Political According Blee and Whittington (2011), government in western countries are introducing different laws in order to discourage different type of drinking which might result into accidents or health problem. Government in the United Kingdom has put a certain limit on drink driving which is over 80 milligrams of alcohol per 100 milliliters of blood as stated by direct. gov. uk (2011) and the drivers whom are found guilty might face driving ban. Economical There are several factors which affects the economic through the brewery industry in Western Europe.
As stated by Blee and Whittington (2011), one of it is the decrease of demand for beer which is eventually results in lower taxes for the government. Social They also suggest that the decrease in demand for beer is usually related to the substitutes and also the new innovation in beer by some company such as apple flavour beer. This means people drinking habit are changing and prefer to some other drinks. In country such as UK sales of beer decreased dramatically after the recession where there was seen a fall of by 9. 9% in 2009 according to Wallop.
Blee and Whittington (2011) shows that there has been decline in demand in countries like Germany and France. Technological There is been new type of drinks created by different firms in order to diversify their products. Firms like have created new product such as apple flavour beer according to the case study. Environmental The main environmental issue with beer is the waste of the cans and the bottles. But in countries like UK and Germany, councils has been providing with separate bin for recyclable items such as cans and bottles according to wasteonline. om. It also suggests that this initiative taken by the Government has also decrease the emission of carbon dioxide which is produced normally on the production of a new glass. Legal There are different concerns about the legal status of brewery firms according to the case study. One of the main issues is licensing of firms. As cited by another issue is the price-fixing cartel. In order to resolve this problem, the European Commission decided to fined firms who were involved.
Some other legal issues related to beer are drink driving and permitted hours for shops to sell them. Porter’s five forces theory Threat of entry Western European brewery industry is highly concentrated and thus it is difficult for any other company to enter the market according to the case study. But this also suggest there are still small threats from firms like Tsingtao which claims to promote its sales volume and became an international great company. Thus, it might be a future challenge for the existing firms.
Supplier’s power The main suppliers for the brewery industry are the packaging industry as cited by the case study. It also suggests the market for the packaging industry is highly concentrated and therefore it is tough for brewery firms to make a backward integration. The other main things that are important to make beer are its ingredients and the most important of them is the barley according to Arnold (2005). The barley companies do not have much bargaining power and the brewery firms can thus exploit the prices.
Buyer’s power The concentration for buyers in brewery industry is low according to the case study. This means that beer is a low percentage of the buyers’ total purchases as stated by Johnson et al (2009). Thus the consumers here buyers can change from one brand to the other as the switching cost is low. Competitive rivalry Brewery industry has few but big firms which compete fiercely against each other. It can be said to be an oligopoly as it is defined as a market where there are few big firms according to.
According to the case study, Heineken and Carlsberg with A-B Inbev are the big players in the Western European market. It also suggests that there are lots of competitions with the firms. Substitutes According to the case study, non-alcoholic beers, extra cold lagers and fruit flavoured beers are the closest substitutes for alcoholic beers. The other substitute for beer is wine as it is been preferred as an alcohol in countries like UK and France as it has saw an increase in consumption through the years according.
It can be concluded that PESTEL and Porter’s five forces can be interrelated to each other. Each of the factors related. For example, Porter’s competitive rivalry is one force that includes most of the PESTEL as it consists of things like political to legal. Regarding the Analysis of the factors affecting the brewery industry, it can be concluded that the market consist of few big firms which makes it an oligopoly. The two analysis show that the demand for beer has been decreasing in Western Europe and the demand for its substitute has increase.
It can also be concluded that due to Government new policies and intervention has firstly help to reduce the abuse of alcohol and secondly has been able to break prize fixing strategy of many firms in order to exploit consumers. An-bev An-bev has the largest market share in the brewery industry in the world according to, this makes it very strong and thus it is very difficult to compete with such competition. The political initiative affects the company negatively as the new policies discourage people from consuming alcohol in Western Europe.