This work is a strategic management project containing an assessment of the current strategic management process conducted for the Corona Beer Industry. That is an individual Mexican beer brand that has a long history. Corona beer is known worldwide and is one of the most famous and top-selling beers. Therefore, proper strategic management is essential for such a company considering its scope of production. Moreover, specific circumstances, namely the Coronavirus pandemic, have been difficult for Corona beer brand, primarily because their names are the same. The internal strategic management of the company has become even more complicated than before. In this paper, some questions on the strategic direction of the Corona beer brand are answered to get a clearer idea of its business processes.
The five forces are an influential model in modern management literature. According to that model, five forces influence organizational management and determine the industry’s attractiveness: competition in the industry, the potential of new entrants, power of suppliers, power of customers, threats of substitute products. Researchers state that these forces of the economic sector drive competition and profitability (Khurram et al., 2020). Analysis of the beer industry using the five forces model allows assessing the impact of external factors on the company. Based on the analysis of the model for the beer industry, one can make a choice that the level of global competition, although high, is quite stable. On the whole, the nature of the competition in the industry appears to be highly dynamic according to the five forces model, with substitutes and new entrants being the most influential factor.
- The industry is highly competitive, especially at the local level.
- The barriers to entering the global market in the industry are high since “beer production is highly concentrated” (Török et al., 2020, p. 13). However, at the local level, craft brewing is developing increasing the competition.
- The beer industry needs equipment, raw materials, and consumables such as bottles, caps, labels. The influence of suppliers on large companies is minimal, as there is no need for complex sourcing.
- In the beer industry, large companies have large audiences who can compare their offerings to their competitors. In the context of high competition both at the global and local levels, their power is high.
- The beer industry is at high risk of substitution as there are many similar products on offer.
Many significant changes in the macroenvironment may affect the beer industry in different ways. Much has changed since the Industrial Revolution, which led larger and more efficient companies to take over more minor and less efficient firms (Hobdari et al., 2020). However, the return of craft beer has denoted a new revolution in the beer industry, and the number of breweries has increased again (Hobdari et al., 2020). The researchers claim that one of the most significant factors for this revolution is changes in the drinking culture (Hobdari et al., 2020). As Hobdari et al. (2020) state, “consumers’ desire for variety has increased, and beer has become one way for individuals to profile themselves in social groups” (p. 8). These changes in the microenvironment of the beer industry lead to its rapid development and innovative nature of the progress to satisfy consumers.
The Corona brand is currently experiencing competitive disadvantages in the beer industry, primarily because of the pandemic. The Corona brand has become an object of many critiques since the virus has started spreading. There is much evidence that consumers reject the beer, saying that they will “never buy it ever again” because of the exact names of the beer and the virus (Rehman et al., 2021, p. 6). There is no evident link between the virus and the beer brand; still, the pandemic has severely damaged the Corona Brand’s image and reputation. Consumers openly state that they do not want to buy beer under the Corona brand and will likely prefer something else (Rehman et al., 2021). Therefore, as the coronavirus pandemic is still in power, the Corona Brand has a critical competitive disadvantage in the beer industry.
Therefore, there are many barriers to imitating the distinctive competencies of the Corona Brand. Despite all the Corona Brand management efforts, consumers do not perceive any distinctive competencies of Corona Beer that could attract them to the brand (Rehman et al., 2021). The pandemic crisis is worldwide and has been ongoing for a long time, and the associations between the names of the beer brand and the virus are too strong. For instance, a recent study shows that 38% of Americans would not buy the Corona beer under any circumstances due to the coronavirus (Rehman et al., p. 2). Although there is no evident link between the virus and the beer, many people do not want to know anything about the brand’s distinctive competencies once they have heard its name (Rehman et al., 2021). Therefore, only those consumers who do not identify any linkage are ready to evaluate the advantages of the Corona Beer.
