Strategic Plan – Steven’s Homestead

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Strategic Plan
Prepared by: Steven Carlisle
Table of Contents
Executive Summary .....................................................................................................................4
Strategic Analysis ........................................................................................................................5
   Market Assessment .................................................................................................................5
       Current Industry Situation ...................................................................................................5
       Competitive Variable Model  Porter's Five Forces ..............................................................6
          Threat of Rivalry ..............................................................................................................6
              Table 1: Market Concentration (C4) Measured by Market Share ..................................7
              Table 2: Incidence of personal beer consumption, 2003-07 .........................................8
          Threat of Substitute Goods ..............................................................................................8
          Threat of New Entrants....................................................................................................9
          Power of Suppliers .........................................................................................................10
          Power of Buyers ............................................................................................................11
   Strategic Mapping .................................................................................................................11
       Figure 1: Strategic Group Map of Brewing Industry ...........................................................12
   Major Competitors ................................................................................................................13
       SABMiller ..........................................................................................................................13
       Molson Coors ....................................................................................................................14
       MillerCoors ........................................................................................................................14
   Leap Growth Opportunities ...................................................................................................15
       Value Innovation ...............................................................................................................15
          Factors Industry Take for Granted .................................................................................15
          Factors Taken for Granted and the Value to Customers .................................................17
              Table 3: Top 15 super-premium and craft beer brands, 2004 and 2006 .....................18
              Table 4: Top 10 regular imported beer brands, 2004 and 2006 ..................................19
          Industry Offerings Consumers do Not Need ...................................................................19
          Customer Wants Not Addressed ....................................................................................20
          Customer Needs Not Addressed ....................................................................................20
   Diamond Mining ....................................................................................................................21
   Market Segmentation ...........................................................................................................22




                                                                                                                                                1
   Long-term Value  Sophisticated Customers .....................................................................22
   Short-term Value  Unsophisticated Customers ................................................................23
Discontinuities.......................................................................................................................24
   Economic ...........................................................................................................................24
       Chart 1: Weighted Average of Currency Exchange Rates ................................................26
   Political/Legal ....................................................................................................................27
   Technological ....................................................................................................................28
   Social .................................................................................................................................29
   Demographic .....................................................................................................................31
       Table 5: Personal consumption of beer by race/ethnicity, May 2006-June 2007 ............31
       Table 6: Personal consumption of beer by household income May 2006-June 2007 ......32
       Table 7: Incidence of personal consumption of beer by age May 2006-June 2007 .........33
   International .....................................................................................................................34
Critical Industry Value Drivers ...............................................................................................35
Firm Analysis .........................................................................................................................37
   Mission Statement ............................................................................................................37
   Value-Chain Analysis .........................................................................................................38
       Analysis of Primary Activities .........................................................................................38
          Inbound Logistics .......................................................................................................38
          Operations .................................................................................................................39
          Outbound Logistics ....................................................................................................39
          Marketing and Sales ..................................................................................................40
          After Sales Service .....................................................................................................41
       Analysis of Secondary Activities .....................................................................................42
          Firm Infrastructure ....................................................................................................42
              Management Profile ..............................................................................................42
              Planning .................................................................................................................42
              Scanning ................................................................................................................43
              Culture ...................................................................................................................43
              Financial Analysis ...................................................................................................44
                  Table 8: Financial Ratios of the Top Three Brewers Compared to Industry in 2007
                  ..........................................................................................................................44




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                     Table 9: Anheuser-Busch Ratio Comparison 2003 - 2007 ....................................47
                  Legal ......................................................................................................................48
                  Quality ...................................................................................................................49
              Human Resource Development .................................................................................49
              Technology Development ..........................................................................................49
              Procurement..............................................................................................................50
       Analysis of Current Strategies ............................................................................................51
       Critical Strategic Strengths and Weaknesses ......................................................................53
          Table 10: Anheuser-Busch Distinctive Competencies, Strengths, and Weaknesses ........53
Business Plan ............................................................................................................................56
   Recommendation  Craft Brew Market .................................................................................56
       Justification .......................................................................................................................56
          Table 11: Purchase Price of Craft Brew Firms .................................................................57
          Table 12: Projected Cash Flows over 5 years for Craft Beer Strategy ..............................58
       Implementation.................................................................................................................59
       Timeline ............................................................................................................................60
          Chart 2: Timeline for Brewing Industry ..........................................................................60
   Recommendation  A-BNation.com ......................................................................................61
       Justification .......................................................................................................................61
          Table 13: Projected Cash Flows Over Project Life (5 years) for A-BNation.com Strategy.62
       Implementation.................................................................................................................62
       Timeline ............................................................................................................................64
          Chart 3: Timeline for "A-BNation.com" ..........................................................................64
   Recommendation  Recycling................................................................................................65
       Justification .......................................................................................................................65
          Table 14: Projected Cash Flows Over Project Life (5 years) of Recycling Strategy ...........66
       Implementation.................................................................................................................66
       Timeline ............................................................................................................................68
          Chart 4: Timeline for Recycling ......................................................................................68
Appendices ...............................................................................................................................69
   Appendix 1  Craft Brew Estimates ........................................................................................69
Bibliography ..............................................................................................................................71



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Executive Summary

In the brewing industry the hot trends in the market today come from mergers and
acquisitions, marketing, and imports and craft beer. The first trend is larger payers in the
market have been merging for the last few years to combat the leader in the market, Anheuser-
Busch. The second trend is marketing changes; companies are going back to the core brands
and messages that made the core brands the best sellers. The final trend is in the craft beer
and imports market; craft beer has continued its double digit growth, in 2007 it was 14%.

The competitive environment of the brewing industry is high and therefore may not be as
profitable. Increased threat in the market from craft beer, lack of after sales service, and rising
costs from suppliers have cut into the profit of the company. All three of these areas are
consistent with current trends in the market and therefore need to be addressed by Anheuser-
Busch.

To combat the growth of the craft brew market Anheuser-Busch must purchase more
independent craft brewers. Four brewers have been targeted for growth over the next year
based on the region where they operate. We will purchase brewers in the Northeast,
Southeast, Midwest, and West Coast. Over the course of five years as the companies are
integrated into the Anheuser-Busch family growth of these brands will increase by 50% over
what they are today. The purchase price is $4.7 million with a Net Present Value of $170,000.

Currently, there is no after sales service in the brewing industry; firms do not reach out to
consumers to measure attitudes, behaviors, or satisfaction. In order to grow the customer base,
it is recommended that Anheuser-Busch create a new portal which will allow the entire family
of brands to be marketed to consumers. The portal will replace the existing product websites
and allow consumers to have one place for all things Anheuser-Busch including the
entertainment division. The cost of producing this portal will be $52,000 with a Net Present
Value of $122,000.

Finally, Anheuser-Busch needs to combat rising costs of materials to the firm for packaging. We
plan to utilize an existing resource, Anheuser-Busch Recycling Corporation, and expand the
scope of the business to include paper, plastic, and glass. This will help lower threats from
suppliers and costs of procurement. Collection sites will be set up at local distributors and
liquor stores with Anheuser-Busch branded collection bins. The collection of recyclables will
give consumers the impression that Anheuser-Busch is a greener company than the
competition. The cost of this project is $1.4 million with a Net Present Value of $326,000.




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