Category: Beer

The selected advert belongs to Schloss Eggenberg beer company and is used to advertise their Samichlaus Beer which is claimed to be the strongest in the world (Knobloch n.pag.). The ad has appeared in print outdoors, as well as in “men’s” magazines and online top lists. Because the ad has appeared mainly in “men’s” magazines, the target consumer is supposedly male. The extensive history of the company and the products they offer imply that this particular ad is targeted at beer connoisseurs just as well as persons who prefer stronger beer. The ad features Samichlaus beer in a whiskey shooter. The ad promises that Samichlaus is no worse than whiskey in terms of strength. The message concerning the exceptional qualities of Samichlaus beer is delivered using a fantasy idea of beer so strong it can only be drunk from whiskey shooters.

The ad is effective partially due to the media it appeared in. Magazines provide high quality color and help directly reach the target consumer, that is, beer lovers who are supposed to be male. On the other hand, outdoor location increases the ad’s visibility in certain routes, commute itineraries, etc. Internet versions of the ad might have a hard time squeezing through the clutter but the consumers’ reaction is easily measurable. Also, the message is delivered through a creative idea that is memorable (Kotler and Armstrong 464). The message is simple: Samichlaus beer is strong. The appeal that is used in the ad to deliver the message is meaningful and distinctive, and, although the idea of beer as strong as whiskey is hardly believable, it is leveraged in a creative way. Overall, the advert is executed in good taste and is easy to remember, which contributes to its effectiveness.

Works Cited

Knobloch, Rudiger. “Eggenberger Schlossbrauerei: Strong Beer.” Digital image. Advertolog. Lixil Graphics Ltd., n.d. Web.

Kotler, Philip, and Gary Armstrong. Principles of Marketing. 15th ed. Upper Saddle River, NJ: Prentice Hall, 2013. Print.

Multiple regression model of the demand for beer in Australia

The descriptive statistics of the regression model provide that the average per capita consumption of beer is 115 liters and the per capita income is $5691.61.

The average prices of beer, wine and spirits is $1.52, $3.34 and $17.41 respectively (Table 1). The standard deviations of the per capita consumption of beer, income, price of beer, price of wine and price of spirits are 13.33, 5399.03, 1.27, 2.31 and 15.06 respectively while the total number of variables applied in the research is 42 (Table, 1).

The regression analysis for this study was done at 5 degrees of freedom. And this provides the basis for conducting the test of the level of significance for the data.

The regression models for data set are: Income Y = -4.063 X -.010, price of beer Y = -6.490 X -68.239, price of wine Y = 7.272 X + 41.922, and price of spirits Y = 2.995 X + 2.652.

The regression line for the income, Y = -4.063 X -.010, indicates that the consumption of beer is negatively related to the income of the consumers.

This also indicates that when the income of a consumer is $1 the level of consumption will be less by 4.063+.010 liters (because when x = 1 y= -4.063*1-.010). The regression line for price of beer is y = -6.490X -6.490 and this indicates that when the price of beer is $1 the consumption of beer is less by 6.490.

Additionally, consumers take less of the beer by -68.239 liters when the price is zero. The regression line for wine is price of wine Y = 7.272 X + 41.922 and this indicates that when the price of wine is $1 the level of beer is 49.194 liters while the consumers take 41.922 liters of beer when price zero.

The regression line of spirits Y = 2.995 X + 2.652 and this indicates that the consumption level of beer is 5.647 liters when price is $1. In addition, when price is zero the consumption of beer is 2.652 liters.

All the observations were significant at 5 degrees of freedom, i.e. the level of significance is less that 05 for all variables under investigation (Table, 2).

From the above regression analysis results it can be observed that when the income of consumers is low there is a decline on the level of consumption of beer as observed in the regression between consumption beer and income levels.

This indicates that consumption pattern follows that of a giffen commodity because consumers reduce the consumption of the products when their incomes are low.

Since the product is not a basic commodity consumers can reduce its consumption when their incomes are low The three range of products; beer, wine and spirits have different demand patterns.

Wine has a higher demand than any of the other products while beer has the least demand of the three products. There is a positive relationship between the consumption of beer and the price of wine and spirits whereas the consumption of beer is negatively related to the price of beer. In addition, there is a negative relationship between the consumption of beer and the income of consumers.

Conditions are required for the validity of regression analysis

1. For regression analysis to be valid the independent variables are required to have independent values. This means that there should be no relationship between all the independent values.
2. It should be possible to identify the independent as well as the dependent variables in the experiment.
3. It is important that enough data should be collected when conducting the regression analysis.
4. The relationship between variables should be easily identifiable both in visual and numbers. This means that the goodness of fit and the numbers should be easy to describe the relationship between all the variables (Wainer, Braun and Educational Testing Service, 1988).

Analysis to determine satisfaction of the conditions

All the independent variables have no relationship at all and therefore the first condition has been fulfilled. The independent variables are the per capita income, price of wine, price of beer and price of spirits. These variables have no relationship at all and this means that the regression valid on basis of the first condition.

The second conditions for validity in regression analysis require that there should be a possibility of differentiating the independent and dependent variables.

In the experiment the independent variables are per capita income, price of wine, price of beer and price of spirits. The dependent variable is the quantity of beers consumed.

In addition, sufficient data has been collected from the population to explain the relationships and this is an indication that the condition of validity has been attained. Lastly, the data is clearly visible both in figures and in the diagram.

This indicates that the regression analysis is valid. Therefore, the conditions for validity of regression analysis have been fulfilled and this shows that the regression is valid.

Reference List

Wainer, H., Braun, H., and Educational Testing Service (1988). Test Validity. New Jersey: NJ, Routledge. Appendices

Table 1

Table 3

Introduction

Homebrewing began in the 1920s when, due to prohibition, the most practical way to obtain beer was to brew it at home (Baron 14). Beer is the product of fermentation of an infusion or a decoction of cereal malt (Baron 14). It is something less tangible and greater than its ingredients. Therefore brewing may be seen as a form of cooking. There are two reasons why home brewing is not as popular as it sounds: because of the difficulty in producing quality beer at home and because of the easy availability of commercially produced beer of various styles. However, homebrewing continues to survive today as a science, a fad, and a hobby. The home brewing process consists of three stages: initial brewing session, fermentation, and bottling. These three stages involve: combining the ingredients and initiating fermentation; transferring the fermented beer, first into a secondary fermenter and then into bottles; bottling, capping, and storing the beer for further maturation and clarification. Within each of these stages, following proper sanitizing, measuring, siphoning, and sealing procedures are essential to prevent bacteria and produce great-tasting beer.

Main body

The initial brewing session includes four processes: milling, mashing, sparging, and chilling. The grain is milled in a grain mill. Milling should be done as roughly as possible. The amount of mashing water is usually 3 liters of water per kilogram of grain. The burner under the Hot Liquid Tun (HLT) is lit and the container is filled with fresh water. It is heated to 57^o Celsius. Milled grain is added and gently stirred. It is best to follow a temperature-time schedule during mashing. After the wort temperature has achieved 78° C, it is time to start sparging. The wort is put in the boil kettle and sparging water (of 78° C) is added to the wort. The sugars are sparged from the grain. The grain is used as a natural filter bed.

The sparging water is added through the grain bed 4-5 times over a period of two hours. Care is taken to ensure that the grain bed does not go dry. The amount of sparging water is determined by the recipe and the kind of beer that you want to produce. For strong beer 3-4 liters of sparging water is used per kilogram of grain. The burner is lit and the hops are added during sparging. After sparging, the boil kettle is full with about 65-70 liters of wort. The collected wort is now boiled vigorously for 1-2 hours. Chilling must be done as far as possible and everything must be kept well sanitized. Chilling is best done using a counter-flow chiller which chills all the wort in about 5-10 minutes and puts it in the fermentation bin at the same time (van de Logt 1).

After the initial brewing session, the next step is fermentation. The yeast is prepared while the wort is being chilled Add at least 6 ounces of lukewarm tap water to the sterilized measuring cup and then open and add dried yeast packets. This rehydration step gently wakes up the yeast. Cover and set aside. The active yeast is now added to induce fermentation. After approx. 12 hours a layer of foam is visible on your beer. The total fermentation time depends on the type of beer and the yeast used but is something between 2-6 weeks. Many brewers siphon the beer after a few days to another bin for lagering. To make sure that the beer does not develop any bacterial infection, an air-lock is used to seal off the fermentation bin. It only allows the carbon dioxide produced by the yeast while converting sugars into alcohol to escape (van de Logt 1).

Once fermentation is complete, the air-lock activity ceases. Now, the beer is siphoned into thoroughly sanitized bottles. The bottles are placed in a large tub filled with hot water. A Chloride solution is added the bottles are left there for about half an hour. They are then rinsed with clean water and a little bit of sugar is added to every bottle. The bottles are now filled with beer from the fermentation bin, topped with a crown cap, and sealed (van de Logt 1).

Conclusion

Homebrewing is a simple process made up of three steps: initial brewing session, fermentation, and bottling. The major challenge in this process lies in sanitizing every piece of equipment. Home-brewed beer tastes good if prepared properly and tasting beer can become a social event if family and friends are willing to be part of the homebrew tasting sessions. One of the best things about making homebrews is the fact that one can experiment with ingredients and brew unique styles of beer.. It is basically a fun activity and often brewers form loosely-knit home-brewing groups, exchanging brewing tips and secrets. The excitement of opening one of the bottles of home-brewed beer and hearing the ‘ppfffft’ sound, pouring the golden liquid into the glass, seeing the head rise, taking in the aroma, and feeling so proud of having made beer – makes home brewing a worthwhile activity.

Works Cited

van de Logt, Emile (2006). The Brewing Process. Web.

Baron, Stanley (1962). Brewed in America: A History of Beer and Ale in the United States. Little Brown Publishers. Boston. 1962.

Introduction and Point of View

Grupo Mondelo is a Mexican beer maker established in 1922. The company was a local beer maker up to the late 1970s when it ventured outside Mexico into the United States of America. The company has become one of the major brewers as well as distributors in the global beer market, thanks to ingenious marketing initiatives.

This has made the company revenues grow tremendously. In addition the company has been settled most of its liabilities, thus becoming one of the most stable companies in global beer manufacturing. As such the company records high profit margins as well as high return on investment getting the company shareholders high returns on their investment. Thus, from an investors point of view the company stability coupled with huge profits makes it a worthy investment option.

Important issues

There are a number of important issues pertaining Grupo Mondel’s success. One of the most important issues to consider for a potential investor is the company’s profitability. The company’s earnings before interest and tax increased by 2.4 % for the one year period ending Dec. 2005. Such profitability means that the company is on its upward growth. The company’s’ stock is therefore attracts both small scale and large scale investors. As such the future looks promising for Grupo Mondelo (Som 257).

Other than profitability, the issue of employee quality and productivity also puts the company at an advantage in regard to profitability. While the company reduced the number of employees for the one year duration ending 2005, the company’s profits within the same period increased.

This means that the company is able to retain a fewer employees whose quality of production is able to guarantee the company profitable returns. This implies that the human resource management issue within the company is effective and efficient (Som 257).

Another key issue within the company is the issue concerning company’s future growth prospects. A number of factors point out the fact that the company will continue to grow in future. These include ratio of company assets to liabilities, which is at 8:1 implying that the company holds a health asset portfolio. This, coupled with reduced capital expenditure, implies that the company has already acquired enough capital assets for its current and future use.

