Carlsberg’s Strategic Analysis

1 January 2017

We have used tools for both, internal and external analysis putting more emphasize on the external section in order to answer our research question handling about the decrease of the beer consumption and the strategic actions the company undertakes to regain the consumers popularity. The project covers PEST, Porter’s 5 Forces, Financial analysis, BCG Matrix analysis and other tools and models which have successfully given answer to our sub questions, regarding the current market situation in the brewery industry, analyzing the buyer behavior and so forth.

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The SWOT /TOWs analysis has also been performed giving rather an interesting view of the company’s competitive qualities and the contrary. By this research we found out the cause of the downturn is rather a change in lifestyle as a primary cause and secondly the economic crisis, which has brought about abrupt increase in prices of not only wheat based beverages but the market in general. In the appendix section the annual report of the brewery can be found, where the financial accountings of the year 2006-2010 are illustrated to get a clearer image of Carlsberg Group’s financial progress or regress.

Introductory Chapter Motivation Since Carlsberg was initially produced in its Pilsner form in 1847, numerous changes have occurred in the company’s values, quality and certainly the variety of the beverages has increased dramatically. Carlsberg is in constant process of development, be it new, innovative products aiming upon diverse age groups or conquering a new market around the globe, while attempting to create unique products for each country and culture. According to up to date information Carlsberg has introduced around 307 different types of beers and other cereal-based beverages during its history.

The brewery focuses upon innovation and development of new products that can be sold internationally. ’Copenhagen’ is the first example of a new beer brand that is spread out globally. It has been launched in May 2011 as soft beer, alternative to white wine and campaign gaining the consumers immediate admiration. The beer is so far available exclusively to the Danish market. Despite of the success Carlsberg has, consumer downturn and decrease of popularity are announced, the cause of which is basically the financial crisis.

The consumers increasingly choose wine and hard liquor over beer, due to the high prices of the beer in relation with the earlier mentioned beverages. The reason is that Carlsberg has increased its product price by far 30% in less than three years period. Analyzing the internal and mainly external structures of Carlsberg, achievement of keys to understanding the company’s development, success and objectives are being expected and most importantly related to current situation and obstacles the company faces. Research question

The objective of our project is to answer the research question, which is- How does the decrease of beer consumption affect Carlsberg company and what strategic actions are undertaken to secure the company’s market position? Sub questions * What are Carlsberg’s vision, mission and objectives and how do they reflect the company’s position on the market? * What is the organisational situation at Carlsberg Company and how does it affect company’s wellness? * What value- generating activities does Carlsberg take to create a competitive advantage of the company and develop shareholders value? What is the financial situation at the Carlsberg Company?

How is Copenhagen beer, as a part of light drinks SBU, performing on the market? * What strategic plan is Carlsberg implementing to reduce the decrease in beer consumption? * What is the current situation at brewery industry? * What are the potential competitors of Carlsberg and how do they influence decision- making in strategic planning? * What are the most significant factors influencing consumer’s behaviour while choosing beer? * How do the macro-environmental factors influence Copenhagen beer consumption and how do they affect the whole company? Interpretation

Carlsberg is a Danish brewery company, that was founded in 1847 possessing success and popularity in Danish and international market. Strategic actions are actions that were undertaken by Carlsberg Group towards achieving the intended objectives. Market position is rationally defined place of the company compared to the competitors of this company that have a similar or can substitute the product we are looking at in this project. Value-generating activities are such activities that bring value to the shareholders, help Carlsberg Company to develop competitive advantage and are defined in the value chain analysis.

Competitive advantage is the advantage that Carlsberg has over other competing parties in brewery industry and on Danish market. Macro-environmental factors are external factors close to business that can have direct impact on its strategy. Those are: customers, employees, suppliers, shareholders, media and competitors. Delimitation Our project work is focused on external and internal analysis of the Carlsberg Company. The external analysis is meant to cover seventy percent of the work putting less emphasizes on the internal analysis.

As well as we will be discussing the position of Carlsberg mostly on the Danish market, but we cannot avoid looking on other markets for comparing company’s performance as Carlsberg Group is an international company. In our BCG matrix we will look to 3 SBU’s that we think are the most important in Carlsberg Company. We are not using all theories and models that we have learned during this semester as long as not all of them are connected to our research and sub questions and would have given us unnecessary information.

