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Strategic analysis of Anheuser-Busch

COMPANY BACKGROUND

Established in 1864 after Adolphus Busch joined a fledgling brewery, Anheuser-Busch is company which manufactures, distributes and markets beverages. The company has 12 operating breweries in the United States and more overseas. The company focuses its strategies on adding value to life’s enjoyment through theme park entertainment and packaging efforts. The success of Anheuser-Busch can be attributed to the company being bold, savvy and its commitment to creating and maintaining high quality standards. The company has sister concerns in the St. Louis based aluminum beverage container manufacturer and recycling plant.  Aside from this the company also invests in the production of malt, rice, turf farming, package labeling-printing, bottle production, transport sector and real estate development. Anheuser-Busch holds a 48.8% market share in the United States with its leading brands Budweiser and Bud Light.

COMPANY VISION

The company’s current vision is to “Add to the life’s enjoyment through its products, services and relationships.”

COMPANY MISSION

Anheuser-Busch is a company which is committed to proving the highest quality beer at the most affordable price. The company aims to exceed customer expectations with its quality products and whereby guarantee customer satisfaction.

COMPANY OBJECTIVES

Anheuser-Busch Company has developed the following objectives for its operations:

Recognize and identify the different beverage needs of its diverse customer base
Broaden the beer product-line according to the tastes of its valued customers
Expand globally in order to tap into unreachable and unexploited markets
Devote all resources towards growth and profitability
Use the comparative advantage that the company has in the market to successfully market the product to reach to its customers.
Devise competitive distribution system to effectively provide the product to the target market.
Attain the position of being the most successful brewery in the world.
Maintain the current customer oriented organization culture and be a quality focused brewer.
Respect the Code of Conduct and engage in moral and ethically sound organizational practices in order to remain a socially responsible citizen.

COMPANY VALUES

The Anheuser-Busch company establishes its values with the following efforts:

High quality in all its operations
Going beyond customer expectations
Creating and maintaining trust, respect and integrity in its relationships with business partners, stakeholders, customers and affiliations
Being a source of continuous improvement, and innovation
Encouraging teamwork and honest open communication
Making each employee responsible for contributing to the company’s success
Creating a safe, productive and rewarding work environment.
Creating a high-performance based, diverse workforce
Promoting responsibility in its customers
Preserving the environment and supporting local communities

CURRENT STRATEGIES

Anheuser-Busch has been successful by maintaining it’s carefully executed two sided strategy to expand the Budweiser brand globally and create strong partnerships with the  leading brewers around the world.

The company has focused its marketing efforts to enhance the image and the importance of beer, and creating its brands as the beers of choice for the people.

The company strives to be innovative in its efforts and product offering. This forms a significant part of the business’s strategy.

The company’s production strategy is based on both contracted brewing, which utilizes the excess capacity of other breweries, and with brewing at its own breweries. This strategy provides the Company with flexibility in addition to quality and cost advantages.

In order to capture the growing beer market in China the Company has developed the strategy to capitalize on the quality and popularity, strength and the image of the company and its beer (Harbin, which is available in China).

The Anheuser-Busch Company and its subsidiaries have adopted a commitment to quality as the central strategy for its operations.

The pricing strategy being used by Anheuser-Busch is to keep prices low and affordable for its consumers while slightly increasing the price of the beer in relativity and allowing for moderate level increments in price in the future. As a result the beer is much cheaper today than it was 10 years ago.

