ba 111a ppt closing case 2

8/10/2019 BA 111A PPT Closing Case 2

1/22

Free Powerpoint Templates

Page 1Free Powerpoint Templates

Chapter 2 Closing Case:The United States Beer

Industry
http://www.powerpointstyles.com/http://www.powerpointstyles.com/http://www.powerpointstyles.com/http://www.powerpointstyles.com/


2/22


Page 2

Case Discussion Questions

1. Why has the United States brewingindustry become more concentrated over thelast two decades?

2. Analyze the competitive structure of theindustry using Porters five forces model .

3. What are the implications of the evolvingcompetitive structure in the brewing industryforthe profitability and strategy of a smaller massmarket firm in the industry?

4. Are there different strategic groups in theindustry? What are they? Do you think thenature of competition varies between groups?
http://www.powerpointstyles.com/http://www.powerpointstyles.com/


3/22


Page 3


1. Why has the United States brewingindustry become more concentrated over thelast two decades?

The U.S. brewing industry has become moreconcentrated over the last two decades forseveral reasons.a. The consumption of beer has been slowlydeclining, in order for companies to gain

market share, they have to take customersfrom other companies. This would then lead tosome companies to go out of business due tothe lack of customers.


4/22


Page 4

b. Brand loyalty also increased. Advertisementplayed a large role. Advertising spending hassteadily increased putting small brewers at adisadvantage. Larger companies were able tospent $0.40 per case of beer sold. Smallermass-market brewers could not afford to spendnear that amount.

c. Technological change in canning anddistribution lead to the concentration of the

brewing industry, as well. The size that a mass-market brewer has to accomplish to acquire alleconomies of scale has grown. They mustproduce more beer and achieve more marketshares. Not all companies reach minimum

efficient s cales of production.

http://www.powerpointstyles.com/http://www.powerpointstyles.com/http://www.powerpointstyles.com/


5/22


Page 5

2. Analyze the competitive structure of theindustry using Porters five forces model .

a. Risk of Entry by Potential Competitors

In this closing case involving the United StatesBeer Industry, there are three establishedcompanies mentioned, namely: the Anheuser-Busch, SAB-Miller and Molson Coors. These threeare under the mass market segment wherecompetition revolves around aggressive lowpricing , brand loyalty, distribution channels,and national advertising spending.



6/22


Page 6

Using the first force in Porters Model, we consideredcompanies in the premium beer segment which areengaged in the art of craft brewing as potentialcompetitors since they have been gaining shares inthe total market and currently account for 11% oftotal market from 1% share in the past. They buildtheir brands around taste and cover higher productcosts by charging much higher prices.

We identified that the risk of entry by potentialcompetitors in the industry as low since there arehigh entry barriers brought about by the strategiesthat they have used such as improving economies ofscale, having low prices, promoting brand loyalty andcreating national advertisements.



7/22

Free Powerpoint Templates Page 7

As for economies of scale, minimum efficient scaleof production has increased over the years whichmean more market capital and more market shareis needed for potential competitors to enter andcompete in the industry.

In terms of brand loyalty, the three establishedcompanies are the preference of the consumerssince 80% of all beer consumed in the UnitedStates is produced by these three companies.

And with national advertisements, brand loyaltywill surely be strengthened. With that, newentrants will have a difficulty in taking the marketshare away from these established companies.



8/22


b. Rivalry among established companies

There is a lot of competition in the beer industrywith hundreds of breweries present dominated bysmall number of large companies taking up 80% ofmarket share. With this, we can say that the rivalryamong established companies is intense since anychanges in one company's price may affect theother company consequently.



9/22


In addition, the decline in the consumption of beer dueto an increase in consumption of wine and spirits mayalso cause a higher rivalry since the companies willcompete for the existing consumers and the only wayfor a company to keep afloat is to be more competitive

among its rival companies in the industry.

The increase in cost conditions due to increase inadvertising spending and technological changeincoming and distribution may cause a threat to the

established companies and to newly entered companyin the industries. The change in the demand of beers,sales of the company enable them to cover their costbut with lower profits. Exit in the industry is relativelycostly and exit barriers are high.



10/22


c. Bargaining Power of Buyers

Wholesalers, Super markets, liquor stores, andbars/night clubs account for some of the majorbuyers in this industry. As mentioned earlier, theconsumption of beer in the United States hadgradually decline over the last two decadesbecause of an increase in demand of otheralcoholic drinks. As a result, the buyers of beerfrom the three big companies have bargained forlower prices since they know that there will befewer buyers of beer than before.



11/22


Buyers have a bargaining power because not only isthere another segment which is the premium beersegment that produces high quality beers but alsoanother industry of wines and spirits that is becomingmore common. Because of all the alternative choices(substitutes) like wine and spirits for wholesalers thatare available to them, buyers have a voice in howmuch companies pay for products.

