Help Management Decide
Anheuser-Busch is an American-based brewer operating on a global scale. The company expended its presence through strategic alliance with a Chinese based-company, Tsingtao Brewery. In 2005, the company “raised its stake in Tsingtao Brewery to 27 per cent by exercising convertible bonds worth US$145. 56 million in China’s largest brewer” (Anheuser lifts Tsingtao 2005). By focusing on rates of return on investment, adjusted for inherent risks, the strategic alliance developed an economic overview of those options likely to produce the best returns for them.
Risks are obviously greatest the more resources are committed to a venture, although also included in the consid¬eration are such issues as political uncertainty, economic fluctuations and uncertainty over the performance potential of third parties. This strategic alliance was successful because it helped both companies to increase market presence. Thus, “margins are expected to remain under pressure as costs rise and the influx of overseas players makes rivals even stronger” (Anheuser lifts Tsingtao 2005).
For Anheuser-Busch, wholly-owned foreign direct investment options afforded it total control over activities and potentially higher returns than other strategies but at the expense of greater risk. Following Carroll and Buchholz (2000), strategic alliances are usually in a powerful position within market to influence
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Trust regulations not damage the people or the environment in the target market. In activities related to market entry and expansion, should be taken to ensure that methods used do not conflict with either local or home values, and will not be construed as including bribery. Assessment of risk and trust interdependence is necessary because it helps act honestly avoiding misleading or confusing claims (Carroll and Buchholz 2000). The international strategic alliances should be aware of what approaches and subjects are considered as acceptable to target market, and conform to requirements.
Duties and obligations help to control activities of both parties and their staff. All efforts should be made to prevent false claims and pressure tactics. Anheuser-Busch did not face with political or legal barriers. Chinese market has positive legal framework for international companies proposing great opportunities for TNCs. On the other hand, fierce competition and rivalry became the main problems faced by Anheuser-Busch. “It is also facing pressure from higher energy and raw material prices” (Anheuser lifts Tsingtao 2005).
Country of origin allowed Anheuser-Busch to obtain a very competitive position on the Chinese market. Anheuser-Busch has had a core of loyal supporters and developed lines of services to satisfy the needs of wide audience. Also, Anheuser-Busch maintained high-speed growth achieved through competitor-based cooperation. Knowledge and technology sharing was considered as a strength of Anheuser-Busch. The advantage of product originality allowed Anheuser-Busch to create a strong international brand image. Brand loyalty was important factor in increasing the costs for customers of switching the products of new competitors.
Using an international mar¬ket development strategy, Anheuser-Busch captured a larger share of a market for current products through market saturation and market pene¬tration. “As a result of its expanded stake, Anheuser-Busch will get a second seat on Tsingtao’s board of directors. Its voting stake, however, will be only 20 per cent, with the Qingdao city government keeping voting rights to the remaining 7 per cen”. (Anheuser lifts Tsingtao 2005). The combination of Chinese language and religion creates a unique culture and traditions.
Anheuser-Busch took into account cultural differences of the countries. It means that, in contrast to the US- based companies, media has a different impact on the viewer. In China, Internet facilities are limited, so the response from this technique can be much lower. On the other hand, some foreign companies do not use to purchase through Internet (banner advertising and e-mail sales will not work in these countries). Strategic alliance with the national company allowed Anheuser-Busch to overcome these problems and respond effectively to competition and technological problems.
Carroll and Buchholz (2000) underline that managers should single out significant national differences in the way people approach work and organizations. Power distance is the extent to which members of a society accept that power is distributed unequally in organizations. In all societies there is inequality between people, be it based upon physical, economic, intellectual or social characteristics (Carroll and Buchholz 2000). Anheuser-Busch relied on its partner and borrowed its cultural patterns of communication and business.
It is possible to say that Anheuser-Busch handled cultural and business differences successfully maintaining strong image and trustworthy relations with the local partner. These cultural variables shaped the values and hence the behavior of people operating in work organizations and enable us to explain differences in the way different countries conduct their business affairs. The facts mentioned above show that Anheuser-Busch chose an effective market entry strategy which helped it to enter the market and achieved competitive position.
For every company, it is crucial to recognize that doing business in foreign markets involves cross-cultural communication in all aspects of the relationship. When the person from the other culture does not receive the sender’s message in the manner intended, cross-cultural miscommunication occurs.
1. Anheuser lifts Tsingtao stake to 27% (2005). Retrieved 03 May 2007, from http://www. chinadaily. com. cn/english/doc/2005-04/12/content_433490. htm 2. Carroll, A. and Buchholz, A. (2000). Business and Society: Ethics and Stakeholder Management 4th edn. Cincinnati, OH: South-Western Publishing Co.