How can Porter’s Five Forces be applied to analyze the beer industry?

  

1. Apply Porters Five Forces on the general Beer Industry. 2. Identify and compare the main strategic groups in the beer industry.1. You need to answer all the questions thoroughly (~500 words)2. You need to draw from theories and concepts rather than using common senseAttached:Boston Beer – This is the case study discussing the beer industry. (MUST USE THIS AS A SOURCE)Powerpoint – Notes on Porter’s Five Forces2nd post – this one is on VerizonIdentify the industry of the company. Apply Porters 5 forces. Do you think this industry is attractive? Is it profitable?1.You need to answer all the questions thoroughly (~500 words)2. You need to draw from theories and concepts rather than using common sense
Analyzing the
External
Environment of
the Firm:
Creating
Competitive
Advantages
Chapter 2
Part 2
Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education
.
The Competitive Environment
2-2
The competitive environment consists of
factors in the task or industry
environment that are particularly relevant
to a firms strategy:
Competitors
(existing or potential)
Including
those considering entry into an entirely
new industry
Customers
(or buyers)
Suppliers
Including
those considering forward integration
Porters Five-Forces Model of
Industry Competition
2-3
Exhibit 2.4 Porters Five-Forces Model of Industry Competition
Source: Adapted and reprinted with permission of The Free Press, a division of Simon & Schuster Adult Publishing
Group, from Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter.
Copyright 1980, 1998 by The Free Press. All rights reserved.
The Threat of New Entrants
4
The possibility that the profits of established
firms in the industry may be eroded by new
competitors.
Barriers to entry can be created by:
Economies of scale
Product differentiation
Capital requirements
Switching costs
Access to distribution channels
Cost disadvantages independent of scale
Barriers to Entry
5
1) Economies of Scale
Spreading
the costs of production over
the number of units produced
fixed costs: plant & equipment,
overhead, advertising, inventory, R&D
Increasing
efficiency through
specialization
Variable cost falls as increasing
experience generates increasing
productivity
Barriers to Entry
6
2) Product differentiation
Unique
products (BMW)
Customer loyalty (Pepsi or Coke?)
Products at competitive prices
3) Capital Requirements
Physical
facilities
Inventories
Marketing activities
Availability of capital
Barriers to Entry
7
4) Switching Costs
One-time costs customers incur when they buy
from a different supplier (i.e., Microsofts
Windows operating system)
New equipment
Retraining employees
Psychological costs of ending a relationship
5) Access to Distribution Channels
Stocking or shelf space
Price breaks
Cooperative advertising allowances
Barriers to Entry
8
6) Cost Disadvantages Independent of Scale
Proprietary
product technology (e.g. patents)
Favorable access to raw materials
Desirable locations
7) Government policy
Licensing
and permit requirements
Deregulation of industries (i.e., Time Warner
can use its cables to carry telephone)
The Bargaining Power of Buyers
9
Buyers: individuals or companies
Buyers can:
Force
down prices
Bargain for higher quality or more services
Play competitors against each other
Buyers are powerful when:
Buyers
are concentrated or purchases large volumes relative to
seller sales (i.e., automobile industry)
The products it purchases from the industry are standard or
undifferentiated (agricultural products, dairy)
The buyer faces few switching costs (i.e., wheat, sugar)
The buyers pose a credible threat of backward integration (a firm
controls its inputs) (i.e., Wal-marts Great Value products)
The industrys product is unimportant to the quality of the
buyers products or services
The Bargaining Power of Suppliers
10
Suppliers: Companies that provide materials, services and labor to
companies in an industry
Suppliers can exert power by threatening to raise prices or reduce
the quality of purchased goods and services
A supplier group will be powerful when:
The supplier group is dominated by a few companies and is more
concentrated than the industry it sells to (i.e., Microsoft and Intel)
The supplier group is not obliged to contend with substitute
products for sale to the industry
The industry is not an important customer of the supplier group
The suppliers product is an important input to the buyers
business
The supplier groups products are differentiated or it has built up
switching costs for the buyer
The supplier group poses a credible threat of forward integration
( they can control their own distribution channels) (i.e., Nike)
The Threat of Substitute Products and
Services
11
Substitutes: Other products or services that can perform
the same function
Substitutes limit the potential returns of an industry by:
Placing a ceiling on the prices that firms in that industry
can profitably charge
Having a higher price/performance ratio
The threat of substitute products increases when:
Buyers face few switching costs
The substitute products price is lower
Substitute products quality and performance are equal to
or greater than the existing product
The Intensity of Rivalry among
Competitors in an Industry
12
Rivalry occurs when competitors sense
the pressure or act on an opportunity to
improve their position
Price competition
Advertising battles
Product introductions
Increased customer service or warranties
The Intensity of Rivalry among
Competitors in an Industry
13
Industry rivalry increases when:
There are numerous or equally balanced competitors (airline
industry)
Industry growth slows or declines (fight for market share) (i.e., fast
food industry)
There are high fixed costs or high storage costs (i.e., airline
industry)
There is a lack of differentiation opportunities or low switching
costs (i.e., steel industry)
When the strategic stakes are high (i.e., consumer electronics)
When high exit barriers prevent competitors from leaving the
industry
How the Internet and Digital
Technologies Affect Competitive Forces
2-14
Using Industry Analysis: A Few
Caveats
2-15
Managers must not always avoid low profit
industries these can still yield high returns for
players who pursue sound strategies
Five forces analysis implicitly assumes a zerosum game yet mutually beneficial relationships
can still be established with buyers & suppliers
Five forces analysis is essentially a static analysis
yet external forces can still change the
structure of all industries
See the value net
Vertical dimension = suppliers & customers
Horizontal dimension = substitutes & complements
The Value Net
2-16
Exhibit 2.6 The Value Net
Source: reprinted by permission of Harvard Business Review. Exhibit from The Right Game: Use Game Theory to
Shape Strategy, by A. Brandenburger and B.J. Nalebuff, July-August 1995. Copyright 1995 by the Harvard
Business School Publishing Corporation. All rights reserved.
Strategic Groups Within Industries
2-17
Two unassailable assumptions in industry
analysis:
No
two firms are totally different
No two firms are exactly the same
Strategic groups clusters of firms that
share similar strategies:
Breadth
of product & geographic scope
Price/quality
Degree of vertical integration
Type of distribution
Strategic Groups Within Industries
2-18
Exhibit 2.7 The World Automobile Industry: Strategic Groups
Note: Members of each strategic group are not exhaustive, only illustrative.
Strategic Groups Within Industries
2-19
Strategic groups as an analytical tool
Helps
identify barriers to mobility that
protect a group from attacks by other groups
Helps identify groups whose competitive
position may be marginal or tenuous
