STRATEGY IN PRACTICE

CEMS Masters in International Management Programme

Graduate School of Management , St. Petersburg University

Professor George Tovstiga

Professor of Strategy
EDHEC Business School, Paris (France)

Case Guidance

06 January 2020 © Henley Business School 2008 www.henley.reading.ac.uk

 Case: Nespresso *

1. Using the basic concepts and notions related to strategy

covered so far, which elements of Nespresso’s strategy can
you identify?
2. In which way have these contributed to Nespresso’s success
so far?

* Case readings:
• “Nestle’s Coffee Business Is Competing With Itself”, Bloomberg, June 28, 2016
• “Nespresso has shot at larger coffee sale”, Financial Times, February 19, 2014

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 Case: Nespresso * Guidance (1)

There are several possible approaches to answering these questions. We begin by reviewing some of the
basic notions of strategy covered in the lecture so far and relate these to Nespresso. The following builds
on the “distinctiveness” value creation/delivery breakdown.

On this basis, elements of Nespresso’s strategy, its competitive advantage achieved through value
differentiation, can be brought down primarily to ‘winning (creating a position of competitive advantage)
on the basis of being different’. Nespresso’s competitive differentiation can be broadly mapped on the
basis of the three distinctiveness dimensions that relate to superior value delivered to respective
stakeholders (beneficiaries):

1. Product distinctiveness
• “uniqueness” (at least initially when launched and for about 25 years thanks to extensive (1,700!)
patenting) of product; premium nature of the value offering
• Quality of beverage (taste/flavour, texture (‘crema’), temperature, consistency, etc. )
• Quality of machine: aesthetics (design), durability and functionality)
2. Relational distinctiveness
• Channel partnering (managing of its supply chain – related to both coffee and materials / machines)
• Ease of doing business with
• Brand building
3. Operational distinctiveness
• (no doubt present; yet not in the foreground, given high level of ‘ premiumness’ of product); yet even in
this case operational excellence is important for NESPRESSO’s primary value disciplines, which are
product and relational distinctiveness.

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 Case: Nespresso * Guidance (2)

‘NESPRESSO’s value premiumness footprint’

…reflecting its competitive differentiation focus

Product Indicators
• Distinct (monetizable) product features
distinctiveness •
•
Unique and superior functionality
High-value-added features (difficult to copy)
• High level IP protection
• Premiumness of brand
synergies
synergies

Relational
distinctiveness Operational
Indicators distinctiveness
• Distinct stakeholder (primarily its ‘pampered’ Indicators
customer base) relations •
• Distinct channel partner / supplier (machine
synergies Operational excellence
• Lean operations
producers) relations • Cost efficiency / reliable, safe, stable operations
• Technological, societal, political foresight

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 Case: Nespresso * Guidance (2)
NESPRESSO’s focus up to now; will it
suffice moving forward?

DISTINCTIVENESS
FOCUS
Product
Relational
Operational

Premium price

Profit
(produc Premium Premium
t leader) Profit
(industry
leader)
Average price
Average
Profit
Averageprofit
cost (cost
leader)
Premium Premium

Lowest cost

Industry leader
Average player

Product leader

Cost leader
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© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance
 Case: Nespresso* (1)

1. What are the value components of Nespresso’s single

serve coffee capsule?
2. Which of these have contributed significantly to its value
premium – and in what way?

* Case readings:
• “Nestles coffee business is competing with itself”, Bloomberg, June 28, 2016

© Professor G. Tovstiga (2019) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 6
 Case: NESPRESSO* (1) Guidance
IMPORTANT: Always begin with consideration of “what’s competitively at stake”? In this case, it’s
about NESPRESSO’s competitive differentiation focus and how it is evolving.

Indicators
• Distinct product features - uniqueness and superiority
NESPRESSO’s evolving Product distinctiveness of coffee & machine
• High-value-added features (difficult to copy)
‘premiumness’ footprint • Premiumness of brand

Original (1980s)
synergies
synergies

current

Relational
distinctiveness Operational
Indicators distinctiveness
• Customer relations Indicators
• Purchasing experience •
• Service quality
synergies Ethical sourcing
• Fair trade practices and supply management
• Boutiques – Nespresso Club • Production
• Ecological footprint

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 Case: NESPRESSO* (1) Guidance
1. Value components: which are relevant; how important is each one (i.e. weighting) ?

