Heineken is a global business as it produces beverages for Europe, North and South America, Africa, Middle East, Eastern Europe, and the Asia Pacific. Heineken’s main strength is brand diversification, aimed to meet the customer’s tastes (Gaspar and Massa 9). Its main weaknesses include currency fluctuations and poor margins as it sells on the mature beer markets using a pricing tool. Among the opportunities, a shift to micro-breweries seems to be highly attractive, as it will allow the global business to enter a less strict market of pub-based breweries selling fresh beer. The main threat to the company’s business is the merger of its rival’s brands. This paper aims to evaluate different aspects of the external environment for Heineken and describe the main competitive forces in its industry.
The main aspects of Heineken external political environment include legal restrictions and regulations for alcoholic drinks, taxes and restrictions on drinking age. Economic external factors for the industry are trends for economic recession, average income growth, and infrastructure developments (Gaspar and Massa 10). Major trends in technology and ecology include packaging trends, environmental regulations in logistics emissions and energy consumption, and innovations in the production processes (Akinyoade et al. 682). Social and cultural factors consist of healthy lifestyle trends, but also provide opportunities in the field of the social and cultural side of drinking, like Octoberfest and Super Bowl-related activities.
The Heineken industry evaluation should focus on the assessment of the industry attractiveness and its main competitive forces. The primary industries for Heineken are alcoholic and non-alcoholic beverages production (Gaspar and Massa 9). These industries are highly competitive owing to production giants like Miller, Fosters, Anheuser Busch, and Molson Coors companies. Therefore, there is a low potential of new entrances, which is relatively convenient for Heineken and disadvantageous for the customers who benefit from diversity most. Moreover, dense competitive conditions give space for using mergers as a competitive tool, which is also inappropriate.
The power of suppliers is stable, as the prices for raw materials are mostly sustained, not to mention some macro-economic fluctuations. Therefore, this factor does not have a significant impact on the production and business processes (Gaspar and Massa 10). On the opposite, the power of the customers is considerably higher, since pricing remains the main leverage for margins extension. It means that Heineken should mainly focus on its customers to increase profits and financial turnover. The threat of substitute products is rather low – people were drinking beer for ages, so it is highly likely that nothing can substitute the preference for beer among other alcoholic beverages. There may be some diversity, like flavored beers, or beers in eco-friendly ergonomic bottles, but the beverage is here to stay for successive decades.
Thus, Heineken external environment was evaluated, and the main competitive forces were described. To summarize it, Heineken has businesses in alcoholic and non-alcoholic beverages production industry. The main competitive power here is mergers, which is connected with the low entrance level to the industry and its overall maturity. Another competitive force is customer targeting, as customer choices seem to have the highest impact on the Heineken’s profits and financial overturn. Heineken’s customers may be targeted through advertisement campaigns during Octoberfest and Super Bowl, eco-friendly packaging, and flavored beer promotion, as well as through customer-loyal promotions, offers, and discounts.
Works Cited
Akinyoade, Akinyinka et al. “The Use of Local Raw Materials in Beer Brewing: Heineken in Nigeria.” Journal of the Institute of Brewing, vol. 122, no. 4, 2016, pp. 682-692.
Gaspar, Luisa, and Carolina Massa. Heineken, Alcoholic Beverages. Dissertation. 2019. Nova School of Business and Economics, MSc Dissertation.