Helps chart the future direction of firms
strategies
Helps to think through the implications of
each industry trend for the strategic group as
a whole
CASES
CASE
20
THE BOSTON BEER COMPANY *
The Boston Beer Company, known for its Samuel Adams
brand, is the largest craft brewery in the United States,
holding a 1 percent stake in the overall beer market.1 It
faces growing competitive threats from other breweries,
both large and small. In the past several years, the beer
industry as a whole has been on a decline, while sales of
wines and spirits have increased. The Boston Beer Company competes within the premium beer industry, which
includes craft beer and premium imported beers like
Heineken and Corona. Although the beer industry has been
on a decline, the premium beer industry has seen a small
amount of growth, and the craft beer industry has seen a
surge in popularity. Because of this success of the craft
breweries in particular the major breweries have taken
notice and many new craft breweries have sprung up.
Anheuser-Busch Inbev and MillerCoors, LLC, account
for over 80 percent of the beer market in the United
States.2 They have caught on to the current trend in the
beer industry toward higher quality beers and have started
releasing their own higher quality beers. For example,
Anheuser-Busch Inbev has released Bud Light Wheat and
Bud Light Platinum in an effort to provide quality beers to
their loyal customers. MillerCoors makes Blue Moon beer,
which is the most popular craft beer in the United States.
Anheuser-Busch Inbev released ShockTop to combat the
popularity of Blue Moon. These companies have also
begun to purchase smaller craft breweries, whose products
have been rising in popularity. Anheuser-Busch Inbev purchased Goose Island Brewing Company in March 2011.
MillerCoors has started a group within the company titled
Tenth and Blake Beer Company for the purpose of creating
and purchasing craft breweries. According to MillerCoors
CEO Tom Lang, the plan is to grow Tenth and Blake Beer
Company by 60 percent within the next three years.3 The
two major companies plan to use their massive marketing
budgets to tell people about their craft beers.
According to the Brewers Association, 1,940 craft
breweries and 1,989 total breweries operated in the
United States for some or all of 2011. While craft breweries account for over 97 percent of all the breweries in the
United States, they only produce approximately 25 percent
of all beer sold.4 However, with the rise in popularity of
premium beers, the craft breweries will continue to grab
*This case was developed by graduate students Peter J. Courtney and Eric S.
Engelson and Professor Alan B. Eisner, Pace University. Material has been
drawn from published sources to be used for class discussion. Copyright
2013 Alan B. Eisner.
C128 CASE 20 :: THE BOSTON BEER COMPANY
more of the market. As the countrys largest craft brewery, the Boston Beer Company had revenue of over $500
million in 2011 and sold over 2 million barrels of beer.
Other large craft breweries include New Belgium Brewing
Company and Sierra Nevada Brewing Company, which
sold over 580,000 and 720,000 barrels of beer in 2011,
respectively.5 In addition, some smaller breweries have
been merging to take advantage of economies of scale and
enhance their competitive position.
According to the Boston Beer Company, there are
approximately 770 craft breweries that ship their product domestically, up from 420 in 2006. There are also an
expected 800 craft breweries in the planning stage, expecting to be operational within the next 23 years. Boston
Beer Company assumes that 300 of those 800 will be
shipping breweries (i.e., breweries that sell their product beyond their local market). Thus, within the next few
years, Samuel Adams beer may be competing with over
1,000 other craft breweries around the country.
The Boston Beer Company competes not only with
domestic craft breweries but also with premium beer
imports, such as Heineken and Corona, which sell beer
in a similar price range. Like Anheuser-Busch Inbev and
MillerCoors, Heineken and Corona have large financial
resources and can influence the market. It is projected that
premium imported beers will grow by 6 percent over the
next five years.
The Brewers Association defines a craft brewery as
brewing less than six million barrels per year and being less
than 25 percent owned or controlled by another economic
interest. Maintaining status as a craft brewery can be important for image and, therefore, sales. Thus, MillerCoors
purchased less than a 25 percent stake in Terrapin Beer, still
allowing it to maintain its craft brewery status.6 The size of
the Boston Beer Company, however, is an issue. With continued growth, the brewery could potentially increase its
volume output to more than 6 million barrels per year, thus
losing its craft brewery status. Furthermore, with the size
of the company and their ability to market nationwide, the
company runs the risk of alienating itself from other craft
breweries who believe Samuel Adams no longer fits the
profile. Many craft breweries already believe the company,
which has been public since 1995, is more concerned with
making money than with providing quality beer and educating the public on craft beers.
Size does have advantages, of course, with more money
for marketing and, especially in the beer business, with
distribution. A heavy complaint for all craft breweries is
the difficulty they have distributing their product in the
current three-tier system (discussed in a later section). The
large breweries have power over the independent distributors because they account for most of their business. Thus,
they can influence the distributors and make it difficult for
craft breweries to sell their product. Because of its size,
the Boston Beer Company has fewer problems with distributors than its smaller competitors do. Consequently, the
company has less in common with other craft breweries
and more with the major breweries in regards to distribution. This is good for Boston Beer Companys distribution,
but might be bad for its image. One brewer from The Defiant Brewing Company in Pearl River, New York, said that
The Boston Beer Company was becoming too large to be
considered a craft brewery and that their substantial connections with distributors contributed to this notion.7
As the above discussion makes clear, The Boston Beer
Company is facing a difficult competitive environment.
They are facing direct competition from both larger and
smaller breweries and from premium imported beers.
Some of the smaller craft breweries are growing quickly
and want to be larger than the Boston Beer Company.
Other craft breweries feel that the Boston Beer Company
is too large already. Thus, while further growth would be
beneficial in terms of revenue, growing too large could
negatively affect the companys status as a craft brewery
and the perceptions of its customers. The company must
pay close attention to maintaining its image for the growing customer base of premium beer drinkers.
Company Background
Jim Koch started the Boston Beer Company in 1984 along
with fellow Harvard MBA graduates Harry Rubin and
Lorenzo Lamadrid. The company began with the sale of
the now popular Samuel Adams Boston Lager, named
after the famous American patriot who was known to have
been a brewer himself. The recipe for the lager was passed
down from generation to generation in Kochs family, dating back to the 1860s. Koch began home brewing the beer
in his own kitchen and soliciting local establishments in
Boston to purchase and sell it. Just one year after its initial
sales, Samuel Adams Boston Lager was voted Best Beer
