Lion Nathan Swot Analysis

MGMT 245

Cultural Dimensions of International Business

SWOT Analysis

4/30/07

Introduction-

This SWOT analysis is regarding Lion Nathan China Brewing Company and their competitive advantage in their business. The major issue in this case is analyzing the company's background and reasons for expanding into China while trying to forecast an appropriate managerial decision regarding the company's future. There are many sources of information we can use to inform us of the past decisions made and good data that can be used to make predictions about the future. This case analysis will take a careful look at the individual strengths of Lion Nathan, the weaknesses of the company, any opportunities presented for future application and threats from other brewing companies. All of these specific key factors are very important in assessing a company's core competencies and a practical promotional plan for future endeavors.

Strengths-

Lion Nathan Brewing Company has numerous strengths that give their company a competitive advantage over other premium-style beers sold in the same areas.

-In 1999 Lion Nathan was an international brewer with three geographic locations around the world: New Zealand, Australia, and China. This is an important strength because it gives them a very broad customer base and allows the company to experiment with new products and new ideas. This is also a very important advantage because it allows the company to be more specified and focus only on premium beer.

-Lion Nathan China Brewing Company also had a portfolio of over fifty brands and owned and operated ten separate breweries. This is a vital strength because while focusing on premium beers the company has the freedom of catering to many types of customers. For example a beer that is popular in Australia might not be a huge hit in China.

-The br ewery exports various types of beer to over fifty countries worldwide. This allows them to keep a strong foreign customer base with money pouring in from other countries while catering to the locals as well.

-They are part of the fourth largest brewing group in the world. This strength speaks for itself, with worldwide brewing comes contacts and references. The more widely know and promoted your company is the greater benefits you will reap.

-The owners of Lion Nathan China Brewing Company appointed a Chief Operating Officer (C.O.O.) who was a complete outsider. This removed any and all business or ethical bias that might have taken place regarding the company's day-to-day operations. With zero financial or emotional obligations to the company, the new C.O.O. has the ability to handle operations without questioning from employees or stockholders regarding his decisions.

-Another important strength specifically involved in the Chinese beer market has to do with how beer is viewed in China. The Chinese government promotes beer because unlike liquor or rice wine, beer has a relatively low alcohol content and it is viewed as a refreshing beverage rather than an alcoholic drink. Lion Nathan's marketing director for China put it quite well, "what will I have? A beer or a Pepsi or a cup of tea?"

-Steve Mason, the marketing director for China also says that beer is used mainly in China as an assisting mechanism to food. This is important in the premium beer business because when someone sits down for a meal it is more likely that they will order a nicer beer. When cultural tendencies offer the opportunity for product placement it is very important to take advantage of this fact and promote your product.

-When Lion Nathan was introduced into China they followed pervious practices from New Zealand and Australia which stated that executive positions could only be held by people with at least five years experience in two or three of their other breweries. The local Chinese managers were required to have previous experience in the beverage or consumer-products industries

-Lion Nathan was able to provide a source of differentiation at the new facility in Wuxi because the local breweries did not have the capabilities to produce a consistent quality product. In any market, with consistency and quality comes a good reputation. Lion Nathan built a good reputation in China and therefore a strong customer base of loyal customers.

Weaknesses-

Lion Nathan like any company had a few weaknesses that needed attention.

-One weakness that struck me was the fact that they were getting into an already declining market. "Growth rates had decreased dramatically from over 20 percent per year in the 1980's, to 12.5 percent on average between 1992 to 1997." If I am managing this company the research analyst has some explaining to do.

- Another weaknesses that needed some attention was the fact that according to figure 2 on page 567 premium beer accounts for less than twenty percent of consumption in both Shanghai and the Yangtze River Delta. This is an awfully low number considering mainstream beer accounts for better than sixty percent and the mainstream beer is cheaper.

-According to market research conducted in China consumers over forty-five years old, influenced by the Cultural Revolution that took place in China, were highly sensitive to price and respond negatively to new products and most forms of marketing. This is a major threat to Lion Nathan because in America that generation is referred to as the "Baby boomers" and they are a large group of people who have a very strong influence on the consumer markets of China.

-Lion Nathan had significant trouble developing sales and distribution networks within China.

-Another weakness that says a lot about the culture in China is that the process of making sales was highly social and time consuming, requiring continuous communication and relationships amongst seller and distributor.

Opportunities-

-Among many opportunities that Lion Nathan has in China I feel the most important one is building brand loyalty and promoting good ethical international business relations. After a significant time period of good business relations in a foreign country the uncertainty of prospective business partners deteriorates and operations continue as smoothly as if you were from the same area, reliability counts.

-Another important opportunity that Lion Nathan is faced with is promoting quality products that are consistent all the