Examples: branding; technical features of machine (robustness; ease of use);

design features (aesthetics; functionality; user friendliness); environmental
(materials – aluminium); price; status value (exclusivity), etc.
NESPRESSO value components might include:
1. Brand (degree of ‘premiumness’)
2. Design aesthetics
To be noted:
• machine
1. This list is not meant to be comprehensive;
3. Quality of coffee it is for illustrative purposes only.
• Intensity 2. All of the value components will be
• Aroma weighted differently, reflecting the current
market needs.
4. Eco-friendliness 3. As markets evolve, (1) weightings of
• impact on environment (used capsules) individual value components may change
5. Price accordingly; (2) new value components
may appear; (3) existing ones may drop
• Machine
off the list
• Pods
6. Exclusivity
• Linked to ‘premiumness’
© Professor G. Tovstiga (2019) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 8
 Case: NESPRESSO* (1) Guidance

2. Competitive relevance of each of the ‘j’ value component in terms of uniqueness and
superiority; then value premium representing the sum of all individual elements:

Critical to keep in mind all along:

1. CR and COMP form the basis for a comparison of NESPRESSO’s offering to that of its competitors
• Who are the competitors (what ‘competitive space’ (i.e. markets) are we talking about)?
• What is their offering; how does it compare with NESPRESSO’s?
• How are market needs changing; how are competitors’ offerings (value premium) changing
relative to NESPRESSO’s?
2. Who are the relevant stakeholders; what are their value expectations (i.e. which components are
stakeholders most sensitive to); how are these changing?
3. How are composition and relevance of existing value components (regardless of who can offer these)
changing; which new ones are emerging; which ones are no longer relevant - as markets evolve?

© Professor G. Tovstiga (2019) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 9
Case: NESPRESSO (1) Guidance
View 1: How well does NESPRESSO perform on VALUE delivery vis-à-vis market demand?

Current value delivered by NESPRESSO

Current market (premium, single-
serve) importance or demand
VALUE COMPONENTS (COMP)
(+) Illustrative!
(competitive relevance)
VALUE IMPACT (CR)

Parity with
0 competitor
Trending / emerging offering
Legacy

Over-delivery? Under-delivery?
• Trend analysis?
(- ) • Competitors’ offering?
Quality of coffee

Customer service
Eco-friendliness

Price
Brand

Ethical sourcing
Exclusivity

© Professor G. Tovstiga (2019) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 10
Case: NESPRESSO (1) Guidance
View 2: How well does NESPRESSO perform in a one-on-one competitor comparison?

Focus: Premium, single-serve coffee; NESPRESSO perspective

Illustrative!
Comparative Value Premium Assessment
VALUE
PREMIUM
COMPETITIVE
DIFFERENCE
VALUE COMPONENTS (COMP) RELEVANCE (CR) Performance N Score N Performance T score T
(scores N - T)
(weighting)

1. Brand premium 3 4 12 2 6 +6

2. Quality of coffee 3 3 9 4 12 -3

3. Exclusivity 3 3 9 3 9 +/-0

4. Eco-friendliness 5 2 10 3 15 -5

5. Price 3 3 9 3 9 +/-0

5. Customer service 5 1 5 5 25 -20

6. Ethical sourcing 5 4 20 5 25 -5
(Bottom-line) Value Premium Achieved -27

CONCLUSION: Based on this analysis, NESPRESSO’s current value premium appears to be seriously challenged by small but
premium coffee roaster Toast; this is a snapshot view; a trend perspective (with particular focus on the KSFs and their evolution)
would yield even greater insight.

© Professor G. Tovstiga (2019) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 11
Case: Nespresso (revisited)*

1. Use a suitable ‘big-picture’ analysis approach to map

NESPRESSO’s current competitive position in its North
American market context.
2. Use this mapping to identify those (really critical) strategic
issues it would be facing in that market.

