Foreign Market Entry and Diversification
Identify and discuss the trends in the global beer markets.
Among the trends in the global beer market is the need for consolidation. In the early years of brewing, beer was developed differently in every country to meet the need of that region’s tastes and unique recipes (Thompson, Strickland, & Gamble, 2010).
This soon became a problem with the many local breweries, the absence of a transportation network made exportation unmanageable. The implementation of national consolidation was first introduced in the 19th century in the United Kingdom and the United States in which gave leeway for economies of scale. Other countries soon followed this trend, making the national taste of that given country the determining influence for the type of beer that would reign in that region.
Another trend in the global beer markets consisted of national leaders expanding abroad. With expansion, acquisitions and merging became very popular. As Thompson, Strickland, & Gamble (2010) discusses, “the Belgian company Interbrew acquired breweries in 20 countries and expanded its sales to 110 countries” (p. C-251).
Acquisitions allowed the high cost of initial startup for a brewery to no longer be applicable. Likewise, mergers were also became a growing phenomenon; consolidation led to fewer global players within the brewery industry. For instance, in 2004, the world’s third largest brewery merged with the world’s fifth largest brewery (Thompson, Strickland, & Gamble, 2010).
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In doing so, they formed InBev, which became the world’s largest brewing company in regards to volume (Strickland, Thompson, & Gamble, 2010).
As stated previously, consolidation and expansion through acquisitions and mergers became growing trends globally in the brewery industry. This is evident with select breweries controlling most of the market share in large beer markets. For instance, in the United States, three top breweries controlled 80 percent of the market.
Discuss how Modelo’s international expansion was made possible through strategic partnerships with experienced distributors in local markets.
Modelo’s strategic plan was to maintain the market share domestically, but branch out internationally through distributor partnerships. Modelo formed these partnerships and entered into contracts with distributors that were knowledgeable of the local market, allowing them control over the marketing tactics, however still being highly involved in the decision making process (Thompson, Strickland, & Gamble, 2010).
Expansion into the United States was originally done with the partnership with Barton Beers Ltd. as its distributor; this company was the largest beer importer in the 25 western states and was proficient in marketing and sales of imported beer such as Corona. Through Barton, Corona’s infamous marketing campaign, “fun in the sun” was born. To continue its growth in the United States, Modelo partnered with a second distributor, Gambrinus Inc., to serve the eastern region. With two partnerships, each importer was responsible for its own 25 states which drove healthy competition.
Modelo’s plan for their two distributors was quite simple; they gave them complete autonomy for essentially all aspects involving the sale of the beer. Production remained in Modelo factories located in Mexico; however, the distributors were responsible for everything from transportation of the beer to creating advertising campaigns (Thompson, Strickland, & Gamble, 2010).
Although Modelo gave full responsibility to their distributors, they maintained having the final say so. Modelo fostered a strong relationship with their distributors which were evident when obstacles in the beer industry became apparent. In 1991, when there was a tax increase, Grambrinus and Barton Beers decided to absorb the increase instead of passing it on to the customers (Thompson, Strickland, & Gamble, 2010).
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The stock market is perfectly competitive because there are a very large number of groups in the market. The stock market, as we know it, is a global community that consists of four different groups: public corporations; market makers; buyers; and sellers. Public corporations are businesses that offer shares, or ownership, to anyone willing to pay money for them. Buyers are investors who want to ...
All the other imported beers weren’t as generous. Modelo harnessed on strong relationships with their importers that would lead to trust and loyalty.
Identify and discuss the next foreign market that Modelo should enter and discuss the strategy it should use to enter that market.
With China surpassing the United States has the largest beer market; it is evident that China should be the next foreign market that Modelo should enter. China increased its lead over the United States, being almost twice as large, mainly due to consuming approximately 450 million hectoliters of beer (Jones, 2011).
Not only does China has the largest beer market, but as of 2010, they had a population of 1.3383 billion (World Bank, 2012).
