International Business Management Report: XYZ Beer in Czech Republic

This report provides a comprehensive analysis of the international business expansion of XYZ Beer Company, an Australian beer company, into the Czech Republic. It begins with an overview of the Czech beer industry, including market trends and key players, supported by figures illustrating beer production. A SWOT analysis evaluates the industry's strengths, weaknesses, opportunities, and threats, with a focus on the high per capita beer consumption in the Czech Republic. The report then investigates the economic, political, and legal factors influencing the business environment, including GDP trends, political stability, and the legal framework within the European Union. The trade and investment environment, foreign exchange issues, financial and cultural factors are also addressed. Challenges posed by cultural factors and other general business challenges are discussed. The report concludes with recommendations for successful international expansion and references used in the analysis.

Running head: INTERNATIONAL BUSINESS MANAGEMENT
International business management
Name of the student
Name of the university
Author Note:

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Table of Contents
Introduction......................................................................................................................................3
Overview of Beer Industry in the Czech Republic..........................................................................3
Figure 1: Total Beer Production in the Czech Republic..................................................................4
Figure 2: Beer Production for Domestic Market in the Czech Republic.........................................5
SWOT Analysis of Beer Industry....................................................................................................6
Figure 3: Highest Beer Consumption in countries..........................................................................7
Investigating the Economic Factor of Czech Republic...................................................................9
Investigating the Political Factor of Czech Republic....................................................................10
Investigating the Legal Factor of Czech Republic........................................................................11
The Trade and Investment Environment.......................................................................................12
Foreign Exchange Issues...............................................................................................................13
Financial Factors............................................................................................................................14
Cultural Factors.............................................................................................................................15
Challenges that the cultural factors pose.......................................................................................15
Other Challenges...........................................................................................................................16
Recommendations..........................................................................................................................17
Conclusion.....................................................................................................................................17
References......................................................................................................................................19

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Introduction
Survival and sustaining in the competitive market is difficult due to saturation of the
business organization in a particular country. After a certain time, a particular sector becomes
saturated in a country, as the number of organization increases to cope up with the current
demand of the customers. Therefore, after the demand is fulfilled, the business organizations are
left with less opportunity for conducting the business and sustain. Therefore, business
organizations go for international business expansion, as this allows them to invade new markets
and customers of the host country. This is noted as a successful strategy undertaken by the
business organizations to increase the revenue, the customer base, and the market.
This report emphasizes on the international business expansion of an Australian
Company named XYZ in the Czech Republic. XYZ is an Australian beer company that aims
towards international business venture in order to explore new markets and opportunities. The
report consists of an overview of the beer industry along with an analysis of the internal and
external environment of the industry and the country respectively. Suitable recommendations are
also included in the report in order to make the international expansion for XYZ Beer Company
successful.
Overview of Beer Industry in the Czech Republic
The beer market of Czech Republic is a diversified sector highlighting the presence of
small, medium and large sized beer organizations. The main beer organizations in the Czech
Republic include Pilsner Urquell, Staropramen Brewery, Heineken, Budweiser Budvar,
Lobkowitz Brewery and Moravian-Silesian Brewery (Wanninayake and Chovancova 2012). The

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country also houses 27 individual medium to small sized beer companies. Reports suggest that
160 beer companies were registered in 2016 only. However, recently the beer industry has been
lately affected by the economic crisis that hit the Czech Republic. This has resulted in the decline
in the overall beer output of the country following the increase in the taxation system. In 2012,
the production of beer in the Czech Republic increased by 2.75% after encountering significant
downfall of the past two years (Lorencova et al. 2012).
Figure 1: Total Beer Production in the Czech Republic
(Source: Matsui et al. 2012)
The above graph suggests that the total production of beer in the Czech Republic has
declined from 1950-2012. This is supposedly due to an economic crisis that has hit the country
and the increased rate of taxation imposed on the beer industry.

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Figure 2: Beer Production for Domestic Market in the Czech Republic
(Source: Kozak 2013)
The above graph also states that the production of beer in the domestic market has
encountered major downfall between the year 2007-2010. However, the production has increased
in the domestic market by 2.6% in 2011 and 1.4% in 2012, that is also very negligible
considering the fact that the beer industry contributes almost 1.6% of the Czech GDP.
Thus, it can be said that XYZ Australian Company has a suitable option for establishing
an international venture in the country.

