Date:04th September 2010
Global Forces and the European brewing industry
This assignment is based on the case example ‘Global forces and the European brewing industry’ and relates to two questions raised in chapter 2 at the end of the case example (Johnson et al. 2008, p. 91) of the book ‘Exploring Corporate Strategy: Text and Cases’ by Johnson, Scholes and Whittington.
1.) Using the data from the case (and any other sources available), carry out for the European brewing industry (i) a PESTEL analysis and (ii) a five forces analysis. What do you conclude? (i) PESTEL analysis
One tool to analyze the broad macro-environment is the PESTEL analysis. In the PESTEL analysis environmental influences are categorized into political, economical, social, technological, environmental and legal aspects. It helps to identify how future trends might influence an organization and furthermore, to identify the key drivers of change to create scenarios for the possible future.
There is an overall decline of consumption of Beer in Europe as many traditional key markets have been made increasingly aware of the social problems associated with alcohol consumption. Factors could be the active campaign of European governments against drunken driving, binge-drinking and consequently the long term health and fitness problems.
In the case study there is the talk of the overall decline of European beer consumption, while there was an increase in emerging markets (e.g. China, Brazil) around the world. This could be because of the government campaigns which caused a shift in sales from the ‘on-trade’ (beer consumed in pubs or restaurants) to the off-trade (retail/supermarkets). Moreover, the success of German supermarkets like Aldi and Lidl with their own ‘private label’ beers rather than the brewery-branded beers has an influence on the European brewing industry. Supermarkets are offering cut price offers. Also the rise of the main purchasing costs like packaging, raw material and energy will have influence on the beer price e.g. Heineken). Also, the increase of fuel prices which will affect the distribution network, thus transportation costs will increase. Besides, due to the economic crises the breach between rich and poor is steadily growing and thus many people cannot afford any more to go out for dinner or having a beer. Through legal restrictions the demand for alcohol in public places could declines. Furthermore, acquisitions, licensing and strategic alliances have occurred because the leading brewers battle to control the market. The global pressures for consolidation due to overcapacity within the industry are another point that influences this industry. There is a growing trend towards cross-border mergers and acquisitions. Introduction of higher-priced premium products let sales values raise. If there are natural disasters like previously the fires in Russia this has an impact on the prices of the raw material.
Wines have become increasingly popular in the Northern European markets. People may rethink their lifestyle and prefer drinking a good wine instead of beer and ‘binge drinking’. This could be because wine is associated with the upper class and people with a higher income. Moreover, people are getting more and more health conscious and therefore, will drink in moderation. Furthermore, there is a rising demand for premium and fruit-flavored beers and also an increasing demand for ‘private-label’ beers. There will also be an increasing acceptance of pan European brands. Besides, the importance of supermarkets in distribution and the growth of own-label products will rise.
Research and development is important in the...