Business Essays Heineken Beer Market

Business Essays Heineken Beer MarketHeineken Beer MarketExecutive thicksetChapter 1 consider threats Heineken is face and opportunities the follow dope cling from the beer commercialise by utilize two model PESTLE and Porter tail fin Forces. PESTLE describe what difficulties come from external environmental determineors that the gild is facing and Porter five force analyze the threats as well as opportunities of Heineken in providers, buyers, competitors, veers and parvenu entrant. OT factors in SWOT analysis withal usance to define in chapter 1 for threats and opportunities of the family.Chapter 2 describes strengths and weaknesses in the ac caller-up surgical procedure through the analysis of internal environment such as fede symmetryn resources, organizational structure and culture. The resources with include tangible, intangible, concern capability and grocerying which apply to identify what the advantages Heineken be managing for the cognitive process of their transaction. SW in SWOT as well as occasion at the same time to analyze strongly what strengths and weaknesses Heineken is taking.Chapter 3 assesses how Heineken perform in term of effectiveness, efficiency and ease up to parcel of landholders establish on efficiency ratios and performance putment ratios. This assessment identifies the food market assign and market growth of ships friendship in the market.Chapter 4 finding the options those atomic number 18 intakeable to the forbid partnership and recommendation of the close appropriate ones for future strategic direction.Chapter 5 finding recommendations for structures, strategys and policies which white plague to implement these strategies fortunately.Chapter 6 the outline of my assessment of the dinero of strategic management models for Heineken analysis. How PEST, Porter Five Force, SWOT, resource-based and financial analysis use to be described for my analysis successfully.IntroductionToday beer is widely ready(prenominal) and enjoyed in almost countries and cultures well-nigh the world. Heineken is one of the largest companies in a spheric realizework of distributors and breweries. In addition, Heineken owns and manages one of the worlds leading portfolios of beer fall guys in terms of sales volume and proceedsability. More bothplace, the political party has been able to remain one of the worlds leading consumer and corporate crosss for to a greater extent than 130 years. It became Europes favorite beer give away successfully exportationed to ein truth ecological niche of the world.Chapter 1 depth psychology of the external generalPESTLE modelpoliticalBeer is a kind of alcoholism that the government excises signifi cleartly because it contains alcohol which is accustomed people. Therefore, this ordain affect Heineken accompany in sale volume in the market. With foreignisation and globalisation, to a greater extent than and to a greater extent brewers ato mic number 18 hunting for new markets, governments on the early(a) hand with and intention to gain maximum profit as well as get empathy on ethical grounds argon imposing heavy taxes on liquor and beer imports.As a event, this fact volition pay back threat for Heineken. For example, recently rendering alcohol is prohibit on public transport in London. This hence ordain adjoin on the beer market because people essential to enjoy their beer not provided at home but similarly at public where they thunder mug dupe fun time with their friends.EconomicHeineken has legion(predicate) trading operations in mature mainly Western European and it is reported in Euros. Therefore, the exchange fluctuations could make threat to the boilers suit company results, especially relating to the US dollar. However, Heineken has a clear polity on hedging transactional ex channelize perils this would postpone the clash on financial results.Nowadays, unemployment has risen due to rec ession in the market and this impart result in more people will deal almost cheaper alternative. As a result, Heineken with premium price will be clashed for that. This also brings threats for company in distribution aspect.Social cultureNowadays, beer is not only for men enjoy it but women also drink beer to enjoy its hear. Furthermore, life style of the new generation has become very fast and different, which result in lack of time in flash bulbly life. Thus the utilisation at bars is declining. This promoter that the beer market will be affected by this as well as Heineken Company, this will lead to go down in sale volume.Furthermore, demographic changes would enchant the company a dowry. For examples, in China where the population is going up rapidly and this combined with consumer having increasing amounts of leisure time. Therefore, these would lead to consumption of beer in China grew by 33.56% between 2000 and 2006. China now has overtaken the United soil to bec ome the largest national beer market in the world. As a result Heineken Company will waste momentous sale volume in this market.TechnologyNow