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Anheuser-Busch and Harbin Case Study - Part 1 Industry Analysis

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Information about Anheuser-Busch and Harbin Case Study - Part 1 Industry Analysis

Published on March 18, 2008

Author: romaincorraze

Source: slideshare.net

Description

A general overview of the chinese beer market
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CORPORATE STRATEGY : Part. 1 : Industry Analysis Anheuser-Busch and Harbin Case Study

Content Chinese beer industry overview Environmental analysis Segmentation of the industry Competition Key Factor Success Strategy groups Drawing scenarios

Chinese beer industry overview

Environmental analysis

Segmentation of the industry

Competition

Key Factor Success

Strategy groups

Drawing scenarios

1. Chinese beer industry overview An increasing market with a huge potential 1 st rank for volume per year but 11 th rank for liters per person Low average price Huge foreign interest on this market but foreign investment usually failed

An increasing market with a huge potential

1 st rank for volume per year but 11 th rank for liters per person

Low average price

Huge foreign interest on this market but foreign investment usually failed

2 .Environmental Analysis: PESTEL Decentralized power structure Unstated hierarchy of power Big power of the local and provincial authorities Important growth of China economy Huge and fragmented market Increase of urbanization rate Low income and standard of living Poor infrastructures Development of urban aeras Reduce emissions of carbon dioxide Obligation to share technology and knowledge for foreign firms High tax for on trasportation POLITICAL ECONOMICAL SOCIAL TECHNOLOGICAL ENVIRONMENTAL LEGAL

Decentralized power structure

Unstated hierarchy of power

Big power of the local and provincial authorities

Important growth of China economy

Huge and fragmented market

Increase of urbanization rate

Low income and standard of living

Poor infrastructures

Development of urban aeras

Reduce emissions of carbon dioxide

Obligation to share technology and knowledge for foreign firms

High tax for on trasportation

3 .Segmentation of the industry

4 .Porter’s Five Forces of competition The Alcohol market is a large market Substitutes depends on the 4 different regional location of Chinese customers A very large growth potential Average sale price is low There is a growth in the target population for beer and the rise in average income Threat of substitutes Threat of new entry

The Alcohol market is a large market

Substitutes depends on the 4 different regional location of Chinese customers

A very large growth potential

Average sale price is low

There is a growth in the target population for beer and the rise in average income

Porter’s Five Forces of competition (cont’d) Average Chinese Beer customers are poor, live in agricultural heartland and are extremely price conscious No loyalty to any particular brand Twice as much of beers is consumed at home as is consumed in bar & restaurant Suppliers are quite fragmented Between 500 and 1 000 firms manufactured beer in China Foreign brewers are willing to pay high prices for even minority positions in local breweries Bargaining Power of Buyers Bargaining Power of Suppliers

Average Chinese Beer customers are poor, live in agricultural heartland and are extremely price conscious

No loyalty to any particular brand

Twice as much of beers is consumed at home as is consumed in bar & restaurant

Suppliers are quite fragmented

Between 500 and 1 000 firms manufactured beer in China

Foreign brewers are willing to pay high prices for even minority positions in local breweries

Porter’s Five Forces of competition (cont’d) Rivalry between established competitors There are no dominant national or international brewers There are only powerful regional brewers The top 5 firms in the industry generate 38% of the result of the market

There are no dominant national or international brewers

There are only powerful regional brewers

The top 5 firms in the industry generate 38% of the result of the market

Porter’s Five Forces of competition (cont’d)

5 .Key Success Factors Key Factor of Success What do customers want? How does the firm survive competition? Average Chinese beer customers : are poor live in agricultural heartland are extremely price conscious consume beers at home do not form any allegiances to particular brand. Highly Fragmented market Chinese consumers did favor well-known brands in public Larger regional breweries preferred to support smaller local brand Foreign brewers are willing to pay high prices for even minority positions in local breweries Foreign investors have to follow some restrictions (interest charges) or establish presences through licensing agreements

Average Chinese beer customers :

are poor

live in agricultural heartland

are extremely price conscious

consume beers at home

do not form any allegiances to particular brand.