This will give Modelo a large market to advertise and appeal to.
Modelo’s main strategy with any new or existing market should be their marketing strategies. As stated before, Modelo’s ingenious campaign of, “fun in the sun”, gave popularity in the United States. While selling the idea of leisure and being carefree, maintaining the campaign of fun in the sun is essential. It has been shown that images of escape, enjoyment, and relaxation allow the customer to conform their own image about the brand (Thompson, Strickland, & Gamble, 2010).
Also, instead of focusing on the typical target market of males aged 25-45, Modelo should market to everyone while still positioning their brand as a premium import. Modelo was able to gain market share domestically and later successfully branch to the United States through the use of distributors and a strategic marketing campaign. Modelo can continue to build their brand in other foreign markets by building solid distributor relationships and maintaining the image that everyone is familiar with, enjoyment and relaxation.
Discuss the challenges that Modelo faces from its competitor, InBev and how it might respond strategically to the industry giant.
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It was suspected that InBev was discussing a merger with rivalry Anheuser-Busch. In doing so, “a brewing colossus with more than one-fifth of the world beer market by volume” would form (Thompson, Strickland, & Gamble, 2010, p. C-257).
This, inevitably, would significantly change the beer sector; with them gaining most of the market share. With such speculations forming amongst facing other competitors, Modelo biggest strategy is to continue to advertise efficiently. They recognized the power of marketing as shown in 1985 of having delegated 600,000 dollars to marketing to increasing it to 5.1 million dollars in 1996 (Thompson, Strickland, & Gamble, 2010).
Modelo was able to reach a new population of beer drinkers by not having the typical “testosterone-driven campaigns”. They realized to be a global player; branding Corona as a beer for everyone would tap into another population of those who didn’t drink beer. By getting non-beer drinkers to drink beer, specifically females, Modelo was able to distribute into bars and restaurants. These are places that may have overlooked their product otherwise. Differentiating themselves from the competitors through aggressive marketing is the key for Modelo to respond to InBev and all other giants in the brewery industry.
Discuss whether or not Modelo should diversify its business, what business it should enter into (if any), and why.
Modelo should absolutely diversify its business. In order to expand and be a global player, having more than one reputable product is essential to any major company. For instance, FEMSA, Mexico’s second largest beer company owns Oxxo, which is Central America’s largest chain of convenient stores (Thompson, Strickland, & Gamble, 2010. Owning its distribution channel led FEMSA in gaining more of the domestic beer market for Grupo Modelo. With that being said, Modelo should follow the same business strategy in the United States or Canada. Gaining ownership of a major convenient store chain in the States or Canada could put Modelo at the forefront like they never seen before. By acquiring such a business, Modelo will be able to market Corona more aggressively and have their product favored over competitors. If Modelo has a single-business company, they are essentially putting all of their eggs in one basket. Diversifying could positively impact the Modelo name and brand.
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Table of Contents Purpose Statement 1 Executive Summary 2 Business Information 3 Personal Financial Statement 3 Business Description 3 Business History 4 Personnel and Organization 5 Marketing Information 6 Market Analysis 6 Market Research 6 Competitors 7 Market Segments 8 Target Market 8 Marketing Mix Strategy 9 Products/Services 9 Promotions 9 Distribution 9 Pricing 10 Suppliers 10 Marketing ...
References
Jones, D. (2011).
World beer market growth to pick up in 2011- plato. Retrieved on February 17, 2012 from website, http://www.reuters.com/article/2011/09/19/beer-world-idUSL5E7KJ1P620110919.
Thompson, A. A., Strickland, A. J., & Gamble, J. E. (2010).
Crafting and executing strategy: The quest for competitive advantage: Concepts and cases: 2009 custom edition (17th ed.).
New York: McGraw-Hill-Irwin.
World Bank. (2012).
Public data. Retrieved on February 17, 2012 from website, http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=sp_pop_totl&idim=country:CHN&dl=en&hl=en&q=population+of+china.