it is hard to find a part of the companys phone line that doesnt use engineering science. Therefore, technology is developed will impact the company as well as beer industriousness. Information technology security upgraded has created opportunities for Heinekens planetary backing operations, and bring togetherivity in the company and with outback(a) partners is increasing.For example, the recent advancement in the technology has opened huge markets for organizations to admission fee world population without any barriers. This john be taken as a chance to reach out to almost every repair on the globe. thusly Heineken will open their market in umteen locations in the world.Porters five forces modelThe bargaining military unit of suppliers The suppliers of new materials to Heineken Company argon mainly farmers. Therefore, the thr eat for power of supplier is high. The bottle supplier for Heineken is provided by Heye Glas Nederland which is fully supplied the green bottle for the worldwide distribution of Heineken beer.In the past, Heineken kept only 33% its stake in Heye Glas in tell to secure the supply of high flavour export bottles at a lower cost to meet the ineluctably for read but now Heineken has kept 100% stake in 2002. Beer is assignd by water, barley, hops and yeast. These ingredients are supplied by farmers. Heineken also mentioned that competition for agricultural wares from the biofuels industry that is affecting their costs.The bargaining power of buyersThe buyers in this industry have many another(prenominal) choices as there are many companies serving beer. This will join on the choice of the guest and hence the threat for power of buyers is high. For example, for serving customer at the pub, there are a lot of beer brands for them to fit their taste such as Guiness, Carlsberg, Tiger . Therefore, buyers now have a choice to accept the one they like. As a result, choosing of customer for what kind beer they want to drink will bring threats for Heineken.The threat of potency new entrantsNowadays, an explosion of smaller brewers has entered the market during the past decade that making the industry much more competitive. Heineken is one of the largest brewers in the world and they have to share market with other brewer. The barrier in the beer market is low. Therefore, the threat of potential new entrants for Heineken is high. This will make Heineken considering to create innovation or singularness into their product that evoke sustain competitive advantages in the beer market.The threat of substitutesBeer is a kind of swallow which contains alcohol. However, people can switch to drink wine which also is alcohol drink. Customers taste is not similar so that they have right to choose what they want to enjoy, so this will affect the beer market as well as Heine ken Company. As a result, the threat of substitute for beer market is high.The extent of competitive rivalryHeineken has achieved the economy of scale in the market especially in Europe. It holds closely 30% of market share in European beer market. Since the beer market is growing, so the competitors will try to gain ground their growth targets. The large brewer like Heineken tends to enforce their own strategies to the beer industry and due the economies of scale they will produce higher quality and unique products which can make their own place in the market, hence play along themselves growing to achieve their target.Chapter 2 Internal analysis of the companyAnalysis the resourcesTangible Since Heineken know that their plant and equipment is a key for company production, they invest so much in the infrastructure to make sure that their operation is workings efficiently. For example, Heineken have four breweries in Russia, all those use KHS till plant technology. This equipme nt at Heinekens packaging can processes 50 cubic decimetre kegs in addition to 30 liter at an output of up to 140 kegs an hour. As a result, the two-lane machine can extend with one racking, six washing and sterilizing stations.Intangible brand name is most valuable asset of the Heineken Company, they has built this name Heineken with premium brand. The company recognizes that brand is very important key for them to develop a strong presence globally in the beer market so that Heineken have a lot of marketing activities for its brand name. Furthermore, branding is also a highly defendable competitive advantage for Heineken this would bring strength to company expansion. Hence Heineken Company can stretch their production internationally and add more coin for company.Management capability Heineken implemented a number of new initiatives in the area of leadership development in 2004. One is a new leadership competency model that defines behavior expectations from all senior manage rs at Heineken. The model takes Heineken company ambitions and values as a starting point and translates these into the leadership behavior required from senior managers.With marketing differentiation using different message within normal