the uk beer and the australian wine industries
TRANSCRIPT
SUPPLYCHAINMANAGEMENTAssignment
AlbertoGILGONI
AxelFISCHER
PerryFONG
SCHOOLOFAEROSPACE,TRANSPORTANDMANUFACTURING
MScinAerospaceManufacturing
AcademicYear2015-2016
February2016
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ContentsTheUKBeerIndustry–TheChallengestoDevelopingSustainableChains...........................................2
1. Introduction...................................................................................................................................2
2. ChallengestoDevelopingSustainableChains...............................................................................2
2.1.Political........................................................................................................................................3
2.2.Economic.....................................................................................................................................3
2.3.Social...........................................................................................................................................3
2.4.Technological...............................................................................................................................4
2.5.Legal............................................................................................................................................4
2.6.Environmental.............................................................................................................................4
3. Recommendations.........................................................................................................................5
4. Conclusion.....................................................................................................................................6
5. References.....................................................................................................................................6
TheAustralianWineIndustry–CompaniesCollaborationandDevelopmentintheFuture.................7
1. Introduction...................................................................................................................................7
2. TypesofCollaboration...................................................................................................................7
2.1Horizontalcollaborations.............................................................................................................8
2.2Verticalcollaborations..................................................................................................................8
2.3Clustercase..................................................................................................................................9
3. Strategy2025...............................................................................................................................10
4. Conclusion...................................................................................................................................11
5. References...................................................................................................................................11
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TheUKBeerIndustry–TheChallengestoDevelopingSustainableChains
1. Introduction
TheUKbeerindustryhasbeendecliningsince2004asthebeersalesbyvolumefellby10.2%from2009 to 2013 [1]. This trend started from the economic depression in 2008/2009 coupled withgovernment policy to inflate beer duty annually from 2008. In recent years, the UK economy isshowing signs of recoverywith positive GDP growth, reduced unemployment rate and increasingaveragehouseholddisposableincome.Thesepositiveoutlook,togetherwiththeabolitionofthebeerdutycouldbekeytotherecoveryofthebeerindustrywithbeersalesexhibitinggrowthbyforthefirsttimesince2004.
2. ChallengestoDevelopingSustainableChains
The challenges to developing sustainable chains was analysed using the PESTLE analysis whichencompassesthethreedimensionsofEconomic,SocialandEnvironmentalinthetriplebottomlineframeworkthatisnecessaryforsustainabilityasshowninFigure1.Thebeerindustryreferstotheentiresupplychainwhichconsistsofthefarmers,breweries,bottlingsupplier,transportdistribution,pubs, supermarketsandconsumers. TheeffectsofPESTLEon the stakeholdersare summarised inTable1.
Figure1.3BLFramework[2]
Table1.EffectofPESTLEonStakeholders
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2.1.Political
Manypolicychangestookplacemainlytotacklealcohol-relateddisorders.Thesepoliciesaffectthesupermarkets,consumersandbreweries.
GovernmentPolicy
In 2014, the government implemented theminimumunit pricing [4], that prevents retailers fromsellingalcoholatlowpricesinordertoreduce‘bingedrinking’.
EUAlcoholPolicy
In2015,theEuropeanParliamentcalledforanewstrategytotackletheadversehealthimpactsofalcohol[5],withtheexpirationofthelastEUalcoholstrategyin2012.Thenewstrategywillfocusonthe importance of labelling to include nutritional information and to increase awareness on theconsumptionofalcoholduringpregnancyanddrinkdriving.
2.2.Economic
Theimplementedtaxchangeshadimpactedtheentirebeerindustrytremendouslyovertheyears.
AlcoholDuty
In2008,thealcoholdutyescalatorwasimplementedwhichincreasedthedutyrateby2%abovetheyearlyinflationratetill2015.Howeverin2013and2014,thedutywasreducedby2%eachtime.Inaddition,thealcoholdutyescalatorwasabolishedamidststrong lobbyingcampaignfromthebeerindustryafterseeingdecliningsalesbetween2009to2013from30.2to27.1millionbarrels[1].
