Carlsberg Case Analysis

There is stiff competition from established players in the South and North American countries and the African market has little growth, therefore it is not lucrative (Carlsberg A/S, 2017). Due to this, Carlsberg have to be a dominant player in Asia and Eastern Europe. If this strategy fails, it risks being reduced to a regional player by the four top breweries which include SABMiller, Heineken, InBev and Anheuser-Busch (Carlsberg A/S, 2017). The company must come up with the best strategy to ensure that it grows its market position. Therefore, this paper will provide an industrial analysis of Carlsberg AS, the reasons for its mergers and acquisitions, its international corporate-level strategy and how it can improve its performance in the industry. The company has since acquired and established more breweries in Sweden, Portugal, Poland, Latvia, China, Vietnam, and Croatia.

Carlsberg was listed on the Copenhagen Stock Exchange in 1970. In 2016, it introduced SAIL’22 as a company strategy that would help it grow its market share in the international market (Carlsberg A/S, 2017). As result of its strong performance in the Asian and Eastern European market, Carlsberg grew its revenue organically by 1% in the 2017 financial year. In total the company has net revenue of DKK 61. Creating a winning culture: This is pursued through promoting team-based performance, contribution to a better policies and application of the company’s codes and policies (Carlsberg A/S, 2017). SWOT Analysis of Carlsberg Carlsberg is considered a secondary player by most analysts despite its market leading position in Western China, Russia and Scandinavia (Smith, 2017). The top four breweries combined out produce Carlsberg more than six times.

These companies are better capitalized and have a focused strategy of acquiring stakes in emerging markets including where Carlsberg is most competitive. Due to this, Carlsberg has the pressure of growing equally as fast or risk being targeted for merges and acquisitions. • Competitors have strategized to enter into emerging markets. Industrial Analysis of Carlsberg According to the Zion Market research, the global beer marker was valued at about $530 billion in 2016 and it is expected to reach about $750 billion by 2022 with a CAGR growth rate of about 6. 0% between 2017 and 2022 (Zion Market Research, 2016). The beer market can be analyzed based on several criteria. These include by the product (light and strong beer), by production (micro and macro breweries), by categories (premium, super premium and normal), and by packaging (canned, bottled and draught).

Besides, based on category, consumers increasingly prefer locally produced premium beer and super premium beer international brands. These two categories are expected to grow substantially during the same period 2017 and 2022. The premium beer is expected to grow at the highest rate during the same period. On the other hand, based on packaging, canned brews expected to give intense competition to the draught and bottled beer. In 2016, the beer market was dominated by the Asia Pacific region which posted the largest revenue share. 8% of the beer sales. These buyers are usually able to negotiate for favorable terms on the prices of the beer with the producers (MarketLine, 2014). This significantly increases the power of the byers. There are low switching costs for the buyers which also increases their power.

On the other hand, beer producers need to provide a wide range of beers to accommodate the preferences of the consumers. Besides, stringent govern regulations is also another factor. On the contrary high-end beers attract high end prices which can enable the small players an initial foothold in the market as microbreweries (MarketLine, 2014). Based on these, the threat of new entrants can be assessed as moderate. Threats of Substitutes The major substitutes of beer are alcoholic beverages such as spirits, wine and cider as well as other non-alcoholic beverages such as functional drinks. The switching costs are relatively low and per-unit prices for beer are higher compared to spirits and wine for both distributors and consumers (MarketLine, 2014). Strategic Challenges facing Carlsberg One of Carlsberg’s strategic challenges is its ownership structure.

Despite being a publicly traded company on the Nasdaq Copenhagen Stock Exchange, the Carlsberg Foundation owns 30. 3% of its outstanding shares. The company changed its charter so that Carlsberg foundation is required to hold 25% of it’s the company’s outstanding shares down from the initial 51% (Carlsberg A/S, 2017). This strategy still ties up stock which prevents additional capital injections that are necessary to facilitate major acquisitions. It has been projected that there is more room for growth in the Asia and Eastern Europe regions since the consumer trends have indicated improving living conditions as well as increased beer consumption in the future. International Corporate-Level Strategy Carlsberg’s international strategy involves taking the beer it has produced for its domestic market and sells them globally with low local customization.

This implies that the beer that the company sells meets international market needs and as such its competition does not put pressures on the company to cut down its costs structure. Besides, Carlsberg has centralized its beer development functions by concentrating the research and development in its home country (Michael, Torben, and Marcus, 2011). On the other hand, the manufacturing and marketing functions are in each country where it operates. Carlsberg should also focus on establishing its own distribution channel in China so that it can boost its sales and capture more market as well as small scale vendors. Carlsberg should also focus on improving the efficiency of its production processes by taking advantage of economies of scale and implementing new technologies in its production as well as improving its packaging.

Factors That Are Important in Carlsberg’s Strategic Decision Making Process The main factors that are important in Carlsberg decision making process are its financial position, the company’s polices and management structure, its competition and the target market. Carlsberg is already in a lot of debt since that is its main source of capital for its ambitious acquisition strategy. This can limit its ability to acquire more companies. This will be more of a new line for the company which will also help raise curiosity from the customers. Besides, it may be more profitable since everyone is accommodated in their products (Michael, Torben, and Marcus, 2011). Carlsberg should also remove its non-value added segments and concentrate on the value added segments.