in America at the Great American Beer Festival in Denver, Colorado. In 1985 Samuel Adams grew immensely
and sold 500 barrels of beer in Massachusetts, Connecticut, and West Germany.8
To avoid the high up-front capital costs of starting a
brewery, Koch contracted with several existing breweries to make his beer. This allowed the production of the
Boston Lager to grow quickly from the relatively small
quantities Koch could brew himself. Growth continued
after that, and in 1988 the Boston Beer Company opened
a brewery in Boston. By 1989 the Boston Beer Company
produced 63,000 barrels of Samuel Adams beer annually.
The company went public in 1995, selling Class A
Common stock to potential investors. The stock was sold
at two different prices, $15 to loyal customers and $20
through an IPO run by Goldman-Sachs. Koch decided
to reward his loyal customers by advertising the stock
offering on the packages of his six-packs, estimating that
30,000 buyers would be interested. He believed that those
who enjoyed the beer and supported it should be the ones
who have a stake in the company. After 100,000 potential
investors sent checks in, Koch randomly chose 30,000.9
Managers from Goldman-Sachs were upset that they did
not receive the lowest-price offering. Koch owns 100 percent of Class B Common stock, of which all major decisions for the company are made. This is seen as a risk
to potential investors because Koch can make important
decisions on the strategy for the company without receiving approval.
Continued success for the business led to the purchase
of a large brewery in Cincinnati in 1997. Since 2000,
Samuel Adams has won more awards in international beer
tasting competitions than any other brewery in the world.
In 2008 the Boston Beer Company purchased a worldclass brewery in Lehigh, Pennsylvania, to support growth.
As of 2013, the Boston Beer Company was the largest craft brewery in the United States, brewing over two
million barrels of Samuel Adams beer, but still only made
up approximately 1 percent of the total U.S. beer market.
The company has expanded its selections to over 50 beer
flavors, including seasonal and other flavorful beers, such
as Samuel Adams Summer Ale, Samuel Adams Cherry
Wheat, and Samuel Adams Octoberfest, as well as the nonbeer brands Twisted Tea and HardCore Cider. The Boston
Beer Company planned to use the profits gained from its
non-beer brands to invest in Samuel Adams and build a
stronger portfolio. Revenue for the company grew from
$380 million in 2007 to over $500 million in 2011, while
operating costs grew from $150 million to $180 million.
Net income tripled from $22 million to $66 million in the
same period (see Exhibits 1 and 2). In July 2012, the company was selling at $113, nearly $100 over the initial public offering from 1995.
The goal of the Boston Beer Company was to become
the leading brewer in the premium beer market. As of
2013, it was the largest craft brewery, but it trailed Crown
Imports, LLC, and Heineken USA in the premium beer
market. The company planned to surpass the large importers by increasing brand availability and awareness through
advertising, drinker education, and the support of its over
300-member salesforce. The salespeople for the company
have a high level of product knowledge about beer and the
brewing process and use this to educate distributors and the
public on the benefits of Samuel Adams. In 2011 the Boston Beer Company formed a subsidiary called Alchemy
& Science to seize new opportunities in the craft brewing industry. The purpose of this group will be to identify better beer ingredients, methods for better brewing,
and purchasing opportunities for any breweries that would
help the business grow. One of these instances occurred in
CASE 20 :: THE BOSTON BEER COMPANY C129
EXHIBIT 1 Income Statements
A
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Case Financials.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
B
Income Statements
Period Ending
Total Revenue
Cost of Revenue
Gross Prot
Operating Expenses
Selling General and Administrative
Nonrecurring
Operating Income or Loss
Income from Continuing Operations
Total Other Income/Expenses Net
Earnings Before Interest And Taxes
Income Before Tax
Income Tax Expense
Net Income From Continuing Ops
Net Income
C
D
Dec 28, 2012
580,222
265,012
315,210
Dec 30, 2011
513,000
228,433
284,567
Dec 24, 2010
463,798
207,471
256,327
219,477
149
95,584
180,246
666
103,655
174,849
300
81,178
(98)
95,517
95,517
36,050
59,467
59,467
(209)
103,500
103,500
37,441
66,059
66,059
(149)
81,108
81,108
30,966
50,142
50,142
All numbers in $ thousands
Source: Boston Beer Company.
EXHIBIT 2 Balance Sheets
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Case Financials.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
A
B
Balance Sheets
C
D
Period Ending
Assets
Current Assets
Cash And Cash Equivalents
Net Receivables
Inventory
Other Current Assets
Total Current Assets
Property Plant and Equipment
Goodwill
Other Assets
Total Assets
Liabilities
Current Liabilities
Accounts Payable
Short/Current Long Term Debt
Total Current Liabilities
Long Term Debt
Other Liabilities
Deferred Long Term Liability Charges
Total Liabilities
Stockholders’ Equity
Common Stock
Retained Earnings
Capital Surplus
Other Stockholder Equity
Total Stockholder Equity
Net Tangible Assets
Dec 28, 2012
Dec 30, 2011
Dec 24, 2010
74,463
36,890
44,361
6,628
162,342
189,948
2,538
4,656
359,484
49,450
27,596
34,072
14,605
125,723
143,586
1,377
1,802
272,488
48,969
23,665
26,614
12,756
112,004
142,889
1,377
2,260
258,530
88,832
62
88,894
566
4,470
20,463
114,393
67,049
67,049
3,345
17,349
87,743
72,199
72,199
3,656
17,087
92,942
128
88,541
157,305
(883)
245,091
242,553
128
47,119
138,336
(838)
184,745
183,368
134
43,876
122,016
(438)
165,588
164,211
All numbers in $ thousands
Source: Boston Beer Company.
C130 CASE 20 :: THE BOSTON BEER COMPANY
early 2012, when the group purchased Southern California
Brewing.
The company continues to invest in efficiency initiatives
to lower cost within its breweries and increase margins. One
large program that the company is employing is its Freshest Beer Program. Typically, bottled and canned beer sits
in a distributors warehouse for three to five weeks, while
kegs sit for three to four weeks. In an effort to reduce storage time in the distributor warehouses by approximately
two weeks and consequently increase freshness of the beer
in retailers, the company focused on better on-time service,
forecasting, production planning, and great coordination
and cooperation with distributors. In 2011 the company
had 50 percent of its beer on the Freshest Beer Program,
with the goal of expanding that number to 75 percent in
2012 by investing $50 million into the program.
While expansion and growth are more commonly
deemed positive attributes, Boston Beer Co. is aware
of the many possible risks in the growth of its business.
With the acquisition of the Lehigh brewery in 2008, the
Boston Beer Company now brews over 90 percent of its
beer from its own breweries. With capital tied up in large
investments, there was a potential for the business to falter
if an unexpected event affected one of the breweries and
halted production at that facility. The company had also
put forth a sizable investment to increase product offerings and another to keep its beer fresh during distribution.
However, with its reliance on independent distributors, a
mishap in its relationship with major distributors could
lead to complications within their supply chain. The Boston Beer Company also depended on foreign suppliers of
raw material ingredients for its beer. An unexpected shortage of a crop might lead to a drop in production volume.
