The International Beer Industry – Opportunities for Carlsberg

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Department of Economics Author:
Bachelor ThesisAnne Mette Lund Madsen
Gina Helland Hauge
Valdemar Smith

The International Beer Industry –
Opportunities for Carlsberg

The Aarhus School of Business
In this thesis there has been an evaluation of the strategy followed by Carlsberg in the Western and Northern European beer market and the objective was to find out if their current strategy is the right one for the company. This market was chosen because it is stagnating and challenging for Carlsberg, especially due to the financial instability in the world markets. When investigating this, there have been used internal and external analyses. Due to Carlsberg’s current strategy concerning growth and expansion, merger theory has been taken into account as well. The Western and Northern European market is a market where Carlsberg faces great challenges and it is therefore important for them to maintain market share. One objective in Carlsberg’s strategy is to lower their debt and increase the cash flow in order to stabilize their share price and ensure investors that Carlsberg is a favourable investment. This seems suitable in the current market. It also creates opportunities for the future where Carlsberg can be able to pursue their long-term strategy of growth and expansion through mergers and acquisitions. In the long-run, Carlsberg have many opportunities, however, there are some obstacles for achieving their goals, such as their ownership relations and their large debt. Their current debt will eventually be lowered if they choose to do this, but the ownership relations are more binding and cannot be dissolved easily. The investigation and research that has been conducted shows that Carlsberg should follow their current strategy on the Western and Northern European market. Carlsberg’s future depends on how they manage to utilise their opportunities as well as maintain or increase market share.

Table of contents
1. Introduction1
1.1 Problem statement1
1.2 Delimitations2
1.3 Evaluation of sources2
1.4 Outline of the paper2
2. The international beer industry3
3. The creation of Carlsberg4
3.1 Historical background4
3.2 The company today5
3.3 Carlsberg’s current strategy6
4. Merger theory7
4.1 Vertical mergers7
4.2 Horizontal mergers8
4.3 Effect on stock price9
4.4 Horizontal boundaries10
4.5 Oligopoly models11
5. Game theory and price setting in the beer industry13
6. External Analysis15
6.1 Carlsberg’s main competitors16
6.1.1 Heineken16
6.1.2 Anheuser-Busch InBev16
6.1.3 SABMiller16
6.2 PESTEL analysis17
6.2.1 Political17
6.2.2 Economic18
6.2.3 Social19
6.2.4 Technological21
6.2.5 Environmental21
6.2.6 Legal22
6.3 Porter’s 5 forces23
6.3.1 Bargaining power of suppliers23
6.3.2 Bargaining power of buyers24
6.3.3 Threat of new entrants25
6.3.4 Threat of substitutes25
6.3.5 Industry rivalry25
6.4 Summary of external analysis26
7. Internal analysis27
7.1 Seven elements of resource-based sustainable competitive advantage27
7.1.1 Prior or acquired resources27
7.1.2 Innovative capabilities28
7.1.3 Being truly competitive29
7.1.4 Substitutability29
7.1.5 Appropriability30
7.1.6 Durability30
7.1.7 Imitability30
7.2 Summary of internal analysis31
8. SWOT analysis31
8.1 Strengths32
8.2 Weaknesses33
8.3 Opportunities33
8.4 Threats35
9. Future prospects36
10. Conclusion39

1. Introduction
The world today is changing very rapidly. Opportunities arise and disappear instantly and it is therefore important for modern companies to follow suit and seize the opportunities present for them at the time. In this context the strategy of a company becomes relevant. Companies develop strategies to ensure that the employees know what to achieve and are working towards the same goals. As the speed of changes and information...
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