Carlsberg's SAIL'22 Business Approach
Carlsberg is now using the SAIL'22 business approach introduced in 2016. The plan aims to improve their presence in their current markets, to introduce them in various geographies that show potential growth in the long term, and to develop a winning culture. It is already the industry leader in Russia and has a 55% market share in China, aiming to dominate new markets. Carlsberg anticipated a hostile takeover by operating in a small area and planned to target rising markets in Russia and China, using an aggressive acquisition plan for-profit acquisition and expansion.
Analysis
According to analysis, while the company was emerging in the Russian and Chinese market, they were at a vantage to enable fast penetration in the markets. For instance, the countries provided raw materials and labor at a low cost. Secondly, the taxation rates for beer were low compared to the taxes on wines and spirits which are relatively high based on the industry's analysis. Thirdly, the big markets meant there is a greater demand for their product. However, they faced cost, political, and management risks and therefore, in their first business strategy, they established partnerships with local brewers to understand and win consumers (Hitt, Ireland, & Hoskisson, 2016).
Secondly, the analysis shows they have a proper positioning of the company in the markets compared to their competitors such as Heineken, Anheuser-Busch, and SABMiller. For instance, they built their first brewery in Hong Kong and conquered the local market since they could buy shares from the local breweries. However, the poor decision making and management from the joint venture strategy led to delays in conquering Asia and resulted in a revision plan (Hitt, Ireland, & Hoskisson, 2016). The ownership structure, where 51 percent shares went to a foundation that catered for research and social projects, caused a slow release of capital. In turn, there was limited expansion and potential fusions.
Recommendation
The analysis shows that Carlsberg would have had the best performance in Asia using the Systems theory instead of classical organization theory in their management (Astley & de Ven, n.d.). The theory demonstrates the interrelations in the organizations, where a change in one area of the structure affects the rest. Implementing the systems theory, the management would have realized the impact changes in the financial and budget sector would have in their economic growth area. The theory would have embraced the changes and priorities in the new environment and helped them adapt to it priorities instead of using policies that were successful in a different market.
Secondly, the analysis shows Carlsberg ought to have used the neuroscientist model in decision making. The model is more appropriate in comparison to the social model that put more value in social projects to win the markets emotionally. The neuroscientist model analyses the responsibilities at hand and favors investment in the task with the highest responsibility. Also, Carlsberg should have implemented the model based on the Multiattribute Utility Theory to ensure that the decision to invest in new markets was the most top priority (Astley & de Ven, n.d.). With the theory, they would have identified the most important design attributes for the company, set the financial limits on each investment, and evaluated the trade-off preferences that would suit the company. Subjective Expected Utility Theory the company used in Asia meant that they implemented their decisions by minimizing their risks even though the new markets required high chances of risks to lure the local brewers.
References
Astley, W. & de Ven, A. Central Perspectives and Debates in Organization Theory. Administrative Science Quarterly, 28(2), 245. http://dx.doi.org/10.2307/2392620
Hitt, M., Ireland, R., &Hoskisson, R. (2016). Strategic Management (12th ed.). Boston, MA: Cengage Learning.
