{"id":6565,"date":"2015-12-09T21:53:19","date_gmt":"2015-12-10T02:53:19","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/anheuser-busch-inbev-ab-inbev-the-winning-formula\/"},"modified":"2015-12-15T00:00:57","modified_gmt":"2015-12-15T05:00:57","slug":"anheuser-busch-inbev-ab-inbev-the-winning-formula","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/anheuser-busch-inbev-ab-inbev-the-winning-formula\/","title":{"rendered":"Anheuser-Busch InBev (AB InBev): The Winning Formula"},"content":{"rendered":"

EXECUTIVE SUMMARY<\/strong><\/p>\n

Anheuser-Busch InBev (AB InBev) has managed to differentiate itself from its competition by executing business and operating strategies that reinforce each other. AB InBev\u2019s goal-focused and growth-oriented culture established AB InBev as the cost efficient player in the market with the strongest existing distribution network. AB InBev\u2019s focus on cost reductions has allowed AB InBev to invest the most money into marketing to maintain a strong connection to its customers through increased brand awareness. AB InBev has taken a rapid path to global expansion, and the company\u2019s \u201cDream, People, Culture\u201d framework in conjunction with aggressive cost-cutting techniques has enabled the quick, successful integration of new acquisitions. AB InBev\u2019s focus on continuous improvement has allowed the company leveraged its global size and scale to keep prices increasingly competitive in its local markets.<\/p>\n

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KEY CHARACTERISTICS OF AB INBEV\u2019S BUSINESS MODEL<\/em><\/strong><\/p>\n

There are several key characteristics that describe AB InBev\u2019s global strategy:<\/p>\n

Growth <\/strong>\u2013 AB InBev\u2019s rapid growth illustrates the firm\u2019s strategy focus on growth through acquisition more so than growth organically. The firm has leveraged the synergies associated with mass production and brand diversification \u2013 this allows AB InBev command a large local and global market share.<\/p>\n

Cost Reduction<\/strong> \u2013 When acquiring new companies, AB InBev has been able to use existing distribution channels in target markets, thereby minimizing infrastructure costs. To further reduce costs, the firm employs an aggressive budgeting strategy while also running very lean organizations. The firm has a global supply chain function, which manages the acquisition of every component of supply from a central system. Due to the firm\u2019s size, it can establish long term contracts with suppliers at very low prices for all the business units around the world.<\/p>\n

Capturing value<\/strong> \u2013 AB InBev\u2019s presence in multiple foreign markets increases customer\u2019s willingness-to-pay by\u00a0leveraging the brand equity of various global brands to its advantage. An\u00a0example is the sale of the Stella Artois beverage, a beer with European origins, in Brazil. \u00a0Even though the beer is currently produced in Brazil, it sell for a premium price in the\u00a0Brazilian market. AB InBev capitalizes on\u00a0the Brazilians’ perception of Stella Artois as\u00a0a premium product with European origins.<\/p>\n

Improving Industry Attractiveness<\/strong> \u2013 AB InBev\u2019s successful growth has made the industry relatively more attractive to outsiders by providing increased regional competition. This is illustrated by the recent rise in craft beer companies that started in the early 2000\u2019s. New market entrants become potential growth targets for AB InBev in the future.<\/p>\n

Product Diversification<\/strong> \u2013AB InBev\u2019s global expansion helps reduce its risk because the company has a set of diversified products. The multiple brands in AB InBev\u2019s product portfolio helps the company optimally manage costs and maximize profit. As such, the negative impact of acquiring a company during times of low profitability in the beer market is immaterial.<\/p>\n

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KEY CHARACTERISTCS OF AB INBEV\u2019S OPERATING MODEL<\/em><\/strong><\/p>\n

There are several key characteristics that describe AB InBev\u2019s global strategy:<\/p>\n

Human Capital Strategy (Dream-People-Culture) \u2013 <\/strong>At the engine of AB InBev\u2019s management style is its renowned human capital practices. These practices are built upon the \u201cDream-People-Culture\u201d platform. This platform recognizes People as the most important resource AB InBev has. As a result, AB InBev works hard to cultivate the best culture to attract, develop, and retain top talent. The company is able to continuously develop and promote employees because of its acquisition strategy \u2013 employees assume new leadership positions at the acquired companies.<\/p>\n

Marketing Campaign \u2013 <\/strong>AB InBev utilizes aggressive marketing campaigns to enable it dictate prices in the market. The marketing campaigns help drive the sales volumes of AB InBev\u2019s products \u2013 this leads to increased pressure on the margins of AB Inbev\u2019s competitors. This pressure ultimately leads to the deterioration of AB InBev\u2019s financial health, thus making them ripe for acquisition.<\/p>\n

Knowledge Localization<\/strong> \u2013 Although AB InBev seeks to leverage the local talent when integrating acquisitions, however, this is not the primary focus of their strategy. Instead, AB InBev prefers to infuse its traditional ideologies into its target companies and only hires local individuals who share similar values. AB InBev\u2019s acquisition strategy does not adapt to the target companies\u2019 frameworks and management styles. Through reallocating resource and sourcing local talent, AB InBev Is able to ensure that its culture is properly instituted within a target company. The company strongly believes in its ability to find people who fit its culture in every country. The company business practices are adaptable, but the culture is ubiquitous.<\/p>\n

AB InBev\u2019s success can be attributed to three key components of its overall strategy:<\/p>\n