MNG3702 STRATEGY IMPLEMENTATION AND CONTROL 70 Marks

MNG3702 STRATEGY IMPLEMENTATION AND CONTROL 70 Marks Section A Answer all the following questions based on the SAB case study provided below. How a South African company turned constraints into global strengths On 28 September 2016, the shareholders of South African born international brewer, SABMiller, approved the company’s acquisition by Anheuser-Busch InBev for $104 billion (R1.5 trillion). The deal paved the way for the creation of what is now by far the world’s largest brewing company. For a company that started out selling beer to miners in Johannesburg during the gold rush of the late 1800s (SAB was founded in 1895 as Castle Brewery and became the first industrial company to list on the Johannesburg Stock Exchange in 1897), it has been quite a journey. How did a brewing company from a developing country rise to compete with the multinational brewing behemoths from the developed world? A series of interviews with senior executives and managers who presided over the growth of what was then South African Breweries’ (SAB) rapid expansion during and after the 1990s are revealing. After building up a monopoly-like position in the beer market in South Africa, the company went in search of new markets. With a vision to be the most admired company in South Africa; a partner of choice, an investment of choice and an employer of choice, it used its experience in South Africa in its entry strategies abroad. SAB’s path reflects the differences between multinationals from developed and emerging markets in terms of location choices, sequencing, time horizons and motivation. A two-phased expansion path emerges to explain the remarkable success story. The first pillar to SAB’s international expansion was a focus on developing markets. Coming from a developing country itself, the company would cope better with emerging market conditions than brewers from the developed world. These ventures became a powerful base for SAB to take on developed markets. The second was to expand into developed countries. This became necessary as it became clear the company was over exposed to emerging markets. After a few early forays into South Africa’s neighboring countries prior to 1993, SAB executives realised that the company could exploit its knowledge of institutional shortcomings in its home country. It would use this experience to adapt more easily than its competitors to conditions in developing countries would. And so began the first part of its internationalisation strategy: a rapid expansion into emerging markets worldwide. Through a series of acquisitions and joint ventures throughout the 1990s, SAB gained a foothold in various countries in Africa, Eastern Europe and Asia. Although many were geographically distant (like Hungary, Czech Republic, China and India), they echoed South Africa in terms of their socioeconomic development. Eastern Europe, for example, was still emerging from political reform in the wake of communism, and infrastructural, institutional and economic weaknesses persisted. By expanding into countries that shared socioeconomic characteristics with South Africa, SAB was able to make use of its experience to turn a perceived drawback – institutional weakness – into a strength. As one respondent explained: ‘To be quite frank, we actually accepted that we would live with the political risk and poor institutions. We did not really shy away from high-risk countries unless, of course, there was a raging civil war that we would have to wait to subside.’ Once it had established this expansion plan, SAB diversified into developed markets such as Italy and the US. As one interviewee put it: