Case Study: Carlsberg in Emerging Markets
Carlsberg A/S is one of the leading brewing companies in the world. The business operates several brewery plants in China, Russia, Europe, and the United States. In addition, the firm distributes its brand products internationally. Based on remarks made by the firm’s CEO, Jorgen Buhl Rasmussen, Carlsberg A/S achieved an economic breakthrough in 2007 after acquiring 50% shares of Baltic Beverages Holding. Despite its remarkable position in the industry, Carlsberg is no exception to the impacts of environmental factors, which shape its operations in the global arena.
Demographic trends are some of the factors that affect Carlsberg’s operations in emerging markets. The variation in market sizes and population influences the success of an entity (Dragnic, 2014). Similarly, this is one of the drivers for Carlsberg’s activities in Asia’s market, particularly China. Western China, a region where the firm owns 60% of the market share, has a population of approximately 100 million people. Despite low beer consumption in the region, Carlsberg focuses on the market size, which is expected to foster growth.
Economic factors also affect the company’s performance. According to Dragnic (2014), this trend can be interpreted in terms of dynamics, business culture, and fiscal elements. One of the economic aspects portrayed in the Carlsberg case is the market cycle. The firm’s decision to invest in emerging markets was influenced by maturity and stagnation in Europe and the United States industries. Other economic challenges that faced the business include industry consolidation and the rising cost of production in the existing markets. Hence, the company decided to penetrate countries with promising growth and lower cost of inputs, such as China and Russia.
The other factor that appears to influence Carlsberg’s operations is social-cultural trends. Such changes may be reflected in consumers’ purchasing behavior. For instance, values embedded in a community may restrict individuals from consuming certain products. In Carlsberg’s case, consumers’ health consciousness growth resulted in a beer consumption decline in Eastern Europe and the United States. Hence, the trend forced the firm to identify a complementary target market for its products.
Varying trends in the political segment also influence the firm’s activities. Political factors can be analyzed in terms of legislation and relationships among countries in which an organization conducts its business. Legislation, for instance, affects Carlsberg both positively and adversely. High liquor taxes in Russia reduced vodka consumption and promoted the sale of beer. The Russian market situation was a source of economic advantage to Carlsberg in the region. On the other hand, the firm anticipates unfavorable taxation proposals in Russia, which might offset the sale of beer.
Global changes also affect the firm. Particularly, fierce competition from other brewing companies threatens Carlsberg’s position on the international platform. Many of these enterprises show interest in emerging markets, which is among Carlsberg’s strategies for maintaining long-term growth in the industry. In addition, they adopt similar approaches to market penetration, including the acquisition and formation of joint ventures. Hence, the company strives to distinguish itself by investing in highly fragmented regions and being less controlled by its competitors.
Information from the above discussion reveals that Carlsberg A/S activities are influenced by environmental trends, which include demographic, economic, global, social-cultural, and political changes. Some of these aspects affect the company in both positive and negative ways. The company’s idea to invest in emerging markets was a perfect strategy. However, the firm should adopt distinctive approaches to remain competitive.
Dragnic, D. (2014). Impact of internal and external factors on the performance of fast-growing small and medium businesses. Management, 19(1), 119-159.