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SWOT Analysis of Beer Industry
Strength
 High volume of beer consumption
 Embedded in the culture of the
countries
 Unique quality of the beer
 High-profit margin
Weakness
 Competitive beer industry
 Loyal customers
 Beer quality depending on
freshness
 Higher price than mass production
Opportunities
 New drinkers
 Huge investment
 Increase in the sales
 Low market concentration
Threats
 Competitive pricing
 Loss of investment
 High substitution rates
 Loss of market
The above table states the SWOT analysis of the beer industry.
Strength
Beer is consumed widely on a global scale and is most preferred around the world.
Around the world, beer is consumed both traditional and non-traditional purposes. Therefore, in
order to cope up with the demands of the customers, adequate numbers of beer companies are
essential at a global scale.

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Figure 3: Highest Beer Consumption in countries
(Source: Rodriguez-Carrasco et al. 2015)
According to the above-mentioned graph, it can be said that per capita consumption of
beer is highest in the Czech Republic. Therefore, increased demand of the beer throughout the
world is one of the strengths of the beer industry.
As commented by De Jong (2013), beer is an integral part of some cultures around the
world making the consumption of beer comparatively higher. As beer consumption is a part of
the tradition of the country, the demand for beer is also higher. As a result, the individuals have
to consume beer as a part of their tradition thereby, increasing the business opportunity of the
industry. The beer companies need to manufacture and produce high quality and adequate
amount of beer to satisfy the market demands. Individuals have different beer preferences that
provide maximum variation in the beer industry. Therefore, beer companies manufacturing beer
can differentiate from each other by producing a variety of beer in terms of flavors thereby,
providing a suitable competitive market for the beer industry.

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Opportunities
Based on the strengths, the potential opportunities for the industry include huge
investments. According to Colen and Swinnen (2016), as the demand for beer consumption is
high at a global scale, a large number of investors willingly invests in the industry and the beer
companies. The more the demand for the product and the industry, the better is the investment
opportunity for the investors. As beer consumption is a part of the tradition for many cultures
and legal, the industry has new drinker every year (Toro-Gonzalez, McCluskey and
Mittelhammer 2014). After a certain age, as the individuals are allowed to consume beer, the
industry never lacks appropriate opportunity. Increase in the number of drinkers also signifies an
increase in sale for the industry. Therefore, the demand of the industry is directly proportional to
the production and sales of the beer. As beer manufacturing and production requires an
appropriate license and adequate finance, the market has a low concentration that is also a
potential opportunity for the beer industry.
Weakness
As mentioned by Conner et al. (2013), increased number of beer manufacturing and
producing companies leads to market saturation and weakness for the industry. However, the
beer manufacturers manufacture wide range of beers in terms of flavor, there are some
companies producing similar flavors. This results in tough competition between the companies
producing similar beer flavors. Particular beer flavors are preferred by individual customers and
consume only those flavors. Therefore, it is difficult for one beer company to attract the loyal
customers of another beer company thereby, having a limited number of customers (Shukla and
Gottschalk 2013). The higher price of the beer also restricts the consumption of beer by people

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in all segments and is regarded as a potential weakness for the entire beer industry. The reason of
comparatively higher price is due to entire supply chain management of the beer industry that
cannot be compromised in order to maintain the quality and quantity of the products.
Threats
Based on the weakness, the potential threats of the beer industry include competitive
pricing, loss of investment, high rate of substitution and loss of market. As mentioned by Conner
et al. (2013), increasing demand for beer and beer products results in the tough competitive
market. This is because each organization in the industry implements unique business strategies
and attracts customers thereby, leading to market saturation and competition. Because of tough
competition, at certain instances, the beer companies tend to lose their market. Loss of market
thereby results in loss of investment by various financial bodies (Shukla and Gottschalk 2013).
Investigating the Economic Factor of Czech Republic
It is estimated that by the end of 2017, the GDP of Czech Republic is going to reach the
US $279.8 billion. The major factors that will drive the economy of the country are predicted to
be automotive, retail, construction, energy, and beer over the period. The economy of Czech
Republic grew around 5% over the period of 2002-2007 with an average growth increment by
6.8% in the year 2006. This is recorded as the highest growth of the economy of the court in the
past 15 years. The major reasons for economic growth of the country include an increase in the
net export from the country along with gross capital formation and private consumption (Svejnar
2013).
Reports suggest that the GDP of Czech Republic feel drastically to 6.1% in the years
2007. Moreover, the GDP of Czech Republic fell to 2.5% due to fall of the global economy in

