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Essay: Overview of (1) Brewing Industry / (2) Air Asia and the Tune Group

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  • Tags: PESTEL analysis examples Porter's Five Forces Analysis Examples
  • Overview of (1) Brewing Industry / (2) Air Asia and the Tune Group
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Portfolio 1: Overview of the Brewing Industry

The case study concentrates on the market conditions of the brewing industry in the United Kingdom especially from the largest remaining brewers, Marston’s and Greene King (Stephen, and Barry, 2007). The brewing industry has seen a significant change because of the varying demands and structure in the market. The pubs are uniquely British institutions that offer food, drinks and social entertainment to the masses.

PESTEL Analysis for the Brewing Industry Environment

PESTEL is a tool that conducts environmental and market analysis as well as a key decision-making process (Zimmermann et al., 2015). PESTEL analyses (see Appendix 1) various business environmental factors such as social, economic and legal (Song et al., 2017).

Political Factor

The political influences explain how and the degree to which the government plays a part in the economy (Clarke, 2014). Such factors include political stability, government policy, foreign trade policy, tax, labour and environmental laws. Based on the pub decline of a British Institution, several political factors affect the industry. Direct government interventions in the pub and the brewing sector over the last several decades assisted in creating giant pub companies (Miller, and Tsang, 2011). Direct government interventions in the country led to the growth of big pub companies such as Enterprise Inns and Punch Taverns.

Economic Factors

The economic factors determine how an organisation does business and also how profitable they are. Economic factors that affect a business include; disposable income for consumers, inflation, economic growth, interest and exchange rates. For instance, in the brewing industry in the UK, consumer habits had changed as individuals became more comfortable and focusing on cocooning (Stephen and Barry, 2007). The government has provided a conducive working environment which has led to an obdurate increased rise in pubs. The increase in the number of pubs led to increased competition.

Social Factors

Social influences are called social-cultural and explain the shared belief of the populations. Some of the social factors include; societal health, population densities, professionalism and age differences (Karagiannopoulos, Karagiannopoulos, Georgopoulos, and Nikolopoulos, 2015). As the pub market has continued to grow more sophisticated, due to changing consumer habits. For example, the days of the wet-led pub where drink sales used to be the major source of revenue no longer occur. The regeneration of many urban centers as well as changes in the traditional roles of men and women within the family has changed and therefore changing pub going habits. Also, the ban on smoking in public places led to the closure of many pubs in 2007 (Miles, 2015).

Technological Factors

Technological factors affect the market and management of the industry in three ways which include, new ways of producing and distributing goods and services. Besides, technical factors include new methods of communicating with the target markets. For example, both companies focused on adopting a new and modern version of vertical integration as well as practices of advertising.

Environmental Factors

Environmental factors include sources of raw materials, pollution prevention, conducting businesses sustainably and ethically. For instance, the ban on smoking in public areas by the government is a factor that relates to protecting and conserving the environment (Donaldson, 2015).

Legal Factors

Legal factors in a business environment include equal opportunities, product labelling, consumer rights, and laws, health and safety and advertising (Morrison, 2017). Some of the legal aspects in the brewing industry include ensuring that the industries produced products that are fit for consumption and are well labelled. The growth of a sophisticated market due to changing consumer needs and habits has made the company to adapt to the changes.

Assessing the UK Brewing Industry Using Porters Five Model

Porter’s five models is a tool that is used to identify and analyse five competitive forces that shape any industry (Killen et al. 2012). The Five Forces used in Porter’s model include; competitive advantage, new entrants potential, bargaining power of buyers, supplier powers and substitute products threats (Russell, 2014). (See Appendix 2)

Competition in the Industry

Marston’s and Greene King experience stiff competition in the industry. When there are many competitors in the industry, the lesser competitive a company is (Noe, 2016). For instance, both Marston and Greene experience competition from Hobgoblin brand. Consumers and suppliers seek out companies that to offer suitable deals.