Furthermore Grupo Mondelo’s price per share earnings as well as dividend per common share have significantly increased over the one year period ending 2005. This makes the company’s stock attractive to investors. As such there will be no shortfall of capital for future investment should the company need to raise it (Som 257).

Another of the key issue for Grupo Mondelo’s success is the company’s marketing strategies. Grupo Mondelo acknowledges that other than having a unique beer taste for its products, the company has identified marketing as a key issue towards its successful growth. These initiatives have seen the company come up with creative marketing drives that challenge people opinion and attitudes about taking beer.

As such, Grupo Mondelo marketing has seen the company gain new consumers for its products in America as well as other markets the company ventures. Grupo Mondelo marketing philosophy can be summed up in one of the company’s former president’s assertions that “people drink marketing and not beer” (Som 254, 253).

The potential of the global beer market is another issue that relates to Grupo Mondelo’s success. The global beer market has progressively developed from expansion to consolidation. This implies that major world beer makers such as Grupo Mondelo, seek to consolidate large markets and then establish control over those markets. In this regard the company has consolidated its market control in the Americas, a region which represents one of the biggest beer consumer markets in the world. Such control ensures stable business.

Finally, the company is also able to make strategic alliances with strategic partners to enable it expand and venture into previously restricted markets. In this regard, Grupo Mondelo has formed alliances with such partners as Anheuser-Busch, Coca Cola and Heineken to enable it venture into the United States of America. These alliances have not only helped Grupo Mondelo circumvent entry barriers into new markets but also increased its revenue earnings (Som 251, 254).

Analysis of KEY issues for potential investors

One of the key issues for potential investors is the company’s future growth prospects. There are a number of key indicators showing the company’s future growth is on the upward trend. One of the key indicators of a solid future is the company’s acid test ratio.

An acid test ratio (assets: liabilities) measures a company’s credit worthiness and evaluates a company’s asset that can be converted into cash (Q Finance 1). In this case, the company assets to liability ratio are 8:1 implying that the company has eight times more assets than liabilities (Som 257).

The very high ratio has implications. The fact that assets outstrip liabilities by eight to one implies that the company has been able to settle most of its liabilities such as insurance premiums, suppliers among others. It also means that the company has a lot of assets for utilization of future expansion plans. This is one of the key issues that potential investor look out for

The company capital expenditure is also another indicator of a strong future for the company. In this case the company registered a reduced level of capital expenditure by -9% in 2005 as compared to 2004 (Som 257).

This can be attributed to a number of factors. The company has made significant investment in manufacturing infrastructure which includes its production machinery as well as distribution channel. This makes the company able to facilitate expansion plans into foreign markets including the USA (Brown, Roath and Pheann 15).

Furthermore, the company also lets its strategic alliance partners control part of the capital investments such as distribution channels (Som 252). As such the company does not have to undergo maintenance cost for running such an infrastructure. With reduced liabilities the company is able to position itself in a better position than its competitor in the market for growth. This definitely attracts potential investors.

Grupo Mondelo’s earnings per share as well as dividend per common share are very attractive to potential investors (Som 257). For the duration ending Dec. 2005,

Grupo Mondelo’s earnings per share as well as dividend per common share increased by 14.1% and 17.8 % respectively (Som 257). This is attractive to potential investors in buying the company’s stock as the returns are good. Coupled with the fact that this company has limited liabilities which guarantee future growth prospects, this assures potential investor.

The company’s profitability another key issue for potential investors is. For the duration that ended Dec. 2005, the company’s earnings before interest and tax rose by 2.4 %. Furthermore, for the ten year period preceding 2005, the company registered a solid 7.8 % growth in net sales.

This is also facilitated by an increase in volume of beer sales for that period in both domestic and export market, which rose by 4% and 12.3 % respectively (Som 256). This signifies that the company beer brands are increasingly becoming acceptable and dominant in the world market (Americas Greatest Brands 43).

Such statistics are attractive to investors since, with a global acceptance, it means that the company’s beer brands are able to outdo competition. This further guarantees the company solidified presence in the global market. As such, any investor willing to make a solid investment will consider Grupo Mondelo as potential investment.

Grupo Mondelo’s financial position portrays a different and unique financial structure than its rival in the market (Brown, Roath and Pheann 11). One of the key indicators of this phenomenon is the company’s profitability ratios, which evaluate the company’s business related expenses Vis a Vis the company’s earnings. The company has seen its net operating income grow by 1.4%, while its net sales grew by a significant 7 % for the one year period ending Dec. 2005.

Within the same period, the company saw its earnings before interest and tax grow by 2.4 % while the return on equity changed by a +0.7 %. Such growth is realized against a situation within which the company has been able to maintain its cost and expense at very low levels. This is reflected in the company’s ability to register a -6.9% growth in liabilities and a -9.4% growth in capital expenses.

Such attractive balances within the company financial books means that the company is able to make better return for inventors. This is reflected in the company’s earning per share margins which increased by 14.1% while the company’s stockholders earned a 17.8% increase in dividend returns (Som 257). This is a reflection of the company’s 17% growth in share value for the same period (Gard, Smith and Weber para 5).

This makes the stock even more attractive to investors. Furthermore, the company is more liquid as compared to its rivals. For the year that ended 2005 the company was able to cover its liabilities eight times over. This signifies a very high liquidity ratio (Som 257). This further implies a good financial outlay since the company has been able to cover most of its liabilities while the existing liabilities are only short term. As such the company has a very good financial outlook.

Summary, Conclusions and Recommendations

A number of key issues are significantly important to Grupo Mondelos business success as well as future growth. The company’s marketing strategies are very strategic positioned to exploit both existing and new markets.

This is attained by creative advertising methods that ensure maintenance of local an export markets while attracting non beer drinkers to try its brands. The issue employee quality and productivity has also been able to guarantees sustained productivity, while the fact that the company is able to make strategic alliances ensure that its brands are able to penetrate into previously restricted markets.

Furthermore, there is enormous potential in the global beer market, which has grown from expansion to consolidation. The fact that the company has been able to consolidate its positions as market leader in the Americas means a very stable business. However, it is the company’s profitability as well as growth prospects that would interest the potential investor.

The company balance sheets paint a very healthy financial outlook for the future as it is able to maximize profits with minimum expenses. Moreover, the company has made significant investments in infrastructure to an extent that it is able to manufacture and distribute its brands to major markets such as the Americas. All these issues paint a very stable company going into the future.

In the current state of affairs it can therefore be concluded that the company is very stable. If the current trend persists, a number of things are likely to happen. To begin with, the company assets value will continue to rise as its liabilities decrease further. This means that the company’s will continue to accumulate assets to an extent that some of them will lay an-utilized.

Furthermore, reduced capital expenditure means increased revenues, but with time capital investment might depreciate in value to an extent that they company’s production capacity might be affected negatively due to wear and tear as well as lack of replaced for worn out equipment.

With reduced production capacity, the company profitability will be negatively affected, and so will the shareholder returns as well as dividends. The company is also likely to loose it market dominance due to reduction in production capacity.

To mitigate these likely affects, a number of things are recommended. To begin with the company needs to protect its future growth prospects. This will be attained through a number of activities. The company should consider venturing into the low calorie drink market to cater for the increasing number of health conscious drinkers.

This is a potential market that guarantees considerable profits. This means that the company will have to reinvest some of its capital in equipment to expand its production capacity to meet this new demand. Secondly, the company is very profitable as it stands.

These profits also need to be protected. This can be attained through putting those profits into uses that will guarantees better future returns. These include expanding into other untried markets such as China and Australia as well as diversify its production into spirits and wines. This will see that company able to capture those clients who have preferences for such drinks, and further increase its income and profits.

Works Cited

Americas Greatest Brands. “Corona Extra.” n.d. Web.

Brown, Chris, Roath, Jennifer and Pheann, Janissa. “Corona Beer: From a Local Mexican Player to a Global Brand: Case Analysis.” 2009. Web.

Gard, Lauren, Smith, Geri and Weber, Joseph. “Life’s A Beach For Corona — Or Is It? Sales growth is slowing in the U.S., so Grupo Modelo is searching for better margins and new customer.” BusinessWeek. 2005. Web.

Q Finance. “Acid-Test Ratio.” n.d. Web.

Som, Ashok. Corona Beer: From a Local Mexican Player to a Global Brand. Paris: ESSEC Business School. 2008. Print.

Introduction

Boston Beer Company was established by Jim Koch in 1984. The headquarters of the company are located in Massachusetts, and approximately 780 people are employed at the company. The company uses traditional methods to brew the best quality natural beer. Boston Beer manufactures beverages with low alcohol content and has concentrated on the US market.

Samuel Adams is one of the brands of the company, which is brewed using the traditional methods. This brand has captured a great portion of the American market. In the financial year 2009, the company made $415.1 profits. The profits have been increasing over the years due to the increasing demand for the products of the company (Grant, 2009).

Porter’s five forces analysis

Bargaining power of consumers

There is low bargaining power of consumers because there are large consumers who can influence the prices offered in the market. This has been caused by existence of many customers in the market. In addition, most customers buy in small scale.

Therefore, there is no single customer with absolute control over the marketing decisions that are made by the company. in addition, the geographical spread of various consumer groups does not give customers the power to control the pricing decisions of the company. However, with the increase in number of retail outlets such as Wal-Mart who can buy in large quantities, the bargaining power is increasing. The producers use the forces of demand and supply to price their products (Schmitt, 2011).

Bargaining power of suppliers

The bargaining power of suppliers is low. There is no unique supplier. Raw materials are easily accessible, and this makes it impossible to have monopoly in the supply of supplies. Suppliers are many and there is no single supplier with ultimate control in the market. However, in the last one decade a scenario where suppliers are reducing in numbers has been experienced. For example, suppliers of hops and grains have declined drastically in numbers. This has provided suppliers with more power to control the pricing strategy of the company (Schmitt, 2011).

Rivalry among competitors

Rivalry among competitors is very high. There are many companies in the beverages industry, and this is causing high competition among the existing firms. In addition, the products in the industry are not differentiable. The industry has reached its final growth stages, and this is making it impossible to introduce new differentiated products.

Companies in the industry have differentiated their products and this has increased the level of competition. Beers and breweries have been differentiated to attract the attention of many customers in the market. For instance, craft brewing has seen only an increase in volume and sales over the past 20 years. This has increased rivalry among existing companies in the market (Schmitt, 2011). The graphs below show an increase in competition in the industry.

Source: Brewers Association (2011)

Threat of substitutes

There are many substitutes in the industry, and this increases threat from substitute products. There are many alternatives to beer, such as wine, sprits and liquors. Apart from the alcoholic beverages, consumers can drink coffee, tea, and other non-alcoholic beverages. The number of beverages is increasing in the market ands this makes it possible for consumers to shift from one brand to another.

Even though brand loyalty has effect on the kind of beverage consumed, brand shifting is high in the industry. Consumers are ready to accept new brands in the market, and this makes it possible to shift to new brands. Brand shifting is not costly, and consumers find it possible to use other brands without incurring any costs (Schmitt, 2011).

Threat of new entrants

Due to the attractiveness of the industry, many new companies are being established in the industry. According to Brewers Association (2011) “growth of the craft brewing industry in 2010 was 11% by volume and 12% by dollars compared to growth in 2009 of 7.2% by volume and 10.3% by dollars” (p.1).

