Study and Analysis of a Multinational Enterprise Heineken

Introduction

A multinational enterprise (MNE) also called transnational company is business entities that operate in more than one country. (wiseGeek, 2010) Multinational enterprise normally has headquarters in one country, known as home country, while other facilities are based in locations in other countries, known as host country.

Heineken is definitely a multinational enterprise. The company carries out production and distribution activities in nations other than its home country. In terms of management orientation and strategy, the Heineken Corporation does a lot of things that show it is the nature of multinational. First of all, the corporation alters its operations to meet local needs. The company markets on a country by country basis. In addition, the Heineken Corporation has professional partners who help to run the operation and do not report directly to the company on day to day matters. Furthermore, the company relies heavily on teamwork by all involved parties.

2.0 Company Background

Heineken is the second largest brewery group in the world and is dedicated to remaining independent and strong. Heineken is available in approximately all country on the earth and is the world’s most valuable global premium beer brand. Heineken has relied on maintaining a various brand portfolio, which included more than 120 brands to maintain a stable of international, regional, local and specialty beer brands around the globe. Their famous brands include Amstel, Europe’s third-largest selling beer, Ochota, Tiger, Star, Birra Moretti, Zywiec, Murphy’s and Cruzcampo.

Heineken N.V headquartered is located at Netherlands. Netherlands is among the top 5 beer brewers globally and the largest in Europe. Heineken brands are well set up in profitable and mature markets, while the reputation of the beers is rising daily in up-and-coming beer markets such as Russia, China, and Latin America and etc. At the end year of 2007, Heineken has the widest existence of all international brewers in more than 65 countries in worldwide and have 50 0004 employees (Heineken N.V. 2008). Heineken and Amstel have been formed as core. The company has make a decisions on each of its brand regional, international and local integrated marketing strategy and packaging product related innovation (Heineken, 2008).

2.1 SWOT Analysis

2.1.1 Strengths

Heineken is the second largest beer manufacturer in the world. They manufacture 5.6 billion liters of beer every year. This gives them economies of scale and a platform for further expansion of their market capitalization.

The savor of Heineken beer is distinctive. In 1886, the yeast that is used in the production of Heineken beer till today was developed. Therefore, the savor and distinctiveness of it has been there for a hundred years.

Heineken brand is perceived as premium brand and has established a brand image successfully in some marketplace like USA and Hong Kong.

The brand was acknowledged as a superior quality or lighter beer expressed in attractive packaging across all markets.

2.1.2 Weaknesses

The corporation has restricted its reach to the European and the Western countries. There still lies a scope for scaling up in countries like India where the beer is just imported and thus making it impossible to enter deep down.

In some country, brand image of Heineken was too marrow and this makes the brand seen like appropriate for special occasions only.

Difference in brand image across global market make the consumers confuse about marketers’ characteristics, the products’ attributes, benefits, and etc.

The local Heineken brand managers had the funds to develop their commercials which were not always consistent to the Heineken brand image that the managers of headquarters wanted to project.

2.2.3 Opportunities

Population in Russia and Asia increasing dramatically make Heineken have chance to earn great market share.

Hispanic consumers in U.S. industry are growing rapidly

Introduction of low calories beer as the society is pushing for a ‘healthy’ beer.

2.1.4 Threats

Mergers and acquisitions of other breweries cause them to become much larger than Heineken’s brewery.

Difficulty in maintain market share when competitors increasing market share.

Increase in underage drinking and drunken driving laws.

PEST Analysis

PEST analysis has been used by Heineken to analyze external environment of their business. With simple analysis consist of considerate the corporation political, economic, social and technological, firm can take it indication when they planning for an investment or business expand.

Political

Government policies

For many countries, Heineken is foreign company, but they have to obey the government policies where they run their business activities. For example, when they invest in Malaysia, Malaysia government will support them because Malaysia government has welcomed investment by western investor with provides many incentives for those companies operating in Malaysia.

Political stability

Political stability will create opportunity for Heineken to expand their business worldwide because it is leader in the beer industry in world wide. Thus this is also an important political factor. For political stability companies, represents an attractive expansion opportunity. This will help to increase profit of Heineken as well.

Economic

Income

Income is an important economical factor for Heineken. This factor decides which class Heineken is going to target. In the early time of Heineken, they focusing on the upper class but they introduce some beer through with different brand’s name to target the middle and the upper level as well.

If there is economic growth in the country and per capital income is increasing due to an increase in GDP will create an opportunity for Heineken. Purchasing power of the people will increase and they can spend more on purchasing. There is a down fall in the economy of many countries. Growing inflation rate and unemployment rate has reduced the purchasing power of the customers.