Method Theories and models used in the project * Vision, Mission and Objectives With the help of these values, we will find out who is Carlsberg Group. Mission defines what the company is going to do for its customers and why. Vision shows us where the company wants to be in the future and objectives are goals that Carlsberg has to be act successfully with their mission. These things will help us to understand what the motivation of the company is and what is vital for them. * Organisational Structure

We will look into organisational structure of Carlsberg Group to see how things are organized within the company and how it helps the company to be doing so well on the market. * Value Chain Analysis We are using Value Chain Analysis to identify value- generating activities within the company. We are going to take a closer look on how this value is created through analysing primary and secondary activities that are taken during the whole process of bringing the product to the end customer and find the core competences of Carlsberg Group. * Financial Analysis

From Annual reports of 2008- 2010 of the company we will calculate the most important financial ratios and make a conclusion on how Carlsberg is reacting to decrease in beer consumption and what is the whole financial situation in the company. * SBU Portfolio Analysis Through this analysis we will see the internal relationship between different product groups that Carlsberg has introduced to the market. The BCG matrix will show us the interaction between the light drinks that are competing in our industry and the Danish market. * Porter’s 5 Forces

This analysis will let us have an understanding of the situation in the brewery industry. We will look at five competitive forces that shape the industry and the market in strategic processes. According to this analysis it is easier to decide how to make an influence or to use particular characteristics of brewery industry. * PEST Analysis With this analysis we are going to identify what impacts have macro- environmental factors on the Carlsberg Company. These factors are of a very high importance because they are vital for knowing the potential and direction for the company. Competitor Analysis The main aim of this analysis is to identify the competitors of Carlsberg Company and to know the probable actions that will undertake the competitors under the influence of changes in the industry and broader environmental shifts that might happen. * Buying Behaviour Analysis This analysis will explain us what factors have an impact on making the decision by consumers while choosing which beer to select. It is very hard to fulfill consumer’s need without knowing such important things. * SWOT and TOWS Analyses

We will use SWOT analysis for auditing Carlsberg Company and its environment. It will help us to clarify strengths, weaknesses, opportunities and threats of the company. TOWS analysis is used to make strategic plans for the future performance on the market. Data collection In this project we are using mainly desk research for the collection of secondary data. The main source we are using is Carlsberg Group’s web page. It has a lot of useful information for our research. Moreover we are reflecting to all suitable information that we can find on the internet.

We are also using databases, such as euromonitor, that are available through our library to collect more statistical information about the brewery industry and the Danish market. Structure of report First of all we are going to make a presentation of our chosen company, which is Carlsberg Group, by using the information we have found on their website. We will go through vision, mission and goals of the company and proceed with the organisational structure of the company. Then we are going to use the models stated in paragraph 1. 5. 1 so that these models help us to answer our sub questions.

We will describe value- generating activities using value chain analysis and define group’s core competences. We will take closer look to the financial statement of the company and use a BCG matrix for 3 different SBU’s that we have selected. In the next part of the project we are going to analyse external environment of Carlsberg Company. Therefore we are going to use Porter’s 5 Forces and PEST to take a notice of the whole brewery industry first. Then we will discuss the product, and it is Copenhagen Beer, through which we are analysing the company.

Hereafter we will use buying behaviour analysis and competitor analysis to know what influence decisions of consumers and what competitors does Carlsberg have. We will finish our research with SWOT/TOWS analysis and end up with discussing the perspectives. Criticism of sources It is important to remember that not all sources that we are using can be totally reliable. The data we collected through the web page of Carlsberg Company may be a bit bias, because it is aimed on the attraction of customers and investors. From this information we can mostly see strong aspects in company’s operations and almost no weaknesses.

Internal Analysis Company Introduction Carlsberg is a well-known brewery company, the history of which dates as far back as 1847, when J. C. Jacobsen named it after his only son, Carl. The brewery has about 500 beers in 80 breweries worldwide. It is introduced to people by its Carlsberg, Tuborg and Baltika brands, which enjoy popular all around the globe, making the brewery the market leader in Denmark, Russia, and 4th most successful brewery in the world scale. Around 45. 000 people are employed by the company inside and beyond the Danish borders.

