Strategic Management Plan for Anheuser-Busch Inbev Division
For North America
Faced with increasing price competition on their mid- and low-end brands globally combined with consolidation occurring at a quickening pace across the larger brands and breweries, the Anheuser-Busch Inbev Division needs to move quickly to stabilize its market position. Doing nothing will lead to the company falling quickly behind smaller, more agile competitors who have unique supply chains and production processes that are delivering high-quality premium and craft beers. These smaller brewers with their focus on quality and highly differentiated beers and flavors, along with wide-scale efficiency gains in larger competitors, is squeezing the gross margins and profitability of Anheuser-Busch Inbev Division. As the analysis in this report indicates, the higher the per capita income of a given household, the more beer is purchased. The higher the income the higher the expectation of quality and unique taste as well. Anheuser-Busch Inbev Division will not be able to attract the higher-end, more profitable customers if they continue producing the same products they are today. What is needed is not only a change to their distribution channels but to their product strategy as well. The following recommendations are based on these factors and insights gained from previous sections of this report.
Recommendation #1: Develop A More Vertically Integrated Supply Chain
As Anheuser-Busch Inbev Division's global competitors align themselves to dominate the fastest growing economies globally, chasing China, India and many regions of Asia by streamlining their supply chains and engaging in joint ventures, the company needs to consider how to become strong in North America. The most strategically vulnerable aspect of the company's value chain today is its supply chain, accentuated by the high level of consolidation occurring in North America today. The future of the North American been market will be deiced who is controlling the most essential and critically important ingredients for brewing beer. Right now, Anheuser-Busch Inbev Division is at a major competitive disadvantage by relying on multi-tier sourcing and procurement agreements. This leaves them very vulnerable to domestic and global competitors alike who could easily enter the American market and quickly buy all sources of barley, hops, grains and essential ingredients for brewing beer. If this happened Anheuser-Busch Inbev Division would either have to drop their standards of quality or consider a joint venture with a smaller competitor that would cost them market leadership. Solving this strategic weaknesses will also open entirely new product line options that will allow Anheuser-Busch Inbev Division to successfully compete at the high-end of the American beer market.
Recommendation #2: Turn Quality Management Into A Strategic Weapon
Based on the analysis competed earlier in this paper, it's clear that given the price competition and consolidation of major vendors, beer quality is suffering and is trending to the worse instead of better. Instead of following the other competitors down the price curve and steadily losing gross margin globally, Anheuser-Busch Inbev Division needs to take the opposite and invest heavily in quality management systems and processes. With many of the major beer producers globally in free-fall from a profitability standpoint, their quality will suffer and eventually erode over time. Quality is an attribute of beer no one wants to be mediocre about, as a lack of it will lead to a brand being blacklisted and all the marketing in the world won't save its reputation. For many brand-loyal customers of the Anheuser-Busch Inbev Division, the consistent quality of the beers produced are what keep them buying every week. If quality was to drop, these customers would move on, some faster than others. Quality is so central to the future success of the Anheuser-Busch Inbev Division that it needs a strong strategic focus and continual investment. With the rapid consolidation fo the global beer market globally in general and in America specifically, investing in quality has the potential to be a very strong marketing differentiator over the long-term. As Anheuser-Busch Inbev Division's competitors continue to concentrate on surviving through mergers and acquisitions that continually fuel consolidation, the company needs to double down on quality management and get ready to take share from them when their quality drops. It's clear from the analysis section that Anheuser-Busch Inbev Division's competitors will very likely sacrifice quality as they look to gain greater distribution advantage. The exception to this trend are the more well-entrenched European competitors including Carlsberg who is investing heavily in R&D centers and quality initiatives as they see this as critical to their future growth. Chance are with this strategy they will survive the industry shake-out by putting this priority about many other potentially attractive strategic options. With a heavy investment in this area, Anheuser-Busch Inbev Division will also be more able to scale up into the higher-end segments of the market where premium beers are making the most profits today. Quality will also further strengthen their brand, which is excellently received in North America. Investing heavily in quality will further distance them from their competitors as they sacrifice this critical attribute to gain greater profits. For Anheuser-Busch Inbev Division this is a major competitive strength they can continue to distance themselves from competitors with.
Recommendation 3: Dominate Distribution and Marketing in North America
While Anheuser-Busch Inbev Division's competitors are distracted with strategies for entering the many Asian and South American nations that show potential for growth, the company needs to concentrate on how to dominate distribution in the U.S. And throughout North America. The best possible strategy in this regard is to enter into a series of joint ventures with key distributors throughout Canada, the U.S. And throughout Mexico. Mondelo in Mexico specifically needs to be considered for a joint venture for distribution rights throughout the upper provinces of that nation. As the analysis shows in this report, Mondelo is dominant in Northern Mexico and throughout the Southwestern U.S. including California and Arizona. Mondelo is the distribution company for best-selling Corona beer, which is one of the most potent competitors to the mainstream Anheuser-Busch Inbev Division beers. By creating an alliance with Mondelo and buying up key suppliers in Northern Mexico, Anheuser-Busch Inbev Division will have achieved the goals of the first recommendation and also solidified its distribution channels as well.
In addition to joint ventures with key distribution partners throughout Canada, the U.S. And Mexico, Anheuser-Busch Inbev Division needs to strengthen its marketing strategies by being more aggressive and intelligence about using social media as well. The higher per capita income beer customers are on social networks. Anheuser-Busch Inbev Division needs to be there too.
ACTION PLAN & IMPLEMENTATION
Of the three recommendations, turning quality into a strategic weapon will give
Anheuser-Busch Inbev Division a major lead on tis competitors and also set in motion secondary strategies to vertically integrate their supply chains. Choosing to dominate on the quality dimension of their products will also attract distributors across North America over time, as the industry will certainly see product quality drop as mergers, acquisitions and increased costs of operating. The merger & acquisition frenzy that is gripping the industry will force all competitors to concentrate on cutting costs to stay profitable. When this occurs the quality emphasis that the Anheuser-Busch Inbev Division has will dominate the market. The following are the key action plans and details of implementing this strategy. Interspersed throughout this plan are the tangential benefits to marketing and sales, as the strongest differentiator for any product over the long-term is a strong focus on product quality.
Action Plan Structure
1. Define the strategic plan for quality management at Anheuser-Busch Inbev Division in terms of six-month phases with specific quality management objectives for each time segment.
The intent of this strategic plan is to create a benchmark to measure overall performance against quality levels, including the development of analytics and reporting systems to track quality management processes. This first step is also critical for getting the change management process moving forward within Anheuser-Busch Inbev Division as the quality focus will force change within key departments and divisions throughout the company.
2. Benchmark quality levels for each beer today including the Business Process Management (BPM) strategies for streamlining sourcing, supply chain and procurement processes. The focus on these areas is critical for long-term competitive advantage, as mergers & acquisitions will force competitors to not pay attention to this area. Designing and implementing a pilot for the best-selling beers at Anheuser-Busch Inbev Division will force a level of insight and focus onto the core processes of these most profitable products and give quality management, production engineering and senior executives more insight into where they really are strong or not. A quality management audit of each best-selling beer will also reveal where there are supply chain dependencies that may not have been noticed at a more aggregated view or level. These audits are also excellent investments for protecting the innate value of their top brands as well, as this area of product often suffers during joint ventures and M&A activity.