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SABMiller: The internationalisation of a brewing giant
5/1/2015

​A recent study of MBA student Roark Nel, undertaken at the University of Stellenbosch Business School, looked into the drivers, strategies and critical success factors of the internationalisation of SABMiller, the world’s second largest brewer.

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Why this study?

SABMiller originated in South Africa and a significant part of its success has been attributed to the culture and history of the organisation in its home market. The aim of this research assignment was therefore to uncover the drivers, strategies and critical success factors of SABMiller's internationalisation move. The company's motivations, enablers and modes of entry were further compared to literature to determine which, if any, theories are best suited to describe its process of internationalisation.

Research methodology

To conduct the research, a qualitative case study methodology was employed, utilising semi-structured interviews conducted with 29 current and former senior managers of SABMiller or its investment partners, all of whom were involved with the organisation's internationalisation. The individuals interviewed related experiences pertaining to particular cross-sectional time-periods within SABMiller's internationalisation process. Data was then examined using thematic analysis.

 

What did the research find?

The role of SABMiller's South African home culture as a differentiator, as well as the development of a deep talent pool to enable rapid expansion, was telling in its success.

Operating excellence was a competitive advantage in the majority of markets the organisation entered, while its in-house mergers and acquisitions competence, coupled with a distinctive partnering ability, clearly demonstrated the advantage of building and maintaining strong relationships and network positions when internationalising.


SABMiller's initial expansion sought to counter the threat of becoming a takeover target in its own right, and to open up new markets that were both affordable and could match the relative competitive advantages it had developed. As the company grew, a broader portfolio view was developed in order to balance risk and currency exposure in emerging markets, with more stable profit pool participation in developed markets.

To enter new markets, SABMiller utilised a beachhead approach whereby its main aim was to secure entry to a desired market from which it would be able to expand – through organic market share gain, increased ownership of its joint ventures or further acquisitions within the market.

Companies engaging in foreign expansion for the first time need to understand clearly their relative advantages, to what they owe that endowment, and to what extent those advantages are sustainable in the face of global competition. Furthermore, locational advantages of a target country must be viewed relative to the competitive advantages they possess within the context of their product class, industry structure, nature of the knowledge to be transferred, and where the value generation lies within their structure.

Global government priorities and political stability are varied and can have an overriding impact on a company's choices and ability to internationalise effectively. Investment in local communities and alignment with priorities of social development and environmental preservation are becoming increasingly important. Therefore, internationalising companies need to factor this into consideration to increase their chances of success.

The significant impact of governments on internationalisation is particularly evident in the case of SABMiller. With the added importance of investment towards societal goals, a study of the motivators and priorities of host governments may add value to companies seeking partnerships to internationalise, particularly within the realm of value chain development.

Conclusion

The analysis showed what competitive advantages SABMiller developed that enabled its success – initially within its home market of South Africa and subsequently as it internationalised.


While the nature of ownership in the beer industry often necessitated entry via joint ventures, the manner in which SABMiller constructed such ventures provided opportunities to shape the industry structure beneficially in a number of cases.

Literature on internationalisation theory offers useful frameworks to examine a company's internationalisation global expansion, such as Dunning's "eclectic" paradigm and Porter's "diamond". The analysis of SABMiller's enablers, motivations and modes of entry was effectively conducted within these frameworks, though no individual theory offered satisfactory explanatory power in isolation. Hence, the literature needed to be considered more holistically in order to gain meaningful descriptive power, drawing particularly on empirical research from other emerging markets and their companies. Thus, the initial deductive approach was expanded to become more inductive as various elements of the literature needed to be applied to form the total picture.

 

While every company's internationalisation process will be different given its unique skill-sets, home markets and opportunities, SABMiller's case did provide interesting insights.


Its diverse South African home culture and history assisted in developing adaptable and resilient managers, while significant investment in training and skills development cultivated a deep talent pool that enabled rapid expansion as opportunities became available. Operational excellence was developed through vigorous domestic rivalry and later encouraged with internal competition and global benchmarking. SABMiller demonstrated the

advantage of building strong relationships and network positions through its in-house mergers and acquisitions competence and distinctive partnering ability. However, the precursory network development with prospective take-over targets that this competence enabled is an application not generally covered by the literature.

 

Recommendations

While literature on internationalisation provides frameworks with which to analyse the paths followed by an organisation, a more holistic regard of literature is recommended to analyse emerging-market multinational enterprises whose history and culture play a significant role in determining internationalisation behaviour.

 

The author further recommends research on the impact of South African culture on internationalisation success – particularly where expatriation forms part of a company's strategy, while the role of leadership as a differentiator in successful internationalisation

is an area not explored extensively within this study. It was uncovered as a significant theme in SABMiller's expansion, however, and it is thus an area that may warrant further exploration.

 

This is a summary of the MBA research assignment written by Roark Nel, supervised by USB lecturer Johan Burger. The research assignment titled SABMiller: The Internationalisation of a Brewing Giant is available at http://scholar.sun.ac.za.

 

'Roark Nel has succeeded in capturing the internationalisation

strategy of SABMiller in all its glory. As it is, the internationalisation

strategies of very few, if any, other South African companies have

been documented. In this very good effort by Nel, he has shown where

SABMiller's strategy correlated highly with existing theory, and where it

"created" new practices. In this regard, he has been able to demonstrate

how the SABMiller practices were aligned with the theory of Michael

Porter, among others. This work makes an invaluable contribution to

the case studies on South African companies that have implemented

internationalisation strategies.' – Johan Burger

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