Internationalization strategy at SABMiller

In the year 1999, SABMiller undertook a globalization strategy and started entering the international markets. The organization undertook this strategy to ensure that it gains high profits internationally and thus attains a sustained growth. SABMiller became the second largest brewer in reference to its profits and volume in the year 2002 by undertaking a lot many acquisitions on other organizations operating in its sector.

SABMiller is considered as one of the most strategic organizations that highlighted four main strategies in the year 2010 to attain a sustained growth. These four strategies were creating a balanced global spread of business, developing strong brand portfolio to create recognition, constantly raising the performance of local business and leveraging the global scale. However, in the year 2015, the organization faced stiff competition in the global markets from multinational companies such as Heineken that posed a lot many challenges. This led to augmented competition and intensified competitive rivalry leading to a reduction in the market share and profit margins as well.

In the year 2015, AB Inbev presented its bid to acquire the SABMiller. The bid was quite attractive and SABMiller agreed for the same. Many experts and critics were not in favour of this decision and had a viewpoint that there were other strategic alternatives available in front of the organization as well. Nevertheless, the key strategic issues associated with this acquisition were associated with the appropriateness of this decision, effective integration of both the business and undertaking the change process. During the course of this research work, the researcher will undertake a secondary research to understand the case in an effective manner and answer the research questions.

Ansoff Matrix and Diversification strategy

As per the Ansoff matrix, the organization has adopted a market development strategy. This implies that the organization is always on a look out for new markets. This will ensure that the risk of the organization is minimized and it is able to attain a long term growth in the market place. In reference to the diversification strategy, the organization is mainly focusing on its core product category i.e. beverages. Hence, the focus on the organization is to sell the same product category to a diverse set of customers thereby developing the market.

PESTEL and VRIO Analysis

Political and legal factors – The political and legal factors may have a negative impact on SABMiller because the government of many countries are strict towards the organizations manufacturing beverage products. This may lead to high fluctuations in the rules, regulations and laws of different markets in the near future.

Economic factors – These factors are not much applicable to such products as people consume them despite the economic situation of a country.

Socio cultural factors – These factors are quite positive for SABMiller as the taste and preferences of the target audience is very much positive for these beverage products resulting in high success of the company.

Technological factors – These factors are quite neutral as the company already has all the necessary technologies that are required for manufacturing the products.

VRIO analysis

VRIO

Description

 
 

Value
Long lasting legacy

 
 

Resources
Infrastructure, technology and employees

 
 

Imitability
Strategic Leadership

 
 

Organization
The organization has been able to utilize these resources successfully.

Resources, Generic strategy and Competitive Advantage

The major resource of the organization is its positive brand image. The organization has a huge successful legacy and the same is leading to a positive branding for SABMiller. This leads to high recognition and recall factor in the market for the products of the organization. After going through the case study comprehensively, it was found that internationalization is the generic strategy followed by the organization. SABMiller wanted to enhance its market share and hence started entering the international markets. The organization undertook this strategy to ensure that it gains high profits internationally and thus attains a sustained growth. The competitive advantage and competency of the organization is associated with the strategic leadership. The transformational style of leadership followed by the leaders enables the organization to implement the changes in an effective manner. This in turn focuses on the implementation of best practices in the organization.

Corporate Level strategy – Acquisition and Strategic Alternatives (Merger and Joint Ventures)

Strategic management is one of the most crucial aspects associated with business organizations today (Needham, 2012). This is mainly because if an organization undertakes relevant business strategies then it may undertake the most appropriate decision at the right time to gain a long term growth (Baker, 2010). A business strategy can be defined as a series of all those actions that allows an organization to gain a long term growth by accomplishing the business objectives. With the augmenting competition in the market place, every organization undertakes relevant strategies to overpower the competing brands and enhance its market share. These strategies may be related to business expansion, diversification and strategic alliances such as joint ventures, acquisitions, mergers and many more. It is usually observed that the top management of an organization is mainly concerned with formulating the business strategies that may assist in gaining high growth. The case study clearly states that SABMiller has undertaken a lot many strategies that have been mentioned above. It has constantly entered the international markets to ensure that it sells its products to the consumers across the globe. The organization has also diversified in reference to its marketing mix to make sure that it offers relevant and valuable returns in the market. In the year 2015, the organization agreed to be acquired by AB Inbev in order to attain a sustained growth. Therefore, strategic management is an important area that can help an organization in overcoming the odds and becoming popular in the market place. In the recent past, a lot many organizations have invested their resources to undertake effective strategic management.