Other important components of Anheuser- Busch’s business strategy are the advertising and promotional activities for its beer brands and theme park operations. The company uses national, regional and local medium available to market its brands and the Anheuser theme parks. Some of the strategies employed take form of television advertising, radio advertising, promoting through the Internet, print and outdoor advertising and organizing event sponsorships.  Also read HP strategy analysis

A large part of the company’s business strategy is caring for its customers and being a responsible corporate and social citizen. In its efforts the company has taken the following steps in the past years:

Anheuser-Busch is collaborating with its wholesalers in order to fight against drunk driving and underage drinking for the promotion of socially responsible behavior and drinking responsibly.
Designing and implementing corporation wide policies to protect the environment and supporting conservation organizations.
The company attempts top reach out those in need of financial support and contributes to the community and charitable organizations.
The company invests in educational institutions to increase the skill and knowledge set in the communities.
The company supports and provides grants to the organizations which help build and strengthen families, and alleviate health issues.
The company gives out grants for societal and community development
Anheuser-Busch strives to enrich and enhance quality of life and promote joy by promoting cultural activities that increase cultural understanding.
The company provides scholarships and funds for those students who are in need of financial assistance through its Anheuser-Busch Foundation
The company also strives to improve the quality of life for its employees by developing the communities where its employees reside and establishing a Employee Volunteer Fund, through which it provides education and training to those employees who are unable to support themselves.
In order to provide fast disaster recovery the company has provided humanitarian aid and established relief programs for the victims of hurricane Katrina & Rita, and the chemical spill at Harbin and Songjiang, China.

NEW DEVELOPED COMPANY VISION

After reviewing the strategies for operations of the Anheuser-Busch company and observing its role as the socially responsible corporate citizen, the following vision for the company has been drawn up:

“To be the world’s best alcoholic beverage company by innovating with high quality standards and bringing joy to life through our products in a profitable and socially responsible manner.”

NEW DEVELOPED COMPANY MISSION

After reviewing the strategies for operations of the Anheuser-Busch company and observing its role as the socially responsible corporate citizen, the following mission statement for the company has been drawn up:

“To provide high quality brands and excellence in service while achieving leadership in the market by:

Accepting risk with responsibility
Being ethical and socially responsible
Building on innovation
Being customer oriented and dedicated to loyal customers
Encouraging societal development”

ORGANIZATION’S EXTERNAL OPPORTUNITIES AND THREATS

The following are the external opportunities available to the Anheuser-Busch Company

Untapped growth opportunity in the international market
Scope for productivity improvement of beer
Scope for productivity improvement in packaging
Scope for productivity improvement in the theme parks and the entertainment business
Better partnership relationships with whole sellers for opportunity in growth in other segments of the industry by promoting better relations.
Expanding the beer industry in order to increase beer category and drinking
Anheuser has a big opportunity to increase globally; as the international market is four times the size of the U.S. market there exists great growth potential
A bigger market will allow Anheuser to experiment with new products and cater to very diverse tastes by appealing to them in different segments
Increase per barrel profitability

The following are the external threats that might affect the Anheuser-Busch Company

When entering into new markets they will have to face the barriers the relevant barriers to entry
They will have to compete against the existing companies that have already established themselves in the market
Competing in another country, on a global level is very expensive.
By going all out global the company will find it hard to keep the costs low.
Extra costs will be involved in oversees distribution or production.
The costs will have to be absorbed in the price of the product and borne by the customer and therefore the pricing strategy of the company might have to be changed.
Low priced alternatives in other countries would be able to compete and slow down their market growth.
Foreign exchange rates will affect operations in the international market with prominent losses due to fluctuation in FOREX rates.
Government regulations could also prevent market penetration.
Anheuser-Busch’s advertising and promotional strategy would have to change in the international market.

Also read IFE Matrix of Coca-Cola

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COMPETITIVE PROFILE MATRIX (CPM)
Competitive Factor

Anheuser-Busch
Miller & Coor

Weight
Rating
Extended
Rating
Extended
Reputation / referral by friends
0.1
1
0.1
2
0.2
Reliability of Product
0.25
1
0.25
2
0.5
Market share
0.05
2
0.1
1
0.05
Financial Position
0.025
2
0.05
2
0.05
Product Quality
0.1
2
0.2
1
0.1
Consumer Loyalty
0.1
2
0.2
1
0.1
Sales Distribution
0.05
2
0.1
1
0.05
Global Experience
0.05
1
0.05
1
0.05
Price Competitive
0.1
2
0.2
2
0.2
Innovation
0.1
2
0.2
1
0.1
Availability
0.05
2
0.1
1
0.05
Advertising/ Promotions
0.025
1
0.025
2
0.05
Total
1

