An evaluation of the strategic management of the South African Breweries Limited (1991-2001)

Spaarwater, Pieter (2002-12)

Thesis (MBA)--Stellenbosch University, 2002.

Thesis

ENGLISH ABSTRACT: This thesis has two objectives, namely: • The construction of a deduced model to evaluate the strategic management of a company. • The application of this deduced model to evaluate the strategic management of the South African Breweries Limited. In essence the model deduced that a company's overall strategic success would ultimately be embodied and reflected in the following aspects: • The company's ability to achieve its stated vision and mission. • The company's ability to add value to its shareholders. • The company's financial performance. • The company's diversification strategy. • The company's shareholding. • The company's ability to be flexible. • The company's strengths, weaknesses, opportunities and threats. The South African Breweries Limited strategic performance, based on the deduced model, essentially and by exception indicated the following for the period 1991 to 2001 (see Chapters 3 and 4 for detailed and quantified analysis): • SAB achieved its stated vision and mission long before its target date. • SAB's drive to add value and maintain its shareholders confidence has been relatively successful. • SAB's operational performance has been relatively successful with a very evident strategy of low cost / low margin, but high volume strategy. Asset utilisation was however not on par with the largest brewer in the world. • SAB's strategic intent to be viewed by its customer as best cost provider has been relatively successful in that its price increases has been less than 85% of the official CPI, whilst at the same time it was awarded international accolades for product quality. • SAB's financial performance compares favourably against Anheuser Busch's, but it performed dismally with regards to its debtors' collection period since 2000 with an all time high of 101 days in 2001. • SAB's diversification strategy has refocused on its core business of consumer beverage market since South Africa's re-admission to the world market in 1994. • The rumour of another large brewer obtaining a relative large shareholding in SAB with a potential future merger was countered by SAB themselves in 1999 I 2000. • Since South Africa's re-admission to the world market, SAB has been able to refocus on its core business very quickly and shed its non-core businesses whilst at the same time becoming a world player. SAB South Africa has however faltered slightly in not being able to counter the slight loss of market share to substitute products. • SAB's entrance to the world markets, especially the emerging markets, has not only presented opportunities, but also threats and risks related to emerging economies. • The Chief Executive, Mr G Mackay, indicated that the investments in the emerging markets require optimisation and productivity improvements in order to achieve similar successes to its South African beer business. In summary it is evident that SAB has undoubtedly been successful up to 2001, but that the real challenge and proof of sustainable success in a multi country economy remains to be seen. To ensure continual growth as well as reduce and hedge its risk associated with emerging markets, diversification into an established first world brewing company, brand and market seem to be a logical next step.

AFRIKAANSE OPSOMMING: Hierdie tesis het twee doelstellings: • Die samestelling van 'n afgeleide model om die strategiese bestuur van 'n maatskappy te evalueer. • Die toepassing van hierdie model om die strategiese bestuur van die South African Breweries te evalueer. In wese lei die model af dat 'n maatskappy se strategiese sukses uiteindelik weerspieël word op die volgende gebiede: • Die maatskappy se vermoë om sy bepaalde toekomsblik (visie) en doelstellings (missie) te bereik. • Die maatskappy se vermoë om sy aandeelhouers toegevoegde waarde te bied. • Die maatskappy se finansiële prestasie. • Die maatskappy se diversifikasie strategie. • Die maatskappy se aandelehouding. • Die maatskappy se vermoë om buigsaam te wees. • Die maatskappy se sterk punte, swakhede, geleenthede en bedreigings. Teen die agtergrond van die model het die South African Breweries se strategiese prestasie van 1991 tot 2001 die volgende getoon (sien hoofstukke 3 en 4 vir 'n gekwantifiseerde ontleding): • SAB het lank voor sy vasgestelde mikdatum sy voorafgestelde visie en missie bereik. • SAB se strewe om toegevoegde waarde te bied en sy aandeelhouers se vertroue te behou, was relatief suksesvol. • SAB se bedryfsprestasie was redelik suksesvol met 'n baie duidelike strategie van lae koste/winsgrens met hoë volumes. Die benutting van sy bates was egter nie op dieselfde vlak as by die wêreld se grootste brouer, Anheuser Busch, nie. • SAB se doelstelling om deur sy kliënte as 'n verskaffer van die beste waarde beskou te word, was redelik suksevol insoverre dat prysverhogings minder as 85% van die amptelike VPI was. Terselfdertyd is hy internasionaal lof toegeswaai vir die gehalte van sy produkte. • SAB se finansiële prestasie vergelyk gunstig met die van Anheuser Busch, maar hy het klaaglik misluk met skuldinvordering sedert 2000, met 'n hoogtepunt van 101 invorderings dae in 2001. • Sedert Suid-Afrika se terugkeer na die wêreldmark in 1994 is SAB se strategie om te diversifiseer weer gekonsentreer op sy kernbedryf, naamlik die verbruiker-drankmark. • Gerugte dat 'n ander brouer 'n relatiewe groot aandeelhouding in SAB wou bekom met die oog op 'n toekomstige samesmelting is in 1999/2000 deur SAB afgeweer. • Sedert Suid-Afrika se hertoelating tot die wereldmark het SAB homself baie vinnig weer toegespits op sy kernbedryf en ontslae geraak van nie-kern-sake. Terselfdertyd het hy 'n rolspeler op die wereldmark geword. SAB Suid-Afrika het egter nie heeltemal daarin geslaag om te keer dat hy 'n marginale markaandeel afstaan aan alternatiewe produkte nie. SAB se toetrede tot die wereldmark, veral opkomende markte, het nie net geleenthede gebied nie, maar ook verwante bedreigings en risiko's van ontwikkelende ekonomieë meegebring. • SAB se Hoof Uitvoerende Beampte, mnr. G. Mackay, sê dat SAB beleggings in opkomende markte verg optimalisering en groter produktiwiteit om soortgelyke sukses as in die Suid-Afrikaanse biermark te behaal. Opsommend is dit duidelik dat SAB tot in 2001 suksesvol was. Daar lê egter groot uitdagings voor en die bewys van sukses in 'n meerlandige ekonomie moet nog gelewer word. Om aanhoudende groei te verseker sowel as om die risiko's verbonde aan opkomende markte te verminder en daarteen te skerm, lyk aansluiting by of investering in 'n gevestigde brouer in die eerste wereld na 'n logiese volgende stap.

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