BUSINESS STRATEGY

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

1970s

1980s

1990s

2000-2003

Environmental Analysis
External Environment PEST Analysis Industry Environment Internal Environment SWOT Analysis

External Porters 5 Environment Forces PEST Analysis

Political Factors
Racist system

Struggle to establish democracy

Campaign for economic sanctions

Excise duty policy

Prohibition on consumption of liquor by black S. Africans

Economic Factors
Exchange Rates Prices of key raw materials highly volatile Uneven consumer disposable income

Socio Cultural Factors

Fierce attachment to local brews Shift from immediate gratification to self improvement Decrease in consumer spending on beer Changing tastes and preferences

Technological Factors
Better production facilities Focus on developing more variants Aim at reducing costs and enhancing quality

PORTERs 5 FORCES
New entrants LOW

Bargaining power of suppliers MEDIUM

Threat from competitors HIGH

Bargaining power of customers HIGH

Threat from substitute products HIGH

Threat from new entrants

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

LOW

Bargaining Power of Customers

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

Threat from Substitutes

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

HIGH

Bargaining Power of Suppliers

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

MEDIUM

Threats from competitors

Industry has eat or be eaten competition Easy access to same distribution channels Low distributor loyalty High innovation and differentiation

HIGH

SWOT ANALYSIS
Acquisitions Extensive product & brand portfolio Diversification Market dominance Management expertise Spread of international business: portfolio effect Decentralized management Over reliance on developing markets Lack of brand equity in first world countries Dependence on volume for turnover growth Acquisition of miller

Competitors gaining MS M&A HIV/AIDS Rising cost of raw materials Decreasing consumer spending on beer Changing lifestyles Devaluation of currency Low consumer confidence in U.S market External restrictions on market expansion Excise duty

SWOT
Increasingly stable macro economic environment Favorable political change JV with Tanzanian govt. Expanding global demand

Strategies

Corporate Level Strategy

Corporate Business Level LevelStrategy Strategy

Functional Level Strategy

Diversification
Related Diversification

Horizontal Integration

Local strong hold

Build critical mass

Diversification
Unrelated Diversification

Safety Matches Food

Retail

Furniture Property

Clothing & Footwear

Hotels & Gaming

Global Expansion
Mode of Entry

Joint Venture

Acquisition

Global Expansion
Competences of global subsidiaries
Management Expertise Economies of Scale

Brand Portfolio

Local Responsiveness
Consumer Preference Political & Economic Environment
Partners & Local Communities

Global Expansion

Pressures for local responsiveness Low High Localization strategy

Low
Pressures for cost reductions

International Strategy Global standardization strategy

High

Transnational Transnational strategy

strategy

Corporate Parent
Identify and acquire businesses

Transform the business

Independent BU strategies

High degree of autonomy

Portfolio Manager

Parenting Portfolio
Leveraging parental competences
Adding value through managerial expertise Focus of future strategies

Heartland Business Units

Strategies

Business Level Strategy

Attaining competitive advantage

Industry
Fragmented industry
Horizontal merger

Consolidate
Economies of scale

Securing a national market

Bowmans Strategy Clock

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

Price Based Advantage

Volume game
Product development

Efficiency program
Production

Labor

Blue Ocean Strategy

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

Strategies

Functional Level Strategy

Integrating resources, processes and people to deliver corporate and business level strategies

Operational Efficiencies
Economies of scale
Innovation: Brutal Fruit and Sterling Light (South Africa), Redds (Poland
and East Africa)

Marketing and distribution Material management: Rationalizing production & distribution Streamlining brands from 50 to 11 - 12

Superior Quality
Clear goals: gain higher market share Commitment to quality Employee performance rating

Customer Responsiveness

Customization Building locally, winning globally Quick response time

THANK YOU!