BIG BEER INBEV VS ANHEUSER-BUSCH Harvard Case Solution & Analysis



  • What are the trends in this industry in terms of consolidation, globalization, and size of companies?

By considering the beer industry, it can be seen historically that sharp positive trends are there in the merger and acquisition activities in the emerging markets. As given in the case, about 883 M&A deals were closed in the year 2003. This is a significant amount and with the help of these activities, the combined companies are significantly cutting their cost of operations due to the global economies of scale. Moreover, they are easily expanding their market share by giving a tough position to other competitors in the market. With the help of these consolidation activities, the companies vitally use the “world as a global market” concept. From the historical data, it can be seen in this industry, there has never been any hostile takeover reported.

  • Do big brewers make sense?

Yes, big brewers perfectly make sense because the merger of these two companies that are dealing in the beer industry can give a relatively tough time to the competitors in the industry. In addition to this, the issues in the individual companies could relatively be solved with the help of this merger, which primarily includes the cost cutting measures as well as the declining profit trend. In addition to this, the issues of the optimal financing mix in the tough economic conditions could also be resolved with the help of this merger. With the help of this merger, the markets would expand globally, which can positively affect the total revenues of the combined company.

3) What is the strategic fit for both companies?

The two companies operate in the beer industry. With the help of increasing diversification through their products, they are expanding in the market. In addition to this, both the companies are finding ways to cut their overall cost through acquiring global economies of scale. It can be seen that the prime activities in order to promote their products is through the use of appropriate marketing channels, which increase the overall expenditure of the company. This strongly suggests that the two companies are strategically fit for each other in cutting the overall cost of the company through the economies of scale and increasing the market share through the cross selling of their individual products.

4) What are the advantages and potential synergies of a merger between InBev and AB?

The two companies are dealing in the beer industry. It can be seen that a tough competition is there in the beer industry because of the presence of large competitors present in the market and who are operating aggressively in order to acquire a large number of market share. Therefore, the first and the foremost benefit of this merger is that the combined company would be enough big to give a tough time to the competitors present in the market. This merger could significantly cater almost a quarter of the world’s beer market, which is relatively one of the most favorable points that favor this merger.

In addition to this, the merger would result in achieving the global economies of scale in terms of cutting the cost of the overall production and help in significantly increasing the market share through cross selling the products. The combined company, by increasing the market share and through the effective cost management teams of the two companies can relatively increase its brand name in the overall market. The potential synergies from this merger are relatively minimal, with the potential cost saving of US $ 500 million to about $ 1.4 billion, which is relatively a significant amount for the combined company....................

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