In effect, the image of the company would diminish if its
products were not available to loyal fans whose enjoyment
of the brand relies on the wide accessibility of a craft beer.
With the surge of an enormous number of other craft beer
choices, customers had many options to choose from.
Industry
Although Samuel Adams was sold in other countries, the
United States was where the majority of the product was
sold and where they held the most prominence in the beer
market. Within the beer industry, Samuel Adams fell into
the craft beer category. In terms of volume of beer sold,
the Boston Beer Company was the largest craft brewery
in the country, but only the seventh largest brewery overall
in 2013. The beer market consists mainly of standard and
economy lagers, which account for nearly 75 percent of all
volume sold. Samuel Adams brand beers were more costly
than standard lagers, and were counted with the premium
beers, which together account for the other 25 percent of
all beer sold.
In 2011 there were over 200 million barrels of beer
sold in the United States. Anheuser-Busch Inbev dominated the beer industry, totaling over 48 percent of the
market. MillerCoors also had a large share of the market
at just over 30 percent. Together these two companies sold
approximately 8 out of every 10 beers purchased in the
United States. The third largest brewer in terms of volume
of beer sold was the Mexican-owned Crown Imports LLC,
which accounted for less than 6 percent of the market. As
the seventh largest brewery in the country, the Boston Beer
Company had a 1.1 percent share of the market.
Changes in Drinking Habits
The consumption habits of beer drinkers appear to have
changed in recent years. From 2006 to 2011, the beer industry as a whole declined by approximately 3 percent.10 This
was mostly due to the decline in the consumption of standard lager by 10 percent and economy lager by 3 percent.
Even though the volume of beer sold declined, the craft
brew market had in fact exploded. Within the same period,
dark ales grew by 67 percent and premium lagers grew by
27 percent. Wheat beers (a segment of dark ales) experienced an especially large growth of over 150 percent.
The Boston Beer Company brewed the Samuel Adams
Cherry Wheat beer in this category, which was one of the
companys popular beers. According to Euromonitor International, projected beer volume sales would decline by
1 percent during 2013 to 2017, but craft beers were projected to grow by 3 percent. As shown in Exhibit 3, dark
beers, low-alcohol beers, and domestic premium lagers
were the only beer categories to grow from 20072011.
The Three-Tier System
In 2011, 75 percent of the volume of beer was sold at offtrade value in supermarkets, beer distributors, and such,
while the other 25 percent was sold in bars and restaurants. Despite the vast difference in volume sold, the value
of beer sold for both off-trade and on-trade were equal
because of the premium charged for purchasing beer at a
bar or a restaurant.
Breweries are not permitted to own either off-trade or
on-trade establishments, so their beer has to be distributed.
Before prohibition however, beer was sold in tavernlike
establishments called tied houses, which supplied and
sold their own beer. There were no regulations regarding
brewing companies owning all of the retail tied houses
and only selling their own beer. After prohibition, a system was put in place to discourage monopolies in the supply and sale of beer. This system was titled the Three-Tier
System and divided the beer industry into suppliers, distributors, and retailers, all independent of each other. Aside
from the brewpub, breweries cannot own retailers or distributors, thus ensuring a level of competition in the brewing industry.11
Although the three categories of the industry are separate, they each have a large influence on one another. For
instance, Anheuser-Busch Inbev and MillerCoors sell
80 percent of the beers in the country. That means that
80 percent of distributors volume, and consequently
CASE 20 :: THE BOSTON BEER COMPANY C131
EXHIBIT 3 Total Sales of Beer, 20072012 (Millions of Barrels)
A
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Case Financials.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Type of Beer
Amber Ale
Other Ale
Pale Ale
Wheat Beer
Other Dark Beer
Subtotal Dark Beers
Domestic Premium Lager
Imported Premium Lager
Standard Lager
Economy Lager
Subtotal Lagers
Low Alcohol Beer
Stout
Total
B
C
D
E
Total Sales of Beer, 20072012 (Millions of Barrels)
2007
2008
2009
2010
0.78
0.81
0.97
1.10
1.57
1.60
1.63
1.78
1.32
1.35
1.37
1.51
1.69
1.95
2.26
2.97
0.08
0.08
0.08
0.08
5.45
5.80
6.32
7.44
13.76
15.55
15.74
15.40
27.29
26.75
25.04
25.40
110.28
109.71
105.37
100.11
50.88
51.68
52.66
51.43
202.22
203.69
198.81
192.34
1.06
1.08
1.93
2.73
1.15
1.16
1.14
1.16
209.88
211.72
208.20
203.67
F
G
2011
1.11
1.94
1.73
3.30
0.08
8.17
15.58
25.71
98.07
48.85
188.21
2.57
1.27
200.21
2012*
1.12
2.09
1.86
3.70
0.08
8.85
15.76
26.03
95.60
44.40
181.79
2.41
1.35
194.40
*Author estimates.
Source: Global Market Information Database.
revenue, is from these two companies. Hence, the distributors value the business of Anheuser-Busch Inbev and
MillerCoors to a higher degree, in fear of losing their business. In an effort to maintain its dominant position in the
industry, Anheuser-Busch Inbev has contracted with several distributors on the condition that they cannot work
with any other breweries. Likewise, the other large breweries impose restrictions on their distributors on what other
breweries they can work with as well.
The distributors act as the intermediary in the beer
industry, providing the beer to retailers. The beer that is
available from retailers is a result of the products that their
distributors carry. The distributors are major decision makers for what beer taps will be available in bars, as well
as the location of beer selections in supermarkets. Small
breweries do not like the system because the distributors
are heavily influenced by the major breweries. This makes
it difficult for the small breweries to compete and achieve
growth if distributors have no incentive to treat them as an
equal business partner. Consequently, it is difficult for a
small brewery to gain widespread recognition in the industry. Despite the challenges, the Boston Beer Company had
made a name for itself and sold its beer to a network of
approximately 400 distributors.
professional breweries as well as home brewers. In 2012
more than 1,650 beers in 65 different categories were submitted. The top 10 brewers were named based on receiving
the highest overall grade in the most categories collectively. Exhibit 4 shows the top 10 brewers for 2012 according to the U.S. Open Beer Championship. The Boston Beer
Company received the second-place ribbon, an impressive
feat with so many breweries participating.12
Home brewing has become an extremely popular hobby
and in many instances has led home brewers to pursue their
passion in the form of an actual brewery. The Homebrewers Association was founded in 1978 and includes more
than 30,000 beer-enthusiastic members. Exhibit 5 shows a
EXHIBIT 4 Top 10 Brewers, U.S. Open Beer
Championship, 2012
Rank
Brewery
1
Sweetwater Brewing
Georgia
2
Boston Beer Company
Massachusetts
3
Deschutes Brewery
Oregon
4
Cigar City Brewing
Florida
Competition
5
Black Tooth Brewing
Wyoming
The Boston Beer Company mainly competes with other
beers sold in the United States. Samuel Adams belongs to
the craft beer category, which has been rapidly growing
over the last several years. The company faces competition
from other craft brewers, premium import brewers, and the
