A Review of Strategic Environment

External Environment

External environment for SAB can be investigated through the PESTLE framework. SAB operated around the world. It is particularly concentrated in emerging countries. Thus, political changes and factors in these countries will affect its position and profitability. The major economic factors are that the growth and business opportunities in 2007 are swiftly switched to the emerging countries. Besides, the brewery industry is becoming more competitive. Besides, as the company derives revenue from various countries, the foreign currency fluctuation is a critical factor affecting the profitability of the firm. From socio-cultural perspective, consumers are stated to prefer premium brands products in brewery industry. From the environmental perspective, the public are more concern with green products and support responsible businesses that do not harm the environment. The technological factors include the rise of IT/IS and the associated system in improving the efficiencies and effectiveness of a firm. The legal factors are largely dependent on the local laws. Some Muslim countries may not allow brewery to be sold to its public.

Capabilities and Competences

The core competencies of SAB are its know-how in operating and restructuring in developing countries (i.e., SAB able to control 99% of market in South Africa in 1979, the firm able to manage operations in countries in turmoil or having poor infrastructure, and if found to be resourceful in solving issues in developing countries). The firm also has wide range of product brand (i.e., whereby the wide product portfolio is achieved through acquisition of competitors, and then to make restructure, to improve the acquired business through upgrading the quality and consistency, marketing and distribution activities). Due to its size (i.e., second biggest in the world), SAB also able to attain the economies of scale necessary to stay competitive and relevant in the ever competitive business environment.

Stakeholder expectations

The shareholders largely expect the firm to grow fast, to become more stable and to earn ‘cash cow’ revenue from the developed countries. They may think it is too risky to depend on revenue derived from emerging countries only. Thus, shareholders demand the firm to acquire companies or brands from the developed country.

Application of Ansoff’s Matrix

According to Ansoff’ Matrix, the first strategic option is to penetrate the existing market. For this, SAB can use pricing discount, engage in more aggressive marketing techniques and advertisement to lure the consumers away from the competitors. The key objective is to take away market shares from other competitors as they brewery industry is relatively mature globally. The second option is to engage in product development strategies. Under such strategy, SAB can apply innovation and creativity to introduce other types of products to the existing market. For example, SAB can introduce fruit juices, different favor of breweries, health related beverages to the existing market. The strategy aims to derive more revenue from cross selling of products to the existing market. Then, next strategy is the market development strategy. Under this strategy, SAB can choose to grow to those countries where it has not tap into, be it developed or emerging countries. Besides, it is also viable to tap into markets ignored by the competitors of SAB previously in those countries that SAB is already operating in. Lastly, SAB can ensure into other types of businesses. The options are unlimited here.

Evaluating Strategic Options for SAB Miller

To penetrate existing market will require a lot of financial resources. It requires SAB to be highly marketing savvy. However, the competition is said to be intense, and is expected in becoming more challenging the near future. The margin is thin in countries such as China. The main competitor is giving price discount to compete with SAB. Thus, the industry nature is already too competitive, and if aggressive market penetration strategy is adopted, the entire industry structure may worsen and deteriorate. This will be bad for profitability of SAB.

To develop new products is a viable strategic choice. As SAB is one of the big players in the industry, the existing hardware and business networks are readily available for introduction and delivery of new products. As SAB already had these infrastructures, it is reasonable to expand to new product lines, and the cross-selling of new product lines not only able to enhance profitability if SAB, but that strategy is also lower in risk. Such a strategy also leverages on its core competencies, such as economies of scale, efficiencies in operations and delivery to reach the consumers.

To develop new market is also a viable, relevant and profitable option for SAB. For this, SAB can not only expand to other untapped market, but can also engage in selling its products online. SAB can develop not only market places, but also new market space on in Internet. It is reasonable to leverage on its competitive advantage to the new market, as SAB had successful track records in doing so. As such a strategy is already practiced by SAB for such a long time; the risk of employing such strategy to grow is mitigated.

Diversification is less viable strategy, as it is high risk, and does not leverage on the existing core competencies of the firm.