SAB Miler - Business Strategy

BUSINESS STRATEGY
Timeline
1960s 1890s
Founded in 1895 Listed in JSE 1897, LSE in 1898 Launched Castle Lager Expanded product portfolio Stellenbosch Farmers winery. Licenses to locally brew Guiness, Amstel and Carling black Label. Unrelated 1983 - Forced to diversification thru reduce interests in Zimbabwe JVs food, property, hotels, 1987 - Leading safety matches retail, etc Sun city Casino & manufacturer in Resort, 1978 Africa 1979 controlled 99% of market in SA 1993 Acquired Dreher, Hungarys largest brewery Move into Central Europe Invited back to participate in JV with Tanzanian Govt. Estd operations in China, Poland, Romania, Slovakia, Russia and Czech Republic. 2001 5th Largest brewer in the world 7.7 Bn litres 2002 Acquired Miller Brewing Co Co renamed to SABMiller 2nd largest brewery by volume in the world!
1970s
1980s
1990s
2000-2003
Environmental Analysis
External Environment PEST Analysis Industry Environment Internal Environment SWOT Analysis
External Porters 5 Environment Forces PEST Analysis
Political Factors
Racist system
Struggle to establish democracy

Campaign for economic sanctions
Excise duty policy

Prohibition on consumption of liquor by black S. Africans
Economic Factors
Exchange Rates Prices of key raw materials highly volatile Uneven consumer disposable income
Socio Cultural Factors

Fierce attachment to local brews Shift from immediate gratification to self improvement Decrease in consumer spending on beer Changing tastes and preferences
Technological Factors
Better production facilities Focus on developing more variants Aim at reducing costs and enhancing quality
PORTERs 5 FORCES
New entrants LOW
Bargaining power of suppliers MEDIUM
Threat from competitors HIGH
Bargaining power of customers HIGH
Threat from substitute products HIGH
Threat from new entrants

High capital requirements No new entrant has cracked the top 3 since WW2 High government regulation Concentration of industry (Top 5 > 80% MS) Strong Brand loyalty accompanied with major players in industry act as deterrent
LOW
Bargaining Power of Customers

Main buyers are wholesalers/ distributors Consolidation of distributors Limiting new buyers govt. licensing Demand for beer - inelastic Demand for particular beer brand - elastic HIGH
Threat from Substitutes

Other alcoholic and non-alcoholic beverages Changes in Income, lifestyle, tastes and preferences Growing substitute industry (juices, wines) No Switching cost
HIGH
Bargaining Power of Suppliers

Small no of suppliers relative to brewers Brewer must have hops, malt, yeast and water Vulnerability to rising raw material prices Grain, grass, aluminum
MEDIUM
Threats from competitors

Industry has eat or be eaten competition Easy access to same distribution channels Low distributor loyalty High innovation and differentiation
HIGH
SWOT ANALYSIS
Acquisitions Extensive product & brand portfolio Diversification Market dominance Management expertise Spread of international business: portfolio effect Decentralized management Over reliance on developing markets Lack of brand equity in first world countries Dependence on volume for turnover growth Acquisition of miller
Competitors gaining MS M&A HIV/AIDS Rising cost of raw materials Decreasing consumer spending on beer Changing lifestyles Devaluation of currency Low consumer confidence in U.S market External restrictions on market expansion Excise duty
SWOT
Increasingly stable macro economic environment Favorable political change JV with Tanzanian govt. Expanding global demand
Strategies
Corporate Level Strategy
Corporate Business Level LevelStrategy Strategy

Functional Level Strategy
Diversification
Related Diversification
Horizontal Integration
Local strong hold
Build critical mass
Diversification
Unrelated Diversification
Safety Matches Food
Retail
Furniture Property
Clothing & Footwear
Hotels & Gaming
Global Expansion
Mode of Entry
Joint Venture
Acquisition
Global Expansion
Competences of global subsidiaries
Management Expertise Economies of Scale
Brand Portfolio
Local Responsiveness
Consumer Preference Political & Economic Environment
Partners & Local Communities
Global Expansion
Pressures for local responsiveness Low High Localization strategy
Low
Pressures for cost reductions
International Strategy Global standardization strategy
High
Transnational Transnational strategy

strategy
Corporate Parent
Identify and acquire businesses
Transform the business
Independent BU strategies
High degree of autonomy
Portfolio Manager
Parenting Portfolio
Leveraging parental competences
Adding value through managerial expertise Focus of future strategies
Heartland Business Units
Strategies
Business Level Strategy

Attaining competitive advantage
Industry
Fragmented industry
Horizontal merger
Consolidate
Economies of scale
Securing a national market
Bowmans Strategy Clock

Route 4: Differentiation
Value addition to local brands Enhanced price for better margins
Price Based Advantage

Volume game
Product development
Efficiency program
Production
Labor
Blue Ocean Strategy

Blue ocean from within a red ocean Created new demand Differentiated products and low costs Rapid and profitable growth
Strategies
Functional Level Strategy

Integrating resources, processes and people to deliver corporate and business level strategies
Operational Efficiencies
Economies of scale
Innovation: Brutal Fruit and Sterling Light (South Africa), Redds (Poland
and East Africa)
Marketing and distribution Material management: Rationalizing production & distribution Streamlining brands from 50 to 11 - 12
Superior Quality
Clear goals: gain higher market share Commitment to quality Employee performance rating
Customer Responsiveness
Customization Building locally, winning globally Quick response time
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BUSINESS STRATEGY

External Porters 5 Environment Forces PEST Analysis

Struggle to establish democracy

Excise duty policy

Socio Cultural Factors

Bargaining power of suppliers MEDIUM

Threat from competitors HIGH

Bargaining power of customers HIGH

Threat from substitute products HIGH

Threat from new entrants

Bargaining Power of Customers

Threat from Substitutes

Bargaining Power of Suppliers

Threats from competitors

Corporate Level Strategy

Corporate Business Level LevelStrategy Strategy

Local strong hold

Build critical mass

Safety Matches Food

Clothing & Footwear

Hotels & Gaming

Pressures for local responsiveness Low High Localization strategy

International Strategy Global standardization strategy

Transnational Transnational strategy

Transform the business

High degree of autonomy

Heartland Business Units

Business Level Strategy

Securing a national market

Bowmans Strategy Clock

Price Based Advantage

Blue Ocean Strategy

Functional Level Strategy

Customization Building locally, winning globally Quick response time

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