BSP4512

Tran Thi Huong Lan (U078628M)

Case write-up: Asia Pacific Breweries Regionalization Strategy

While giving a comprehensive look into Asia Pacific Breweries strategy, operations and current challenges, the case highlights several key issues that are challenging APB. After decades of gaining great achievements in performance and wide presence across Asia Pacific region, it is questioned if APB was to leverage on its previous victory to take it to greater heights, as mentioned by Mr. Roland Pirmez during his CEO acceptance speech in October 2008. This is also involved in the ability of APB management to maintain and balance its wide portfolio in twelve countries in the region. The portfolios range covers from developing markets such as China and India to growth markets such as Vietnam and Thailand, and finally established markets such as the home country Singapore, New Zealand and Papua New Guinea. Historically backed by the common Asian theme and pride, this portfolio was well balanced by offsetting downturns in one market with a good performance in another market to give APB a better position compared to rivals. However, finding and keeping the equilibrium point for this widely diverse portfolio is not easy all the time. Local knowledge advantage does not guarantee that APB could continue building upon its success and balancing its portfolio. In addition, APB faces a critical decision to ensure logical and appropriate allocation of resources to various markets to maximize profit and growth both in short-term and long-term. In other words, the firm needs to analyze different conditions and scenarios to optimize its investment in areas that will yield high returns and prospects. Currently, amid the regionalization strategy, APB has explicitly announced that it would invest heavily in China, the largest beer market in the world, in the long-run. Despite several strategic initiatives and reorganization steps in China which totaled more than US$100 million, APB is still struggling with the uncertainty in this developing market.

In my opinion, I do agree with the comment by Business Monitor International that APB is unlikely to dominate in China or India when leveraging a very broad approach to expansion which will serve the regional ambitions well. After analyzing both global integration pressures and local responsiveness pressures to understand the industry effect, I believe dominating Chinas beer market is much more difficult done than said, and placing most emphasis on China might not be as strategic as allocating equal resources across markets. According to the CEO of Molson Coors Brewing Co., beer is actually still a local market with 85 percent of local market volume. Beer, therefore, is not really a global product although demand for it exists everywhere. There are global rivals in the US and Europe who were less expansionary and therefore were not positioned as high as APB during the 2008 economic crisis. In this capital intensive industry, obtaining high economies of scale is crucial to compete with local low-priced products. These factors accumulatively cause moderate to high Global Integration pressures. Looking at Local Responsiveness pressures, it is easily recognized that this dimension in industry categorization is relatively high. This was attributed by the fierce resistance by local brewers, limitations in the wholesaling function, and high power of retailers. Besides, there exists uncertainty in China such

BSP4512

Tran Thi Huong Lan (U078628M)

as the volatile returns, unfavorable weather conditions and price changes in raw materials. All of these analyses give us an Industry Categorization map to identify the attractiveness of China market. APB will be located roughly in the red oval area drawn on the map below. According to the map, APB may either go for a niche market or become a multi-skilled MNC. While the former is difficult and never in APBs strategy, perhaps the latter is more suitable as APB can leverage on its local knowledge advantage to centralize certain areas and decentralize other certain areas. This also means regionalization strategy will make more sense than an attempt to dominate one market alone such as China because APB can use its prior success to keep ahead of the competition. Also, as Asia Pacific is not yet a stabilized region with lots of changes in the future, holding a diversified portfolio might be smarter than investing everything in a single market. In other words, a broad approach to expansion works well with the regionalization strategy, and I think this is the most suitable way for APB. High
Global Integration

Low Low
Local Responsiveness

High