This has increased the number of new entrants for the last decade. Many investors prefer to invest in this industry because there are many consumers. Even though the initial capital is high, there are many people willing to take the risk of investing in the industry. Few restrictions and barriers of entry have been placed in the industry, and this makes it possible to penetrate the industry (Schmitt, 2011).

Market Analysis

Demographic Trends

There is a shift in the demographic trends in the market such that the young, middle aged and the old are consuming crafted beer. Consumers in the market are interested in getting quality beer more than the price. With change in culture, many young generations are consuming alcoholic drinks. This has increased the consumers of beer products in the market (Schmitt, 2011).

Socio-Cultural systems

The number of beer consumers is increasing due to change in social and cultural structures. People have more leisure time to spend their income on leisure products. The consumers have higher expectations on the products in the market. The middle class income groups have excessive concern for foods and drinks. Most of the customers have higher interest on products with natural ingredients. In addition beers brewed naturally and traditionally are more preferred by consumers (Stevens, 2008).

Development in technology

With improvement on technologies, mass production of craft beers is possible. This has made is easy to export craft beers, rather than producing for local or regional consumers. Technology has also developed in the marketing strategies. An example is the e-marketing where companies can access the global markets. This has made it easier for companies to access foreign markets, and to communicate with customers (Remmé, 2008).

Economic effects

With the changes in macroeconomic environments, larger companies in the industry are buying smaller companies. Large companies have the advantage of economies of scale, and this makes them competitive in the market. This has made it impossible for small companies to survive. The global financial crisis that happened in 2008 affected the economies of many countries. There is a decline in the market for most (Schmitt, 2011).

Political and legal pressures

The abuse of alcohol beverages has been criticized by most governments. This has caused increase in taxes on alcoholic products. The laws governing the sale as well as distribution of alcoholic products have been toughened. Various interest groups have called for decrease in beer consumption. For example, MADD advocates that drivers should have low blood alcohol content. Heavy punishments as well as fines have been imposed for those who drive while drunk (Stevens, 2008).

Strategy Formulation

The Boston Beers Company should penetrate the global market. The company operates only in the US craft beer market. There is need to adopt the strategy of extending its operations to other countries. This strategy will increase the market share of the company. In addition, the company will be able to increase its sales abroad. This strategy will require the company to expand its operations so that it can serve the larger market (Remmé, 2008).

The cons for this strategy are that the company will incur more costs in establishing itself in foreign countries, and rivalry among competitors may be high. Since there is high competition in the global markets, there is potential that the company will encounter stiff competition which makes it impossible to penetrate such markets. Another disadvantage is that various countries have imposed strict laws on alcoholic drinks. This is limiting many companies from entering and operating in such countries (Schmitt, 2011).

By penetrating in other countries, the company will be required to produce in large quantities. Mass production will provide the company with economies of scale. This will make it possible to manufacture a unit of any product at a lower cost. Therefore, the company will be able to offer its products at lower prices both locally and globally (The Boston Beer Company, Inc., 2011). The graph below shows that the global the potential to absorb more firms

Source: Krin Holdings (2011).

Conclusion

Boston Beer Company has been operating in the industry for a long time, and has focused on offering customers with high quality beer. The company operates in the US market only. The beer industry has more potential and the management of the company should consider expanding its operations to global markets. The company should consider penetrating into the global markets to expand its operations.

References

Brewers Association, (2011). Number of breweries. Web.

Grant, T. (2009). International directory of company histories: Volume 100. Detroit, Mich: St. James Press.

Krin Holdings, (2011). Per Capita Beer Consumption by Country (2004). Web.

Remmé, J. (2008). Leadership, change and responsibility. Oxford: Meyer & Meyer Media.

Schmitt, C. (2011). Brewing Industry Analysis. Germany: GRIN Verlag.

Stevens, P. F. (2008). Hidden history of the Boston Irish: Little-known stories from Ireland’s “next parish over”. Charleston, SC: History Press.

The Boston Beer Company, Inc. (2011). Welcome to the Boston Beer Company, Inc. Investor relations website! Web.

Abstract

This paper concentrates on Singha beer of Thailand and the current business climate in the country. Politics, technology, societal trends, regulation and the economy of Thailand are dealt with in the paper. The paper will especially be useful to marketers who are always positioning their brands in the market on the face of stiff competition.

Introduction

Singha beer is the most popular beer brand in Thailand. Before Chang was introduced, Singha was the flagship product for Boon Rawd Brewery of Thailand. The company has unsuccessfully tried to expand its operations across borders due to stiff competition and unfair business practices (Cummings, 2003).

The beer brand however remains the most popular in the country owing to the largely efficient and well-funded marketing campaigns organised by the Boon Rawd Brewery.

Thailand according to the US State Department is the 24th largest economy in the world. Despite the impressive figures posted by the economy, different factors have ensured negative impacts on the country’s businesses like manufacturing where brewing fall under.

Unstable political climate, dynamic social trends and the ever-changing technology have had different impacts on Singha beer and its position in Thailand.

Politics

The Asian continent has many trouble spots as far as political instability is concerned. Thailand is one of the countries in the region that has experienced political upheavals that have been quite disruptive to business and the economy. There is a lot of uncertainty in Thai politics with especially with the meddling from the military (Siengthai & Andrews, 2009).

The most were the anti-government demonstrations led by the red shirt movement. However, some businesses like the food and beverage industry have developed in the last 20 years and are easily cushioned against such political shocks (Siengthai & Andrews, 2009). Singha beer should therefore take advantage of the resiliency shown by economy to increase its market share.

Economy

According to the Oxford Business Group (2009), Thai beer industry is one of the most rapidly developing industrial segments in the country. The sector holds a lot of potential for growth in the future in the economy of Thailand. The economy of Thailand is rapidly growing and so is the middle class.

There is growing competition from Chang the main competitor of Singha. The government also is increasingly targeting the industry with increase of tax on beverages, which hurts the growth of the industry and the brand. However, it is the packaging and the positioning of the brand that is most important in trying to keep up with the times.

For instance in 1997, Chang took advantage of Singh’s complacency to rebrand itself as the beer of the moment, while branding Singha as that of the past. This was targeted at the growing middles class Singha was clearly caught off guard (Roll, 2005). Because of the dynamism of the economy, rebranding will help Singha ward such unfair attacks by opponents hence keeping its share of the market.

Societal Trends

With such branding Chang proved to be wary of the emerging trends in the society and the apparent preference of anything new in the market by the population. The simple assumption here was that people no longer perceive anything old as “gold” hence the need to do away with them.

The Thai social culture is an interesting one. Thailand boasts the biggest sex industry in the world. The industry is so critical to the economy that even the government acknowledges it cannot do without it. Tourism and entertainment therefore are big in Thailand and so are the accompaniments that come with them like drinking.

Singha may be the best-known brand of beer in Thailand but they can also establish long-term presence if they subtly linked taking of their beer with the country’s most famous activities. World over, the age of drinking is rapidly declining. More and more young people are adopting the drinking culture legally or otherwise.

Most of these young people are culturally parallel with their parents who can safely be described as “old fashioned”. Being “cool” is what young people want. Repackaging Singha to look cool before any one who drinks will ensure long-term loyalty from current generation consumers.

Technology

Technology is a crucial element in the success of any business in the 21st century business environment. With an economy expanding at an average of 4% per annum, Thailand’s manufacturing sector is one of the areas where new technology is introduced regularly including beer production.

Singha is arguably one of the beers that are brewed using state of the art technology. In the 1990’s after the failed expansion to Germany, Boon Rawd Brewery retained some of the European technology it used to produce beer (Protz, 1995). In Thailand the factory where the beer is manufactured also boasts state of the art equipment that have helped the company maintain an output of over one billion litres per year.

Regulation

Regulation in the beer industry is necessary. Moreover, not all regulations are anti-business. For instance, the government of Thailand in 2001 enacted the Thai Health Promotion Foundation act popularly known as ThaiHealth.

The act sought to help industry players like Singha beer manufacturers to regulate themselves (Lewis, 2010). Boon Rawd Brewery can take this advantage and boost its promotional activities while at the same time passing on a message of responsible drinking. Corporate social responsibility will endear the brand t the public and boost its loyalty among the population while netting new fans.

Conclusion

The current economic climate is very dynamic and somehow unpredictable. For businesses like Singha beer to keep running, there needs to be a level of innovation and perceptive business decisions to counter the shocks of the current world economy.

References

Cummings, J. (2003). Thailand. London: Lonely Planet. Melbourne; London: Nd

Lewis, R. (2010). Beverages in Asia – Issues for Responsible Investors. London: Responsible Research.

Oxford Business Group. (2009). The Report: Thailand 2009. Oxford: Oxford Business Group.

Protz, R. (1995). The ultimate encyclopedia of beer: the definitive guide to the world’s great brews. New York: Smithmark.

Roll, M. (2006). Asian brand strategy: how Asia builds strong brands. New York: Palgrave Macmillan.

Siengthai, S. & Andrews, T. (2009). The Changing Face of Management in Thailand. New York: Routledge.

Executive summary

The report seeks to explore the market analysis, country analysis, and the foreign entry modes that can be applied by a company while entering in an international market. A company based in the UK has been experiencing problems associated with market share as the market has been saturated with beer products.

The brands that it would like to introduce in the new market are the sales of ales, stouts and bitters, low/no alcohol beers, premium lager, specialty beers and standard larger. However, because of the feared competition in the target country market, the report addresses low/no alcohol beers, premium lager, and specialty beers. These would be marketable in France the target market for the preference by French population to consume foreign beers with specialty beer being the leading product.

The report uses PESTEL analysis to analyses the France macro-environment forces as it assesses the possibility of launching its beer products. The market of the beer products is analysed using the available marketing mix in France, as well as the segmentation of the market, positioning of the products and the targeted market.

The findings are that the market is segmented on basis of age, while targeting the youth. The report unveils different foreign entry modes which are commonly applied. The modes are the licensing, the foreign direct investment, exporting and joint venture. The suitability of the entry modes are well represented and discussed with their respective advantages and disadvantages.

For the UK based company, exporting entry mode has been recorded for its numerous advantages. Based on the findings, the company has a better chance of entering the France market and gain a market share in the beverage beer industry.

Introduction

UK has been leading in the production of beer in Europe with a huge consumption. However, the consumption of beer has been reducing over the years as the population has been concentrating on health living. This has left the consumption of beer low as they have turned to the consumption of wine and low/no alcohol beers.

The country has been filled with many beer key players making the market become saturated. This has forced companies to seek foreign markets that have low beer production with the aim of utilizing the available market share.

On the other hand, France has been known for its production of fine and competitive wine for the longest time possible. However, there are few beer brewers in the market with the major breweries holding 90% of the market share. This has been more of monopoly for the companies.

Over the pasts few years the population of France especially the young generation has changed it consumption habits. The population however, has preference to imported beer to the locally manufactured and available beer. The commonly preferred beer is the specialty beer for its uniqueness and the application of different preparation techniques and flavours.

For the UK based company to enter the French market beer industry and gain a market share, it has to consider the country analysis, market analysis and the various foreign entry modes and choose the most adaptable and preferable. Both UK and France are members of the European Union (EU), so it could be easy to trade as they share almost same trading regulations and laws.

It is advantageous to transact as not currency exchange rates would be required as they both use the same currency the Euros as a medium of exchange. Lastly, members’ states of EU have free transaction of goods and services making it possible for the companies to trade.

Product information/facts

The company available beer brands are low/no alcohol beers, premium lager, and specialty beers in UK after its market has been saturated. Low/no alcohol beers are a beer brand that have low alcohol content and are neither harmful to health nor have any health related complications.

In the UK the law recognizes no alcohol beers as the one which is below 0.5% alcohol by volume (ABV). On the other hand, low alcohol has no more than 1.2% alcohol by content while that of France is below 3%, meaning the UK beer meets the standards of France. These kinds of beers are common in UK and the larger population is changing its alcohol consumption trends to usage of low/no alcohol beers.

The premium larger beer is the largely produced and consumed beer in France. However, the beer has been doing badly in UK as the market has become saturated although the lager makes 68% of the UK beer sales. The specialty beers are flavored kind of beer which has become common in the France as the younger generation is preferring specialty beer to the locally manufactured malty beers.

Because of its demand its production has increased over the years as well as its distribution to various markets. The techniques and the fermentables used in the manufacture of specialty beer are unusual. The wide range of the beers includes the spiced, herbed, smoked, and fruit flavoured beers. Because of their different flavours, they have become very common in Europe especially in France.

Analysis

Country information/facts

The preferred country for exporting the beer products from the UK is France which is also found in Europe and a member of the European Union. Based on the current GDP of $2.580 trillion (Bureau of European and Eurasian Affairs 2011), France is ranked fifth in the world in terms of economic growth.

However, the real GDP fell in 2008, but the economic growth picked in the end of the year. Generally, the economy of France has been fairing on well for the last quarter despite the financial crisis that have hit the world. France has a growing population that is characterized by skilled workforce.

With unemployment rate of 9.5%, venturing in the market would create jobs for the unemployed and increase its GDP. The country is ranked the second in terms of trading in the Western Europe (Bureau of European and Eurasian Affairs 2011). The country is known for its agricultural activities and is ranked the first in the European Union and the second in the world. It largely produces wheat, corn and barley which are used in the production of beer.

France is categorized as one of the leading consumers of beer products in the world although it is not a major brewer of beer in Europe. This forms a good market for the beer product because of the people desire to take beer. However, the country is the leading producer of wine making the beer market more open and available to foreign companies that would export beer to the country.

The country’s beer consumption is approximately half of the consumption in the Western Europe. Nonetheless the consumption of beer in Europe has been low although it depends on the weather of the country. The common usage kind of beer is lager which forms two thirds of the total consumption.

The population has moves away from using the local beer and preferring the specialty beers. These are the imported beers from other countries in the European Union which have been increasing over the years. This would make a perfect market to export beer products from UK to Germany because if the increased preference of imported beer over locally manufactured ones.

With a population of almost 60 million, the population consumes an annual approximate of 20 million hectoliters. The country has an annual beer consumption of 38.6 liters per capita.

According to Cohen (2008) past statistics have revealed that the European population is taking more beer than wine. For instance, a previous study carried shows that 25% of the respondents in France who are over 50 year’s have starts taking beer one a day (Cohen 2008). Other results from the same study indicated that 43% of the participants aged 14 to 29 years have developed the habit of consuming at least five drinks of beer per day.

The correlation between UK and France beer consumption is that UK drinkers have resulted to the consumption of wine although it is a beer making country. This offers the best chance for the UK based company to enter the French markets that have a changed preference and an age group that prefers beer to wine.

Macro environment forces considered

Before the launch the beer products in France several macro environment factors have to be considered that would govern the operation and the percentage of market share. The elements are based on the PESTEL analysis which determines international operations. They are political factors, environmental, social, technological, environmental and legal factors. Other factors based on the international entry analysis include the competition position in the country and the financial requirements.

Legal matters

These are regulatory laws that protect the competition with the aim of protecting the consumer and the market (Pride, Hughes& Kapoor2012, p.346). For the company to enter the market it has to consider the legal requirements needed for the establishment of a market of beer products in UK.

UK and France belong to the European Union leaning that they operate under almost similar laws governing beer regulations. However, the company should be aware of the legal restriction on the usage of beer in France. For instance, the French tobacco and law legislation also referred to as the ‘Loi Evin’ prohibits the use of television to advertise alcoholic beverages either indirectly or directly.

The offense is punishable by the law which has a fine of an estimate of EUR 75 000 with either an addition of 50% amount used on the advert already banned. The legislation is aimed at checking the level of consuming alcohol in France. This may be a problem to the company as it has to devise optional methods of advertising its beer products. It will also be faced with a problem of reduced demand if the product does not catch the required market share in the short run period.

Social cultural factors

Social cultural factors are concerned with the beliefs, attitudes and the welfare of the people in the targeted market (Pride, Hughes& Kapoor2012, p.346). The demographic figures of the French population are changing with the number of the old people increasing more than the youths. However, this is not a hindrance in entering the international market as the youths of age groups 14 to 29 years are the ones who are taking beer compared to the population ages 50 and above.

The social cultural trend has the capacity of affecting the company in a positive way as the young preferences of beer to wine forms a basis of the market entry.

Also most of the French populations prefer taking alcohol at the comfort of their homes. This would encourage the company to come up with beer beverages that are portable and usable in the hone than in bars. The most negative social cultural aspect that can affect a company in France is the religious beliefs that French people as they are catholic and most are against consumption of beer.

Environmental factors

These are regulations that are concerned with the environmental conservation and management. Being in the 21st century it would be imperative to put into consideration the environmental factors so as to remain relevant in the market. For instance, France has environmental regulation that requires the usage of environmentally friendly methods of manufacturing the beer. Or it could have the packaging of the beer in environmentally friendly packaging to avoid bans or fines from the French government.

Technological

Both the UK and French have undergone technological revolution that has shaped their different markets. Based on this the company would be having a competitive edge as its manufacturing techniques are compliant to the targeted international market.

With the people well versed with technology and e-commerce it would be possible to sell the products under the sane platform thus making France the country of choice of the saturated beer brands. With an already existing market and technology it would be easy as the company would enjoy economies of scale. This would reduce the costs required in entering the French beer market.

Economic factors

These are factors that are determined by the economic forces in the market industry. They include inflation, economic growth rate, interest rates, inflation, taxation changes, and exchange rates. These economic factors may have impact on the decision to be taken by a company.

For example, if the interest rates are higher then investments may be low because of high costs of borrowing. If the growth rate is high then the demand of the products of the firm is raised too. A country with high inflations rates may force the firm to pay high wages to the employees increasing its production cost.

And lastly a strong currency hinders exports because of products high prices in the foreign market. However, since the countries uses euro as a medium of exchange, it would be advantageous to the company. However, it would under go taxation as the law requires imported alcohol products to be licensed even if the country is a EU member state.

Political factors

These are factors that are influenced by the government through the initiation of different policies. They may include incentives and subsidies that the government may be wiling to offer to the firms (Pride, Hughes& Kapoor2012, p.346). The priority in implementing these is crucial to firm.

They have impacts on areas of infrastructure, quality of the goods produced as well as the health of its people. They can also have impact on the education. Examples include the provision of a transport infrastructure to the firms or regulating the prices of some goods. For example, being under the EU and using the euro it would be advantageous for the company because there are exchange rate restriction and taxation policies because the markets have been opened.

This will also allow free movement of goods from UK to France without taxation which is an advantage to the company. The company will also enjoy tax exemptions because it is a qualified member of the European Union.

France beer Market information

The market is saturated with wine products as France is known for the production of fine wine brands. However, the country produces beer with premium lager having a market share of two thirds. Although the country is known for its alcohol consumptions, the population that is taking alcohol has been declining because of the changes in their life styles. Wine being integral part in the culture of French people, has brought a tremendous change as many people have shunned from alcohol to other beer products.

There has been a decline in the consumption of beer in France from 21.43% to 19.73%million hectoliters as reported in last year (Business Beer.2011). It is assumed that the market for beer has reached its plateau because of the changing beer consumption trends and lifestyles. However, beer turnover has been high because of the increased preference to specialty beers which are mainly imported.

The market share for specialty beer increased by 5.4% to amount to 33.3% in 2009 (Business Beer 2011) with speculations that the trends are bound to increase by 2011. In contrary, conventional beers have been reducing in terms of market shares as they lost 5.3& of the market share in 2009 although the consumer level has not reduced by much. Some reports show that there was a similar decline 30years ago when the consumption dropped to by more than 30%.

Marketing mix

The marketing mix consists of the 4ps used in the marketing which according to Kurtz, Mackenzie and Snow (2009, p.424) are price, promotion, place and product.

Product

The common beer products found in France are Kronenbourg, Grand Cru which has 6% ABV and Kronenbourg Blanc which is a spicy favoured beer (Beers.co.uk 2009). Desperados is another beer found in France which has a 5% above alcohol average, and the Kronenbourg 1664 which is the common and is preferred more than any other lager for its malty taste. Bieres du garde is another beer product has a bittersweet finish and ABV of 8.5% another beer product is the Ch’Ti beeers (Beers.co.uk 2009).

Price

The prices of the French beer products vary from one location to another. They are customer friendly and affordable which are some of the aspects considered in the pricing of a commodity. However, some of the beers are more expensive than the others because of the targeted customers’ base and the type of brands. Nonetheless, they have been able to capture their own market share in the market.

Promotion

Advertisement of beer in UK is prohibited meaning that it is punishable by the law. This means that beer products are advertised through other channels and mediums. As part of the European Union treaty, the advertisement of alcohol should not encourage its excessive drinking. The “Loi Evin” bans TV alcoholic beverages advertisements that are over 1.2% ABV (Institute of Alcohol Studies 2010, p.12). The law also prohibits the advertisement of alcoholic drinks in cinema. Involvement of companies in sponsoring cultural events and sports is prohibited. The same applies to radio advertisement where it is prohibited between 5pm and midnight (Institute of Alcohol Studies 2010, p.12). Alcohol advertisement towards minors is also prohibited, however, advertisement is only allowed when the characteristics of the products are being used.

Place/Distribution

Beer in farce is distributed through established channels that ensure that the products reach the targeted market in time. Most of popular place where beer is concentrated is the Nord-Pas de Calais which is close to Belgium (Beer co.uk 2009). The beers produced in France are similar to the ones found in Belgium hence its location.

The place is characterized by young stars who prefer beer to wine. Other than being concentrated in the small town, beer products are strategically in supermarkets. There are also numerous pubs, taverns, bars, and restaurants where beer products are sold to the targeted customers especially the youth.

Therefore, any company that tries to enter the French market need to comply the marketing mix of France as it gives the guidelines. Any company that does not comply with the governing marketing mix has the possibility of acquiring a low market share.

Segmentation

The beer products in France are classified as follows Kronenbourg, Grand Cru, Kronenbourg Blanc, Kronenbourg 1664, desperados, and the Bieres du garde. Market segmentation involves the process of clustering the people who share similar needs or characteristics (Botha, Strydom & Brink 2004, p.61).

The segments which are homogenous groups respond differently to advertisements, promotions, and communications among other variables of the marketing mix. The common and prevalent segmentation of beer is based on the age group. The young generation of between 19 and 29 prefer beer more to wine.

Targeting

Based on the available data of the French beer industry, the old are targeted through the use of low/no alcohol beer. The other targeted group is the youth below 29 years generation because of its preference to beer to wine. This has been necessitated by the changing lifestyles and ways of living among the youth.

Differentiation is used to target the different segmented groups in the France. This is supported by Havalder (2005, p.93) who note that differentiation is used to communicate the different segmented markets with the products in the market.

