Asahi Breweries Ltd. Harvard Case Solution & Analysis

PROBLEM STATEMENT

Asahi Breweries had a proposed investment plan of 230 billion yen in two years (1989 & 1990 respectively) to expand its brewing and packaging capacity. The president Hirotaro Higuchi of the company needs to decide whether to accept or reject this proposal.

ANALYSIS

Internal Analysis

The Company had a strong leadership in the form of its president Hirotaro Higuchi, who had a long history of success and achievements. His actions helped Asahi to differentiate itself from the rest of the market and to grow as a market leader in the industry due to the initiatives of President Hirotaro Higuchi, the company had introduced “Super dry” in 1987, which was a big success. The Asahi had a strong image and market reputation, strong marketing strategies, sound financial position with 2,509 million yen net profit by the end of 1987, real state resources, and strong market position. Some of the few problems that raised several other problems for the Asahi included its quality, capacity and distribution management. These areas made it difficult for Asahi to meet the needs and demands of its customers effectively.

Strategic Perspective of the Investment

If the proposed investment plan be analyzed strategically, it would become clear that this was a very strong and effective plan that could help the company to grow steadily in the future. As argued in the case, that the taste of Japanese consumers shifts hardly in a short span of time, therefore, the shifts in taste towards dry beer among the Japanese consumers opened new ways towards growth and provided huge market opportunities. Within a short span of time the share of draft beer (dry beer is a type of draft beer) was increased to 50 percent in 1987 from 21 percent in 1980. In 1988, Asahi was the leader in this segment with a market share of 54.1 percent. Unfortunately, Asahi’s capacity was very low, which allowed it to supply only 70% of the orders of the times when “Dry War” from Asahi’s competitors was at its peak. This had not only reduced the sales of the company but also resulted in several disputes with distributors. Moreover, it had also encouraged its competitors specially, Kirin and Sapporo, to capture the market share from the company.  In this regard, the proposed plan would help the company to increase its capacity as well as to build strong relationships with distributors by meeting their expectations.

External Analysis

Exhibit 1 shows Porter’s Five Forces Analysis for Japanese Beer Industry. Buyer’s bargaining power (end consumer) was low because the switching costs from beer to general soft drinks was relatively high, however, for distributors, the bargaining power was high and to meet their demands and expectations they could easily switch from one firm to another. The suppliers bargaining power was low because Asahi, Kirin and Sapporo were the three major manufacturers of beer and dry beer, so they could not switch to others easily. Industry rivalry was high in this industry because of low imitation costs because the point of competition among the beer manufacturers was taste and marketing strategies. Threats of substitute were high with respect to non-beer beverages such as tea, juices, milk, bottled water, vodka, and wine, etc. Increasing health concern also increased threats of substitutes as people prefer to have healthy beverages. Barriers to entry were high because of high startup costs as well as cost and efforts required for building brand and customer base.

Apart from these factors, government regulations had a great power to influence the operations of beer manufacturers because government could grant licenses to companies for selling, manufacturing and expanding beer plant and facilities. Meanwhile, the external factors of the beer industry were also justifying the acceptance of the proposed investment plan because this would give the company an ability to maintain its position in the market as well as will help it to exploit future opportunities.

Conclusion

The retention of Asahi’s previous achievements, existing performance and future opportunities greatly depends on the acceptance of the proposed investment plan because in this way the company will grow its resources and manufacturing capabilities. The president Hirotaro Higuchi should accept this proposal because the long term benefits and growth opportunities are very high as well as the degree of risk is very low. As per the estimation of Finance director of Asahi, the cash flow risk was very low because of the good performance of the stocks of the company and apart from this, the Sumitomo Bank was also contributing effectively in the sound financial position of the company, which was also reducing the risk...................

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Focuses on competitive repositioning, organizational renewal, and personal guidance. Describes how Asahi Breweries was faced with an important decision to expand its capacity, after the success in increasing market share dramatically in the traditionally stable Japanese beer industry. This was done by creating a new product category, "Dry beer." Information on industry economics, organizational processes Asahi, and competitive interaction is carried out, as well as a detailed description of the profile of top management and control posture in Asahi. Designed to discussion on how to make a balanced decision incorporating such market strategy issues as product strategy, competitor retaliation, advertising policy, discount policy and management distributor relationships, and organizational elements such as corporate goals financial integrity, quality control, human resources, management philosophy and operating style. "Hide
by Malcolm S. Salter, Jiro Kokuryo Source: Harvard Business School 22 pages. Publication Date: February 23, 1989. Prod. #: 389114-PDF-ENG

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