1.575

1.5

EXTERNAL FACTOR EVALUATION MATRIX (EFE)
Factor
Weight
Rating
Extended
Opportunities

Untapped growth opportunity in the international market
0.2
4
0.8
Scope for productivity improvement of beer
0.05
3
0.15
Scope for productivity improvement in packaging
0.05
3
0.15
Scope for productivity improvement in the theme parks and the entertainment business
0.025
3
0.075
Better partnership relationships with whole sellers for opportunity in growth
0.05
4
0.2
Expanding the beer industry in order to increase beer category and drinking
0.1
4
0.4
A bigger market will allow Anheuser to experiment with new products
0.075
3
0.225

Threats

Face barriers to entry
0.1
1
0.1
Compete against existing companies
0.025
1
0.025
Competing in another country, on a global level is very expensive.
0.05
2
0.1
Extra costs will be involved in oversees distribution or production.
0.1
2
0.2
Low priced alternatives in other countries would be able to compete and slow down their market growth.
0.025
2
0.05
Foreign exchange rates will affect operations in the international market
0.05
2
0.1
Government regulations could also prevent market penetration.
0.05
1
0.05
Anheuser-Busch’s advertising and promotional strategy would have to change in the international market.
0.05
1
0.05
TOTAL
1

2.675

ORGANIZATION’S INTERNAL STRENGTHS AND WEAKNESSES
The following are the internal strengths of the Anheuser-Busch Company

The company operates in a socially responsible way while enhancing growth opportunities
Anheuser-Busch has a strong expanded network of wholesalers
Seven of the top fifteen brands in the US market are property of Anheuser-Busch
Anheuser’s Budweiser and Bud Light are the top two brands in the world
Enhanced product innovations, new product officering and new tastes are provided by Anheuser like Tilt and BE, with unique ingredients e.g. caffeine and ginseng
Established innovations in products and packaging
They have extensive resources to take on big projects
Anheuser-Busch has 47% of the global market share
The company has made significant marketing investments to build Budweiser brand recognition outside the United States and operates overseas breweries in China and the United Kingdom
The company has a significant equity position in Grupo Modelo, Mexico’s largest brewer and producer of the Corona brand
There are reports of continuing profit growths in its packaging and entertainment operations
Packaging operations provide significant efficiencies, cost savings and quality assurance for domestic beer operations
Entertainment operations enhance the company’s corporate image by showcasing it’s heritage values and commitment to quality and social responsibility
The company’s most important technique is target marketing
Anheuser-Busch sponsors events and runs advertising specifically aimed at all sorts of consumers: blacks, whites, and blue-collar workers, computer-buffs, and sports fans.
The largest advantage that Anheuser has is its financial status
Anheuser’s distribution also gives them more power in the industry

The following are the internal weaknesses of the Anheuser-Busch Company

The primary economic issue affecting this company’s environment is taxation.
The company is significantly impacted by federal, state and local taxes, including beer excise taxes. Beer excise taxes are a sin tax, which raise revenue for the government.
An increase in taxes effects costs to the company, hence, costs to the wholesalers and consumers.
Anheuser-Busch’s aggressive advertising campaign has targeted more than who they bargained for. Through A-B’s catchy advertisements, they have attracted customers other than the 21+ age group, and recreational drinkers
Advertising is subject to serious debate and these issues may place constraints on marketing activities and must be taken into consideration.

