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Published by: Wits Business School - University of the Witwatersrand
Published in: 2001

Abstract

In May 2000, Graham Mackay, Group Chief Executive of South African Breweries (SAB), faced a difficult decision regarding the company''s global strategy. By the end of 1999, SAB had become the fourth largest brewer in the world, by volume. It had long been the dominant player in Africa, and was growing rapidly in other emerging markets. Yet SAB was challenged to reach the same growth in hard currency earnings obtained by its global competitors. Aiming to increase its globalisation efforts, make acquisitions, and compete in developed markets, SAB shifted its headquarters to London and listed on the Stock Exchange in March 1999. While the global brewing industry remained highly fragmented in the early 2000, the race for consolidation among the major players had begun in earnest. Despite SAB''s movement overseas, SAB was primarily an ''emerging market'' brewer and the company was closely associated with South Africa - an economy out of favour at the time. The South African rand and other regional currencies had plunged against the dollar. High political risk and volatility were attached to these emerging market economies, and SAB''s ratings on the international financial markets were inevitably affected. SAB''s share price was trading at what Mackay believed to be a significant discount below its true value, and this made raising capital an expensive proposition. Mackay, aiming to keep the company in the top tier of international brewers, was considering several potential courses of strategic action. The teaching objectives are: (1) to understand SAB''s competencies: ie, what competencies the company has developed, related to both domestic and international markets; (2) identify success factors: ie, several of the factors that underpin the success of specific international operations, in countries such as China, for instance; (3) determine criteria for entering first world markets; and (4) analyse the global beer industry with an understanding of competitive advantage, and accompanying strengths, weaknesses and threats.
Industry:
Size:
Large
Other setting(s):
2000

About

Abstract

In May 2000, Graham Mackay, Group Chief Executive of South African Breweries (SAB), faced a difficult decision regarding the company''s global strategy. By the end of 1999, SAB had become the fourth largest brewer in the world, by volume. It had long been the dominant player in Africa, and was growing rapidly in other emerging markets. Yet SAB was challenged to reach the same growth in hard currency earnings obtained by its global competitors. Aiming to increase its globalisation efforts, make acquisitions, and compete in developed markets, SAB shifted its headquarters to London and listed on the Stock Exchange in March 1999. While the global brewing industry remained highly fragmented in the early 2000, the race for consolidation among the major players had begun in earnest. Despite SAB''s movement overseas, SAB was primarily an ''emerging market'' brewer and the company was closely associated with South Africa - an economy out of favour at the time. The South African rand and other regional currencies had plunged against the dollar. High political risk and volatility were attached to these emerging market economies, and SAB''s ratings on the international financial markets were inevitably affected. SAB''s share price was trading at what Mackay believed to be a significant discount below its true value, and this made raising capital an expensive proposition. Mackay, aiming to keep the company in the top tier of international brewers, was considering several potential courses of strategic action. The teaching objectives are: (1) to understand SAB''s competencies: ie, what competencies the company has developed, related to both domestic and international markets; (2) identify success factors: ie, several of the factors that underpin the success of specific international operations, in countries such as China, for instance; (3) determine criteria for entering first world markets; and (4) analyse the global beer industry with an understanding of competitive advantage, and accompanying strengths, weaknesses and threats.

Settings

Industry:
Size:
Large
Other setting(s):
2000

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