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Heineken S.W.O.T Analysis

Heineken boasts of a large international presence. It has a worldwide distribution network and breweries. The company owns and manages leading portfolios of beer brands and thus has one of the largest beer sales volumes. Moreover, for more than 130 years, Heineken Company has remained one of the leading global consumer and corporate brands and Europe’s favourite beer brand (Hailemeskel 2016).

Mission

Heineken’s mission is: “To be a proud, independent, international brewer committed to surprising and exciting all consumers around the world (Hailemeskel 2016).”

Through its mission of surmising and exciting its customers, Heineken Company has been able to define clear characteristics of its beer products for a long time with the intention of meeting consumer needs. The mission has guided the company in brewing high-quality beer accompanied by great packaging, thus meeting consumer expectations and impacting the overall success of the company.

Vision

“To win all markets with Heineken with a full brand portfolio in markets we choose (Hailemeskel 2016).”

The vision of the company is guiding it in maintaining standards regarding brand value, style, and the company’s development. The vision pushes the Heineken Company to establish varying beer flavours under a single brand. Hence, the vision consistently guides the company in utilizing its brand impact, thus winning global markets and impacting its overall success (Grusenmeyer 2009).

Primary stakeholder

Heineken’s primary stakeholders are customers, suppliers, creditors, and employees.  Its primary stakeholders are connected throughout the processes, resulting in high-quality beer. The company’s processes are re-executed by its employees and managers who continuously ensure that its production rates and principles are met daily. Most importantly, the company is driven by consumer needs and expectations, which it has to meet through a consistent supply of quality products from suppliers. Hence, the company’s stakeholders ensure that the company maintains normal business processes, thus positively impacting its overall success (Hailemeskel 2016).

S.WO.T Analysis

Situation/Environment Analysis

Parent company Heineken International
Product portfolio  Heineken

Tiger Beer

Buckler

Cruzcampo

Amstel 

  Birra Moretti
Starobrno

Zagorka
Żywiec Brewery

Jillz
Newcastle Brown

Strengths  

1. Heineken has a leading brand portfolio, It has more than 170 international premium beer, regional, and local together with speciality beers.
2. Heineken company has strong advertising and promotional initiatives.

3. Strong brand portfolio in the international market thus ensuring a stable inflow of revenues.

4. Heineken has a wide network of breweries. Currently, it owns over 125 breweries in over 70 countries.

5. All Heineken breweries are located near their end markets, thus Heineken Company is often in a position to serve its customers with fresh beer.

7. There is a strong network of breweries which enables Heineken Company to continuously supply its customers with beer at lower costs thus keeping its customers satisfied.

8. Excellent branding through advertising and sponsorship initiatives.

9. Many consumers in the US still prefer imported beer to local beer.

 

Weakness ·       Shrinking market share.

·       The unprecedented increase in excise duties to curb drinking thus increasing the beer prices and eventually making customers opt for alternative affordable beer brands.

·       The ban on selling beer in public places thus limiting the beer selling platforms.

·       Maintaining corporate image in distinct cultures.

·       Counterfeit packaging from competitors.

Opportunities ·       Heineken can acquire small breweries.

·       Heineken can expand its product line in new areas to accommodate its customers’ changing tastes and preferences.

·       The technological changes can be exploited to strengthen Heineken’s brand.

·       Falling trade and ownership regulations in the US market.

·       There is a positive beer-drinking trend where more females are now drinking beer.

·       Customers are demanding low-calorie beer.

·       There is a growing number of home deliveries.

 

Threats ·       Tax regulations on the beer industry.
An increasingly negative societal perception towards alcohol could instigate more restrictive legal measures.·        Slowing beer industry growth rate.·       The changing customers’ tastes and preferences.

·       Consumers today want to know more about the history and production methods behind what they drink. And they enjoy experimenting across categories and styles. As a result, they are less brand-loyal than ever before

·       Legal issues related to underage drinking and retailer licenses may continue to limit the selling platforms for beer products.

·       The production costs are rising to unprecedented levels.

Competition
 

 

Competitors

·        AB InBev

·        Carlsberg

·        SABMiller

 

Beer Industry Market Analysis

Production

Breweries are often categorized into micro-breweries and micro-breweries on the basis of production volume. The tag war between these two producers is that craft brew companies consistently grow their production. Though microbreweries offer quality and quantity through greater distances, microbreweries also do the same.  This has been influenced by changing drinking trends, such as preferences, which significantly increase consumer demand for microbreweries (Ft.com 2017). A greater number of consumers are shifting towards craft beer due to its distinct quality and taste. Therefore, micro-breweries persistently expand due to the growing consumer demand for craft beer.

Global Beer Market

The figures for global sales are on an upward trend. Apparently, most brands are experiencing significant success because of the rising disposable income and the changing lifestyles of US consumers. For instance, there are now a growing number of female customers. Besides, exploiting the niche consumer segment, the traditional markets are also experiencing a great shift from the high-calorie beer market to that of low-calorie beer consumers. Moreover, there is a growing popularity of craft beer which is creating a way for new producers.  Other than glass-like PET, beer manufacturers are opting for packaging solutions that are durable but ductile, sustainable and affordable like cans (Zion Market Research 2017).

