Pestel Factor Affecting the Brewing Industry

Topics: Beer, Brewing, Alcoholic beverage Pages: 5 (1619 words) Published: September 19, 2012
Brewing Industry Case Study
Module: Strategic Planning ProcessLecturer: Michael ShovelinDate: 04th September 2010Postassignment: Case exampleGlobal Forces and the European brewing industry------------------------------------------------- This assignment is based on the case example Global forces and the European brewing industry andrelates to two questions raised in chapter 2 at the end of the case example (Johnson et al. 2008, p.91) of the book Exploring Corporate Strategy: Text and Cases by Johnson, Scholes and Whittington.1.) Using the data from the case (and any other sources available), carry out for the Europeanbrewing industry (i) a PESTEL analysis and (ii) a five forces analysis. What do you conclude?(i) PESTEL analysisOne tool to analyze the broad macro-environment is the PESTEL analysis. In the PESTEL analysisenvironmental influences are categorized into political, economical, social, technological,environmental and legal aspects. It helps to identify how future trends might influence anorganization and furthermore, to identify the key drivers of change to create scenarios for thepossible future.Political factorsThere is an overall decline of consumption of Beer in Europe as many traditional key markets havebeen made increasingly aware of the social problems associated with alcohol consumption. Factorscould be the active campaign of European governments against drunken driving, binge-drinking andconsequently the long term health and fitness problems.Economic factorsIn the case study there is the talk of the overall decline of European beer consumption, while therewas an increase in emerging markets (e.g. China, Brazil) around the world. This could be because of the government campaigns which caused a shift in sales from the on-trade (beer consumed in pubsor restaurants) to the off-trade (retail/supermarkets). Moreover, the success of Germansupermarkets like Aldi and Lidl with their own private label beers rather than the brewery-brandedbeers has an influence on the European brewing industry. Supermarkets are offering cut price offers.Also the rise of the main purchasing costs like packaging, raw material and energy will have influenceon the beer price e.g. Heineken). Also, the increase of fuel prices which will affect the distributionnetwork, thus transportation costs will increase. Besides, due to the economic crises the breachbetween rich and poor is steadily growing and thus many people cannot afford any more to go outfor dinner or having a beer. Through legal restrictions the demand for alcohol in public places coulddeclines. Furthermore, acquisitions, licensing and strategic alliances have occurred because theleading brewers battle to control the market. The global pressures for consolidation due toovercapacity within the industry are another point that influences this industry. There is a growingtrend towards cross-border mergers and acquisitions. Introduction of higher-priced premiumproducts let sales values raise. If there are natural disasters like previously the fires in Russia this hasan impact on the prices of the raw material.Social/cultural factorsWines have become increasingly popular in the Northern European markets. People may rethinktheir lifestyle and prefer drinking a good wine instead of beer and binge drinking. This could bebecause wine is associated with the upper class and people with a higher income. Moreover, people  

2are getting more and more health conscious and therefore, will drink in moderation. Furthermore,there is a rising demand for premium and fruit-flavored beers and also an increasing demand forprivate-label beers. There will also be an increasing acceptance of pan European brands. Besides,the importance of supermarkets in distribution and the growth of own-label products will rise.Technological factorsResearch and development is important in the brewing industry due to the changes in consumertastes. People demand alcohol in different flavors, with low...
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