HOLMES INSTITUTE

Competitive strategy
assignment
SAB Miller case
Dai Chu Quang BCP3000

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 HI5008 Competitive Strategy

Table of content

Executive summary………………………………………………………3

Introduction about SAB Miller …………………………………………4

Corporate logics…………………………………………………………..5

Strategic position in 2007………………………………………………...6

SWOT analysis……………………………………………………………8

Implication of current strategic position for the future of SABMiller..10

Recommend the strategy that South African Breweries should follow.12

Conclusion…………………………………………………………………15

References …………………………………………………………………16

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 HI5008 Competitive Strategy

1. Executive summary
This article analyse the strategies of SAB Miller through the case study since it started
concentrating on local market till 2007 when SAB Miller become the second largest miller in
the world.

Through the case this article analyse strategies of SAB Miller in each stage of it’s history.
SAB Miller adapted the change of environment quickly, avoid risk and seek more
opportunities, they are good at working in changing environment. Most of market of SAB
Miller are developing market where SAB Miller has competitive advantages about wide
range of products, experiences, and ability to deal with problems in developing countries.
That’s the culture of SAB Miller. By acquiring companies, expand abroad with smart
strategies, Miller offer suit products for each market by their wide range of products, SAB
became the largest brewer in the world but they failed when broke into US.

In future SAB Miller need to keep the high performance in each local market, offer wider
range of products and balance in all markets. With the advantage is global scale SAB Miller
need to maximize profit by their global scale.

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2. Introduction about SAB Miller

SAB Miller was founded in the year of 1895 in South Africa which known as South African
Breweries (SAB) miller. SABMiller is the world’s second main brewer in volume, it’s sectors
include of production and retailing of beer, malts and carbonated soft drinks. With long
history and culture doing business in emerging market SAB become a big brewer in
developing market like south America, Africa, Asia. They have wide range of products meet
requirement of customers mostly in developing countries but lack of products for developed
market. The company has brewing interests or distribution agreements in over 60 countries
spread across six continents. The company’s products and brands include:
Products:
Beer
Carbonated soft drinks
Brands:

Amstel Hamm’s Miller

Carling Black Label Hansa Pilsener Miller Genuine Draft

Castle Haywards Miller High Life

Dog In The Fog Henry Weinhard’s Milwaukee’s Best

Dorada Holsten Olde English

Dreher Keller Peroni

Frisco Knock Out Port Royal

Gambrinus Leinenkugel’s Redd’s

Grapetiser Lion Lager Rhino

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3. Corporate logics
Through the course SAB Miller adopted some corporate logic and strategies as well. Firstly
their strategy is dominating local market due to change in political environment in 1950.
They moves their Head office to Southern Africa to gain advantages to work as local brewer,
avoid any limitation, restriction from government and have less foreign competitors. They
acquired some local brewers to expand in local market, become the biggest local is their
strategy at that time cause doing business in local market is much easier with no foreign
rivals and emerging market in a developing country. They succeeded with that strategy, by
1979 SAB controlled 99% of South Africa market and by1990 they invested in the
development of 3 mega breweries across country. They changed and succeeded because of
environment changed, they adopted that strategy to meet new requirement and achieve
opportunities from environmental changes. It lead to the change of their strategy again in
1993.
Political change eased SAB return and their way to expansion abroad, SAB got this
opportunity to expand abroad by acquiring local companies, marketing new products to
healthier people who are willing to pay more for beer. They adapted international strategy,
SAB broke into local market by buying local business to serve cheap beer and use their
distribution channels to market new products for upper class. They expand by acquiring
another companies, it’s the fastest way cause they can use remained channel, brand,
knowledge about local customers to export their products. By buying local companies they
can gain knowledge, brands and have wide range of brand to serve wider market. Using
international strategy SAB gain more benefit from wider market, that’s why their revenues
increased during the time from 1993 to 2002. SAB was the fifth largest brewer in the world
by volume.
Their culture is doing business in emerging market, developing countries, it was created
through their history, their experiences about working in developing market. That’s the
reason why when they changed their strategy to move to developed country like US they
didn’t success. They acquired Miller Brewery Company in US but their share price dropped
and cause they relied a lot on developing market, US is mature market with low growth
market. US market has a lot of products, mostly higher standard than products in developing
countries where SAB products concentrate on. SAB moved to developed market to protect
their return in strong currencies, not for benefit like they moved to developing market before.
This change is different from their strength and their corporate culture and they decide to
withdraw to emerging market again.
They concentrate on Asian market by joint venture with local companies. They expand to
Asian market by another entry mode, joint venture not by acquiring like they did with African
and American markets. SAB understand local culture of each country and choose the right
entry mode to break into the market in Asia, choose the right marketing method to market
their products in African and American markets. That’s the competitive advantages of SAB,
they are good at dealing with government issues, sensitive with political changes. They use
their capability is finance very well to acquire companies and achieved the expansion they
want, they reacted very quickly to political change as well. The change in direction from
local to international market each time politic change is evidence for their political sensitive.