In reference to the decision by SABMiller, it should be stated that an acquisition may not be the most appropriate decision under this situation. According to Azad (2009), an acquisition is a strategic decision under which one organization takes over another company by acquiring its majority market share. It is usually observed that a strong organization acquires a majority stake in a weak organization that is unable to operate in a lucrative manner in the market place. Thus, in the case, SABMiller will be acquired by AB Inbev. This directly means that the management of AB Inbev will be responsible for undertaking all the business decision after the acquisition (Azad, 2011). In addition, in a huge majority of cases, it has been observed that an acquisition arrangement leads to dissolution of one organization. This implies that the organization that is being acquired usually loses its legal entity and is dissolved in the acquiring organization. However, it should be stated here that after reading the case in a comprehensive manner, it was found that there were other strategic alternatives available in front of the organization as well. It should be mentioned here that SABMiller is not a weak organization and was quite strong in reference to its sales, profits and brand image in the market.

Therefore, SABMiller could have undertaken a joint venture to gain a long term growth. A joint venture is a strategic alliance under which two organizations operating in the same sector or different sector joins hands to undertake a business activity. This also means that the organizations to a joint venture share profits and losses that also reduce the risks. SABMiller could have focused on this strategy as it is considered as more lucrative than an acquisition. This is mainly because the parties to a joint venture have equal decision making rights. In addition, the brand name of both the organizations entering a joint venture contract also legally exists. This may lead to a perpetual growth for SABMiller as well. Therefore, joint venture can considered as another strategic alternative that SABMiller could have considered. This would have ensured that the organization operates with less risk in the global markets, has its legal entity and also enjoys the power of decision making. It should be noted that the organization may have also focused on a merger. According to Azad (2011), a merger is a strategic alliance under which two different legal entities merge together to form a third legal entity. This could have also assisted the organization in overpowering the competing brands.

Integrating the Culture

It is quite evident that in an acquisition process, both the organizations i.e. SABMiller and AB Inbev have to ensure that their cultures are integrated to gain high efficiencies in the future. A culture is a set of tangible and intangible elements that relates to the shared values and norms. According to Armstrong & Baron (2002), a culture may act as business strength but if an organization is unable to manage its culture effectively then it may also lead to a major barrier in implementing any kind of change in the organization. Therefore, the role of every organization is to ensure that an effective internal culture is shaped to gain high efficiencies. In reference to the mentioned case, AB Inbev will acquire a majority stake in SABMiller. These two organizations have to ensure that their work cultures are amalgamated in an effective manner to gain productive business activities in the future. Following are some of the elements of organizational culture that should be focused on –

Power structure – The organizations have to understand their power structure. This implies that a centralization or decentralization approach has to be figured out to comprehend the power structure. Centralization is an approach under which the top management takes all the decisions associated with the business operations. Thus, the powers and authorities are vested in the hands of the top management. On the other hand, decentralization is an approach under which the organization divides the powers and authorities amongst the organizational members. This gives the employees with more rights and authority to make business decisions.

Organizational culture – Both the organizations to this acquisition has to understand whether a clan culture or hierarchy culture is followed. This may assist in proper amalgamating the cultures in an effective manner. A clan management culture is an arrangement under which a friendly environment is created inside the organization. The organizational leader acts as a mentor to the other employees and guides them in the right direction to ensure that the organizational objectives are accomplished. On the other hand, a hierarchy culture is one under which the entire organization is divided into different hierarchies. Formal protocols are followed and a top down communication is encouraged in the organization. Therefore, this culture is more formal to be followed in an organization. Both the organizations to this acquisition should focus on implementing the most appropriate culture that suits to the expectations of employees.