* Case reading:
• “Nestlé’s Coffee Business Is Competing With Itself”, Bloomberg, June 28, 2016

© Professor G. Tovstiga (2019) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 12
Case: NESPRESSO (revisited) Guidance
1. Getting started: We always begin with critical reflection on “what’s strategically at
stake” (in other words, why are we spending any time on this; is there a strategic
challenge – if so, what is it?). In this case we focus on NESPRESSO, particularly the
strategic challenge it faces if it chooses to go to NA in a significant way! Key strategic
question: Will it be able to establish itself (competitively) in NA in a way which will
allow it to achieve the impressive strategic performance (= generation of a high value
premium!) it achieved in Europe and elsewhere previously?
2. Mapping of NESPRESSO’s competitive position using a high-level, ‘big-picture’
strategic analysis framework: For this we have a choice of three frameworks, but the
preferred one (in view of the second part to this question!) is the Unique Competing
Space (UCS) framework – we’ll see why this is so when we proceed to the second part
of the question!
3. Identifying (i.e framing) strategic issues (related to NESPRESSO’s strategic challenge!)
with the help of the high-level, ‘big-picture’ strategic analysis we set up in first part of
this question: Solution approach: we prefer to use the UCS because it lends itself
especially well to the framing of strategic issues on the basis of the premise that
“strategic issues, if and when they arise, do so at the boundaries of the relevant UCS in
question!”.

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Case: NESPRESSO (revisited) Guidance
NESPRESSO’s ‘big-picture’; which insights are relevant to NA market?

Single-serve
coffee
market
(50+ systems on
Customers’ market in 2014):
needs • “a hermetically sealed aluminium
capsule with unique water dynamics
Chic, high-end pod market for producing a perfect espresso kissed
premium coffee & experience with foam”
(boutiques, up-scale customers) • Perfectly portioned highest
Competitors’ quality Grand Cru coffees
offerings • Smart, stylish coffee machines
2 • Exclusive, personalized customer
1 services – the NESPRESSO Club

Macro-economic context
Econ: US$ 8.5bn global coffee market (2016)
3 Econ: premium single-serve segment: 28% growth
1,700 patents on ‘lock-in’ Econ: recessionary / austerity pressures
Soc: Lifestyle / upscale / chic: premium quality
machine/capsule system
home-brew for affluent
$millions invested in R&D;
Env: biodegradability / eco-awareness
brand; boutiques; high-profile
marketing; BUT - expiring Pol/Econ/Soc: first sales in China
patents; slowed growth Tech: advanced automation and flow

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance
Case: NESPRESSO (revisited) Guidance
NESPRESSO’s strategic issues: Focus on NESPRESSO’s North America ambitions

Strategic Issue
NESPRESSO’s potential NA Cluster 1
competitors and their offerings
• Numerous established competitors
• Increasingly competitively attractive
offerings by competitors
• Increasingly more difficult to achieve Strategic Issue
competitor ‘push-back’ (i.e. through Cluster 2
legal means) 2
1
Unique NESPRESSO’s potential NA
competing customers, stakeholders and
space
market space
Relevance of NESPRESSO’s basis 3
• Nespresso NA: newcomer position
of competitiveness & ability to
• Increasingly attractive alternatives to
deliver value to NA NESPRESSO’s offering
• NESPRESSO’s strategic orientation • NA coffee consumption habits
• R&D pipeline; relevance to NA mkt Strategic Issue • Shifting market space; impact of
• Innovation capability – reflecting Cluster 3 economic recession
ability to generate and move • Brand impact in NA market
innovative and strategically relevant
• Changing consumer demands (e.g.
product concepts into its UCS
eco-sensitivity)
© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 15
Case: LEGO®*
Comparative competitor analysis: LEGO® and competitors
Set up a comparative competitor analysis on the basis of a key success
factors analysis for LEGO® and its main competitor(s):
1. Identify 4 or 5 really key, order-winning KSFs relevant to LEGO®’s global
business
2. Prioritise and weight these keys success factors accordingly
3. On the basis of the key success factors and their weightings, assess
LEGO®’s comparative delivery performance on these KSFs vis-à-vis
relevant competitor(s).