Social

Culture

Heineken put a hard effort in doing research to understand customer’s culture and trends to produce a suitable beer to target customers. This creates an opportunity for them. There is always changing of customer demands such as changing of healthy life-style and increased in trend of healthy product. There is a drop in sales for beer company recently because many people aware of importance of healthy.

Beer industry might create a huge influence for the host societies in positive and negative side. Positive effect includes developing friendships by understanding every culture and customs through positive attitudes towards each other.

Technology

Pace of change:

Pace of change means rate of change. Technology is very important for the success for every company. Heineken is using modern technology to produce beers to get the competitive advantage. High technology can help to produce high quality products.

Research and Development:

Research and development is also an important factor I order to success in operating a company. Heineken is much focus on research and development. Its market research is inefficiency. For example, Heineken can easily entering the worldwide market due to understanding their culture, needs and trend through technology information.

Legal

There is much legal law in nation or oversea countries that affect firms operating. There is very important to obey legal laws in order to operate a business. In Malaysia, legal changes can affect beer industry in firm’s cost (instance: when new system or procedures is developed) and demand.

Below are the different categories of laws:

Consumer laws are used to protect consumers against unfair practices such as misleading.

Competition law is used to protect small firms from bullying by larger firms and will not demoralize by other firms with monopoly power.

Health and safety legal ration is used to ensuring workplace is safe for practical using with appropriate provision of safety equipment.

Heineken Group is very cautious about the steps it takes because of the political environment which might land it in trouble. Heineken has played smart in making a social networking website so that its intention of marketing is also solved and it didn’t cross the line of the law as the laws are different for different states.

Environmental

Environmental factors include the weather and climate change. Heineken increases promotions during summer time as the climate is generally warm in country such as India.

4.0 Impact of globalization

The impact of globalization is products become more standardized globally, which lead to a raise in the overall quality of alcoholic beverages available. Global distribution networks might be more efficient economically, construct opportunities for economies of scale in production and in marketing. Furthermore, global products can benefit from the global division of labor, using the comparative advantage possessed by some countries to develop global marketing campaigns, locate manufacturing, acquire ingredients, and develop new products. The formation of global networks enhances employment and diffuses technological advances from more to less developed countries, although in practice control over much of the technology tends to remain in the hands of the global corporations. (Room R., Jernigan D., 2000)

Globalization can guide to an increase in international trade even though most alcoholic beverages are consumed in the country which they are produced, but this rarely benefits developing nations. Global trade figures suggest that overwhelming majority of global trade in alcoholic beverages occurs among the developed countries themselves, with very few middle or low income countries (e.g. Chile, Mexico)breaking into the ranks of the leading exporters. (Jernigan D.H., 2001)

This level of globalization and attention also lead to extraction of monopoly profits and monopoly pricing, as well as creating much superior political and economic actors within every national context. The fact that the company is also major advertisers increases their visibility at the national level. Heineken ranks among 100 largest advertisers in global. Globalization also leads to quick transfer of innovation from one market to another. These innovations can be in the realm of production technology, marketing, public relation, product design and distribution. The role of global alcohol producers as main advertisers points to the vital disparity among globalized and other types of alcohol. Global alcohol is marketed, and this is the dominant feature of its global production network. (Jernigan D.H., 2000) Fabrication of alcoholic beverages, and especially of beer, is delegated easily. In Malaysia, for example, a joint venture between Guinness and Heineken produces both beers under the supervision of a Heineken brew master.

Globalization of marketing and production networks has permitted Heineken to raise global integration of marketing and production, as well as to spread sophisticated technologies for marketing and producing its products quickly around the world. It has also formed a small group of huge corporations who are capable to promote their points of view efficiently in global forums, such as the World Health Organization and the World Trade Organization.

Another impact of globalization is on branding and marketing. Companies in brewery industry increasingly compete with each other on a global scale. They find themselves having to commune their products to global audience. Heineken’s challenge is that being a global brand it has to have communication strategy that maintain its consistency so as to ensure that a message is conveyed yet it has to take into account the local culture and gradation of different markets. The goal and the challenge of communication for Heineken will be to convey the core values of the brand and modify the message as to plead to its different markets, patter into local trends and leveraging that information to generate a association with the audience so that they build an emotional tie with Heineken.

Political factors might have direct or indirect factor on the performance of the corporation. Several resolutions made by the federal government of the U.S. have influence negatively on the business of Heineken. For instance, legal suits brought against in 2001 and decided to reduce production and marketing of high performance computers is considered a threat to U.S. national security. These have had enormous impact to the corporation. Every corporation is affected by economic factors such as currency exchange rates, fiscal policy rates, consumers’ factors, interest rate policy, etc. It is likely that the U.S. economy’s climate dominates how the customer behaves in the society. The self-confidence of the customer will automatically alter if the economy is recessing, booming or recovering.

