Business Life Cycle Assesment

No reference from investopedia, wikipedia, blogs, and etc.

Running head: BUSINESS LIFE CYCLE
Business Life Cycle
Name of the Student
Name of the University
Author Note

1BUSINESS LIFE CYCLE
Table of Contents
Introduction:...............................................................................................................................3
Part 1: Strategic and Operational Issues:...................................................................................3
PESTL Analysis:....................................................................................................................3
Political:.............................................................................................................................3
Economic:..........................................................................................................................4
Social:.................................................................................................................................4
Technological:....................................................................................................................4
Legal:..................................................................................................................................5
Porter’s Five Forces:..............................................................................................................5
Competitive Rivalry: High.................................................................................................5
Threat of New Entry: Low.................................................................................................6
Threat of Substitution: High...............................................................................................6
Bargaining power of Suppliers: Moderate.........................................................................6
Bargaining Power of Buyers: High....................................................................................7
Plans of Expansion:................................................................................................................7
Buyout Offer:.........................................................................................................................8
Part 2: Reflection:......................................................................................................................9
Conclusion:..............................................................................................................................11
References:...............................................................................................................................12

2BUSINESS LIFE CYCLE
Introduction:
The study is based on analysing the strategic position of the Boston Beer Company
which is one of the top most beverage manufacturing company operating in the US beverage
industry from 1984. Along with that, the study evaluates the strategic and operational issues
that the company is expected to face in the mentioned industry. The study includes a PESTL
and Porter’s five forces analysis for identifying and elaborating the issues. Along with that,
the study evaluates the suitable course of action for the company considering the scope of it
in expanding its business operations to Chinese market. Other than this, the study provides a
detailed elaboration regarding the suitability of the company in accepting the proposed
buyout offers. Along with that the study provides a self -reflective summary of the
knowledge that is gathered from the competition of the project in relation to accounting,
corporate finance and strategic management.
Part 1: Strategic and Operational Issues:
PESTL Analysis:
Political:
Considering the US beer industry, it is understandable that the political pressure on
the business actions of the beverage companies is at moderate level. The nation is recognized
to have a strong democratic set up with the established rule of law. The political structure of
the nation is fair and transparent, however, the government of the nation is observed to face
considerable amount of criticism for the interventionist nature in the global politics. As per
the comments of Simien (2015), the US government is playing a substantial role in
formulating the dynamics of the world politics and trade relations. The beverage industry is
one of the top most profit driving sector for the government and the Boston Beer Company is
expected to face the heat of the same with increasing tariff rates.

3BUSINESS LIFE CYCLE
Economic:
The nation is observed to have a strong economic condition. With the collection of an
estimated GDP (PPP) per capita of 55681.05 US dollars in the year 2018
(Tradingeconomics.com. 2020), the nation is observed to be placed in a substantial position.
The current total GDP (PPP) of the nation is 20,544,343.46 million US dollars
(Data.worldbank.org. 2020). On the other hand, the total GDP (nominal) of the nation is
observed to be 5,433.6 billion US dollars in the year 2019 (Ceicdata.com. 2020). Hence, it is
understandable that the economic strength of the nation is pretty significant and is expected to
contribute in the growth of the Boston Beer Company in an efficient manner.
Social:
The country is observed to have a medium score of 39.0 in the Gini Co- efficient
(Data.worldbank.org. 2020). The score states the intermediate wealth distribution across the
citizens. Hence, it is understandable that the company is associated with a market that ensures
increasing purchase capability of the customers. Other than this, the nation is observed to
score substantially high in the dimension of Human Development Index and that is prominent
with the score of 0.920 (Hdr.undp.org. 2020). Such high score in the aspect of the human
development index clearly signifies higher literacy rate, life expectancy rate and per capita
income indicators of the citizens. As a result, the company is expected to achieve sufficient
scope of gathering skilled and experienced employees for managing their business actions in
the US beverage industry.
Technological:
With a detailed consideration towards the high score of the nation in the human
development index, it is evident that the citizens of the nation have a great share of
acceptance towards the technology. The high rate of literacy clearly signifies the capability of
the citizens in responding to the technological and innovative solutions in a more efficient