New Entrants’ Potential to Enter Into the Industry

The company is significantly impacted by new entrants force into the market. For instance, The United Kingdom government has enhanced proper regulations in the brewing industry which makes it possible for new companies to start up (Dockalikova, and Klozikova, 2014).

Bargaining Power of Suppliers

The power explains how suppliers can affect the prices of commodities by pushing them up. Suppliers have stronger bargaining power when they are few in the industry. For the case of the brewing industry in the UK, the government has created an enabling environment and proper tax tariffs therefore many suppliers (Porter, 2014).

Bargaining Power of Buyers

Power of customers specifically deals with the ability of consumers to bring down the prices of goods and services. In the United Kingdom, consumers have more power because of the high competition in the brewing industry (Mesarovic, and Pestel, 2012). Besides, the switching costs from one provider to the other are low and therefore giving consumers more power.

Threat from Substitutes

Substitutes pose a great threat to the products and services of a product. For example, in the United Kingdom, Marston’s and Greene King face the risk of Substitute Company that offers different types of liquor with similar benefits (Mkude, and Wimmer, 2015). A company’s competitive advantage is weakened when substitute products are sold at lower prices.

Based on the analysis of the brewing industry in the UK using both Porter’s five model and PESTEL, the pub risks the danger of becoming extinct in the 21st century (Covin, and Slevin, 2018). Due to the tough working conditions and regulations provided by the government, the pub risks stiff competition from other new entrants in the market. Also, technological advancements in the industry may lead the two pubs Marston’s and Greene King into extinction if they are unable to adapt to the changing markets, for example, use of social media and internet to advertise their products. Moreover, the increased bargaining powers of consumers and threats from substitute products may cause the extinction of the pub. The pub should, therefore, make a comprehensive analysis of its environmental factors and competitive advantage to avoid the risk of becoming extinct in with the changing business factors in the 21st century (Bivolaru, and Purcaroiu, 2017).

Portfolio 2: Overview of Air Asia and the Tune Group

Portfolio 2 seeks to study and analyse the case study of Air Asia and the Tune group. The portfolio aims to apply strategic management concepts, theories, and models. Air Asia was bought from the Malaysian government in 2001 by Tony Fernandez and Kamarudin Meranum. The new venture was later launched at low cost and considerable debt. However, after 15 years, Air Asia had become the most significant carrier with low prices in the Asian region. Both Tony Fernandez and Kamarudin were efficient in advertising and promoting the group in websites and the media. The owners of the group served clients who were well less-off in Asia through delivering quality services at the best price. The mission of the group is to make leisure activities affordable and accessible as well as entertainment specifically in the Asian market (Ghoshal, 2015).

Factors Driving the Diversification of Tune Group

Some of the factors that led to the diversification of the Tune group include; financial capability, the attractiveness of the industry, workforce resources, government regulatory policies, research, cultural diversity and institutional environment (Delaney, and Huselid, 2016).

Financial capability

The Tune group has been able to diversify across industries due to its financial health, though the group started with a lot of debts (Matzura, 2018). In 2011, the group reported a 45 percent increase in the revenues made which made it possible for the expansion of China, Taiwan, India, South Korea, and Japan routes. For example, the owners of the company were able to critically analyse and undertake a comprehensive analysis of the airline’s financial capability and thus established it was capable of diversification. The strong financial capability that was created by Fernandes along his fellow investors made it possible to diversify in hotel and financial services industries (E. Dobbs, 2014). Tune hotels were built with the aim of offering a service chain that provides five-star beds and accommodates travellers during their flight destinations. Besides, the financial health enjoyed by the company made it possible for the enrichment of lives through loyalty cards and prepaid cards for its loyal clients as well as life and general insurance products (Elsbach, and Sutton, 2012).