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4. Strategic position in 2007

In 2006 annual report SAB has 4 strategic priorities:
 create a balanced and attractive global spread of businesses

 developing strong brand portfolio in the relevant market.

 constantly raising the performance of local operations

 leverage global scale

SAB will balance between developing market and developed market by consolidation in
developing market, not acquisition. In developing market SAB will have to face increasing of
competitors, stop expanding and consolidating to ensure the market share. Keep developing
quality of products and boost productivity cause it hasn’t been competitive anymore,
competitors imitated. To raise performance of local operation SAB have to keep innovating
to boost productivity, pay attention to operation rather than expanding.

SAB will offer wider range of products to both developing market and developed market to
create full range of products to maximize profit in each market. In developing market SAB
have to offer more higher class products for richer people, that’s the market share SAB did
concentrate on in the past. In developed market SAB have to offer more products for lower
class with cheaper price to attract lower income customers which is big segment in developed
market. In develop market customers are moving to consume more wine instead of beer,
that’s the point SAB have to pay attention. SAB might have to concentrate and break into
wine market in these developed market.

About global scale, SAB have to maximize the scale of product by offer wider range of
products to both developing and developed market. Concentrate on each local market rather
than expanding, boost productivity and sale in each local market to push the total revenue up.
Tap into new market in each market like expensive products for developing market and wine,
cheap beer for developed market. It can increase revenue as well.

One problem SAB face ahead is competitors, look at their competitors:

Anheuser-Busch Companies, Inc.

Asahi Breweries, Ltd.
Heineken N.V.
Kirin Brewery Company, Limited

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Marriott International, Inc.

Nestle S.A.
PepsiCo, Inc.
MGM MIRAGE
ACCOR
Carlsberg
Inbev
Burtonwood Brewery Plc
Merrydown Plc
Grupo Empresarial Bavaria
Royal Grolsch NV
Foster's Group Ltd.
Fraser and Neave Ltd
Brau Union AG
National Beverage Corp.
Tsingtao Brewery Company Ltd
Fuller Smith & Turner P.L.C.
Young & Co's Brewery PLC
Pivovary Staropramen a.s.
Molson Coors Brewing Company

Competitors are hard to imitate SAB competitive advantage is ability to deal with issues in
developing market in experiences in doing business in new market, especially developing
market. But competitors can imitate the effective operation so SAB need to keep innovating
and cut cost, concentrate on operation.

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5. SWOT analysis
Strengths Weaknesses
Global operation Low inventory turnover because mass
produce
Leading market position in emerging
countries Hard operation in North America

Strong cash flow by big revenue

Opportunities Threats
Acquisition Rising raw material price

New brewery investment in Russia Industry consolidation

Growing of emerging markets Changing preferences

Strength

SAB has global market and global scale, it help SAB to have wide distribution channel and
strong brand worldwide, ensure the quality of products. They operate in 6 continents, 60
countries, it make them become global brand which customize products to suit each regions.

With Snow, SAB are the leader in Chinese market, an emerging market and a lot of
opportunities in the world. With the position in china make sure the strong revenue and cash
flow for SAB to acquire more companies.

Opportunities

SAB have opportunities to acquire more to widen their market by strong cash flow, it’s the
fastest way to break into new market. SAB have new project in Russian market and emerging
market like China, they have a lot of opportunities cause these market are new and growing
fast. It can bring advantages for SAB cause they succeeded in market that hard to break in to

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like China, they can gain first mover advantages and increase revenue, profit due to fast
speed of growing in these market.

Weakness

SAB have low inventory turnover, it can reduce their cash flow. Even they succeed in
emerging market but they have difficulties in developed market like US, a mature market.
Doing business in developed market is not their culture and they don’t have experiences
about developed market, they mostly do business in developing countries and that’s their
advantages. They invested in US just for protecting their currencies, not for business so SAB
will have to deal with these problems.