4BUSINESS LIFE CYCLE
manner. As a result, it places the company in a perfect position to proceed with the usage of
the technological gadgets and methods for the purpose of beverage production processing and
for conducting the marketing activities.
Legal:
The legal consequences that the companies operating in the beverage industry of US
are expected to face, is immense. One of the fundamental legislations that affect the business
actions of the companies is the Nutrition Labeling and Education Act of 1990 which manages
the ethical labelling actions on the beverage products (Congress.gov. 2020). Other than this,,
the quality of the products is controlled with the application of the legislations of Food and
Drug Administration, the employment relations in the industry is managed with the
application of the legislations of Federal Trade Commission, the sourcing of the raw
materials for the beverage products is managed with the application of the legislations of
United States Department of Agriculture (Usda.gov. 2020).
Porter’s Five Forces:
Competitive Rivalry: High
Considering the business actions of the Boston Beer Company and the dynamics of
the US beverage industry, it is understandable that the company is expected to face an intense
level of competition in various categories of beverage. In the domestic beer segment, the
market share of AB InBev and MillerCoors is observed to be a great concern for the Boston
Beer Company (Ab-inbev.com. 2020). In the craft beer segment, the company is facing the
heat of intense business competition from the part of Sierra Nevada Brewing Company which
is the second largest craft beer maker in the nation. Along with that, the substantial market
share of New Belgium Brewing Company in the craft beer segment is increasing the
competitive rivalry of the company. In the imports section, the diversified business actions of
Grupo Modelo and Heineken is expected to provide considerably limited breathing space for

5BUSINESS LIFE CYCLE
the Boston Beer Company to conduct a sustainable business (Heineken.com. 2020). In the
Flavored Malt Beverage Category, the company is facing a high level of competition from
the part of the companies such as the Twisted Tea, Smirnoff Ice, Mike’s Hard Lemonade and
Bacardi Silver (Theliquorbarn.com. 2020).
Threat of New Entry: Low
The decline in the sales of the domestic beer industry along with the considerably
slow growth in the light beer and craft beer categories is one of the fundamental reason that is
restricting the interest of the new business organizations in entering the US beverage markets.
Apart from this, the concern of the new organizations in spending substantial amount of
monetary resources for the development of the required infrastructure and for managing the
strict control provisions for the creation of the trade licenses are observed to place Boston
Beer Company against a considerably low threat of new entry.
Threat of Substitution: High
With a close look at the presence of various established business organizations in
different sectors of the US beverage industry, it is evident that the company is expected to
face an intensely high level of threat in being substituted by the other business organizations.
The success of majority of the established companies in utilizing their expanded
infrastructure for creating diversified product offerings and applying competitive pricing for
the same, is able to increase the threat of substitution for Boston Beer Company (Scott,
Hawkins and Knai 2017).
Bargaining power of Suppliers: Moderate
The strict ethical and legal considerations on the business actions of the companies in
sourcing the raw materials is one of the main factors which force the companies to experience
the services of considerably limited number of suppliers in the industry. Having said that, the

6BUSINESS LIFE CYCLE
capability of the suppliers in supplying the raw materials in accurate quantity, appropriate
timing and through following professional techniques of supply increases the ease of Boston
Beer Company in sourcing the raw materials in a professional manner.
Bargaining Power of Buyers: High
With a close consideration towards the ability of the established companies in
applying competitive pricing policy for their products and services, increasing the product
chain of the companies in a professional manner and complying with the health and
nutritional standards of the nation during the manufacturing of their products, it is
understandable that the buyers of US market are subjected to a series of options for
purchasing their products. As a result, the company is expected to experience a high
bargaining power.
Plans of Expansion:
The concept of the mergers and acquisition has great significance for the companies
in expanding their business actions to the new markets. In addition to this, the joint venture is
observed to be a new trend amongst the companies when it comes to manage a financially
feasible expansion of their business. Considering the case of Boston Beer Company, it is
understandable that the company is expected to expand their business operations to Chinese
market. In order to understand the suitability of the expansion activities that the company
should undertake, it is important to analyse the concept of the merger and acquisition along
with the joint venture activities. As per the comments of Greve and Man Zhang (2017), the
merger and acquisition activities are recognized as the consolidation of the companies or the
assets of the companies. The consolidation of the companies is managed through various
types of financial transactions, tender offers, management acquisitions and purchase of assets.
In the merger and acquisition activities, a particular organization combines with other. In the

