Global Forces Essay Example for Free

Global Forces EssayIntroductionThis case advancedlights how the European create from raw material effort is striving to grow and gain competitive advantage worldwide. In line to achieve this in that respect pass been a lot of grounding, acqiusitions, mergers and of course rebranding of beer products in the Industry. Companies atomic enactment 18 further trying to reduce operational cost for improved profit. It is therefore imperative that we analyze the global forces in this pains. 1.A PESTEL ANALYSIS(i)PESTEL FACTORPolitical first I noted that there pee-pee been impregnable campaigns by giving medications to stop drunken driving. This might affect the consumption levels for the beers. More especially when there ar functions such as weddings and parties, because during such functions Drivers are tempted to drink as functions unfolds. Also people whitethorn start avoiding taking beer from Pubs and restaurants since they are required to drive billet from such pla ces. Political effects are further emanating from the Goernment campaigns against binge drinking or overindulgence on inebriantic beverages, hence discouraging eat uprs from pubs or any social clubs. This may act as catalyst in the reduction of business opportunities for the brew companies. I further noted that Governments regulate on how packaging for beer should be done due to environmental issues. For example Denmark the use of Bottles is kinda of cans. Politically some this may affect the profitability of some create from raw stuff companies in Europe.EconomicThe Governments regulations to restrict alcoholic beverage consumption in term of drunken driving and excessive consumption have sincerely helped in increased sales of beer in supermarkets. As indicated in the case statistics shows that sales increased to 66% in 2005. The shift to Chain Stores has worked to the advantage of the brewing industry as the use cut-price on beer which, attract people to buy the commodity. This scenario or should I simply economically the brewing companies would run as they are assured of more sales though this is indirect business. However there have been little growth in consumption of alcohol or in a nutshell a shift in demand to the developing economies such as China and Brazil. This requires that the brewing industry in Europe should yarn-dye its investments to overseas markets.Social FactorDiscouragement of binge-drinking affects some people socially as they are denied happiness that comes with alcohol consumption. Furthermore the highly publicized issues of alcohol effects on Health and fitness cause consumption levels to go down. Due to such awareness people chose to socialize without taking any alcohol in some set ups.TechnologyI note from the case the due technological advancement has led to the introduction of tonic products tailored to peoples tastes such as fruit flavored beers and extra cool lagers. In European brewing industry, it is the technology t hat makes the products attractive as labeling on packages communicates how good the beers on sales may be and also replaces to packaging styles is make easy with technology. It is also clear in the case that there have been economies of scale in brewing and dispersal of alcoholic beverages as machineries as readily acquirable due to advancement in technology in Europe.EnvironmentAs stated above the Governments regulations toward environmental protection affect the brewing industry in the European markets either positively or negatively as they have to change packaging to the preferred bottles than cans. The aim is to sustain the environment hence even consumers are al miens conscious of such laws as they buy beers.Legal factorsMy digest is that the Brewing Industry in Europe is affected negatively as there are laws to curb binge drinking and drunken driving. I have noted that brewing companies have had low sales a result as people are required to buy their products from chain st ores and consume it from homes instead of social clubs or pubs. My conclusion after carrying out the PESTEL analysis is that the Brewing Industry in Europe has potential to grow as there are salubrious conventional companies that able to merge with new(prenominal) organasations either overseas or locally. Also most brands are wellspring known world over hence able to survive any effects that may impact them negatively due to PESTEL factors.(ii) FIVE FORCE ANALYSISThreat of New EntrantsThe threats of new entrants is low in the European markets due to the following reasons campaigns by governments to curb drunken driving and strong awareness about the effects of alcohol on peoples health makes the business an attractive. It is also a known fact that in areas where there are business leaders who are well appointed it is difficult for the new entrants to survive as customers switching costs maybe very high. Also the high packaging costs for the product makes it irregular as to wheth er the new entrant will be able to survive. Also the switching cost of customers may be high due to ready established relations and confidence that customers have in some existing brands. Further the upcoming economies such as China or Ukraine makes it very unattractive to establish such a business in Europe as there could less business opportunities.Threats of SubstitutesThe threat of substitutes is very high. This is because raw materials are readily available such as barely and other fruits, therefore very is for any orgsanisation to come up a product that my act as substitute. Further piss Industry is taking its shape such that they are now supplying bottled water. This acts as substitute to quench someones thirsty, considering that there campaigns for health life history and people are now avoiding alcohol to keep fit.Also Laws that govern drunken driving compel customers more especially motorists to take water as a substitute instead of Beers. Moreover due to technological a dvancement it is very easy to produce substitute products such as Juices that may be appealing to consumers and such is obtaining in the European Markets as these can be consumed in clubs and Pubs. Lastly the move to high consumption of wines in the United landed estate than usual beers makes it very clear that the threats of substitutes are high.Suppliers Bargaining PowerIt is clear that the providers negotiate power is high. For example it noted that the Packaging industry is highly concentrated in Europe and is dominated by multinational organizations, as such there are no substitutes to packaging hence suppliers of such materials are on the advantageous side. In addition suppliers are on good side in Europe due to the fact that production costs in the Brewing Industry are there is need treat the suppliers well in order to operate effectively and efficiently. This gives supplier high bargaining power.Buyers Bargaining PowerI can simply say buyers are consumers of the products under discussion. In this context their bargaining power is very. This is because they have a wide choice of such products, this means they able to choose which brand or change at any time. Since there are a lot of substitutes available the switching costs are low hence no impact on them. Further customers would survive whether they consume the product or not. They choose when to buy and when not to, this mean that there is no concentration of buyers. Hence their bargaining power is low.Competitive