Case readings:
• “Lego builds on momentum to increase profits and revenues” , Financial Times, March 1, 2016
• “Lego’s ‘awesomeness’ was always bound…”, Financial Times, September 5, 2017

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 16
Case: LEGO® Guidance

1. What’s at stake competitively for LEGO®; what’s at the core of its

strategic value consideration?
2. Issues reflecting “what’s competitively at stake” for LEGO®
1. Changing competitive field marked by rapidly expanding “digital
borders” in toy-making sector
2. Fusion of traditional physical toys with digital formats with
entertainment
3. Evolving demographics – from infants to adults (“serious play”)
4. Increasingly global playing field; importance of global footprint and
mindshare
5. NB: These issues are not unique to LEGO®; they reflect the rapidly
evolving global “toy” markets in the face of technological,
economic and social change.
3. Use issues to identify KSFs – particularly those that are symptomatic of
the changing nature of competition

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 17
Case: LEGO® Guidance
Focus: Toymaking – entertainment - digitalization

COMPARATIVE COMPETITOR PERFORMANCE

Illustrative!
LEGO Mattel Hasbro
KSFs IMPORTANCE Performance Score Performance Score Performance Score
(ranked) (a) (b) (a x b) (b) (a x b) (b) (a x b)

1. Brand 5 5 16 4 20 4 12

2. Global mindshare 4 4 15 3 10 3 25

3. Demographic reach 4 5 15 3 15 4 6

4. Adaptation to digital 4 4 12 4 16 4 12

5. Toys-to-life portfolio 4 4 8 3 12 4 20

Comparative Scores: LEGO 93 Mattel 72 Hasbro 80

CONCLUSION: Based on this (purely illustrative!) analysis, LEGO appears to be in leading position vis -à-vis
its competitors; indeed, this is born out by recent financial results. However, this is a quickly evolving
market and LEGO®’s continued leadership position will depend on its continued ability to push the
evolving “digital borders” with its digital strategy.

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 18
Case: LEGO® Guidance
Delivery on key success factors
Key Success Laggard Competitive Leading Breakthrough
Factor “behind the pack” “in the pack” “ahead of the pack” “setting entirely new
competitive agenda”

Brand C F
Global mindshare C F
C Current level
Demographic reach C F
F Future target level
Adaptation to (within specific time horizon)

digital C F
Toys-to-life
portfolio C F
COMMENTARY: Lego has established itself as industry leader – by pulling clearly ahead of its competitors Mattel and
Hasbro; so, one might ask: “what’s left for it to achieve?” This, of course, would be a precarious and risky attitude to take
– given the rapidly changing and evolving markets it is competing in. So, This becomes more a matter of scoping where
it might strive to achieve greatest possible impact to defend its competitive position ahead of the competition; this might
arguably be in the areas relating to digitization.

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 19
 Case: IBM*

How important is IBM’s semiconductor business really to its

competitive positioning in 2014?
Use a suitable strategic resources mapping approach to come up
with an answer to this question.

*“Semiconductor sale a vital part of IBM’s strategic realignment”, Financial Times, February 7th 2014

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 20
 Case: IBM Guidance
Need to begin with critical reflection on:
1. “What’s competitively at stake” for IBM; what are the specific issues;
what are IBM’s greater (cross-business) issues?
2. Competitive repositioning as services firm in rapidly changing and
evolving markets (increasingly global competition)
3. IBM’s very successful years under Palmisano; increasing pressure on
Rometty to sustain that momentum – increasing pressure to strategically
realign business portfolio
4. Importance of IBM’s Semiconductor business against this backdrop; IBM
no longer ‘powerhouse’ in chip manufacturing, but still leader in chip
research design and IP
5. How important is it for IBM to maintain manufacturing capability in this
business – as opposed to research and IP capability?
6. IBM formidable chip design capability; its ‘Power’ architecture – reputed
to be superior to Intel’s x86 (yet Intel making competitive inroads) and
relevance for IBM’s reputation (cf. IBM ‘Watson’)

Map IBM’s Semiconductor resources/capabilities position

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 21
 Case: IBM Guidance
Partial view: IBM’s Semi-
10 conductor business

‘Power’
‘Fab’ mfg ‘Fab’ mfg
plant
? knowhow
architecture
capability
Relative Strength

Chip
research Chip IP

IBM’s Semiconductor business

•Revenues (2013): $1.75bn but $130m in pre- Update (October 20th 2014)
tax losses •IBM pays GlobalFoundries (Silicon Valley
•Chips (and hardware) decreasing portion of based; ATIC – Abu Dhabi) $1.5bn to take over
IBM’s business: 16% of revenues and 11% OP its SC manufacturing arm
•Rising costs of staying at leading edge of SC •IBM to invest further $3bn in SC research
research and manufacturing over 5 years – GF have preferred access
•GF to be IBM’s primary server producer for
next 10 years