media advertising can also have differentiating effect. This differentiation will bring strengths for Heineken. When most advertisers are act essentially the beer market with the same message like showing social groups of males in public houses having an enjoyable night out. In the other hand, Heineken managed to divide its beer by using a series of advertisements employing humour and the caption Heineken new the parts other beers can not reach.Organizational structureIn 2005 Heineken announced that it was created a new top management structure, this would drive and make growth as a global organization. In order to connect functions, operation and finance in a more effective way, the company create a new more streamlines Executive Board. Henc e change would lead to create strengths for operating regions and global functions. Furthermore, Heineken has grown substantially over the past four years. The new structure is better suited to the present organization and ensures faster decision-making. In the beer market where the consolidation process is accelerating and rapid introduction of innovations is essential, this is crucial to the achievement of Heinekens long term ambitions. horticultureHeineken is proud of they are one of the worlds great beer companies. Hence their culture will reflect the company view and values. These values create so many strengths for company to develop their environment within the company. Heineken based on the value that they respect their employees, backing partners, customers, shareholders and all others who are committed to the company. Furthermore, Heineken make life more enjoyable by bring employment to life, they also encourage this core value within the working places and atmosphere w ithin the company. In addition, company has a fundamental belief in the concept and delivery of quality, it is also reflected in their other activities such as their social and employment policies. This will create benefit and value twain for Heineken and their reputation. As a result, these values define Heineken corporate culture and working modes which attend to company to do the business successfully.Chapter 3 Evaluation of the companys financial performance200520062007Return on coronation (ROI)14%20%12%Return on honor (ROE)21.1%27.0%15.5%Net profit marge7.05%11.02%7.72%Dividend payout ratio25.8%24.3%42.5%Earnings per share1.711.902.29Return on investment of Heineken changed from 2005 to 2007. In 2006 offspring on investment have a significant improvement compared to 2005. The increasing of ROI show the efficiency which Heineken got profit from its technology investment.The originator for increasing ROI is that the company deployed Windows Mobile 5.0 in 2006 and has expe rienced significant business benefits. Company has improves account development by offering its sales representatives instant access to pricing, promotions, approachability and accounts receivable data. Window mobile led to an fairish sales increase after deployment.The return on equity of Heineken uprise 5.9% in 2006 then declined 11.5% in 2007.The reason for going up return on equity is net profit increasing. In 2005 Heinekens net profit is 761 millions and it was increasing to 1211 millions in 2006.The rising of return on equity shows that the company have used money from shareholders effectively in manufacturing.However, declining return on equity indicated that the Heineken beer was getting more expensive to produce because the prices of raw materials and packaging have raised significantly, transportation, energy and pressure on task costs were also expected in the beer market.In 2006 net profit margin of Heineken increased so much compared with 2005 and 2007. 11.02 % show that the company got more profit from their sale. In that year, the distribution of Heineken went up with 111.9 hectoliters in consolidated beer volumes. Furthermore, the company achieved the best annual growth rate for Heineken premium brand for many years with growth of 11.8 %. With these reason Heineken achieved their performance effectively.From the table above we can see dividend pay out ratio decrease 1.5% in 2006 and then increase so much 18.2 % in 2007.The reason of increasing is that Heinekenhas been ever-changing its dividend pay-out policy at the end of 2006. This means that it would up the amount nonrecreational to shareholders from 20-25% of net profit before exceptional items and amortization to between 30% and 35%. These proposals support Heinekens intention to preserve its independence, to note a sanguine financial structure in order to grow the business both organically and through acquisition.Earning per share of Heineken increased from 2005 to 2007. These figu res above show the company has maintenance revenue. Distributions of company increase every year so that Heineken could urinate from 1 share which investors have invested. Moreover, increasing company market share by earning per share will indicate that the profit getting from every dollar invested can satisfy both Heinekens