Global Forces And The Western European Brewing Industry

Global Forces And The Western europiuman Brewing IndustryThe PESTEL framework categorizes environmental influences into six main types political, economic, social technological environmental and level-headed. Where by the political science highlight the role of government economic refers to macroeconomic factor such as exchange rates, and polarial economic growth rates around the orb social influences include changing culture and demographics technological influences refer to innovations as the internet environmental stands for issues such as pollution and waste and finally legal embraces legislative constraints or changes such as health and safety legislation or restrictions on company mergers and acquisition.The Western European create from raw stuff industriousness is exceedingly penetrated too many companies due to which the competition is very(prenominal) steep which is causing desegregation through acquisition, alliances and closures within the fabrication. The PESTE L framework can be used to avail identify the key forces that are driving the change in the market.PoliticalFactors could be the active campaign of European government against drunken driving, binge drinking, and hence the long term health and fitness problems. These campaigns give birth the potential to push for law changes surrounding what alcohol can be purchased in restaurants, pubs, bars and sell outlets in terms of both quantity and alcohol intensiveness %There is an overall decomposition of habit of beer in Europe as many conventional key markets have been made increasingly aware of the social problems associated with alcohol consumption.Restrictions on packaging such as the usage of cans in Denmark.stintingEconomic recession in 2009 has also lead to an effect on beer sales mainly in the United Kingdom where an estimate of 50 pubs closed per hebdomad due to recession.Beer consumption per capita varies widely between countries, for example being four times higher in Ge rmany than in Italy. Some traditionally low consumption European markets have been showing good growth, for example with reference to table 1 comparing year 1980 to 2000 the consumption of beer has increased from 3534000 hectoliters to 6453000 hectoliters which is harshly 82.60%.Social life style in emerging market has changed due to the increase in the availability of disposable income, leading to an increase in beer consumption. The new trends like wines, non alcoholic beers, unornamented cold lagers and fruit flavored beers will adversely affect the consumption of beers.Education and health there is an increasing awareness of the effect of alcohol on health and fitness. Particularly in the United Kingdom there is increasing hostility to so called binge drinking excessive alcohol consumption in pubs and clubs. expertRate of technological change as seen in the Anheuser Busch InBev (Belgium) company that efficiency gains will come from more central coordination of purchasing, inc luding media and IT from the optimization of its inherited network of breweries and from the share-out of best practices across sites internationally.Innovation of new products the case witnesses that the introduction of higher priced premium products such as non alcoholic beers, extra cold lagers or fruit flavored beers has led to increase in sales.EnvironmentalPollution people are getting more and more aware of the environment and it is necessary that the companies do everything to hold environmental pollution. It is important that the environmental load through the brewing process is as low as possible.Waste and recycling reusability and recycling is important, the brewing industry for example treats their effluents so that they can use it again for irrigation. Through this they save energy and minimize sludge disposal.LegalInternational law when comparing Europe with the United States we have witnessed that in America it is forbidden to drink in public places in contrast to Eur ope where you can drink alcohol wherever you want. This could lead to new laws that forbid drinking in the public place.Acquisition, licensing and strategic alliance have all occurred as the leading brewers battle to control the market. The planetary pressures for the consolidation due to over capacity within the industry, the need to contain costs and benefits of leveraging strong brands. For example in 2004, Belgian brewery Interbrew merged with Am Bev, the Brazilian brewer group to create the largest brewer in the world.A quintuplet forces analysisThe five forces analysis was originally developed by Michael doorkeeper in 1990, as a way of assessing the attractiveness of different industries or sectors in terms of militant forces. The five forces constitute an industrys structure, although initially developed with businesses in mind the industry structure analysis with the five forces framework is of value to most of the organizations. As well as assessing the attractiveness o f the brewing industry the five forces can help set an agenda for action on the various areas that they identify. The five forces areThreat of new entrantsThreat of substitutes bargain force-out of buyersBargaining power of suppliersCompetitive rivalryPOTENTIAL