Positioning

Product positioning describes the way consumers perceive particular products in the market (Botha, Strydom & Brink 2010, 61). The beer products of France are well placed at par. This is because they are considered as better and the market is 90% controlled by the major breweries. The reason why the French beers are well placed in the whole Europe is because of their better quality than all other areas (Beers co.uk 2009).

Market entry modes

There are various foreign market entry modes that a company can successfully apply to entry in a new market and gain a market share. The common entry mode that can be applied when entering the French beer industry are, exporting, sole venture, joint venture and licensing. Before entering in a French market there is need to assess some of the factors that would limit the success of the product in the new market.

Exporting

This is one of the popular methods of entering a foreign market. It involves the transport of the fully or partially finished products to the targeted market. France has been an importer of beer products since most people prefer the specialty beers to locally manufactured beers. One of the reasons why export is used is on when trade barriers have been lifted or reduced (McDonald, Burton & Dowling 209). Through the diversification of markets, the mode can be applied to minimise risk.

A UK based company can export its beer products to France at less cost because of the reduced taxes as they both belong to the European Union. With differentiated goods which are patented, a company can easily use export entry as it has the likelihood of enhancing market share over the already existing products. A company can enter a foreign market either through the direct branch, direct agent, or indirect entry in the market (John & Gilles 1998, p.262).

The reason why export is a favourable entry mode is because it requires fewer investments as production is done in the home country. The only costs incurred are the marketing expenses. However, coordination between the government, exporter, transporter and importer is required for its success.

Licensing

This entry mode requires the use of license that permits another company that is located in the targeted country. For instance, the company can permit a France based company to sell beer products on its behalf. The difference between licensing and franchising is that the latter adopts the name of the company with the products. However, the licensed company uses the patented product without any modification whatsoever after paying an agreed fee.

This type of contractual entry mode is applicable to patented products. This type of market entry attracts large risks of investments. The drawback of using licensing as an entry mode in a foreign market is that the company loses direct control on industrial property, quality and manufacture (John & Gillies 1998, p. 265).

Joint Venture

The company comes into partnership with an already existing company in the target country market. For instance, the UK based company would partner with Fischer brewery which produces Desperados and form a partnership with same market share. This increase the chances of getting large market share as the company is perceived as an insider.

The objectives achieved through joint venture is to gain market entry, develop a product jointly, conform to any existing laws and regulations on foreign investors, share technology, and share rewards and risks involved in the venture. The benefits associated with joint venture are that a company can access the already existing distribution channels and be politically connected.

This mode of entry mode is favourable when combination of the market power, the size of partners and pooled resources are less in line with the targeted industry leaders. It is also important when learning is required or the companies share the same goals, ideas and skills.

However, this mode of market entry is riskier than all the others as ownership, pricing, technology applied, and control of the ownership is predetermined. It is advisable to put these aspects into consideration before entering into a joint venture.

Foreign Direct Investment

A foreign company places its company directly in the targeted country. For example, the company would establish a beer manufacturing company in France and operate from there. Resources both financial and human capitals are then transferred to the target market (Sharan 2003, p.45).

There are several ways that can be applied on FDI like acquiring an already existing entity or putting a new enterprise. In this mode, the foreign company in the target company has the highest capacity of controlling the operations and management of the company. The chances of knowing the competitive environment, key players, and existing consumers is very high. The drawbacks of using this form of foreign entry mode are that it requires a lot of commitment, resources and capital to venture into.

Comparison of the four modes of entry

Recommendation (market entry mode)

Based on the market analysis of France and the regulations of UK, the most recommended mode of entry to the France market would be through exports. The company would export the explained beer products to France because it is more cheap, less risk and convenient to export the products. Based on the advantages given and the suitability conditions of exporting then the company would adopt exports to the other entry modes.

The countries are both located in Europe and are members of the European Union/ community. When exporting commodities from UK to a country which is a member of the European Community, the exports can circulate freely without the payment of some taxes although they are subjected to VAT. The products being exported to UK have alcohol content which is below 30 percent meaning that they are exempted from duty stamp.

This implies that duty stamp would not be paid on the beer products exported to France. France has a well established market, according to john and Gillies (1998, P.66) exports can be applied where there is high break even, has likelihood of achieving economies of scale, greater resources are committed, and large volumes are to be sold then direct export can be applied.

This favours the company as the France market size is large and has the potential of growing further as people trends of beer consumption are changing. Also export is applied where the home market has become saturated with its products.

Conclusion

Market analysis and country analysis are important tasks that need to be carried before venturing a foreign market. The most suitable country and market that the UK based company can easily access and gain its market share is the France. This is because the population has changed their wine consumption trends to beer consumption with the youth being the largest consumer. The market is also centrally placed as it lies in Europe and is a member of the European Union.

This gives the company the opportunity of trading freely in the region with less reduced taxation and regulations. From the market analysis, it has been concluded that the French market has a ready target population, well segmented and positioned. In France, the TV cannot be used to advertise and promotions cannot be carried through sponsoring of games and other events.

There is a generation that is getting away from the usage of wine to the usage of beer. Specialty beer which is largely imported is the commonly preferred beer brand in France. This has been necessitated by the different flavours it has and its unique technique of fermenting.

The commonly used foreign entry modes are the exporting, joint venture, licensing, and foreign direct investment. Based on the report analysis the export entry mode is more preferred for the UK based company to adopt. This recommendation has been based on the market analysis and the UK market operations and regulations.

Reference List

Beers.co.uk. 2009, French Beers. Web.

Bureau of European and Eurasian Affairs. 2011, Background Note: France. Web.

Business Beer. 2011, France: Beer consumption declines by 1.7% in 2010. Web.

Bothat, J., Strydom, J. & Brink, A. 2004, Introduction to marketing, Juta, Cape Town.

Cohen, A. 2008, Europe’s Changing Drinking Habits: More Beer, Less Wine, Few Regrets. Web.

Havaldar, K. K. 2005, Industrial marketing: text and cases, Tata McGraw-Hill, New Delhi.

Institute of Alcohol Studies. 2010. Alcohol and advertising. Web.

John, R. & Gillie. A. M. 1998, Global business strategy, Thomson, London.

McDonald, F. & Burton, F. 2002, International business, Thomson Learning, London.

Pride, W. M., Hughes, R. J., & Kapoor, J. R. 2012, Business, South-Western/Cengage Learning, Mason, OH.

Sharan, V. 2003, international business: Concepts, environment and strategy, New Delhi, Pearson education India. Appendices

Executive Summary

Over the recent past, the market for beer has been characterized by a very high level of competition among various breweries. In order to be successful in such a market, it is advisable for an organization to expand its market globally. This report gives an analysis of the Australian market as a domestic market and of UK beer market as the foreign one.

The beer market in Australia has been saturated over the recent past. It is therefore necessary to consider expansion of the market by venturing into the UK beer market. This discussion gives a clear analysis of both markets. This analysis provides a good base on which the entry decisions are built upon.

It is revealed that the amount of beer consumption in both markets has been declining over the time. However, the market share for the imported beer has been rising in the UK beer market over the past. Finally, several recommendations have been proposed based on the findings.

Country and Market Analysis

In the contemporary world, the market has become highly competitive. This has been triggered by the increased entry of new players in the market. This has led to saturation of the domestic market. As the market becomes saturated, the level of competition reaches its maximum. This has threatened the performance of many organizations as this tends to increase the total costs and reduce the total sales. This characterizes almost every product in the market.

In Australian market, the beer market has grown highly competitive from the saturation of the market over the recent past. This has been as a result of entry of many players in the industry as well as the rapid expansion of the already existing organizations. In the Australian market, beer market consists of sales of products like stouts, ales and bitters, low or no alcohol, standard lager, premium lager, and specialty beers (National Library of Australia 78). Currently, the market has been saturated with these products.

The Australian market for beer can be traced far back in nineteenth century. From then, the beer market has grown rapidly. A number of breweries registered their individual trade marks for their various packaged beer. During the time the markets was expanding at a very high rate and at same time the demand was increasing rapidly and the existing brands were not efficient. The per capita consumption was growing rapidly by then (Jones par 3).

According to Jones and Morgan, more than a dozen breweries in Australia were operating in unchallenged and secure regional markets (163). In fact, each of the state in Australia was having about one to three monopolies. During the period, there were very low chances for entry.

These restrictions were mostly emanating from the high fixed costs that were required in order for an organization to enjoy the economies of scale (Baker, Graham and Harker 64). Since it required a significantly large amount of capital, only a few organizations managed to venture into the industry. Because the demand was increasing by then, the level of competition remained very low. Each organization enjoyed its competition-free regional markets.

In the year 1967, a new brewery by the name Courage entered into the Australian market. Although most of the company’s shareholders were located at the United Kingdom, its entry had a significant impact in the Australian market. It triggered change in the brewing industry.

Before the company’s entry, most domestic companies were more concerned only about minimizing their operational costs and advancing their technological infrastructure. None of the companies was more concerned about building their brands since competition level was very low.

Soon after its entry to the Australian market, Courage introduced a range of beers in the make (Jones 162). This posed a danger to the domestic companies that have for long been enjoying non competitive market. In reaction to this, various companies in the country took various decisions.

For instance, CUB decided to take control over the distribution channels. It managed to take control of these channels by increasing the total number of managed and tied houses. Despite of such restrictions, the level of competition in the Australian market began to increase significantly.

In this period when the Australian organizations were more concerned about the total costs of production rather than the brands, the marketing expenditures in various organizations were very limited (Wenner 47). The mostly used means of advertisement during that period was through bill boards (IbisWorld par 36).

The press was rarely used in advertisement. This was because organizations aimed at retaining minimum level of expenditure on advertisement. “Advertisements for beers, wines and spirits in the Australian press took up a smaller percentage of advertising space than their share of advertising expenditure in the UK press at about the same date” (Jones and Morgan 164).

Later, many organizations in Australia recognized the need for advertising its product in order to maximize its sales. For instance, the newly elected leaders of the CUB’s beers recognized the need to have an effective marketing strategy in order to compete with Courage. In order to achieve this, CUB launched a marketing campaign with an aim of increasing its sales and building its brand loyalty for its draught beers (Euromonitor international Australia par 13).

During this period, the combination of the residents who were born in Australia and the increasingly rising number of the in-bound tourists as well as the free advertising services by the cult magazine in 1960’s gave Foster’s a niche market (Kingham par 6). This was characterized by a new and unexpected group of consumers.

Over the past, the Australian beer has been internationally exported to other countries. For instance, a significant amount of the Australian beer was marketed to the United Kingdom. However, the fraction increased with time. For example, the Australian beer exports increased from 165, 0000 litres in 1960 to 179, 000 after ten years (Jones 168).

Over the past, beer has recorded a 3% value increase. This increase can be attributed to the economic recovery that has been taking place in the country. For instance, the value reached A$ 14. In the Australian market, lager is the best performing among other types of beer.

It has remained dominant in the Australian market up to the present where it has recorded a fraction of 85% of the total volume of sales in the country in the year 2010. The main competitors in the market are Foster and Lioon Nathan. The two has strong brands that have been successfully built. In the year 2010, the two accounted for 91% of the total volume of beer in Australia (IbisWorld par 3).

Pattern of Beer Consumption in the Australian Market

There are several factors that have been influencing the consumer choice in the Australian market for beer. Some of these factors such as the lifestyle, international production, among other factors has been significantly influencing the Australian market. The recent statistics indicates that there has been stagnant or marginally less per capita in beer.

