Anheuser-Busch (AB) is once again pushing forward in their attempt to gain market share in China. Many major global brewing corporations over the last 10 years have failed to achieve any degree of success in the tough Chinese market. Many challenges exist for foreign entrants into the Chinese market and very few foreign companies have been able to gain market share.
Our group has decided to first look at past mistakes foreign brewers have made when entering the Chinese market. Learning from others mistakes has allowed our group to determine what strategic plan to recommend to AB’s CEO. Our strategic plan will enable AB to grow their market share across all of China’s four main regions.
We have determined that the strategic issue at hand is the challenge of gaining market share in a country mainly looking at cost and is dedicated to cultural tastes as well. The five major firms in the industry make up only 38% of the market. AB has purchased a 10% minority interest in the number one firm, Tsingtao. AB’s recent takeover of Harbin Brewery shows that AB believes it is the right time to start acquiring dominant players and further pursue China’s potential.
Finally, we outline three major strategies that AB could follow: multi-domestic, global, and transnational. Of these three strategies, we suggest that the transnational strategy be adopted by AB. The transnational strategy best deals with the issue of keeping prices low through increased economies of scale and the need for local responsiveness simultaneously.
Anheuser-Busch (AB) is facing many difficult challenges competing in the Chinese beer market. In this case analysis, we will identify AB’s strategic issue. We will then analyze the financial statements while completing a SWOT analysis. Following the analysis, we will present alternative strategies that relate to the strategic issue. Finally we will discuss our recommendations for moving forward and overcoming the strategic issue.
The strategic issue challenging Anheuser Busch
AB’s strategic issue is the need to increase overall market share in China. Increasing overall market share will not be easy. Chinese consumers are very price conscious and also demand a certain degree of local responsiveness from foreign firms such as AB. AB has several obstacles that need to be addressed in order for the company to have a fighting chance at gaining market share. These obstacles are addressed and solutions are formulated in the Strategic Objectives/Goals section.
An analysis of the strategic objectives/goals
China has huge market potential. There are over 926 million people in China’s four main regions. China possesses the largest growth potential, as well as the largest beer volume potential of any country in the world. Many Chinese are increasingly moving towards urbanization. The urbanized population is beginning to move towards the target population for beer as they are also experiencing increasing average incomes. By targeting this section with AB’s products, AB will, over time, be able to pick up considerable market share. As average income rises and the Chinese will be more apt to go out to bars to drink standard and premium beer instead of drinking economy beer at home. Low end consumers will also see an increase in wages once the economic multiplier takes affect. These Chinese citizens who once could not afford to buy more than one or two beers at a time will have the funds available to purchase more volume at one time. There are many reasons why foreign entrance into the Chinese market is difficult. Political and legal challenges are very difficult for foreigners to understand. To succeed in this environment, AB must respect all levels of authority and be granted the “red stamp”. Whoever bears the “red stamp”, controls all actions associated with the organization. AB’s must have control over the “red stamp” to fully take advantage...
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