Attractiveness to the industry

Tune group has remained to be attractive in the industry and thus able to diversify. For example, the group is attractive to clients by offering quality services at affordable prices (Narayanan, and Fahey, 2015). The group became attractive for instance through embracing Tune Talk which is a mobile phone operator that gives clients super low rates of calling. Also, the group attractiveness through Tune studios which engages in the promotion of local Asian and international talent through concerts, audio productions, and talent management has made the company to be in a position to diversify. The Group’s attractiveness to clients is also seen through its participation in corporate social responsibility activities such as sports and corporate entertainment.

Regulatory and economic conditions

Regulations and economic policies made by the government affect the diversification of a business (Huselid, 2015. For example, in the year 2008, there was an increase in jet fuel prices with projections indicating that oil prices would reach unprecedented levels of 200 dollars per barrel which negatively affected the diversification strategy of the group. The government has established appropriate regulations that encourage mergers thus enabling the company to diversify across industries.

Tune Group Portfolio and Contributions Made By Each SBU

SBU is a profit centre that focuses on market segmentation and product offering. The various portfolio for Tune group includes; Tune Talk, Tune Sport, Tune Studios, Tune Air. Tune Talk has contributed immensely to the acquisition of a big market share by giving customers low calling rates. Tune Studios have increased the attractiveness of its clients by promoting the country’s talent through concerts and audio productions (Grundy, 2016). Besides, Tune hotels have been a key part of the Group’s portfolio where the company provides five-star beds at best prices for its clients.

Moreover, Tune money also forms the group’s portfolio which aimed at offering financial products to potential customers. The dominant logic for the group is air travel. With the SBU strategies put in place, the group may not face challenges in the future (Gibbs, 2017).

How Tune group has added value to the individual SBUs

The Tune Group has continued to foster an alliance with AirAsia which enhances stronger financial and technological backing thus leading to more competition in the insurance market. Tune Group has added value to Tune Talk through a website which is the youngest mobile virtual network operator (Han, 2013). Besides, the Tune Group has added value to the SBUs through making an affordable sports car with F1 technology which was sold at much less price than Ferrari and McLaren road cars. Besides, the Group researches to determine new changes in the market, especially in technology thus making the company gain a competitive advantage over its competitors.

Future potential of the Tune Group

The Tune Group has the potential of more significant growth in different industries. The Group should focus on industries that make the company more attractive from its clients and also the ones that generate more income (Shilei, and Yong, 2009). For instance, the Group should focus on diversifying its portfolios such as Tune Studios, Air, Sport, and Talk. Besides, the group has the potential of expanding further into the hospitality field through offering quality services for clients. The Group has the potential of diversifying into more countries due to the efficient analysis of the market.

Positive aspects from Tune Group

Some of the positive aspects learned from the Tune Group include resilience to make more revenues and profits by the company, providing best solutions for clients, ensuring customers enjoy the best qualities in the industry and diversification of businesses into many fields (Yüksel, 2012). Moreover, the strategic business units implemented by the group provide an effective way to ensure that the company’s objectives are realised.

Reflective piece

During the study of strategy in the SMIO module in Semester 1 and Business Management degree, several learning aspects have been achieved. For example, the study has provided an understanding of the competitive advantage of a company. Some of the changes I have made to my personal development from learning the course include critical analysis of the business environment and the various factors that enhance success and diversification of ventures. I have been able to acquire and develop various skills that enhance employability such as, kind, hard work, agility, self-awareness, and integrity and teamwork spirit. Moreover, I have been able to develop critical thinking skills which will assist me in my future job. For example, the ability to analyse external and internal factors that impact business. The conclusion is that ventures and companies should critically understand and analyse their environments before embracing a change or diversification. An organisation should be aware of its environment to develop a competitive advantage over competitors. Moreover, from the case study of AirAsia and Tune Group, diversification is an important aspect which should be considered by the management of a company to make more revenues. Some of the responses were taken from my employment and student life to build on my strengths, include conducting comprehensive research on the operations of a business and benchmarking on best practices in the industry.

14.1.2019

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