In the Australian market, beer consumption has been declining since 1970s. Before then, Australians were ranked among the top beer consumers. For instance, they were ranked as number three top beer consumers in the world during the time (Dealfish par 4). Currently, the Australians cannot even be ranked among the top ten because the level of consumption has significantly reduced.

According to the statistics released in the year 2010, the per capita beer consumption was 4.5 litres per year (The immigration Agency par 6). This was the lowest level of per capital consumption since 1950s. This is a significant drop bearing in mind the fact that it has been reaching up to 6.4 per capita.

Analysis of UK’S Market for Beer

Marketing plays a major role in determining the success of a certain brand in the UK beer market. The most successful brands are the ones with the most effective marketing process. It is necessary for an organization to make more people take its product in order to maximize the level of sales in such a competitive market.

Just like in the case with the Australian market, the beer consumption in UK’s market is decreasing; beer consumption in homes, pubs and bars is declining according to the recent statistics (Sibun par 6). It is also important to note that booze regulations are becoming tighter and therefore making it a bit difficult in marketing beer in the UK’s market. According to the report released in 2009, there is also an increase in the misuse of alcohol. This again poses another complication in the UK’s beer market.

It was projected that the level of sales in the market will decline over the time. For instance, projections have it that there will be a decline in sales by 2.5 percent in UK’s sales of cider, beer and flavoured alcoholic drinks between 2008 and 2013 (Business Wire par 5). Again this is the highest fall in the beer sales in the UK market over the past.

Beer consumption patterns are changing dramatically in the UK. For instance, most of the people prefer taking the beer in their homes. This led to a rise in the off sales by about 2.6 % between 2003 and 2008 (Stokes and Lomax 32). On the other hand, on trade sales fell by 2.7% within the same period.

The level of competition is also very high in the UK. Each of the company is taking all the possible measures to maximize its sales. For instance, Molson Coors intends to become one of the top four largest brewers in the world by the year 2012 (Mayer 35). Other companies have also set their goals all of which are determined by the level of sales. This will significantly increase the level of competition in the country as the brewers crumble for the diminishing level of consumers.

Beer is heavily taxed in the United Kingdom. It is also projected that there will be a drastic increase in the amount of excise in the near future. For instance, Molson Coors made a profit of $60m in 2009 while it paid a total of $600m as tax and excise to the government (Handley par 30). This clearly indicates that the government is taxing excessively on beer. This has led to shrinking of the profit margins.

Essential UK Beer Statistics

The recent statistics on UK beer market has revealed a unique pattern. It has revealed a changing consumption patterns among the people. Statistics has revealed a decline trend in Britain’s indigenous beer styles and relentless growth of lager (Sutton 12).

Majority of the people have shifted from ale to lager culture over the time. Since the year 1978 and 1998, there was a significant change in the proportions of the amount of ale and lager consumed during this period. That is, the proportion of lager to ale consumed during this period changed from 27:73 to 60:40 (British Beer and Pub Association par 12). This reveals how the consumption patterns have changed over the past. The fraction of Cast conditioned ale continued to fall to less than 10 % of the UK beer production.

Statistics on UK beer consumption has also revealed that there are some beer types whose consumption has been decreasing over time. For instance, the consumption for ale has significantly decreased. On the other hand, the consumption for lager has been increasing over time. Therefore, it is not advisable to introduce ales in the UK market where consumption levels have been falling with time. However, it will be easier to market lager because it has recorded a recommendable growth over time.

As already noted, beer consumption in the UK has been fluctuating over time. However, beer consumption reached its maximum in 1979 when a total of 69.5 litres were consumed in the UK (British Beer and Pub Association par 5). Unfortunately, the consumption has significantly decreased over the past. For instance, the current level of consumption is below 60 million hectolitres. This is one of the major threats to most of the brewers in the UK.

Recent statistics have also revealed that there is excess production capacity in the UK. Again, this has threatened the success of breweries since the consumption levels has been falling with time.

However, there has been an increase in the market share of the imported beer. It is therefore expected that there will be a rise in the amount of beer exported from the UK in the future in an effort to expand the global market share (Hornsey 54). Over the past, beer exports levels from UK have remained very low. However, this has been increasing over the recent past. Currently, more than 3 million hectolitres of beer are exported from the UK.

Over the last 40 years, the total number of pubs has significantly increased in UK. This is despite the fact that the level of consumption has been declining within the same period. Again, this reflects an increasing level of competition at the retail level in the market.

Analysis of Facts Gathered

The above discussion has revealed several facts about the UK beer market. This information is of great importance in making appropriate decisions on the best way to venture into the market.

From the above facts, there are a number of advantages in venturing into the UK’S beer market. To start with, an organization will be able to expand its market networks globally. Although the level of competition is also high, it is easier to build a brand loyalty and therefore increase the total level of sales (Dinkhoff 56). People here have varying tastes and therefore it will be very easy to build a brand name.

Despite these advantages of marketing beer in the UK, there are also a number of complications associated with the market. For instance, it has been revealed that the levels of beer consumption will decline with time. This indicates that the level of competition is likely to increase significantly.

This is more so bearing in mind the fact that more organizations are venturing into the market, now and then. Therefore, there is a likelihood of recording a declining level of sales with time in such a market. This threatens the performance of an organization in the global market.

It is also clear that there is need for intensive advertisement efforts in the UK’s market in order to market a certain brand. Advertisement is more critical in marketing beer in UK compared to the Australian market. This implies that an organization will be forced to incur extra advertisement costs in the UK market. This increases the operational costs hence reducing the profit margins. Again, this poses a great danger for a new entrant.

This analysis has also revealed that beer consumption patterns have also changed significantly in the UK. This has a significant implication in marketing strategies. For instance, off shop sales have been increasing over the past while the on sales have been decreasing (Vaughan 68). Therefore, it will be more effective to focus on the fast moving consumption goods in order to make their respective brands to look more attractive.

Majority of the pubs in the UK has applied a wide variety of measures in order to attract a significant number of customers. Many brewers are focusing on adding sense of occasion in the venues in order to attract more people (Anonymous par 9). In connection to this, more live music in the pubs has been one of the major strategies that have been applied in an effort to increase the level of sales.

Over the past, most brewers in the UK have been focusing on the young drinkers only. This is mostly the age between 18 And 34 years of age. Many brewers are now devoted to encourage drinking in the older people in order to increase the level of sales. A number of organizations have also been trying to come up with flavoured beer in order to attract female drinkers (Nwankwo and Gbadamosi 148).

This is aimed at increasing the level of sales. Many organizations have managed to achieve this through developing and building new brands hence maximizing the level of its sales. This has forced the brewers to redefine their market segments in order to cater for these groups.

In most cases, marketing of beer in the global markets becomes complicated because it is banned in some areas. For instance, advertising of alcohol in television and cinema is banned in France (Handley par 8). This is because of the increasing number of alcoholism among the teenagers. Therefore, brewers are forced to apply only a restricted marketing mix. This poses a major problem because advertising plays a pivotal role in educating, persuading, and entertaining people.

Another major problem with the UK market is the fact that there is a very high level of taxation. The excise is also highly exaggerated. This makes it expensive to operate in such an environment. For instance, the government takes more than six times the total profit enjoyed by the breweries.

Statistics indicates that the level of consumption in the Australian market has been decreasing since 1970s. On the other hand, many organizations have been struggling to increase the level of production and sales. Meanwhile, other companies from other countries have been introducing their brands in the already saturated market.

Therefore, for any organization to remain in the market there is need to come up with the necessary marketing decisions (Shaw and Mazur 125). As the Australian market is already saturated, the best option is to market the products in the international market. This will help an organization in expanding its level of sales by expanding its market networks in the international trade.

Analysis of the Findings

Assessment and Selection of Entry Strategies

Before venturing into the foreign market, it is important to analyze various methods of entry. This should be determined by the nature of the new market. It is important to choose the entry mode that is most feasible with the new market.

The success and the ability of an organization to adapt fast in the new environment will largely be determined by the feasibility of the entry mode. Each of the entry method is suitable in certain circumstances. There are several modes of entry through which an organization can venture into a new market.

Joint Venture

Joint Venture is a very common method that has been applied by a number of organizations in their effort to venture into an overseas market. In this form of entry, two businesses combine their resources to sell their goods and services in a foreign market (Tielmann 65). Joint ventures are very common in the countries where the economy is tightly controlled. In such economies, an organization may be forced to partner with the foreign companies in the target market in order to be able to sell its products to the residents.

The main advantage with this method lies on the fact that an organization is able to partner with a company that is experienced in the foreign market. This makes it easier and cheaper to market the product in the new market.

Joint ventures also suffer a number of limitations. To start with, these partnerships may be very difficult to manage. This is because they are mostly formed by two companies with varying cultural backgrounds whose management may differ significantly. Therefore, these differences may make it difficult to manage such partnerships. Another shortcoming of this method is that the partners are supposed to share the profits. This reduces the share received by every company. This leads to shrinking of the profit margins.

Joint ventures are most favourable to the markets where there are import barriers. By joining a foreign company in the target market, an organization is able to overcome the barriers posed on imports in the target markets. This method is also suitable in situations where there is large cultural distance. In such a case, joint venture becomes more suitable.

The local companies can also provide the necessary resources, distribution networks, and skills that are necessary in any market. An organization is also able to get a brand name whose loyalty has already been developed in the target market. This significantly increases the level of sales in the new market.

Licensing

Licensing is also another common method of foreign market that has been widely used. In this case, an organization signs contracts with the foreign businesses (Lymbersky 38). This allows the overseas companies to manufacture and also sell the company’s products in the target market.

Through licensing, a company is allowed to use the property of the licensor. However, most of the property is usually in intangible form. These include the property rights and patents, trademarks and certain technological production techniques (Ireland, Hitt and Hoskisson 175).

The main advantage associated with this method is that it has the potential of yielding very high levels of returns on investment. Therefore, this method has a promising good returns on the investments made. This method also opens the door for a low risk manufacturing environment in the foreign country.

Licensing as a method of entry into a new market is mostly situated in the target market where an organization does not have the ability of becoming a competitor. It is also suitable in circumstances where the level of sales is expected to be very low. It can also be helpful where there are significant cultural differences.

Exporting

Exporting is one of the oldest methods that have been applied while venturing into the foreign markets. In this case, exporting implies the process of marketing of the goods produced in one country into another.

This implies that the goods to be exported should be manufactured in the domestic country before they are marketed in the foreign country (Wolfe par 6). In this case, an organization is required to make a significant investment on marketing in order to sell its brands. There is therefore need to have a detailed marketing strategy.

There are several advantages associated with this method. To start with, the manufacturing process is home based; a thing that helps in minimizing the level of risks. This method also gives an organization a chance to learn more about the foreign market before making critical investment decisions. This method therefore is very useful in situations where an organization is not very sure about the nature of the foreign market.

In such circumstances, an organization can get a chance to survey and identify possible risks in a certain foreign market. This will play a pivotal role in making the final investment decisions. This method reduces the potential risks of operating overseas (FAO Corporate Document Repository par 8).

This method suffers from the disadvantage that one can be at the mercy of the foreign agents (Klug 34). Therefore, the exporter may lose all the control that makes them prone to exploitation. This method is most favourable in certain set of conditions. For instance, this method is very important in market environments where there are high political risks.

