Carlsberg in Emerging Markets: Competitive Strategy

This presentation discusses the competitive strategy of Carlsberg in emerging markets, focusing on their expansion in Russia and China. It explores the challenges faced by Carlsberg, including bad partnerships, cultural barriers, ownership structure, market consolidation, decreasing sales, fragmented market, and increasing taxation. The presentation also includes a PESTLE analysis, SWOT analysis, advantages and disadvantages, theoretical concepts, and the application of strategy in Carlsberg's case.

Competitive Strategy
Carlsberg in Emerging Markets

Introduction
• Beer is one of the highly consumable beverage products that
is sold in the market.
• Carlsberg is the forth largest brewery firm in the in the world.
• Carlsberg is famous by a high degree of selection of
philosophies, products and markets.
• Due to maturity in the western markets, Carlsberg has
focused towards the emerging markets such as Russia and
China.
• However they have faced many issues in these tw countries
as well.

Summary
• Carlsberg was one of the biggest brewery company in
the world but in the changing business environment,
this firm faced different kinds of challenges.
• This case illustrates how the wrong partnerships in
the form of merger & acquisitions and joint ventures
had impact on the company. It lead to huge loss.
• In this case study there is illustration of the way in
which for achieving competitive advantage,
Carlsberg had to acquire small firms in the market.

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• This case study reflects the way in which Carlsberg’s
most attractive market Russia was tackled by the
company especially when the Western and eastern
European markets is not performing so good for the
Company and the way they with competition from
Heineken.
• This case study also illustrates its expansion in China
were there was not control of any specific company
and the market was also distributed with very less
consumption power.

Issues in the case study
There are different issues faced by the companies.
These issues are not allowing Carlsberg to gain
competitive advantage which they seek to in the
international markets. Some of these issues are:
• Bad partnership records: This company made
many mergers and acquisitions, not everyone
proved to be successful. This put Carlsberg into
debts. In china also they faced issues when they
had to come out of joint venture with Chang.

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• Cultural Barrier: There had been cultural
difference between western markets and Asian
markets like China and Russia. This did not
allowed Carlsberg to make fast expansion in
these markets (Beaumont, 2018).
• Ownership structure: The ownership structure
of Carlsberg is the biggest contributor to
financial expansion.

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• Market consolidation: The global brewing industry was
characterised by a process of intense consolidation.
• Decreasing sales: The sales in the western markets such as
Europe and America had seen a downfall due to increasing
health-consciousness.
• Fragmented market: Chinese market was actually a
fragmented market and highly regionalised with no truly
national brewery (Carlsberg Group, 2019).
• Increasing taxation: In the markets like Russia there was
increase in the taxes of liquor product. This had effect on the
prices of the company.

Pestle analysis
• Political: In many parts of the world government is banning the drinking of the
alcohol. This is having impact on the expansion of the company.
• Economic: In many parts of the world economic challenges are getting bigger which
will have impact on the performance of the company.
• Social: There is increase in the health conscious behaviour which will have impact
on the growth chances of the firm.
• Technological: With the increment in the use of technology, it is essential that
company invest money on the technology related to microbiological and
biotechnological research.
• Legal: This company has faced challenges related to merger and acquisitions hence
it is critical that in future company checks all the legal obligations before entering
into such strategies.
• Environment: There is increase in the environment related concerns hence Carlsberg
needs to focus more on organic beers and at the same time they also need to focus
on recycling activities.

SWOT analysis
Strengths
• Bigger brand name.
• Efficient distribution channel.
• Higher resource capability.
Weaknesses
• Debt of Carlsberg is very high.
• Wrong strategic decisions.
Opportunities
• They have opportunities in the emerging countries like India.
• They have opportunities to develop environment friendly packaging.
Threats
• They are facing threats related to over competition.
• Maturity is reaching in the developed markets.

Advantages and Disadvantages
Advantages
• This company has advantage that they have a strong supply chain
network.
• It is also an advantage of resources as this company has unique
resources.
• It also has advantages in terms of the quality that it serves.
Disadvantages
• They are facing disadvantages in term of the fact that their economic
condition is not so good.
• At the same time they have lesser skilled employees when compared
with the industry standards due to which operations related
challenges arise in the firm.

Theoretical concepts
There are many theories that explains the way in which
Carlsberg conducted it in different markets. The
strategy that need to be used by Carlsberg is
International strategy.
• International strategy explains the way in which
Carlsberg is entering into new markets. Since the
European market along with American market was at
the phase of maturity hence it needed to look at the
new emerging markets (Buckley and Ghauri, 2015).

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• In this also they were following globalisation
strategy in which there was use of merger &
acquisition so as to move forward. Other
partnerships such as Joint ventures was also done by
the company.
• In merger and acquisition one company acquires or
merges with others so as to enhance their economies
of scale. This was also done by the company to
improve its resources so as to deal with the
challenges that they might face in the market.

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• Some of the partnerships in which Carlsberg entered
was by acquiring BBH in Russia, Norweign Orkla,
Scottish and Newcastle and many small companies
at the Domestic level. They also did Joint Ventures
with Thai company Chang Beverages Pvt. Ltd. In
China most of the partnerships were done with the
help of Joint Ventures with local partners, the
Danish Internationalisation Fund for Developing
Countries and local authorities.

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• In terms of expanding in the new countries, company
followed first mover strategy especially in many
regions of China.
• Multi-domestic partnerships with regional firms had
helped them in gaining larger part in the global
markets.
• In all these markets the firm gained control at the
initial levels but at the global levels, they faced
challenges in the form of loss that they generated
when they came out of partnerships.

Application of strategy
Carlsberg adopted the strategy of Merger &
Acquisition along with Joint ventures to grow in
different markets. These strategies proved to be a
success in the emerging markets. This is because
by adopting smaller brewery they were able to
control the local markets especially in terms
supply chain. This also improved their position
in the market and also enhanced their capturing
power within the country.

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• Merger & Acquisition allowed the firms to improve
their position in the market in terms of the resources
they have and the way in which they can improve the
way in which they are dealing with the local markets.
• Each company has their own set of competitive
advantages and when a company like Carlsberg
acquired other firms they improved their supply
chain and resources that gave them competitive
advantage over the rivals.

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• Joint Ventures allow the company like Carlsberg to
understand the cultural orientation of the company
and the buying behaviour of the people. This can be
done to have understanding about market dynamics
and also allows them to improve their stake in the
market.
• Since these partners are able to have a clear
understanding about the market dynamics at the local
levels hence the company like market dynamics,
purchasing behaviour of people etc.

Conclusion
Companies like Carlsberg that aims to enhance
their position in the global market followed
international strategies so as to make expansion.
Following this, they used Merger & Acquisition
as their primary strategy. Along with this they
also used Joint ventures to expand in the new
markets like China. But due to these partnership
they faced a loss also when they broke up their
partnerships.

Referencing
• Beaumont, S. (2018) How the global beer category will face the
growth challenges of the future [Online]. Available from:
https://www.just-drinks.com/comment/how-the-global-beer-
category-will-face-the-growth-challenges-of-the-future-
comment_id127295.aspx [Accessed on 14th sep 19]
• Buckley, P. and Ghauri, P., (2015) Case study I: Internationalization
of brewery companies: the case of Carlsberg. In International
Business Strategy (pp. 122-128). Routledge.
• Carlsberg Group. (2019) SAIL ’22 The Carlsberg group strategy
[Online]. Available from: https://carlsberggroup.com/who-we-
are/about-the-carlsberg-group/our-strategy/ [Accessed on 14th
sep 19]