Free «The Acquisition of Harbin Brewery» Essay Sample

The Acquisition of Harbin Brewery

1. The situation at the Chinese beer market is very complicated. First of all, the level of rivalry between the national producers and the new international entrants is high. Secondly, there is a lack of national brand recognition (Lasserre, 2008). Though Anheuser-Bush controls only 36% of Harbin brewery, the company has a ig potential for the Americans. Its value is based on three parameters: (1) “Harbin is the oldest operating brewery in China and has a leading position in the country’s beer industry” (Ascher, 2012, p. 52); (2) “Harbin controls half the market in China’s north west” (Wang, 2012, p. 3); (3) the Chinese brewery provides vast distributional and marketing benefits for Anheuser-Bush (Wang, 2012). Currently, “Harbin is the fourth largest Chinese brewer” (Lasserre, 2008, p.1). There are three possible scenarios of Harbin Brewery development. The first of them is that the brewery will become a dominant market player, when it is possessed by Anheuser-Bush. The second one is that Harbin will be acquired by another company. The most probable scenario is that Harbin will grow by 10% and will stay on its leading position, bringing profit to Anheuser-Bush (Arraya, Gardner, Jackson, & Orr, 2010). Consequently, there no negative perspectives for Harbin Brewery. Therefore, Anheuser-Bush understands that it is the main value of the company.

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2. It is difficult to compare the value of price ($ 720 million), paid by Anheuser-Bush for Harbin without receiving the maximal predicted profit and benefits from the Chinese brewery. However, Lasserre (2008) states that the discussed acquisition “would give Anheuser-Bush an opportunity to gain scale and geographical expansion in a high consuming region” (p. 2). It is possible to use some statistical data to demonstrate that there is positive dynamics in Harbin’s financial parameters in the period of 2002 – 2004 (Lasserre, 2008). The growth of each index proves that Anheuser-Bush has a potential to reach its objectives. Arraya et al. (2010) state that there is a significant increase in sales for Anheuser-Bush in 2003 – 2007, which is also provoked by acquiring Harbin Brewery. All the difficulties, which exist at the Chinese beer market, enumerated above, are overcome by Anheuser-Bush, because in spite of the general tendency of decreased profits, the company is increasing the level of its sales annually (Arraya, et al., 2010). Arraya et al. (2010) state that Anheuser-Bush considers the acquisition of Harbin to be successful. Therefore, it plans to continue acquiring more companies in China to obtain market share and reduce beer prices in order to promote the consumption of the drink.

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3. Since the value of Harbin has been proved, it is necessary to determine why Anheuser-Bush is ready to pay such a price. The company could consider propositions to acquire other enterprises in different countries for lower prices. However, it is ready to pay for Harbin, because of the following reasons: (1) the company wants to win the bidding game and successfully compete in the industry; (2) the company wants to demonstrate its power to its long-term competitor, ABMiller; (3) Anheuser-Bush sees the necessity to address the issue of liability of business in China for foreigners; (4) the customers’ preferences of domestic beer brands can contribute to developing Harbin and preventing Anheuser-Bush from failure. Generally speaking, the acquisition of Harbin matches the business strategy of Anheuser-Bush, which is “global distribution coordination” (Arraya et al., 2010).

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It is wise from the side of Anheuser-Bush to perceive China as the largest growing beer market with the highest potential of sales. Following the SWOT analysis of Anheuser-Bush, large investments are considered to be a weakness of the company, but in case of Harbin the investor is confident that a significant amount of money spent will be repaid. Moreover, Anheuser-Bush has a chance to create large production facilities to win the rivalry game in China (Arraya et al., 2010). Therefore, the decision is justified by the objectives the company sets and the business strategies it chooses.

4. Regardless of how successful the acquisition of Harbin will be for Anheuser-Bush, it is impossible to avoid the difficulties of the post-acquisition phase. These challenges may include the crisis, which may be caused by the employees of the company. When the administration of an enterprise changes, the workers always become anxious and uncertain, because they do not know what to expect from new administration (reduction of salaries, firing, changes in the working schedule and many other possible outcomes). The second possible difficulty is lack of synergy. It is important to have a collaborating staff of workers and reliable leaders. Lack of communication can become a serious obstacle as well. There will definitely be some problems in the context of the cultural differences. It is difficult for Chinese employees to follow the American style of work and the process of adaptation will take some time. It will be important for the administration of Anheuser-Bush to provide them with the exact written instructions (Wang, 2012). Therefore, a complicated post-acquisition stage of Harbin should be perceived as a norm. In order to avoid its negative consequences, it is important for Anheuser-Bush to develop an effective plan of overcoming the challenges, which are faced by both companies in the process of acquisition.