Heineken's Strategic Management: Industry, SWOT, and Innovation

This report provides a comprehensive strategic analysis of Heineken, examining its position in the global alcoholic beverage market. It begins with an overview of the industry structure, market size, and Heineken's background. A detailed SWOT analysis is presented, highlighting the company's strengths, weaknesses, opportunities, and threats. The report then delves into Heineken's innovation strategies, including its 'Brewing a Better World' initiative and open innovation approaches. It also explores the company's CSR activities, governance, and ethical practices. The report concludes with a VRIO analysis of Heineken's strategic capabilities and core competencies, assessing their value, rarity, imitability, and organizational aspects. The analysis covers the company's financial resources, diverse product portfolio, distribution network, and innovation capabilities.

Running head: STRATEGIC MANAGEMENT IN BUSINESS ENVIRONMENT
STRATEGIC MANAGEMENT IN BUSINESS ENVIRONMENT
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................ 2
Industry structure, market position, country markets and size..................................2
About Heineken.......................................................................................................... 3
SWOT analysis of Heineken........................................................................................ 4
Innovation and strategic innovation in Heineken.......................................................6
CSR activities in Heineken.......................................................................................... 7
Governance and ethics in Heineken...........................................................................8
Strategic capabilities and core competencies of Heineken – VRIO analysis...............9
Conclusion................................................................................................................ 10
References............................................................................................................... 11

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Introduction
The increase in globalization of world economy has led to enhancement of
different organizations that have global operations. International business had been
introduced as a concept in the 20th century and international expansion of business
operations had taken place in different parts of the world. The multinational
organizations belonging to different countries have however dominated the global
economy in a huge manner. The operations of Western organizations have
expanded for the purpose of including the organizations that belong to the Eastern
countries like China and India. The international businesses have also ensured that
global outlook and levels of local adaptation have been blended in an effective
manner for the formation of the concept of “Glocal” (Aguinis, Edwards and Bradley
2017). The report will be based on the analysis of an organization named Heineken
that has its operations in different countries of the world. The internal structure of
the organization and industry in which it operates will also be discussed in the
report in detail.
Industry structure, market position, country markets and size
The global market of alcoholic beverages has been valued at around 1439
Billion Dollars in the year 2017. The total value of this value can reach to 1684
Billion Dollars within the year 2025 that is based on the annual growth of 2.0% from
the years 2018 to 2025. People belonging to different cultures in different parts of
the world have started consuming various alcoholic beverages. The local alcoholic
beverages have been able to consume major part of the market in different
countries of the world. The prices of beverages have been decided with respect to
the costs related to production and the levels of price elasticity as well
(Alliedmarketresearch.com 2020).

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Figure 1 – Alcoholic beverages market
Source - (Alliedmarketresearch.com 2020)
About Heineken
Heineken N.V. is a brewing organization that was established in the year
1864 and the company is of Dutch origin. The firm was founded by Gerard Adrian
Heineken in Amsterdam that was further able to develop more than 165 breweries
in greater than 70 countries of the world. Heineken provides the 250 local,
international, specialty and regional beers and ciders to customers in different parts
of the world. The organization produces 188.3 million hectoliters of beer on an
annual basis that had led to global revenues of EUR 20,511 Billion in the year 2015.
Heineken N.V. has gained the position of number one brewer in Europe and is also
considered to be the largest brewer in the world based on volume of production
(Theheinekencompany.com 2020).

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SWOT analysis of Heineken
The SWOT analysis framework can be used for the purpose of analyzing the
internal strengths and weaknesses of Heineken that have led to the development of
external opportunities and threats.
Strengths –
 Distribution and reach is considered to be a major strength of
Heineken that has been formed with the help of its outlets in different
parts of the world and in most of the states as well.
 The cost structure if Heineken is quite low and is able to help the
organization to sell its products at low prices that has led to increase in
customer base of the firm (Bogers et al. 2019).
 Heineken has formed a strong relationship with the suppliers or dealers
over the years of its operations in the beverage industry. The
organization also focusses on the ways by which its products can be
promoted among the consumers.
 The strong financial position that Heineken has been able to form is
mainly based on the profit reserves that the firm has gained in the last
five years (Brannen, Piekkari and Tietze 2017).
 The diverse workforce of Heineken has proved to be a major the
strength that has been developed by the organization in order to
maintain its operations in different parts of the world.
 The innovative teams of Heineken have allowed the organization to
enter new markets and gain success in the industry as well. The firm
has also been successful in the initiatives that have been taken in
different countries.
 Social media has been used by Heineken in order to enhance its
presence and improve the communication with consumers in different
parts of the world (Cantwell 2017).
Weaknesses –
 The currency fluctuations have a negative impact on the profit levels of
Heineken as the organization is dependent on the foreign market for
maximum parts of its revenues.

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 Pricing is considered to be a major selling point for Heineken in the
developed markets and this a negative effect on the profit margins
that are gained by the organization (Chi et al. 2019).
 The two major competitors of Heineken namely Anheuser Busch and
Sab Mille have started their operations in the market after developing
a merger. This has been able to enhance the levels of competition
faced by Heineken in the beverage industry. Global business of
Heineken has been influenced in a huge manner due to development
of strategies for the purpose of fighting the merger (Cravino and
Levchenko 2017).
Opportunities –
 Different pubs in the world have started the development of brewing
operations and the customers also tend to choose these products
instead of those which offered by various brands.
 Exposure – The consumers have become more aware of the global
beer brands that are offered to them and organization can thereby aim
at targeting the young people with the help of its products (Demir,
Wennberg and McKelvie 2017).
 The implementation of new technologies and innovation has influenced
the operations of Heineken in the alcoholic beverages industry. This
has enhanced the products that are offered by the firm to its
consumers.
Threats –
 The competition that is faced by Heineken in the beverage industry
from organizations like Fosters, Miller, Molson Coors and Anheuser
Busch. Competitors of the firm have an impact on the prices of
products and profit margins that have been gained in the industry as
well (Hanson et al. 2016).
 The alcohol companies are always at the risk of facing legal hassles in
different countries. Legal hurdles have the ability to influence the
operations of Heineken in the foreign markets. The legal hurdles

