Closing Case – The United States Beer industry

1) Why has the United States brewing industry become more concentrated over the last two decades? I think that there is a couple of reason for this trend in the United States. One thing is that the consumption of beer has been slowly declining, in order to raise in market share, companies are having to think of ways to take customers away from other companies. This would lead to the rise in market share for some companies and the decrease or closer of over companies. Another risen is advertisement. Larger companies are able to spend $0.40 per case of beer on advertisement. Smaller companies can’t spend that much on advertisement.

2)Analyze the competitive structure of the industry using Porter’s five forces model.

•Risk of entry by potential competitors: New micro brewing companies have low barriers of entry, because they do not rely heavily on brand loyalty or economies of scale. Mass market brewers are faced with higher barriers to entry because of brand loyalty of customers and absolute cost advantages. •Intensity of rivalry among established firms: new customers are always entering the market as they become legal age, so mass market brewers try to appeal to them to get their business, minimizing the competition to take other companies competitors. Demand has also been growing, making them less competitive. •Bargaining power of buyers: this is low for mass market brewers because there is a large number of buyers available for High microbrewers. •Bargaining power of suppliers: the brewing industry has medium to low bargaining power of suppliers. •Threat of substitutes: there is a threat because there are other alcoholic beverages that can be a direct substitute for beer, such as spirits and wine.

3)What are the implications of the evolving competitive structure in the brewing industry for the profitability and strategy of a smaller mass-market firm in the industry?

Small mass market companies in the brewing industry are looking for high barriers of entry, strong bargaining power from suppliers and strong bargaining power from buyers. To reach economies of scale, they would need a lot of money in production volume, causing a high barrier of entry.

4)Are there different strategic groups in the industry? What are they? Do you think the nature of competition varies between groups?

Yes, there are two different groups in the industry, they are mass market brewers and micro brewers. Mass market brewers are more competitive, and try to get as much of the market share as they can. Micro brewers focus towards smaller customers who want to try different things.

In this industry I think that the functional competencies that are the most important for you to build are the ability to use efficient and cost-effective approaches in the organization. The ability to understand and be able to change to the technological changes. The ability to ship products in a prompt matter. With focusing on these areas you can offer lower prices than you competitors. To ensure that these are built in the company, I will make sure that all of the organization is on the same page. First, you need to find the most cost-effective approach to produce the drives. With finding the most effective way we would be able to lower our prices and be cheaper at selling our products. If we could have the same quality of product as our competitors, but at a cheaper price the manufactures will go with our product. We also need to be aware of the fast pace changes in this market. We would need to always be planning and designing updated products. Last and most important is that we need to be able to keep up with making the product and delivery of the product. We will need to be well organized and keep up the inventory to ship to the manufacturers. 1)The business strategies the made Mattel the industry leader was share-building strategy and market penetration strategy.

With share-building strategy, Mattel built a high market share with its Barbie doll. It provided a doll that reflected the look and lifestyle of women in that generation. With the Barbie doll, Mattel had a product that they knew mothers would want their children to play with. After having no real competition for years, Mattel no longer used the share building strategy. They moved into using the market penetration strategy. They continued advertising and promoting their same Barbie doll to try and keep advantage over competitors. 2)The strategies that MGA pursued were share building and the product proliferation strategy. With being a new company MGA had it get its name and information out to customers, so with this they did share building strategy. They also used the product proliferation strategy to fill the niches of the market. They provided a doll that appealed to the “tween” girls market and they provided products to the customers who needs were not meet by the Barbie doll. MGA recognized that customer’s tastes and needs were not being meet, and they were able to capitalize on it with a new doll line. 3)The new strategies that Mattel needs to pursue are product development strategy, market development strategy, and the excess capacity strategy. With the product development strategy, they would update the Barbie doll with new trends and tastes that are going on at the times. Market development strategy would help Mattel ward off new competitors by competing in new market segments. The last strategy would be excess capacity, this would mean that Mattel would produce more product than customers demand. They can use excess capacity to warn competing companies if they enter the market. With the excess products they can also force prices down and make it unprofitable for new companies.