7BUSINESS LIFE CYCLE
merger activities, the companies are observed to formulate a new legal entity with a new
corporate name (Brueller, Carmeli and Markman 2018).
On the other hand, the acquisition influences an organization to purchase the other
outright and at the same time, the acquired firm does not need to change the legal name as it
can operate under the banner of the parent company (Davies, Desbordes and Ray 2018).
Considering the concept of the merger and acquisition, Boston Beer Company is expected to
face the threat of high cost and at the same time, it can also lead the organization towards
facing the heat of inappropriate integration issues with the home office of Chinese company.
On the other hand, Chetty, Ojala and Leppäaho (2015) claimed that the concept of joint
venture allows a particular organization to formulate a business arrangement with another one
or multiple business organizations where they can share their resources for the purpose of
accomplishing a common goal. According to the comments of Lau and Tovstiga (2015), the
joint venture allows the organizations to share the profit, loss and costs associated with the
venture. With a detailed consideration towards the benefits of the joint venture such as the
low extent of risks, shared responsibility of the costing along with the profit share, the
suitability of the mentioned form of business expansion for a company like Boston Beer
Company in expanding their business actions to China certainly increases. Along with that,
the joint venture places the selected company in perfect position for avoiding the strict
legislative compliance for the formulation of the trade licenses and for setting up the
infrastructure required for the management of their business in China (De Villa, Rajwani and
Lawton 2015).
Buyout Offer:
With a detailed consideration towards the business actions of Boston Beer Company
and the success that the company is able to achieve with their light beer and craft beer
products, the reason for rejecting the buyout offers in recent times, is pretty prominent.

8BUSINESS LIFE CYCLE
Considering the current market share price of the company, it is evident that the company is
able to achieve a share price of 369.80 US dollars (Witkowski 2020). Along with that,
company is able to achieve 341 million US dollars as revenue in the year 2007
(Bostonbeer.com 2020). At the same time, the cost of goods sold for the company was 152
million US dollars and the net income of the company was 22.5 million US dollars
(Bostonbeer.com 2020). The growth of the company is pretty prominent with the increment
of 22% in the revenue of the company and that increased the revenue of the company to 415
million US dollars in 2009 (Bostonbeer.com 2020).
Considering the day range of the market share price (390 US dollars to 400 US
dollars) (Witkowski 2020), it is understandable that the acceptance of the buyout offer will be
profitable for the company at the current stage. However, the financial growth that gets
reflected from the financial statistics of the company is pretty significant in influencing to
wait for an improved offer which is on the cards for the company. On the other hand, the
organization is expected to have a great market share in the craft beer segment and that
growth of the mentioned segment is a strong motivator for the company to operate as an
individual entity. In addition to this, the preferences of the general citizens regarding the
products of Boston Beer Company is considered to be an important factor capable of
influencing the success of the company in near future. In addition to this, the excellent ability
of the companies operating in the beverage industry including Boston Beer Company in
tackling trade legislations and taxation rates, is expected to influence the company to operate
as an individual business entity (Du et al. 2018).
Part 2: Reflection:
With an in depth look at the above section, it is understandable that the capability of
the companies in operating in a sustainable manner, is primarily dependent on their ability in

9BUSINESS LIFE CYCLE
managing their business actions as per the strategic objectives of the companies. From the
analysis, it is pretty prominent that the sustainability of the business actions of the companies
is reliant on their excellence in analysing the macro and micro environmental factors of the
industry. The efficient evaluation of the various factors ranging from the political, economic,
social, technological and legal aspects of an industry is crucial for the formulation of the
strategic and operational activities of the companies. At the same time, the evaluation of these
factors educates the managers regarding their probable course of actions in managing their
business activities in a varying business environment. The PESTL analysis provides detailed
elaboration regarding the probable political, social, economic, technological and legal
impacts that the companies are required to deal with, when it comes to maintain the
sustainability of their business activities. On the other hand, the Porter’s five forces
framework is of great significance for the modern managers in understanding the impact of
the business competition on the business activities of their organizations. The elaboration of
the competitive rivalry educates the business leaders regarding their possible rival
organizations. Apart from this, the porter’s five forces increases the knowledge of the
managers regarding the bargaining power of their customers, bargaining power of their
supplier organizations, threat of new entries and the threat of substitutions that their business
organization are expected to face.
Considering the concept of the business expansion, the above mentioned analysis is
pretty significant in stating the comparative significance of the various methods of market
entry such as Mergers and Acquisitions and Joint Ventures. With a close look at the above
analysis, it is evident that the joint ventures provide greater flexibility to the companies in
entering a new business market with the comparatively low threat of loss, scope of achieving
shared profit along with the possibility of facing low risks. Considering the analysis of the
buyout, I understood the importance of evaluating the market share price has great

10BUSINESS LIFE CYCLE
significance in taking the decisions regarding the acceptance or the rejection of the buy- out
offers. Along with that, the revenue and the operating income analysis plays a massive role in
analysing the feasibility associated with the buy- out offers. Having said that, the non-
financial considerations which includes the taxation policies, labour legislations and trade
legislations also influence the decision of buyout offer acceptance.
Conclusion:
On a concluding note, it is visible that Boston Beer Company has the capability of
conducting a stable business in US beverage market. The growth of the craft beer industry
and flavoured malt beverage industry is expected to play a crucial role in the growth of the
company. The political stability of the nation, economic strength and the socio cultural
excellence of the citizens will contribute to the sustainability of the company. On the other
hand, the intense level of business competition offered by the established companies is major
point of concern for the company. The company requires to formulate a joint venture for
expanding their business actions to China and at the same time, the company has the
capability to achieve greater success in near future while working autonomously.

