05 Jul Fiver Porter’s Forces Industry Peer’s Case Analysis
Industry Analyst Threats of New Entrants- (LOW) The capital asset requirements needed to enter the beer market make the threat of new entrants low. Rising costs of inputs such as glass, aluminum, and hops, forces large breweries to seek consolidation in order to increase their market share. This allows them to strive for economies of scale in relation to production and advertising. Although there has been an increase in micro or specialty breweries over the years, the capital requirements necessary to compete on a global scale against the big firms are extremely high. These high costs of construction and operation act as a barrier to entry for firms that are attempting to compete in the beer industry. Another barrier to entry is the access to distribution channels. New firms trying to enter the market may find that existing competitors have ties with distribution channels and a deep relationship with their distributors which can make it difficult to distribute their product. The beer brewing industry is also highly regulated by the government. Overall, the beer brewing industry faces numerous barriers to entry. Bargaining Power of Suppliers- (LOW) Suppliers possess little bargaining power in the beer industry. There are manufacturers and suppliers who produce brewing equipment for small-scale breweries. However, brewers can also purchase refurbished or used equipment. Many suppliers of beer brewing equipment do not focus on just those products alone. They typically offer other products and services, and brewing equipment is just one of many phases of their operation. Bargaining Power of Buyers- (MODERATE) The distributors hold the power and have all of the connections to retailers and to the consumer. The distributors control the prices based on what profit margin they are seeking. The distributors are consolidating and thus increasing in power. Threats of Substitute Products- (STRONG) Wine and liquor are strong substitute products for beer. This week’s case study mentions that the Russian beer market has significant growth potential due in part to the Russian government’s taxation of liquor. A serious threat to the beer market, however, is that the cost for a consumer to switch from being primarily a beer drinker to a wine drinker is non- existent. In order for Carlsberg to reach a sustainable competitive advantage with regards to substitute products, they need to develop brand loyalty. Intensity of Rivalry among Competitors- (MODERATE) Over the years, the beer industry has witnessed a large amount of consolidation among the key brewers. The ten largest brewers have gone from a market share of roughly 38.6 % to 60.5% in a decade. This is due in part to organic growth but also due to merger and acquisitions, as well as, joint-ventures. The rivalry among competitors is mediocre. Due to the high requirements needed to make economies of scale and the difficulties in securing a large distribution network, rivalry is moderate. Current Market Analysis Carlsberg, although aggressively pursuing emerging markets, still relies on the majority of their revenue from the stagnating Western European markets. Their pursuit of the Western Chinese beer market, as well as, the Russian beer market does look promising. Carlsberg still faces numerous challenges regarding the operational, competitive, and regulatory hurdles standing in their way. Only time will tell if their aggressive emerging market approach will be a successful venture for Carlsberg. References: Probably the best beer in the world. (n.d.). Retrieved April 8, 2019, from https://www.carlsberg.com/en/ (Links to an external site.)Links to an external site. Huddleston, N. (2018, March 22). Carlsberg Performance Trends 2013-2017 – results data. Retrieved April 8, 2019, from https://www.just-drinks.com/analysis/carlsberg-performancetrends-2013-2017-results-data_id125362.aspx CSR Carlsberg Profit Carlsberg A/S has been a leading brew company. Their focus for developing their company began with a desire to be a leader globally. When they realized this goal was unattainable, they began to take a different look at their possibilities for growth. Carlsberg’s solution was to focus on emerging markets, such as Russia and China. For Carlsberg to expand into these emerging markets, they reorganized their company so that the Carlsberg Foundation did not have as much controlling interest in the company. This allowed Carlsberg to attain other companies in key positions facilitating their expansion into other markets. By 2008, Carlberg was considered a market leader in Russia and had 55% of the market share in China. Carlsberg has not always held the highest position in their industry and for a while they were floundering, but with careful planning and by sticking to their plans they have succeed in their goal to build and maintain long-term growth. Philanthropy The majority owner of the Carlsberg Group is the Carlsberg Foundation. This foundation is dedicated to the advancement of science, art, and culture. Every year the foundation awards two prizes to researchers who have made a crucial contribution to basic research in naturals science and humanities or social sciences. The foundation is particularly supportive of talent development and generational change. The Carlsberg foundation also awards fellowship, both doctorial and postdoc. Ethical and Legal According to their website, Carlsberg asserts to be dedicated to performing business ethically and legally. They strive to provide their employees with a safe and healthy working environment. This claim not only applies to their employees but their business partners as well. They are adamant that they follow all applicable laws and company policies. Carlsberg says that they extensively train their employees and business partners. Their code of ethics starts with basic compliance and goes on to cover a myriad of issue that may arise with working at or with Carlsberg. They have gone so far as to enact a whistleblower system that allows employees to report criminal or misconduct violations through “Ethics Point.” The security ensures that employees will be safe when reporting issues. Carlsberg has set several ambitions for themselves. These ambitions are ZERO carbon footprint, ZERO water waste, ZERO irresponsible drinking, and ZERO accidents. Each of these areas have been issues for Carlsberg in the past, but they are making moves to change they way they conduct business to eliminate these issues. References Carlsberg Group. (2019, April). Retrieved from Carlsberg Group: https://carlsberggroup.com/sustainability/our-ambitions/zero-carbon-footprint/ Michael A. Hitt, R. D. (2017). Strategic Management Competitiveness and Globalization.Cengage. …
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