Case Study Carlsberg Company
Introduction
Carlsberg company was founded by Jacob Jacobsen in 1847. In Copenhagen, Denmark. The company was ranked the 5th best breweries in the world in 2007. It is led by the vision “our bands will be the consumer’s first choice, and we will lead our industry in profitability and growth through a culture of quality, innovation, and continuous improvement” the core activities include brewing, marketing, and selling beer. The first foreign brewery was established in Malawi in 1968. It operates in western and eastern Europe and has also penetrated the Asian market. It has provided jobs for 33,000 globally and makes a revenue of 6,000 million according to the 2007 report. His paper wil consist of depth analysis of Carlsbergstrategies and business operations and some recommendations on how it can improve its performance in the industry.
Conduct an industry environment analysis. Is Carlsberg A/S in an attractive industry?
Carlsberg’s environmental industry is very competitive, with the company turning out to be the 5th best brewer. These companies produce high-quality products with different designs just to capture a wider market and beat competition out of one another. There is the availability of merging acquisition options from large companies too. Carlsberg entered a venture with Thailand company to get a strong position in the Asian market but faced a lot of competition from Heineken, especially in the China market. Due to competition, the industry is basically controlled by four major companies InBev, Heineken, Anheuser-Busch, and SABMiller.
Consumer behavior in the global market varies. People are quite conscious about beer consumption due to increased health awareness in Europe and US markets, which has decreased beer consumption. Also, there is increased competition from wine and spirits with many preferring drinks with a high percentage, yet the beer market in Asia is very demanding. The company has acknowledged the limited chances of thriving as a global company due to markets being dominated by the four dominant companies. In my opinion, Carlsberg has set foot in an attractive industry because of the fierce competition from price, quality, and design. The company will be forced to put a lot of work if it will survive this huge competition and get a strong position in the Asian market. However, with the right strategies, the company can overcome that.
Identify the reasons for Carlsberg A/S’ mergers and acquisitions (M&As)? What type of the M&A strategy does Carlsberg A/S use?
According to the case study, the reasons for Carlsberg’s A/S mergers and acquisition is that the company needs to learn and develop new strategies that are only available in foreign markets like Russia and China. The company cannot do this on its own. Therefore, the mergers and acquisitions help Carlsberg identify its weaknesses and develop strategies to help it overcome these weaknesses. It will also help it improve its operation processes and design new products that will have a chance in the foreign markets.
For example, Carlberg bought when the company bought BBH in Russia. It introduced to the world a new brand of upgraded drink with a delicious taste of barley. This reduced the chances of failure by creating a new product and selling it using a brand name that had been known to many Russians. Using a new brand name helped the company to penetrate markets that had already been possessed by major companies. Carlsberg was losing ground as a strong brand in the 200s. Therefore buying shares from other known companies was necessary. Entering into a merge gives both companies mutual benefits such as increasing customer base, strengthening customer relationships, and making more sales, thereby increasing the competitive edge and creating new business opportunities.
The type of M&A strategy used by Carlsberg A/S is the market extension mergers strategy. This type of strategy involves two companies dealing in the same industry but in different locations. When the two companies merge, they hope to access a wider market to increase their customer base. This is the same case for Carlsberg because, initially, the company was first formed in Copenhagen in Denmark. Then it allies with BBH to have access to the Russian market. Carlsberg A/S can also be called a full asset merger because Carlsberg company bought 100% of the shares in BBH and gained full ownership.
Describe Carlsberg A/S’ international corporate-level strategy
Entering into a merge was a strategy by itself. This strategy has granted Carlsberg the know-how and skills to gain a competitive edge. Through the agreement, it was able to penetrate an existing market using a dominant brand. The company also used product development strategy, where it improved the BBH beer and sold the market a new, improved product with a new taste of barley. By being innovating, the company gained a big market share in Russia. Through a market penetration strategy, the company ventured into the global market, such as western Europe, the US, Russia, and China. The company is also anticipating to be to get a strong position in the china market and merged with Thailand company.
Integrating the results of the analysis, do you think Carlsberg A/S’s decision to go into the emerging markets is a good decision? Summarize your findings and propose recommendations that could improve Carlsberg A/S’ market performance in the industry. ( Minh Le – 139150
Based on how the company has been performing after merging with other companies, merging is a pretty good idea. Merging has enabled the company to penetrate new markets and taken advantage to introduce new, improved products. For instance, Carlsberg entered into a merged contact with BBH, took full control over it, and produced a new product that attracted more customers. Thecarlberg also uses the M&A strategy to seek a stronger position in china. When it entered china’s market, it was faced with stiff competition from Heineken. Therefore it merged with a Thailand company, which also operated in the beer industry to get a stronger position in the China market. By merging, the company did not have to use a lot of money to build its brand as the Thailand company was also known.
In Europe, the company was able to make profits by market development, innovation, and streamlining.
Recommendations
The company can do much more to compete actively with the four giant competitors. It could improve and enhance the existing product to boost customer demands. The company can also use the cost leadership strategy to attract more customers now that it is new in the market. To do this, it has to use the locally available products and local labor to cust on operation costs. This way, it can sell the same products at a reduced price just to attract more customers. Also, the company could try through advertising. Even if the M&A strategy is saving the company some cost of advertising, it should be reluctant rather. It should advertise more to attract more customers.
References
Hansen, M., Laren, M., & Pedersen, T. (2011). Case 4: Carberg in emerging Markets.
Alkasim, S.B. & Abdullah, Haim Hilman & Bohari, M. & Abdullah, S.S. & Sallehuddin, M.R. & Fathilah, R. & Yunus, N.K.Y.. (2017). The impact of market penetration strategy and market development strategy on the competitive advantage of manufacturing-based SMEs. International Journal of Economic Research. 14. 73-84.
Junni, Paulina & Teerikangas, Satu. (2019). Mergers and acquisitions. 10.1093/acrefore/9780190224851.013.15.