Through export, an organization is able to overcome the risks that are political based. This method is also suitable in situations where there is limited number of sales in the foreign country. In such circumstances, it is advisable to carry out the manufacturing processes within an organization and then sell the finished products in the foreign market (Decker and Zhao 190). This will help in saving on the unnecessary investments where there is no high demand for the service.

This method will also be favourable in situations where there are extremely high production costs in the target countries. For instance, labour in China is cheaper compared with countries like the United States. In such a case, it may be advisable for an organization to consider exporting in order to minimize operational costs.

Internet

In the contemporary business world, the use of the internet has intensified. An organization can use internet while venturing into a new market. Through the internet, an organization is able to access all different types of customers from all over the world. An organization can therefore easily target the foreign customers through the internet. In this case, an organization does all the production operations in their home countries.

These products are then transported to the foreign countries where they are sold to the customers. Clients order the products they want after which it is delivered. Since an organization contacts their customers directly online, there is no need for any contact with the local businesses (QuickMBA par 3).

The main advantage with this mode of entry is that it is usually inexpensive. The only major costs incurred in this case are the website and the marketing costs. This method is therefore cost effective as there are minimal expenses.

However, this method of entry suffers from the fact that an organization does not have physical presence in the foreign market. Physical presence of an organization in the foreign market is better than marketing and selling products online.

Purchasing Foreign Assets

This is the mode of entry where an organization invests in a foreign company. However, this may be more expensive since it requires huge amount of capital. The advantage of this method is that an organization can enjoy the profits of an overseas company, which has already developed with a strongly built brand.

Discussion and Recommendations

The above analysis has given the description of various methods that can be applicable in venturing into a new market. The discussions have clearly shown that each of the above methods has its own advantages and advantages. Some are more suitable in certain situations than others. It is therefore necessary to be careful when choosing the entry method. This discussion has provided vital information that is important in making various decisions in an organization.

To start with, it is necessary to consider venturing into the global market as a way of increasing the total sales. This is due to the fact that the domestic market has reached its saturation point. The only alternative is therefore to venture into the global market in order to expand the market. However, it is necessary to choose the entry method appropriately in order to achieve the best results.

From the above analysis, UK’s beer market is already highly competitive. The supply is high while the demand has been falling with time. Therefore, it may be risky to venture into such a market independently. Consequently, the most suitable method to venture into the market is through a joint venture.

In this case, the organization will be able to reap from an already established brand name. Moreover, an organization will be able to maximize the sales since it can enjoy the established market networks. It will be also easy to overcome the import barrier in the UK beer market.

Works Cited

Anonymous. “Real Ale – For Life-Balance, Healthy Mind and Body, and Lessons about Business Development, Markets, Culture and Quality.” Businessballs, 2010. Web.

Baker Michael John, Graham Peter and Harker Debra. Marketing: Managerial Foundations. Australia: Palgrave Macmillan Australia, 1998.

British Beer and Pub Association. “UK Beer Statistics.” patto1ro, 2001. Web.

Business Wire. “Research and Markets: UK Beer Market Insights 2010.” Businesswire, 2010. Web.

Dealfish. “UK Beer Statistics.” European beerguide, 2010. Web.

Decker Reinhold and Zhao Xuemin. SMEs’ Choice of Foreign Market Entry Mode: A Normative Approach. International Journal of Business and Economics, 2004, Vol. 3, No. 3, 181-200.

Dinkhoff, Mark. UK Beer Industry Analysis: Porter’s Five Forces. Germany: GRIN Verlag, 2011-12.

Euromonitor International Australia. “Beer in Australia.” Euromonitor, 2011. Web.

FAO Corporate Document Repository. “Market Entry Strategies.” Fao, 2010. Web.

Handley, Lucy. “Only Here To Put Cheer Back Into Beer Market.” Marketing week, 2010. Web.

Hornsey, Ian. Royal Society of Chemistry (Great Britain); a History of Beer and Brewing. UK: Royal Society of Chemistry, 2003.

IbisWorld. “Beer Breweries in Australia: Market Research Report.” Ibisworld, 2011. Web.

Ireland Duane, Hitt Michael and Hoskisson Robert. Understanding Business Strategy: Concepts and Cases. New York: Cengage Learning, 2011.

Jones, Geoffrey and Morgan Nicholas. Adding Value: Brands and Marketing in Food and Drink. UK: Routledge, 1994.

Kingham, Ian. “Australia’s Coldest 100.” Beerandbrewer, 2011. Web.

Klug, Michael. Market Entry Strategies in Eastern Europe in the Context of the European Union: An Empirical Research into German Firms Entering the Polish Market. Germany: DUV, 2006.

Lymbersky, Christoph. Market Entry Strategies: Text, Cases and Readings in Market Entry Management. New York: Christoph Lymbersky, 2008.

Mayer, Florian. Marketing, Future Scenario Planning Karlsberg Brewery. Germany: GRIN Verlag, 2007-18.

National Library of Australia. Australian National Bibliography. Australia: National Library Australia, 1988.

Nwankwo Sonny and Gbadamosi Tunji. Entrepreneurship Marketing: Principles and Practice of SME Marketing. New York: Taylor & Francis, 2011.

QuickMBA. “Strategic Management: Foreign Market Entry Modes.” Quickmba, 2010. Web.

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Sibun, Jonathan. “UK Beer Sales Tumble To the Lowest Since 1975.” Telegraph, 2008. Web.

Stokes David, and Lomax Wendy. Marketing: A Brief Introduction. UK.: Cengage Learning EMEA, 2008.

Sutton, John. Sunk Costs and Market Structure: Price Competition, Advertising, and the Evolution of Concentration. Hong Kong: MIT Press, 1991.

The immigration Agency. “Australia’s Beer Market Getting a Shake Up.” business-visas-Australia, 2011. Web.

Tielmann, Viktor. Market Entry Strategies: International Marketing Management. Germany: GRIN Verlag, 2010.

Vaughan, Alexis. Bitter Harvest, Bitter Beer: The Impact Of Beer Production And Consumption On People And The Environment. London: Alexis Vaughan, 1999.

Wenner, Lawrence. Sport, Beer, and Gender: Promotional Culture and Contemporary Social Life. Volume 17 of Popular Culture & Everyday Life. New York: Peter Lang, 2009.

Wolfe, Michael. “Five Modes of Entry into Foreign Markets.” Ehow, 2011. Web.

Introduction

The following essay is analyses the beer industry in the United States. It looks into the beer industry and what can be done to ensure that the beer it develops an appropriate growth mechanism in the light of globalization, integrated technology and strict industry regulations.

The analysis looks into the political environmental, social, technological, economic and legal factors that affect the beer industry in the United States.

The Political/Legal Factors

In the year 1940 the prohibition era was over but alcohol did not have wide acceptance among the potential consumers (Lundström 2005). Even after it was made legal by the federal government, the state government perpetuated prohibition by limiting the hours of drinking and distribution systems of beer to make the Americans accept beer as good drink.

The political environment includes taxation procedures that are in the country. Currently, the tax is 40% of the retail prices, which is a higher rate of taxation compared with taxation in other countries such as Germany (Lundström 2005). The imported beer sales volume is at par with the locally produced beer in United States (Figure 1).

Regulation of the beer industry has also affected its profit margins due to regulation on advertising, as it is perceived to be deceptive to public on the advantages of drinking beer (Strokes 2010).

The Economic Factors

United States of America is the world’s largest economy. It boasts of having the world’s highest gross domestic product as well as highest per capita income of $48,000. The country has a population of approximately 300,000 million people. It is the largest exporter of electronics and technological goods such as computers as well as organic waste (The World Bank 2010).

The first economic aspect that has affected the beer industry is the global recession, which has reduced the volume of beer consumption in the country. The other economic factor relates to the increased competition across the globe due to the merger and acquisition of the beer companies resulting to concentration of beer industries (Figure 2).

For instance, the United Distillers, one of the major importers of beer in the United States has acquired more than forty establishments of beer distribution in the United States (Espey 1989).

Social Cultural Factors

Americans have a high sense of style and self-importance and everything that helps them to perpetuate this image has a wide acceptance (Strokes 2010). This explains how Heinemann has managed to sell its classic drinks in the United States successfully.

In a survey conducted by the Institute of Beer Manufacturers, it showed that sixty percent of those who drink beer are between eighteen and forty-five years of age (Table 1). It also indicated that beer drinking exists in all social economic classes although it was low among people with $50,000 per capita income (Espey 1989).

Table 1. Estimated Number of Beer Establishments

To understand the culture better, the existing literature especially fictional works indicates instances where the characters were in a binge and the types of beer that they drunk (Swedberg 2009). The social-cultural environment in the United States of America shows prevalence of drinking beer in the country. It also provides information on how beer marketers can capitalise on this market (Andriani et al. 2004).

Technological Factors

Technology has affected the beer industry in the United States in a number of ways. The first way involves the methods of beer production. With increased technology especially the development of enterprise resources planning systems beer industries have increased (Figure 3).

The companies have reduced their costs of operations and managed to reduce the selling price. The use of Enterprise Resource Planning has enabled the companies to reduce administrative costs such as payroll processing to pay the workers, supplier management and inventory management (Schultz 2000).

Technology is also useful in fermenting, processing and eventual production of beer and this has significantly reduced costs of production. Technology has also been useful in marketing the beer products all over the globe through the traditional media such as the television as well as the social networks. The ability to integrate technology in marketing and production activities gives the companies advantage over their competitors (Pratesi 1994).

The Environmental and Ecological Factors

Beer is made from fermented food materials such as rice, corn and barley. With the increased global climatic changes, the demand for food has increased and led to increase in the prices of these commodities. This has made the production costs of beer to be high (Table 2).

Table 2. Estimated Number of Employees

The environment advocacy groups advocate for companies to be energy and environment-conscious. Most of the companies have also engaged or used their resources in environment conservation efforts (Beverage World 2000).

The other environmental factor relates to the increase in lifestyle-related diseases in the United States of America where many people suffer from obesity, diabetes, blood pressure and kidney ailments.

These ailments have made people more conscious and reserved from enjoying alcoholic beverages due to their contribution on the diseases. This has affected the companies negatively as it has reduced the overall number of beer consumers in the country (Lundström 2005).

Buyer Power

The buyers have economic power as the capital consumption of beer in the United States is 121 litres. This shows that beer consumption in the country is not ingrained compared with other European countries like Germany, which has per capita consumption of 140 litres.

The beer industry in the United States contributes approximately $228 billion where $71 billion goes to wages and salaries of those involved in production of beer in the country (The World Bank 2010).

The economic recession, which intensified in the year 2008, has affected buyer power significantly. The unemployment and job losses affected many people negatively. However, the beer industry has not been fully affected mainly because of beer being an addictive substance that people who have a habit of drinking cannot stop doing (Table 1). However, this has affected the sale of classic drinks that have reduced since 2008 (Barnes Reports 2012).

Suppliers

There are two types of suppliers in the United States beer industry. The first type of supplier deal with raw materials such as barley, rice sugar and corn which are the ingredients of beer. Although their supplies are critical they have diminished influence on the industry as they are many and competition among suppliers lowers the prices of this ingredients (Figure 4).

The second class of suppliers who have influence on the beer market are suppliers who supply technology and equipment. They are powerful and they have more influence as technology reduces the cost of production and operations. Therefore, established beer companies establish good relationship with these suppliers to ensure that they are abreast with technological changes that will improve their operations (Barnes Reports 2012).