11BUSINESS LIFE CYCLE
References:
Ab-inbev.com. 2020. Home. [online] Available at: https://www.ab-inbev.com/
Bostonbeer.com 2020. The Boston Beer Company - IR Site. Overview | The Boston Beer
Company - IR Site. [online] Available at: http://www.bostonbeer.com/overview
Brueller, N.N., Carmeli, A. and Markman, G.D., 2018. Linking merger and acquisition
strategies to postmerger integration: a configurational perspective of human resource
management. Journal of Management, 44(5), pp.1793-1818.
Ceicdata.com. 2020. United States Nominal GDP [1947 - 2020] [Data & Charts]. [online]
Available at: https://www.ceicdata.com/en/indicator/united-states/nominal-gdp
Chetty, S., Ojala, A. and Leppäaho, T., 2015. Effectuation and foreign market entry of
entrepreneurial firms. European Journal of Marketing.
Congress.gov. 2020. H.R.3562 - 101st Congress (1989-1990): Nutrition Labeling and
Education Act of 1990. [online] Available at:
https://www.congress.gov/bill/101st-congress/house-bill/3562
Data.worldbank.org. 2020. GDP (current US$) | Data. [online] Available at:
https://data.worldbank.org/indicator/NY.GDP.MKTP.CD
Data.worldbank.org. 2020. GINI index (World Bank estimate) - United States | Data. [online]
Available at: https://data.worldbank.org/indicator/SI.POV.GINI?locations=US
Davies, R.B., Desbordes, R. and Ray, A., 2018. Greenfield versus merger and acquisition
FDI: Same wine, different bottles?. Canadian Journal of Economics/Revue canadienne
d'économique, 51(4), pp.1151-1190.

12BUSINESS LIFE CYCLE
De Villa, M.A., Rajwani, T. and Lawton, T., 2015. Market entry modes in a multipolar
world: Untangling the moderating effect of the political environment. International Business
Review, 24(3), pp.419-429.
Du, M., Tugendhaft, A., Erzse, A. and Hofman, K.J., 2018. Focus: Nutrition and Food
Science: Sugar-Sweetened Beverage Taxes: Industry Response and Tactics. The Yale journal
of biology and medicine, 91(2), p.185.
Greve, H.R. and Man Zhang, C., 2017. Institutional logics and power sources: Merger and
acquisition decisions. Academy of Management Journal, 60(2), pp.671-694.
Hdr.undp.org. 2020. [online] Available at:
http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/USA.pdf
Heineken.com. 2020. Heineken® - Global. [online] Available at:
https://www.heineken.com/in/agegateway?returnurl=%2f
Lau, V.M.Y. and Tovstiga, G., 2015. Exploration of relational factors: Sino-foreign joint
venture partnering. Journal of strategy and management.
Scott, C., Hawkins, B. and Knai, C., 2017. Food and beverage product reformulation as a
corporate political strategy. Social science & medicine, 172, pp.37-45.
Simien, E.M., 2015. Historic firsts: How symbolic empowerment changes US politics.
Oxford University Press.
Theliquorbarn.com. 2020. Bacardi Silver Rum 750ML. [online] Available at:
https://www.theliquorbarn.com/bacardi-rum-light-750ml/
Tradingeconomics.com. 2020. United States GDP per capita PPP | 1990-2018 Data | 2019-
2020 Forecast | Calendar. [online] Available at:
https://tradingeconomics.com/united-states/gdp-per-capita-ppp

13BUSINESS LIFE CYCLE
Usda.gov. 2020. USDA. [online] Available at: https://www.usda.gov/
Witkowski, W. 2020. Boston Beer stock drops on earnings, outlook miss. [online]
MarketWatch. Available at: https://www.marketwatch.com/story/boston-beer-stock-drops-
on-earnings-outlook-miss-2020-02-19?siteid=yhoof2&yptr=yahoo