Threats

In future SAB might face some challenges like rising of material price, they have to cut cost
rather than increase price cause brewer is high competitive industry. Consolidation is the
trend of this industry and in future they will face bigger and stronger competitors,
competitors will have wider market and wider scale, more channel to compete with SAB. It’s
a problem for SAB to concern.

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6. Implications of current strategic for the future

There are some implication of SAB’s strategic for it’s future, they are:

Create balanced portfolio between developing market and developed market: SAB
mainly operate in developing market with their wide range of products. their culture and
advantages is experiences about these market but they started investing in America to balance
their portfolio and avoid depend on emerging markets which have environment change
quickly and unstable. SAB did that to minimize risk from depend too much on these markets.
With developed market they acquired company in US and will have to change strategy to
seek opportunities in this market.

Customize products to suit each market: SAB enter market by use local products and local
channels to introduce their products, with their wide range of products they can offer right
product to suit each market. Depend on characteristic of market SAB have right product
which match demand of customers there to offer and that their advantages but most of their
products are for developing countries and for price sensitive customers there, they lack of
products for developed market with higher standard and style. They have to change strategy
to attract US market cz each market has different demand, their strategy for emerging market
doesn’t match US market. In china they face a problem about their product, SNOW. Taste
and demand of Chinese customers is different from other market so they are struggling in this
market cz their product doesn’t match Chinese consumers demand.

Continue to expand in developing market: they keep expanding into emerging markets,
which are advantages of them. By acquiring and invest in these market they improve revenue
and widen their products range, seek more opportunities of high growth in these market.
That’s their strategy to grow, by expanding market to improve profit after dominating current
markets and less opportunities to grow, they choose to expand widely, not deeply by develop
more in current market.

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7. Recommendation
With the current strategy and economic condition, SAB should have some change in their
plans to adapt the change of economic environment like economic crisis:

SAB miller is facing economic crisis like all company in the world, decrease in revenue,
profit are the main problems they are facing. Most of SAB’s market are developing market
that maintain the high growth even economic crisis, these market still grow demand so to
avoid decrease in revenue and profit SAB should concentrate to these emerging market to
maintain the growth of revenue. In hard economic condition SAB should concentrate on
economy products with lower price, cheaper products and less concentrate on high class
products. Economic crisis is a good opportunities for SAB to acquire and break into
developed market by buying company which facing difficulties. In crisis many company in
developed countries are affected because developed countries are the centre of economic
crisis, SAB can use their strong cash flow to acquire with lower price to break into developed
market that they haven’t been good there.

In developed market SAB should change strategy and offer different products, different
marketing strategy to match market with high standard concentrate on style of products, not
price only. In developed market SAB cant use the same strategy like in developing countries
by offer products with low price cz price is not very important in developed market. SAB can
offer to higher class, concentrate on lifestyle and quality of products.

In Chinese market, SAB faces problem with SNOW, their product. They don’t understand
Chinese market and government policies, they should keep joint venture and offer local
products, not their own products. Chinese market use local beer with special taste and low
price, SAB have to use local products and expand their business by joint venture to gain
profit in sale of local beer, not their own beer.

They have to change their system from decentralize to centralize to concentrate on building
strong global brand to compete with global customers. When expanding is not the right
strategy they have to maximize their profit in each market and compete with competitors. By
building strong brand they can improve profit by customers loyalty and post purchase and
position themselves in customer’s mind by brand.

8. Conclusion
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In this case SAB show the ability to adapt the change of environment quickly, especially
political environment. They changed from foreign company to local company to seek
opportunities to dominate local market. When policies changed, they adapted again and
expanded to foreign market by acquiring local company to break into these markets. They fail
in breaking into US market cz they choose it not for business and don’t have the right
strategy for this market that totally different from their current markets. From the beginning
and their history, their routines as well we can see that their culture is doing business in
emerging markets. The competitive advantages and culture of them is doing business in
developing market, it helps them expand and have big market mostly in emerging market.
They have right strategy to break into these market and widen products range. But they now
facing some problems cz their global scale, it makes them hard to customize products to each
market, decentralized system which they use when they expanded makes them hard to build a
strong brand as well. In future they have to minimize their scale to centralize system to build
their global brand nad customize products in each markets.

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9. References
http://www.daylife.com/topic/SABMiller

SAB Miller website

http://www.sabmiller.com/

12manage

http://12manage.com/

Scribd

http://www.scribd.com/

Datamonitor Company profile

http://datamonitor.com

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