7/23/2019 Case Study_ Sabmiller, Strategy Analysis - 2006 _
Vaishak V
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CASE STUDY: SABMiller, STRATEGY ANALYSIS - 2006
Posted on Friday, March 02, 2012 by Vaishak V. Suvarna
As of 2006, SABMiller had presence in both developing
countriesas well as developed
countries. After the lifting of the international sanction
against South Africain 1 990s, SAB was able to
capture new growth by expanding into developing countries,
whilst at the same time consolidating its
existing regional market of South Africa and in 2 002 entered
developed market of US with the
acquisition of Miller.
External Analysis
SABMiller's business strategies are influenced b ythe forces in
its external environment.
PESTEL and Porter's five forces framework are used to analyze
these factors influencing the
firm's macro-environmental and i ndustry sectors respectively
(Johnson et al, 20 08, p.55). From
SABMiller's PESTEL Analysis (Append ix A) and Porter's Five
Forces Analysis (Appendix B),
the key external driversof change affecting SABMiller are
Political Threat & Economic Threat
SABMiller relies on markets in developing coun tries for its
growth objectives. Hence it has to comply with diverse
set of local regulations, tax laws that are unique to these
countries. And it is dependent on political stability in
these countries as any kind political turmoil can have a
negative effect on SABMiller's operations and profitability.
In the developed countriesSABMiller has to face and adopt to
stricter alcohol laws along with growing anti-alcohol
lobby.
Economic Threat
SABMiller is subject to global econo mic cycles like GDP,
exchange rates, oilprices, levels of
disposable income. When income l evel falls in emerging markets,
beer consumption falls.
Fluctuation in local currency exchangerate will also have
significant effect on its profits .
Increase in the prices of raw materials or transportation cost
will effect its profits.
Buyer Po wer
In developing countries, beer consumption increases as
disposable i ncome increase. However
buye rs can ea sily switch from beer con sumpti on t o wine
& oth er spirit s due to c hangi ng
lifestyle. Anti-alcohol movement in western countries like
curbing of bar/pub hou rs along withsmoking ban affects beer
consumptions
Competition
Even though, SABMiller is the second largest brewing company by
volume and it enjoys
competitive advantag es in economies of scale and l ow prices,
it still faces fierce competition
from the few large established brewing companies like
Annheuser-Busch, InBev, Heineken, etc.
These competitors have entered developing markets and compete
directly against SABMiller..
For Example Anheuser-Busch in China.
Internal Analysis
In spite of being in a highl y competitive industry, we can see
from SABMiller's SWOT
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analysis (Appendix C), that emerging markets is fastgrowing with
huge potential and there is
an increase in demand for Premium beers in d eveloped markets.
SABMiller has been able to
successfully exploit these opportunitiesby entering both
developing and developed markets and
then creating a sustainable market by using an optimized brand
portfolio approach.
From External and Internal analysis SABMiller's success factors
can be attributed to its un ique
Resources and capabilities of
Scanning Business Environment
Throughout its history, SABMiller has developed unique
capabilities of scanning business
environment and making strategic choices. When faced with growth
constraint due to
international sanction during apartheid regime, SAB was willing
to diverse away from its core
busin ess of b eer to maintai n growth . For Exampl e Venturing
into Hotel & Match busin ess for
regional growth. After the lifting of sanctions, SAB was able to
identify u nique oppo rtunities in
emerging countries of Eastern Europeand later into Asia and
South America.
Manag ement Skil ls
SABMiller's management has lot of experience condu cting
businesses in devel oping coun tries
and was successful in leveraging this skill in developed country
also. When SAB acquired
Miller, the group had to move from their traditional practices
of conducting businesses in
emerging economy to developed country which shows management's
flexibility to adapt to
changes. SABMiller's Management are capable of developing
sophisticated logistics i n
developed regions of USA and Western europe, whilst capable of
working with primitive
logistics i n rural areas of Asia and Africa.
Value-adding and Corporate parenting
SABMiller has unique competencies of working well in di fferent
countries and possess valueadding
parenti ng ca pabil itie s to increasi ng o peratio nal
efficienci es and transform acqu ired
busin esses. One such example is when SABMille r used i ts manag
ement sk ill s and corporate
parenti ng t o tu rnaround Mill er by bringi ng i n it s operat
iona l efficien cies an d empl oyee
performancepractices.
Acquisi tion & Takeovers
SABMiller has unique competence in acquisitions and t akeovers.
Its growth has come through
entering developin g markets, acquiring businesses and growing
them. They are confident in
acquiring small companies in developing countries and also high
profile acquisitions like Miller
& Fosters in developed countries.
Stakehol der E xpect atio n
SABMiller has made strategic choices to fulfill stakeholder
expectations. One such
move is it s acquisition of Miller. When SAB listed itself in
LSE, it faced huge pressure from
investors and analysts to have a presence in western market and
move away from over reliance
on emerging markets. In order to be establi sh itself as a
global player, SAB acquired Miller
which gave it immediate access to US market and establi shed
itself as the world's second largest
brewing company by v olume.
SABMiller has utilized its un ique resources and core
competences to address competitive
challenges and stakehol der expectations. From being a regional
player in South Africa during the
1990s, it has achieved tremendous growth via globalization and
as of 2006, it has annual revenue in
excess of US $18 billion, with more than 2 00 brands and has
firmly established it self as a global
brewing company (Annual Report 2007 ).
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