Work force diversity – The employees from both these organizations have to work together in order to attain the short term and long term objectives. Diversity is the concept under which the differences in the employee attributes such as culture, nationalities, age, gender, education and many more may have an impact on interpersonal relationship of the employees. This implies that the employees from different cultures or nationalities may not accept each other and hence it may lead to conflicts as well. The task of AB Inbev and SABMiller is to make sure that all the employees work as a part of team. This will lead to high efficiency in the operational activities.

Effective leadership – Leadership can be defined as the strategic task of comprehending the vision and mission of an organization, communicate the same to the team members and ensure that all the resources are dedicated towards the attainment of the goals. In the recent past, it has been observed that effective leaders such as Bill Gates, Ratan Tata, Steve Jobs and many more have enabled their organizations to gain high profits and a sustained growth as well (Blythe & Megicks, 2010). Therefore, the role of leadership is highly crucial for the success of an organization (Kotler, 2013). The main purpose of leadership is to provide a visionary direction for the organization and manage the various processes and other aspects of the organization with the goal of achieving maximum benefits (Needham, 2012). The leader, in this case, has to focus on creating a culture that is not only employee supportive but also provides the best returns to the stakeholders.

It should be noted that the leaders of both the organization have to ensure that the above mentioned elements of an organizational culture are shaped in an effective manner. This will lead to high success in the acquisition process as the internal culture of both the organizations will be amalgamated to suit the needs of all the associated parties.

Strategic Change Management – Implementing the Change effectively

Change management is highly imperative for business organizations today. This is primarily because of a dynamic business environment and the enhanced competition. A dynamic business environment comprises of different variables that may have any kind of influence on the operations of an organization. This may include the changing political, social, cultural, economic and technological factors. In addition, the enhanced competition is also posing a lot many challenges in front of the business organizations and hence change is the need of the hour. Every organization today has to change its internal structure, implement the best practices and ensure fruitful operations in order to gain a sustained growth. It is usually seen that if an organization does not accepts the change or fails to implement changes in an effective manner then it may not survive for a long time. In reference to the mentioned case study as well, SABMiller has to undertake this major change in its internal structure because it is facing a dynamic business environment. Despite being a multinational company that operates in numerous countries, it is facing a lot many problems from the environment and competitive forces. Taking this into consideration, it has agreed to be acquired by another organization.

However, looking at the entire situation of SABMiller, it can be very well stated that implementing this major change may prove be a daunting task for the management. According to Huselid (2000), implementing a change is highly tactical in nature and hence a lot many resistors can play a pivotal role in confronting a change implementation process. Lack of communication, rumors generated against the change, failure to look at the change process as a strategic task and many more factors may lead to major resistance in the successful implementation of change process. In the case of SABMiller, employee resistance towards the change process may act as a major source confrontation. This is primarily because such a major change will have a direct impact on the job responsibilities, duties and job security of the employees. Hence, they may resist any kind of change in the internal structure of SABMiller. Following are two main elements of employee behavior that may lead to a high resistance –

Firstly, Affective processes or ‘Feelings’ may be defined as the emotions that are related to the change. According to Yilmaz & Kilicoglu (2013), there might be several types of emotions such as happiness, sadness, anger, frustration or irritation may be experienced during an organizational change. This implies that one employee may share these positive or negative emotions with the others and shape a similar emotion in them as well (Weick & Quinn, 2009). Therefore, it is very much necessary to comprehend whether the employees have positive emotions and feelings towards the change or not.

Secondly, the rational aspect of the employee is the process of evaluating the change from their own logical perspective of the present (Smollan, 2011). This implies that the employees make an attempt to understand whether the change process inside the organization will have a direct impact on the working, operations and say to say life of the employees in the immediate present. If the implemented change has a positive impact then the employees can accept the same and vice versa.

Therefore, change management may prove to be a difficult task for SABMiller as the employees may not accept the change in a positive manner.

