Carlsberg is a major global brewer. It is a multi-national firm with strong presence in Europe and Russia. It is foraying into emerging markets with a competitive strategy to capture the thriving beer market of these counties like China, India, and Malaysia. The strategic value creation objective of Carlsberg has made its presence felt all over the world as the fifth largest brewery in spite of it being a firm, which has lowest volume sale. Carlsberg is known for its quality assurance and for its brand value creation over a century. The firm should however concentrate on pricing strategy, which has to achieve competitive advantage in its local brands along with niche-segmented products like Pilsner, Tuborg. The patience and belief of Carlsberg’s shareholders is expected to reap bountiful profits in the future as the company has been consolidating its bases in emerging markets through investments in local brewery partnerships.
The idea of competitive strategy can be defined as a concept used by multiple companies to ensure that they are able to gain market dominance over their competitors in the industry to function better and to enhance their profit margin. The organisations aim to create a defensive position in the market to ensure that they can generate huge amount of ROI (Return on Investments). These types of plans or strategies tend to play a key role to ensure that the companies can function better in the competitive industry. The report focuses on the business strategies used by the beer brewing company named Carlsberg. The company had been able to gain huge amount of success in Europe and have enough market shares but the company has not been able to generate enough success rate in the emerging markets such as China and Russia. The company is the fifth largest brewer in the world and have the chances of success in their expansion strategy for EU but their chances of success in both of these countries have been posing a threat for minor success. This report will focus on the different strategies that have been used by the company and their possibility of gaining success.
Carlsberg has fair share of both tangible and intangible resources and most of the prominent beer companies find the growth markets of India, China and Russia as an opportunity to enhance their profitability. It is because one of the major concerns of the company was to maintain the value of their share in the established markets after beer started consolidating. The report will allow in the proper analysis of the company’s ability to conduct operations overseas. The company has enough reputation in the European markets but they have significant amount of weaknesses in overseas holdings.
Carlsberg is a big name in the brewery business. The company had always focused on value creation through profitability. The business performance of Carlsberg had been stable in the western & eastern European markets, and it already had started to penetrate into emerging markets. Globally the business performance of the company can be assessed as its reach globally, its brand popularity and its profitability. This Danish Brewery has been a consistent performer however; it is showing a rise in profits due to intelligent pricing strategies but a decline in its overall volume of sale (Ft.com. 2018). . Carlsberg is considered the 5th largest brewery in the world yet in the global beer industry perspective, it is seen that the volume sale of Carlsberg is the lowest at 115.2 million hectolitres. The emerging market has high growth potential hence Carlsberg has sought to foray into China. Carlsberg Chill, a brand designed for the Chinese markets has however been achieving continuous success. The refreshing taste has flavourful taste and intelligent segmentation, has ensured that the Chinese new generation is attracted to the vibrant taste and packaging. The positioning of this has been such that it shall be bearing fruit in the future years.
The business performance of Carlsberg has however been dismal initially in the Chinese market. The fragmented Chinese beer market led to non-premium local brands emerging as regional leaders. The failure of the firm to dominate the posh places like Southern and Eastern market in China has been upsetting for Carlsberg. Western china has been targeted but consumption is low, so profitability is marred by low sales volume. Joint venture with local partners has also led to fines and legal issues for the firm; hence, performance has been much below expectation. On the other hand, Western Europe, Eastern Europe is all stagnating, mature markets where growth possibilities are limited. Russian market has been extremely promising but restrictive legislation on beer has led to Carlsberg’s operating profit taking a severe hit (Ft.com.2018). The business performance of Carlsberg has been continuous focus on Value Creation and not volume growth, the product pricing strategy of the brand is aligned to this objective of premium niche segmentation.
Russia has always been a growing beer market, as vodka is a more popular drink. In 2007-2008 BBH became a part of the global Carlsberg Group. The business strategy in place was that of penetrating the vodka dominant market with association with a regional player (Baltika Breweries, 2018). The major competition of Carlsberg in Russia was another global brand Heineken as it had forayed into associating with local brands like Volga , yet the 16% growth spurt in beer consumption was attractive .The business strategy used by Carlsberg in Russia was that of market share expansion, by also targeting the Baltic Region of Eastern Europe. The company invested in growth of BBH’s production capacity, infrastructure and logistics.
Differentiation of the product was a business strategy that the company focused on. The best- selling brand of BBH , ‘ Baltika’ was an aromatic golden brew, this was highly promoted in Russia even though it had 38% share in the market, alongside this product was even promoted by Carlsberg on an international sphere as it was considered extremely flavourful and novel as a product.
One product marketing was not used rather, several business level strategies were used by Carlsberg in Russia; it continued with BHH’s popular brands alongside this it also introduced its popular brands like Pilsner, Tuborg in the Russian market. The consumption of both premium and low priced beers are growing (Gammelgaard and Dörrenbächer, 2013). The objective of introducing Pilsner and Tuborg was to capture the premium segments of the Russian population. The regional focus made by Carlsberg in Russia, by streamlining BBH’s current distribution channel proved to be extremely beneficial strategy. Value creation by building on BBH’s market share by introducing more premium segment international brands was a conscious strategy of Carlsberg. The competition and the legal aspects of Russia are a challenge to every brand; hence increased focus is required in adhering to the stringent laws of the land and also ensuring market share expansion in Russia, before the competitive advantage of other brands take roots. Business expansion of Carlsberg in Russia has to ensure to position BHH’ s already present products alongside the new brands of the international brand thrive equally , so that processing of the brand is much more efficient, by consolidating the value strategy for commanding premium for the brand.
In the earlier stage, the prominent market of the company was in Western Europe, and they managed to hold a strong position in the market despite the dominance of most of the local brands in the industry. For the operations in Western Europe the central strategy of the company was to ensure that they can focus on value creation and profitable and with collaborations with some of the prominent brands the company just witnessed more of debt. The company encountered many setbacks during their expansion in China. The beer market was not favourable for the expansion of the company because the local brands dominated the market. The local brands constituted about more than 95% of the total sales. At the same time, there were multiple entry barriers for the company, which led to the formation of the joint venture with a Thai company named Chang Beverages (Buckley and Ghauri, 2015). Further, the competition between the local and the international brands led to the process of consolidation as well. The joint venture with the Thai company made Carlsberg think that they could strengthen their position in the Asian markets. However, the company failed to perform in the Southern/eastern China market and due to extensive amount of strategic differences and losses; the joint venture came to the verge of break down as well.
The company had to revise its strategy for Asia and focused on the highly fragmented, poor Chinese provinces. Their revised strategy focused on the persuasion of the provinces of the west that would provide them with better sale opportunities and ensure that they can avoid the fierce competition in the Southeast part of the country. The cornerstone of Carlsberg’s new strategy was to focus on achieving leadership and gain the advantages of being the first movers to the Western province of the country (Søderberg, 2015).
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