Carlsberg worried that a small area would be a hostile takeover and wanted to target increasing markets in Russia and China. Both countries have been competitive in the market following the rapid growth of the Russian economy, and the huge population in China have made it a large market for market consumption. In order to achieve profit acquisition and growth, Carlsberg is currently the market leader in Russia with a 55% market share in China, adopted an aggressive acquisition strategy. Carlsberg is now trying to capture new markets. In 2016, they launched the SAIL’22 strategy that seeks to strengthen their position in their existing markets, launch in different geographies that exhibit potential growth in the long term, and establish a winning culture.
According to Porter’s analysis, while the company was emerging in the Russian and Chinese market, they were at a vantage since 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 would be a greater demand for their product. However, they faced cost, political, and management risks. In their first business strategy, they had to establish partnerships with local brewers to understand and win consumers(Hitt, Ireland, &Hoskisson, 2016).
The SWOT analysis shows the 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 ownerships 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.
My 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 argument 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 systems 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, 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 Multi-attribute 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.
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.