Executive Summary
The beer industry in the United Kingdom is very competitive. However, Cobra Beer has been able to curve for itself a section of the market share by offering unique products to its clients. The founders of this company identified a gap in the market than developed a product that fills the gap in the best way possible. In this paper, the analysis focuses on the market forces that Cobra Beer faces in the market and how it has developed strategies to deal with these forces. It looks at how this firm has been able to expand its market share beyond the United Kingdom to China and India using various strategies. The report shows that Cobra Beer has to manage a competitive business environment using effective strategies. The strategies needed of this firm must give it an edge over its top market rivals. They must also protect it from the threat that new entrants may pose in the market.
It is clear from the report that the differentiated strategy has helped this firm achieve growth in the United Kingdomâs liquor market. Using this strategy, Cobra Beer has made its products unique compared to what other market rivals offer. The differentiated strategy has enabled it to create a market niche for itself where other competitors cannot outperform it. The differentiated strategy has also been effective in China and India, the other two major markets for Cobra Beer outside the United Kingdom. The report looks at the effectiveness of this strategy in the long term. As shown in the discussion, a strategy that a firm chooses must be capable of standing the test of time. Since the time it was founded, Cobra Beer has used differentiated strategy as a way of avoiding stiff market competition in the United Kingdomâs market. The report shows how the strategy has helped the firm overcome numerous challenges in the market even at a time it was facing insolvency. The Cobra Beer brand remains strong in the United Kingdomâs market, a sign that the strategy has stood the test of time.
Introduction
Cobra Beer, founded by Karan Bilimoria in 1989, is increasingly becoming a popular beer brand in the United Kingdom. The firm has its headquarters in Burton-on-Trent in Staffordshire. Its brand appeals to a section of the market in the beer industry. It is important to note that both the internal and external environmental forces directly affect its performance in the market. The firm will need to develop effective strategies that can help it overcome both macro and micro environmental forces. It will also need to have strategies that can enable it to deal with internal issues in its operations. According to Grossman (2013), when a firm is operating in a highly competitive business environment such as the one in which Cobra Beer is operating, success can only be achieved if the firm is capable of understanding its internal environment and external forces and how they can be managed in order to achieve the desired results in the market. In this report, the researcher will look at the external environment of Cobra Beer in the United Kingdom and its internal environment with the view of coming up with strategies that can help it achieve the desired success in the market.
Analysis of the External Environment
The external environment in which this firm operates has a direct impact on its performance and sustainability. The management of this company will need to understand the forces in micro and macro environments to be capable of developing effective strategies.
Macro Environment Analysis Using PESTEL Model
The macro-environment analysis will be conducted using PESTEL model to understand the environmental forces that this company will have to deal with in the market as it strives to achieve success. The political climate in the United Kingdom has been very stable following the end of World War II. The stable political environment in the United Kingdom provides a stable business environment where Cobra Beer can operate without the fear of lawlessness. The political class in the United Kingdom has also avoided actively engaging in activities that might be detrimental to the progress of both public and private companies. According to Grossman (2013), the political climate in the United Kingdom is suitable for the growth of firms because of the non-interference approach taken by the leaders of the country.
The economic environment is another important factor that the management of this company must consider. One of the most important economic factors is the purchasing power of the targeted customers. The United Kingdom has one of the strongest economies in the world. The purchasing power of the individual citizens is also very high, which means that the targeted customers are economically empowered. The growth of the countryâs economy, especially the rapid diversification supported by the government, offers attractive growth opportunities (Searle, Alston, & French 2014). In the recent past, the government has avoided punitive taxation systems that were common in the past to reduce the popularity of alcohol in the country, especially among the youth. In such an attractive economic environment, it is easy for a firm to achieve the desired economic growth.
According to Barrow, Barrow and Brown (2012), the social environment is also important in defining how successful a firm is in the market. A firm must understand how the social environment affects its operations in the market. One aspect of the social environment that is critical for this firm is the nature of the recreational activities popular in the country. The attitude of people towards alcohol, as shaped by socio-cultural forces of the country, defines how popular the product can be among the target market. The United Kingdom social environment is relatively supportive of alcoholic drinks. There is a growing population of responsible binge takers who are capable of taking alcohol without letting it interfere with their socio-economic lives (Keatley et al. 2017). Having such responsible clients is very important for a company because they will always have enough money to purchase the firmâs products in future.
The technological environment is another critical aspect of the macro-environment that the management of this company must put into consideration (Harhay et al. 2014). The emerging technologies are redefining the manner in which firms operate in the market. For instance, most companies are now using modern ways of production based on emerging technologies. Technology is not only impacting production strategies but also modes of communication. Firms are now heavily relying on a social media platform to reach out to their customers. Majority of the customers of Cobra Beer are regular users of Fecebook, Twitter and YouTube. Firms are using these new technology-based communication platforms to reach out to their target customers.
