Porter 's Five Forces Industry Competition

New Belgium is, however, the third-largest craft brewery in the nation, with estimated sales of over $100 million, equaling approximately 700,000 barrels of beer per year. An analysis of the craft beer industry as a whole suggests that there is continued growth potential for New Belgium. Exhibit 5.1 of the New Belgium Brewing (B) case shows that craft beer is the fastest growing segment of the U.S. alcoholic beverage market, with an increase in market share of over 100 percent from 1999-2011. It is also an industry whose customers tend to be extremely loyal, making them less likely to view craft beer as a commodity. Consequently, craft beer has a higher probability of being immune to competition from inferior goods and substitutes. This is particularly applicable to New Belgium’s target market of “beer connoisseurs” that appreciate the high quality and taste of craft beer and who include “executives, lawyers, and accountants” with the continued ability to pay higher prices for craft beer, enabling the craft beer industry to achieve gross margins of up to 30 percent (Clark & Rogler, 2013).

The Boston Beer Company is currently the largest craft beer company in the United States, however, the craft beer industry is growing in an otherwise shrinking market increasing the amount of serious competition that The Boston Beer Company is facing.

In terms of quality, the company created a premium beer by its selective use of ingredients and less water. Boston Beer has won honors such as being the first American beer sold in Germany due to its use of only barley, yeast, hops, and water as its ingredients. With the increase in health consciousness among beer drinkers and the rise in more distinctive and flavorful brews, the Boston Beer Company has been able

In a world where large, corporate breweries rule the market, craft beer is created to please an audience that applauds the styles, techniques and flavors. Though craft beer can be purchased through several different outlets, the best place to thoroughly enjoy the entire experience of the specially made beer is in the brewery where it was made. The article titled, “In Lean Times, a Stout Dream” in The Wall Street Journal1 states that, despite the hard economic times and consequent consumer cutbacks, sales of craft beer, the industry 's fastest-growing segment, rose

Beer Company 2 is a brewer of “seasonal and year-round beers with smaller production volume and higher prices” that “outsources most of its brewing activity” (pg. 120). It is financially conservative, and has undergone a “major cost-savings initiative to counterbalance the recent surge in packaging and freight costs” (pg. 120).

In the United States the beer industries are regulated by the state and the federal governments. The state and the federal government pass their opinions in term of production, advertisement, distribution,

There are many sellers in the market heating up pricing competition. Competitors like McDonald’s, Dunkin Donuts, Peet’s Coffee and other specialty coffee companies incentivize price wars. Furthermore, coffee’s demand is elastic which makes it difficult to increase prices without greatly reducing the demand. This makes differentiation and positioning very important. Also, it is easy for customers to switch from coffee vendors. Whichever company is most convenient for the customer will likely win the business. Competition is a top priority in the industry.

What this means is that their “facilities are organized around a product […]; they have long, continuous process” (Heizer, Render and Munson, p.284). The process is in continuous motion. Anheuser-Busch has a demand and a need to be continuous because they require high volume; “Budweiser and Bud Light, the company’s beers lead numerous beer segments and combined hold 46.4 percent share of the U.S. beer market” (About, n.d.). That is almost half of the entire beer industry is dependent on them. Anheuser-Busch have low variety- although this company has what can be seemingly a variety of products, there are very minimal changes other than slight changes to the recipe that differentiate each family of beers (National Geographic, 4:25, 2011). Meaning that the process is the same the ingredients are what differ. According to the text, “That is to be expected as the attributes change” (Showghi, slide 4,2016). It is still the same product in the end. Because they are producing only beer, they have high fixed costs and low variable cost, they are not making any drastic changes to their product keeping the input the same. Less skilled labor is not part of the equation in this instance; breweries are looking for people with high skills in

Brand plays a key role in the beer-purchasing process, along with taste, price, special occasion,

Within the craft beer market, consumers have many products to chose. A product is anything offered within a market that which fulfills a want or need (Armstrong & Kotler, 2015). In 2012, over 1,750 breweries operated in the United States (U.S.), with over 1,920 the following year (Brewers,

     The brewing industry was once held to competition among many breweries in small geographic areas. That was almost a century ago. The U.S. brewing industry today is characterized by the dominance of three brewers, which I will talk about in this paper. There are many factors today that make the beer industry an oligopoly. Such factors include various advancements in technology (packaging, shipping and production), takeovers and mergers, economies of scale, barriers to entry, high concentration, and many other factors that I will cover in this paper. Over the course of the paper I will try to define an oligopoly, give a brief history of the brewing industry, and finally to show how the brewing industry today is an

In his article “The five competitive forces that shape strategy“, Michael Porter (2008) updates and extends his “five forces” framework he first introduced in 1979 and which has influenced the academic and business research for decades. He reaffirms that “THREAT OF ENTRY”, “THE POWER OF SUPPLIERS”, “THE POWER OF BUYERS”, THE THREAT OF SUBSTITUTES”, and “RIVALRY AMONG EXISTING COMPETITORS” are the forces that shape every single industry, and a thorough understanding of such forces help analyze everything from the intensity of competition to the profitability and attractiveness of any industry. The framework has two dimensions; the vertical dimension that connects

customers who are willing to buy the brewer at a lower price. Thus, they can profit by covering

Although sales of premium brands have fallen in a steady response to the growing popularity of the craft beer. The industry revenue has been stable over the past 5 years. As a result, from 2011 to 2016 the industry revenue is expected an increase and growth annually at 6.7 percent over the five years,with a total of $39.5 billion . (IBISWorld iExpert) In the long-term, these numbers are expected that grow 0.9 percent annually within the next five years. The potential growth will be seen in the traditional and premium beer sector. As a response, the giant companies in the industry Anheuser-Busch InBev and MillerCoors look forward into the merges and acquisitions as a strategy to maintain market dominance. The strategy is based on the

The threat of new entrants refers to the threat posed by new competitors within an industry. If it is easy for new firms to enter the industry barriers to entry are low and the threat of new entrants is high. A profitable industry attracts more competitors. Economies of scale, learning curve effects and other macro factors impact the nature of an industry 's