Beer wars Contents
Executive Summary 2
Research and Analysis 3
Porters’ Five Forces Analysis 4
Ethical considerations 8
BeerWars Documentary film shows some of the challenges that smaller beermanufacturers go through as they try to gain a grip on the USmarkets. Such companies are normally faced with the challenge of lackto access to large financial resources that would enable them toexperience better growth and as well, attract a large pool ofcustomers who, in the end, would be willing to buy the productsproduced by such firms continuously. It also explains some of thechallenges that stem from policies put in place by the government,which hamper the growth of smaller companies while larger ones suchas Coors, Miller, and Anheuser-Busch continue to experience growththat would be desirable to them. The paper shows a complete analysisof the beer industry by use of Porter’s Five Forces to clearlydemonstrate the extent of the problem and what it means for thedifferent companies that operate in the industry.
BeerWars is a documentary produced in 2009 that sheds some light on theAmerican beer industry. It shows the various types of wars that go onamongst the major players and the kind of strategies they put inplace to ensure they can remain at the top of the supply chain andcreate huge profit margins that can sustain their growth and makethem highly relevant in the current fast-growing world (Baron np). Italso highlights some of the differences that have occurred betweenthe major companies, which include Anheuser-Busch, the Coors BrewingCompany, and the Miller Brewing Company. It also explains some formsof wars that existed between smaller beer manufacturers such asDogfish Head Brewery, Yuengling 69, Moonshot and Stone BrewingCompany. The paper aims to provide a clear analysis of thedocumentary, with the goal of showing some areas of interest and onesthat may need to be strengthened on, to increase chances of betterperformance of the beer industry.
Throughoutthe film, there is a clear indication that smaller beer companies arefaced with a problem of growth as a result of the existence of acondition that favors those of large ones. The case, therefore, putsa clear show of existence of Porter’s Five Forces. It shows thatsome external factors play a huge role towards determining the kindof outcomes that may be realized about the performance of thedifferent beer companies involved in the wars (Francis and Martin 66)As would be expected, some companies end up benefiting at the expenseof others. It shows that while it is quite easy for some to grow,others are faced with a myriad of challenges that make it quitedifficult for them to enter the market or even experience growth. Thecase, therefore, brings about a situation where the firms in questionend up having some forms of wars as they try to find their positionin the market.
Porters’Five Forces Analysis
Largerbeer manufacturers such as Miller, Anheuser-Busch, and Coors havebeen performing well in the industry for long. They have, therefore,been in a good position to harness growth they have had to theiradvantage and attain a good position in the market. The case has,therefore, ensured that they could gather a lot of resources thatwould enable them to perform even much better. Among some of theareas that have been quite imperative in playing a good input for thefirms is their ability to carry out massive advertisement campaigns.As a result, they can maintain a large pool of loyal customers aswell as having the capacity to attract many new ones who provide themwith the ability to continue experiencing the level of growth thatwould be desirable in the end (Anton 22). Such firms are also able touse their experience in the market to identify some of the challengesthat may come up as well as coming up with strategies through whichthey could deal with them in the most appropriate manner. The case,therefore, provides them with an edge over smaller ones, which happento be limited regarding having access to data that would be crucialtowards ensuring they can attain growth.
Thefact that large beer companies such as Miller, Anheuser-Busch, andCoors have been in a position to experience growth in the industryhas made it quite hard for other companies to enter the market. Largefirms have created strong networks with both the market and thesuppliers in such a way that it would be quite hard for othercompanies interested in the same venture to penetrate the market andmake huge sales. Large corporations have also secured huge fundingfrom both within and through acquiring loans from financialinstitutions (Magretta,83). The case, therefore, means that they havepushed the cost of operating in the industry quite high. The aspect,therefore, clearly shows that they are the only ones who can takepart in the industry and run a high probability of drawing out thekind of outcomes that would end up being desirable for all of them.The case also shows that the companies can attract a large level ofsustainability given that the suppliers of different commodities maybe willing to work more with them as opposed to new entrants. Thecase is given by the fact that they have created a huge network thatcan push them towards the level of growth that they may term ashighly desirable.
Itis also quite clear that the level of rivalry experienced in the beerindustry is quite high. Despite the fact that the small beercompanies do not have the large pool of financial resources that theycould need to grow as fast as the large ones. They normally do theirlevel best to ensure they can get a share of the market throughputting in place some of the actions they believe will be quitecritical towards pushing them to greater levels (Wilson 51). Someactivities that such smaller companies engage in are such as,engaging in lawsuits to seek for rectification of policies thathamper the growth of smaller companies. As aa result, such entitiesview the aspect that they can experience growth where they are givena fair playing ground that would accord them the same better levelopportunities as those that are shared by large beer companies. Italso indicates that such companies are also willing to pick up anaction that would help to push them into attaining betterperformance.
Amongone of the policies that smaller beer manufacturers fight so hard tobe repealed, included the introduction of the three-tier system. Thesystem was introduced following the repeal of the prohibition thathad earlier on been put by government. The policy highlights thatthere needs to be some level of the organization regarding productionand distribution of alcoholic products in such a way that they wouldbe some order in general and increase the chances of various playershaving some benefits that stem from such a practice (Wilson 48). Thedifferent players in the industry include producers/importers,distributors, and retailers. The law indicates thatimporters/producers can only sell beer products to wholesalingdistributors. Wholesaling distributors can only sell the products toretailers. It is only the retailers who are allowed to sell theproducts to final consumers. Such an action, therefore, means thatmanufacturers’/producers end up making lesser money per unit giventhe fact that most of the money gets used up in the supply chain.