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mainly include licenses and the necessary permissions that are
required to sell the products in the various countries.
 The new entrants in alcoholic beverage industry has a major impact on
the levels of competition that is faced by Heineken (Hitt et al. 2016).
Innovation and strategic innovation in Heineken
The major vision that has been set by Heineken is mainly based on its mantra
“Brewing a Better World”. The organization mainly runs the crowd-sourced
competitions on the Innovators Brewhouse named online platform. The company
aims at seeking the best possible solutions that are mainly based on product design
and sustainability levels. The commitment that has been provided by Heineken
towards implementation of open innovation is considered to be a major factor that
has an impact on the design of the products (Nambisan, Zahra and Luo 2019). The
strategy of Heineken “Brewing a Better World” that was developed in the year 2010
has been able to enhance the revenues of the firm over 1 Billion Dollars. Open
innovation has a major impact on the packaging of consumer goods that are offered
to the consumers and is also able to support the organization to face competition in
the overcrowded beer based market. The economic implications that the operations
of Heineken has in different countries are also based on implementation of open
innovation (Meyer and Peng 2016).

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Figure 2 – Innovations in Heineken
Source - (Theheinekencompany.com 2020)
CSR activities in Heineken
The sustainability initiatives that have been implemented by Heineken have
been able to enhance the brand image of the organization in alcoholic beverage
industry. The partnerships and innovative projects formed by Heineken have
influenced the operations of the firm in different parts of the world. Sustainability
has been considered to be a major driver of business operations of Heineken and it
is also a positive force based on changes that have been implemented in the firm.
“Brewing a Better World” is one of the four major priorities that were set by
Heineken. The organization has also aimed at uniting its global brands in order to
face the challenges of the society (Newburry, Deephouse and Gardberg 2019). The
major focus areas that have been taken into consideration by Heineken in order to
maintain the sustainable operations include protection of the water resources,
reduction of CO2 emissions, sourcing in a sustainable manner, responsible
consumption process, promoting the health and safety and growing with
communities as well. The organization has been quite successful in reducing the
levels of consumption of different resources that are required for the manufacture
of different products that are a part of the portfolio (Perri and Peruffo 2016).

8STRATEGIC MANAGEMENT IN BUSINESS ENVIRONMENT
Figure 3 – Sustainability in Heineken
Source - (Theheinekencompany.com 2020)
Governance and ethics in Heineken
The governance of Heineken is also based on the strategy of “Brewing a
Better World” or BaBW. The decisions that have been made by the executive team
of the organization are also influenced by the strategic priorities of Heineken in the
alcoholic beverage industry. The targets and strategies of Heineken are also based
on the approval provided by Executive Board of the organization. In the year 2018
the decisions mainly included approval of the Every Drop program of the
organization. The BaBW strategy is focused on the areas that are included formally
in annual planning and strategic process of the organization. The focus that
Heineken has on the levels of sustainability has been embedded in different areas
of the business operations. The BaBW strategy is coordinated in an effective
manner by Global Sustainable Development team of the firm and is also supported

9STRATEGIC MANAGEMENT IN BUSINESS ENVIRONMENT
by different experts who are a part of the organization (Silva, Styles and Lages
2017).
Figure 4 – Governance in Heineken
Source - (Theheinekencompany.com 2020)
Strategic capabilities and core competencies of Heineken – VRIO analysis
VRIO analysis framework can be implemented for the detailed analysis of the
internal resources that are able to provide sustainable competitive advantage to
Heineken in the alcoholic beverage industry.
Valuable –
 The financial resources and capabilities of Heineken are considered to
be valuable for the operations of the firm.
 The diverse product portfolio that is offered by Heineken to the
customers is valuable for formation of a sustainable competitive
advantage in the industry.
 The distribution network and channels of Heineken have supported the
growth of Heineken in the industry (Brannen, Piekkari and Tietze
2017).
 Innovation and research and development have also proved to be
highly valuable for the competitive advantage that can be formed by
Heineken.

10STRATEGIC MANAGEMENT IN BUSINESS ENVIRONMENT
Rare –
 Financial capabilities and resources of the firm are considered to be
rare and have provided a major competitive advantage to Heineken.
 A rare resource of Heineken in the alcoholic beverage industry are the
employees who have been able to depict the skills that help in
improvement of revenues of the firm.
 The patents and licenses that have been gained by Heineken are also
rare and have supported the competitive advantage of the
organization (Bogers et al. 2019).
Imitable –
 Financial resources of Heineken are costly to imitate and the
competitors are not able to easily develop their financial position in
comparison to the organization.
 The licenses and patents of Heineken are not easily imitable in nature
and have helped the company to maintain its competitive advantage.
 The new entrants and competitors of Heineken are also not able to
imitate the distribution network of the organization (Cantwell 2017).
Organization –
 Heineken has been able to organize the financial resources in order to
capture the value that have an impact on the operations of the
company.
 Heineken has formed the distribution channels in such a manner that
has supported its growth in the industry.
Conclusion
The report can be concluded by stating that Heineken has been able to
maintain its international operations in the alcoholic beverages industry with the
support that is provided by the different resources and product portfolio of the
organization. The competition that is faced by Heineken is however able to
influence the profit margins of the organization in a huge manner. The company has
however provided major levels of importance to the sustainable operations in the
industry.

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