Heineken International commonly referred to as Heineken traces its history from a small brewery in Amsterdam nearly 150 years ago. Since the development of brewing firm in 1864 the company has transformed into an international operator thus becoming one of the major players in the beer production sector (Heineken, 2015). Presently, the firm stands as the number one beer brewer in Europe and number two across the world (Heineken, 2015). The business aims at achieving innovation, seeks to establish a long-term brand investment, as well as quality delivery. The brewer hopes to utilize its history and legacy as an independent beer producer to conduct its activities internationally. The company’s ability to deal with emerging issues in the beer industry helps it to remain among the top brewers.
Industry Life Cycle
Gaining knowledge on Heineken’s industry life cycle provides awareness on the firm’s conception, maturity (growth) and features that may cause decline. The company as already indicated commenced its operations in 1864 in Amsterdam. The brewer tried to rebrand its name to Heineken’s Bierbrouwerij Maatschappij (HBM) in 1873 with the hopes of attracting more buyers (Smit, 2014). The company during its development applied the bottom-fermenting method to prepare yeast but later changed to the Heineken A-type yeast after the construction of a better laboratory in 1886. The company made tremendous strides in its forms of production under the management of Henry Pierre (the founder’s son) who managed Heineken from 1917-1951 (Smit, 2014).Heineken, during this time, strived to build on the quality and also sought to expand into other nations. The brewer gained a stronger position in the industry at the beginning of the 1960s at a time when Alfred Henry (Pierre’s son) took over the leadership. The leader who exited the executive position in 1989 improved the company’s stock value by acquiring the activities of other operators in the industry and halting their operations. It is also during this time (1968) that Heineken partnered with Amstel that later shut its functions letting Heineken take over. Henry took the company through the maturity phase by establishing new production points with the introduction of the station in Zoeterwoude in 1975 earning the corporation a better position in the European beer industry (Smit, 2014). The analysis of Heineken’s decline might not be applicable in describing its life cycle because the company continues to run its operations to the present time.
Porter’s Five Force Analysis
Heineken’s activities become clearer through an analysis of Porter’s five forces analysis about the corporation’s functions. The team strives to deals with the threat of new entrants by offering good quality products while maintaining a fair price. The company also deals with the stiff industry rivalry that exists among leading players such as Anheuser-Busch InBev (ABInBev), UB Group, Coors, and SABMiller by offering goods that would satisfy consumers (Smit, 2014). Heineken finds it essential to balance its sales depending on the buyers’ and seller’s bargaining power. The group records higher profits when the demand goes high, yet the supply is low because of the increased seller’s bargaining power. The business, however, has to cope with lower returns when the supply increases but the demand stagnates. Finally, the company focuses on overcoming the threat of substitutes by partnering with firms that offer a wide variety including Sol, Affligem, Desperados, and Strongbow Ciders.
Strategies with a Focus on Critical Areas
The company adopts approaches that it believes will give it the opportunity to propel its activities to further heights. The firm considers acquiring the operations of other breweries and forming merges as practical strategies for maintaining its leading position. The company made significant strides in capturing higher heights in the industry with its acquisition of Scottish & Newcastle that had its headquarters in Edinburgh, Scotland (Smit, 2014). The deal that materialized in 2008 placed Heineken at the third position in terms revenue production coming after ABInBev in Belgium that generated $45.5 billion in 2017 and the London-based SABMiller that sold almost 21 billion liters of its products in 2009. Heineken assumed the second position in the industry following the merger between ABInBev and SABMiller in 2016. Heineken also successfully formed an alliance with Fomento Economico Mexicano (FEMSA) that functions as a leading brewer in Mexico. The strategic deal in 2010 strengthened Heineken’s entry into the South American market.
Other than forming ties with other companies, the corporation considers adopting new technology as a strategic form of enhancing production and achieving quality. The leadership performs a regular review of the machines to make sure that they are stable at all times, and to make transformations in areas that show weaknesses. The company seems to rely on the guideline by Berisha-Shaqiri (2015) who postulates that incorporating advanced machinery into the business’ activities make the production process quite faster and heightens the chances of developing quality substances. The firm puts effort to hire employees who know about technological applications and offers training to advance the workers’ level of understanding.
Research and Development (R&D)
The organization understands the importance of developing products that meet the customers’ wants and desires and employs the research and development (R&D) strategy to meet the qualities buyers would appreciate. R&D encompasses finding out more about the markets and the consumers’ wants and producing new and advanced goods and services to satisfy the requirements (Smit, 2014). Even though the businesses tend to adopt varying forms of performing R&D, Heineken mostly applies the marketing mix (4Ps) and market segmentation models to meet the buyers’ needs. The firm while applying the 4Ps model ensures that the products are of good quality, the price is affordable, buyers value the product at the place of sale, and ensures that the promotional techniques encourage buyers to acquire the product. The manufacturer also performs some research to identify how the buyers’ needs might differ depending on different factors (Smit, 2014). The company, for example, distinguishes the buyers based on their demographic features such as gender, age, income, and socio-economic class. Heineken also looks into the geographic features which entail the physical location, and also consider the behavioral patterns such as rate of purchase, benefit-sought, and time of usage. The management believes that considering such features will make it easy for the firm to understand the consumers’ wants.
The manufacturing processes at Heineken rely on technological means. The automotive movement of raw materials from one point of the manufacturing process to the other facilitates the procedure and in turn minimizes the time it takes to complete the manufacturing of a particular set of the consignment (Smit, 2014). The use of technology to aid manufacturing also put the company at the forefront regarding beer production in the field.
