Facilitating Competitive Advantage Through Quality Management at SABMiller - Case Study Example

Introduction Takeovers, irrespective of the size, are a risky business. They can make or break a company. It is highly essential that both the companies involved in a takeover understand the organizational culture of each other and design strategies to facilitate the takeover. Failure to do so will prove to be very costly for both the companies involved. This report is aimed at analyzing SABMiller’s takeover bid of Foster. SABMiller is one of world’s leading brewers with its operations in over six countries. Foster, on the other hand, is Australia’s leading beer brand. With a history of 120 years, Fosters today is available in over 150 countries. Both companies have their unique organizational cultures and both have been very successful. For this takeover to be a success, it is important for SABMiller to identify the various features that are essential to facilitate the take over and design strategies to successfully facilitate the integration of the two companies. This report in the first part identifies and analyses the various facilitating features that needs attention of the management. The second part of the report suggests the various steps to be taken and strategies to be designed to successfully facilitate the integration. Part1 1.1 Facilitating features SABMiller’s Global scale/Experience and Knowledge of Foster’s Weakness and Australian Market: SABMiller plans to lead in the stable and profitable Australian beer industry through thorough knowledge of Foster’s and the Australian market and to improve Foster’s financial and operating performance. SABMiller will create value for shareholders, through making Foster’s an important part of its global business, whilst taking into account Foster’s strong heritage (Greenblat 2011). Some promised strategies, in which SABMiller has proven capabilities (Payne, 2011) include improvement to Foster’s weak, underperforming brands, restructuring business segments, saving costs, focusing on new profitable segments and bringing in global scale benefits (SABMiller.com, 2011). Running local brewing operations worldwide and understanding differences between the overseas and Australian Market would help the SABMiller-Foster’s integration. Additionally, SABMiller already owns and manages Foster’s brands in India and America (SABMiller.com, 2011), proving the strategic fit between the companies. SABMiller’s Production Location Demographics: A location strategy advantage is created from SABMiller and Coca-Cola Amatil’s joint venture whereby it will be dissolved with SABMiller taking control of the NSW Central Coast brewery at Warnervale. This brewery will be converted to a Foster’s on-tap beer production brewery for NSW instead of having it delivered long-distance from Brisbane (Speedy, 2011). Foster’s Strong Retail Customers: Coles and Woolworth’s are Foster’s top retail customers and their biggest medium of sales. SABMiller plans to use a collaborative approach with them to limit reliance on unprofitable heavy price discounting and kick-start stalled beer-sales growth (Greenblat, 2011). SABMiller wants to make use of a tested initiative (see part 2), which has demonstrated flying colours in North America and Europe. SABMiller’s Proximity to Emerging Markets: This integration ensures that Foster’s famous Australian icons and its people will receive recognition and bigger opportunities offshore. The rapidly growing Australian economy is linked closely to the newly fast-growth economies of China, India and the East (Brown, 2011) and the increasing rate of immigration to Australia from the East will prove a source of great international support (Pollaers, 2011). 1.2 Impeding Features Leadership and management differences: Intangible; personally oriented and based on individual’s belief about others and themselves, leadership is tough to impose (Mole, 2010) and thus may prove as a challenge to integration. Clearly, SABMiller and Foster’s are operating under different regional cultural backgrounds. Despite the fact that both the organisations boast closely related leadership styles and organisational cultures, they are not cushioned for the resistance that may arise owing to differences in management practices. For instance, British business culture is more formal, with a money-orientated approach. British employees like to engage with people, while there management and leadership puts a greater emphasis on organisational structure. Conversely, Australian work culture is more informal and casual and above all, the organisation itself rather than the workforce, acts as the key motivator. Australian managers like to take a direct part in employee progress and encourage a coaching culture. Additionally, Australians are more performance oriented rather than power oriented. This evidently indicates that unless SABMiller addresses these imminent cultural, management and leadership style differences, the takeover bid may suffer. Organisational Culture Clash: Organisational culture can be defined as ‘the values, beliefs and hidden assumptions that organizational members have in common’ (Naranjo-Valencia et al. 2011, p.58). The extent that SABMiller and Foster’s can integrate their organisational cultures will largely determine the success of the takeover. The Anglo-African SABMiller has a self-described ‘high performance culture’ which expects employees to ‘go the extra mile’ (SABMiller, 2011). This highly driven culture is demonstrated though the company’s success as the second largest global brewer, operating in over 75 countries (Williams, 2011). While also boasting a ‘high performance