Strategic Management: SAB Miller SAB

strategic management: SAB Miller SAB Miller is currently recognized worldwide as one of the most important breweries in the world, with a solid positioning not only in South Africa, but in more than 40 countries in the world. According to the company's 2004 annual report, the company currently runs operations in over 40 countries and ranks among the top three brewers in more than 30. In 2004, the growth figures were more than optimistic.

As such, the overall turnover grew by 41% (from $8,984 million in 2003 to $12,645 million in 2004), while the profit before taxes grew by an estimated 81%. The company has encountered in 2004 excellent performances in Europe (a growth in Earnings Before Interest and Taxes - EBITA - by 39%), as well as good figures in the African and Asian markets (growth in EBITA by 31%).

Having a look at Meyer Kahn message to the shareholders, we will be able to obtain additional information on the company's strategic positioning and evolution in each of the continental markets it operates. As such, the U.S. operation has offered optimistic results ever since the purchase of the Miller Brewing Company, despite important efforts to restructure parts of the operations. SAB has successful implemented a financial improvement program which is still on the way.

The Central American operations have brought important revenues, with specific actions to improve the brand portfolio. In Africa, the most important market remains the South African one, where SAB still has a market share of well over 90% (it had reached 98% in 2003, according to estimates). Given the fact that the South African beer market currently ranks as the 11th largest beer market, these are not figures to be ignored. Additionally, the company saw good growth figures in Europe, with the large Russian market performing well.

The second pillar of the SAB strategic positioning in 2004 that needs to be explained refers to emerging markets, specifically in Asia, with the Chinese and Indian market providing significant perspective for future growth, specifically if we look at the growing population in these countries and the booming economy in both China and India. In 2004, SAB Miller formed a joint venture in India with Shaw Wallace Breweries and acquired several important operating facilities on the Chinese market.

Resuming, SAB Miller's strategic positioning in 2004 includes three separate levels that need to be considered. First of all, we have the markets where SAB Miller is one of the most important, if not the most important player in many of these. These are the markets where SAB plays the leader's role, with an adequate positioning in each case, and the markets where the company's position has been consolidated in time and where most earnings come from.

The most important of these is the South African market, where the company's position is still unchallenged and where SAB can control its competition, especially in terms of entry market conditions. The rest of Africa also seems to be following on the South African characteristics. In markets like the U.S. And European ones, SAB Miller has improved its positioning, without reaching the leading position it boasts on the African market. Mainly, this is due to the increased local competition it has to deal with in countries within these markets.

For example, Europe is a traditionally beer-consuming market, with many countries developing their own brands, with a significant tradition in beer producing. The United States can also be included in this category of countries where SAB is positioned as a challenger. Third of all, we have the merging markets, most notably China and India. These are markets where SAB has made its entry especially by acquiring local companies and where the company still needs to promote its brand portfolio and obtain highest efficiency.

In these markets, we can include SAB in the new entered companies category. 2) Following the description of the three different levels of strategic positioning we have previously described, we are able to identify the strategic options available to SAB Miller for the subsequent period of time. However, we should first note the three-part strategy for growth as it was first conceived in 1999. This relied on three specific strategic directions for development. First of all, it relied on improving volumes, margins and cash-flows in South Africa.

Second of all, it promoted the expansion of the company's position in other developing markets and, third of all, it sought major value-adding investments in all markets. We can nuance these three strategic options in order to adapt them to the three pillars of the company's strategic positioning we have previously described. First of all, we have the traditional South African market, where the company is an obvious leader.

Given its position here, the company's strategic options revolve around market formation and around determining the variables around which the market will develop. In this case, the company can be considered a trend creator and a market definer.

On the other hand, the South African market, given the company's market share here, provides an excellent base for performing financial results, with earnings and profits that can be used to finance other projects the company may have in the future, especially on less developed markets and in markets where the company's presence is not yet so important. Second of all, in the markets where the company plays the challenger's role, the company's strategic options can be resumed as the totality of actions directed towards challenging the leader's positions.

This can be done either by promoting the company's current brand portfolio or by acquiring local brewing companies and extending thus SAB's market share, with the consolidation of its presence on the market. Currently, the company seems to have chosen the latter strategic option. Indeed, the 2004 Annual Report presents several important acquisitions on the European and North American market that the company has undergone in the last years.

In Europe, for example, SAB Miller has undergone the acquisition of Czech brand Pilsner Urquell, considered the original golden beer, as well as several important brands on the Italian (Nastro Azzurro), Hungarian (Dreher) or Polish markets. In the United States, this strategic option has materialized with the acquisition, in 2002, of the Miller Brewing Company, the second largest U.S. brewer, which ensured a direct entry on the market in one of the top positions for SAB, as well as a good representation in the niche markets.

Third of all, we have the strategic options for the emerging markets, where the company's presence is still unconsolidated. These are mainly the Indian and Chinese markets, the largest in Asia and the only ones that the company has chosen to approach so far. The company's strategic options here are somewhat similar to the ones in the markets where the company acts as a challenger.

A strong entry and, later on, presence on the market can be achieved through direct investments and through local company acquisitions, a solution that the company has been using so far. On the other hand, we should note that such a strategic solution is fundamentally conditioned by the company's revenues and its capacity to finance its investments abroad. In this sense, the role of the South African operations, which, as previously pointed out, provide significant parts of the revenues, is crucial.

3) Basically, in order to determine what strategy SAB Miller should be following in the future, we need to recapitulate the strategic options we have previously described and emphasize the options we recommend. First of all, as previously pointed out, the company's market share in South Africa creates the necessary premises for a strong revenue base there. In this sense, in terms of the South African operations, SAB Miller should make its facilities as cost efficient as possible.

Additionally, given its strong position on the market, SAB should also look towards imposing new trends to the consumers. In this sense, one could consider launching several new brands, specifically adapted to the South African market, created especially for it. Second of all, in the markets where SAB is a challenger, the main strategic objective is the increase of the company's market share. The current activity in.