Analysis Of The External General Business Essay Example

as both a consumer brand and a corporate brand.

In Chapter 1, the PESTLE model is utilized to analyze external factors that affect Heineken. Specifically, it focuses on political factors related to government regulations on alcohol sales that may impact the company's market performance. As markets become more globalized and internationalized, beer manufacturers are expanding their operations into new countries. However, authorities are imposing high taxes on imports of beer and spirits in order to maximize profits and address ethical concerns.

This presents a risk for Heineken, as evidenced by recent restrictions on alcohol consumption in public transportation in London. This limitation will have an impact on the beer market because people now desire to enjoy their drinks not only at home but also in social settings with friends.

From an economic perspective, Heineken primarily operates in mature markets located mostly in Western Europe where it reports earnings in Euros. Fluctuations in currency exchange rates particularly concerning the US dollar have the potential to pose a threat to the company's overall financial performance.Heineken has implemented a policy to hedge transactional exchange risks, delaying any impact on its financial results. The current recession has led to higher unemployment rates and increased demand for cheaper alternatives. This economic situation will also pose challenges for Heineken as a premium brand and affect distribution. Social and cultural factors have shifted in relation to beer consumption, with women now enjoying beer as well. Additionally, the fast-paced lifestyle of the new generation has resulted in a decline in bar consumption due to lack of time. As a result, both the beer market and Heineken will experience a decrease in sales volume. Demographic changes will

also have a significant influence on the company's operations, particularly in China where there is rapid population growth and increased leisure time contributing to an increase in beer consumption. Between 2000 and 2006 alone, China saw a 33.56% rise in beer consumption, making it the largest national market globally surpassing the United States. Technology plays a vital role for Heineken across various aspects of its operations within today's business environmentHeineken and the entire beer industry are impacted by technological advancements, particularly in information technology security. This has allowed Heineken to expand its connectivity with external partners globally and reach new markets without barriers. As a result, Heineken plans to establish a presence in multiple locations worldwide.

According to Porter's five forces model, Heineken faces high bargaining power from suppliers, especially farmers who supply raw materials like water, barley, hops, and yeast. Heye Glas Nederland specifically supplies green bottles for their global distribution. Previously, Heineken had a 33% stake in Heye Glas but acquired full ownership in 2002 to ensure cost-effective and high-quality export bottle supply.

While competition from the biofuels industry affects agricultural product costs, buyers have significant bargaining power due to the availability of various beer choices such as Guiness, Carlsberg, and Tiger.Heineken faces a threat from smaller beer makers that have emerged in the market. Despite being a major player, Heineken now has to share its market with these competitors. The low barriers to entry in the beer industry allow for new entrants, which poses a significant threat to Heineken's business. To remain competitive, Heineken must consider implementing innovative features in its products. Consumers also have alternatives such as wine that contain alcohol, creating a

high risk of substitution for both Heineken and other companies in the beer market.

However, Heineken has achieved economies of scale primarily in Europe where it holds approximately 30% of the market share. In order to meet growth targets and succeed, companies like Heineken develop their own strategies in the expanding beer market. Thanks to economies of scale, they can produce high-quality and distinctive products that establish strong market positions and facilitate continued growth.

In Chapter 2, Heineken acknowledges the importance of tangible assets when analyzing resources. The company heavily invests in infrastructure including plants and equipment to ensure efficient operations. For example, they utilize KHS Till plant technology in their four breweries located in Russia.
This technology enables Heineken to process both 50-liter kegs and 30-liter kegs at a speed of up to 140 kegs per hour, utilizing a two-lane machine and six washing and sterilizing stations. In addition to tangible assets, Heineken highly values intangible assets such as its brand name. The company has invested significant efforts in establishing the premium brand name "Heineken", recognizing that branding is essential for establishing a strong global presence in the beer market. Consequently, Heineken dedicates substantial resources to marketing activities aimed at promoting their brand. Furthermore, Heineken acknowledges that branding provides a valuable competitive advantage for industry expansion and growth, allowing them to expand production worldwide and generate increased revenue. In 2004, they introduced new leadership development initiatives which included a model outlining expected behavior from senior directors that aligns with Heineken's aspirations and values.This model serves as guidance for leadership conduct within the organization. Additionally, Heineken distinguishes itself in marketing by employing unique messages in traditional media advertisements.