PubClosure
Thealcoholdutyescalatorhadastrongimpactonbeerpriceswiththecostofapintincreasingfrom£2.67to£3.23between2008and2014.Thehighpricescoupledwiththetied-pubtenantmodelhasresultedinthedeclineofpubsby9.8%between2008and2012.
2.3.Social
Thesocialproblemsmainlyaffectstheconsumers,whichcontributestotheeconomicaspectofthebeerindustry.
HealthAwareness
Thereisanincreasingawarenessonthehealthimplicationsof‘bingedrinking’inrecentyearsthatisledbyaNGOgroup–Drinkaware.Theyprovides“impartial,evidencebasedinformation,adviceandpracticalresources,raisingawarenessofalcoholanditsharmsandbyworkingcollaborativelywithpartners”[6].Fromtheirwebsite,theyprovidefreeeducationalmaterialsforstudentbetween9to14yearsold,toeducatesthemontheharmfuleffectsofdrinking.In2010/2011,thereisareported1.2millioncasesofalcohol-relatedadmissionstohospitals[7],withalcoholbeingthethirdmain‘lifestylerisk’factorsinUK,thatleadstodiseasesanddeathaftersmokingandobesity.Currently,theUKsocietyispayinganestimated£21billionannuallyforthis[3].
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Misconceptions
Therearemanymisconceptionsaboutbeersuchas ‘consumption leadstobeerbelly’and ‘wine ishealthierthanbeer’.AsurveybytheBritain’sBeerAllianceshowsthat10%ofBritishthinkthatbeerhasmorecaloriesthanwine,25%thinkthatapintofbeerhasmorefatthanachocolatebarand25%thinkthatapintofbeerhasmoresugarthanacanofcola[8].
2.4.Technological
Technologicalchallengesislimitedtothefarmers,breweriesandbottlingsuppliers.
CostofImplementation
Manytechnologicalsolutionsareavailabletoimprovesustainabilitysuchassolarpanels,hi-techbiogasgeneratorandwatertreatmentplant.However,thetotalcostofownershipoftheseequipmentisveryunaffordableformanysmallermicro-breweriesthatisontherise.AccordingtoKeyNote[5],thenumberofbrewerieshasincreasedfrom745to1442from2009to2013,ofwhich88.1%haveemployeesofbelow10.
2.5.Legal
Thelegalissuesaremostlyrelatedtotheconsumers,breweriesandpubs.
Marketing
ThealcoholadvertisinginUKissubjectedtorestrictionsthatpreventthemfromtargetingtheyouth.These restrictions are self-regulated and is governed by the Portman Group and the AdvertisingStandards Authority. Many health groups have criticised these restrictions and called for morestringentcontrolstobeinplace[9].AnanalysisonthealcoholindustrybytheHouseofCommonsHealthSelectCommitteein2009revealedmajorshortcomingsintheself-regulatorycodesandthattheyouthareindeedamarketingtargetfortheseadvertisers[10].
StatutoryCodeforPubcos
In2014,thegovernmentsuggesteda‘StatutoryCode’toaddressalongexistingissuebetweenpubcosandtheirtied-tenants.Inthetied-pubtenantmodel,thepublicanrentsthepubandbuysthebeerfromthepubcos.Often,thisself-regulatedsystemhasreceivedmanycomplaintsfromthetenantsoverunfairtreatmentandunprofitabilityofthismodel.Whilemanytenantsandconsumerswelcomethischange,pubcosontheotherhandopposesthis,claimingthatthiswould leadtoreducedpubinvestment and increased rents. Many pubcos have voiced their strong concerns and will likelychallengethislegallyifimplemented.
2.6.Environmental
Thebeerindustryisamajorindustrialusersofwater,consumesalargeamountofenergyandreleasesa significant amount of carbon. The environmental issues affect the farmers, breweries, bottlingsupplier,transportdistributionandpubs.
CarbonEmission
Energyisanimportantaspectforbeerbrewersthatisdrivenbyincreasingenergycostandregulatorypressuretoreduceenergyuse.Inresponse,theBritishbeerindustrysetanaimtoincreasetheenergyefficiencyby19%andreducecarbonemissionsby30%byyear2020[11].
