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CASE STUDY: SABMiller, STRATEGY ANALYSIS - 2006

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Posted on Friday, March 02, 2012 by Vaishak V. Suvarna

Asof2006,SABMillerhadpresenceinbothdevelopingcountriesaswellasdeveloped
countries.AftertheliftingoftheinternationalsanctionagainstSouthAfricain1990s,SABwasableto
capturenewgrowthbyexpandingintodevelopingcountries,whilstatthesametimeconsolidatingits
existingregionalmarketofSouthAfricaandin2002entereddevelopedmarketofUSwiththe
acquisitionofMiller.
ExternalAnalysis
SABMiller'sbusinessstrategiesareinfluencedbytheforcesinitsexternalenvironment.
PESTELandPorter'sfiveforcesframeworkareusedtoanalyzethesefactorsinfluencingthe
firm'smacroenvironmentalandindustrysectorsrespectively(Johnsonetal,2008,p.55).From
SABMiller'sPESTELAnalysis(AppendixA)andPorter'sFiveForcesAnalysis(AppendixB),
thekeyexternaldriversofchangeaffectingSABMillerare
PoliticalThreat&EconomicThreat

SABMillerreliesonmarketsindevelopingcountriesforitsgrowthobjectives.Henceithastocomplywithdiverse
setoflocalregulations,taxlawsthatareuniquetothesecountries.Anditisdependentonpoliticalstabilityin
thesecountriesasanykindpoliticalturmoilcanhaveanegativeeffectonSABMiller'soperationsandprofitability.
InthedevelopedcountriesSABMillerhastofaceandadopttostricteralcohollawsalongwithgrowingantialcohol
lobby.
EconomicThreat

SABMillerissubjecttoglobaleconomiccycleslikeGDP,exchangerates,oilprices,levelsof
disposableincome.Whenincomelevelfallsinemergingmarkets,beerconsumptionfalls.
Fluctuationinlocalcurrencyexchangeratewillalsohavesignificanteffectonitsprofits.
Increaseinthepricesofrawmaterialsortransportationcostwilleffectitsprofits.
BuyerPower

Indevelopingcountries,beerconsumptionincreasesasdisposableincomeincrease.However
buyerscaneasilyswitchfrombeerconsumptiontowine&otherspiritsduetochanging
lifestyle.Antialcoholmovementinwesterncountrieslikecurbingofbar/pubhoursalongwith
smokingbanaffectsbeerconsumptions

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CASE STUDY: SABMiller, STRATEGY ANALYSIS 2006
Eventhough,SABMilleristhesecondlargestbrewingcompanybyvolumeanditenjoys
competitiveadvantagesineconomiesofscaleandlowprices,itstillfacesfiercecompetition
fromthefewlargeestablishedbrewingcompanieslikeAnnheuserBusch,InBev,Heineken,etc.
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Inspiteofbeinginahighlycompetitiveindustry,wecanseefromSABMiller'sSWOT

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analysis(AppendixC),thatemergingmarketsisfastgrowingwithhugepotentialandthereis
anincreaseindemandforPremiumbeersindevelopedmarkets.SABMillerhasbeenableto
successfullyexploittheseopportunitiesbyenteringbothdevelopinganddevelopedmarketsand
thencreatingasustainablemarketbyusinganoptimizedbrandportfolioapproach.
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ScanningBusinessEnvironment

Scenario Planning & Strategy - Part 1

Throughoutitshistory,SABMillerhasdevelopeduniquecapabilitiesofscanningbusiness
environmentandmakingstrategicchoices.Whenfacedwithgrowthconstraintdueto
internationalsanctionduringapartheidregime,SABwaswillingtodiverseawayfromitscore
businessofbeertomaintaingrowth.ForExampleVenturingintoHotel&Matchbusinessfor
regionalgrowth.Aftertheliftingofsanctions,SABwasabletoidentifyuniqueopportunitiesin
emergingcountriesofEasternEuropeandlaterintoAsiaandSouthAmerica.

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Maximization

ManagementSkills

SABMiller'smanagementhaslotofexperienceconductingbusinessesindevelopingcountries
andwassuccessfulinleveragingthisskillindevelopedcountryalso.WhenSABacquired
Miller,thegrouphadtomovefromtheirtraditionalpracticesofconductingbusinessesin
emergingeconomytodevelopedcountrywhichshowsmanagement'sflexibilitytoadaptto
changes.SABMiller'sManagementarecapableofdevelopingsophisticatedlogisticsin
developedregionsofUSAandWesterneurope,whilstcapableofworkingwithprimitive
logisticsinruralareasofAsiaandAfrica.
ValueaddingandCorporateparenting

SABMillerhasuniquecompetenciesofworkingwellindifferentcountriesandpossessvalueadding
parentingcapabilitiestoincreasingoperationalefficienciesandtransformacquired
businesses.OnesuchexampleiswhenSABMilleruseditsmanagementskillsandcorporate
parentingtoturnaroundMillerbybringinginitsoperationalefficienciesandemployee
performancepractices.
Acquisition&Takeovers

SABMillerhasuniquecompetenceinacquisitionsandtakeovers.Itsgrowthhascomethrough
enteringdevelopingmarkets,acquiringbusinessesandgrowingthem.Theyareconfidentin
acquiringsmallcompaniesindevelopingcountriesandalsohighprofileacquisitionslikeMiller
&Fostersindevelopedcountries.

StakeholderExpectation
SABMillerhasmadestrategicchoicestofulfillstakeholderexpectations.Onesuch
moveisitsacquisitionofMiller.WhenSABlisteditselfinLSE,itfacedhugepressurefrom
investorsandanalyststohaveapresenceinwesternmarketandmoveawayfromoverreliance
onemergingmarkets.Inordertobeestablishitselfasaglobalplayer,SABacquiredMiller
whichgaveitimmediateaccesstoUSmarketandestablisheditselfastheworld'ssecondlargest
brewingcompanybyvolume.

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SABMillerhasutilizeditsuniqueresourcesandcorecompetencestoaddresscompetitive
challengesandstakeholderexpectations.FrombeingaregionalplayerinSouthAfricaduringthe
1990s,ithasachievedtremendousgrowthviaglobalizationandasof2006,ithasannualrevenuein
excessofUS$18billion,withmorethan200brandsandhasfirmlyestablisheditselfasaglobal
brewingcompany(AnnualReport2007).

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