Highly Fragmented market

Chinese consumers did favor well-known brands in public

Larger regional breweries preferred to support smaller local brand

Foreign brewers are willing to pay high prices for even minority positions in local breweries

Foreign investors have to follow some restrictions (interest charges) or establish presences through licensing agreements

The market is the largest in the world It’s still possessed the largest growth potential In China, the population and the natural resources presented opportunities Pub culture is emerging in the cities The population is increasing in the cities No dominant national or international brewers Politics make the rules on the market and help some brewers (privatization plans…) Key Success Factors (cont’d)

The market is the largest in the world

It’s still possessed the largest growth potential

In China, the population and the natural resources presented opportunities

Pub culture is emerging in the cities

The population is increasing in the cities

No dominant national or international brewers

Politics make the rules on the market and help some brewers (privatization plans…)

6 .Strategic Groups (cont’d) National Wide Product Range Geographical Scope Regional Narrow China Ressources Entreprises Huiguan Brewery, King Long, Fujian Huiquan Harbin Group Tsingtao Beijing Yanjing Group

Many of the foreign brewers had started to target the economy segment, indeed the Chinese beer consumer is price conscious. Competition is intense. North China: saturated market East China: greatest promise for growth in Per capita beer consumption Mid China: Low capita income and the slowest growth market. South China: the next hot beer market Strategic Groups (cont’d)

Many of the foreign brewers had started to target

the economy segment, indeed the Chinese beer

consumer is price conscious. Competition is intense.

North China: saturated market

East China: greatest promise for growth in Per

capita beer consumption

Mid China: Low capita income and the slowest

growth market.

South China: the next hot beer market

Premium beer witnessed a higher rate of growth Improving standard of living in the bigger cities National Strategy: Expand its presence in east and south of China by increasing its market share in these two regions. Higher investment in premium segment. Strategic Groups (cont’d)

Premium beer witnessed a higher rate of growth

Improving standard of living in the bigger cities

National Strategy: Expand its presence in east and south of China by increasing its market share in these two regions. Higher investment in premium segment.

7. Drawing scenarios Focus on the industry life cycle Evolution of the life cycle over the life cycle Scenario 1 Scenario 2 Scenario 3

Focus on the industry life cycle

Evolution of the life cycle over the life cycle

Scenario 1

Scenario 2

Scenario 3

The industry life cycle Introduction Emergence Maturity Decline Demand (units/year) Time

Evolution of the life cycle over the life cycle End of Growth / Beginning of Maturity Demand - Mass market - Increasing demand Technology - Improvement of product composition Products - Commoditization - New products Manufacturing - Harbin achieved 90% capacity utilization - Consolidation Trade - Increasing demand imported brewing barley Competition - Bloody competition - Profits fall Key Factors of Success - Brand local presence - Price & Cost Management - Foreign Direct Investment

The Chinese beer market

A fragmented market

Drawing scenarios Buyer power Scenario 1 Increasing gap between highest and weakest revenues East strategy VS West strategy Standard lager segment renunciation Focus on Prenium and Economy segments Threat of new entry Increased interest for standard lager segment Generating a new demand Looking for market leadership

Scenario 1

Increasing gap between highest and weakest revenues

East strategy VS West strategy

Standard lager segment renunciation

Focus on Prenium and Economy segments

Increased interest for standard lager segment

Generating a new demand

Drawing scenarios (cont’d) Threat of substitution Scenario 2 Increased interest for wine Decrease of standard lager sales Favorising the development of new products Threat of new entry Uniqueness of service Specialist knowledge Supplier power Become a leader in a niche market

Scenario 2

Increased interest for wine

Decrease of standard lager sales

Favorising the development of new products

Uniqueness of service

Specialist knowledge

Drawing scenarios (cont’d) Threat of substitution Scenario 3 Suppliers are growing slower than the demand Shortage of Malt Competitors Supplier power Adaptation / Reconversion Buyer power Sensitiveness to differences between competitor Cost of changing

Scenario 3

Suppliers are growing slower than the demand

Shortage of Malt

Competitors

Sensitiveness to differences between competitor

Cost of changing

Thank you for your attention Any questions ?

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