In a modern society where environmental conservation is becoming a major macro-environmental issue, it will be important for this company to understand the environmental issues that are relevant to this industry. The United Kingdom is one of the countries that have put into place measures to ensure that companies do not exceed a certain limit in their emission of greenhouse gases. Environmental conservation is a big issue in the region and firms are under pressure to ensure that their operations have the least possible impact on the environment. There is also an emerging pressure for firms to embrace CSR activities relating to environmental conservation not only within the country but also at the regional level. Companies are finding themselves in a situation where they have to be actively involved in projects relating to environmental conservation.
The legal environment is the last factor that this model proposes must be considered by a firm to achieve the desired success in the market. According to some recent studies, a firm cannot operate successfully in an environment that lacks proper legal structures (Britton et al. 2015). Cobra Beer will need a legal environment that can protect it from the external players that may want to exploit it. The legal environment also defines how it should relate with its customers, suppliers, government, public and any other relevant stakeholders. The United Kingdom has a clear legal structure that defines such relationships. The law explains the responsibilities of a company to each of the relevant stakeholders. The management will ensure that the firmâs operations are within the legal framework set by various agencies within the country. It is also natural that the government will protect it in case other stakeholders engage in practices, which are unfair to the firm and against the law.
Industry Analysis Using Porterâs Five Forces
After an analysis of the Macro-environment, it is important to narrow down to the industry level analysis. At this moment, it is clear what Cobra Beer will have to deal with in terms of countrywide environmental forces. The forces discussed above affect all firms irrespective of the industry in which they operate. However, the industry-specific forces are also important and require critical analysis. Industry analysis is particularly important in helping a firm to come up with operational strategies (Adam 2014). The forces make it possible to understand the areas where the company will need to give special consideration in order to maintain its competitiveness in the market. Using Porters Five Forces model makes it possible to understand the forces within the liquor industry. The following figure shows the model.
As shown in the above model, five industry-specific factors must be considered for a firm to know how to come up with the appropriate strategies in the market. The first factor is the level of competitive rivalry. The level of competition in the market helps a firm to know how to define its market strategies to give it an edge over its rivals (Adam 2014). The level of competitiveness in the industry is very high. It is still growing and as such, the level of competition is expected to be even higher. Currently, some of the top beer brands in the United Kingdom include SAB Miller, Marstonâs Brewery, Fullerâs Brewery, Samuel Smith Brewery, Youngâs, Shepherd Neame Brewery, Scottish & Newcastle and Adnams Brewery. These are top brands in the liquor industry, which pose serious competition to Cobra Beer.
The bargaining power of the suppliers is another important issue that must be put into consideration when analyzing the industry. Very powerful suppliers may dictate product prices and delivery strategies in a way that may be unfavorable to this new company. According to a report by Davies (2016), most of the raw materials used in the liquor industry are available locally within the region. With a number of suppliers in the market, the manufacturers have a number of choices to make when planning to purchase the raw materials. It means that the power of the suppliers is relatively low in the market because of their high number. This is an advantage to beer manufacturers. It is an assurance that it can not be exploited by unscrupulous suppliers who may want to get abnormal profits from it.
The bargaining power of buyers is another critical issue that companies in this industry will be interested in (Adam 2014). When buyers have a number of options to make when planning to purchase a product, then they become very powerful because they know firms will try to do everything to please them. In the current United Kingdomâs market, the power of buyers is very high. As mentioned above, there are numerous companies, which offer various brands of beer. For firms, which have not identified and colonized a special market niche where the level of competition is low, they have to manage the strong bargaining power of the buyers. They have to find ways of pleasing customers to purchase their products in the market.
According to Marshall (2013), the threat of new entrants coming into the liquor industry in the United Kingdom is high. According to this report, the main factors that determine the ease with which new entrants can come into a given market include the investment needed to operate in the industry, government regulations and level of expertise that a firm needs to operate within the industry. For a new firm that is planning to offer beer or related products, the level of investment needed is relatively high. It means that with the required skills in liquor, a firm will need financial resources to put up an operational liquor-manufacturing firm. The United Kingdomâs government has created a liberal market where local and foreign firms can start and operate within the local market without unfair restrictions. These factors mean that the threat of new entrants coming into the market is high. Cobra Beer must come up with competitive strategies that can protect its market share once other companies start operating in the local market.
The final factor in this model is the threat of substitute products in this industry. The threat of substitute products is relatively low. Although some people prefer wines and spirit instead of beer, a study by Adam (2014) shows that lovers of beer often prefer taking beer, not spirits. In fact, many prefer sticking to a specific brand that they feel offer them the highest level of satisfaction. They may try other brands occasionally when trying to explore, but the moment they realize that they get the best value from a given brand, they stick to it. As such, the threat of substitute products is low I this industry.
