Contents
Introduction
The strategic analysis of a company helps in evaluation of their strategy and enables them to change and modify strategy to compete effectively with competitors. Strategic tools such as VRIO analysis and value chain analysis helps in identifying source of competitive advantage and enables a company to sustain its competitive advantage. The current report helps in strategic analysis of Carlsberg in comparison with their nearest competitor Heineken.
Discussion
Background of the company
Carlsberg is a manufacturer and marketer of alcoholic and non-alcoholic beverage with its headquarter in Copenhagen, Denmark. As stated by Netwise Data (2016) it was established by Jacob Christian Jacobsen on November 10, 1847 and export of Carlsberg’s beer products began in 1868 and their foreign brewing began in 1968 with establishment of brewery at Blantyre, Malawi. The key competitors of Carlsberg are Heineken, Anheuser-Busch InBev and ABI Sab group Holding Limited. Carlsberg is one of the leading international brewery groups in the world currently with a wide portfolio of beer and other beverages brand. Earlier Carlsberg was considered as a big beer brand with small corporate footprints but became fourth largest beer company in world within past two decades with acquisition of various smaller brands. As opned by GlobalData plc. (2018) the main markets of Carlsberg are Eastern and Western Europe, China, India and Russia owing to high demand for beer in these markets. The global beer market is valued at around 510 Million EURO with a volume of 180 billion litres of beer.
Strategic Capability
The value chain analysis of Carlsberg :
Primary Activities
Inbound logistics- Carlsberg has breweries located all over the world which enables them to minimize shipping costs of their raw materials. They store raw material sourced from various parts of the world in their breweries which are located in various strategic locations to minimize shipping costs.
Operations- The operations of Carlsberg comprise of various reputed breweries all over the world to increase their offerings so as to cater to local needs of customers located in various parts. The operations of the company include sourcing high quality materials such as malts and other ingredients and brewing the beer based on the taste requirements of the customers.
Outbound logistics- The breweries of Carlsberg are located in various strategic locations of the world which enables them to ship finished product to various parts with reduced shipping costs.
Marketing and sales- The marketing and sales activity has enabled Carlsberg to become one of the most popular and reputed beer companies in the world. The efforts and initiatives undertaken by them for marketing and sales has enabled to create a brand name amongst customers.
Services- Carlsberg offers top quality services to customers to ensure that they have the finest drinking experience with their beer products. The services offered also help in development of brand loyalty among customers. The services which was initially offered by Carlsberg was accounting services but later the company increased its service portfolio such as IT. Master Data, Procurement, Internal controls, HR services, Logistics, Planning, Sales Support and Controlling. The services which are offered by Carlsberg helps in creating a difference between both the company as Carlsberg by virtue of its increased services have been able to outperform Heineken who provide limited services.
Secondary activities
General administration- The general administration ability has helped Carlsberg overcome issues which were initially faced in China and Russia and helped them become profitable. By virtue of their general administration, Carlsberg was able to take control on the Chinese markets where initially they suffered heavy losses. In order to take control of the Chinese market, the company acquired breweries in China which helped in enhancing their market share. In context of Russia also it can be stated that their general administration has helped in the adoption of issue which helped to sustain high competition level and establish strong market.
Human Resource Management- The approach regarding Human Resource Management has enabled Carlsberg remain profitable and productive in market for years. Their human resources are highly skilled and productive which ensures that they can perform their tasks with very limited supervision and also ensures that they remain productive and efficient. The company focuses on continuously providing training to their staffs in order to ensure that they remain updated regarding use latest brewing technologies for making beers.
Technology Development- Carlsberg makes use of advanced technology to increase quality and standards of their products and use latest technological development in packaging to ensure that their products are delivered in an efficient way to customers. Technological advancements also helps them in marketing and promotion of the products.
The value chain analysis of Heineken is as follows:
Primary Activities
Inbound logistics- The breweries of Heineken are dispersed globally, therefore the raw materials can be stored in any plants to minimize transportation costs. Their raw materials are stored in warehouses which are spread throughout the world to reduce transportation costs.
Operations- As stated by Dow Jones Institutional News (2018)the operations of Heineken were limited to acquiring small breweries until 2003. Later they acquired BRAG for $2.1 billion which helped in becoming largest beer maker across seven nations within Eastern Europe.
Outbound logistics- The brewers of the company located all over the world, therefore they can ship finished product for adjacent areas to reduce transportation costs.
Marketing and sales- As opined by Millington (2015)Heineken is ranked as the 5th most reputed brand of beer in the world and they have acquired various smaller breweries around the world to spread their label in an enhanced manner.
Services- Heineken has recently stepped into non-alcoholic malt and fruit flavoured drinks as an avenue to tap other customer segments. The services which are offered by the company are purchasing services, business process services and technology services.
