Question

1 A local homebrewer is looking to expand his small in-home operations into a company that will mass produce his beers. He hires you, the analyst, to conduct an analysis on specific types of strategies that his company should take so as to succeed in his mission of providing fresh, locally sourced, handcrafted beers to all (of legal age) in NJ. In this case study, you will provide an analysis of the current market as it stands. You will leverage 5-Forces to describe the competitive landscape. Furthermore, you will identify the resources that the brewer currently has, and what they can obtain, so as to ensure that they are able to execute their operations by leveraging their core competencies. Last, you will identify the supply chain strategies that this company may want to implement given the competitive and resource-based analysis.

2 5-Forces Analysis In 1994, NJ had only 5 permitted breweries in the state. In 2018, this has grown to 139 breweries (Alcohol, Tobacco, & Bureau, 2018). It is clear that there are many competitors in this market. The question that comes to mind, however, is "what does the competition itself look like?". You, the analyst, must conduct an analysis on the competitors to determine the landscape of the market.

1. Go online and find data regarding the beer industry in NJ.

2. Determine, if you can find the data, the market shares for the top 5-10 small breweries in NJ (how every much data you can find).

3. From that data, calculate the market share percentage for each firm

The next phase of the analysis is to determine the current barriers to entry of the NJ beer market. NJ requires a lot of different types of permits in order for a new brewery to open. Furthermore, as recent as 2018, they are only allowed to hold certain events up to 25 per year, each of which must be approved by the state with a special permit.

1. Research other potential barriers to entry into this market.

2. Explain how the firm may be able to overcome some of these barriers.

The NJ beer market is entirely reliant on water, barley, yeast, and hops. Some beers may require additional ingredients called adjuncts. For now, the brewer is mostly concerned with understanding the markets of these four basic ingredients that go into any beer. Furthermore, the brewer will need specialized equipment in order to brew the beer. This equipment includes large fermentation tanks, as well as bottles, machines to fill and cap the beer, as well as machines to package the beer bottles.

1. Research the various markets for each of these ingredients. Identify the number of suppliers in the market, for each market (ingredient), as well as the overall demand for the markets.

2. Speculate who will have more power: the brewer or the supplier of the goods. Give a reason why you may think this.

3. Identify whether or not beer is a "substitutable product". Explain why or why not.

3 VRIN Analysis The home-brewer holds a degree in Chemistry and Business Administration Management. As both a scientist and a business owner, he has a good chance of succeeding in this area. However, he needs to hire very skilled labor. In this part, you will go resource by resource to analyze what the potential competitive advantages are for the home-brewer.

1. Identify some resources (raw materials, people, processes, skills) that the brewer will most likely require.

2. Identify which resources are VRIN. Go resource by resource, and give a reason why your think that resource is VRIN (go step-by-step through VRIN for each resource). Do this about about 10 resources.

3. Which resources have you identified as VRIN? How might this business owner leverage these resources to compete within the NJ beer market?

4 Supply Chain Strategy The brewer will need to partner with suppliers so as to ensure they are receiving the correct raw materials that are necessary in order to manufacture the beer. In this section, you will identify the types of supply chain strategies that will be necessary in order to leverage the competitive advantages identified above.

1. Draw out what the potential supply chain for this brewer will look like (at the organizational level of analysis). Identify the types of organizations the brewer will need to contract with. From there, think about the type of suppliers that the suppliers themselves might have.

2. Identify one or more supply chain strategies that may be necessary to achieve the mission of this brewer’s company. Think about the market characteristics of the beer market, the resources that this company will have, as well as the consumer taste preferences and demand patterns. Explain why you believe that the firm should engage in the strategy, or strategies, that you identified earlier.

Needs all answered

Answer 1

Q1. The five force analysis:

Supplier power: It is above average. The raw materials form large part of the cost. Any hike from their side can lead to increase in price of the beer and the company can lose market. Strategies that can work here are branding the product focusing on place identities. It can be done by making alliance or invest in business of local producers and distributors (backward integration). This will make a very strong statement of the source of its origin or community. This is a differentiation strategy and taps supplier power. Collaborating with them will ensure planning batches and managing supply of ingredients based on customer demand.

Buyer power: It is most severe. They don’t have loyalty to any brand. They go by taste. They prefer locally brewed products. The research tells that the generational cohort of beer consumers is between 25-34 years of age. The company can go for diversification strategy by coming up with new variants of flavors and intensity in products. It can tap needs of all customers; novice as well as enthusiasts. Give unique feel to drinkers by improving ambience (especially taprooms). Mixing beer with food snacks that enables non drinkers to convert into clients. Participate in beer festivals; attract foreign visitors to improve beer tourism. It’s part of direct to sale consumer model.

Rivalry: It is very high. There is high competition between big breweries. They are further expanding through joint ventures or acquisitions. Recently craft breweries are coming together and have formed a Brewers Guild so as to have proper representation and talk to government about policies that affected their business in unified way. It will enhance their market presence and facilitate their buyers to purchase their products.

Threat of substitutes: It is not as high as drinkers prefer low alcohol drinks so opt beer. Else water, tea, soft drinks are available.

Threat of new entrants: It is medium. It is due to regulations and presence of big players. Market is increasingly growing for small breweries only. When they try to scale up, the big players get into strategic alliance with them. As competition is mounting up, sales need to be restructured. Sale can be done through online mode. Encourage drinkers to give feedback on apps to improve reach of market.

Q2. (1&2) Present market situation: The U.S. beer market is an oligopoly with top three leaders: Anheuser-Busch having 48 % of the market share, Miller Brewing Co. having 18% and Coors Brewing Co. having 11% market share. At present NJ has more than 139 microbreweries that sprung up after the controls on industry were relaxed. They need to take license from Alcohol and Tobacco Tax and Trade Bureau (United States, Treasury Department) and NJ division of Alcoholic Beverage control (ABC). The threat to micro breweries is coming from the new rules that are imposed by government recently on this industry. They can only hold 25 events, only allowed 12 times to sell outside their premises, can have only 52 private parties. All the more, they need to inform about the conduct of mentioned events at least 10 days prior of it to Alcoholic Beverage control through online mode.