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Requirement
Assume you are in charge of developing the strategy for a beer making company in the United States. You are looking at expanding your sales outside the United States where incomes are rising fast. One issue is whether you should pursue a multi-domestic or global strategy. Explain which strategy will be appropriate to increase the sales of your beer in foreign markets. Give reasons for your answer.
Solution
Introduction
As per the latest figures, today more than 75% of sales in the beer segment are still coming from the local brands in each and every major country in the world. Whereas, the volume represented by the international brands is only 11% of the total global business. This means that there are very few brands that have been able to achieve the long term global success. Historically as well, beer has been sold in the similar form and taste for thousands of years. The local taste, transport costs, short shelf life, availability of ingredients, taxes and limited wholesale distribution ensured that beer remained a local product. However, even the onslaught of industrialization and globalization, which evolved the business of beer, could not take it to the global(Baron, 1995).
Now, due to the rising trends of the income levels of people outside United States coupled with the fact that beer is one of the least consolidated and least profitable industries in FMCG, it would be better to pursue multi-domestic strategies so that the operations could be independently performed and the business can be maximized. The fact that the local factors influence the business as far as beer sales are concerned. In view of this, the company’s subsidiaries in their respective local markets will have the authority to perform the operations.
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Therefore, the multi domestic approach will be most effective in order to sell the beer in the foreign market. The reasons for possible success of these strategies are as follows:
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Competitive Advantage: Whenever any company feels the need to expand into a new market, particularly a foreign one, then it would be highly beneficial to choose the region which provides a competitive advantage for the company. So, in terms of increasing the sales of beer, we will have to choose the markets of those countries where there is least competition provided by conducive government policies. Therefore, we would be able to maximize the effect of competitive advantage.
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Decentralization: fact that a multi domestic company is much more decentralized in order to allow its management of different countries to operate with some degree of autonomy as well as adopt different practices from one another. Therefore, this strategy will be more flexible and capable for different practices in different countries where there are different environments in terms of generating maximum sales(Reader, n.d.). Also, sometimes, it is no completely feasible to co-ordinate the actions of the different departments and branches, then decentralization becomes a matter of necessity.
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Independence: as far as the affinity towards beer is concerned on the part of consumers, as mentioned earlier, the local factors mostly take precedent. Therefore, it is of paramount importance to have a fair degree of independence for the business of a particular area, so that the local touch could be given to fulfill the local needs of the consumers. Often in the case of multi domestic companies, the multiple branches become fairly independent of one another. Although all of them rely on the same financial resources, making them to operate and identify their own suppliers and establish a healthy working relationship separately from one another. Hence, in case of this company, it could be of great advantage when it comes to adjust the local conditions with regards to the sale of the beer. However, it could also be a matter of concern if in case separate branches end up competing with one another.
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Culture: it is a known fact that different business cultures are developed which are also based on the culture of the country where the business is moving. In another words, the culture of another country influences the business to a large extent. In this case, the culture of beer of that particular country will be going to set the tone of our further strategies and operations. As a matter of fact, any company expands into the business environments also have different requirements. Therefore it completely makes sense to become multi domestic. The main benefit of this strategy will be that separate but effective organizational cultures would be formed.
Apart from the above business strategies with regards to the sales of beer in countries outside United States, there are some more innovative ways to increase the sales in a bar or restaurant(Porter, 1986). These are:
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1. The delivery and packaging of your beer is essential in satisfying customers.
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2. There should be innovative ways to display beer on tap.
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3. Cross promotion of beer and food
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4. Advertise in multiple channels such as social media
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5. Weekly/monthly specials
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Baron, D. (1995). Integrated Strategy: Market and Nonmarket Components. California Management Review, 37(2), 47-65. http://dx.doi.org/10.2307/41165788
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Porter, M. (1986). Changing patterns of international competition. The Int. Exec., 28(2), 13-14. http://dx.doi.org/10.1002/tie.5060280205
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Reader, C. The Definition of a Multidomestic Company. Smallbusiness.chron.com. Retrieved 21 April 2016, from http://smallbusiness.chron.com/definition-multidomestic-company-22154.html
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