Anheuser - Busch in China Report 1: Strategy Formulation David Arraya, Kevin Gardner, Trenton Jackson, Brad Orr

EXECUTIVE SUMMARY Anheuser-Busch Beer Non-Alcoholic Beer Energy Drinks Budweiser Busch Michelob Natural Light Non-Alcoholic Beer Energy Drinks Specialty Malt Beverages Domestic beer, International beer, packaging, and entertainment markets Largest brewery in the U.S. (48.8% of beer sales) 4th largest brewery in the world

EXECUTIVE SUMMARY The Chinese Beer Industry Dominant Firm’s Tsingtao China Resource Enterprises Beijing Yanjing Group Key’s to Success Gaining vast market share Establishing presence with brand name and low prices

COMPANY VISION AND MISSION Through all over our products, services and relationships, we will add to life’s enjoyment MISSION Be the world’s beer company Enrich and entertain a global audience Deliver superior returns to our shareholders

SWOT ANALYSIS External Environment Economic Political Technological Huge population Low per capita beer consumption Highest beer volume consumption in the world Rising income levels Social “Pub” culture emerging Price conscious consumer Political Bureaucratic government Beer taxed heavily Technological Old, out-of-date beer manufacturing plants Ecological Pollution and waste a growing concern in China

IMPROVEMENT OF THE MISSION Focus on employees State objective of how they intent on becoming the best beer company in the world Reflect corporate social responsibility

COMPANY PROFILE Value-Chain Analysis (Market) Problem is market, not businesses Large, fragmented, and traditional In order to gain a competitive advantage, the businesses must focus on Primary Activities Inbound Logistics Outbound Logistics Marketing and Sales Service

COMPANY PROFILE Resources Tangible Assets Production facilities Harbin Brewery Established suppliers Financial resources Intangible Assets Brand recognition Company reputation Accumulated experience Organizational Capabilities Global distribution coordination - World-class distribution network

COMPANY PROFILE Strengths Access to capital Brand recognition Acquisition of Harbin Brewery and interests in Tsingtao Experienced and solid management team Weaknesses Foreign competitor Taste for local brands Large investment Competitive Advantage Leadership in Northwest China (Harbin) Creation of large production facilities

PORTER’S FIVE FORCES Present Ranking Force Threat Level #1 Threat Substitute Products High #2 Threat Threat of Entry High #3 Threat Rivalry Among Competitors Moderate #4 Threat Buyers Low #5 Threat Suppliers Low Future Ranking Force Threat Level #1 Threat Rivalry Among Competitors High #2 Threat Buyers Moderate #3 Threat Substitute Products Moderate #4 Threat Threat of Entry Low #5 Threat Suppliers Low

LARGEST BEER PRODUCERS IN CHINA Ranking Company Name Competitive Advantage #1 Tsingtao Market Consolidation #2 China Resource Enterprises Low-cost Leader #3 Beijing Yanjing Group Advanced Distribution

FINANCIAL ANALYSIS Used financial statements and ratio analysis to compare Anheuser Busch’s past years and the competitive market Increase in sales from 2075.9 million to 2115.3 million dollars from 2003 to 2007, which is above the industry average

RATIO ANALYSIS

CORE ISSUE Market Fragmentation Symptoms from Core Issue 500-1000 brewing firms in China No dominant leader in the market Symptoms from Core Issue Price wars Decreased profits Buyer power

LONG-TERM OBJECTIVE “Harbin brewery is committed to increasing its market share in Northeast China, becoming the dominate market share holder within the next 10 years”

PREMISES AND SCENARIOS Major Premises Acquisition of competition will create “trench warfare” between regional powerhouses Foreign Investment will continue Scenarios Best Case - Harbin will become dominate market player Worst Case - Harbin will be bought by another powerhouse Most Likely Case - Harbin will grow by 10% and remain the 4th largest brewer in China

CORPORATE-LEVEL STRATEGIES Continued acquisition of companies in China to gain market share Offer lower cost products to compete with the largest segment of beer drinkers. Build CSR

BUSINESS-LEVEL STRATEGIES SBUs Budweiser Family of Beers Harbin Premium Beers

BUSINESS-LEVEL STRATEGIES GENERIC STRATEGY Low-Cost Leadership Need to penetrate traditional market Want to get the product in the minds of the consumer GRAND STRATEGIES Market development - Bring Harbin to the rest of China Innovation - mainly through advertising Horizontal integration - acquisition of smaller breweries

STRATEGIC CHOICE Growth through horizontal integration Very feasible Will allow Anheuser-Busch to establish presence in other regions of China Anheuser-Busch has the financial capital to carry out this option Will increase market share

Thank You and Remember to Drink Responsibly