Due to the circumstances described in the previous section, the Corona Brand has had to use specific marketing strategies to manage competitive rivalry in their industry. One of them is the so-called silence strategy, meaning that the brand keeps low on media instead of active advertisement (Rehman et al., 2021). The rationale for that is the company’s provocative name, which would likely evoke associations with the virus and not the beer (Rehman et al., 2021). Another strategy used by the Corona Brand recently is the advocacy strategy. The company has made a significant donation to the fund that has helped restaurant workers who have suffered the consequences of the pandemic (Rehman et al., 2021). This action demonstrates the company’s readiness to stop hiding out of the media due to the coronavirus crisis and take a stance to oppose it (Rehman et al., 2021). This strategy has probably aimed to change the associations between the beer and the virus linkage to the association of the brand fighting the pandemic.
The company uses a global business strategy, which implies placing the product in the markets of different countries with minimal local adjustments. However, the pandemic circumstances that have been negatively influencing the company’s general performance seem to have weakened since the company appears to overcome the crisis. The Corona Brand has made several ads demonstrating that the company is back to its core management strategies (Rehman et al., 2021). Researchers state that the company may no longer see any danger coronavirus can bring to them, so the Corona Brand is “back-to-business as usual” (Rehman et al., 2021, p. 4). There is a high chance that the initial reputational damage of the coronavirus was not that significant as the company’s managers feared, meaning that they can proceed with their “back-to-business” global marketing strategy.
As mentioned before, the beer industry is rapidly progressing nowadays, which leads to an increase in competition and the need to apply new strategies to compete globally. For instance, Mathias et al. (2018) state that beer sales have increased 15% annually in the past years, and the number of breweries has almost doubled (p. 7). Most research shows that two major strategies are the most effective for global competition: cooperative and competitive (Mathias et al., 2018). The Corona brand is currently using a competitive strategy, which seems correct due to the scope of the brand (Mathias et al., 2018). The cooperative strategy is more efficient than the competitive one for smaller companies that cannot compete adequately with major brands (Mathias et al., 2018). However, the competitive strategy is more appropriate for the Corona Brand as they can successfully manage costs pressure and pressures for local responsiveness.
The Corona Brand has pursued the horizontal integration strategy due to several strategic reasons. The horizontal integration implies that an organization becomes a part of another organization, and the Corona Brand is a part of the major group Constellation Brands (Rehman et al., 2021). The strategic reason for pursuing the horizontal integration strategy, in this case, was the high level of competition in the beer industry, meaning that being a part of a widescale corporation is beneficial for business.
The vertical integration strategy can potentially create significant value for the Corona Brand because of the brand’s scope. First, breweries often have distribution systems of their own and even are engaged in integration with local restaurants and pubs (Hobdari et al., 2020). The researchers claim that vertical integration in the chain of supplies might increase the company’s general efficiency by reducing consumer prices (Hobdari et al., 2020). The government might intervene because of âthe exclusion of competitorsâ brands from the controlling outlets (Hobdari et al., 2020, p. 6). However, the bureaucratic costs of engaging in the vertical integration are not expected to be critical because, considering the Corona Brand’s scope, the outcomes in profit will likely cover those costs.
References
Hobdari, B., Madsen, E. S., & Gammelgaard, J. (Eds.). (2020). New developments in the brewing Industry: The role of institutions and ownership. OUP Oxford.
Khurram, A., Hassan, S., & Khurram, S. (2020). Revisiting Porter five forces model: Influence of non-governmental organizations on competitive rivalry in various economic sectors. Pakistan Social Sciences Review, 4(5), 1-15.
Mathias, B. D., Huyghe, A., Frid, C. J., & Galloway, T. L. (2018). An identity perspective on coopetition in the craft beer industry. Strategic Management Journal, 39(12), 3086-3115.
Török, Ă., Szerletics, Ă, & Jantyik, L. (2020). Factors influencing competitiveness in the global beer trade. Sustainability, 12(15), 1-15.
Rehman, S., Petrov, A., & Burman, D. (2021). A case of Corona: Management decisions. Corporate Brand Management and Reputation, 1-28.