edabm marketing strategy question 4 cultural factors affecting bass brewery’s operations in the...

EDABM Marketing StrategyEDABM Marketing Strategy

Question 4Question 4

Cultural Factors affecting Bass Brewery’s Cultural Factors affecting Bass Brewery’s Operations in the Czech RepublicOperations in the Czech Republic

Cultural Factors affecting Bass Brewery's Operations in the Czech Republic 2

YearYear EventsEvents

19181918 End of the First World WarEnd of the First World War

1919 – 19381919 – 1938 Interwar PeriodInterwar Period

1945 1945 End of the Second World WarEnd of the Second World War

1946 – 19481946 – 1948 The “Iron Curtain” across EuropeThe “Iron Curtain” across Europe

19681968 Soviet Invasion of CzechoslovakiaSoviet Invasion of Czechoslovakia

19891989 Collapse of the Soviet UnionCollapse of the Soviet Union

19931993 Czech Republic and Slovakia formed under the Czech Republic and Slovakia formed under the peaceful “Velvet Revolution” peaceful “Velvet Revolution”

19991999 Joined North Atlantic Treatment Organization Joined North Atlantic Treatment Organization (NATO)(NATO)

20042004 Joined the European UnionJoined the European Union

Briefing History in Czech RepublicBriefing History in Czech Republic


Background of Bass in CzechBackground of Bass in Czech19941994

First invested in the Czech First invested in the Czech Republic with Republic with 34% stake34% stake in in Prague Breweries.Prague Breweries.

19951995

Bought the breweries where is Bought the breweries where is located in the north of the located in the north of the country as 78% and 51% country as 78% and 51% representatively. representatively.

19961996

Merged the three large local breMerged the three large local breweries (Staropramen, Branik and weries (Staropramen, Branik and Mestan) in Prague and Mestan) in Prague and increased increased their shareholding to 51%their shareholding to 51% before before passed it to the Interbrew in 200passed it to the Interbrew in 2000.0.

NowNow

After passed to the InterbrewAfter passed to the Interbrew

(which have the No. 1 or No. 2(which have the No. 1 or No. 2

position in over 20 key markets;position in over 20 key markets;

and 13% global market share), it and 13% global market share), it

help Bass to set up a stable andhelp Bass to set up a stable and

good image in Czech Republicgood image in Czech Republic..


Cultural FactorsCultural Factors

Social Culture

Nationalism

Management & Marketing Strategy

Ideology that creates and sustains a nation as a concept of a common identity for groups of humans.


Social Cultural factorsSocial Cultural factors

What do Czechs believe?What do Czechs believe? "Beer "Beer makes beautiful bodiesmakes beautiful bodies"" "Drinking beer "Drinking beer makes you live longermakes you live longer, ,

because it reduces the aluminum in the because it reduces the aluminum in the body, body, saving it from the effects of agingsaving it from the effects of aging and Alzheimer's disease“and Alzheimer's disease“

““Drink beer every day for Drink beer every day for healthy sex healthy sex lifelife” Czech Doctor said. ” Czech Doctor said.


Social Cultural factors (Cont)Social Cultural factors (Cont)

What are the habits of Czechs?What are the habits of Czechs? Man, woman and child Man, woman and child take beer everydaytake beer everyday Beer drinking was one of the few legal Beer drinking was one of the few legal

leisure-time activitiesleisure-time activities Czechs Czechs prefer to do their beer-drinking in prefer to do their beer-drinking in

pubspubs rather than at home rather than at home Czech meal is often Czech meal is often accompanied by beeraccompanied by beer Czech have a Czech have a recipe for beer souprecipe for beer soup


Social Cultural factors (Cont)Social Cultural factors (Cont)

High consumption of beer…High consumption of beer… In 1995, 161 litres of beer is drunk per pers

on. That was a bottle of beer for every man, woman, and child.

Existence of STRONG MARKET and HIGH REVENUE of consumption for beer in Czech Republic poses an OPPORTUNITY for Bass investment.

However, whether it is a REAL OPPORTUNITY?We shall look into a greater depth in LOYALTY TO LOCAL BRANDS OF BEER.


NationalismNationalism

What are the national impacts to Czech?What are the national impacts to Czech? The Czech reputation as the The Czech reputation as the thirstiest thirstiest

throats in the Worldthroats in the World attracted many attracted many foreign breweries after 1989foreign breweries after 1989

After the After the collapse of Soviet Unioncollapse of Soviet Union in in 1989, the mentality of Czech Republic is 1989, the mentality of Czech Republic is changing fromchanging from

“ “CommunismCommunism” to “” to “CapitalismCapitalism””


Comparison between the Under- and Post-Comparison between the Under- and Post-Communism Beer Market in Czech RepublicCommunism Beer Market in Czech Republic

Under-Communism Period Post-Communism Period

Provide very cheap beer with simply produced method (Quality is not guarantee) Quantity-oriented

Provide a good quality beer with the traditional and technological methods.

Communists put no investment into the breweries industry

Breweries were forced to privatize. Thus, they try to make for it to exports

Profit-oriented

Brewing beers are legal and most popular hobby among Czech men Little Competition

Become a wider production, having both small local microbreweries and Mid-sized breweries. Keen Competition

Government tried to raises the price of beer but still fall within a year.

No Marketing Concept

There had a price controls lifted in 1991, although there had a decrease in beer consumption but the price still not go down much. Marketing Strategy


Nationalism (Cont)Nationalism (Cont)LOYALTY TO LOCAL BRANDS OF BEERLOYALTY TO LOCAL BRANDS OF BEER…… RESISTANCE TO TRY foreign brands of beer or

imported beer – combined with the economic factor of higher price of foreign

branded or imported beer– existence of wide range of local beers available

Foreign importers are left to scrap over less than 1 percent of the total national consumption.