This sets them apart from other advertisers targeting the beer market with similar messages. Instead of featuring groups of men at a bar, their ads incorporate humor and the tagline "Heiniken refreshed the parts other beers can't reach". In 2005, Heinken implemented a streamlined Executive Board structure to support global growth goals.This text highlights the efforts made by Heineken to improve connectivity and decision-making processes within their global operating units. The updated structure has led to significant growth over the past four years. Consolidation and rapid innovation are crucial for long-term success in their industry, which Heineken recognizes and values. The company prides itself on being a leading beer company and places a strong emphasis on respecting employees, business partners, customers, shareholders, and all others connected to the company. They promote happiness in the workplace and believe in delivering quality through social and employment policies. These values define Heineken's corporate culture and working methods that contribute to successful operations. In Chapter 3: Evaluation of fiscal performance, there were changes observed in Heineken's tax return on investment from 2005 to 2007. Notably, there was a significant improvement in ROI in 2006 compared to 2005 due to the implementation of Windows Mobile 5.0 technology.The deployment of Windows Mobile played a crucial role in generating profit efficiently for Heineken and led to significant business benefits. It enhanced the accessibility of pricing, promotions, availability, and accounts receivable information for sales representatives, resulting in an average increase in sales. Additionally, Heineken observed a rise of 5.9% in return on equity in 2006 but experienced a decline of 11.5% in 2007. This increase is attributed to the growth in net profit

during that period; specifically, Heineken's net profit rose from a‚¬761 million in 2005 to a‚¬1,211 million in 2006. This improvement suggests effective utilization of shareholder funds for production by the company.
However, the decrease in returns on equity indicates that it became more expensive for Heineken to manufacture beer due to significant increases in raw material and packaging prices. The beer market also faced additional costs such as transportation, energy, and labor pressures.
From a net profit margin perspective, Heineken witnessed substantial growth in 2006 compared to both 2005 and 2007. The company achieved success with increased net income from sales during this period. Moreover, there was significant expansion in the distribution of Heineken beer with an increase of 111.9 hectoliters.The premium brand also achieved its highest annual growth rate at 11.8%. These factors contributed to Heineken's strong performanceThe table provided shows the changes in Heineken's dividend pay-out ratio over time, including a 1.5% decrease in 2006 followed by an 18.2% increase in 2007. These changes were due to Heineken's decision to modify its dividend pay-out policy at the end of 2006, which resulted in shareholders receiving between 30% and 35% of net income before exceptional items and amortization instead of the previous range of 20-25%. This alteration was made to support Heineken's objective of maintaining independence and a strong financial structure for business expansion through organic growth and acquisitions.

Additionally, from 2005 to 2007, Heineken experienced an increase in earnings per share, indicating consistent revenue growth. This growing market share and profitability per share demonstrate stakeholder and shareholder satisfaction with the profit generated from each invested dollar.

Chapter 4 provides recommendations for strategic options available to the company.

To address market pressure, Heineken has implemented a strategy focused on socially impactful production and sale of beer. With this strategy, Heineken aims to raise awareness about both positive and negative aspects of alcohol consumption while encouraging consumers to make informed decisions regarding their actions. As part of this approach, the "Enjoy Heineken Responsibly" program was launched in 2006 to further promote responsible consumption with consumer involvement.It is highly advised that Heineken continues implementing this strategy as it not only discourages alcohol abuse associated with the brand but also helps foster a positive reputation within society. Moreover, Heineken has implemented a hedging strategy to manage currency risks in the volatile global market. This involves deducting costs in dollars, allowing the company to retain net cash influx in US currency. They utilize forward contracts to hedge their cash flow in advance and mitigate short-term fluctuations between the US dollar and Euro. However, due to market unpredictability, I do not recommend using this scheme extensively. Additionally, to expand their international marketing efforts, Heineken sponsors various sports activities globally which significantly benefits their brand. Major tennis championships such as Wimbledon, the US Open, Australia Open, and the Shanghai Open are among those they sponsor. Furthermore, they focus on promoting music programs and have successfully expanded from Singapore to markets like Malaysia and Thailand. By maintaining these marketing efforts, Heineken can demonstrate that they provide enjoyment while acting responsibly towards people worldwide. Therefore, I suggest that Heineken maintains this strategy alongside implementing a rigorous information technology (IT) security scheme to ensure confidentiality of data and information integrity as well as availability in order to keep up with technological advancements.The

company is strengthening support and monitoring activities for IT operations. Heineken suggests implementing a partially outsourced IT shared service Centre as a contingency measure for IT, which would allow the company to connect with global operations. It is recommended to implement this scheme.

