Asahi Breweries' Performance Measurement
Asahi Breweries’ market performance in the past three years had amazed the Japanese business community. Being a marginal player before 1986, the company had recorded an increase of 71.9% beer sales volume in 1988 while the whole industry grew only 7.6%. At the same period, the company’s market share grew from 10.5% to 20.6%. The company’s current flagship product is its Super Dry beer, a revolutionary beer with an appealing and a distinct sharp taste. Accordingly, Asahi’s competitors have also moved into the dry beer market and attempted to capitalize the surprising profitable opportunity. Thus, Asahi has encountered many challenges resulted from the high growth rate of sales and emerging competition. Asahi’s capital infrastructures and human resources are in need of expansion.
Performance Measurement The annual sales growth rate from 1986 to 1988 had been an outstanding exponential growth (see figure 1). According to Exhibit 6, Asahi’s drastic sales growth in Super Dry beer has helped Asahi to outperform the other competitors in seizing market shares. In 1988, Asahi’s sales were accounted for 20.6% of the entire market sales, growing from a 9.9% in 1985. At the same time, Kirin, a dominant player in the market, had dropped 11.2%. According to Exhibit 4, Asahi is a highly leveraged firm as its equity to total asset ratio (ETA) is 30%. This is normal for the industry because Asahi’s competitors, Sapporo and Suntory, are also highly leveraged, 29.7% and 25% ETA respectively. According to the Finance Director Okada, Asahi funds all of its current investments with equity (evidence can be seen in the outstanding shares growth in 1987 on the balance sheet). From a debt to equity perspective, this move is favourable to the investors as the financing method does not increase the firm’s risk of bankruptcy or violate the existing debt covenant. Furthermore, Asahi paid off many its debt liabilities in 1987, as indicated in the 1986 and 1987 balance sheets, to further
Performance Measurement The annual sales growth rate from 1986 to 1988 had been an outstanding exponential growth (see figure 1). According to Exhibit 6, Asahi’s drastic sales growth in Super Dry beer has helped Asahi to outperform the other competitors in seizing market shares. In 1988, Asahi’s sales were accounted for 20.6% of the entire market sales, growing from a 9.9% in 1985. At the same time, Kirin, a dominant player in the market, had dropped 11.2%. According to Exhibit 4, Asahi is a highly leveraged firm as its equity to total asset ratio (ETA) is 30%. This is normal for the industry because Asahi’s competitors, Sapporo and Suntory, are also highly leveraged, 29.7% and 25% ETA respectively. According to the Finance Director Okada, Asahi funds all of its current investments with equity (evidence can be seen in the outstanding shares growth in 1987 on the balance sheet). From a debt to equity perspective, this move is favourable to the investors as the financing method does not increase the firm’s risk of bankruptcy or violate the existing debt covenant. Furthermore, Asahi paid off many its debt liabilities in 1987, as indicated in the 1986 and 1987 balance sheets, to further