Download Anheuser-Busch and Harbin Brewery Group of China

Report 1: Strategy Formulation
David Arraya, Kevin Gardner, Trenton Jackson, Brad
Orr

Anheuser-Busch
◦ Beer




Budweiser
Busch
Michelob
Natural Light
◦ Non-Alcoholic Beer
◦ Energy Drinks
◦ Specialty Malt
Beverages
◦ Domestic beer,
International beer,
packaging, and
entertainment markets
◦ Largest brewery in the U.S.
(48.8% of beer sales)
◦ 4th largest brewery in the
world

The Chinese Beer Industry
◦ Dominant Firm’s
 Tsingtao
 China Resource Enterprises
 Beijing Yanjing Group
◦ Key’s to Success
 Gaining vast market share
 Establishing presence with brand
name and low prices
VISION
• Through all over our products, services and
relationships, we will add to life’s enjoyment
MISSION
• Be the world’s beer company
• Enrich and entertain a global audience
• Deliver superior returns to our shareholders

External Environment
◦ Economic
 Huge population
 Low per capita beer
consumption
 Highest beer volume
consumption in the
world
 Rising income levels
◦ Social
 “Pub” culture emerging
 Price conscious
consumer
◦ Political
 Bureaucratic government
 Beer taxed heavily
◦ Technological
 Old, out-of-date beer
manufacturing plants
◦ Ecological
 Pollution and waste a
growing concern in
China



Focus on employees
State objective of how they intent on
becoming the best beer company in the world
Reflect corporate social responsibility
Value-Chain Analysis (Market)
 Problem is market, not businesses
◦ Large, fragmented, and traditional

In order to gain a competitive advantage, the businesses
must focus on Primary Activities
◦
◦
◦
◦
Inbound Logistics
Outbound Logistics
Marketing and Sales
Service
Resources
Tangible Assets




Production facilities
Harbin Brewery
Established suppliers
Financial resources
Intangible Assets



Brand recognition
Company reputation
Accumulated experience
Organizational Capabilities

Global distribution coordination - World-class distribution
network
Strengths
 Access to capital
 Brand recognition
 Acquisition of Harbin Brewery and interests in Tsingtao
 Experienced and solid management team
Weaknesses
 Foreign competitor
 Taste for local brands
 Large investment
Competitive Advantage
 Leadership in Northwest China (Harbin)
 Creation of large production facilities
Present Ranking
#1 Threat
#2 Threat
#3 Threat
#4 Threat
#5 Threat
Force
Substitute Products
Threat of Entry
Rivalry Among Competitors
Buyers
Suppliers
Threat Level
High
High
Moderate
Low
Low
Future Ranking
#1 Threat
#2 Threat
#3 Threat
#4 Threat
#5 Threat
Force
Rivalry Among Competitors
Buyers
Substitute Products
Threat of Entry
Suppliers
Threat Level
High
Moderate
Moderate
Low
Low
Ranking
#1
#2
#3
Company Name
Tsingtao
China Resource
Enterprises
Beijing Yanjing
Group
Competitive Advantage
Market Consolidation
Low-cost Leader
Advanced Distribution


Used financial statements and ratio analysis
to compare Anheuser Busch’s past years
and the competitive market
Increase in sales from 2075.9 million to
2115.3 million dollars from 2003 to 2007,
which is above the industry average
Profitability
Gross Margin %
Net Profit Margin %
Sales % (vs year ago
qtr)
Return on Equity %
Boston
Beer
Coors
Brewing
Anheuser
Busch
Industry
54.9
5.6
40.2
8.6
35.1
8.7
51.4
11.7
10.9
15.5
4.5
7.9
7.9
59.7
7
28.1
3
16.2
1
8.6
0.9
21.9
1
18.4
1.4
1.9
5.4
3.1
8.4
10.7
15.3
9.3
Liquidity
Current Ratio
Receivable Turnover
Leverage
Leverage Ratio
Activity
Inventory Turnover

Market Fragmentation
◦ 500-1000 brewing firms in China
◦ No dominant leader in the market

Symptoms from Core Issue
◦ Price wars
◦ Decreased profits
◦ Buyer power
 “Harbin
brewery is committed to
increasing its market share in
Northeast China, becoming the
dominate market share holder
within the next 10 years”
Major Premises
 Acquisition of
competition will
create “trench
warfare” between
regional
powerhouses

Foreign Investment
will continue
Scenarios
 Best Case - Harbin will
become dominate
market player


Worst Case - Harbin
will be bought by
another powerhouse
Most Likely Case Harbin will grow by
10% and remain the 4th
largest brewer in
China



Continued acquisition of companies in China
to gain market share
Offer lower cost products to compete with the
largest segment of beer drinkers.
Build CSR

SBUs
Budweiser Family of Beers
Beers
Harbin Premium
GENERIC STRATEGY
 Low-Cost Leadership
◦ Need to penetrate traditional market
◦ Want to get the product in the minds of the
consumer
GRAND STRATEGIES
◦ Market development - Bring Harbin to the rest of
China
◦ Innovation - mainly through advertising
◦ Horizontal integration - acquisition of smaller
breweries

Growth through horizontal integration
◦ Very feasible
◦ Will allow Anheuser-Busch to establish presence in
other regions of China
◦ Anheuser-Busch has the financial capital to carry
out this option
◦ Will increase market share

Thank You and
Remember to Drink
Responsibly