two major domestic breweries, Anheuser-Busch Inbev and
MillerCoors.
The U.S. Open Beer Championship is a highly recognized nationwide beer competition that includes
6
Niagara College
Ontario
7
Full Sail Brewing
Oregon
8
Sprecher Brewing
Wisconsin
9
Morgan Street Brewing
Missouri
Maui Brewing
Hawaii
C132 CASE 20 :: THE BOSTON BEER COMPANY
10
Source: U.S. Open Beer Championship.
Location
EXHIBIT 5 Top 10 Beer Categories in 2012
Best Beer
Best Brewery
Best Portfolio
Russian River Pliny the Elder
Sierra Nevada Brewing Company
Boston Beer Company (41 beers)
Bells Two Hearted Ale
Dogfish Head Craft Brewery
Dogfish Head Craft Brewery (34 beers)
Dogfish Head 90 Minute IPA
Stone Brewing Company
New Glarus Brewing Company (28 beers)
Sierra Nevada Pale Ale
Russian River Brewing Company
Rogue Ales (27 beers)
Stone Arrogant Bastard Ale
Bells Brewery
Bells Brewery (26 beers)
Bells Hopslam
New Belgium Brewing Company
New Belgium Brewing Company (26 beers)
Sierra Nevada Celebration
Firestone Walker Brewing Company
Sierra Nevada Brewing Company (25 beers)
Stone Ruination IPA
Deschutes Brewery
Three Floyds Brewing Company (25 beers)
Sierra Nevada Torpedo
Lagunitas Brewing Company
Goose Island Brewing Company (23 beers)
North Coast Old Rasputin
Founders Brewing Company
Great Divide Brewing Company (23 beers)
Samuel Adams Boston Lager (31st)
Boston Beer Company (11th)
Source: Homebrewers Association.
ranked list of the top 10 beers, top 10 breweries, and top 10
most diverse breweries.13
The Boston Beer Company also competes with the
noncraft breweries that sell premium imports and standard
and economy lagers. In regards to dollar sales, a list of the
top 20 beers in the United States is shown in Exhibit 6,
followed by a list of the top imports in Exhibit 7. Samuel
Adams did not crack the top 20 list.14
Sierra Nevada Brewing Company
Ken Grossman and Paul Camusi started the Sierra Nevada
Brewing Company in 1980. It is the second largest craft
brewery behind the Boston Beer Company and the 10th
largest brewery in the United States. It was also voted
the best craft brewery by the Homebrewers Association.
Sierra Nevada makes a pale ale that is the highest-selling
pale ale in the country. The company sold approximately
EXHIBIT 6 Top Dollar Sales of Beers in the United States
A
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Rank
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Top Dollar Sales of Beers in the United States
Beer
Dollar Sales
Brewery
Bud Light
$5,327,145,000
Anheuser-Busch Inbev
Budweiser
$2,072,380,000
Anheuser-Busch Inbev
Coors Light
$1,946,762,000
MillerCoors
Miller Lite
$1,672,598,000
MillerCoors
Natural Light
$1,089,709,000
Anheuser-Busch Inbev
Corona Extra
$ 964,968,900
Crown Imports
Busch Light
$ 735,397,100
Anheuser-Busch Inbev
Busch
$ 684,463,700
Anheuser-Busch Inbev
Heineken
$ 577,453,300
Heineken USA
Michelob Ultra Light
$ 518,075,100
Anheuser-Busch Inbev
Miller High Life
$ 498,743,900
MillerCoors
Keystone Light
$ 484,396,900
MillerCoors
Natural Ice
$ 363,154,400
Anheuser-Busch Inbev
Modelo Especial
$ 331,697,700
Crown Imports
Bud Light Lime
$ 299,320,300
Anheuser-Busch Inbev
Icehouse
$ 239,119,900
MillerCoors
Bud Ice
$ 221,357,000
Anheuser-Busch Inbev
Pabst Blue Ribbon
$ 204,409,400
Pabst Brewing Company
Yuengling Lager
$ 185,332,400
Yuengling Brewery
Corona Light
$ 168,556,600
Crown Imports
Source: SymphonyIRI Group.
CASE 20 :: THE BOSTON BEER COMPANY C133
EXHIBIT 7 Top Dollar Sales of Imported Beers in the United
States (millions of dollars)
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Financials.
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B
C
Top Dollar Sales of Imported Beers in the
United States (millions of dollars)
Beer
Sales
1
Corona Extra
$422.90
2
Heineken
$275.40
3
Corona Light
$129.10
4
Tecate
$ 95.90
5
Modelo Especial
$ 90.50
6
Stella Artois Lager
$ 67.80
7
Heineken Premium Light Lager
$ 58.30
8
Dos Equis XX Lager Especial
$ 56.40
9
Newcastle Brown Ale
$ 56.20
10
Guinness Draught
$ 47.20
11
Beck’s
$ 45.00
12
Pacico
$ 42.70
13
Labatt Blue
$ 42.10
14
Labatt Blue Light
$ 33.40
15
Amstel Light
$ 30.20
16
Fosters Lager
$ 27.30
17
Red Stripe
$ 24.80
18
Negra Modelo
$ 22.40
19
Dos Equis XX Ambar Lager
$ 20.40
20
St. Pauli Girl
$ 19.90
Source: Global Market Information Database, Sales of the leading imported
beer brands of the United States in 2011, www.statista.com.
865,000 barrels of beer in 2012 and distributes in all
50 states. Sierra Nevada was one of the earliest craft
breweries, and its founders are consequently referred to as
pioneers in the craft brewing industry. The company plans
to open another brewing facility within the next few years
to continue growth of the business. They create goodwill
by promoting the craft beer industry and by their efforts
to be environmentally friendly in their beers production.
One of Sierra Nevada Brewings goals is to overtake the
Boston Beer Company as the largest craft brewery in the
country.15
New Belgium Brewing Company
Jeff Lebesch founded New Belgium Brewing Company
in Fort Collins, Colorado, in 1991. New Belgium Brewing Company is the third largest craft brewery in the
United States behind the Boston Beer Company and Sierra
Nevada, and the 8th largest brewery in the country. The
companys flagship beer is an amber ale called Fat Tire,
but it has over 25 different beers in production. In 2012 the
company sold over 700,000 barrels of beer and was distributed in 29 states. Over the last several years, the company has seen growth of approximately 15 percent. New
Belgium has plans to build a $100 million brewery in
North Carolina by 2015 to compete with the other major
breweries. Like Sierra Nevada, New Belgium focuses on
energy-efficient practices. New Belgium Brewing also
hopes to become the largest craft brewery in the country.16
C134 CASE 20 :: THE BOSTON BEER COMPANY
Crown Imports, LLC
Crown Imports, LLC, is a joint venture between Grupo
Modelo and Constellation Brands. Crown Imports has
a portfolio of beers that includes Corona Extra, Corona
Light, Modelo Especial, Pacifico, and others. Crown
Imports controls approximately 6 percent of the market
and has the number one import into the United States with
Corona Extra, which brought in almost $1 billion in revenue in 2012. It is the third largest brewing company in the
United States behind Anheuser-Busch Inbev and MillerCoors. The beer brands are owned by the public company Constellation Brands. Constellation owns over 200
brands of beer, wine, and spirits and had sales of almost
$3 billion in 2012. With such a large financial backing,
Crown Imports wants to remain the number one import in
the country and close the gap in market share from the top
two breweries. Due to its large amount of capital, Crown
Imports is able to advertise its brands nationally. Crown
also hosts several charitable events.17 Crown recently
started a campaign to make Corona Extra the most liked
beer in America.
Heineken
Heineken is the second largest import brewing company
and the fourth largest brewing company in the United
States. The company has had approximately 4 percent of
the market for the last several years. The company was
founded in 1873 and resides in 71 countries worldwide.
Heineken imports popular brands such as Heineken,
Amstel Light, Sol, Dos Equis, and Newcastle. The
Heineken beer alone collected more than $590 million in
sales in 2012. With Heinekens large size and reputation,
it has the ability to advertise its products nationally. The
Dos Equis brand has grown by over 10 percent since the
popular Most Interesting Man in the World commercials
began airing. Most of the brands offered by Heineken are
in the price range of Samuel Adams, making them a close
competitor.18
