A Review of Strategic Environment Facing SAB Miller

The strategic environment of SAB can be discussed from three perspectives, namely external environment, the company’s capabilities and competencies and stakeholder expectations.

External Environment

The external environment can be analyzed through the PEST framework. From political perspectives, as the company is operating in many countries around the world, the stability and conditions of the politics will affect the operations of SAB. Furthermore, SAB is operating in emerging countries, where the political situations can be more unstable. From economic perspectives, the diversified operations of SAB around the world subject the firm to exchange rate risk. For this, currency translation effects may harm profitability and financial stability of the firm. Besides, the competition in developing countries such as China is becoming more intense (i.e., margin became thinner). From the social cultural perspective, it is noted that consumers’ preferences shifted to favor premium brand around the world.

Capabilities and Competences

One of the key competencies of SAB is its ability to operate and grow well in developing countries. The company started its fast growth and dominance in Africa, and it duplicating its success to other emerging countries. Secondly, the company has wide product portfolio. The company is also experienced in acquisition of competitors, for the growth of the firm’s market shares and product portfolio. Besides, the firm also enjoyed economies of scale, and is capable of restructuring newly acquired operations to make it efficient, consistent and reliable.

Stakeholder expectations

Different stakeholders have different expectation on the firm. One of the powerful stockholders identified are the investors. Investors largely expect the firm to acquire brands from developed world, so that earning base for the company can become more diversified; and they want to see SAB do not over rely on developing countries.

Ansoff Matrix for SAB Miller

By using Ansoff’s Matrix, the possible strategic options for SAB can be suggested. Here, we shall explore the possible strategic options as proposed by Ansoff’s Matrix in a sequential manner, to venture from the lowest risk business to that of the higher risk, depending on the company core competencies and industry structure. Firstly, in those markets that the firm hasn’t gain dominance, it should continue its market penetration strategy, by ensuring efficiencies of operations, for consistent and quality products. Then, the firm should also engage in market development strategy, whereby those market the firm is currently not in can be targeted and marketed. Some developing markets are largely unexplored by the firm (for example, some countries from Southeast Asia). Thirdly, the firm should engage in product development. For example, the firm can choose to develop new type of beverages for the consumers. Fourth, the company can engaged in related or unrelated diversification strategies. For example, the firm already had existing hotels and gaming business. If that is profitable, expanding to such sector may be viable.

Suggesting Strategic Direction for SAB Miller

SFA framework can be used to discuss the advantages and disadvantages of each of the strategic options. Under such framework, each of the option will be discussed from four perspectives, i.e., from the suitability, feasibility, acceptability, perspectives, and ultimately if that options can lead to achievement of competitive advantages of the company.

Option 1: market penetration. Market penetration can be hard, as when competitors started to retaliate by competing in pricing, the entire industry may suffer. Besides, the core competencies of the firm, of which to secure market shares via efficient and quality operations, are swiftly learned by the competitors.

Option 2: market development. Market development is viable and suitable strategy. To expand to untapped developing countries can be considered as low risk, while high profit potential as the firm is the industry expert in expanding to developing countries. Thus, to expand into those untapped developing countries can be an option to grow the company. By adopting such a strategy, the firm can further refine its ability, and best business practices to operate in developing countries.

Option 3: Product development. It is possible that the company can develop new beverages to be marketed to existing consumers. Such a strategy can be of higher risk because it is less certain if consumers love the new products developed, or the new product lines will cannibalize the existing products. However, due to the already existing distribution channel, operational capabilities of the firm, it is reasonable to develop viable product to test the market. If the market responses are good, the firm had essentially secured another long term growth strategy in the next decade around the globe.

Option 4: diversification. Diversification is the worst strategy to be pursuing, as the firm should concentrate on what it is doing best, and to further sharpen its competitive advantage to maintain its leader position in the industry. The firm should instead engage in aggressive measures to prevent new comers, to further lower its cost, to fight for more market shares instead of diverting its attention on unrelated issues. Diversification may dilute the concentration of the firm, and may cause the firm to lose its sights or its competitive advantage if those competencies are neglected.

Thus, it is proposed that the firm should firstly employ a market development strategy, while to be followed up by product development strategies.