Case Study on South African Breweries Ltd (Sab)

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Contents

Company Background2
Challenge for the Company3
Policy/ Strategy3
Paradoxes and debates around strategy4
Mintzbergs’ Theory4
Strategy theory of Wittington6
Planning procedure and strategic decision making7
Adding Of Value8
Keeping Balance In Globally and Locally9
Considering Global Market9
The Global Expansion Challenges for SABMiller10
Conclusion11
References12

Company Background

South African Breweries Ltd (SAB) is one of the major global brewers. It is the supplementary of a South African company SABMiller plc. Now it has more than 200 brands brewing interest and circulation in 75 countries worldwide. SAB has the leading position to produce and distribute both alcoholic and non-alcoholic beverages. it’s been registered in 1895 in London and since then with momentous profit and prevailing market position it has develop its business in home sectors as well. SAB was fully incorporated in 1970 after the shifting of its head office from London to Johannesburg. Government put high restriction on the expansion and international business of SAB. From 1955 to the following seven years beer production was the highest taxed beverage and SAB had to respond to competitors’ acquisition and production and distribution rationalisation. In 1960 it took over Stellenbosch Farmers’ Winery and obtained brewing license locally for Amstel and Carling, Black Label and Guinnes which played major turn of its expansion. Within 1979 SAB could capture about 99 percent South African market alongside major control over Lesotho, Swaziland and Rhodesia. SAB was the first organisation in the country which published a non-discriminatory employment code in 1978. The Lion Match Company merged with SAB in 1987. SAB concentrated on developing three mega breweries in the country in 1990 and the invention of joint venture in Zambia, Mozambique and Angola followed in the following years. The company got dominance over 98 percent of market and faced a little left expansion in local business and tried to expand globally in 2000. It made its way to central Europe in 1993 with the acquisition of the largest brewery of Hungary Dreher. In the following year it established operation in Czech Republic, Poland, Romania, Russia and Slovakia. SAB had spread small business with Rolling Black Beer one of the breweries in United States of America as well. Then 2001 it expanded its business into Central America.

In 2001 SAB had production of 77m hectolitres of alcoholic and non- alcoholic beverages and dominated as the fifth largest brewer in the world covering 21 countries. In 1990 the head quarter moved back to London. In this report i would like to narrow down my focus on SABs expansion globally by acquiring the second largest brewery of America; the Miller Brewing Company and having new name as SABMiller in 2002 and it became the second largest volume in the world. Though it is facing some profit margin difficulties in North America because its competitors are lowering down the price of beer. To keep up with the market over there SABMiller has to compromise with the margin of profit.

Challenge for the Company

No arguments come when SAB admits that South African market is fully dominated by them. Though it had made some tactically poor judgment while expanding in Hungary and US market. Among the challenges SAB faced were: In 2001 it acquires 58 percent interest in breweries in Hunduras and El Salvador which cost them US$ 500million. Further it spent a sum of US$5.6 bn when it acquired Miller from Altria. To expand its business in Western Europe SAB acquired a major company in Italy named Peroni and spent US$ 270 million. In Africa SAB had to encounter problems when for low income in Malawi the industry does not appear to be set up. Again in Ghana SAB has made its entrance where there is already good competition between Guinness and Heineken. In Nigeria governments has imposed restriction on importing...
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