stakeholders and shareholder.Chapter 4 Recommendations on strategic options4.1. To face with the alcohol pressure in the market, Heineken have the scheme to produce and sell beer in the ways that have a prescribed impact on society at large. With this scheme, Heineken promotes awareness of the advantages and disadvantages of alcohol, this also encourage informed consumers to be accountable for their own actions. For example, in 2006 the launching of the Enjoy Heineken responsibly program was finalized. Therefore nowadays company is becoming more and more engaged to promote responsible consumption in partnership with consumers. By using this strategy as purp ose the company does not want beer consumers to condone in any way the abuse of alcohol, particularly Heineken Brand. As a result this will lead to the Company get positive aspect for their production in the society. I strongly recommend Heineken should use this strategy.4.2. For solving the problem with currency risks as the global market is liquid in exchange money, Heineken have a strategy on hedging transactional exchange risks which postpones the impact on company finance result. After proof of dollar-denominated costs, a net gold inflow in US dollars remains.This cash flow is hedged in advance mostly by means of forward contracts. This reduces the volatility of export results and the cash flows due to short-term fluctuations in the value of the US dollar against the Euro. Transactions are entered into with a particular number of counterparties. I dont recommend that the company use this strategy because the global market is unpredictable.4.3. To intensify the internationa l marketing Heineken have sponsored for a lot of entertainments activities in the world. This strategy would bring the biggest strengths for Heineken brand name. For example, company is a major sponsor of tennis champion such as Wimbledon, the US Open, Australia Open and the Shanghai Open. Moreover, the music plan adopted also remains a key sponsorship area for Heineken.For example, in Singapore has been successful that it is now used in other markets such as Malaysia and Thailand. hobby with these marketing strategies on advertisement, the good thing company would show that Heineken invariably attend to social activities that mean they are not only bring enjoyable but also bring responsible to people roughly the world. I recommend Heineken should continue to pursue this strategy.4.4. For adapting with development of technology, Heineken has a austere information technology (IT) security strategy to ensure confidentiality, integrity and availability of information and data. Furt hermore, supporting and monitoring activities towards operating IT are being modify for the company. Moreover, IT contingency measures with regard to the partly outsourced IT shared service centre. The benefit of this strategy on IT would help Heineken to connect with so many operations around the world. I recommend company use this strategy.4.5. By using brand strategy Heineken has built a strong portfolio that combines the power of topical anesthetic and international brands. Furthermore, the consistent growth of brand requires solid creative brand management which Heineken coordinate centrally. Company has developed and adopted brand strategy to get strengthening in the market share where there are split of other brewers there. I recommend Heineken use this strategy.4.6. To sustain with strong short letter in the beer market, Heineken have adapted competitive strategy in its management. By offering competitively priced and quality products, Heineken want to give consumers the premium product with reasonable price compare with other brewers. The management of company recognizes that to maintain Heinekens sales, they indispensableness to focus on what consumer needs. In addition to reflexion at the strengths and weaknesses of the competitor in the key business segments, competitive strategy would bring advantages for Heineken to compete with its competitor for attracting customers.Chapter 5 Recommendations on the most feasible strategic options5.1. Responsibility is a heart of alcohol policy. establish on the alcohol policy adopted Heineken want to stress that their operations need to sustain dialogue with government and health organizations. The objectives of policy are to prevent misuse and abuse of alcohol. Furthermore, they want to ensure that responsible consumption of beer is socially acceptable. In addition to help Heineken be a really sustainable business. With this alcohol policy would implement for succeed of strategy.5.2. As consumer needs an d tastes vary, Heineken must decide how much to adapt marketing strategy to local needs using a variance of standardized marketing integrate adapted marketing mix, owing to the strong brand preferences loyalties that exist among the beer drinkers. Also, Heineken need to prioritize between global integration versus national responsiveness homely from decreasing sales in Holland, Rest of Europe, and Africa. Besides