Asahi Breweries, after its successful introduction of “Super Dry” to the Japanese beer market, has established itself as a profitable national player. To meet its growing demand, Asahi is considering an investment proposal to expand capacity. Firm-specific analysis, industry analysis, and a critical assessment of alternative strategies will be discussed to evaluate the proposal. A recommendation and implementation schedule will be presented based on the quantitative and qualitative factors examined in the analyses. FIRM DESCRIPTION
Brief History & Basic Description Asahi was a direct result of the Dai Nippon split in 1949 by the occupation forces in Japan. Since Dai Nippon had been divided geographically, Asahi and Sapporo began as regional players, which quickly gave way for Kirin to reap the national market. Consequently, Asahi’s growth was hindered by lack of brand recognition and loss of distribution networks and relationships. Later, under accomplished leaders Murai and Higuchi, Asahi was able to improve distributor relationships and enhance its brand image.
Asahi’s production consists of two primary products: draft beer and dry beer. Asahi used about 20% of its production capacity to produce draft beer while it used the remaining 80% of its capacity for Super Dry beer (1988). In addition to the beer business, Asahi is diversified through investments in real estate, and production of food items and pharmaceuticals, which accounts for 21.4% of total corporate sales. Financial Situation With the tax ratio of 67%, Asahi’s ROA increased from 1.093% in 1986 to 1.384% 1987, indicating increased efficiency in asset use. As for liquidity, Asahi improved its current ratio from 0.892 in 1985 to 1.076 in 1987 Asahi would not easily go bankrupt due to short-term payments (at least in the short run). Strategy & Structure of Ownership Innovation is Asahi’s primary competency. Its most notable innovation is the Super Dry beer, which became a huge success. Asahi’s launch of Super Dry, despite scepticism, demonstrates the company’s risk-taking culture. When competitors imitated Super Dry, Asahi emphasized its originality, retaining customers and building on brand loyalty. The implementation of such strategy can be credited to Higuchi’s strong leadership and his initiation of top-down management; together, the structure of the firm promotes strong sense of responsibility, decision-making and profitability. Strengths & Weaknesses Innovation, coupled with strong leadership, is a significant strength which enables Asahi to achieve a competitive advantage. Asahi’s success with Super Dry and resulting intangible resources such as brand image are also strengths. Its large advertising budget and successful campaigns is another strength that Asahi has over its competitors.
However, the concentrated production of Super Dry while producing very little of lager beer may be a weakness since consumer preferences have been volatile recently. Asahi relies too heavily on the success of Super Dry, though in terms of the entire market share it is still relatively small. Another weakness is Asahi’s distribution problems it fights for shelf space which results in high distribution costs. INDUSTRY ANALYSIS
Six Industry Forces Asahi competes in the consolidated Japanese beer industry alongside Kirin, Sapporo and Suntory. There is intense rivalry between the firms since they closely imitate each other’s products, advertise with direct reference to one another, and market on the same dimensions by all claiming to be top-quality and best-tasting. The firms have benefited from the overall market growth (7% annually), but competition will intensify further once the industry reaches the shakeout and maturity stages. Overcapacity for a product that must be fresh will lead to a price and/or promotion war along the supply chain.
There is a high threat of substitutes within the industry as shown by dramatic changes in...