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WaterUsage
Waterisoneoftheprimaryingredientsofbeerandbrewersunderstandstheimportanceofpreservingitwithdecreasinglyglobalavailability.Theneedtoimproveprocessefficiencyisprimarilydrivenbycost,aswellasdevelopinglongtermresilienceduetoincreasingrisksofdroughtandwatershortagesthatmightresultingovernmentalreviewofaccesstowatertoensuresufficientsupplytoall[11].
PackagingWaste
Thebeerindustryhasbeenkeepingthetraditionalenvironmentally-friendlywayoftransportingbeerusing kegs or caskswith an average life-spanof 15 years.However, this dispensing systemwhichaccountsfor50%ofUKbeerproductionarefacingincreasingpressureduetolossandmisuseofthesecontainers,withanannualestimatedcostof£50million[12].
3. Recommendations
This section provides recommendations that is based on existing trends which will improve thesustainabilityofthebeerindustry.
InnovativeCategory
Currently,thereisanincreasinginterestinthespiritbeerscategory,whichinvolveinfusingbeerwithspirits suchas tequila, rumorwhiskey.There isalsoa risingdemand for loweralcoholbyvolumeproductsduetoincreasinghealthconcernsandpricesofalcoholicdrinks.Thebeerindustryshouldalwaysexplorewaystoinnovatetheirproductinordertokeepupwithconsumer’sdemand.
ChangingPerception
Campaigns can be launched to educate the public on the health benefits of drinking beer inmoderation. The beer academy has published the article “Beer & Wholesomeness” to correctmisconceptions about beer such as calorie and cholesterol content, aswell as emphasizing on itshealthbenefitsthatmaydecreasetheriskofheartdisease,osteoporosisandhighbloodpressure[13].
GoingGreen
ManybrewersinUKhavestartedinvestinginrenewableenergy,waterefficiencyandwastereduction[11] inorder to increase their sustainability resilience. Somehave lookedat “light-weighting” andredesigningof the glassbottles,while initiativeswere launched toensure that the kegs/casks arerecovered.
FemaleDrinkers
Therearehugeopportunitiesinthefemalebeerdrinkerssectorwithpenetrationof51%in2015[14].StudiesbyMintelindicatesthatwomenprefersmallerservingsthatisservedinwine-styleglassesandrecommendation from friends as well as new flavour/ingredients are themost effective ways tointroducethemtobeer.Thus,marketingstrategycanbegearedtowardsthesepreferences.Thereisalsoaneedtochangetheperceptionthatthebeerisaman’sdrink.AsocialexperimentbyAVInBevshowsthatthebeerwasalwaysservedtothemaneventhoughitwasorderedbythewomen[15].
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4. Conclusion
This reportprovidedacriticalanalysisonthesustainabilitychallengesthat theUKbeer industry iscurrently facing using the PESTLE framework and showed how political, economic, social,technological,legalandenvironmentalaspectsaffectedthevariousstakeholdersinthesupplychain.Italsoprovidedrecommendationsonthefutureaheadbasedonthecurrenttrends.
5. References
[1] KeyNote(2014).MarketReport:Breweries&theBeerMarket.KeyNoteLimited.[2] PresentationslidesSupplyChainSustainabilitygivenbyPeterBall,CranfieldUniversity(20Jan
2016)[3] U.K.HMGovernment(2012).TheGovernment'sAlcoholStrategy.Availableat:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/224075/alcohol-strategy.pdf
[4] U.K.HomeOffice(2015).GuidanceonbanningthesaleofalcoholbelowthecostofdutyplusVAT.
[5] KeyNote(2015).MarketReport:Breweries&theBeerMarket.KeyNoteLimited.[6] Drinkaware(2016)AboutUs.Availableat:https://www.drinkaware.co.uk/about-us(Accessed
2Feb2016)[7] Chaplin,R.,Flatley,J.andSmith,K.(2011)CrimeinEnglandandWales2010/11.HomeOffice
StatisticalBulletin10/11.London:HomeOffice.SupplementaryTable7.11.[8] There’sABeerForThat(2014)Mythaboutbeer.Availableat:
http://www.beerforthat.com/beermyths(Accessed2Feb2016)[9] IAS(2013)MarketingandAlcoholFactsheet.London:InstituteofAlcoholStudies.[10] Hill,L.,andCasswell,S(2001)AlcoholAdvertisingandSponsorship:CommercialFreedomand
ControlinthePublicInterest.InternationalHandbookofAlcoholDependence&Problems,JohnWiley&Sons.