INTERNAL FACTOR EVALUATION MATRIX (IFE)

Weight
Rating
Extended
Strengths

Operates as a socially responsible corporate citizen
0.05
4
0.2
Has a strong expanded network of wholesalers
0.05
4
0.2
Seven of the top fifteen brands in the US market are property of Anheuser-Busch
0.05
4
0.2
Anheuser’s Budweiser and Bud Light are the top two brands in the world
0.05
4
0.2
Enhanced product innovations and new product offering
0.05
4
0.2
Established innovations in products and packaging
0.025
3
0.075
They have extensive resources to take on big projects
0.025
4
0.1
Anheuser-Busch has 47% of the global market share
0.05
4
0.2
Has made significant marketing investments to build Budweiser brand in US, China and UK
0.05
4
0.2
Has a significant equity position in Grupo Modelo, Mexico’s largest brewer and producer of the Corona brand
0.05
4
0.2
Packaging operations provide significant efficiencies, cost savings and quality assurance for domestic beer operations
0.05
3
0.15
Entertainment operations enhance the company’s corporate image by showcasing it’s heritage values and commitment to quality and social responsibility
0.025
3
0.075
The company’s most important technique is target marketing
0.05
3
0.15
The largest advantage that Anheuser has is its financial status
0.2
4
0.8

Weaknesses

The company is significantly impacted by federal, state and local taxes, including beer excise taxes. Beer excise taxes are a sin tax, which raise revenue for the government.
0.05
1
0.05
An increase in taxes effects costs to the company, hence, costs to the wholesalers and consumers.
0.025
2
0.05
Anheuser-Busch’s aggressive advertising campaign has targeted more than who they bargained for. Through A-B’s catchy advertisements, they have attracted customers other than the 21+ age group, and recreational drinkers
0.1
1
0.1
Advertising is subject to serious debate and these issues may place constraints on marketing activities and must be taken into consideration.
0.05
1
0.05
Total
1

3.2

STRENGTHS, WEAKNESSES, OPPORTUNITY AND THREATS MATRIX (SWOT)

STRENGTHS
WEAKNESSES

SO STRATEGIES
WO STRATEGIES
OPPORTUNITIES

Use the financial status and position that A-B has to expand significantly into the international market
Apply the pricing pyramid approach and target the different segments of the market with the appropriate price for the product

Create a profile of innovative drinks that suite the tastes and lifestyles of the different customers in the international market
Research into the large customer base that the company has and develop new techniques to market the product which would not negate the company’s image

Use target marketing techniques to target the different segments of the innovated drink market
Sponsor educational institutions, educate about hazards of drunken driving and the benefits of propriety behavior and social drinking awareness

THREATS

ST STRATEGIES
WT STRATEGIES

Promote Budweiser and Bud light as the cash cow brands and apply diversified marketing techniques to the rest of the products being introduces in the international market
Avoid the socially taboo issues in advertising and promotional concepts

Identify what products are required or there is a scope for, and market them

Identify those current strategies which are still profitable and applicable in the international market

STRATEGIC POSITION AND ACTION EVALUATION MATRIX (SPACE)

SPACE FACTORS

INTERNAL STRATEGIC POSITION
EXTERNAL STRATEGIC POSITION
[ Financial Strength (FS) ]
[ Environmental Stability (ES) ]
Return on investment
Technological changes
Leverage
Rate of inflation
Liquidity
Demand variability
Working capital
Price range of competing products
Cash flow
Barriers to entry

Competitive pressure

Price elasticity of demand

Ease of exit from market

Risk involved in business

[ Competitive Advantage (CA) ]
[ Industry Strength (IS) ]
Market share
Growth potential
Product quality
Profit potential
Product life cycle
Financial stability
Customer loyalty
Technological know-how
Competition’s capacity utilization
Resource utilization
Technological know-how
Ease of entry into market
Control over suppliers & distributors
Productivity, capacity utilization

SPACE MATRIX

BOSTON CONSULTING GROUP MATRIX (BCG)

INTERNAL – EXTERNAL MATRIX (IE)

As a result of the internal external matrix, the company lies on the border line of Grow and Build and Hold and Maintain strategy guild. The company has the following options:

Employ market penetration strategies
Develop the international market for its products
Develop new products for the current as well as international market
Perform backward integration with its suppliers
Perform forward integration to get closer to the customer
Integrate the corporation wide operations
QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)

