The bargaining power of suppliers
The suppliers of raw materials to Heineken Company are mainly farmers. Therefore, the threat for power of supplier is high. The bottle supplier for Heineken is provided by Heye Glas Nederland which is fully supplied the green bottle for the worldwide distribution of Heineken beer.
In the past, Heineken kept only 33% its stake in Heye Glas in order to secure the supply of high quality export bottles at a lower cost to meet the needs for demand but now Heineken has kept 100% stake in 2002. Beer is produced by water, barley, hops and yeast. These ingredients are supplied by farmers. Heineken also mentioned that competition for agricultural products from the biofuels industry that is affecting their costs.
The bargaining power of buyers
The buyers in this industry have many choices as there are many companies serving beer. This will increase the choice of the customer and hence the threat for power of buyers is high. For example, for serving customer at the pub, there are a lot of beer brands for them to fit their taste such as Guiness, Carlsberg, Tiger. Therefore, buyers now have a choice to choose the one they like. As a result, choosing of customer for what kind beer they want to drink will bring threats for Heineken.
The threat of potential new entrants
Nowadays, an explosion of smaller brewers has entered the market during the past decade that making the industry much more competitive. Heineken is one of the largest brewers in the world and they have to share market with other brewer. The barrier in the beer market is low. Therefore, the threat of potential new entrants for Heineken is high. This will make Heineken considering to create innovation or uniqueness into their product that can sustain competitive advantages in the beer market.
The threat of substitutes
Beer is a kind of beverage which contains alcohol. However, people can switch to drink wine which also is alcohol drink. Customer’s taste is not similar so that they have right to choose what they want to enjoy, so this will affect the beer market as well as Heineken Company. As a result, the threat of substitute for beer market is high.
The extent of competitive rivalry
Heineken has achieved the economy of scale in the market especially in Europe. It holds about 30% of market share in European beer market. Since the beer market is growing, so the competitors will try to attain their growth targets. The large brewer like Heineken tends to enforce their own strategies to the beer industry and due the economies of scale they will produce higher quality and unique products which can make their own place in the market, hence keep themselves growing to achieve their target. Internal analysis of the company
Analysis the resources
Tangible: Since Heineken know that their plant and equipment is a key for company production, they invest so much in the infrastructure to make sure that their operation is working efficiently. For example, Heineken have four breweries in Russia, all those use KHS Till plant technology. This equipment at Heineken’s packaging can processes 50 liter kegs in addition to 30 liter at an output of up to 140 kegs an hour. As a result, the two-lane machine can operate with one racking, six washing and sterilizing stations.
Intangible: brand name is most valuable asset of the Heineken Company, they has built this name Heineken with premium brand. The company recognizes that brand is very important key for them to develop a strong presence globally in the beer market so that Heineken have a lot of marketing activities for its brand name. Furthermore, branding is also a highly defensible competitive advantage for Heineken; this would bring strength to company
expansion. Hence Heineken Company can stretch their production internationally and add more money for company.
Management capability: Heineken implemented a number of new initiatives in the area of leadership development in 2004. One is a new leadership competency model that defines behavior expectations from all senior managers at Heineken. The model takes Heineken company ambitions and values as a starting point and translates these into the leadership behavior required from senior managers.
With marketing differentiation using different message within normal media advertising can also have differentiating effect. This differentiation will bring strengths for Heineken. When most advertisers are pursuing essentially the beer market with the same message like showing gregarious groups of males in public houses having an enjoyable night out. In the other hand, Heineken managed to differentiate its beer by using a series of advertisements employing humour and the caption Heineken refreshed the parts other beers can not reach.
In 2005 Heineken announced that it was created a new top management structure, this would drive and support growth as a global organization. In order to connect functions, operation and finance in a more effective way, the company create a new more streamlines Executive Board. Hence change would lead to create strengths for operating regions and global functions. Furthermore, Heineken has grown substantially over the past four years. The new structure is better suited to the present organization and ensures faster decision-making. In the beer market where the consolidation process is accelerating and rapid introduction of innovations is essential, this is crucial to the achievement of Heineken’s long term ambitions.
Heineken is proud of they are one of the world’s great beer companies. Hence their culture will reflect the company view and values. These values create so many strengths for company to develop their environment within the company. Heineken based on the value that they respect their employees, business partners, customers, shareholders and all others who are connected to the company. Furthermore, Heineken make life more enjoyable by bring enjoyment to life, they also encourage this core value within the working places and atmosphere within the company. In addition, company has a fundamental belief in the concept and delivery of quality, it is also reflected in their other activities such as their social and employment policies. This will create benefit and value both for Heineken and their reputation. As a result, these values define Heineken corporate culture and working methods which help company to do the business successfully.