The activities of Carlsberg are however not limited by producing wheat based beverages. The company is consecutively offering sponsorship programs in two forms, Carlsberg Brewery (commercial campaigns) and Carlsberg Foundation (suggesting contribution to arts and sciences). Carlsberg’s Tuborg brand/logo is also often seen on different events, mainly musical. It is the official supplier of Roskilde festival, Gron koncert and so forth. As well as it possesses the J-day ‘julebryg’ product, which is Denmark’s forth best-selling beer, despite of the fact that it annually appears only six months in the market.

Carlsberg is intensively concerned about the environment. The statement is indeed proven by the Environmental Report of the company being realized every other year, to ensure that environmentally-friendly; safety standards are established and maintained, particularly in regards of water and energy consumption. The brewery follows a relevant environmental policy consisting of seven core goals ascertaining the environmental wellbeing. The company has various interactive services designed to satisfy the customer needs.

Nowadays, it is possible to order beverages on their homepage by slightly higher prices. Innovation has become a second culture to Carlsberg, by usage of which new markets are targeted to be conquered to increase the downturn of the revenue suffered by the economic crisis factor. Carlsberg’s Vision and Objectives It shows the fundamental purpose of the company’s existence. So they have to define it accurately. Mission is created by the company’s uniqueness. Carlsberg Denmark’s mission is to create valuable experiences for customers and consumers. It wants to be the fastest growing global beer company.

There are countries where Carlsberg has no breweries, but it sells their products by exports. Its portfolio contains more than 500 brands so they want to satisfy as much people as they can with this wild range of products and variety tastes. The group creates unique products for the different countries and cultures. That is why it took Copenhagen to the Danish market. Carlsberg’s vision Vision is company’s dreaming perspective. It is about the future and it can be a little fluffy. It is a picture from the company in the future. Carlsberg Denmark’s vision is to be commercial in what they do!

Carlsberg is the fourth largest brewery group in the world and it wants to secure its leading positions in the countries. They achieve it by the big variety of brands. The company employs a lots of people (approximately 41. 000) so it gives a lots of job opportunities in the countries and they would like to hold this situation furthermore. Carlsberg’s objectives Objectives are the targets towards which management is directed regarding how to achieve the objectives. In this case the main objective is to lead the industry in profitability and growth. They want to innovate and improve continuously. Conclusion

From the Group’s vision and objectives we can clearly see that it has concrete purposes, like hold their position on the market, satisfy customers need with the wild range of product and good quality, create and maintain job opportunities, be the fastest growing company in the brewery industry. Organizational Structure As the world’s fourth largest brewery group, Carlsberg Group employed over 41,000 people and is characterized by a wide range of diversity between brands and cultures. In the Beverages industry, there are 2,265 workers in 172 companies located in 44 countries, while 1293 executive movements have been recorded in the last 12

Carlsberg managers have understood the increased competition in their different markets groups combined with growing competitive pressure and, because of that started to force the organization to be more agile, or as their motto states: “smarter, faster and leaner. ” New Organization structure A change to standardize the organization and create a common structure is needed, but in order to form principle, rules and training of the new employees would not only be expensive considering the size of the company, but the challenges the company face would also have to be quite large to start such a program with the current culture.

In order to improve growth and efficiency by exchanging experience and key factors for developing across Europe, Carlsberg has established a new organizational structure for the companies around the map. A good plan was implemented in Croatia, Bosnia and Herzegovina, Serbia, Montenegro, and Bulgaria with the new organization structure called Carlsberg South East Europe presided by Isaac Sheps, who was named the CEO of the region. The Supervisory and the Executive Board

The management of the company is split into two main sections, the supervisory and the executive board, each of them having a definite role in leading the company and achieving greater results through communication, interaction and planning. The board ensure that Carlsberg management structure and control programs are in touch with the market, fully understood and work as intended.

They offer an excellent stratification and overall performance, but, since the foundation and board controls 73% of the voting power it is impossible to gain company full control. the Supervisory Board It is in touch with the CEO and other managers from the Executive Board. The Board of Directors has the duty to assure proper management of the company Performs the supervision of the Executive Board Constitution: 12 members in total from which 8 are to be voted for each year`s main meeting.

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