culture’, Foster’s culture centers on its ‘long and rich heritage in Australia’ (Foster’s, 2011). As ‘iconically Australian,’ Foster’s owns brands seen as synonymous with Australian culture, such as VB and Cascade (Brown 2011; Williams 2011; United Voice 2011). The sale of Foster’s overseas may impede integration due to an associated loss of identity (Thomson & Wilson, 2011). It is imperative that cultural artifacts such as values, language, symbols, and physical surroundings be considered (Higgins & McAllaster 2004, p.64). For instance the Abbotsford Brewery, in operation in Victoria since 1904, is a symbol of the long heritage and cultural importance of Foster’s, with much public attention surrounding its possible closure (United Voice 2011). If cultural issues go unaddressed, the integration of the companies will be greatly impeded. SABMiller’s employee Philosophy Deeply embedded in corporate culture, SABMiller’s employee philosophy may impede integration if not acutely managed. SABMiller prides itself on attracting and retaining the highest quality people, with particular requirements for all employees. (SABMiller, 2011) Although this may initially appear as a strength, in the light on the takeover SABMiller’s rigorous requirements for it’s employees is seemingly making the company vague on Foster’s employee retention issues (Thomson & Wilson, 2011). Noticeably absent from media releases has been a commitment from SABMiller CEO Graham Mackay to protect and renew local Australian jobs or factories including the famous Abbotsford brewery (Thomson & Wilson, 2011). Therefore it seems unlikely that all Foster’s employee jobs will be guaranteed under the new management, while considerable restructuring of employees and high employee turnover seems highly probable. Whilst layoffs may provide benefit to the company by increasing profits through restructuring and reducing costs, it may be an impediment to successful integration as job cuts can create substantial backlash and a negative public image for the company when it is intent on capturing the lucrative Australian market. Part2 Facilitating Although SABMiller has a lot of plans in place to facilitate it’s integration with Foster’s, the steps taken should surpass verbal promises between the two CEOs. Marvin Weisbord’s 1978 Change Theory, among other things, emphasizes on setting out and planning proper strategies, the ability to foster healthy relationships with stakeholders and making sure that there are helpful mechanisms in place to ensure efficiency in the integration. This can be placed to Foster’s dying relationships with its strong retail customers Coles and Woolworths and how this change can provide remedies for that. With the onset of this takeover, Coles has positive hopes for the new ownership structure and SABMiller has initiatives in place which it wants to implement in Australia to improve this connection. The Building Excellence at Retail (BEER) strategy has demonstrated its flying colours in North America and Europe and will enable them to measure and improve retailer service quality. Fruitful evidence is that stores which are linked to the brewer’s strategy have outperformed unaligned outlets volumes and sales. The key idea of this strategy is to build an improved customer relationship model which will provide mutually beneficial solutions for both parties opening up improved revenue and enhanced channel management of the business, making the products the integrated entity provides attractive to point-of-purchase shoppers. SABMiller knows where it wants to focus it strict attention on so following from Kotter’s 8 steps, they are aware that a sense of urgency has to be created on putting forth to customers, higher growth sub-sectors and alternatives of beer such as sweeter and healthier light, low carbohydrate beers which are faring better in the industry (Business Monitor International 2011), preventing ‘beer bellies’. Planning and pursuing this fast-growth strategy would assist the merged entity to create short-term wins. Consolidating this strategy with better with retailer customer service will also bring about the change which Foster’s much required and its potential success will bring about the advent of some institutionalized approaches which the merged entity can work with and learn from in the future. Impeding 2. Steps to be taken by SABMiller to Improve the Integration Process Marvin Weisbord six boxes model, which include purposes, structure, leadership, relationship, reward, and helpful mechanisms, can effectively be used to solve SABMiller takeover bid challenges. Purposes calls for the management to analyse the extent to which organisation goals are clear, fits its vision and is upheld by everyone (Sharma , 2007; 72). Structure is the next element, it focuses on how work and communication flows in the organisation. Relationships require management to assess the relationship between organisation members, people and technology. Reward calls for management to identify what to recognise. Leadership calls for specific leadership style to be applied. Helpful mechanism calls for adequate coordination techniques (Shapiro, 2010). Kotters 8-Step Change Model is also the best solution to SABMiller takeover challenges. Step calls for the management to create urgency by publicizing the urgency around the need for change (Coutts, 2007). Forming a powerful coalition involves convincing everyone about the need for change while creating a vision for change involves stating the picture of the future with respect to organisation’s demands. Communicating the vision involves keeping the vision fresh in the minds of the stakeholders. Removing the obstacles involves the need to remove barriers to change structure while creating a short-term target involves setting short-term goals (Young, 2003; 468). Build on change warns against declaring victory early. Institutionalise the change by making it part of the organisation culture. 