[11] BBPA(2014)BrewingGreen:OurcommitmenttowardsasustainablefutureforBritain'sbeerandpubs.BritishBeer&PubAssociation.Availableat:http://www.beerandpub.com/world-of-beer-and-pubs/responsibility/environment(Accessed2Feb2016)
[12] BBPA(2016)Lookingafteryourkegsandcasksleaflet:Areyoudoingyourbit?.BritishBeer&PubAssociation.Availableat:http://www.beerandpub.com/kegaware(Accessed2Feb2016)
[13] TheBeerAcademy(2016)Beer&WholesomenessReport.TheBeerAcademyLimited.Availableat:www.beeracademy.co.uk/cms/file/1396/beer-wholesomeness-report-pdf/(Accessed2Feb2016)
[14] Mintel(2015)UK-BeerReport:ExecutiveSummary.MintelGroupLimited.[15] ABInBev(2016)UKwomenraiseaglasstobeer.ABInBevUKLimited.Availableat:
http://www.ab-inbev.co.uk/2015/10/uk-women-raise-a-glass-to-beer/(Accessed2Feb2016)
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TheAustralianWineIndustry–CompaniesCollaborationandDevelopmentintheFuture
1. IntroductionTheAustralianeconomicgrowthbenefits from itsnatural resources,anddespite its isolation fromEuropeandAmerica,itisrankedintopeightproducersbyvolumeandthefourthlargestexportersofwine in theworldwithamarketshareclose to5%[1].TheAustralianwine industryexported724millionlitresin2015,about60%ofitsoverallproduction[2].ThemaindifficultythattheAustraliangrowersencounteredistodistributetheirproductstoEuropeandAmerica,andtheyovercamethisbyhavingcollaborationswithinternationalalliance.Thecollaborationconceptinthewineindustryhasbeendevelopedovertheyears.SmallandlargewineproducersoftenhavedifferinginterestsbutthatchangedwhentheindustryassociationscreatedtheStrategy2025plantoencouragecollaborationbetweenthem[3].Theindustry’sgrowthpotentialtriggeredtheexpansionofsynergiesandsharedinterests.AsshowninFigure1,threemajorfirmsaccountfor51%oftheoverallwineproductionand70%ofthetotalexports[3][4].Collaborationincludesareassuchastradeissues,researchanddevelopment,training and investments. Collaboration also allowsproducer to promote the industry collectively,ratherthanlookingonlyaftertheirowninterests.
Figure 1. Market Distribution in Production [left]; Market Distribution in Exports [right] [3]
2. TypesofCollaboration
Independent grape growers used to produce their own wine, until large foreign companies andwinerieswhoareattractedby thegrowthof thebusiness, started investing in thegrapegrowers.Nowadays,mostofthegrapegrowersdonotproducetheirownwine,butonlysupplythegrapestothewineries.
Somewinemakerswhoareverticallyintegratedintheirsupplychain,producestheirownwinefromtheirvineyards.Also,therearebrandownersthatareonlyinvolvedinwinecommercialisationwithouttheirownwinemakingfacilities[Figure2].
51%49%
Wineproduction
Largest3brandsRestbrands
70%
30%
Exportsmarketshare
Largest3brandsRestbrands
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Figure 2. Australian Wine Supply Chain [4].
ThesuccessoftheAustralianwineindustryisfromitseconomyofscale,andalsothetwodifferentwaysofcollaboration,horizontallyandvertically.