In addition, the way Heineken has sold its products was affected by the powers within the society such as friends, media and family. Majority of the customers have been given the wrong impression about products made from America are high quality. This means that corporation such as Heineken have benefited a lot. Social factors affect customer interests, attitude, and opinions on the way they view products from certain corporations. As technology changes, the way Heineken operates its business has changed. For instance, the internet has helped corporations such as Heineken to meet up new markets and widen its global outreach. It has had a profound influence on the marketing mix strategies of numerous companies. In this ever changing world, every business supposed to keep in touch with modernization and changing technology.

The globalization of Heineken has negative effects to small breweries in countries where it choose to build breweries. The minor companies are finding it hard to compete with large multinational companies such as Heineken. Globalization also pushed Heineken to change their products and brands, which are their legacy to products that will be accepted worldwide.

5.0 Strategies use to respond to the impact of globalization

As a global corporation, Heineken try to operate more affiliate since the world move into 21 century. The corporation’s sustainable development is the integration of the new method of ‘green’ vision of all aspects of its business. Heineken identify the role it should play and has paying attention on several areas:

5.1 Continuous development of its environmental impact

Amongst the goals the company has set is a decrease of indirect and direct carbon dioxide emission in the industries by at least 40 per cent and consumption of water by at least 25 per cent in 2020. In addition, Heineken has also developed initiatives to reduce the carbon footprint throughout the value chain. As an initial step, all replacement refrigerators issued to customers would be based on ‘green’ technology starting from 2010. (Sustainability Report 2009)

5.2 Empowerment of communities and people

The Heineken Company will bring in a series of initiatives. For instance, the investment of an additional EUR 10 million (total of EUR 20 million) during the Heineken Africa Foundation, allowing up to EUR 1 million per year to be straightforwardly invested in local projects in 2010. Besides, they target to enlarge the local basis of raw materials within Africa to 60 per cent by 2020. In addition, they set a goal to make sure all dependents and employees have admission to basic and free of charge healthcare. The others initiatives of Heineken Company are the foreword and audit of new employee rights policy. (Sustainability Report 2009)

5.3 Continuing to create a positive impact on the role of beer in society

Heineken Company will reinforce its acknowledged, positive approach to responsible consumption by increasing its programmes to on and off premise. Furthermore, Heineken plan to make sure that all markets have partnership that assist the company play its part in plummeting alcohol abuse. Moreover, the company will expand its brand related responsibility messaging and amplify its efforts working with the industry on this key issue. (Sustainability Report 2009)

5.4 Supply chain responsibility

In terms of ethics and the environment, improvements in value chain are having a positive outcome on their cost base as well as on the objectives they set within sustainability agenda. An established and important approach inside Heineken is working together with suppliers to help build improvements in their value chain. They work together to address both ethical considerations and the environment. It is the key constituent in establishing a joint commitment to sustainability with their suppliers. They believe their approach to supply chain responsibility assist in distinguish Heineken from its competitors. (Sustainability Report 2009)

5.5 Quality crops at a fair price

Heineken brew beer with natural ingredients. They use the predominantly barley, highest cereals, for brewing, and hops for flavor and bitterness. They need to access to high quality, adequate raw materials at an acceptable price. Their partners, maltsters that malt the barley and the farmers that grow the crops need to be convinced that Heineken disburse them at a fair price and support them over the long term. Making a dedication towards superior local sourcing and providing agricultural training and support, authorizes local farmers economically (greater guaranteed sales and better crop yield) and diminish both the cost and environmental impact for Heineken. (Sustainability Report 2009)

5.6 Responsible consumption

When it is abused or misused, society is usually confronted with the negative facets of alcohol. They are dedicated to playing their part in dipping alcohol-related harm. Wherever they can, they do so in coincidence with NGOs, police forces, industry groups, retailers, governments, Horeca owners, third parties, legislators and community groups – every one of which have their role to play. They believe that working together to deal with specific aspects and occurrence of abuse is the only method to effectively resolve the negative impact that has on individuals and society. (Sustainability Report 2009)

6.0 Conclusion

Heineiken products are selling worldwide. However they still have a space to expand their business. Most of the consumers are concerns about green environment. Heineken can come out with new taste of beer with environmental friendly packaging to target customers and contribute to environmental protection responsibilities. In addition, science and technology is more advanced compare with last time. Heineken can use technology trend to come out with good marketing communication to target consumers and settle the negative force of problems in their business. With excellent business management, Heineken can create more well know brand name internationally and earning more profit for its company.