South African Breweries International:

Devising a China Market Strategy

Case Analysis

    - Organizational Strategy

    The case proves that South African Breweries International (SABI) had combined several organizational strategies to approach success, so it will be best to discuss the some of the most important ones.

    First of all, SABI was a company which was always progressing by taking advantage of its experience. Concerning  this issue, the firm was aware that learning from the mistakes was very critical for its future business.

    Secondly, identifying the target market was another organizational strategy implemented by SABI. Indeed, the company had several different target markets and was executing various strategies for each one.

    Thirdly, increasing the volume and productivity in the local market was also a well-known and beneficial organizational strategy of South African Breweries International.

    Next, the initial diversification strategy was used by the SABI. By divesting non-core businesses, SABI was able to strengthen its positions in core businesses. However, this one was indeed a forced strategy in the early times of SABI because of the restrictions imposed on the firm to invest internationally.

    Then, SABI always kept the acquisition and operating costs low while managing the local breweries. Thus, actually this was SABI's organizational strategy focusing on the management. This one helped the firm to become the world's lowest cost quality beer producer.

    The final emphasized organizational strategy of SABI was the company's meetings. SABI and CRE senior managers were meeting regularly to discuss the company's strategies. That was very advantageous in terms of brainstorming, evaluating and discovering new ideas.

    - International Strategy

    The initial underlined international strategy of SABI was using the joint venture strategy for international markets. For instance, SABI had a joint venture (JV) partnership with CRE Beverage Limited (CREB) which really helped the company a lot in many aspects.

    Secondly, the company had the international strategy of having local partners in the international markets. As an example, China Resources Enterprise Limited (CRE) was one of them. Using this strategy, SABI was able to take advantage of the local firms' experience and contacts.

    Following that, other two international strategies of SABI was to acquire local breweries and to expand the existing ones. These strategies were very helpful for SABI to increase their strength internationally.

    After that, optimizing and expanding established positions in developing markets was an attractive strategy. The ideal mix was important and the market share had to be increased.

    Then, SABI had brand portfolios which were used as an eye-catching international strategy. In regards to that one, the company had established several brands which were targeting very diverse consumers. For example, some brands were targeting the low-income customers while others were targeting the high-income customers. So, SABI was able to generate profits from all classes of consumers.

    Next, SABI gave a lot of importance to gain economics of scale with its operations. This international strategy was very helpful since it was able to present a great cost saving advantage for the company.

    Moreover, SABI was a kind of business which was focusing on the distribution channels. Forming good relationships with key distributors was also highly valued. This international strategy did also bring a lot of benefits for the business.

    Furthermore, SABI put forward the international strategy of transferring personnel and equipment. So, when SABI did expand to new international markets, personnel  and equipment were sent from the headquarters.

     SABI also had some specific international strategies. As an example, for the European market, the company invested in countries that were in transition from state-run to market economics.

    As an international strategy for entry, SABI acquired state-run breweries that lacked adequate capital investment and management, and upgraded production facilities and processes, making them more efficient and profitable.

    Afterwards, SABI had the international strategy of gaining market share in regions. The company believed that the more market share they could control in that region, the more attractive the region would be to their competitors. The firm then used to expand this logic to other regions.

    Besides, after acquiring a new brewery in an international market, SABI even sometimes changed the management to approach the best results. This strategy also sometimes helped to increase the market share in great quantities.

     A detailed market research was one other international strategy implemented by SABI. For example, before creating and selling the Keller Brand in China, the research had showed that the Dalian consumer would be receptive to an inexpensive German-style beer. That moved had increased the market share seriously.

    The packaging differentiation was another international strategy of SABI. As an example, the Lowen brand was supported by the Chinese consumers because it was different in packaging.

    Going on with SABI's international strategies, sophisticated marketing techniques must also be mentioned. Because this strategy was very good in terms of supporting the company's brand portfolio development.

    Finally, SABI had a special international strategy for China. Based on that one, only a few expatriates were allowed to work in China. According to this international strategy, relying on the local talent was very important. The logic was actually simple, because the local managers and employees knew how to make business in China, they had amazing contacts, were armed with a high knowledge of the Chinese market.

    - International Expansion

    Between 1988 and 1993, SABI had investment activities in Switzerland, Lesoto, Botswana, Zimbabwe, Canary Islands, Tanzania and Hungary. These investments can be analyzed in terms of company's first international expansion.

    In 1994, SABI came to the China for the first time, but it was for a market research concerning apple concentrate for Appletiser, an SABI subsidiary. The China visit attracted the company immediately to the potential of brewing market. SABI continued to invest in China since 1994.

    Between 1994 and 1995, SABI invested in Zambia, Mozambique and Poland (Lech).

    In 1996, the firm had investment activities in Romania and Poland (Tyskie).

    In 1997, some new investments were done in Uganda, Ghana and Slovakia.

    In 1998, SABI's European operations represented the largest international division, representing 9.3 million hectolitres, or in other words, 44 percent of SABI's total volume. Also in the same year, SABI's African volumes had increased steadily over the past three years to 6.7 million hectolitres. Finally in 1998, the company had investments in Kenya and Russia.

    In 1999, SABI decided to expand further in the international arena and bought the Tianjin brewery in the North. Additionally, the firm had some investments in Ethiopia.

    Toward the end of 1999, two breweries were acquired, one in Anshan and the other in Shenyang. These acquisitions provided dominance in Shenyang. Now, there were three breweries in the city and a brewery on the main Shenyang to Dalian highway.

    In early 2000, SABI announced its entry into India. At that time, SABI's only Asian market was China.   

    In 2000, SABI were operating in 19 countries covering sub-Saharan Africa, Central and Eastern Europe and China.

    - Recommendations

    In my opinion, SABI must continue to invest and develop in the Chinese market. Thus, the company should buy further strategic positions in China. Because the beer market in the country is still rapidly growing and the potential of the region is really great. This decision will further increase the firm's market dominance as well as discouraging the rivals. Furthermore, I believe that this move will significantly increase the profits. Finally, investing in China is again a wise idea since it will mean investing to the future. The company must immediately start preparations and take advantage of this opportunity since they have the strength and government incentives with them.     

    Cevdet