South african breweries. this case is about the osition of the brewery and its strategy.

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Introduction

South African Breweries (SAB) is an international company committed to achieving sustained commercial success, principally in beer and other beverages, but with strategic investments in hotels and gaming. The company was founded in 1895 in response to the demand by gold miners in the Johannesburg region. Prior to the introduction of beer, the miners' drink of choice was raw potato spirits mixed with tobacco juice and pepper. No wonder why the new beer was well received!

Because of Apartheid, South Africa was excluded from the United Nations from 1974 to 1990 . Due to the political isolation experienced throughout these sixteen years, SAB pursued a domestic policy of purchasing cross-holdings in other South African firms, and eventually controlled 98% of the South African beer market. Cross-holding was a form of capitalization for SAB because the local capital markets were drying up due to the international boycott of the country.

In the late 1990's, per capita beer consumption in South Africa was in decline, and SAB was working hard to sustain revenue growth. The fall in consumption is attributed to a number of factors, including the bad South African economy.

Now that South Africa's economy is open to the world the result will be an increased globalization strategy, necessitating an increased focus on, and benchmarking against, world-class standards in order to ensure competitiveness.

To what extent is a global strategy or a multinational strategy effective in the brewing industry?

There are two basic alternative strategic orientations in every industry -a multinational strategy and a global strategy . Beer companies expand outside their domestic markets for several reasons -to gain access to new customers, to lower costs and become more competitive on price, to leverage its core competencies, and to spread its business risk across a wider market base. The strategies a beer company uses to compete in foreign markets have to be situation-driven -cultural, demographic, and market conditions vary significantly among the countries of the world.

The following chart has been designed to portray the pros and cons for a beer company in deciding for a multinational or a global strategy:

There are four key factors that drive an industry toward globalization :

·The market factors that lead an industry toward globalization are: homogeneous market needs, global customers, shortening product life cycle, transferable brands, and common international distribution channels. In the case of the beer industry the market needs are not homogeneous as there is a wide variation of taste and prices, there hardly is a global customer, the international product life cycle is not a major factor, and on top of all that, the distribution channels are very much local, and vary on a country-to-country basis.

·The economic factors that lead an industry to globalization are: worldwide economies of scale in manufacturing and distribution, steep learning curve, significant differences in country costs, rising product development costs, and logistics. In the case of the beer industry the economies of scale in manufacturing and distribution are regional or national, not global. The learning curve is not a factor, and although country costs differ, it is not a traded product. The development costs are low, and sourcing efficiencies are unlikely at global level. Logistics not favorable for global strategy.

·The environmental factors that lead an industry toward globalization are: falling transport costs, improving communications, government policies, and technology change. In the case of the beer industry the transport costs only affect super-premium imports. Communications may create some brand awareness spillover but otherwise it is not a factor. Government policies make new foreign entry and investment easier. Technology change is pushing up minimum economic size in manufacturing, but still below national levels....
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