From the above analysis, one can conclude that the liquor industry in the United Kingdom is attractive and profitable. Although a number of challenges exist as discussed in the section above, it also offers a number of opportunities that firms can take advantage of in the market. Cobra Beer can achieve the desired success in this market.
Industry Life Cycle
The final section of the industry analysis involves looking at its life cycle determine how companies should manage the existing forces.
The beer industry is one of the oldest industries that go back to the pre-historic periods. It is currently in the maturity stage. However, many companies in this industry have been reinventing themselves overtime to ensure that there is sustainable growth based on the growing population of the country. As Davies (2016) notes, the beer industry is one of the most mature industries in the United Kingdom.
Analysis of the Internal Environment
The internal environment of Cobra Beer determines how well it is capable of dealing with threats in the environment and taking advantage of opportunities. In this section, the analysis will focus on its internal capabilities.
Resources and Capabilities
The beer industry is one of the most competitive industries in the United Kingdom. It is, therefore, important for this firm to use its valuable intangible and tangible resources to transform short-term competitive advantage into a sustained competitive advantage as defined in the Resource-Based View (Adam 2014). Using this theory, Cobra Beer will use the internal resources that can give it a short-term competitive edge in the market to gain a sustained edge over its market rivals. It is, therefore, important to look at the firm’s resources that it can use to gain a competitive edge over its market rivals.
Financial resources
Cobra Beer has registered impressive financial success over the recent past because of its marketing strategies. In 2015, the firm announced that it had registered a market turnover of ÂŁ59.1 million. It made a profit of ÂŁ7.7 million before tax in the same financial year (Marshall 2013). The firm has been making impressive financial progress, especially after the end of the 2008 global economic recession. Its huge financial resources have made it possible for it to acquire other firms as a way of expanding its market share within the country. The financial resources also make it possible for the firm to purchase relevant equipment needed for production and to conduct regular market research to understand the changing market forces.
Human resources
Human resource with the right skills and experience is one of the most important resources that a firm must have to achieve success in the market. The management of this firm understands the nature of the market it is operating in and the expectations of its clients. It has developed an effective recruitment strategy that helps in identifying and hiring top talents in the country. Its remuneration strategy is also meant to ensure that its talented employees do not leave for other firms. As a result, the company has retained a team of highly skilled employees in its production and marketing departments. It also has skilled employees in finance, procurement, and other departments. The experience and knowledge about the market that these employees have form part of the resources needed for Cobra Beer to gain a sustainable competitive advantage over its market rivals.
Brand as a resource
Brand, as Marshall (2013) notes, is another critical resource when a firm is operating in a highly competitive business environment. In the beer industry, the brand of a firm is one of the primary factors that determine its success. This is so because customers often demand a specific brand when they want to consume beer. A brand that is not known in this industry may face serious challenges in the market. Cobra Beer is a known brand and it has a good following in the market. It has its trusted customers, which means that it helps in giving this company a competitive edge over its market rivals.
Value Chain
Cobra must deliver value to its customers to ensure that they become reliable followers in the market. The figure below shows Porterâs value chain, which identifies a series of activities a firm must undertake diligently to deliver the desired value in the market.
Inbound logistics, operations, outbound logistics, marketing and sales, and services are the primary activities, which when supported by firmâs infrastructure, effective human resource management, technology development and procurement helps in delivering superior value. Cobra Beer will have to continue improving on its value that it delivers to the customers to sustain its growth in the market.
Core Competencies
According to Davies (2016), a firm’s core competencies help in giving it a competitive edge over its market rivals. This firm makes a unique premium Indian beer that is extra-smooth and distinct from other common brands in the country. This is a core competency because it enables this firm to curve a unique market niche with a product that other firms are not offering in the market. The differentiation strategy employed by this firm helps it to gain a competitive advantage over its major market rivals. It is offering a product that other firms in the market do not, and it makes it possible to avoid price wars that are known to reduce a firm’s profitability. The ability to continue using this strategy will define its capacity in making this competitive advantage sustainable in this market.
Organizational Culture
The leadership of this company reflects its determination to embrace emerging market forces and to remain as flexible as it possibly can. The current chief executive officer of the firm is a reformist who has promoted a culture of change within the firm since he assumed the position. He has been working very closely with Karan Bilimoria, who is the founder and current chairperson of the firm, to ensure that the company is capable of meeting the changing needs of customers in the market. According to Davies (2016), the firm has embraced an open-door policy when it comes to decision-making. Although the top leaders make the final decision, these leaders often allow junior employees to take part in these processes. The culture allows the stakeholders to play internal politics with the view of positively transforming the firm.