1 Strategic weaknesses

1 Strategic Relevance 10

CONCLUSION: Splitting IBM’s Semiconductor business – selling off manufacturing

and hanging on to ‘Fab’ mfg. knowhow, chip design, IP arguably makes sense.
© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 22
 Case: Anheuser-Busch InBev (1)*

AB InBev’s recent takeover bid for SABMiller, if successful, would create the world’s
dominant brewing company. It would also rank as the third-biggest takeover in
history.
1. Is there a defendable rationale to the proposed strategy – if so:
• what are the key elements of that rationale, and how rigorous is this
rationale?
• If not, what’s missing?
Show how you would set up suitable high-level and supporting – level analyses
to probe and (ultimately) answer this question?

2. Would you, on the basis of AB InBev’s proposed strategy, recommend potential

investors to buy AB InBev shares today? Why (or why not)?

1. “AB InBev still ‘dreams big’ with move on closest rival”, Financial Times, September 17, 2015
2. “The beerhemoth”, The Economist, October 17, 2015

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 23
 Case: AB InBev (1) Guidance
Basic approach…
1. We always begin with a critical reflection on: “What’s competitively at stake” for AB
InBev? A broadly drafted statement of this might go something like this:

“What’s strategically at stake? Achieving continued growth trajectory in rapidly changing

global brewing markets; implications of scale and positioning; relevance and rationale of:
‘sales growth, global diversification, corporate ambition’ (whatever these mean!)”

1. What are the relevant critical issues; strategic questions; insights prompted?
• Application of systematic strategic thinking approach.

2. High-level ‘big-picture’ mapping; supporting-level analysis.

• Mapping application on basis of UCS or VP frameworks and appropriate supporting – level
analyse; purpose-driven analysis, whereby “purpose” is to generate those insights prompted in
“Step 2” above

NB: This analysis is focused on AB InBev; it’s purpose is to scope and probe AB InBev’s
current strategic context and the rationale for AB InBev’s need to undertake any strategic
action – regardless of shape or form that strategic action might take on.

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 24
 Case: AB InBev (1) Guidance
Narrowing the focus of the analysis; utilization of UCS boundaries for issues
framing; identification of insights required; and, on this basis, consideration of
suitable sources of insights
INSIGHTS
AB InBev’s global markets; multi- •Insig hts prompted?
Industry/market context regional: Focus on beer •Sources of insig ht?
•Analysis of insig ht?
Competitors’ Markets’ / Stakeholders’ needs
offerings •Evolving global beer markets INSIGHTS
•Changing tastes, preferences •Insig hts prompted?
•Investor considerations •Sources of insig ht?
SAB Miller INSIGHTS •Regulatory considerations •Analysis of insig ht?
Heineken •Insig hts prompted?
•Sources of insig ht?
Carlsberg •Analysis of insig ht?
Craft brewers
Key strategic questions: How can
AB InBev continue on its global
2
1 Unique growth trajectory; implications of
competing sales growth, global diversification,
space and corporate ambitions for
expansion of its UCS overall?
3
AB InBev’s basis of Current Macro- Relevant macro-economic
INSIGHTS
drivers (societal, economic,
competitiveness competitive economic demographic; regulatory;
•Insig hts prompted?
INSIGHTS •Sources of insig ht?
reality •Insig hts prompted? variable dynamics across •Analysis of insig ht?
NB: AB InBev’s increase in OM •Sources of insig ht?
context different regions
from 10% to 32% via previous •Analysis of insig ht?
acquisition strategy!
© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 25
Case: Zipline*

1. Map Zipline’s business model using the Osterwalder & Pigneur business
model canvas.
2. Identify critical elements of the business and explain why these are
critical to Zipline’s business success.