Secondary activities
General administration- Heineken was considered as the leading premium beer brand for many years and was the most popular brand in US before the arrival of Corona. As stated by Nathai-Balkissoon, Maharaj, Guerrero, Mahabir and Dialsingh (2017) due to increasing popularity of Corona, Heineken focussed on development and promotion of other brands which would help them reduce excessive reliance on the core brand. The introduction of Amstel light was considered as a right step in direction of establishing small brands as Amstel Light transformed into the most imported light beer brand in the US.
Human Resource Management- Heineken created various positions for management which were responsible for overseeing their five separate operating regions and nine distinct functional areas. Their new structure helped in encouraging risk taking and boosted energy level of their employees.
Technology Development- Heineken makes effective use of technology for storing detailed documents regarding hipping, for quality of products and to improve their shipping process of products.
Core Competencies
As opined by Knott (2015) the core competencies of Carlsberg includes mergers and acquisitions made globally, wide product portfolio through which it satisfies taste requirements of their customers and research and development capability. The main advantage which Carlsberg has over Heineken is regarding the reach of the company in developing markets. In context of developing markets such as India and China it is observed that Carlsberg has been more successful than Heineken in satisfying the taste requirements of its customers. The other advantage which Carlsberg holds over Heineken is the merger and acquisition strategy of the company by virtue of which it has acquired multiple breweries globally in prospective locations.
The VRIO analysis of Carlsberg is as follows:
| Capability | Valuable | Rare | Inimitable | Organized | Type of competitive advantage |
| Merger and Acquisition | Yes | Yes | Yes | Yes | SCA |
| Manufacturing capability | Yes | Yes | No | No | TCA |
| Innovation capability | Yes | Yes | Yes | Yes | SCA |
The core competency of Heineken includes wide product portfolio through which it satisfies taste preferences of customers, marketing and sales initiatives adopted and high level of operational efficiency.
The VRIO analysis of Heineken is as follows:
| Capability | Valuable | Rare | Inimitable | Organized | Type of competitive advantage |
| Merger and Acquisition | Yes | No | Yes | Yes | TCA |
| Manufacturing Capability | Yes | Yes | Yes | YES | SCA |
| Innovation capability | Yes | Yes | Yes | Yes | SCA |
Innovation
As opined by Miglietta, Battisti and Campanella (2017) the recent innovation approaches of Carlsberg comprises of launching ‘World of Beer’ initiative due to rising interest of customers in beers from other countries. One of the brand that was introduced as a part of this initiative was Saku Dublin, which is a mild beer with a low level of alcohol and with a creamy foam head and sweet taste of dark lager brewed by the Estonian brewery of Carlsberg. As stated by Steinglass (2013)The other innovative approach adopted was launch of revolutionary Snap Pack packaging which has helped in achieving their target of CSR. The innovation approaches and actions which were undertaken were product innovation, introduction of new mild beer which pulled market and introduction of Snap Pack packaging which was technology push in nature.
As stated by Morton (2016)the recent innovation approach of Heineken is the launch of Radler which is a mixture of high quality beer and lemonade which has been designed due to increasing tendency of customers towards seeking more natural products. As stated by Bresciani (2017) another recent innovation was launch of SUB which was developed in partnership with Marc Newson and engineered by Krups and it helped to deliver professional quality draught beer at home which resembled a futuristic submarine and could chill up to 2 degree Celsius. The innovation approaches and actions which are undertaken are product innovation and the innovations that are market-pull in nature.
Analysis of Carlsberg:
Brand Investment- Carlsberg has made large number of investments in their brand to change perception of customers regarding their products. They previously used to focus on brewing quantity but as a result of incorrect perceptions of customers regarding their products, Carlsberg invested heavily on its brand and increasingly focused on brewing quality instead of brewing quantity.
In case of Heineken also, they have made significant brand investment to increase their brand image which resulted in increasing brand value year after year. Their brand strength lies in commitment, consistency and presence. The brand value of Heineken as of 2018 is approximately $5500 million.
Ability to innovate- Carlsberg largely relies on its innovation capability to satisfy taste requirements of customers and to maintain its profitability in market. They rely on advanced research and development competency to remain innovative. Innovation is at the core of Carlsberg and they have high ability of innovation in developing new product which satisfies taste requirements of customers or through incorporation of innovative technologies in manufacturing and packaging of their products.
Heineken also largely relies on innovation capability to stay competitive in market. Innovation is at the heart of their business and they believe that innovation can not only come from within but also from external sources such as customers, suppliers, partners etc. They have introduced large number of innovative products in market which satisfies preferences of customers by virtue of high quality of research and development capability.
Manufacturing capability- Carlsberg has high manufacturing capability owing to number of breweries which are owned around the world. Their merger and acquisition policy has also helped in increasing manufacturing capability.
The manufacturing capability of Heineken is also high as a result of presence of large number of breweries all over the world. In order to optimize their production capacity, they have partnered with Infor to implement standardisation program across their brewery network.
Corporate Governance
Corporate Governance comprises of system of rules, practices and processes which helps in directing and controlling a company. It is also defined as the collection of mechanism, processes and relations by which companies are controlled and operated.