Analysis of PR Crises
A report released by Davies (2016) showed that binge drinking among the United Kingdom teenagers, especially girls, is second only to Denmark among the developed economies. The problem is getting worse and beer manufacturers have been blamed for this problem. Cobra Beer is one of the companies blamed for having appealing advertisements making their beer appear cool to the teenagers. The report created a public relations issue as companies struggle to demonstrate that they are responsible and keen on protecting the youth from alcohol abuse. Cobra Beer came out strongly to protect its public image.
Care Ethics Theory
Care Ethics Theory places emphasis on interpersonal relationship and benevolence as important virtues. When this issue arose, the management of this company knew that it has to respond and show that it is morally concerned about the future of the countryâs youth. It had to demonstrate that its actions have always focused on mindfulness towards the youth and an understanding that they are not of the appropriate age to drink. At the end of all their advertisements, the firm developed a message warning against underage drinking. As a sign of its moral responsibility to the teenagers, their parents and the future of the country, Cobra Beer has made deliberate attempts to discourage binge drinking among teenagers using both social and mass media platforms. To access its website, one has to prove that he or she is of the legal age, a further indication that its products are not meant for minors.
Corporate Social Responsibility
Cobra Beer Foundation is making a significant impact in providing support in education, health and communal services in the United Kingdom and South Asian nations. The firm has donated money to hospitals to help in improving equipment used in treating patients. It has also sponsored other youth initiatives in this country as a sign of its commitment towards having responsible youths in the country.
Strategic Analysis
It is important to conduct a strategic analysis of this firm to determine how it is managing competition in the market. The analysis will also look at what the management of this firm should do to help it achieve growth in the market despite the threats in the external environment as discussed in the section above.
Business-Level Strategy of Cobra Beer
As mentioned in the previous section, Cobra Beer is using differentiation as a way of achieving market success. The firm has been keen on offering its clients a product unique from what rival firms offer. Its unique value proposition in the liquor industry is a smooth less gassy beer that can be taken at any time. Differentiating its products from that of other rival firms means that it has created a unique niche in the market. It enables it to avoid stiff rivalry in the industry, including price wars, which may affect its profitability in the market.
Corporate Level Strategies: Ansoffâs Matrix
It is important to analyze the corporate level strategies used by Cobra Beer as it seeks to achieve growth in its operations. Ansoff Matrix, shown in the figure below, identifies four main strategies that a firm can use to achieve growth in the market.
Cobra Beer, just like any other firm in this industry, often tries to use all the four strategies mentioned above. It has various sub-brands for their beers to meet varying customer needs, which means that it is using a diversification strategy. It advertises heavily in the local market, which means that it is using a market penetration strategy. The firm has also been keen on introducing new products in the market (product development strategy) in line with the changing tastes and preferences. However, market development comes out as its main strategy in the market. The firm is currently offering its products in British, Chinese and Indian markets. The management is always keen on exploiting the global market, especially in Europe and Asia.
Suggested Strategy
It is important that this firm should find ways of sustaining its current strategy of market development. Its unique beer will be attractive to clients in North America, South America and parts of Africa if it keeps delivering high quality. It should tap into the opportunity available in these countries by delivering products unique from what other companies in these new markets offer.
Evaluating the Strategy: SAF Model
Market development is an effective strategy in the modern global market. However, the management of this firm must confirm that the strategy is effective in the long term. SAF model can help in evaluating the strategy. In terms of sustainability, the strategy can work well and for a long time because the global market is huge and if this firm can manage to capture just a small fraction, then the returns can be very impressive. The feasibility of the strategy will rely on the scale of expansion. The strategy is feasible if this firm can identify new markets, at reasonable intervals and expand in these new markets, before moving to other new markets. This strategy can be acceptable to the shareholders because it assured them of higher returns on their investments in terms of more profits for the firm.
Implementation Techniques
Cobra Beer should implement the above strategy using three main strategies based on the forces in the new market. It should use direct market entry when the level of competition in the new market is low and the current players offer products of low quality. It should use a joint venture when the competition is high and there are firms that offer products of high quality, just like its products. It should use franchising in developing markets such as Africa where investing directly may not yield returns at required rates.
Conclusion
Cobra Beer is a special brand of beer that has achieved massive popularity in the United Kingdom, China and India. The firm was founded on the premise that it will offer unique products compared with what was available at that time. Since the time it was founded, the firm has registered impressive performance in the market over the years because of its high-quality products. The management has been keen on not only penetrating the beer market in the United Kingdom but also finding other markets in China and India. Although the market poses a number of challenges to the firm’s operations, it has continued to register impressive growth in its home and foreign markets.
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