Carlsberg Beer Company And Their Global Entry Expansion Strategy (Case Study Sample)

Carlsberg Beer Company and their Global Expansion Strategy Student’s Name Course Submission Date Carlsberg Beer Company and their Global Expansion Strategy In the contemporary world, the business environment is diversifying, and the primary concern for most entrepreneurs has been the increased effect of globalization. Notably, globalization is affecting individuals and large companies since it is enhancing the integration of consumer tastes and demands. Indeed, the impact of globalization is in some instances described to be turning the world into a global village. In this situation, more competitors are in the business, and the consumers enjoy the variety of goods and services. For that reason, most companies are aiming at internationalizing their business, and this strategy takes different approaches depending on the target market and the size of the company. It is important to note that internationalizing business involves more challenges that might pose risks to the performance of the business. If the planning strategy is ineffective, the company might end up making losses, especially considering social, political and economic vagaries that exist between nations.[Katerina Ristovska and Aneta Ristovska, "The Impact of Globalization on the Business," Economic Development/Ekonomiski Razvoj 16, no. 3 (2014): 2.] Carlsberg Entry Strategy Before highlighting the strategies chosen by Carlsberg to foreign entry, it is essential to have a brief background on the fundamental operations of the company and then identify the reasons for internationalizing the business. Carlsberg used to operate as a domestic player in the 1860s. Later in the same period, a trial export was established in Sweden and Iceland, and this was the beginning of exportation. In 1868, the company initiated operations with the U.K where matured beer was sent to merchants in Thiemann and Danish. Jacob Christian Jacobsen played a significant role in enhancing business with Europe by spending time in Edinburgh for four years. After creating a friendship with Thielemann, Jacobsen identified unexploited potential in Scottish Market and recommended for the selling of beer in the area.[Martin Iversen and Andrew Arnold, "Carlsberg: From Exporter to an Integrated Multinational Enterprise," Brewery History 131 (2009): 51.] During the initial stages of expanding the business, Jacobsen was concerned with possible risks that would be associated with the possibilities of comprising with the quality of the products. The concern centered on controlling the production methods so that the same quality would be sold overseas. If the standards were not met, it would threaten to damage the reputation of the company. In this case, he perceived oversea business as more experimental than a commercial one. From a close assessment, Jacobsen was more concerned building reputation at the early stages more than making the profit. If the company maintained the reputation and the national name on the beer products, this would result in increased sales and trust by the consumers in the subsequent years.[Ibid., 53.] Although Jacobsen was a perfectionist and worried about maintaining the quality of the products, it came to a point he had to adopt new production strategies. The primary reason for changing to a new approach was to enhance the manufacturing, packaging and transportation of goods that would endure a long transportation period to the destination. As a result, he had to embrace the English approach of production that enhanced bottling of beer and steam boiling. This method resulted in several advantages that enhanced the company to meet the demands of its destination. The reputation of the company was strengthening after being praised for enduring a long journey and still maintaining their quality. As a result, the company became famous at the international level, and this was the basis for its expansion.[Ibid., 53.] Now, the study provides basics on how a company can build its reputation by first considering the need for strengthening the reputation and setting aside its profit objectives. In this case, it is elemental that a company can achieve its desired goals by setting aside a substantial amount that is an investment that would allow creating a large consumer base. If the company overlooked the need to maintain the quality, it would still achieve the expansion in the short run but in the long run encounter low performance. After the company built its reputation, new competitors entered the market. Competition is inescapable in the market, and this situation is non-exceptional. Tuborg came in the industry with its own bottling plants in Copenhagen and became an export for the brewery. However, this competitor did not make sales to the extent of outdoing Carlsberg. However, later in the period Tuborg established pilsner and started to pose many overseas direct sales in countries like Denmark which was the same strategy used by Carlsberg. Nevertheless, the companies did not have any direct sales, and the performance was relatively low.[Martin Iversen and Andrew Arnold, "Carlsberg: From Exporter to an Integrated Multinational Enterprise," Brewery History 131 (2009): 53.] However, Jacobsen made several reservations that were meant to improve the sales of the company. In this case, the exports started increasing, where the orders averaged at 2,300 and sold to Scotland and England. Later in 1885, the sales rose to 10,000 hectoliters. Later, there were disputes in the company where the father and the son split. Jacobsen started a new brewery that exported lighter products compared to Bavarian beer. This product formed the foundation for the expansion of Carlsberg in 1914, and a total of 42,322 hectoliters were shipped from the product alone. However, the development of business at the international level is not escapable from the political issues. Now, during the World War I, the sales declined significantly and then the firm encountered challenges in reaching the overseas. The sales only reached 25, 000 hectoliters. In this case, the demand had gone down, and there were increased breweries in Japan and China. Some of these organizations became famous by taking advantage of the conflicts.[Ibid., 53.] [Martin Iversen and Andrew Arnold, "Carlsberg: From Exporter to an Integrated Multinational Enterprise," Brewery History 131 (2009): 53.] However, in 1924, Carlsberg identified that the workers had overlooked some aspects in exportation, especially in consideration of the use of faked label by the companies. It was, therefore, essential to mitigate the problem and take it as an opportunity to rebuild the company’s reputation against the failure of the other companies. In this case, the organization established three distribution centers in Edinburgh, Goole, and London, and focused on the use of standardized labels and a standard beer. However, the business establishment had only the UK as the destination where there was a direct sale of its product. Nevertheless, in other areas, the East Asiatic Company handled the distribution arrangements. During the Second World War, the company made sales to Europe and other markets but again, the war stopped the operations. By 1947, the company had a new market, Belgium where the selling averaged at 68, 254 hectoliters which was the identification of a new market that was unexploited thus attracting competition.[Ibid., 54.] [Ibid., 54.] Belgium as a new market introduced a need for new strategies in the export sector between the company and its competitors. In the 1950s and 1960s, the company experienced stiff competition from Tuborg in the Belgium market and to avoid the persistence of the problem. It was important to agree on investments between the companies. This strategy gave rise to the new formulation in Turkey, Iran, Brazil, Malaysia, and Malawi. To some extent, the two companies almost blocked the operations of each other at the international market. Other competitors were utilizing sophisticated market strategies like merging which was a threat to acquire Denmark. As a result, it was necessary to merge with Tuborg and strengthen the expansion.[Ibid., 54.] Merging opened up new opportunities and enlightened the two companies to new approaches that would enhance their business performance. At this point, it was possible to have different plans like licensing that were meant to improve both income and coverage of the target market. These improvements contributed significantly to the increase in sales, and up to 24% of the sales accounted for the exportations. Markedly, the products from the mergers, Tuborg and Carlsberg superseded the products sold in Denmark. The sales increased from 24% to 60% then to 90%. The popularity of the products exceeded to be availed to over 140 countries, and this was a remarkable improvement in sales.[Martin Iversen and Andrew Arnold, "Carlsberg: From Exporter to an Integrated Multinational Enterprise," Brewery History 131 (2009): 54.] The need for licensing was strategic to reduce the costs in different ways. At first, licensing would reduce the cost involved in transportation. In 1973 the price of fuels had increased, and the companies were experiencing high expenses in exporting the products. With licensing it was possible to use a broad scope of partner’s network and enhance cost-effective distribution. This scope would eliminate the high costs created for the exportations. Besides, it was not reliable to use the Danish labor market since it had become unreliable. In this case, licensing is identified as a strategy that can solve the persistence of cross-national differences that would limit the organizations to achieve the desired ends.[Ibid., 55.] However, despite the embracing the need for mergers, there was a problem with the retention of the business. Carlsberg operated from two offices that had a conflict of interest in some situations. On...