As stated by Singh, Aggarwal and Anand (2017) good corporate governance is considered very essential for an organization as it is core of successful businesses. It is vital for a business to accomplish goals and drive improvement in addition to maintaining legal and ethical image in front of shareholders, regulators and wider community.
The information regarding corporate governance of Carlsberg can be found in the official website of the company in the “Who We Are” section.
The Corporate Framework of Carlsberg seeks to ensure active management of business throughout the Group and lower risks associated. They aim to develop and maintain a relationship which is positive and constructive with all their stakeholders. The foundation of their Corporate Governance comprises in particular the Danish Companies Act, the Danish Financial Statements Act, IFRS, the EU Market Abuse Regulation, Nasdaq Copenhagen A/S’ rules for issuer of shares, local legislation and the Company’s Articles of Association.
The Committee of Corporate Governance recommends that the Board of Directors of Carlsberg should focus on ensuring continuous communication between them and shareholders so that they can gain relevant rights and the Board of Directors become aware of their views, interests and opinions. The Committee of Corporate Governance also recommends that Carlsberg must publish quarterly reports to let shareholders know about their interim accouchements (Hatch, Schultz & Skov 2015).
CSR or Ethics
The Corporate Social Responsibility of Carlsberg comprises of an ambitious sustainability program named Together Towards Zero. As stated by Mialon and McCambridge (2018) this sustainability program expresses their vision for a enhanced future at a time where the world is experiencing vital challenges in form of change in climate, scarcity regarding water and health concerns of public. The sustainability program of Carlsberg comprises of four targets namely, ZERO carbon footprint, ZERO water waste, ZERO irresponsible drinking and a ZERO accidents culture. The ambitions of Carlsberg regarding sustainability are underpinned by individual and measurable targets which builds up to 2022 and 2030 (Verde 2015).
The actions undertaken by Carlsberg for sustainability program comprises of:
Snap Pack- The Snap Pack is an innovation of Carlsberg which helped in reducing use of plastics. Carlsberg constantly attempts to make everything about their beers even better and one such result is the Snap Pack packaging which is considered as unique in the world in beer packaging. This innovation was developed in 3 years by Carlsberg in collaboration with their partners (Niero, Hauschild, Hoffmeyer and Olsen 2017).
Major efficiency gains in China- Since 2015, the efficiency of Carlsberg in thermal energy improved by more than 29%, efficiency for electricity improved almost by 11%, which resulted in a strong 37% lowering of relative carbon emissions. The Together With Zero initiative resulted in reduction of relative water consumption by 15%.
Preventing sales of beers to underage in Ukraine- The beers products of Carlsberg are only made for consumption above legal drinking age, therefore they have been working hard to prevent sales to younger people (Brusendorff 2014).
Innovative Partnerships
Carlsberg deeply believes in usefulness of innovative partnerships for delivering change and in the future, collaboration can be considered as vital than ever, as they seek to design and implement new solutions together with their partners. As stated by Broto (2016) Carlsberg has intentionally set challenging targets to increase rate of innovation and for encouraging creativity along their value chain. By means of collaborative action, Carlsberg hopes to develop a virtuous circle of improvements within the business, suppliers and business partners as they believe that together they can make it happen.
The initiatives of Carlsberg regarding zero carbon footprint comprises of:
- Increase of renewable energy share substantially in global energy scenario by 2030.
- Doubling the global improvement rate of efficiency regarding energy by 2030.
- Strengthening the resilience and adaptive capacity in context of hazards regarding climate change and natural hazards.
- Improving education, developing awareness and capacity regarding mitigation to climate change, adaptation, reduction of impact and early warning
The initiatives of Carlsberg regarding zero water waste comprises of:
- Increasing water-use efficiency in a substantial manner and ensuring sustainable withdrawals and supply of freshwater to combat water scarcity by 2030.
- Implementing integrated water resource management at all levels by 2030.
The initiatives of Carlsberg regarding zero water irresponsible drinking comprises of:
- Enhancing prevention and treatment of abuse of substances which also includes harmful use of alcohol.
- Halving global deaths and accidents from road traffic accidents by 2020.
The initiatives of Carlsberg regarding zero accidents culture comprises of:
- Protecting the rights of labour and promoting safe and secure working environments for all their employees.
Recommendation
The main recommendation for Carlsberg to improve their position in market is designing future products based on health concerns and requirements of their customers. The other recommendation is to increase their product lines in emerging economies such as India and China to tap growth and development opportunities which are offered by these markets.
Conclusion
From the above strategic analysis it can be stated that the source of competitive advantage of Carlsberg lies in their research and development which enables them to develop innovative products based on requirements of customers. It can also be concluded that to enhance their competitive advantage over Heineken, Carlsberg needs to increase their operational efficiency and focus on growth and development in emerging economies.
From the above strategic comparison of Carlsberg and Heineken, it can
be observed that the advantage which Carlsberg holds over Heineken is regarding
merger and acquisition. Carlsberg has successfully acquired many breweries
around the world in various strategic locations which ensures that it has close
proximity to various key markets of the company.
References
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