Strategy analysis sabmiller free essay sample

As of 2006, SABMiller had presence in both developing countries as well as developed countries. After the lifting of the international sanction against South Africa in 1990s, SAB was able to capture new growth by expanding into developing countries, whilst at the same time consolidating its existing regional market of South Africa and in 2002 entered developed market of US with the acquisition of Miller. External Analysis SABMillers business strategies are influenced by the forces in its external environment. PESTEL and Porters five forces framework are used to analyze these factors influencing the firms macro-environmental and industry sectors respectively (Johnson et al, 2008, p. 55). From SABMillers PESTEL Analysis (Appendix A) and Porters Five Forces Analysis (Appendix B), the key external drivers of change affecting SABMiller are ; Political Threat Economic Threat; SABMiller relies on markets in developing countries for its growth objectives. Hence it has to comply with diverse set of local regulations, tax laws that are unique to these countries. And it is dependent on political stability in these countries as any kind political turmoil can have a negative effect on SABMillers operations and profitability. In the developed countriesSABMiller has to face and adopt to stricter alcohol laws along with growing anti-alcohol lobby. Economic Threat; SABMiller is subject to global economic cycles like GDP, exchange rates, oil prices, levels of disposable income. When income level falls in emerging markets, beer consumption falls. Fluctuation in local currency exchange rate will also have significant effect on its profits . Increase in the prices of raw materials or transportation cost will effect its profits. Buyer Power ; In developing countries, beer consumption increases as disposable income increase. However buyers can easily switch from beer consumption to wine other spirits due to changing lifestyle. Anti-alcohol movement in western countries like curbing of bar/pub hours along with smoking ban affects beer consumptions Competition; Even though, SABMiller is the second largest brewing company by volume and it enjoys competitive advantages in economies of scale and low prices, it still faces fierce competition from the few large established brewing companies like Annheuser-Busch, InBev, Heineken, etc. These competitors have entered developing markets and compete directly against SABMiller.. For Example; Anheuser-Busch in China. Internal Analysis In spite of being in a highly competitive industry, we can see from SABMillers SWOT analysis (Appendix C), that emerging markets is fast growing with huge potential and there is an increase in demand for Premium beers in developed markets. SABMiller has been able to successfully exploit these opportunities by entering both developing and developed markets and then creating a sustainable market by using an optimized brand portfolio approach. From External and Internal analysis SABMillers success factors can be attributed to its unique Resources and capabilities of ; Scanning Business Environment; Throughout its history, SABMiller has developed unique capabilities of scanning business environment and making strategic choices. When faced with growth constraint due to international sanction during apartheid regime, SAB was willing to diverse away from its core business of beer to maintain growth. For Example; Venturing into Hotel Match business for regional growth. After the lifting of sanctions, SAB was able to identify unique opportunities in emerging countries of Eastern Europe and later into Asia and South America. Management Skills; SABMillers management has lot of experience conducting businesses in developing countries and was successful in leveraging this skill in developed country also. When SAB acquired Miller, the group had to move from their traditional practices of conducting businesses in emerging economy to developed country which shows managements flexibility to adapt to changes. SABMillers Management are capable of developing sophisticated logistics in developed regions of USA and Western europe, whilst capable of working with primitive logistics in rural areas of Asia and Africa. Value-adding and Corporate parenting; SABMiller has unique competencies of working well in different countries and possess valueadding parenting capabilities to increasing operational efficiencies and transform acquired businesses. One such example is when SABMiller used its management skills and corporate parenting to turnaround Miller by bringing in its operational efficiencies and employee performance practices. Acquisition Takeovers; SABMiller has unique competence in acquisitions and takeovers. Its growth has come through entering developing markets, acquiring businesses and growing them. They are confident in acquiring small companies in developing countries and also high profile acquisitions like Miller Fosters in developed countries. Stakeholder Expectation; SABMiller has made strategic choices to fulfill stakeholder expectations. One such move is its acquisition of Miller. When SAB listed itself in LSE, it faced huge pressure from investors and analysts to have a presence in western market and move away from over reliance on emerging markets. In order to be establish itself as a global player, SAB acquired Miller which gave it immediate access to US market and established itself as the worlds second largest brewing company by volume. SABMiller has utilized its unique resources and core competences to address competitive challenges and stakeholder expectations. From being a regional player in South Africa during the 1990s, it has achieved tremendous growth via globalization and as of 2006, it has annual revenue in excess of US $18 billion, with more than 200 brands and has firmly established itself as a global brewing company