Cultural Dimensions of International Business

Cultural Dimensions of International Business

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Cultural Dimensions of International Business


Introduction-
This SWOT analysis is regarding Lion Nathan China Brewing Company and their competitive advantage in their business. The major issue in this case is analyzing the company's background and reasons for expanding into China while trying to forecast an appropriate managerial decision regarding the company's future. There are many sources of information we can use to inform us of the past decisions made and good data that can be used to make predictions about the future. This case analysis will take a careful look at the individual strengths of Lion Nathan, the weaknesses of the company, any opportunities presented for future application and threats from other brewing companies. All of these specific key factors are very important in assessing a company's core competencies and a practical promotional plan for future endeavors.

Strengths-
Lion Nathan Brewing Company has numerous strengths that give their company a competitive advantage over other premium-style beers sold in the same areas.
-In 1999 Lion Nathan was an international brewer with three geographic locations around the world: New Zealand, Australia, and China. This is an important strength because it gives them a very broad customer base and allows the company to experiment with new products and new ideas. This is also a very important advantage because it allows the company to be more specified and focus only on premium beer.
-Lion Nathan China Brewing Company also had a portfolio of over fifty brands and owned and operated ten separate breweries. This is a vital strength because while focusing on premium beers the company has the freedom of catering to many types of customers. For example a beer that is popular in Australia might not be a huge hit in China.
-The br ewery exports various types of beer to over fifty countries worldwide. This allows them to keep a strong foreign customer base with money pouring in from other countries while catering to the locals as well.
-They are part of the fourth largest brewing group in the world. This strength speaks for itself, with worldwide brewing comes contacts and references. The more widely know and promoted your company is the greater benefits you will reap.
-The owners of Lion Nathan China Brewing Company appointed a Chief Operating Officer (C.O.O.) who was a complete outsider. This removed any and all business or ethical bias that might have taken place regarding the company's day-to-day operations. With zero financial or emotional obligations to the company, the new C.

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O.O. has the ability to handle operations without questioning from employees or stockholders regarding his decisions.
-Another important strength specifically involved in the Chinese beer market has to do with how beer is viewed in China. The Chinese government promotes beer because unlike liquor or rice wine, beer has a relatively low alcohol content and it is viewed as a refreshing beverage rather than an alcoholic drink. Lion Nathan's marketing director for China put it quite well, "what will I have? A beer or a Pepsi or a cup of tea?"
-Steve Mason, the marketing director for China also says that beer is used mainly in China as an assisting mechanism to food. This is important in the premium beer business because when someone sits down for a meal it is more likely that they will order a nicer beer. When cultural tendencies offer the opportunity for product placement it is very important to take advantage of this fact and promote your product.
-When Lion Nathan was introduced into China they followed pervious practices from New Zealand and Australia which stated that executive positions could only be held by people with at least five years experience in two or three of their other breweries. The local Chinese managers were required to have previous experience in the beverage or consumer-products industries
-Lion Nathan was able to provide a source of differentiation at the new facility in Wuxi because the local breweries did not have the capabilities to produce a consistent quality product. In any market, with consistency and quality comes a good reputation. Lion Nathan built a good reputation in China and therefore a strong customer base of loyal customers.

Weaknesses-
Lion Nathan like any company had a few weaknesses that needed attention.
-One weakness that struck me was the fact that they were getting into an already declining market. "Growth rates had decreased dramatically from over 20 percent per year in the 1980's, to 12.5 percent on average between 1992 to 1997." If I am managing this company the research analyst has some explaining to do.
- Another weaknesses that needed some attention was the fact that according to figure 2 on page 567 premium beer accounts for less than twenty percent of consumption in both Shanghai and the Yangtze River Delta. This is an awfully low number considering mainstream beer accounts for better than sixty percent and the mainstream beer is cheaper.
-According to market research conducted in China consumers over forty-five years old, influenced by the Cultural Revolution that took place in China, were highly sensitive to price and respond negatively to new products and most forms of marketing. This is a major threat to Lion Nathan because in America that generation is referred to as the "Baby boomers" and they are a large group of people who have a very strong influence on the consumer markets of China.
-Lion Nathan had significant trouble developing sales and distribution networks within China.
-Another weakness that says a lot about the culture in China is that the process of making sales was highly social and time consuming, requiring continuous communication and relationships amongst seller and distributor.

