant of the fact that their resources and capabilities are not suited for every industry or industry segment.

Threats from the external environment are difficult to define because of the broad diversification of A-B into not only alcoholic beverages, but also food products, entertainment, real estate and sports management. However when considering just alcoholic beverages, the threats from new entrants are not very high because of the gradual consolidation of the industry. The top 15 brewing companies generally have a greater degree of economies of scale and vertical integration than any firm trying to enter the industry. Threats from substitutes are high because of the introduction of new products and product lines that lead to price wars between the large firms. Supplier power is moderate because of the dependency of brewing companies on harvests and product costs while they simultaneously order in large quantities from a fair number of suppliers. Individual consumer buyer power is miniscule, but buyer power of distributors is relatively high. These distributors determine how, when, and at what price the product reaches the end consumer. The threat of rivalry from existing competition is through the roof. The consolidation of the industry has left a few remaining brewing giants that battle for cost leadership and low price advantage.

Threats to the alcoholic beverage industry include new federal legislation, lobbying and other country-by-country political factors. The economic environment is causing price wars that have led to 90% of retailers selling alcoholic beverages at less than the regular prices. Other firms in the industry have also increased their advertising budgets and introduced new low-price...
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