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Heineken’s Global Reach Essay

1227 words - 5 pages

1) Describe fundamental issues in foreign market analysis for a firm like Heineken?
To successfully increase foreign market share, firms must assess alternative markets, evaluate the prospective costs, benefits and risk of entering each and select those that hold the most potential for entry of expansion.
• Levels of Competition – firm must consider the current and future level of competition in foreign markets. Assessing their competitive environment should identify the number and size of firms already competing in the potential market.
• Legal and Political Environment – it is important for a firm like Heineken to understand the host country’s policies and laws especially dealing with ...view middle of the document...

Consequently, Heineken will improve quality of products, and it can gain more market share in international market.
• Expand Sales - expanding into international market gives various chances to get profit for Heineken. The long term relationship with international market lasts, export development cost can be covered and they increase their additional sales through the market. Also, company can further create economies of scale to decrease producing cost.
• Minimize Risk - Beer is sold certain seasons: especially summer. Thus, Heineken can utilize and avoid seasonal factors during different season in foreign countries. Also, selling product to multiple markets allows Heineken to diversify their business and spread risk.

Disadvantages are:
• Complexity in Operations: Heineken need to plan various marketing strategies to meet different needs for each country. Thus, it causes increase in product cost. Also, there are a lot of unpredictable situations for Heineken such as establishment regulation to limit alcohol, natural disaster etc. Heineken has no choice but to be dependent on fluctuation other countries` situations.
• Cultural Collision: multinational companies have to consider various cultural differences among different countries. For instance, religion, customs, purchasing behaviors are things to consider. Consumption of alcohol is a sensitive matter in this sense to many countries and can cause numerous social problems.

3) What are the key issues facing Heineken insofar as international licensing is concerned?
Basically licensing in this case would be Heineken, a beer company would license a brewery in country they wish to enter. That same brewery would produce Heineken branded beer with Heineken’s unique recipe. This way Heineken would reduce production cost and expand internationally but…
Despite the advantages of licensing Heineken never licenses anyone inside the US to produce their beer and that was a great strategic decision. Reasons that people consume a certain brand of beer can be various but simply to name the two main reasons would be because first, a consumer is simply loyal to that brand because they grew up with it or, for a second reason, to drink a particular brand of beer gives the consumer a sense of exoticness. Thus, to produce a beer that people drink mainly because it is a foreign brand in a local brewery would definitely drive consumers away. Moreover because consumers believe that the “real” Heineken beer comes from Dutch breweries, Heineken is able to charge double for Dutch made beers. High dependence on its brewing partner would limit the market opportunities of Heineken when its decisions have to go through the agreement of its partner before execution. This would affect the speed of entry into new foreign markets and other dominant breweries would have seized the opportunities,...

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