Anheuser-Busch Inbev NV
Anheuser-Busch Inbev is one of the largest beer companies in the world, with roughly $40 billion in revenue in
2012. The brewing portion of the company remains the
largest brewery in the country and has an approximate
50 percent stake in the United States beer industry.19 They
have the two best-selling beers in the country with Bud
Light and Budweiser and the fifth best-selling beer with
Natural Light. However, they have seen the sale of their
products decline over the last several years. In an effort
to combat the lower volume of sales, they have raised the
prices of their beer.
Additionally, the company has also been witness to the
explosive growth of the craft beer industry. Although it
could never be considered a craft brewery because of its
size, Anheuser-Busch plans to make more craftlike beers,
as it has done with its brand Shock Top. They also plan
EXHIBIT 8 Map of Domestic Beer Brands*
Domestic Beers
Alcohol by volume (%)
Avg. Price for a 6 Package of Beer
Market Share
Bud Light
4.20
$4.99
0.198
Coors Light
4.20
$4.99
0.097
Budweiser
5.00
$4.99
0.074
Miller Light
4.20
$4.99
0.041
Corona Extra
4.60
$7.99
0.035
Natural Light
4.20
$3.49
0.035
Busch Light
4.10
$3.99
0.032
Busch
4.60
$4.49
0.029
Miller High Life
4.70
$3.99
0.024
Keystone Light
4.13
$3.49
0.022
Blue Moon Belgian White
5.36
$8.49
0.015
Heineken
5.00
$5.99
0.010
Samuel Adams Boston Lager
4.90
$8.49
0.009
Shock Top Belgian White
5.20
$8.49
0.008
Sierra Nevada Pale Ale
5.60
$8.49
0.008
New Belgium Fat Tire
5.20
$8.99
0.007
Yuengling Lager
4.40
$6.49
0.005
Dogfish Head Pale Ale
5.00
$8.99
0.004
Brooklyn Brewery Lager
5.20
$7.99
0.004
*Some shares are estimated due to undisclosed information.
Source: Global Market Information Database.
to invest in and purchase small craft breweries, like that
of Goose Island, which makes the popular beer 312. The
company is also not opposed to merging with other large
breweries. In June of 2012, the company was partaking in
talks with the maker of Corona to purchase the company.
The size and influence that Anheuser-Busch has pose a
threat to the Boston Beer Company because their substantial lead in available capital.
Belgian White. They have also started the group Tenth
and Blake to focus on the craft beer industry and premium
imports and plan to expand the group by 60 percent over
the next few years. Some of their other premium beers
include Leinenkugels Honey Weiss, George Killians Irish
Red, Batch 19, Henry Weinhards IPA, Colorado Native,
Pilsner Urquell, Peroni Nastro Azzurro, and Grolsch.20
Thinking about the Future for Beer
Millercoors, LLC
MillerCoors, LLC, is the second largest brewing company in the country, a joint venture between the Miller and
Coors brands, accounting for approximately 30 percent
of the market. They have two out of the top five most
popular beers with Miller Lite and Coors Light, and would
like to catch up with Anheuser-Busch Inbev. The company
trades publicly as Molson Coors Brewing Company and
SAB Miller, and were sold for over $40 and $2,600 respectively in July of 2012. MillerCoors would also like to push
its craft beers after witnessing the growth in the market.
They have the most popular craftlike beer with Blue Moon
The Boston Beer Company created high-quality craft
beers and sold them at a higher prices than standard and
economy lagers. It was the largest craft brewery in the
country and the seventh largest overall brewery. While
Boston Beer was delighted to be the largest craft brewery,
the goal was to become the third largest overall brewery
in the country. Brand recognition is key to any business,
and it is especially obvious in the beer industry. AnheuserBusch Inbev and MillerCoors spend enormous amounts of
capital each year to advertise their products. Due in large
part to Anheuser-Busch Inbev and MillerCoors, beer has
become synonymous with sports, and nowhere is this more
CASE 20 :: THE BOSTON BEER COMPANY C135
apparent than the Super Bowl. Anheuser-Busch Inbev was
one of the main sponsors of the Super Bowl in 2012, and
beer commercials were apparent throughout the game.
The challenge for craft brewers is to gain the attention
of potential customers while these large brewers spend a
great deal of money vying for these same consumers. One
might argue that the larger brewers beers do not encompass the same amount of flavor or high-quality taste as the
craft beers do, but it is hard to be heard in a crowded space.
Jim Koch and the Samuel Adams team emphasize the
amount of hops and flavor that their products have and
they want to get better beer to potential customers.
Boston Beer even tried to help the craft beer movement
as a whole, with the potential of hurting their own Samuel
Adams line of business. In 2008 the company sold excess
hops to small brewers who were struggling to pay for the
rising cost. Boston Beer also partnered with Accion to
provide microloans to small businesses trying to start up
breweries and to help small breweries in distress.21
Over the last several years, the craft brewing industry
has grown at the expense of standard and economy lagers.
The major breweries have taken notice and have started to
build up their craft-style beer portfolios. In the past, the
Boston Beer Company had an advantage as being one of
the only craft breweries that was nationally recognized.
With other craft breweries on a steady rise, the Boston
Beer Company has to position itself to remain in front.
Exhibit 8 shows the pricing and alcohol by volume for
popular U.S. beers.
The Boston Beer Company made an effort to move
away from contract brewing and toward brewing its own
beer with the purchase of the large brewery in Pennsylvania. They had also put a focus on growing the brand in
other countries outside the United States. In 2009 the company established a relationship with Moosehead Breweries
in Canada to expand the Samuel Adams brand presence
there. In addition, with the increase in popularity of other
C136 CASE 20 :: THE BOSTON BEER COMPANY
alcoholic beverages besides beer, Boston Beer has positioned their Twisted Teas and HardCore Cider products to
be recognized nationwide as well.
Boston Beer Company was in a tough position, as both
the smaller craft breweries and the larger breweries wanted
to compete with them. Only time will unfold whether
Boston Beer will continue to brew flavorful beers that people enjoy, in order to maintain a loyal customer base and
see continued growth in the future.
ENDNOTES
1. Global Market Information Database. 2012. The Boston Beer
Company, in alcoholic drinks (USA). February.
2. Global Market Information Database. 2012. Beer in the US. February.
3. Los Angeles Times. 2011. MillerCoors CEO Tom Long seeks growth
with craft beers. August.
4. www.brewersassociation.org.
5. Washington Times. 2012. Top Ten: Craft beers of 2011. January
6 Rotunno, Tom. October 31, 2011. MillerCoors Crafts Small Beer
Strategy. CNBC.com, http://www.cnbc.com/id/45079554
7. Personal Interview with Woody from Defiant Brewery in Pearl River,
New York, June 2012.
8. www.bostonbeer.com.
9. The New York Times. 2012. An IPO that is customer-friendly.
February.
10. Euromonitor International and author estimates
11. www.abdi.org.
12. www.usopenbeer.com.
13. The Homebrewers Association
14. Dayton Business Journal. 2012. Top 20 selling beers of 2011.
January.
15. www.sierranevada.com.
16. www.newbelgium.com.
17. www.crownimportsllc.com.
18. www.heineken.com.
19. www.ab-inbev.com.
20. www.millercoors.com.
21. Anonymous. 2008. Sharing beers: Largest craft brewer offers
scarce hops to rivals. Associated Press, April 06, 2008. In http://
www.pantagraph.com/business/article_3f06ff0a-44a8-53c2-bd1852b5e6e25977.html.

