Exam (elaborations)
MNG3702 Assignment 1 Semester 2 2023 (726484) - DUE 25 August 2023
- Institution
- University Of South Africa (Unisa)
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MNG3702Assignment 1
Semester 2 2023
(726484) - DUE
25 August 2023
[Document subtitle]
[DATE]
[COMPANY NAME]
[Company address]
, MNG3702 Assignment 1 Semester 2 2023
How a South African company turned constraints into global strengths On 28 September
2016, the shareholders of South African born international brewer, SABMiller, approved
the company’s acquisition by Anheuser-Busch InBev for $104 billion (R1.5 trillion). The
deal paved the way for the creation of what is now by far the world’s largest brewing
company. For a company that started out selling beer to miners in Johannesburg during
the gold rush of the late 1800s (SAB was founded in 1895 as Castle Brewery and became
the first industrial company to list on the Johannesburg Stock Exchange in 1897), it has
been quite a journey. How did a brewing company from a developing country rise to
compete with the multinational brewing behemoths from the developed world? A series of
interviews with senior executives and managers who presided over the growth of what was
then South African Breweries’ (SAB) rapid expansion during and after the 1990s are
revealing. After building up a monopoly-like position in the beer market in South Africa,
the company went in search of new markets. With a vision to be the most admired
company in South Africa; a partner of choice, an investment of choice and an employer of
choice, it used its experience in South Africa in its entry strategies abroad. SAB’s path
reflects the differences between multinationals from developed and emerging markets in
terms of location choices, sequencing, time horizons and motivation. A two-phased
expansion path emerges to explain the remarkable success story. The first pillar to SAB’s
international expansion was a focus on developing markets. Coming from a developing
country itself, the company would cope better with emerging market conditions than
brewers from the developed world. These ventures became a powerful base for SAB to take
on developed markets. The second was to expand into developed countries. This became
necessary as it became clear the company was over exposed to emerging markets. After a
few early forays into South Africa’s neighboring countries prior to 1993, SAB executives
realised that the company could exploit its knowledge of institutional shortcomings in its
home country. It would use this experience to adapt more easily than its competitors to
conditions in developing countries would. And so began the first part of its
internationalisation strategy: a rapid expansion into emerging markets worldwide.
Through a series of acquisitions and joint ventures throughout the 1990s, SAB gained a
foothold in various countries in Africa, Eastern Europe, and Asia. Although many were
geographically distant (like Hungary, Czech Republic, China, and India), they echoed
South Africa in terms of their socioeconomic development. Eastern Europe, for example,
was still emerging from political reform in the wake of communism, and infrastructural,
institutional, and economic weaknesses persisted. 2 By expanding into countries that
shared socioeconomic characteristics with South Africa, SAB was able to make use of its
experience to turn a perceived drawback – institutional weakness – into a strength. As one
respondent explained: ‘To be frank, we accepted that we would live with the political risk
and poor institutions. We did not really shy away from high-risk countries unless, of
course, there was a raging civil war that we would have to wait to subside.’ Once it had
established this expansion plan, SAB diversified into developed markets such as Italy and
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