Coors updateCoors update

1985: Miller introduces Genuine Draft1985: Miller introduces Genuine Draft 1986: Agreement with Asahi Breweries to brew and 1986: Agreement with Asahi Breweries to brew and

distribute Coors in Japandistribute Coors in Japan 1987: Shenandoah packaging facility opened1987: Shenandoah packaging facility opened

– Sent concentrated beer there and added water to it. Sent concentrated beer there and added water to it.

– A‑B ran ads making fun of Coors for claiming Rocky Mtn. A‑B ran ads making fun of Coors for claiming Rocky Mtn.

spring water when the water came from Virginia. spring water when the water came from Virginia.

– Coors sued & lost, and lost the right to claim “Rocky Mtn. Coors sued & lost, and lost the right to claim “Rocky Mtn.

spring water” in advertising.spring water” in advertising.

Coors update (cont’d)Coors update (cont’d)

1990: Purchase of a Stroh’s brewery in Memphis1990: Purchase of a Stroh’s brewery in Memphis 1990: Coors rises to #3 among US brewers1990: Coors rises to #3 among US brewers 1993: New president and COO hired from Frito-Lay; 1993: New president and COO hired from Frito-Lay;

first non-Coors family member to be presidentfirst non-Coors family member to be president 1996: A-B has captured 48% of US beer sales1996: A-B has captured 48% of US beer sales 2002: Coors acquires 22002: Coors acquires 2ndnd largest UK Brewer, Carling largest UK Brewer, Carling 2004: Coors outbids SAB/Miller for Molson, Canada’s 2004: Coors outbids SAB/Miller for Molson, Canada’s

largest brewerlargest brewer 2005: Molson Coors is world’s 52005: Molson Coors is world’s 5thth largest brewer 3 largest brewer 3rdrd

largest in U.S.largest in U.S.

Coors takeaways:Coors takeaways: CompetitionCompetition

Need to understand industry and nature of competition Need to understand industry and nature of competition

to make good strategic decisionsto make good strategic decisions What matters for competition? Here, What matters for competition? Here,

– transportation costs => geographytransportation costs => geography

– scale economiesscale economies

– advertisingadvertising

Market dynamics: what determines market structure in Market dynamics: what determines market structure in

the long run?the long run?– Look at MES/market sizeLook at MES/market size

– Here also: escalation of advertising expendituresHere also: escalation of advertising expenditures

Cross-functional perspectiveCross-functional perspective

Assessing a firm’s strategy and its options Assessing a firm’s strategy and its options

requires looking at all functions/activities:requires looking at all functions/activities:– ProcurementProcurement

– ProductionProduction

– MarketingMarketing

– DistributionDistribution

– Often also: organizational structure, HR policies, Often also: organizational structure, HR policies,

financial position etc.financial position etc.

External and internal fitExternal and internal fit

Strategy can be seen as link between firm and its Strategy can be seen as link between firm and its

environmentenvironment External fit: how well do firm’s activities fit with external External fit: how well do firm’s activities fit with external

market forces?market forces? Internal fit: how well do various activities fit with one Internal fit: how well do various activities fit with one

another?another?– An An activity system activity system is an important tool to assess internal fitis an important tool to assess internal fit– 70s: good match between regional strategy and choices in 70s: good match between regional strategy and choices in

production and marketing;production and marketing;– 80s: mismatch between activities and national strategy80s: mismatch between activities and national strategy

Assessing competitive Assessing competitive advantageadvantage

Look at costs and (customers’) benefits; prices Look at costs and (customers’) benefits; prices

dependdepend on those on those– Cost drivers (e.g. scale economies, transportation Cost drivers (e.g. scale economies, transportation

costs) => cost advantage?costs) => cost advantage?– Benefit drivers (freshness?, limited availability) => Benefit drivers (freshness?, limited availability) =>

benefit advantage?benefit advantage? Try to quantify each, given available dataTry to quantify each, given available data Useful (but too simple) distinction: “cost” vs. Useful (but too simple) distinction: “cost” vs.

“differentiation” strategy“differentiation” strategy

Sustainability of a competitive Sustainability of a competitive advantageadvantage

Having a competitive advantage does not mean it’s Having a competitive advantage does not mean it’s

sustainable!sustainable! Two kinds of threats:Two kinds of threats:

1.1. Changes in the market (e.g. increasing importance Changes in the market (e.g. increasing importance

of advertising)of advertising)

2.2. Efficient markets principle at work: if you’re making Efficient markets principle at work: if you’re making

profits, others will try to go after you!profits, others will try to go after you!

Strategy and commitmentStrategy and commitment

Strategic decisions are often hard to reverse, due toStrategic decisions are often hard to reverse, due to– Sunk costsSunk costs– Late-mover disadvantagesLate-mover disadvantages– Delays in implementing changesDelays in implementing changes– Organizational inertiaOrganizational inertia

Successful strategic planning requires thinking things Successful strategic planning requires thinking things

through ahead of timethrough ahead of time1.1. Monitor/anticipate changes in the market.Monitor/anticipate changes in the market.

2.2. Try to anticipate others’ movesTry to anticipate others’ moves Others’ moves can quickly change your position in market, Others’ moves can quickly change your position in market,

or force you to change itor force you to change it