Introduction:
In today’s highly competitive business environment, it is essential for organizations to assess the external environment to remain competitive and achieve a sustainable competitive advantage. One crucial aspect of analyzing the external environment is using Porter’s Five Forces model to evaluate the industry’s competitive dynamics. This model assesses the five key forces that influence a company’s profitability and shape its competitive strategy. In this context, this article examines the application of Porter’s Five Forces in the beer industry.

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Description:
The beer industry is highly competitive and consists of several key players, making it a challenging industry to succeed in. The application of Porter’s Five Forces model shows that there are five critical forces that shape the industry’s competitive dynamics. These forces include the threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute products/services, and rivalry among existing firms.

Firstly, the threat of new entrants in the beer industry is relatively low due to high capital requirements and significant economies of scale faced by existing players. The beer industry is a mature and well-established market that requires a considerable investment in production, marketing, and distribution capabilities. New entrants will have to compete with established firms with well-recognized brands, making it difficult to gain market share.

Secondly, the bargaining power of buyers in the beer industry is relatively high due to the industry’s fragmented nature and the abundance of choices available to buyers. Consumers have the power to decide which beer products they prefer and can shift their preferences quickly. The high number of microbreweries and other small players offer a range of beer options that attract consumer loyalty.

Thirdly, the bargaining power of suppliers in the beer industry is relatively low. The primary raw materials required to produce beer include hops, malted barley, and yeast, which are widely available. Additionally, the industry does not rely on a single supplier or group of suppliers, making the power of suppliers weaker.

Fourthly, the threat of substitute products is moderate in the beer industry. While there are several substitutes available, such as wine, spirits, and non-alcoholic beverages, beer remains a popular drink globally, with a significant market share.

Finally, the rivalry among existing firms in the beer industry is intense due to the number of players existing in the market. The beer industry’s leading players include Anheuser-Busch InBev, Molson Coors, Heineken, and Carlsberg, with several other small and medium-sized players operating in the market.

Overall, the beer industry is highly competitive, and firms that compete in this space need to have a nuanced understanding of the industry’s dynamics to succeed.

Objectives:
– To understand and apply Porter’s Five Forces in analyzing the beer industry
– To identify and compare the main strategic groups in the beer industry
– To evaluate the attractiveness and profitability of the industry

Learning Outcomes:
– After studying the beer industry case study and PowerPoint notes, the learner will be able to identify and analyze the five forces of competition according to Porter.
– The learner will be able to distinguish and compare the main strategic groups operating in the beer industry based on Porter’s Five Forces analysis.
– The learner will be able to assess the attractiveness and profitability of the beer industry based on a thoughtful analysis of Porter’s Five Forces.

Analyzing the External Environment of the Firm: Creating Competitive Advantages

The Competitive Environment

The competitive environment consists of factors in the task or industry environment that are particularly relevant to a firm’s strategy. According to Porter’s Five Forces model, these factors are the:

1. Competitors (existing or potential) including those considering entry into an entirely new industry
2. Customers (or buyers)
3. Suppliers including those considering forward integration
4. Threat of substitute products or services
5. Threat of new entrants

Porter’s Five Forces Model of Industry Competition

One of the most commonly used frameworks to understand industry competition is Porter’s Five Forces Model. It helps firms to identify the key drivers of competition and to develop effective strategies to gain a competitive advantage.

The Threat of New Entrants

The possibility that the profits of established firms in the industry may be eroded by new competitors. The barriers to entry can be created by:

1. Economies of scale
2. Product differentiation
3. Capital requirements
4. Switching costs
5. Access to distribution channels
6. Cost disadvantages independent of scale
7. Government policy

The Bargaining Power of Buyers

Buyers are individuals or companies that purchase goods or services from a firm. They can bargain for better prices, higher quality, or more services, and they can play competing firms against each other. Buyers are powerful when they are concentrated, purchase large volumes relative to the total industry, or are capable of backward integration.

Identifying the Industry of the Company: Verizon

Verizon is part of the telecommunications industry which provides services such as landline, wireless, internet, and television services. The industry is highly competitive, and the barriers to entry are relatively low compared to other industries.

Applying Porter’s Five Forces on Verizon

The Threat of New Entrants: The telecommunications industry has become increasingly popular with many new entrants. The barriers to entry are relatively low, providing an opportunity for new entrants. The advancement in technology has also led to the emergence of new technologies making it easier for new entrants to compete. However, the proliferation of the industry has also resulted in intense pricing competition, which makes it more difficult for new entrants.

The Bargaining Power of Buyers: Buyers in the telecommunications industry are powerful. They have the ability to choose from several providers of the same services. The introduction of new technologies has also made it easier for customers to switch providers. Thus, the bargaining power of buyers is relatively high, leading to increased pressure on firms to lower prices and improve their services.

Conclusion

The telecommunications industry is an attractive industry for new entrants, but the intense competition makes it difficult for them to succeed. The bargaining power of customers is high, leading to increased pressure on firms to lower prices and improve their services. Verizon should focus on differentiating its services to stay competitive and provide better value to customers.

