The European Brewing Industry Essay Research Paper

The European Brewing Industry Essay, Research Paper

The European Brewing Industry

Analysis of the Corporate Environment

Student Name: Michael Lynch

Diploma in Personnel Management, 1999.

Subject: The Corporate Environment

PEST Analysis – The European Brewing Industry

Political Environment

· European Union

- Poland, Hungary and the Czech Republic will join within five years- these countries have young populations with a desire for all things Western.

- ING Barings predicts growth in these economies to average 8% p.a. over the decade after which they join the EU.

- Europe is moving towards becoming a single market with a stable political environment.

· WTO, GATT

- The current pressure on Europe from America and Australia to reduce agriculture subsidies could result in a change in the industry.s raw material supply base.

· Taxes

- VAT & Duty rates vary across Europe- VAT ranges from 15% in Luxembourg to 22% in Finland , while UK duty levels are seven times higher than those in France .

Economic Environment

· GDP

- Per Capita GDP in Europe has risen from $11,500 in 1989 to $16,800 in 1999 . GDP growth for 2000 is estimated to be 2.8% .

· EMU

- Many stocks are now traded in Euros- investors can compare stocks across Europe easily and see which companies are lagging against their competitors.

- EMU has lowered interest rates- Spanish companies can now access the same interest rates as German companies, compared to four years ago when they paid 4.5 percentage points more in interest than German companies . This creates a level playing field for all European companies seeking access to capital.

· Mergers & Acquisitions

- The value of M&A activity in the EU is $1.3 trillion per annum- a 400% increase on 1994 – this is leading to a pan-European economy.

· Energy Costs & Availability

- Deregulation of state monopolies has brought more competition among suppliers and a fall in the price of gas and electricity.

Social & Cultural Environment

· Demographics

- World population is expected to grow from 6bn now to 9bn by 2050. The developing world accounts for 95% of this growth .

· Lifestyle Changes

- People are becoming more health conscious, and more active in leisure and recreation.

· Values

- The consumer backlash against GM crops and protests at the WTO meeting signify how the values of consumers can affect the activities of businesses.

Technological Environment

· Innovations

- The internet has redefined the concept of commerce, and has forced every organisation to look at the way it operates.

· Impact on Costs

- Increased efficiency in production from new technologies has brought down unit costs, giving larger manufacturers huge economies of scale.

Key Strengths and Weaknesses

· Strengths

- Companies competing in the future will need to have the ability to make intelligent alliance and acquisition decisions as the need to gain economies of scale forces companies to seek growth opportunities.

- Successful companies will have to strike a balance between the forces of globalisation and the need to maintain a local focus on each market.

- Companies will need decision-makers who can respond quickly and effectively to changing markets and who can predict market changes before competitors.

- Companies will also need flexible practices in the areas of production and logistics to be able to respond to change.

· Weaknesses

- Companies operating in industries which have fallen foul of public opinion may not survive.

- A marketing strategy which ignores the diversity of cultures across Europe.

The Internal Resources of the Brewing Industry

.The goal of any strategist is to find a position in the industry where his or her company can best defend itself against the forces which exist in the industry, or to use them in its favour. .

The Brewing Industry will have to recognise the forces which define the industry, and examine how these will affect the performance of the industry in the future.

· Threat of Entry

- Scale Economies

Anheuser Busch of the US has twice the capacity of any European brewer. AB could use its vast economies of scale, or its financial resources to acquire an established European brewer to enter the market.

- Product Differentiation

Harp Lager held 80% of the lager market in Ireland before Budweiser and Heineken launched massive brand building campaigns . Global brewers can spend large amounts to differentiate their brands from local brews. This strategy could be used by a non-European brewer wishing to gain market share.

- Access to Distribution Channels

A new beer would have to displace European brands from supermarket and bar shelves. Ownership of the distribution chain by existing brewers would make it difficult to achieve this. The power of retail chains would enable a new entrant to deal directly with them . their buying power would give any new entrant significant economies of scale.

- Government Policy

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