Foreign Market Entry and Diversification Global beer market trends Over the past decade, the global

beer market has undergone a lot of change. Developments and improvements in the quality and appeal of beer brands have resulted in a strong organic growth in the beer category. Brewers have responded to the declining beer consumption trends in developed markets. The decline of beer consumption in developed markets is due to high unemployment rates, high fuel prices, and reduced consumer spending. Industry consolidation has continued and the four largest brewers-Anheuser-Busch InBev, SABMiller, Heineken, and Carlsberg- produce almost half of all industry volume and generate up to 70 percent of industry profits. The beer consumption in countries like Africa, Asia, and South American continue to rise. This is primarily driven by the growth in population and incomes. Improvements in beer quality and appearance have also lead to the rise of beer consumption. Consumers have begun to shift from informal and unregulated forms of alcohol to attractively branded and safer commercial beers. Modelos international expansion Grupo Modelos international expansion began with the United States. As Modelo continued to produce beer domestically, they entered into distribution contracts with companies that possessed local knowledge of the beer market and gave them the freedom to market the product appropriately, yet maintain an active involvement in the decision-making. Barton Beers Ltd. was Modelos the first strategic partnership with a local distributor. Modelo made the decision based on the fact that Barton Beers was the largest beer importer in the 25 western states and was experienced in the marketing and sales of imported, premium beers. In an effort to supply the eastern states, Modelo partnered with a second distributor, Gambrinus Inc. Each of Modelos distribution partners was responsible for its own 25 states. The distribution agreement required each importer to be responsible for all activities involving the sale of the beer, except for production. Foreign market strategy The recent trends in the global beer market proved Modelo with a choice of three foreign markets to enter; Africa, Asia, or Latin America. Based on these three emerging beer markets I think Asia offers Modelo with the greatest potential for success. Asia has become a significant region in the global beer market, accounting for about a third of global beer sales. Chinas economic growth has resulted in a booming beer industry due to its growing middle class and increasing discretionary income. These factors have made China the biggest beer consumer in the world and the fastest rising market. Their beer consumption is predicted to expand at a compounded rate of five to ten percent over the next five years. Modelo should use the Think-Global, Act-Local approach for entering Chinas beer market. The middle ground approach would allow Modelo to use the same basic competitive of differentiation but allow local managers the ability to (1) incorporate whatever country-specified variations in product attributes are needed to best satisfy local buys and (2) make whatever adjustments in production, distribution, and marketing are needed to be responsive to local market conditions and compete successfully against local rivals. Modelo should use a similar strategy to the one they used when interring the United States market. Due to China being a localized beer market, Modelo should

initially seek to partner with a local distributor. This will allow them to test the demand for their products as well as develop additional strategies for expansion into other locales. Challenges faced from competitor InBev On November 18, 2008, InBev and Anheuser-Busch merged, creating Anheuser-Busch InBev, the leading global brewer and one of the top five consumer products companies in the world. They have over 200 brands in their global portfolio, 14 of which have an estimated retail sales value of over one billion dollars. Anheuser-Busch InBev are strongly in most of the worlds leading markets for beer, including the United States, which remains the industrys top profit pool, and high-growth areas like Brazil and China. The company has continually invested heavily to attract, retain, and develop the very best talent worldwide. This has been the key to their sustainable competitive advantage. The companys marketing approach is supported by three solid pillars: brands, connections, and renovation/innovation. For example, in 2010, Anheuser-Busch InBev sponsored the 2010 FIFA World Cup. Modelo could strategically respond to the industry giant by acquiring smaller companies that are having local or regional success, or they could look to merger with Anheuser-Busch InBev. The acquisition of small, regional beer manufactures would give Modelo a strategic advantage in both expanding their products offerings and entering a new market. For example, Modelo could acquire a small company like Fosters or some of the local, independent beer manufactures in some of emerging global markets. Merging with Anheuser-Busch InBev would give them a strategic advantage but it would allow Modelo to compete on a more global level. Should Modelo diversify its business? After reading this case study and doing research on the global beer market I believe Modelo should definitely diversify its business and brands. The first thing Modelo can do to diversify its business and brands is expand their product offerings. This could be accomplished by entering in the liquor and or the soft drink/energy drink business. Every year small companies develop new drinks that with the proper backing could find success in their respective markets. Acquiring small, existing companies would reduce the costs associated with initially building a brand. Modelo can also diversify its business by increasing their brand exposure through sponsorships, endorsements, and commercials. Using sporting events and televised events as means of free brand exposure is always beneficial when growing a brand. For example, international soccer teams wear advertisements on the uniforms. Modelo could find a professional soccer team in a region they want to expand into and use the teams uniform as a way of advertising their brand. Commercials are also a valuable outlet for brand exposure. Catchy and captivating commercials have the ability of drawing in the consumer and creating interest in the product. If Modelo utilizes some of these strategies they would be able to create diversity to their business and expose the brand to a different consumer base. References Anheuser-Busch InBev, 2010 Annual Report, December 31, 2010,http://www.abinbev.com/go/investors/reports_and_publications/annual_and_hy_reports.cfm Jones, G. (2009). Report breaks down slowing global beer market . Retrieved from http://www.beveragedaily.com/Markets/Report-breaks-down-slowing-global-beer-market

Kots, N. (2011). Cheers to the asian beer market. Beer Business, Retrieved from http://eng.pivnoedelo.info/2011/04/11/cheers-to-the-asian-beer-market/ SABMiller, 2010 Annual Report, December 31, 2010, from http://www.sabmiller.com/index.asp?pageid=39 Thompson, A., Strickland, A. J., & Gamble, J. (2010). Crafting & Executing Strategy