Stakeholder analysis

Stakeholders are all those parties that are affected by the business strategies of an organization. Any kind of cultural change or structural change of SABMiller may have a direct impact on many stakeholders. The different primary stakeholders associated with SABMiller are employees, customers, shareholders, suppliers, lenders, creditors, banks and the entire society that may get affected by the deeds of the organization. It should be mentioned here that the organization has to focus on ensuring that all the mentioned stakeholders are happy and convinced with the change process. This will lead to successful business operational activities after the acquisition process.

Recommendations

There are a lot many challenges that SABMiller might face to ensure that this acquisition proves to be lucrative for both the organizations. Looking at the challenges mentioned above, following are some of the recommendations that may assist both the companies in effective implementation of change process –

Firstly, the organization should focus on implementing the ‘collaborative style of change management’. This can be done by implementing the Kotter’s model of change management. This model has three phases that focuses on implementing the change in a systematic manner. Following is a graphical representation of the change process –

The first phase of the model relies on creating a climate of change. This implies that the management should always guide the employees to accept the changes in a positive manner as it may lead to an improvement of the internal processes. The second phase of the model focuses the ‘collaborative style of change management’. This implies that the organization should focus on engaging the employees in the change process. For this, an effective communication should be maintained to persuade the employees towards the change process. The last phase of the model focuses on sustaining the change for a long time. This will make sure that all the stakeholders are positive towards the change process.

Secondly, the organizational leaders should focus on adopting a transformational style of leadership. This is a style under which the leader constantly focuses on implementing the changes inside the organization. The leader works as a part of the team, guides the team members in an effective manner and thus ensures that the change is implemented effectively. In the recent past, it has been observed that this style of leadership has proved to be highly lucrative for the organizations implementing changes in the internal structure.

Lastly, SABMiller should focus on understanding the entire context in reference to this major change in the organization. Following is a pictorial representation that focuses on understanding the context –

The different elements associated with the change process such as time required to implement the change, scope of change for the employees or entire stakeholders, impact of change on the internal diversity, capability or capacity of the organization to change and the readiness of the employees towards the change process are to be understood by the management of both the companies to the acquisition process. By understanding these elements and adapting as per the situation, the management will be in a better position to implement the change in an effective manner. For instance, if the readiness of the employees is less towards the change process then the management had to counsel and mentor them to enhance the readiness. After this adaptation, the change process should be implemented.

Conclusion

SABMiller has undertaken the strategy of an acquisition to ensure a sustained growth in the long future. However, the management has to focus on implementing this major change in a successful manner. Integrating the culture, implementing the change process and stakeholder management are some of the crucial challenges in front of the stakeholders. Taking this into consideration, several recommendations have been provided to the management that may assist SABMiller in the effective implementation of the change process.

References

Armstrong, M. Baron, A. 2002, Strategic HRM: the key to improved business performance, Chartered institute and Personnel and Development, London

Azad, P, 2009, Retail Management, APH Publishing Corp

Azad, P, 2011, Marketing Management, APH Publishing Corp, New Delhi

Baker, M.J. 2010, Marketing: Philosophy or Function? In M.J.Baker & M.Saren (Eds.). Marketing Theory: A Student Text 2nd Ed. (3-25). London: Sage Publications Ltd.

Blythe, J. & Megicks, P. 2010,  Marketing Planning: Strategy, Environment and Context. Harlow: Pearson Education Limited

Huselid, M.A. 2000, “The impact of human resource management practices on turnover, productivity, and corporate financial performance”, Academy of Management Journal

Kotler, P. 2013, Marketing Management. Pearson Education. p. 25.

Needham, D. 2012, Business for Higher Awards. Oxford, England: Heinemann.

Smollan, R, 2011, Engaging with resistance to change, University Of Auckland Business Review, 13(1): 12-15.

Weick, K. E., & Quinn, R. E. 2009, Organizational Change and Development. Annual Review of Psychology, 50(1), 361-386. Retrieved January 15, 2014 fromhttp://www.annualreviews.org/doi/abs/10.1146/annurev.psych.50.1.361

Weiner, B, 2009, A theory of organizational readiness for change, Implementation Science, 4(67).

Yilmaz, D & Kilicoglu, G, 2013, Resistance to change and ways of reducing resistance in educational organizations, International Association of Social Research, 1(1): 14-21.

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