Introduction
The Coors Brewing Company is a US brewery and beer corporation that began in 1873 in Golden, Colorado, as a holding business. The organization is managed by the heirs of the founder, Adolph Coors. Since its formation, the Coors Brewing Company has sustained high production levels and expansion, making it one of the leading American breweries (Dess et al. 6). The success was primarily due to the company’s effective management, good leadership, and acquisition of talents and resources across Colorado. Unfortunately, the operations of the firm started deteriorating from the mid-1970s to the mid-1980s, as shown in figure 1 below. As a result, the corporation began losing its competitive value in the USA. This essay discusses what made Coors’ competitive advantage in America drop and how to improve its prospects.
The organization had got through Prohibition by making porcelain, cement, malted milk, and near beer. Subsequently, this made the company a crucial player in the American brewing industry that sold over 90,000 beer barrels within four years after the Prohibition (Dess et al. 6). However, its competitive position in the sector dropped between the mid-1970s and mid-1980s due to various factors. One contributing aspect was the restriction of Coors’ market to eleven states only through 1975. At this time, other competitors had begun expanding countrywide to capture new markets. Contrarily, Coors had confined its operations to these eleven states and, at the same time, increased the cost of expansion in the future.
A second issue that led to this deterioration is the high cost of raw materials. According to this case study, the company had made considerable investments in achieving higher vertical integration of its corporate practices and processes (Dess et al. 6). Coors wanted to achieve self-reliance and quality in procurement by buying facilities, ingredients, and machinery. Specifically, the organization heavily invested in energy sources, glass manufacturing, malt production, recycling, secondary packaging, and label manufacturing. As a result, the cost of sustaining the aforementioned initiatives was higher than that incurred by other significant competitors who depended on external suppliers.
In terms of production, Coors failed to maintain its competitive advantage due to extra finances needed for refrigeration of unpasteurized beer, lack of product differentiation, and longer brewing cycles. Additionally, the demand for beer had stagnated despite heavy machinery investments and ineffective capacity extension strategies (Dess et al. 8). Consequently, this resulted in minimal growth and, subsequently, beer shortages during peak seasons. Finally, the corporation had several unethical operations that caused product boycotts, federal agencies filing occasional legal suits, and employee strikes. Coors’ distribution strategy also deteriorated, as the company incurred extra costs in shipping unpasteurized beer in refrigerated rail trucks and cars (Dess et al. 9). Although Coors had extensive distribution monitoring programs, the firm was disadvantaged by its strict policies. Some of these rules include preventing wholesalers from cutting costs, restricting geographic beer distribution, and avoiding selling draft beer in bars except when they have carried it exclusively.
Another contributing factor to the dropping Coors’ competitive advantage is the expansion strategy entering at least two states every year. The plan increases the median beer shipment distance, thus elevating the transportation cost of moving the products from the firm’s distribution centers to wholesalers. The company also invested considerable amounts in market development and partnered with weaker resellers compared to leading competitor organizations like Miller and Anheuser-Busch (Dess et al. 10). The intended competitive advantages of Coors Transportation Company were not met after its establishment because of its inability to obtain sources of traffic, including autonomous carriers, leading to substantial cost overruns.
How Coors can Improve its Prospects
Coors management needs to develop reliable marketing techniques and emphasize quality production. These tactics will allow them to evolve and accommodate local and international competitors quickly. In addition, the company should change its structure to meet international standards while maintaining its family culture. Coors should also increase its product line to get a competing edge over the other brands (Dess et al. 8). The organization needs to create effective ways of delivering products from the processing station to retailers and wholesalers. Coors Breweries can also improve their production by setting new management rules that prompt every department to strive for higher targets regardless of the prevailing circumstances.
Secondly, Coors needs to create an efficient procurement process that will minimize production costs. The company should develop well-structured franchises and hire independent suppliers. Besides, it should strive to be self-reliant by establishing grain processing firms that supply its starch needs and avoid price fluctuations. Additionally, the firm should design its malting packaging and labels (Dess et al. 8). All these factors will reduce the company’s costs of production to a minimum value.
Improving the production process will also play a critical role in Coors’ prospects. Coors executive team should devise techniques to improve their products for the international markets, according to Dess et al. (12). They can open several shops in U.S popular towns to allow clients to access their beer easily. Moreover, the organization can use product branding as the primary marketing technique and develop market segments to increase product sales. Coors can also utilize cost-effective production techniques to increase their profit margins and compete with other breweries.
Another vital recommendation is sourcing quality ingredients and utilizing a unique brewing process that will produce quality beer. Coors should focus on increasing its economies of scale by producing more beer. The brewery needs to develop expansion strategies that will enable it to produce beer for regions with shortages. Marketing is another element that Coors should consider when planning competitive strategies. Managers need to implement effective marketing strategies like outsourcing marketers from other firms (Dess et al. 10). Further, they need to launch new brands and increase their advertising expenditure to create awareness of their beers.
Coors should also develop efficient distribution processes to be at the top of the competition. They should eliminate distribution channel barriers and recruit reputable wholesalers with proven market records to distribute their products (Dess et al. 10). Coors’ leaders can also develop comprehensive distributor monitoring programs to ensure wholesalers sell fresh beer to consumers. Further, the company should plan to expand its business to different states in the US. They can minimize their shipping expenditures by setting up distribution centers in the new states. Furthermore, Coors brewing company needs to build a good reputation and make consumers trust its brand. The brewery should set up many stores offering its branded drinks at pocket-friendly costs.
Conclusion
To conclude, this case study has analyzed the growth of Adolph Coors in the brewing sector in terms of its competitive advantages. The research aimed to understand why the competitive position of the organization deteriorated during the 1970s and 1980s. Subsequently, it proposes strategies that should be implemented for the organization to enhance its prospects. Leaders need to develop effective strategies and best business practices to meet the company’s specific goals, thus propelling it to greater heights. By implementing the aforementioned strategies, Coors Brewing Company will rise again to be a leading beer producer in the US.
Diagram
Work Cited
Dess, Gregory, et al. Strategic Management: Creating Competitive Advantages. 9th ed., McGrow-Hill, 2019.