2.1HorizontalcollaborationsOneofthebenefitsisreductionoftransactioncostthatisachievedwhenthewineryislocatednexttoagrowerwherebythewineisproducedinthefarmer’sfacility.Anotherbenefit isthedevelopmentofrelationshipbetweenthewineryandthecommercializationcompany.Thecommercialcompanyunderstandsthemarkettrends,andthereforeimprovesthewineproductionbyintroducingfeedbacksintothesystem.Moreover,thetraderisabletodistributetheproductsmoreefficientlythroughitslowcostchannelsbymanagingmanybrandssimultaneously.Horizontal collaborationandmergersalso improved theoverseas competitivenessofmediumandlargecompaniesbyachievingeconomiesofscale.
2.2VerticalcollaborationsThe vertical collaboration between the Australian companies and the international alliances hasallowedtheAustraliancompaniestounderstandthemarkettrendsinEurope&Americaandtobecompetitivebyusingtheexistingdistributionchannelsofthesealliances.AnexampleofalliancesistheacquisitionofBRLHardy’sbytheConstellationBrands[4].Domestic alliances also exist within Australia to exploit economies of scale and to reduce costs.Clustersunderlargecompaniesincreasebargainingpowerandmakingitpossibletoincreaseexportcapacity. This is especially important for smaller brands who want to move their product fromdomesticboutiquechannelsalestosupermarketandotherretailnetworks.AnexampleisSouthcorpacquisitionoftheFoster’sGrouptobecomethelargestpremiumwinemakerintheworld[4].Theseallianceshavetransformedthebusinessintooligopolisticwithafewlargefirmsholdingontoalargemarketshare[Figure1].
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2.3ClustercaseTheSouthAustralianwineclusterisanillustrationoftheoligopolisticindustry,accountingfor44%ofAustralia’soverallproductionand66%ofexports.Thisclusterexperiencedhighgrowthintheearly90s, and remained competitive by maintaining deep collaboration across the value chain and bychangingthelowqualityperceptionoftheAustralianwineintheexportmarket[5].Thecluster consistsof thegrapegrowers,wineproducersandbrandownersvertically integrated,whileothercompaniessupportthebusinessbyprovidingconsultingservicesandvineyardequipment.In addition, bottles manufacturers such as Amcor and case suppliers such as Upper Murray andHenrichCooperagearealsointegratedintothesupplychain[5].OtherorganisationssuchastheStateorFederalGovernmentwhichprovidestaxbreaksfornewplants,arealsointegratedintheclustermap. Exports are also facilitated by good infrastructure between the vineyards and the Port ofAdelaidetokeyexportmarkets.
Figure 3. South Australia Cluster Map [5]
Collaborationsinvolvingthegrapegrowersandothersupportingcompaniesalsoexist.Forexample,Tolley Viticulture helps the farmers with mechanised pruning and summer trimming. DavidsonViticultureoffersspecialisedservicessuchasplanningandmanagementorevenhelpingvineyardstoadapttoclimatechangewhichisimportantinAustraliaasitisahotanddrycontinentthatismoreexposedtoclimatechange.ThecollaborationbetweenthefoodandtourismclustersallowsthegovernmenttopromotetheSouthAustralia Food andWine Tourism Strategy. This has led to growth in both sectors, as 40%of thetouristsvisitatleastonewineryforwinetastingduringtheirholidaytrips[5].
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3. Strategy2025The strategy comprises of three aspects – Anticipating themarket, Influencing the consumer andBuildingsustainablesuccess[6].AnticipatingthemarketDecision-making in the Australian wine industry can be improved by exploiting global marketintelligencethroughfocusedinformationcollection,analysisofthemarketopportunitiesandanalysisofthewinesupplyrequirements.For instance, informationsuchasconsumer insights,competitor,supplyandsalesintelligencecanbeintegratedtodevelopadeeperunderstandingofthevaluechainlinkagesanditssustainability.In order tomaintainAustralia’s leading position in implementationof Research andDevelopment(R&D)intothisindustry,asector-directedresearchstrategycanbeemployed.ThisstrategywillallowtheR&Dtobedirectedattheneedsandopportunitiesofthewinesector.Someoftheresearchsectorsincludekeynoteresearchesthat involvestheunderstandingofmarketopportunitiesandeconomicimportance of innovation as well as climate change researches that models the economic andgeographicimpactofclimatechange.The activities in the wine sector can be better coordinated by the national, state and regionalorganisations,inordertosupportmarketdevelopmentandtoensurethattheyarealignedintherightdirection. Firstly, roles and responsibilities must be defined for the national, state and regionalorganisations. Secondly, there must be strong communication between the organisations,stakeholdersandconstituentstoensureaconsistentflowofinformationbetweenthem.Lastly,theoverallAustraliawinemarketingstrategymustbeintegratedthroughouttheentiresector.InfluencingtheConsumerTocreatetheWineAustraliabrandsegmentationstrategy,marketingactivityshouldbecoordinatedtoengagethreemainaudiencesnamelytrade,mediaandconsumers.AfeedbacksystemtomeasuretheconsumerperceptionsoftheWineAustraliabrandshouldbeintroducedtocheckthesuccessofthestrategy.Thewineindustryshouldsetnewexpectationsandincreasepublicawarenessforthefinewinesector.For example,major trade event can be held to promote theWine Australia brand segmentationstrategyaswellaswinetastingforthetrademediainthetargetedmarket.Inaddition,thewineindustryshouldalwaysseeknewconsumerandtocreatenewmarketthroughinnovationandcommunication.Forexample,throughanannualeventtoshowcasethedevelopmentofanewproductoranonlinemarketingcampaigntopromoteAustralianwinetothenextgenerationofwinedrinkers.
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BuildingsustainablesuccessThefinalstrategyaddressesthesustainabilityissuesofthewineindustry.Oneofthekeystrategyistoformaclosepartnershipwiththegovernmentinpolicymakinginorderto fosterapositiveand sustainablebusiness climate for thewine industry. Strong communicationbetweentheindustryandthegovernmentiscrucialtoimplementmeasuressuchasthesimplificationofthebusinesstaxes,aswellasimprovingrelationshipwithkeymarketsbythegovernmentinordertoreducepossibletradebarriers.Thewineindustryshouldalsodevelopacultureofself-reliancewhichwillbesupportedbycontinuousimprovement inbusiness skillsandpractices.A ‘CodeofConduct’ for thewine industry shouldbeimplementedandwidelyadoptedbythegrapegrowersandthewineries.Riskmanagementshouldalsobepractisedusingaframeworkofstrategiesattheproducerandindustryorganisationlevels.Thewineindustryshouldcontinuouslyimprovetheenvironmentalperformanceinordertocopewiththevariationofconsumerandcommunitydemandsforsustainability.Socialresponsibilityshouldalsobeconsideredtoensurethatwineissafelyconsumedinmoderation.
4. ConclusionThecollaborationintheAustralianwineindustryhasledtothecreationofclustersandtheseclustershaveprovedtobemorecompetitivethanthepreviouscollaborationmodel.Currently,theseclustersplay a major role in the international market as they continuously try to explore new marketopportunities.CommitmenttoresearchanddevelopallowedtheAustralianwineindustrytoimproveitsknowledgeaboutconsumer’sconsumptionpractices.Finally,commonobjectivesforthe2025horizonhavebeensetbytheAustralianwinesector.Theseobjectiveswillkeepthegrowthmomentumoftheindustrybyanticipatingthemarket,influencingtheconsumerandbuildingasustainablesuccess.
5. References
[1] AustralianGovernment.WineAustralia.WineExportApprovalReport2013.Availableat:http://www.wineaustralia.com
[2] AustralianGovernment.WineAustralia.WineExportApprovalReport2015.Availableat:http://www.wineaustralia.com
[3] MarshI.,ShawB.Australia’swineindustry:CollaborationandLearningasCausesofCompetitiveSuccess.2000;(May).
[4] SpinoglioF.WineClusterCompetitivenessinSouthAustraliaandPiedmont(Italy):StrategiestoaddresschallengesresultingfromtheGlobalFinancialCrisis.2013;(January):1–112.
[5] NipeA.,YorkA.,HoganD.,FaullJ.,BakiY.HarvardUniversity.TheSouthAustralianWineCluster.harvarduniversity.2010;(May):1–33.
[6] WineAustralia:Directionsto2025:Anindustrystrategyforsustainablesuccess.2007.