Case Study – the Demise of Foreign Competitors in the Chinese Beer Industry
In the case, background in 1990’s China Government open beer market to foreign investor. China is a huge, future potential market, a lot of foreign brewers enter to the Chinese market and making multi million dollar investment on production facilities as well as labor market. However a few years later most of the foreign brewers were still running at loss. On other hands the local brewers with untrained management, problematic human resource and poor quality product and weak marketing capabilities was winning in this beer wars. We would use PEST framework to evaluate the China beer market whether is affricative for foreign investments, what the strength of local brewers are and why foreign brewers are lost.
In …show more content…
Also the personality of Chinese people is collectivism and patriotism. In this reason, “Guanxi” relationships and connection is one of important elements which foreign investor must be knew it. That is one of successful reason of South African Breweries and China Resources alliance.
According to SAB’s managing director for Asia:
“Our partners are the China experts. They have experience of doing business there. As a result they have amazing contacts that can cut the red tape surrounding many issues: they can bring their other commercial operations to bear in a number of areas, they have access to people, they know the market and understand the rate of change required. We have been able to harness our knowledge of the beer industry with their knowledge of China and come up with an awesome team”2
As well as Li Giurong, the chairmen of Tsingtao, highlighted:
“Chinese have a very strong sense of home place…If I live in a place, I want to drink my local brand….I don’t go into a place and say ‘My Tsingtao beer is better than your beer. My quality is better than yours. So why don’t you drink me?’”3
The labor market also is a consideration for the foreign investor, in 1990’s the labor force in
China is large, but poorly skill, as well as unhygienic, unsafe operation practices and sloppy.
In 1990’s weak infrastructure and vast distance is major problem in China. “Bass faced distribution problems caused by local