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Case Analysis: sab Miller (Colombia)

SAB Miller adopted a similar strategy to that preferred by Diageo. It acquired a publicly-listed company and chose to pursue the entire acquisition of the firm. The major advantage for SAB Miller is that the bulk of the shares were held by a single family. This enabled it to effectively negotiate for a purchase of the entire equity.

The group has benefited immensely from the acquisition as it now represents 10.8% of net revenues (SAB Miller, 2013a). It also enabled SAB Miller to have immediate access to 5 other vital Central and South American markets. In these markets, Grupo Bavaria had market leadership positions and thus offered SAB Miller a strong regional presence.

Wholly owning the subsidiary has enabled SAB Miller to execute a transformation strategy that improved the positioning and differentiation of its brands. In Colombia, Poker had a 16% market share prior to the acquisition but has been repositioned to become the nation’s largest beer brand with a 42% market share (SAB Miller, 2013a).

The major challenge in Latin America has been the proliferation of illegal alcohol which has had a significant impact on volumes. The practice is pervasive and has impacted on investment in brewing and distribution of formal brands. Colombia has some of the highest taxation for the industry in South America.

The size of the market of the market is very attractive and as such, SAB Miller chose to acquire the entire firm and aggressively pursue organic growth. It has been extremely successful as it has been able to strengthen market presence. The company is primed to grow much faster as incomes rise quite fast in the region.

Cross-Case Analysis

Diageo and SAB Miller have approached the two markets with a similar entry strategy; acquisition. SAB Miller was able to acquire the entire company (99%) while Diageo has had a slim majority ownership (50.03%). Both strategies have been hugely successful as both companies have gained access to nascent markets.

The regulatory environments in both nations bear some similarities as the main challenges are related to high taxation and prevalence of illegal alcohol. Diageo’s investment in EABL was relatively cheaper with an open market purchase of just over $300 million. The company was profitable and was virtually debt free.

SAB Miller had to pay at least $1.8 billion to pay debts owed by Grupo Bavaria during the acquisition. The size of the Colombian alcohol market at approximately $5.9 billion justified the steep purchase price. The two companies have used the acquisitions to promote their own brands. Diageo has had a particular advantage in extending its spirits portfolio to Kenya.

Overall, the acquisition strategy has been effective in gaining control and dictating the strategic positioning of the company with huge benefits to the acquirer.

Chapter 6: Summary, Conclusions, and Recommendations

Introduction

This chapter highlighted the summary of the discussions of the empirical findings. It also provided conclusions of these findings based on each objective set earlier. Recommendations were detailed focusing on strategic growth of businesses into international markets. Gaps were identified that could form the basis for future research by expounding on the topic