RivalryThe competitor in this industry in the European Market is high. This is due to the fact that consumption levels have been reducing hence all producers have to sell their products to a reduced number of customers. Furthermore there are a lot of new brands arising from emerging markets such as fruit flavored and other exotic beers from outside(a) markets. What make competition much high are the distribution channels. The beers are distributed through supermarkets and its up to the brewing companies to do a lot of announce in order to catch the consumers eye while shopping in supermarkets.In my conclusion I have noticed the Brewing business line in Europe is very ugly for the new entrants. It is therefore incumbent upon the existing companies to take up survival strategies such merging with others or acquisitioning of shares in the emerging markets such as Russia, China and Baltic Countries. They should also endeavor to re-brand themselves and try to enter other international markets such as Africa where customers are well attracted to beers from overseas and there are less entry barriers.2.Impact of trends on the four companies(a)Heineken in NetherlandsThis company is named the biggest in European Beer Industry. However in order to survive the flooded market its target is to go in to international markets and use the local companies that they may acquire to introduce their beer. Transferring of Knowledge and technology is another way it aims to strengthen its new markets. The impact is that this company would grow they take up survival measures in the manner outlined above.(b)Its strength It holds five percent of sales in Asia-Pacific and 17% in Americas this puts in a good position when it comes to business share in a market where there is high competition. Heineken is better placed in ground of strength has it is the producer of worldly known brands such Heineken and Amstel. Due to family controlled aspect it becomes stable and independent in terms of business growth even in international markets. Economies of scale gives makes it strong considering that brewing is costly in Europe and in a nutshell it is secondary to non in brewing industry in Europe hence claims its strength in these area. Form the case I have deduced that the other strength is that they have a vision or simply where they want to be regardless of the competition industry where they operate from. I also noticed that another strength that Heineken has, is fiscal capacity to implement new projects as fast as possible as funding is always available for such.Heinekens WeaknessesFirstly weakness that, I have picked that they are unable to be innovative due family controlled. This means they may lack new ideas as the family may always influence decision making to suit their investments thus may be compelled to do things in the same manner hence lagging behind. This may result in non human race of new product development in the organization. A high price of Packaging Materials is another weakness at Heineken. They have no control or other sources for such materials this more reason why they complained of 11% price escalation.(ii)Grolsch (The Netherlands)(a)The impact if these existing business trends will cause Grolsh to push for mergers with other international organizations as it commands other brands such as US Miller and flavored beers such as grapefruit. It is also clear that it may require channeling much of resources to branding and inno vation since thats its strategy in line to survive. They believe that better looking product will attract a lot of business such leafy vegetable bottles and swing tops. (b) Its Strength and WeaknessOne of its strength is long existence. It is on record that it was established in 1615 hence experienced hence may attract customer royalty as issues of closure may not easily arise. It has further embarked on centralization hence increase in terms of production volume which results in reduced cost. Grolsch also supplies variety of products this is strength as it gives it competitive advantage in the market in which it operates. Furthermore the other strength is its innovation in order to achieve its strategy.Its WeaknessThough its brewery is centralized it is single, thus pose a high risk in that in case of any challenges there can be no production at all. It also lacks financial muscle for example in 2005 when their colleagues Heineken made amassed 11.8 billion British Pounds Grolschs income from sales was only 313 Million Pounds hence very easy to fold. (iii)InBEv (Belgium/Brazil)(a)Impact of these trendsEven though InBev is the largest brewer in the world with a huge financial power it cannot survive with the existing trends in European markets. How can it survive? For it to stay alive it should strive to acquire other well established companies in the world. Since the world is more global now its strategy should be to built more global brands and increase it efficiency via purchasing and technology. The trends have impacted positively on InBev has it now sets its direction to growth through the above.(b) InBevs StrengthsThe first strength is that it is the largest in the world it is ranked either number one or two in about twenty lands. It has a sound financial position hence able to establish businesses anywhere in the world. In addition InBev is already established in emerging markets such as Chine and Brazil though acquisitions. It has well known brands suc h Becks and Stella ArtoisInBevs WeaknessesLack of analysis before acquiring other companies, for example it acquired a certain company whose brands were declining in terms sales, such acquisitions may gambling out to be loses.(iv)Scottish and Newcastle (UK)(a)Impact of trends on the organizationDue to the business trends Scottish and Newcastle should be able to a lot of acquisitions in the UK being the market in which it operates this would act as a point of growth. In line to gain competitive advantage the changing trends has pushed this company to invest in the fast suppuration markets such as Baltic Beverages where it has put fifty percent and China in CBC twenty Percent. (b) Scottish and Newcastles StrengthsIt gains its strength by possessing strong brands such as John Smith, Baltika and Fosters. The strength are also drawn from its investments in fast growing economies such as China and Baltic nations, this may result in profitability regardless on competition in Europe. They are also market leaders in France, the United Kingdom and Russia as observed this is a very good strength for Scottish and New castle as competitive advantage is not easily achievable in these areas.Its WeaknessesScottish and Newcastles financial position is not adequate for the high completion it is exposed to in this industry.My conclusion in to this assignment is that the Brewing Industry in the European Markets is highly competitive hence the need for companies to be innovative them to survive. There is also need for bigger companies to adopt strategies of acquisitioning of diminished ones so that they may expand their brands. Companies in this industry also need to spread their web to other countries if they are to gain competitive advantage.BibliographyHUNGER DJ/WHEELER TL (5th ed) (1992) Essentials of Strategic Management Global Forces. Online available from www.opp.com. Accessed 13 September 2012 3H Strategy and international business. Online available from www.dur.ac.uk. Accessed 13 September 2012