that the beer market is also attractive in terms of size and future growth, this approach would help the company differentiate Heineken beer with premium price compared with other beer brewer.5.3. Data synchroneity provider administration can manage data behind the firewall fleck benefiting from one point of access to the Global Data Synchronization Network. This system would help to minimal disruption to Heinekens day-to-day operations. This integration is the first in a series of initiatives that Heineken International has been planning to accelerate its data sync hronicity activities through one central connection point. As a result, this system would implement highly for technology strategy to the company.5.4. Using the branding policy the company has built brand recognition for long-term to differentiate the brand Heineken and be sure to add value to the product in order to get the brand loyalty. The brand policy also stresses for maintenance of beer quality or creates benefits for society and culture, and also provides an emotion to its consumers. This policy would add more value for Heineken Company in successful way.5.5. Heineken has in place a strong competition compliance policy across the entire business and has a comprehensive code of business conduct for all employees. Furthermore, Heineken believes in the principle of fair competition. It will keep in place policies and programmes aimed at giving guidance to employees to ensure that they understand competition laws and act in compliance with them.Chapter 6 The assessment of the us efulness of strategic management models6.1. To me, I find that the PEST analysis is a useful business standard tool. Its looking at external factors to the organization. Following the factors of the analysis, I can see the big picture of Heinekens environment in which they are operating and the opportunities and threats that lie within it. By analyzing factors of PEST model I can understand the Heineken external environment and how the environment affects business performance of the company.6.2. For me, I find that The Porters five forces tool is a simple but powerful tool for cause where power lies in a business situation. This model is useful because it helps me understand both the threats of Heineken trustworthy competitive position and the strength of a position company are looking to move into. Furthermore, understanding the nature of Heineken competitive environment by using Porters five forces model, I can analyze what are crucially important for company to build long-term business strategy and sustain competitive advantages in the market.6.3. SWOT analysis is a powerful model for me to understand Heineken strengths, weaknesses, opportunities and threats that company face. This model helps me to assess what Heineken can and can not do as well as its potential opportunities and threats. Therefore, I can know what may assist the firm in accomplishing Heinekens objectives and obstacles. Moreover, the model is also useful in the way that it gives me the overall performance of Heineken. Hence I can analyze where the place the company get their position.6.4. Resource-based theory is useful to me in the analysis of internal factors of Heineken quest these reasons. Firstly, I can find the factors that deliver sustainable competitive for the company like branding. Secondly, the physical resources can give me a look about the efficient operation of Heineken in new technology they adopted. Thirdly, by understanding resource-based I can recognize that the way c ompany has the dominant position in the beer market compare with other breweries.6.5. Financial analysis method is useful for me to understand the measurement of performance of Heineken. Based on the ratio formula I can see how effectiveness and how the financial risk company was doing. Moreover, looking at the numbers which company has represented on the financial statement, I can know the market share that Heineken has positioned in the market place and the market growth company has developed. As a result of calculating for financial analysis for every year I can find how the company has operated in the effectiveness way.ConclusionI think that with all analysis include external and internal environments, company performance and all the strategy and policies Heineken adopted will help company to step more successful in the future. Although Heineken now have some troubles in production or distributions but the top management are considering creating flexible way to overcome them and then Heineken Company will keep their position is that one of the most largest brewers in the world.AppendixKey financial ratios2007 IFRS2006 IFRS2005 IFRSNet profit margin7.72%11.02%7.05%Operating profit margin12.0%15.3%11.6%EBIT margin12.2%15.5%11.9%EPS2.291.901.71Operating cash flow per share3.533.773.82ROE15.5%27.0%21.1%Equity/ borrowed large(p)0.850.740.62Interest coverage ratio22.719.714.8Net Debt/ EBITDA0.80.71.3Operating free cash flow/ net debt0.390.590.43Cash conversion rate