Solution 1: Apply Porter’s Five Forces on the general Beer Industry and Solution 2: Identify and compare the main strategic groups in the beer industry

Solution 1: Apply Porter’s Five Forces on the general Beer Industry

The beer industry is a highly competitive market with established players and new entrants trying to gain market share. Using Porter’s Five Forces, we can better understand the competitive environment of the industry, which comprises five forces:

1. Threat of new entrants: The threat of new entrants is high in the beer industry due to the low barriers to entry for new players. The requirement for capital investment to set up production of beer, branding, and marketing campaigns is relatively low. Established players such as Anheuser-Busch and Carlsberg have economies of scale and established brands, which can act as a barrier to new entrants.

2. Bargaining power of suppliers: The bargaining power of suppliers is moderate to high in the beer industry as it is highly dependent on agricultural products such as hops, barley, and malt. Suppliers can set prices based on demand, and the production of the raw materials such as hops and barley is limited to certain regions globally, which can lead to volatile prices. However, large beer manufacturers have more bargaining power due to their size and ability to negotiate better prices.

3. Bargaining power of buyers: The bargaining power of buyers is high in the beer industry due to the large number of suppliers and distributors available to businesses and consumers. Additionally, there is a trend of increasing demand for craft beer, which has led to a rise in competition, price pressure, and greater consumer bargaining power.

4. Threat of substitute products: The threat of substitute products is high in the beer industry due to the growing popularity of wine, spirits, and non-alcoholic beverages. Additionally, health concerns and the trend of seeking reduced calorie and alcohol content beverages can lead to consumers seeking healthy alternatives to beer.

5. Rivalry among existing competitors: Rivalry among competitors is high due to the large number of players in the industry and the ongoing competition among market leaders to gain a greater market share. Established leaders such as Anheuser-Busch, Heineken, and Molson Coors have a significant competitive advantage due to their size, marketing budgets, and branding. However, smaller players can gain a foothold either through regional distribution or niche products, which can lead to increased competition.

Solution 2: Identify and compare the main strategic groups in the beer industry

The beer industry is broadly categorized into three strategic groups based on their business focus and market share:

1. Market leaders: Large global brands such as Anheuser-Busch, Heineken, and Carlsberg operate in this group. Their focus is on economies of scale, extensive distribution networks, and brand building. They have a large market share, a high degree of control over the supply chain, and access to markets all around the world.

2. Niche players: Niche players are those that focus on producing beer with a specific taste or targeting a specific audience. They have a smaller market share but tend to be more profitable due to their focus on premium beers, which attract more price-sensitive consumers. They also have a lower cost structure, which allows them to be competitive and target specific geographic regions.

3. Microbreweries: Microbreweries are relatively small players but are growing in popularity. They focus on brewing small batches of craft beer using traditional brewing methods and focusing on the taste and quality of the brew. They are usually regionally based and distribute in local markets, which provides them with a competitive advantage. Microbreweries focus on creating unique, branded products and making a profit through a high selling price.

In conclusion, the beer industry is a highly competitive market, with low entry barriers and fierce competition among market leaders. However, there are also opportunities for niche players and microbreweries to gain a foothold by creating specialized products or focusing on local markets. The industry is highly impacted by trends in consumer preferences, government policies, and competitive behavior, making it essential for businesses to be nimble and adaptable to succeed.

Suggested Resources/Books:
1. “Competitive Strategy: Techniques for Analyzing Industries and Competitors” by Michael E. Porter
2. “Craft Brew: 50 Homebrew Recipes from the World’s Best Craft Breweries” by Euan Ferguson
3. “The Business of Craft Beer: Running a Successful Brewing Company” by K. Florian Klemp
4. “Beer School: A Crash Course in Craft Beer” by Jonny Garrett and Brad Evans

Porter’s Five Forces Model in Beer Industry:

Porter’s Five Forces Model is a framework utilized for industry analysis and strategic planning. It was created by Harvard Business School Professor Michael E. Porter in 1979. The model is helpful in assessing the rivalry among existing players, bargaining power of suppliers, bargaining power of buyers, the threat of new entrants and substitutes within an industry. Here is the application of Porter’s Five Forces Model on the beer industry:

1. The Threat of New Entrants:
The beer industry has a high threat of new entrants due to the low barriers to entry. However, there are some significant barriers to entry that prevent new firms from entering the industry, such as economies of scale, access to distribution channels, complex regulations and high capital requirements.

2. The Bargaining Power of Suppliers:
Beer manufacturers depend on raw materials, including hops, barley, yeast and water. The bargaining power of suppliers in the beer industry is moderate since the market is heavily concentrated, but suppliers are largely fragmented and are not consolidated.

3. The Bargaining Power of Buyers:
The bargaining power of buyers is high in the beer industry due to increased competition. Individuals or companies who purchase beer products in bulk can negotiate discounts, and they can also switch from one brand of beer to another with ease.

4. The Threat of Substitutes:
The threat of substitutes in the beer industry is low since beer has fewer alternatives. However, wine, spirits and other alcoholic beverages are primary substitutes that can lead to a decline in the beer industry.

5. Rivalry among Existing Players:
The rivalry among existing players in the beer industry is intense due to the presence of several domestic and international companies and increased competition. Some popular beer brands include Budweiser, Coors, Heineken, Corona and Miller.

Similar Questions:
1. What are the significant barriers to entry in the beer industry?
2. How does the bargaining power of buyers impact the beer industry?
3. What are some alternatives to beer in the alcoholic beverage industry?
4. How do the economies of scale affect beer production?
5. How does government policy influence the beer industry?

Verizon’s Industry and Porter’s Five Forces:

Verizon is an American multinational telecommunications conglomerate and the largest wireless communications service provider in the United States. Here is the application of Porter’s Five Forces Model on the telecommunications industry:

1. The Threat of New Entrants:
The telecom industry has a medium threat of new entrants. The industry demands high capital, and there are regulatory issues, which makes it challenging for new players to enter the market.

2. The Bargaining Power of Suppliers:
The bargaining power of suppliers is low in the telecommunications industry since most suppliers are large firms that demand to fulfill Verizon’s requirements.

3. The Bargaining Power of Buyers:
The bargaining power of buyers is high in the telecommunications industry due to a high competition in the industry. Customers can choose from several cellular, landline, and cable providers.

4. The Threat of Substitutes:
The threat of substitutes is high in the telecommunication industry since several substitutes such as email, instant messaging services, and other social media apps are available.

5. Rivalry among Existing Players:
The market is highly concentrated with only a few dominant players, but the competition is severe. The rivalry among existing players in the telecommunication industry is high.

Similar Questions:
1. What are the regulatory challenges faced by the telecommunication industry?
2. How have technological advancements impacted the telecommunication industry?
3. How does a high concentration of market players impact the telecommunication industry?
4. What are some substitutes to traditional telecom services?
5. How does brand recognition play a role in the telecommunication industry?

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