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2008. However, Czech Republic achieved an overall growth in the GDP by 2.3% in 2010, as the
global economy of revived. Moreover, the government of the country also helped Czech
Republic in coping up with the fall of GDP within the required time. The country has
encountered robust growth over the past 10 years but is predicted to encounter economic growth
by another 2% in the next five years (True 2012).
Investigating the Political Factor of Czech Republic
The Czech Republic has provided private establishment for sectors such as banking, retail, and
telecommunication and has undergone severe economic reformation. As the Czech Republic has
encountered huge economic growth within 2001-2011, the economy is favorable for investors.
However, the economy of Czech Republic was adversely affected due to global economic
downfall. Due to this the government of the country used and implemented fiscal consolidation
help the public with financed thereby, improving the business environment of the country. As a
part of the fiscal consolidation, the government also introduced pension and health care reforms.
As a result, the country revived and grew by 2.5% and 1.8% in the year 2010 and 2011
respectively. However, the recovery of the country’s economy remained stagnant in the year
2012 and remained to 1.2% (Tworzecki and Semetko 2012).
However, the political scenario of Czech Republic has encountered continuous struggle
due to the opposition and the ruling government. This ultimately led to tension between the
political parties that hampered the business market of the overall country. The main reason for
the tension between the political parties was the emergence of the new political party named the
Liberal Democrats. Therefore, the emergence of the new ruling party resulted in spilled between

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the governments. The other members of the ruling party later joined the opposition due to the
power (Albu et al. 2013).
Investigating the Legal Factor of Czech Republic
As the Czech Republic is included within the European Union, the legal outline of the
country will be similar to the EU. Increased number of mergers and partnerships between the
international brewing companies suggests that the legal framework of the country is not strict.
This provides suitable and many opportunities for international beer companies to establish the
business in the Czech Republic successfully. However, the tax rates for the country are
considerably high thereby, prohibiting medium and small sized beer organizations for entering
the country for business. Moreover, Czech Republic also imposes high labor taxes making it
unaffordable for some companies to venture in the country (Sklenicka et al. 2013).
From the economic, legal and political analysis of Czech Republic, it can be said XYZ Beer
Company has potential and suitable options to establish the business successfully in the country.
Apart from the analysis of the external environment, the high demand for beer and being the
highest consumption of beer per capita, XYZ Beer Company have suitable opportunities for
international business expansion.

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The Trade and Investment Environment
The European nation Czech Republic has opened up its doors to FDI. Statistics of the
country shows that it is a substantial receiver of Foreign Direct Investment. Being a medium
sized country and having an economy which is totally export driven creates a substantial demand
for the foreign investment (Zapletalová 2015). The country being in the most favored trading
area, euro zone gets a huge advantage while carrying trade. The main trading area of the country
is Europe which contributes more than 80% of the total exports. The country took a wait and see
option before making an entry into the Euro zone as it wanted to ensure the maximum profit
before entering the core markets of Europe. The country is a totally functional market economy
with the availability of practically all kinds of goods and services (Cette 2016). The private
sector of the country accounts for more than 80% of the Gross Domestic Production. The
government of the country has slowly converted all the business sectors into private to ensure the
maximum participation of local as well as foreign investors in the market.
XYZ Company which manufactures beer has decided to expand itself into a number of
global markets, Czech Republic being one of them. The company has started the basic things that
are needed to enter into the market. At the beginning the management of the mentioned
organization has decided to analyze the trading and investment options in Czech Republic. The
study conducted has found out that the country applies the union trade policy like antidumping,
anti subsidy measures to control the market. The adoption of the Fiscal Compact in 2014 limited
the state budget deficits to 3% of the Gross Domestic Production. The adoption of Euro has also
changed the business environment in the country (De Boer and Bitetti 2014). Though some
major economic reforms has taken place in the country the slow movement of the legislative and