Bus 599 Paper

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Master Degree in Business Administration

Strayer University

Strategic Management

BUS 599

Assignment 3

Submitted in Partial Fulfillment of the Requirements for the MBA program

Abstract

Through this paper, one will understand the trends in the global beer market. There will also be the possibility of Modelo’s international expansion. There will also be an assessment about the next foreign market that Modelo should get involved with. A decision about the challenges that Modelo faces from their competition InBev and how Modelo should respond to this beer industry giant is presented in this paper. Last but not least, a discussion about weather or not Modelo should diversify their business is stated in this paper.

Historically, the brewing business was known as a local industry. Furthermore, only few of the brewers were known at an international level. During the past decades, there were a lot of consolidations done within the beer industry. With the past few years, the process of global beer consolidation grew even higher. By the year 2008, there were two major acquisitions made within the global brewing industry. The two acquisitions were made of Scottish and New Castle by Carlsberg and Heineken. The other acquisition was done of Anheuser-Busch by InBev. (www.carlsberggroup.com). The trend of beer over the last five years had a combined annual growth rate (CAGR) of 4.8% worldwide. (www.encyclopedia.com/doc/1G2-2843300064.html.). Within Central America and South America, the CAGR increased to 6.3%. Africa also showed growth by having CAGR that got up to 6.4%. A key note about the growth of beer was shown in Asia. (www.encyclopedia.com/doc/1G2-2843300064.html). The trends of beer for the last five years have being tilting toward consumers wanting expensive beers. Due to that, expensive beers or premium beers accumulated 17% of the beer sales globally. The premium beer market of North America as well as Western Europe sales happen to be higher than the global average for premium beers. www.carlsberggroup.com/company/market). Due to the high economic downturn, the consumption of premium beer became very low. Grupo Modelo happens to be the most popular and largest makers of beer in the country of Mexico. Over the years, this company has strived for excellence and became the 12th largest producers of beer in the world by 1998. (www.businessweek.com/globalbiz/content/aug2008/gb20080814_195868.html). Grupo Modelo’s most famous brand of beer is the Corona Extra. Corona Extra was noted as the first among imported light beers within the United States in the year 1997. Moreover, Corona Extra was ranked the fifth in light beers worldwide in 1997. Grupo Modelo is the producer of nine brands of beer within their company. Modelo mission is to “produce, distribute and sell quality beer at a competitive price, optimizing resources and surpassing customers’ expectation in order to contribute to the social development of Mexico.” (www.gmodelo.com.mx). Due to North America’s Free Trade Agenda (which eliminated barriers as well as tariffs) Modelo made a strategic business move that involved protecting themselves from having to deal with U.S. beer taking over their sales in Mexico. Moreover, Grupo Modelo Company decided to become partners with Anheuser-Busch. The deal of partnership with Anheuser-Busch allowed Modelo to be an exclusive distributor of all the Anheuser-Busch products in the country of Mexico. Within the United States, four different brands of beers produced by Modelo were sold and distributed by Barton Beer. Anheuser-Busch did not distribute any of Modelo’s beers within the United States. With the partnership of Modelo’s and Anheuser-Busch, Anheuser-Busch was not doing very well in Mexico. Moreover, Anheuser-Busch beers (Budweiser and Bud Light) during that time of the late 90’s were only selling well in tourist areas within Mexico. Due to this discouraging fact of...
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