Beer is one of the world's most used alcoholic drinks. Nelson (2005) mentioned that it is the most popular drink after drinking water and tea. There are lots of brewing companies though emphasis will be made on Carlsberg in this situation.
The Carlsberg Group is the world's fourth major brewery group. The Group is recognized by a high degree of variety of brands, markets and civilizations. Its activities are centred on market segments where in fact the Group gets the strength and the right products to secure a respected position. Because of the variant of the markets, the contribution to expansion, earnings and development within the Group differs, both at the moment and in the longer-term projections (Carlsberg, 2012).
In countries where Carlsberg has no breweries, the Group provides its products through exports and licensing contracts. It aims to determine and develop strong market positions for their international high quality brands through powerful partnerships with licensing, export and duty-free associates round the world. The Carlsberg beverage portfolio includes more than 500 brands. They change significantly in volume level, price, market and geographic penetration. (Carlsberg, 2012).
Carlsberg International Strategy and Prospective Partners
The company operates using a global strategy which implies that it takes the beer first produced for its home market and offers them internationally with only low local customization. This highlights that the ale it sells meets an internationally need with such do not face substantial competitors which means that it isn't confronted with pressures to cut down its cost composition. It tends to centralize the beverage development functions such as research and development in its home country and set up making and marketing functions in each country it runs. Carlsberg chose a global strategy for the following reasons:
To increase sales and income growth by going into new market segments and also selling in existing marketplaces (Hill, 2009). That is achieved since it exports its products to destinations like SOUTH USA where it has no breweries and in some instances through licensing contracts like it did with Charrington and Tetley in Britain by giving them to brew and bottle Carlsberg beverage and in exchange get a royalty payment. It also created joint endeavors with Scottish & Newcastle and a brewery in Honk Kong which it now fully owns. The Group also shaped mergers with Danish rival, Ruborg and Orkla of Norway which it later owned or operated fully. From case study, it is very obvious that each goes into these markets at a poor but cautious rate by using the services of the lovers which is to avoid information costs and risk plus some other uncertainties such as trade barriers associated with overseas involvement. In addition, it gets to learn about the foreign market in cases where it made joint ventures and mergers and later take full control of the business.
Another reason is to protect Carlsberg's home market share because functioning in foreign countries takes away business from its competitors by offering clients other choices and it let us the competitors know that they might face the same response if they attack the house market (Rugman & Collinson, 2009).
Furthermore, this is a techniques that Carlsberg might use to diversify themselves against the chance and uncertainties of the local business circuit (Rugman & Collinson, 2009). Therefore that by functioning far away it could decrease the negative consequences of economic golf swing such as recession in its home country.
Despite Carlsberg apparently predatory instinct for 100% control and ownership, prospective partners engage with Carlsberg as a result of following reasons:
They will reap the benefits of its intangible properties (Hill, 2009), like in the case of licensing where in fact the licensee gets the right to Carlsberg's intellectual properties such as patents, processes and trademarks. This also pertains to joint projects as the partner gets to know about its procedures as well.
They can offer their clients a wider range of products and services (Mcpheat, 2010). For instance in licensing where Carlsberg provides them rights to its intellectual properties, the lovers tend to take benefit of more market opportunities (recently discovered demand) as they will not only sell their own products but also that of Carlsberg, meaning their customers have variety of products to choose from.
They might also have an opportunity to get endorsed into Carlsberg's adverts (Mcpheat, 2010). That is Carlsberg might support their products in its advertisements where it sorts a merger or jv with associates.
They share set costs and financial hazards with Carlsberg which means that they can succeed in dealing with failure to meet a certain standard or insufficient resources (such as land, labour or capital). An example of an instance where this occurs is within joint projects.
Cooperating with Carlsberg creates room for pooling ideas and generates more creative answers to problems (Country wide Relationship of Conservation Districts, 1994). That is applicable when companions form joint endeavors and mergers with Carlsberg. Thus, customers will be more happy as their problems would be solved at a faster thus improving customer support experience (Mcpheat, 2010).
Potential acquisitions goals and strategic replies to acquisition bids
According to the research study, Carlsberg has a worldwide share by level of 7. 5% making it the fourth major brewing company after Abdominal Inbev and its market capitalization was over 80 billion Danish Kroner (Dkk). Its sales in '09 2009 were 59. 4 billion (Dkk) which it achieved 15. 8% operating profit percentage. This makes it a potential future acquisition target for other brewing communities such as Belly Inbev for the following reasons:
The larger making group would want to increase their company's portion of sales within the marketplace in order to increase costing electric power (Campbell et al. , 2003). "In case a company does not have much pricing power then an increase in their prices would reduce the demand because of their products" (Investopedia US, 2012).
Carlsberg has knowledge and marketing knowledge about the local markets where it possesses breweries therefore other brewing communities would want to acquire it as accessibility method to these markets. Besides it would be a quicker way for these to make their presence known in these marketplaces.