Opportunities-
-Among many opportunities that Lion Nathan has in China I feel the most important one is building brand loyalty and promoting good ethical international business relations. After a significant time period of good business relations in a foreign country the uncertainty of prospective business partners deteriorates and operations continue as smoothly as if you were from the same area, reliability counts.
-Another important opportunity that Lion Nathan is faced with is promoting quality products that are consistent all the time. If Lion Nathan can continue to produce quality products then other local and state run breweries will be forced to adhere to the same quality of product or be forced out of the market in China. This will in turn improve the overall quality of Chinese beer and make it more appreciated throughout the world.
-Lion Nathan also has the great opportunity to employ numerous local Chinese people in both Shanghai and the Yangtze River Delta. Previously these peoples perhaps had little or no work however with the breweries in place many of the locals stand to benefit financially. By employing so many locals Lion Nathan would gain international and local respect.

Threats-
-Lion Nathan has many key competitors in the Chinese beer market, however maybe none as influential and powerful as Anheuser-Bush. This American based company was the world's largest brewer distributing Budweiser brand beer to better than sixty countries around the world and aiming to control twenty percent of the entire world's market share. In 1998 Budweiser was the leading premium beer brand with a thirty percent control over the Chinese market. Anheuser-Bush invested heavily in marketing in order to boost its brand equity. They also used the world-renowned Budweiser beer to gain an international foothold.
-Another very prominent competitor is Beck's Brewing Company. Brauerei Beck & Co have a strong international focus with divisions in Finland, Greenland, Great Brittan, The United States, Canada, Venezuela, Taiwan, and Puerto Rico. German Beck's brand was very distinctive due to the interesting shape of the bottle and it was positioned as a top quality premium beer. The company also complied with extremely harsh regulations for the raw materials and their brewing process. Beck's beer was brewed with a license at Putian and distributed in over forty cities in China.
-Foster's is a prime threat to Lion Nathan not only in China but also in Australia. When I think of Australian beer immediately Forster's comes to mind. Foster's goal in China was to become the largest brewer with a national network of breweries. Foster's China was based out of Shanghai exactly where Lion Nathan planned to market. Foster's also spent a large sum of money advertising in Shanghai with billboards in many frequently trafficked areas.


-The last threat that I will focus on is Kirin. Kirin is the fourth largest brewing group in the world. They entered into the Chinese market through a joint venture with a local brewer at Zhuhai in Guangdong province. In Japan Kirin has fifteen breweries and captured over forty percent of the market share. Kirin sold over 300 variations such as soft drinks, tea, coffee, wine and spirits. Again when I think of Japanese beer Kirin is the first to my mind and the first beer I order at a Japanese restaurant. Kirin is also involved with other joint ventures including pharmaceutical plants and research laboratories.

Recommendations-
-Lion Nathan has performed so well in their international endeavors that I recommend expansion into North and South America and perhaps South Africa. North America would be a difficult place to introduce his or her premium beer because I feel everyone is fairly set on his or her specific drink of choice. South America however is flooded with mainstream or low-end beers that could open up an interest with the upper class or at fine dining establishments. South Americans are also generally more excepting of foreign cultures and willing to try new things. South Africa has a very narrow market meaning that sixteen local brands control 98 percent of the domestic beer market. If Lion Nathan were to start producing beer domestically in South Africa they would stand to take over a large share of the market because they are internationally revered and can produce a consistent quality product. No matter which location Lion Nathan decides to pursue next I strongly recommend that they continue expanding to different locations around the world. These same tactics have worked wonders for Anheuser-Bush with their Budweiser and to me there is no reason why Lion Nathan couldn't reap the same benefits.
-I also recommend that regardless of expansion to new places, Lion Nathan continue to follow in their footsteps of quality and consistency. I recommend that they continue to require executives to have at least five years of Lion Nathan experience in two or three breweries. I also recommend that they continue to use quality raw materials and an outstanding brewing process.

Conclusion-
-The SWOT analysis of Lion Nathan has been very beneficial in my understanding of international management. I learned that much insight and investment is needed to expand your business into foreign countries, proper planning and experience is vital. I learned that there are many other factors other than simply supply and demand need to evaluate proper placement. I learned that brand labeling and product placement are intricate parts of marketing new products into a new environment. However most importantly I learned and understand the strengths, weaknesses, opportunities and threats of an international powerhouse brewer, Lion Nathan.
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