Key External Factors
Strategy 1
Strategy 2
Technological changes
Invest in the new technology available to keep up the high level of quality and innovation that is the trademark of the Anheuser Busch Company worldwide
Perform Backward and forward integration using the new technologies available
Changes in the social environment
Uphold the responsibility to the society and the environment by contributing back to them in form of providing health care in the communities, education and training for the employees, grants and scholarships for those in need and donations to the conservation projects.
Start sister concerns of the Anheuser-Busch company which themselves would be separately promoting the society and environmental efforts
Global competition
Play on the strong financial position and the brand name of Anheuser Busch to match the competition on a global level
Develop a stronger image and customer base in the global market to thwart by leveraging its main two brands to thwart the competition
New products by competitors
Respond to the competition by launching new products
Be proactive and build strong customer basis for the Budweiser and the Bud Light brand
Changes in customer tastes
Be proactive and perceptive in catering to the diverse needs of the international market
Provide the current product offering to the customers in the international market with customized marketing strategies
Key Internal Factors

Product Innovations
Innovate the products to cater to the changes in the customer requirements
Create new products and add to the product like instead of innovating old ones.
Advertising campaign
Change the advertising campaign completely and observe a conservative approach towards targeting the market
Make no drastic changes in the campaign. But also simultaneously provide health warning, and promotions against drunken driving and under age drinking.
Product Portfolio
Increase and change the product portfolio to cater to the international market
Keep the same product portfolio and sell the same products to the new market. Only focus on expanding the beer market
Organization Culture
The organization culture should be brand concentric
The organization culture should be customer oriented

RECOMMENDATIONS
After conducting the analysis of Anheuser-Busch’s strategies and operations it has been determined that the company can gain strategic advantage in the international market by focusing on the following strategies.

Promoting globalization in the company
Evaluating and determining the best suited e-commerce options available
More product innovation specifically for the customers in the international market
Tracking the operations and strategies of Mills & Coor
Tracking the operations and strategies of significant competitors in the global market
Determine the overall capability of the company
Investigate the changing global lifestyle of the customers.

The current strategies were lacking focus in the some fields. These fields have been highlighted below and recommended strategies have been provided as:

The company can perform backward integration to establish better relationships with its suppliers by investing in e-commerce. The direct interaction between the suppliers and the company would mean greater efficiency and control.
The company can also perform forward integration in its supply chain to establish a closer relationship with its wholesalers and retailers. The company would be able to control the operations as well as come closer to its customers and therefore be better able to understand them and drive innovation.
The e-commerce option would also pose as a convenient medium for interaction with the wholesalers and retailers in the global market outside US.
Implement a reward system for the stakeholders in the international distribution system. This would help implement wholesaler loyalty on a global level as well.
The organization can change its current employee structure and provide training to cater for cultural diversification in its workforce. This would enable diversification in the generation of ideas and innovations in the company as well as help the company understand its diverse customer base in a much better way.

The current position of the Anheuser-Busch is very strong with huge growth potential. No drastic changes need to be made to the current strategies but more value adding and diversification would prove to be beneficial for the company in the long run.

REFERENCES

Anheuser- Busch Annual Report, (2005) available at: http://www.anheuser-busch.com/investor_relations/report_annual.html
The Nature of Strategic Management, available at: http://www.mktgandmgmt.utep.edu/smanagement/chap06.ppt
Strategy and Policy Tools for Cases, available at: http://www.kulzick.com/stu/casether.htm
Strategic Audit for Miller Brewing Company, available at: http://www.gwu.edu/~crn40013/strataud/Miller.htm
Anheuser Busch Company’s corporate website, http://www.anheuser-busch.com/
Budweiser website, http://www.budweiser.com
Anheuser-Busch’s Programs to prevent Alcohol Abuse and Drunk Driving, available at http://www.beeresponsible.com
Edmunds, Karl, (2003) The Challenges of Staying on Top: A Strategic Look at the Continued Ascent of A-B – Distributor-Supplier Forum – Anheuser-Busch, available at: http://findarticles.com/p/articles/mi_m3469/is_46_54/ai_111697285

 

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