Grolsch Global Strategy Essay Example

competitor rivalry, suppliers, buyers, substitutes, and new entrants / barriers to entry. A PEST analysis helps in understanding the macro-environmental factors such as market trends, market potential, business positions, and direction for future operations (see exhibit 2). The four components of PEST include Political, Economic, Social, and Technological factors affecting the industry.

These frameworks are useful in providing a basis for analyzing Grolsch’s global strategy. Insights are referenced in this paper, but details contained within each framework are primarily discussed in the exhibits so as to focus on core questions related to Grolsch’s global strategy. Grolsch’s early globalization Although Grolsch was founded in the 17th century, it was not until the 1970’s and beyond that they began to expand internationally. The reasons for this were twofold: Stagnation in the home market and success by others expanding internationally.

As with most businesses, Grolsch recognized the only feasible means for increasing revenues is to sell more beer to their current customers in the Netherlands or find new customers elsewhere to whom they could sell their beer. After years of Grolsch’s and Heineken’s success in their home country increasing, sales began to stagnate and shrink in the 1970’s. This left the option of expanding to other markets where Grolsch was not already sold in order to increase revenues, often through stealing share from competitors in those foreign markets.

The second reason for Grolsch’s global expansion was as a result of Heineken’s success. As Grolsch’s larger rival in the Netherlands, Heineken had been ‘making impressive headway’ in exporting beer to foreign countries. Further, Heineken’s success led to the merger with Amstel, further strengthening their position domestically and internationally. These conditions led to

Grolsch pursuing international exporting of its beer. By 2007, 51. 5% of Grolsch’s sales came from exports. Grolsch’s adaptation and international strategy As Grolsch globalized, it was forced to adapt to changing market conditions.

The Asian financial crisis, which had ripple effects in Eastern Europe, caused Grolsch to adapt its strategy and pull-back from markets. Meanwhile, since Grolsch used other brewers for distribution while importing beer into foreign countries, the ongoing industry consolidation often led to a need for changing distributors. In several of their markets Grolsch was already on its third or fourth distributor in the span of 15 years. Besides the political, economic, and logistical issues Grolsch had to adapt to, they also were adapting to cultural differences.

Their marketing campaigns would vary significantly from market-to-market. While their ability to be nimble, change strategies, and adapt where necessary has been a benefit, it has also been limiting in that Grolsch has struggled to build a consistent brand image and market position in several of its key markets. For example, even though the UK accounted for 25% of Grolsch’s volume, they still only held 1. 5% of the UK market. Further, operations have been impacted by the consistent turnover of distributors in several important markets.

Grolsch’s adaptation strategy has kept them nimble but has prevented any large scale and stability in certain countries outside the Netherlands. The right international strategy for Grolsch going forward is a transnational strategy, though there are strong elements pushing this toward a global strategy. In reviewing strategy within the beer industry, either generally or through frameworks (see exhibits), it appears the optimal path currently involves both multi-domestic elements and global elements.

Exhibit 4

outlines various dimensions and where Grolsch’s business fits. For example, on the dimensions of product/marketing and structure/decisions, the strategy is more multi-domestic as many customer-facing decisions must be made on a country-by-country basis. However, on the dimensions of market participation and primary activities (brewing), the strategy is more global as mostly uniform actions can be taken at a higher level. Strategic focus and competitive moves/responses are shifting to be more global though the need for localized approaches still exists.

With the industry consolidation, there is a shift from multi-domestic to global as competitive reactions are handled globally due to the presence of large brands competing across multiple countries. Though the most compelling argument for this industry being global is the supply chain for making and distributing beer being highly global, the selling and brand development of the product needs to be customized for local markets. Due to the mixed nature, Grolsch should pursue a transnational strategy, incorporating elements of both the global and multi-domestic approaches.

Grolsch’s MABA framework In order to assess the attractiveness of markets, Grolsch has relied on the MABA framework. This is a form of a CAGE framework. The CAGE framework assesses cultural, administrative, geographic and economic differences between the host country and a foreign market. Some of the positives from this are it helps combine market potential with critical indicators of market and commercial success. For example, language is a proxy for cultural distance and can give an indication of differences in behavior, values, and perceptions.

This helps Grolsch better understand if customers in foreign countries are likely to value their product in a similar or different manner from the home Dutch market. EU

relation matches with administrative distance and speaks to the trade relationships between various countries and the Netherlands. This is a mixed measure – on the positive side, it assesses what tariffs and hurdles might need to be overcome, but given the diverse government relationships throughout the world, this might be too simple an assessment.

Transportation cost is a proxy for geographic distance, though ideally this metric should be rated directly on the costs rather than reducing its accuracy to a simple 1-5 scale. Finally, GDP per capita aligns with economic differences. This framework is a useful starting point for assessing potential target countries. Grolsch should supplement their MABA framework by using aspects from Porter’s Diamond Model, which highlights other strategic elements regarding foreign expansion.

Exhibit 3 is an example created for the U. S. market. MABA alone can oversimplify complex relationships that exist between countries and some results can be counterintuitive. For example, China is listed as high market attractiveness (Exhibit 9 in the case), but in solely assessing the individual MABA scores, one might expect China to perform poorly on market attractiveness, given the differences between China and the Netherlands in distance, culture, transportation costs, etc.

Grolsch should continue to utilize MABA for directional analysis, but should not place too much emphasis on the outcome from MABA alone. Following the merger, SABMiller’s strong distribution network in some markets could be a benefit which may not be fully captured in MABA. Conclusions: Key takeaways for Grolsch Although the mergers of large breweries have not been conclusively positive, there is reason to believe the merger with SABMiller can be beneficial. In areas where Grolsch was unable to maintain a

consistent distributor, they should utilize SABMiller’s network.

This allows for a consistent strategy and image in those markets as well as opens the opportunity for selling in developing markets where SABMiller has a strong presence. However, Grolsch needs to continue carefully evaluating the components of the MABA framework for each country to ensure an entrance is not made without fully understanding if differences in the target country will adversely affect the sales of Grolsch beer. The prospects for Grolsch’s continued globalization and increased growth internationally look positive following this merger.