Carlsberg is a very important brand and therefore is a focus on for other bigger groups as they would want gain its intellectual property such as "patents, trademarks, production processes, directories that are difficult to re-create, and research & development laboratories with a history of successful product development" (Bragg, 2012).
Its being the fourth greatest brewing corporation on the planet helps it be is a major competition in the making industry and in order to lessen competition a making group such as Belly Inbev might want to acquire it.
Furthermore, it is difficult to get costumers to improve brands because customers are fiercely devoted to local brands and the only path of tapping into these marketplaces is by purchasing the brewery (Rugman & Collinson, 2009). For example in countries where Carlsberg trading markets its products that the larger groups haven't joined yet, they could tap into these market segments by purchasing the brewery because the customers are familiar to Carlsberg's products.
The larger making group will want to gain preferential access to Carlsberg's sales and syndication programs. By acquiring it, they can put it to use to distribute its own products. Some of examples of sales channels they would benefit from are telemarketing or a well-trained-in house sales staff (Bragg, 2012).
However, there are a few barriers a making group such as Belly Inbev might face if they sought to acquire Carlsberg this could be:
Clash of culture between both groups in conditions of high management turnover which might possibly be because of this of Carlsberg's employees not liking the acquiring group's way of doing things and could decide to leave the business. This may materially damage the performance of the brewery because management talent and competence will be lost and therefore Carlsberg might reject an effort to be bought (Hill, 2009).
Integrating with other companies is difficult because of this of differences in management idea and company culture. This tends to decelerate the integration of functions. National culture variations could even get worse these problems (Hill, 2009). For example language obstacles between Carlsberg (had by way of a Danish speaking company) and Abdominal Inbev (a Dutch speaking company) may make Carlsberg decide to reject a bet.
Also, Carlsberg is a big company as well and might reject an attempt to be bought because it doesn't want to reduce its personal information. They could go as far as responding to any acquisition bids by purchasing other breweries as a form of defence. Due to its having good market shares purchasing other breweries will make its stocks bigger that this can't be bought within the brewery industry without anti-trust (this refers to specific laws guarding trade and business from unfair business routines (Merriam-Webster, 2012)) in so doing making it difficult for companies like Belly Inbev to obtain it (Bragg, 2012).
Global brand collection management and consolidation
A global strategy that sustains 500 brands cannot possibly be right because this plan focuses on increasing profitability and profit growth by reaping the expenses reductions that come from economies of range and learning effects in other to truly have a low-cost strategy on a global scale. This implies that this kind of strategy suits where there are strong stresses for cost reductions and demand for local responsiveness are low. Carlsberg has 500 brands and they customise their product somewhat to meet local conditions which customization includes shorter production goes and the duplication of functions, which tends to raise costs. They won't reap the advantages of economies of range as there will not be reduction in the unit cost attained by producing different product in large volumes. Also, they don't have the ability to save costs that come from learning by doing in terms of producing the same brand again and again i. e. their labour efficiency may not increase over time as it isn't easy for individuals to learn most effective of performing responsibilities when a big level of different products is involved. Hence, production cost increase due to a decline in labour productivity and management efficiency, which can decrease the firm's profitability (Hill, 2009).
Carlsberg should rationalise its facilities and concentrate on far fewer brands because it would be much easier to control and take care of fewer brands and also putting into action a worldwide strategy would be easier in comparison to when it has 500 brands. By doing this they would have the ability to benefit from a little from economies of level and learning effects. Furthermore, the price of advertising so many brands is relatively expensive. The customization of the brands would even make it more costly if they have different advertising for different brands in various countries. So they could want to consider concentrating on fewer brands because the fewer the brands the smaller the price tag on advertising.
Individual Representation and Self-Analysis
Expectations: I put always wished to find out more on the business world and management and as such my expectations for this component prior to start was to gain understanding of business and management in an international context as the main element to a successful business is how well the business enterprise is been able. This expectation has been fulfilled because I have gained the preliminary knowledge how organizations or organisations carry out their businesses internationally for example the strategies on how firms type in a international market. It has also given me an introductory knowledge how to identify a good home based business, have good plan of action to run and also take care of a firm efficiently.
Challenges: I had formed some challenges during the module and this was because I researched Electrical/Electronic Engineering in my first degree and knew next to nothing about business. Needing to do circumstance studies wasn't something I put done in my own previous degree and so I struggled with how to critically analyse and answer the questions that usually follow suit. I wouldn't say I have completely beat this task as you may still find some circumstances where I'm still not able to comprehend a case but I understand reading ahead of the lectures and paying attention during lectures has helped me to a certain extent.
Preparation for Experts: Personally i think prepared to commence a Masters level programme which component helped me plan it. This is because, I have learned the fundamentals of international business and management and also how to do comprehensive researches and framework a report, and my referencing skills have improved as well.
