Marketing

Environment

Case: 961 Beer: Launching a
Lebanese Brewing Company

MM5003
Dr. Nita Garnida
OBJECTIVES

Able to conduct:
•  PEST (political, economic, social, technological) analysis and identify key
drivers that impact the industry.
•  Five forces analysis on the competitive environment, i.e. rivalry within
the industry, threat of substitution, buyers’ bargaining power, supplier
power, threat of entry
•  SWOT (strengths, opportunities, weaknesses, threats) analysis
•  Five stages of growth analysis on management role and style
•  Porter’s chart of competitive advantage and scope.
ANALYTICAL QUESTIONS

1.  Evaluate Hajjar’s decision to start an artisanal brewing

company.
•  How could the competitive and macro environment affect
the company?
•  Is Lebanon a good market for beer? Is it a good business
opportunity?
The Five Forces Model of Competition
• The five forces that could determine profit potential of an
industry and shape a firm’s competitive strategy
Two key insights:
Bargaining
Threat of •  Competition must be
power of
substitution viewed more broadly, to
buyers
encompass not only direct
competitors, but also these
Threat of Suppliers five forces.
entry power •  The stronger five forces, the
Rivalry
among lower industry’s profit
competitors potential.

Threat of Entry
The risk that potential competitors will enter the industry for the first time to gain
market shares.
Incumbent may
lower prices
Potential New Industry’s Entry Barriers :
Competitors profit potential •  Economies of scale
Incumbent spend reduce
•  Product differentiation
more to satisfy
existing customer •  Physical resources
•  Network effects
•  Capital requirements
•  Switching costs
•  Government policy
•  Advantages independent of
size
•  Credible threat of retaliation
Suppliers Power
Bargaining power of suppliers could reduce firm’s ability to obtain superior
performance for two reasons:
1.  It can raise cost production by demanding higher prices for the inputs
2.  It can reduce the quality of the input factor of service level delivered

Bargaining Power of Buyers

Buyers can affect an industry through their ability to force down prices,
bargain for a higher quality or more services, and play competitors
against each other
Threat of Substitution
The substitute offers an
attractive price-performance
trade-off
High threat of Industry’s profit
substitutes potential reduce
The buyer’s cost of switching to
the substitute is low

Rivalry among Existing Competitors

The extent to which companies compete with one another for customers.
The intensity of rivalry among existing competitors could be based on price
and competitive industry structure.
 Competitive Industry Structure
FORM
Perfect Monopolistic
Competition Competition Oligopoly Monopoly

Consolidated
Fragmented

FEATURES

Many firms; One firm;

Many small firms; Few (large) firms;
Some pricing power; Considerable pricing
Firms are price Some pricing power;
Differentiated power;
takers; Differentiated
product; Unique product;
Commodity product; product;
Medium entry Very high entry
Low entry barriers High entry barriers
barriers barriers

RESULTING PROFIT POTENTIAL

Low High
ANALYTICAL QUESTIONS

2. Does a brewing company fit Hajjar as an entrepreneur?

•  What kind of entrepreneurial approach does he use?
SWOT Analysis

Strengths Weaknesses
Internal capabilities that Internal limitations that may
Internal may help a company reach interfere with a company’s
its objectives ability to achieve its objectives

Opportunities Threat
External External factors that the Current and emerging external
company may be able to factors that may challenge the
exploit to its advantage company’s performance
Positive Negative
ANALYTICAL QUESTIONS

3. How do you evaluate Hajjar’s role as manager and

entrepreneur in the success of 961 Beer?
Five Stages of Growth
ANALYTICAL QUESTIONS

4. How do you evaluate Hajjar’s decision to start a business under

exceedingly adverse political and economical conditions?
The PEST Framework
EXTERNAL
•  PEST framework allows ENVIRONMENT

to scan, monitor, and

evaluate changes and Political
Industry
Economic
trends in the firm’s
macro-environment:
•  Political FIRM
•  Economic
•  Social
•  Technological

Social Technological
Political Factors
• Result from the processes and actions of government
bodies that can influence the decisions and behavior of
firms, includes:
• Political situation
• Financial policies
• Employment laws
• Contractual agreement
• Trading policies
• Etc.
Macroeconomic factors that affect firm strategy:
1.  Growth rates
Economic Factors
Economic is Demand is Growth Level of Skilled human
booming higher rates higher employment higher capital is lower

2.  Levels of employment

3.  Interest rates Consumer
spending is higher
Economic is Interest rate Credit is
booming is lower cheaper Firm’s
Firm to borrow Cost of
competitiveness
money is easier capital lower
4.  Price stability (inflation and deflation) is higher

Competition among
firms is lower
Demand
higher
Price level is
Inflation
rising
Currency E.g. US$ is depreciated
5.  Currency exchanges rates exchange rates against Rp.
Sociocultural Factors
• Factors that capture society’s cultures, norms, and
values, which differ across group.
• Demographic trends that capture population
characteristics related to
• Age * Sexual orientation
• Gender * Religion
• Family size * Socio-economic class
• Ethnicity
• Firm needs to closely monitor sociocultural trends and
consider the implication for the
firm’s strategy.
Technological Factors

• Factors that capture the application of knowledge to

create new processes and products.
• Major innovations in process technology:
• Lean manufacturing, Six Sigma quality, biotechnology,
nanotechnology
• Major innovations in service technology:
• Social media
• Online search engines
ANALYTICAL QUESTIONS

5. What has been 961 Beer’s strategy for entering and developing
the market?
•  Why has it succeeded?
6. What can Hajjar do to expand the business further so as to
remain competitive without compromising quality as well as the
values that constitute his 961 Beer venture?
 Porters’ Chart of Competitive Advantage
Competitive Advantage &
Scope Lower Cost Differentiation
Cost
Broad Target Differentiation
Competitive Leadership
Scope Focused
Narrow Target Cost Focus
Differentiation
THANK YOU