Summary

The research study was tasked with examining business strategy as far as internationalization was concerned. It subdivided the main objective into three main objectives; evaluation of attractiveness of international markets, ascertain the most appropriate market entry strategy, and determine the challenges experienced during internationalization.

International markets have become extremely important to firms that wish to sustain growth. The study examined the various internationalization quests that had been undertaken by Diageo and SAB Miller. The main import for the push was to extend their market reach and diversify their concentration from the home markets.

Market entry strategies extended from exports to establishment of wholly-owned subsidiaries. Choice of market entry mode was tied to the corporate strategy as well as prevailing regulatory and market conditions. Industry trends also dictated the choice especially in the international markets as competition intensifies.

There are numerous challenges that are witnessed while expanding to international markets. The most pressing ones are related in adapting to the domestic culture and integrating operations seamlessly. Market dynamics as far as operations are affected by local knowledge and the ability to utilize corporate resources to penetrate the market.

Conclusions

International markets have become increasingly important for alcoholic beverage companies as they seek to cement their market presence. These companies have been consolidating their operations especially among the leading brewers/distillers; Anheuser-Busch Inbev, SAB Miller, and Diageo.

Diageo’s acquisition of the stake in EABL allowed it to gain immediate market access to new markets. Through EABL, it has extended its presence to Tanzania, Uganda, Rwanda, and South Sudan. It has been able to leverage on their network to develop markets and distribute their beer, sprits, and wine portfolio.

SAB Miller also entered the Colombian market through the acquisition mode. It was able to extend its market presence in region and gain new markets mainly in Central and South America. The group has been able to leverage on its business expertise to develop the existing brands to become dominant market leaders in the market.

Market challenges in both markets have uncannily similar with high taxation impacting on operating margins. A growing illegal alcohol market has affected the uptake of formal alcoholic brands. Diageo through EABL sought to counter this challenge by launching an economy brand in Senator which has been extremely successful.

SAB Miller has focused on the mainstream and premium brands which are largely unaffected by the illegal alcohol. But it has been essentially locked out of the economy market which is one of the fastest growing segments. The challenges require proactive, market-specific mitigation as well as coordination with relevant government authorities.

Recommendations

The study revealed that market entry is hugely dependent on the target scale that is intended to be achieved. For large multinationals such as Diageo and SAB Miller, a rapid expansion is effective and thus acquisitions are the best approach as they allow them to have business control and extend their strategy efficiently.

This strategy may not be particularly attractive for small and medium-sized enterprises which are financially capable. It is prudent to evaluate the effectiveness of the market entry mode to overall business strategy. Internationalizing firms have to have medium-term to long-term strategies in the international markets to sustain growth.

The most poignant outcome of the research was that market entry mode has to be consistent throughout the enterprise. This enables the firm to gain competencies that are involved during the integration process. Having a controlling stake in an international business is critical in ensuring that management is able to react to changing dynamics in the market.