Globalisation as a political factor has influence on the beer markets in the United States. The liberalisation of markets allowing importation of beer from other countries has led to the entry of variety of beer and alcoholic brands in the country has also reduced the supplier’s influence in the industry.

New Entrants

There are new entrants who have entered the beer market since the year 1990, such as Seagram, Allied and Heinemann that entered the market courtesy of globalisation.

However, there are stringent licensing regulations in the United States that makes it hard for the new entrants (Figure 5). However, with globalisation new entrants come in through takeover by multinationals or mergers with foreign beer companies (Beverage World 2000).

This has hindered creativity in beer industry marketing and advertising due to such regulations. Other regulations pertain to the entry into the industry where the licensing procedures are complicated and designed to lock out new players who want to enter the industry (Lundström 2005).

Substitutes

The main substitutes for beer about alcoholic industry are wines and spirits. However, this can be termed as differentiation rather than substitution. Substitutes such as non-alcoholic drinks have increased their sales especially processed fresh juices.

This is especially due to the health-based marketing, which portrays alcohol as harmful. Pepsi and Coca-Cola have dominated this market of non-alcoholic drinks (Beverage World 2000).

The main substitute is the soft drinks that have competed successfully with the beer industry. Pepsi has been very competitive and its products are consumed in the market.

Rivalry

Rivalry in the industry is fierce due to the need to compete for the market. The competition between the industry players is well displayed through commercials and marketing campaign with each beer company trying to appeal the consumers differently. The rivalry comes through price wars, distributorship and legal actions.

Currently, most of the companies in the industry prefer to use the traditional distribution systems such as retail stores or establishments such as bars and restaurants (Espey 1989).

The future of beer industry in the United States is brighter because of the increased number of beer brands and young consumers. The economic forecasts show that the economy will be out of recession in the year 2014 and this will lead to expansion of the beer industry.

The overall sales volume of beer in the country grew by 4% in the year 2012 (Table 3). Similar growth is expected in the year 2013 and even more growth is expected in the country (Barnes Reports 2012).

Table 3. Five-Year Trend of Sales

Conclusion

The beer industry is one of the greatest industries in America with significant contribution to the economy of the country. Increasing production as well as ensuring that there are factors relating to the development and creation of resources that pertain to the prosperity of country will ensure the development of resources and the issues relating to the expansion of the industry.

References

Andriani, L, Gold, F, Rotella, M, & Scharf, M. 2004, ‘Travels with barley: a journey through beer culture in America’, Emily Publishers Weekly, vol. 8, pp.42.

Barnes Reports 2012, U.S. Beer and ale wholesale industry. Web.

Beverage World 2000, ‘Brew u? Labatt USA opens beer academy’, Beverage World News, 15 May, pp.16.

Espey, J 1989, ‘The big four: an examination of the international drinks industry’, International Journal of Wine Marketing, vol. 1, no. 2, pp.47-64.

Lundström, A. 2005, Beer production policy: theory and practice, Springer, New York.

Pratesi, C 1994, ’Miller beer,’ Management Decision, vol. 32, pp.25-28.

Schultz, M 2000, The expressive organisation: linking identity, reputation and the corporate brand, Oxford University Press, New York.

Strokes, R 2010, E-marketing: the essential guide to online marketing, McGraw Hill, New York.

Swedberg R 2009, Beer: the social science view, Oxford University Press, Oxford.

The World Bank 2010, Doing business 2011: making a difference in beer industry, International Finance Corporation, Washington, D.C.

Introduction

The following essay analyses the beer industry in the United States. It looks into the beer industry and developing growth mechanisms in the light of globalization, integrated technology and strict industry regulations. The analysis examines the political environmental, social, technological, economic and legal factors that affect the beer industry in the United States.

The Political/Legal Factors

Even after beer manufacturing was made legal by the federal government, the state government perpetuated prohibition by limiting the drinking hours and distribution systems of beer to make the Americans accept beer as good drink. The political environment includes taxation procedures that are in the country.

Currently, the tax is 40% of the retail prices, which is a higher rate of taxation as compared with taxation in other countries, such as Germany (Lundström 2005).

The imported beer sales volume is a part of the locally produced beer in the United States (Figure 1). Regulation of the beer industry has also affected its profit margins due to regulation on advertising, as it is perceived to be deceptive to public on the advantages of drinking beer (Strokes 2010).

The Economic Factors

The United States of America is the world’s largest economy. It boasts of having the world’s highest gross domestic product as well as the highest per capita income of $48,000. The country has a population of approximately 300,000 million people. It is the largest exporter of electronics and technological goods, such as computers as well as organic waste (The World Bank 2010).

The first economic aspect that has affected the beer industry is the global recession, which has reduced the volume of beer consumption in the country.

The other economic factor relates to the increased competition across the globe due to the merger and acquisition of the beer companies resulting in concentration of beer industries (Figure 2). For instance, one of the major manufacturers of beer, Anheuser-Busch InBev, has acquired more than forty establishments of beer distribution in the United States (Espey 1989).

Social Cultural Factors

Americans have a high sense of style and self-importance and everything that helps them perpetuate this image has a wide acceptance (Strokes 2010). This explains how Heinemann has succeeded to sell its classic drinks in the United States.

In a survey conducted by the Institute of beer manufacturers, it is shown that sixty percent of those who drink beer are between eighteen and forty-five years of age (Table 1). It also indicates that beer drinking exists in all social economic classes although it is low among people with $50,000 per capita income (Espey 1989).

Table 1. Estimated Number of Beer Establishments

To understand the culture better, the existing literature, especially fictional works, indicates instances where the characters are in a binge and the types of beer that they drink (Swedberg 2009). The social-cultural environment in the United States of America shows prevalence of drinking beer in the country. It also provides information on how beer marketers can capitalise on this market (Andriani et al. 2004).

Technological Factors

Technology has affected the beer industry in the United States in a number of ways. The first way involves the methods of beer production. With increased technology, especially, with the development of enterprise resource planning systems, beer industries have increased (Figure 3).

The companies have reduced their costs of operations and managed to reduce the selling price. The use of Enterprise Resource Planning has enabled the companies to reduce administrative costs, such as payroll processing to pay the workers, suppliers and inventory management (Schultz 2000).

Technology is also useful in fermenting, processing and eventual production of beer, and this has significantly reduced costs of production. Technology has also been useful in marketing the beer products all over the globe through the traditional media, such as television as well as social networks. The ability to integrate technology in marketing and production activities gives the companies advantage over their competitors (Pratesi 1994).

The Environmental and Ecological Factors

Beer is made from fermented food materials such as rice, corn and barley. With the increased global climatic changes, the demand for food has increased and led to growth in the prices of these commodities. This has made the production costs of beer to be high (Table 2).

Table 2. Estimated Number of Employees

The environment advocacy groups advocate for companies to be energy and environment-conscious. Most of the companies have also engaged or used their resources in environment conservation efforts (Beverage World 2000).

Another environmental factor relates to the increase in lifestyle-related diseases in the United States of America where many people suffer from obesity, diabetes, blood pressure and kidney ailments.

These have made people more conscious and reserved from enjoying alcoholic beverages due to their contribution to these diseases. This has affected the companies negatively as it has reduced the overall number of beer consumers in the country (Lundström 2005).

The Buyer Power

The buyer power of the beer consumers in the United States of America is moderate. This is because, on the one hand, the major beer buyers are hypermarkets and supermarket retailers. This buyer negotiates the beer prices with the manufacturer. The transfer costs of this buyer are not very high, which gives them undue advantage (Schultz, 2000).

However, the beer manufacturers have differentiated their products in terms of the ingredients of the beer products that offer the buyer many options of beer brands.

This minimizes the buyer power, as the buyers who are supermarkets have to stock different brands of beer for their consumers. The other factor of buyer power is that of an expected market decline which has ensured a reduction in the number of consumers as shown in Figure 4.

Supplier Power

The suppliers play a significant role in the beer industry, and their influence cannot be underscored. The major suppliers who wield power in the beer industry are those who supply the beer inputs such as barley, rice and corn. The beer industry moderates this power by butting the beer supplies rather from independent farmers than from cooperatives. This makes it easier for them to dictate the quality and price of the product.

To reduce the power of suppliers, some of the beer companies decided to have their own ad hoc farms, which supply their own inputs (Figure 5). This weakens the suppliers. However, the suppliers do have an added advantage in that they can choose not to sell their supplies to the beer manufacturer and instead use the barley, corn for animal supplies.

This utility advantage gives the supplier a moderate influence on the beer industry where the farmers can improve their process of production if needed. The suppliers can also sell their supplies to the wines and spirit manufacturers (Figure 6)

New Entrants

Other than the government’s stringent regulations on new entrants in the beer industry, the capital required to enter into the beer market poses a major challenge to the new entrants. However, new entrants in the beer industry come in as microbreweries where they fill a certain niche in the market. The main beer manufacturers focus on the major brands where they focus on major brands which have higher prices (Figure 5).

The new entrants can concentrate on providing low-processed beers. The new entrants are, however, at a disadvantage as many of the beer manufacturers focus on the economies of scale that produce large volumes of beer at lower costs, which has increased their profit margins (Table 3).

Table 3

The new entrants in the beer market will also have to face the competition in the production of the beer, as they have to take more time before they establish a good network with independent suppliers, and retailers in the market. The new entrants’ influence on beer market in the United States of America is minimal and has little effect on the major players in the industry (Beverage World 2000).

Threat of Substitutes

The substitutes in the beer market play also a significant role as one of Porter’s market forces. The substitutes that pose threat to beer are mainly spirits and wines and non-alcoholic or low alcoholic drinks. With concerns on the impact of alcohol on consumer’s health, a percentage of consumers now prefer non-alcoholic drinks.

The retailers have also noticed this trend and stock non-alcoholic or low-alcoholic beverages together with the beer (Beverage World 2000). However, the beer manufacturers retain some advantages in that most of the substitute products are new entrants that cannot match the capital intensity of the beer industry.

Some of the non alcoholic products take longer shelf space and time, which makes beer a preferred product to stock by the sellers in comparison with other beverages. For instance, it is expensive to stock beer products as compared to wines and spirits (Table 4).

Table 4. United States beer market category segmentation: % share, by value, 2006–2010

Degree of Rivalry

The rivalry in the beer industry in the United States is relatively higher as compared to other market forces. The beer industry in the United States has high concentration although three major industry players, namely, the Anheuser-Busch inBev, SAB Miller and Molson Coors, occupy a large market signet.

The extent of this rivalry is seen through the number of beer brands that each manufacturer has in the market, which gives the consumers a wide variety of beer brands to choose. Rivalry is also evident through the advertising that each company spends to promote its brands, with each of the there major players spending over $1 billion in advertising annually (Figure 7).

Conclusion

In the next five years, the beer industry is expected to be in a boom mainly due to the expected economic recovery, which will increase consumers’ expenditure. The sales volume is expected to soar by over ten percent by the year 2017. The concentration of the beer brands in the industry will continue to exist in five years, and no major new entrant is expected.

The other notable phenomenon is that the taxation for beer products is expected to remain high in the forthcoming years. The prices will also increase due to the increase of supplier power and industry rivalry. The overall sales volume of beer in the country grew by 4% in the year 2012 (Table 5). Similar growth is expected in the year 2013, and even more increase is expected in future (Barnes Reports 2012).

Table 5. Five-year trend of sales

References

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