Heineken has successfully built a strong portfolio of local and international trade names through brand strategy. To further grow these brands, it is essential to have effective central coordination of brand management. The company has adopted a brand strategy that aims at enhancing its market share in the presence of numerous competitors in the beer industry. It is recommended to continue utilizing this strategy.

To maintain their dominant position in the beer market, Heineken follows a competitive management approach by offering high-quality products at competitive prices. The goal is to provide consumers with premium products at reasonable prices compared to other beer manufacturers. The management team acknowledges the importance of meeting consumer demands in order to sustain sales.Additionally, analyzing competitors' strengths and weaknesses in key business segments allows Heineken to effectively compete for customers.

If you need professional assistance with your essays, help is available immediately.In Chapter 5: Recommendations on Executable Strategic Options, learn more about Heineken's approach to alcohol policy and marketing strategies.Heineken aims to emphasize the importance of ongoing dialogue with authorities and health organizations in their alcohol policy. The objective is to prevent alcohol abuse and mistreatment, promoting socially acceptable responsible beer consumption. This aligns with Heineken's sustainability goals as a business. To cater to diverse consumer preferences, Heineken must determine how much to adapt their marketing strategy locally, while considering strong brand preferences among beer drinkers. Additionally, they need to

prioritize between global integration and national responsiveness due to declining sales in Holland, Europe, and Africa. By following this approach, Heineken can differentiate its beer from competitors and maintain premium pricing. Implementing a data synchronization provider system enables secure management of data while benefiting from centralized access points within the Global Data Synchronization Network (GDSN). This system minimizes disruptions in Heineken's daily operations by managing data exchange across various platforms. It serves as the initial step in enhancing data synchronization through a centralized connection point for implementing the company's technology strategy at Heineken International.Heineken has established a long-term brand recognition for the Heineken name through its branding policy. This policy focuses on adding value to the product, promoting brand loyalty, and emphasizing beer quality, societal benefits, cultural contributions, and emotional connections with consumers. By implementing this policy, Heineken will successfully enhance its value.

Additionally, Heineken has implemented a strong compliance policy throughout its entire business. This includes a comprehensive code of conduct for all employees and a commitment to fair competition. The company has policies and programs in place to guide employees and ensure compliance with competition laws.

In Chapter 6 of our study, we focus on evaluating strategic management models' usefulness. Personally, I find PEST analysis to be a valuable tool for assessing businesses as it examines external factors that impact organizations. Analyzing these factors provides me with a comprehensive understanding of Heineken's operating environment while identifying opportunities and threats it presents. It is crucial to understand how the external environment affects Heineken's business performance.

Moreover, I also find Porter's five forces tool valuable for analysis purposes. The text discusses various models and theories that can be

used to analyze Heineken's competitive position and potential strengths including Porter's five forces model, SWOT analysis, resource-based theory, and overall performance analysis.These models assist in identifying key factors for developing a long-term business strategy, understanding strengths and weaknesses, assessing capabilities and potential opportunities or threats, and determining sustainable competitive advantages. By utilizing these models, it becomes evident that Heineken holds a dominant position in the beer market compared to other breweries due to factors such as branding and efficient operations with regards to new technology. The financial analysis method is useful for comprehending Heineken's performance measurement. Through ratio analysis, I am able to evaluate the company's effectiveness and financial risk. Additionally, analyzing the figures presented in the financial statements allows me to determine Heineken's market share and growth. By calculating financial analysis for each year, I can assess the company's operational efficiency.

Conclusion:

Considering the external and internal environmental analysis, as well as Heineken's public image and strategies, it is projected that the company will achieve further success in the future. Despite challenges in production and distribution, senior management is actively seeking flexible solutions to overcome them. As a result, Heineken is expected to maintain its position as one of the top global beer manufacturers.