Smallercompanies, therefore, put up a fight as they state that the threetier system works against them and goes on to benefit larger beercompanies. Smaller companies make lesser sales compared to largercompanies. They, therefore, end up being quite limited regarding theprofits that they end up making in the long run (Magretta 86). Largerfirms, in the end, make huge profits as they can maximize on theturnover that they make with the sale of their products. The case,therefore, shows that such firms can continue experiencingexponential growth in the market while smaller ones continue tosuffer from lack of ability to enhance the kind of sales that wouldbe desirable to all of them. They argue that, where the three-tiersystem is removed, there is a high chance that all the companies thathave a role to play in the industry will end up having a betterability to remain sustainable in the industry.
Smallercompanies also apply the case of government lobbying to ensure theycan call for better actions about the kind of opportunities they callto be accorded to them. They do their level best to push forfavorable laws be put up to ensure that the restriction that nowexists about hampering the chances of other companies entering theindustry are dome away with (Wilson 48). They poll resources and pushfor Congress to put in place laws that would remain relevant to themand ones that will ensure the large players in the industry do notend up being unfair to them. They also push, through lobbying, forfinancial institutions to offer them better treatment that wouldenable them to acquire the kind of resources that would make themhave the ability to continue experiencing growth.
Thecase of bargaining power of buyers and bargaining power of suppliersis also quite evident. Given the fact that there are many players inthe beer industry, buyers and suppliers have a lot of bargainingpower. They have different alternatives that they can choose from,and as a result, they can choose the ones whom they feel would beable to meet the various needs they have in the most appropriatemanner (Baron np). Given the fact that larger beer companies have thehuge financial resources needed to survive in the market, they becomemore willing to pay more for various supplies that are needed. Insuch a case, they end up pushing the cost of acquiring such suppliesquite high. In the end, smaller companies experience problems as theydo their best to meet the new high costs that are associated with thedifferent goods and products that they seek from the suppliers. Suchlarge companies are also able to lower the general prices of goodsthey sell. They still stand a high chance of making huge profitsbecause they have the ability to make huge levels of sales that wouldmake them maximize on the same.
Themajor players in the beer industry are faced with a lesser threat ofsubstitutes. They have grown to levels that have allowed them tocontinue experiencing better sales that would see them remainsustainable for longer periods (Magretta,93). Smaller beer companiesare, however, constantly faced with the threat of substitutesnormally brought along by larger companies. Such firms, therefore,need to be constantly on their toes to ensure that they have offeredthe market the kind of advantages that would make more people willingto buy the products provided by such companies.
Inspite of the fact that the beer companies operate in a free market,they need to come up with actions that show they can adhere to someof the stipulated ethical considerations. Larger companies, forinstance, need to ensure they provide smaller ones with a fairplaying field that would accord them the kind of capabilities thatthey, also have. Among the issues that companies from both sideswould need to avoid is the need to send wrong messages regarding theperformance of others (Magretta 89). Throughout the advertisementcampaigns, they need to adhere to the very need of ensuring they canaccord other companies the opportunity to carry out their businessesin a more orderly fashion. They also need to shy away from engagingin some forms of malpractice such as engaging in bribery issuesduring lobbying sessions to make the government offer them betteropportunities than those provided to other firms. Larger companiesalso need to be keener to ensure they do not collude with industrysuppliers so that they make it difficult for smaller firms to gainaccess to some of the necessary material needed in the productionprocess. Where fair practices are put in place, there is a highchance that there will be bound to be an improvement in terms ofperformance of different players in the beer industry.
Inconclusion, the Beer Wars documentary clearly points towards the factthat larger companies are well placed as opposed to smallercompanies. They have huge financial resources need to make themcontinue growing. They have also been in the industry for long and,therefore, able to gather enough information as it relates to someactions that they may need to put in place to attract huge sales.They have also developed strong networks in the industry that offerthem the advantage to experiencing continued growth that would bequite sensible for all of them. The existence of the three-tiersystem policy put up by the government also happens to favor largerbeer companies as opposed to smaller ones.
Anton,R. (2015). An Integrated Strategy Framework (ISF) for CombiningPorter`s 5-Forces, Diamond, PESTEL, and SWOT Analysis.
Baron,Anat. Beer Wars. 2009
Magretta,Joan. Understanding Michael Porter: The essential guide tocompetition and strategy. Harvard business press, 2013.
Mutha,Kunal, Justin Smith, and Thomas Hatch. "The Capital of Craft:Innovating New Ways to Promote the San Diego Craft Beer Industry."(2016).
Francis,Mathooko, and Martin Ogutu. "Porter`s five competitive forcesframework and other factors that influence the choice of responsestrategies adopted by public universities in Kenya." (2015).
Wilson,Rachel C. "Mayhem: A Hands-on Case Playing Activity for TeachingPorter’s Five Forces to Undergraduate Business Students."Small Business Institute® Journal 11.2 (2015): 48-59.
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