This provides them (especially wholesalers) with thechoice to change brands which could hurt the companyand the chances of building customer loyalty. Thebuyers also have used the threat of switching theircompany of choice by choosing the premium beersegment. Since the switching cost is so low, powerfulbuyers have raised the costs and sought for better

quality pro ducts and services.

http://www.powerpointstyles.com/http://www.powerpointstyles.com/http://www.powerpointstyles.com/


12/22


d. Bargaining Power of SuppliersSuppliers in the brewing industry play a significantrole. Starting with the production of the good,suppliers from agricultural industries such as corn,barley, and yeast are key in the production andpricing of the end product. Other suppliers includethe glass industry and paper labeling industry.Because of the low power is given to the industriesmain players who are able to strike larger supplycontracts for a better price. Most of the key inputs ofbrewing are highly regulated thus keeping bulk pricessteady and allow firms to purchase ingredients over ayear in advance. Some differentiation exists in theinputs when it comes to the higher qualityingredients that are used in some premium beers.



13/22


Since these inputs are offered only by few suppliersthat time, the bargaining power of the supplier arehigh. The suppliers can demand high price and thebrewing industries cant force the price down. Thisbargaining power of the supplier is a threat tobrewing industries and they cant just change theirsuppliers because it is too much costly. Also theproduct that suppliers sell has few substitutesmaking it hard and unwise to jump from one supplierto another. However, over the growing decades, newtechnologies arise and innovation is raging highmaking the inputs of the brewing industry easy toattain. Thus, the bargaining power of the supplierstarts to lessen. The beer industry has nowalternatives to choose from bottles and plastic.



14/22


e. Substitute Products

When wine and spirit industry started to bloom,beer consumption in the United States started todecline. Particularly, wine and spirit are substitutes

to beer thats why when these substitutes offerlower prices over beer, most patrons switcheddrastically to them. The existence of these closesubstitutes signifies a strong competitive threatsince it limits the price that companies can

change. If the beer companies dont put a strategyto compress these threats, they might lose theirpower/control over the market and the competitormight gain the power.



15/22


3. What are the implications of the evolvingcompetitive structure in the brewing industry forthe profitability and strategy of a smaller massmarket firm in the industry?

The implications of evolving competitive structurefor profitability and strategy for a smaller massmarket firm means that the smaller firms will haveto lower their prices to be competitive with theprices of the larger firms. This includes cutting

down on operating costs by streamlining theirproduction with contemporary productionphilosophies such as kaizen and tqm.



16/22


4. Are there different strategic groups in theindustry? What are they? Do you think thenature of competition varies between groups?

Yes, there are 2 different strategic groups that

can be observed the mass-market segmentand the premium beer segment. The mass-market segment revolves around aggressivepricing, brand loyalty, distribution channels andnational advertising spending while premiumbeer segment focuses on discerning buyers andthey build their brands around taste and coverhigher product costs by changing much higherprices.



17/22


The nature of the competition does not varybetween the group however effects of thesecompetition may differ depending upon the kind.Say for example, the substitute, wine and spirit,the closest competitive threat to beer industry.The sudden appearance of these substitutesoffering cheaper price forces the beer industry tolimit their change or else the customers will turn tosubstitutes.



18/22


MESSAGE RELAYGame


19/22


Mechanics1. There will be a member in charge of each group2. Each group will have 7 players: first player will pick a movie title, once he/she gives the

paper back to the tigbantay, he/she could no longer readit again, meaning he has to remember or memorize

second player will pass to the third

third player will pass to the fourth fourth player will pass to the fifth fifth player and sixth player will play taboo. the fifth

player will give clues to the sixth player without

mentioning the listed words given to them. the sixth player will then play charades. the sixth player

should act out the movie title and run to the moderatorfor confirmation.


20/22


3. This will be an elimination type.

During the first round, the first three to give the correctmovie title moves to the next round. During the second round, the first two to give the

correct title moves to the final round. During the final round, whoever gives the first title

wins.


21/22


Objectives

In this game, each player is crucial to the victory of the

whole team since a mistake of one player may causethem to give out the wrong answer-- just like how eachemployee is crucial to the success of the wholeorganization.

The first player, having to make sure that he reads andkeeps in mind the correct word-per-word title of the movie,symbolizes how a manager should have a true and fullstudy of the external forces of the organization so hecould relay this information to the administration.

The second, third and fourth players should make surethat they relay all the words correctly.


22/22


The fifth player's restriction to say some words representsthe regulations that external forces impose upon theorganization, like laws and regulations that may limit thecompany's activities.There are also other external forces that may affect theteams like: rivalry since the teams are pressured to outrunthe others.

ba 111a ppt closing case 2

Documents