The company relies on a reliable supply chain that ensures the movement of products from the point of production to consumption. The team acquires its raw materials from suppliers who offer quality products, transforms them to consumable products, and then sales to wholesalers, who pass the product to retailers who finally give the drink to consumers (Smit, 2014). The company has a robust logistic unit in every station to oversee the distribution of products to the different markets.
The effort Heineken puts in its activities appear to have a significant impact on the company’s sales. A report by Kostov (2017) for the Market Watch reports in his article that Heineken recorded profit in the first half of 2017 thanks to the increase in European and Asian sales. Kostov (2017) asserts that Heineken’s net profit was $1.02 billion, up forty nine percent from the same period in 2016. The beer volumes increased by 2.6% surpassing the forecasters’ expectation of a 1.7% shift (Kostov, 2017). Analysts predict that the sales may continue to rise, mainly because of the progressive expansion.
The company applies various marketing methodologies to reach out to the buyers. Consumers can see the products Heineken produces on the firm’s website, and can also view the description and images of the beers on social media avenues that are becoming a valuable business tool for marketing. The brewer uses media platforms such as TV and radio adverts and also places ads on newspapers and magazines (Smit, 2014). Earlier until 2005, the firm used the slogan “Heineken offers the refreshes other beers do not give” on its adverts and adopted The Asteroids Galaxy Tour’s song “The Golden Age” that offers a soothing call to consumers (Smit, 2014). The organization believes that embracing different forms of marketing will give it stability in the market.
Heineken understands that its buyers are a fundamental aspect of its operations and puts much attention in providing support on issues that require assistance and clarification. The brewer has set up customer care divisions in every station where customers can address their concerns. Other than putting up centers where visitors can get help at the respective production point, the company’s official website allows customers to have a live online transaction with the attendants on site (Heineken, 2015). The company hires employees who are eloquent achieve successful communication processes that lead to customers’ satisfaction.
Business Unit Strategy
The group divides tasks into different departments as a strategy to facilitate operations within the business’ units. The organization, for example, breaks down the marketing team into groups that focus on different tasks including transportation, the creation of media ads, and a unit focusing on road shows. The organization has departments such as HR and the Secretariat that handle different tasks thereby facilitating operations at the business unit levels (Heineken, 2015). Dividing the duties into separate units further makes it easy to post employees into the areas of their specialization.
The firm relies on working as a team as a corporate strategy that would lead to success. One of the core values, as it appears on company’s website, is to build real human connections and to shutter barriers because the group believes in good moments of shared encounters and experiences (Heineken, 2015). Apart from working as a team among the employees, the information by Heineken (2015) informs that the corporation seeks to collaborate with its customers and partners to grow as a team and to emerge winners with fairness and integrity. The management attributes the trust it builds among workers, the diversity it achieves, and the progress it makes in its activities from the teamwork it employs as a corporate strategy.
Heineken considers expanding its operations into other regions as an international strategy that will give it stability in the beer sector. Other than establishing numerous production points in European countries such as France, Belgium, England, Croatia, Belarus, Austria, Ireland, Czech, Hungary, and Greece, the organization has production sites in Brazil, Jamaica, Haiti, and the Bahamas (Heineken, 2015). The corporation is also making entries into some African countries which distinguish it with some of the leading producers in the Western states. An article by the KenyanVibe (2011) informs about Heineken’s entry into Nairobi, Kenya to get avenues to venture into the East African market. The East African general manager, Koen Morshuis, mentioned during the launch in 2011 that office in Nairobi will cater for markets in Tanzania, Somalia, Kenya, Madagascar, Eritrea, Uganda, Southern Sudan, and Comoros. Hopefully, Heineken will achieve its vision of becoming the world’s largest beer producer if it advances on its expansion strategies.
Corporate, International, Business and Functional Strategies Before and After Strategy Recommendations
An analysis of the corporate, international, business and functional strategies before and after strategy recommendations reveal some clear contrast. All these aspects have transformed over the years to become more efficient and flexible. Heineken aspires to turn every aspect of its undertakings to meet the demands of the changing industry (Heineken, 2015) and based on this information it is evident that the applications by the brewer before its adoptions of improved features were quite inferior compared to now. The agency expects to experience even more changes in the coming years telling from the alterations at the current time.
Implementation Issues Including Structure and Culture
Even though Heineken strives to improve its operations, it has to deal with some issues that emerge from time to time. The firm, for example, has to identify the most suitable business models that would help it perform well in its activities which is sometimes challenging. The team must settle on an IT system that is not likely to fail, and must invite business experts to identify any loopholes in the way the producer functions (Smit, 2014). Maintaining the business structures and models is usually a daunting task, primarily because of the high financial investment required in this area. Furthermore, the company must deal with the cultural challenges it faces when it expands into foreign markets.
Heineken’s maintenance of its top position in the beer industry is because of the efforts it put to overcome the internal and external business pressures it experiences. The agency must apply a wide range of business strategies which entail applying useful business models and diversifying into other countries to uphold its capacity as a leading beer producer. Otherwise, failing to be keen on every stage may significantly jeopardize the business activities.
Berisha-Shaqiri, A. (2015). Impact of information technology and internet in business. Academic Journal of Business, Administration, Law and Social Sciences, 1(1), 73-79.
Heineken (2015). About us. Retrieved from
KenyanVibe. (2011). Heineken opens regional headquarters in Kenya. Retrieved from https://www.kenyanvibe.com/heineken-opens-regional-headquarters-in-kenya/
Kostov, N. (2017). Heineken profit up 49% on U.S., Europe sales. Retrieved from https://www.marketwatch.com/story/heineken-profit-up-49-on-us-europe-sales-2017-07-31
Smit, B. (2014). The Heineken Story: The ‘larger’ than life tale of the world’s bestselling beer. London, UK: Profile Books Ltd.
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