ENTRANTSCOMPETITIVE RIVALRYThreat of entryThreat of substitutesBargaining powerBargaining powerSUPPLIERSBUYERSSUBSTITUTESFIG 1THE FIVE FORCES FRAMEWORKThreat of substitutesThe threat of substitute is high because there is an availability of wine, fruit flavored beer and also extra cold lagers. From table 1 and 2 in the case study we can witness the negative effect of the substitute on beer taking an example of Denmark table 1 shows a decline in the beer consumption and in table 2 shows increase in the importation of exotic beers from overseas.Threat of new entrantsThreat of entry depends on the issue and height of barriers to entry barriers of entry are factors that need to be overcome by new entrants if they are to compete successfully. According to the case I telephone the threat of new entrants is very low because the industry is very much penetrated and mergers taking place, also there are global pressures for consolidation which sustain their agonistic position in the industry. There are very few big brewery companies which makes them dominate the market, so for a new entrant would be hard to have that financial effort.Bargaining power of buyersCustomers of course are essential for the survival of any business, but sometimes customers can have such high talk terms power that their suppliers are hard pressed to make any profits at all. The bargaining power is high due to the government campaign powerfully against drunken driving, and binge drinking which has led to an increase in off trade (retail) than on trade (beer consumed on premises as in pubs or restaurant). The off trade is increasingly dominated by large supermarket chains such as Tesco and Carrefour which gives them the bargaining pow er.Bargaining power of suppliersSuppliers are those who put up the organization with what it needs to produce the product or service. The main purchasing costs are packaging, raw material such as barley and energy. The European packaging industry is highly concentrated, dominated by international companies. The case shows that the bargaining power of supplier in packaging is high because there solitary(prenominal) three can makers and shifting cost from one can maker to the other could be high either in terms of money or even technology.Competitive rivalryCompetitive rivalry is organizations with similar products and services aimed at the same customer group. The competitive rivalry in the brewing industry is very high because almost all companies have the same product/ product differentiation is low, high rate of acquisitions, alliances and strategic alliance and also consolidation due to over capacity within the industry.ConclusionWith regard to the PESTEL analysis and the Porte rs five forces analysis I conclude that in order to sustain the competitive position and market share in the brewing industry, one should acquire, license or strategic alliance with an existing company could be small, medium or already a large company.Question 2For the three breweries outlined above or breweries of your own choice explainHow these trends will impact differently on these different companies andThe relative strengths and weaknesses of each companyAnheuser-Busch InBev BelgiumA-B InBev is the largest brewer in the world it achieved this position when InBev acquired the leading American brewer Anheuser Busch for 52bn. The company this instant has nearly 300 brands and approximate 50% share of the US market and owns 50% of Mexicos leading brewers. The company is frank about the strategy to read itself from the biggest brewing company to the best.STRENGTH helplessnessLargest brewer in the worldInherited network of breweriesStrong financial powerThe merger of Belgian Inte rbrew and Brazilian Am Bev in 2004The companys strategy to transform itself from the biggest to the best byBuilding strong global brandsIncrease efficiency through more central coordination of purchasing including median and IT.Greene King United KingdomGreene King is now the largest domestic British brewer, which was established in 1799. It has expanded through a series of acquisition including Ruddles 1995, Morland 1999 and Hardys and Hansons 2006.STRENGTHWEAKNESSBrew high feeling beer from an efficient single site.Medium size brewing companyFocused brand portfolio which is minimizing the complexity and cost of a multi brand strategy.Less financial power2000 pubs across the UK with a particular dominant position in its home region of East Anglia.Expansion through acquisition, which led to critics calling the company devouring(a) king.Tsingtao ChinaTsingtao brewery was found in 1903 by German settlers in China, after state ownership under communism Tsingtao was privatized in the e arly 1990s and listed on the Hong Kong demarcation exchange in 1993. Tsingtao has 13% market share of its home country, the company has described its ambition thus to promote the continuous growth of the sales volume and income to step forward the target of becoming an international great company.STRENGTHWEAKNESSIt is the Chinese brand leader in United StatesSmall brewing companyIts now sold in more than 62 countries.Less financial powerAlmost 50% of exportsHome market share is very low 13%A bottle of Tsingtao appeared in the 1982 science fiction film blade Ronner.