Subsequently, the global beer market is expected to accumulate about $688.4 billion by 2020. This growth is believed to be fueled by the growing markets. Moreover, imported beers and premium beers like Heineken are consistently increasing in popularity among their consumers because of the growing disposable income of these consumers. On the other hand, to acquire more market share, beer producers are expanding their distribution channels in new developing markets through mergers and acquisitions (Zion Market Research 2017). Most international and domestic breweries are considering merging or collaborations while some multinational producers are consistently making huge investments to broaden their market. Apparently, more international breweries are collaborating with domestic breweries to allow consumers in host countries to explore local and international beers. Despite all these efforts, the growing health concerns or consciousness among beer drinkers are raising the demand for non-alcoholic beers.

Consumer Analysis

Young US beer consumers are increasingly disposing of consumer income, thus increasing premium beer sales. There are more young beer consumers who are more impulsive thus looking for something exciting. That is, they are very experimental and are attracted to social events. They can be reached through long-range forms of communication.  Therefore, their communication is mostly via digital media (Kaze 2010). They also tend to pay in cash. Despite the increased number of craft beers, most consumers still prefer drinking imported beers like Heineken.  This is because many US middle-class consumers love to be associated with premium beer brands. These young consumers are always satisfied with their decision after purchasing premium beer due to their high involvement and social visibility. Moreover, the numbers of such young consumers tend to rise through experimental marketing because they always woo their counterparts by telling them about their experiences with the brand (Kaže & Škapars, 2011). Therefore, beer consumers engage in beer consumption as participants. Also, the market trends are that millennial consumers are increasingly preferring craft beers. However, these consumers want a variety of beer tastes and quality. They also want authenticity. However, the current customers prefer healthy beer with low alcohol content, which is increasing the demand for low-alcohol beer among young consumers (Zion Market Research 2017). The target consumers also interact mostly through social media. They watch television and live sporting and entertainment events.

Five (5) Forces of Competition

The Bargaining Power of Suppliers

Heineken’s main suppliers are majorly farmers. They supply barley, yeast, hops, and water. Hence, the farmers have high power regarding supply which is a threat to the company. The battle supplier is Heye Glas Netherlands. Heineken has more than 33% stake in Heyes Glas thus reducing the supplier’s power. Finally, Heineken faces high competition for agricultural products from the biofuel and beer industry thus increasing the costs of raw materials (Suarez Carmona 2012).

The Bargaining Power of Buyers

Currently, customers have various beer choices from many beer companies to buy. The beer companies are increasing customer choices thus the threat to the buyer is significantly high.

The Threat of Potential New Entrants

There is an explosion of small craft brewers in the market. Low barriers in the beer market have instigated the entry of small brewers. They are a threat to Heineken’s market share. Hence, Heineken must consistently devise innovative ways to sustain its competitive advantage (Suarez Carmona 2012).

The Threat of Substitutes

Beer is an alcoholic product just like wine. Hence, Heineken faces the threat of such a substitute since consumers can choose wine instead of beer. The wine industry threatens the beer industry’s market share.

The Extent of Competitive Rivalry

Apparently, Heineken holds approximately 30% of the global beer market share. However, its growth consistently triggers competitors’ efforts to attain their growth targets. The efforts of its competitors will consistently drive Heineken to maintain its economies of scale, produce quality beer and achieve targets (Suarez Carmona 2012).

Internal Mechanism

Heineken is applying the internal governance mechanism by utilising the hierarchal system to control the decision-making flow. The company is managed by an executive board that subsequently sets directions and forms company goals. On the other hand, the corporate shareholders give the board of directors the responsibility of daily governance. Consequently, the board then establishes transparency by setting quality and frequent financial reports, analyst meetings, investor presentations, etc. Hence, the internal mechanism ensures that Heineken’s business functions are effectively performed to achieve the company’s goals (Hauswald & Marquez 2009).

Secondly, the external corporate governance mechanism entails the capital market, Heineken’s market share, labour market, federal statutes, and shareholder proposals.  Heineken combines both external and internal governance mechanisms to protect stakeholders from management misconduct. While the internal corporate governance mechanism is applied to monitor and control the management actions and align the management of shareholder interests in the Heineken company, the external governance mechanism controls management behaviours.  Hence, both mechanisms employed by Heineken induce management actions, which maximize shareholder value and corporate profits (Rezaee 2009).

Leadership within Heineken Corporation

The good leadership of Heineken is propelled by its First-Line Manager Development Program, which trains first-line managers responsible for daily operational and marketing work. For this reason, Heineken has proven its management capacity to be one of the most effective in the beer industry. Through a hierarchal management system, Heineken is not only able to realize the continuous changes in the world, but it is also able to respond effectively to constant product innovation. Hence, Heineken’s leadership is embedded in the value of products and stakeholders. Moreover, through the first-line Manager Development, the corporation has established a leadership that can meet the challenges of cultural differences, operational disparities and consistency across international boundaries (Heineken Company Web Access).

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