Foreign brewers have had more success entering the Czech market through the acquisition of Czech breweries.

When British brewer Bass PLC bought a 1/3 share in Prague Breweries a few years ago, public hackles were raised and the newspapers cried corruption.


Nationalism (Cont)Nationalism (Cont)IMPACT ON CONSUMER BEHAVIOURIMPACT ON CONSUMER BEHAVIOUR……

Consumers are get used to low priced products

IMPACT ON EMPLOYEES AT WORKIMPACT ON EMPLOYEES AT WORK……

Employees focused on production and products, customer focused is difficult concept to adopt

Salaries are in similar range – no initiative to take more responsibility and to make decision

People are in equal social status – why treating people with respect? Also difficult to be customer focused


Management & Marketing StrategiesManagement & Marketing Strategies

No. of important considerations …No. of important considerations …In In ManagementManagement view: view: To To work with local managerswork with local managers in Czech in Czech To spend more time to To spend more time to change the change the

management and human ideologymanagement and human ideology

In In MarketingMarketing view: view: To focus on a strategy of To focus on a strategy of creating branded creating branded

goods and premium brandsgoods and premium brands To help them To help them to accept new or foreign beer to accept new or foreign beer

productsproducts


Management & Marketing StrategiesManagement & Marketing Strategies

Frank Cook, marketing director for Bass in the Frank Cook, marketing director for Bass in the Czech Republic, says: Czech Republic, says:

"When companies enter this market they "When companies enter this market they think they can apply western values. In reality think they can apply western values. In reality they have to they have to throw away the rule bookthrow away the rule book and and go go back to basicsback to basics. You do things here that haven't . You do things here that haven't been done in the UK for years. It needs real been done in the UK for years. It needs real originality and lateral thinking."originality and lateral thinking."

(Marketing. London: Sep12, 1996. pg. 30, 2 pgs)(Marketing. London: Sep12, 1996. pg. 30, 2 pgs)


Management & Marketing Management & Marketing StrategiesStrategies(Cont)(Cont)

Bass Strategies adopted in Czech …Bass Strategies adopted in Czech …In In ManagementManagement view: view: Enhance the understanding of Corporate Enhance the understanding of Corporate

ideology through comprehensive internal ideology through comprehensive internal CommunicationCommunication– Introduced a fast electronic news service (FENS). Introduced a fast electronic news service (FENS). – to keep employees informed on a range of topics of to keep employees informed on a range of topics of

value to them in their work and their careers - value to them in their work and their careers - including company news, updates on business including company news, updates on business performance and plans, functional information, performance and plans, functional information, industry and competitor profiles, and job vacancies. industry and competitor profiles, and job vacancies.



Bass Strategies adopted in Czech …Bass Strategies adopted in Czech …In In ManagementManagement view: view: Promote work more, gain more schemePromote work more, gain more scheme

– base salarybase salary, allocated according to market rate, allocated according to market rate– annual divisional bonusannual divisional bonus for all staff depending for all staff depending

on grade and profit performance on grade and profit performance – sales-staff incentivessales-staff incentives for teaching individual and for teaching individual and

team profit and volume targetsteam profit and volume targets– bonus payments for directors and managersbonus payments for directors and managers, ,

determined by performance against personal determined by performance against personal business objectives. business objectives.



Bass Strategies adopted in Czech …Bass Strategies adopted in Czech …In In MarketingMarketing view: view: Building Premium BrandsBuilding Premium Brands

– New Production Development – “Velvet”New Production Development – “Velvet”– PremiumPremium, , innovativeinnovative and and democraticdemocratic– Invest more on bottle labelling, promotion and sInvest more on bottle labelling, promotion and s

ponsorshipponsorship– Post-revolution/Youngster are Post-revolution/Youngster are more receptive to more receptive to

new ideasnew ideas Target High Income ConsumersTarget High Income Consumers

– To build To build Brand PersonalityBrand Personality

… Q & A Session


Conclusion (1)Conclusion (1)

Did Bass succeeded in Czech finally?Annual Performance of Prazske Pivovary in Czech 1996 (Kc 152m) => (USD 6.6m)1997 (Kc 255m) => (USD 11.03m)1998 (Kc 766m) => (USD 32.87m)1999 ~(Kc 370m) => (USD 16.00m)

(1USD =~ 23.12 Kc on 1 Feb 2005)

Miroslav Nosal, from Merrill Lynch in London, said "They have been there for four years, and they've kept on showing losses. Although they have kept their position on the market, their corporate governance and financial management has been terrible."

(Prague Business Journal May 29, 2000)


Conclusion (2)Conclusion (2)Bass PLC Divisional Results First Half 99/00Operating Profit (£m)

Bass Hotels & Resorts 146 Up 20.7%Bass Leisure Retail 173 Up 31.1%Bass Brewers 73 Up 2.8%Britvic Soft Drinks 9 Up 12.5%

* 28 weeks ended 15 April 2000,(Sir Ian Prosser, Bass PLC Interim Results Presentation to Investors 200

0)In 2000, Bass has agreed to sell its brewing operations to Interbrew of Belgium for £2.3bn, and the proceeds will be invested in its pubs, hotels and restaurants.

Bass's chairman, Sir Ian Prosser, said "There is a high degree of sadness about this, but our responsibility has to be with shareholders."

(http://www.guardian.co.uk/print/0%2C3858%2C4029588-103676%2C00.html)

edabm marketing strategy question 4 cultural factors affecting bass brewery’s operations in the...

Documents

bass brewerys operations

czech market

czech republiccomparison

czech republicnationalismwhat

czech reputation

acquisition of czech

mentality of czech republic

czech republicbriefing