Carslberg In Emerging Market Harvard Case Solution & Analysis

Question no 1

The distinctive competence and distinctive incompetence of Carlsberg are analyzed through SWOT analysis.

SWOT Analysis

Strengths:

  • Leader in beer market with strong brand awareness and brand name.
  • It has number one market position in 7 out of 9 countries.
  • Economies of scale in production.
  • Cost efficiency and effective vertical integration.
  • High company debt, difficultly in expanding through acquisitions.
  • Stagnant growth in Western European countries.
  • Barrier to entry in East China because of high competition.
  • Unable to sustain growth in the past.
  • Already have footsteps in one of the fastest growing beer market of Russia.
  • Chance to become a major player in Western China.
  • Taxes on liquor, which has shifted the trend towards beer market.
  • Chances to extend from Western states of China towards Central states through organic growth, means less expenditure than acquiring companies.
  • Risk of increase in taxes in Russian market, consumption may decline.
  • High trend of Consolidation in industry may increase the competition in Russia.
  • Reputation risk due to selling beer through the local brands in China, which may createa bad image on brand name.
  • Failing to grow fast enough to compete with the competitors who have the strategy to grow through acquisitions.

Weaknesses:

Opportunities:

Threats:

Question no 2

INDUSTRY ATTRACTIVENESS:Five Forces Model

Threat of Substitutes:

The Russian market has several brands that also have same brand awareness and brand name as Carlsberg, as they are considering growing by acquiring different small companies, which enhances the threat and can affect the profitability of Carlsberg.Moreover the substitutes of beer such fizzy drinks, vodka, and wine are also present in the market. However, in China there is a lack presence of world famous brands, as only local and regional brands are available, therefore the threat to profitability is low, while the cost of switching is also low in both areas.

Buyers Power:

Customer loyalty is important in the beer market, even though the switching cost is low Also, there are variety of drinks to choose from is high.Aquality or supply chain problem can affect the profitability of the company and have the power to affect the customer’s choice.

Suppliers Power:

The power of suppliers is moderate in the Carlsberg as the supplies do not include any high tech supplies, and market forces drive the prices of supplies, while the switching cost is low however,the quality of beer depends on the quality of supplies and the processes in making the beer.

Threat of New Entrants:

The threat of new entrants in matured regions like America and Western Europe is low, where big brands are already competing and has economies of scale. While in the Emerging markets like China, the first mover has the advantage over others, and the big names with acquisition power can easily overtake the market and have severe effects on the profitability. In Russia, only major world players can enter the market by heavy marketing or acquiring the local companies that are already working in the region.

Competitive Rivalry:

The rivalry between the top 5 beer selling companies of the world is high in the Western European countries and United States. Heavy advertisement and marketing expenditure is required with innovation and streamlining used to improve the profitability of the company and the main focus is to retain the market share, and trying to improve it through marketing, innovation and streamlining.

The rivalry in Eastern European countries is moderate with Carlsberg dominating the industry through BBH, even though other big players are making an effort to enter the market and gain market share, which would force Carlsberg to keep innovating, and trying to find new methods for cost reduction and better pricing to create an entry barrier and to keep its profitability growing with the growth in the market. However,investment is necessary in this region because it is a growing market, and entering into new segments like premium for high profitability ratio should be the goal for future.

In the emerging market like China, there aren’t much players yet in the Western side, which means that the rivalry is not high, how ever there is always an option for the companies operating in Eastern side to enter the western market,. Therefore, Carlsberg needs to create an entry barrier by creating an image and creating customer loyalty, which will affect the profitability in a positive manner, however,entry in the Eastern market for Carlsberg might be a problem which could bedue to existing beer companies holding the share of Eastern side.........................

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