*Case article: “Drones to deliver medicines to 12m people in Ghana”, Financial Times, April 24, 2019

Strategy & Business Modelling / Professor G. Tovstiga (2019)

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 26
 Case: Zipline Guidance
A “mission-driven, for-profit tech company”

Key Key Activities Value Customer Customer

Partnerships Distribution of proposition Relationships Segments
medical supplies via
Gavi (Ghanian govt) Governmental
drones
Rwandan govt Mission-driven, agencies Health ministries
Development of drone for-profit tech Investors Hospitals
Vaccine Alliance technology (AI)
UPS Foundation firm” Doctors
Running operations
Gates Foundation Patients
(base stations)
Novartis Efficient, eco-
Pfizer Key Resources friendly, reliable, Channels
very fast
Network of drone distribution of Services
base-stations vital medical (distribution of
AI experts supplies to medical supplies by
Investment funding difficult-to-access, drone)
remote areas

Cost Structure Revenue streams

Operational costs (base stations) Government revenues for services provided
CAPEX (expansion of network) Investment funding
Maintenance of operations

Based on: Osterwalder & Pigneur (2010)

Strategy & Business Modelling / 27

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) Professor G. Tovstiga
- GSOM /St. Petersburg (2019)
University / Case Guidance
 Case: Zipline Guidance
Greiner’s Enterprise Growth Model (1972; 1998)
Harvard Business Review. From "Evolution and Revolution as Organizations Grow" by Larry E. Greiner, May 1998.

Where is Zipline in this model?

Is this model useful in the Zipline
case?

Strategy & Business Modelling / 28

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) Professor G. Tovstiga
- GSOM /St. Petersburg (2019)
University / Case Guidance
 Case: AB InBev (2)*

Critically scope the critical components of AB InBev’s “Megabrew” strategy.

Identify and discuss the three key components relevant to AB InBev’s unique
competing space and their implications for the success of the proposed
strategy

1. “AB InBev still ‘dreams big’ with move on closest rival”, Financial Times, September 17, 2015
2. “The beerhemoth”, The Economist, October 17, 2015

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 29
 Case: AB InBev (2)* Guidance

Components of the AB InBev “Megabrew” strategy: UCS perspective

Anheuser-Busch InBev’s “Megabrew” strategy is an expansionary (growth) strategy; it is not
prompted primarily by any direct threat (although, of course, one can always argue that “not doing
anything” at a given point in time poses a threat to continued competitive advantage).

AB InBev’s rationale for “Megabrew”: “sales growth, global diversification, corporate ambition” in
response to a rapidly changing industry.

NB: “Megabrew” is a “buy” option/response

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 30
 Case: AB InBev (2)* Guidance

Component “1”: COMPETITION Anticipated Component “2”: STAKEHOLDERS,

reaction on part of AB InBev’s main competitors (e.g. REGULATORS, MARKETS
Heineken, Carlsberg, craft brewers, others?) Targeted expansion into new markets
Multi-regional implications for AB InBev (products, geographic) in rapidly changing
global brewing industry – growth markets
(e.g. Africa); demographic shifts; changing
preferences and drinking patterns, shift
1 2
from “high volume” to “high value”
consumption; regulatory considerations
Competitors’
offerings
Option “n”
Stakeholders’
needs
Achievement of enhanced “sales growth, global
diversification and reach, corporate aspirations”

Reconstructed
Firm’s 3 competitive landscape
relevant to specific
competitive basis strategic challenge

Component “3”: ORCHESTRATION OF “MEGABREW” STRATEGY

Integration, reconfiguration, alignment and mobilisation of enhanced AB InBev/SABMiller
capability, reach and global footprint; response to shifting consumption patterns – multi-regional
and –market rollout; resolution of potential cultural integration issues, SABMiller ‘s joint ventures

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 31
 Case: AB InBev (2) Guidance

Strategic implications of SABMiller acquisition for AB InBev

IMPLICATION: Opportunity to
enter new (African) growth
Industry/market context market space; geographic,
IMPLICATION:
Elimination of products; assertion of global
Competitors’ footprint and aspirations;
SABMiller leads
offerings changing drinking behaviour &
to diminished
Markets’ / preferences
competitor
space Heineken Stakeholders’
Carlsberg needs IMPLICATION:
Craft brewers Opportunity to
2 expand UCS at all
three boundaries
1
IMPLICATION: Unique
Mobilisation of competing IMPLICATION: Post-
space acquisition integration of
reconfigured
resources 3 SABMiller, capture of synergies
across 3rd
boundary
IMPLICATION: Potential
Macro- Regulatory constraints and
conditions; opportunity to respond
AB InBev’s basis of economic to socio-economically changing
competitiveness
context competitive environment

© Professor G. Tovstiga (2016) / STRATEGY IN PRACTICE (SIP) - GSOM /St. Petersburg University / Case Guidance 32