2. In light of your answers to 1 above, what steps should be taken by the company to improve the integration of the two companies 2.1 Strategies to improve integration In an attempt to counteract the potential negative public perception of SABMiller in the wake of the Foster’s takeover, attributed to both job losses and the overseas loss of iconic Australian brands, the management team at SABMiller can actively engage in several steps to improve the integration of the two companies. One such step involves the establishment of a specific public relations/media team whose sole purpose is to manage the company’s Australian image and to improve its perception in the media. A pertinent recommendation here is that SABMiller guarantee’s the continued operations at the illustrious Abbotsford brewery. Renewing jobs at this iconic symbol of the Australia working class will take some of the heat of the company when other job cuts are eventually made. This relates to Kotter’s 8-step and Weisbord’s model such that it is important for company to create vision and purpose, a goal for where they are headed and what is trying to be achieved. This vision obviously needs to be communicated to the public if they hope to gain public support for the takeover. Thus equally important is the use of press releases by the PR team, which acutely convey the reasons for any job losses, justifying these in the context of the Australian market. Furthermore the creation of an incentives scheme that ties rewards to company performance for employees that the company retains, is essential to ensure that any disgruntled employees work towards the best interests of the company. Further links are made here to Kotter’s model, as well as Weisbord’s rewards model, as empowering people to act on the company vision in this way, perhaps through bonuses or pay increases for reaching local production and sales targets, will assist in getting people to respond to the company’s vision. Important here is also to plan for and create short term wins, such as prizes, vouchers or time in lieu based on short-term performance orientations, to keep employees motivated in the short-term and not to loose sight of long-term goals that presently may seem unattainable. Just as important as the development of an incentives program for employees is the establishment of a team of advisors to help assist employees deal with the takeover. A change agent such as this, be that a group or an individual helps to ensure strategic change runs as smoothly as possible within the organisation and that all those engaged or involved in the change are aware and comfortable with the process. The recommendation here is that this change team be the job of middle managers, as senior managers often do not have the same access or familiarity with employees as middle managers. Here their goal would be to implement and control the change in the employee base through assessing behaviour, helping to inform decision-making, making sure things are happening and that it makes sense in the context of the business and assisting in reinterpretation and adjustment to the new working environment. Additionally they would engage in sense making in explaining to employees what the change means for their day-to-day requirements and to give meaning to their new roles and responsibilities. But most importantly act as a friendly and familiar face with which employees can openly engage with and ask questions or voice issues they have with the ongoing change process. As discussed by Weisbord, the aforementioned effective relationship management, particularly interfacing and conflict, is crucial for the successful integration and the operation of any business. This naturally extends to the management of the relationship the company has with the public and thus the public relations team could further be used, as a useful mechanism, to help alleviate negativity towards the company due to the loss of important Australian brand names. According to Higgins and McAllaster, ‘a key ingredient to achieving sought after strategic performance is aligning relevant parts of the organization’s culture- its value systems and norms- with the new strategy’, such that the management of cultural artifacts relates to the values and norms pertinent to the strategic change. In modifying existing cultural artifacts to support SABMiller in their attempt to engage with the Australian consumer, a pro-active, well-researched and effective advertising campaign, devised by an experienced marketing team, may help to leverage the strong support for and identity of local Australian brands. With a nation-wide new advertising camping targeted specifically towards the Australian market, such as “SABMiller: we love your local brands just as much as you do!” SABMiller can show how they allow their businesses a high degree of autonomy in meeting local needs, bringing in deep consumer insight to the building of brands in local markets and honoring that ‘deeply rooted in local communities, beers often have their own rich histories and heritage.’ In emphasizing it’s commitment to local brands SABMiller can not only prevent its Australian market share from falling but also potentially tap into a new consumer market. Successful use of cultural artifacts in this way will help to reinforce the desired changes in consumer thinking so that it supports the values and norms of SABMiller. Read More