The key strategic issues and problems facing the company
Company’s inability for gauging the trends
It is essential to refer to the fact that in the case of company’s inability for gauging the trends as well as addressing the changeable preferences of the customers in a prompt and costly effective way, there is a high risk of decreasing in the market share as well as the rates of sales. Such decreases have the potential of adverse affecting of the gross margin. It was claimed by the management of the CBA that the attention of the management as well as the costs, involved into the maintenance of the innovative brand portfolio, are significant for all the period of the Alliance existence.
The same trend is expected furthermore. In the case of changing the strategic approach towards this factor of the company’s success (proper addressing of the preferences and desires of the target audience), there is a high risk of inability of the company in terms of maintaining the high quality of the offered production for the durable timeframe. This trend may be also caused by shifting the emphasis to the innovative brands (instead of quality aspects) – as a result, the overall image of the brand may be damaged to some extent. In the case if such trend takes its place, there is a high probability of adverse effects on the future sales of the company and its cash flows and outcomes of its business operations.
This statement may be supported by the fact that the CBA competes in the highly competitive market of craft beer as well as in the beverage industry in general (which in turn, involves both the fuller-flavored beers, manufactured by the core national brewers and imported beers).
Additional sources of competition for CBA are the following: flavored alcohol beverages, wine and other spirits, which are offered by the national brewers and by the larger spirit producers (Craftbrew Conference 1). It is essential to note that the increased rates of competition may lead to the adverse effects of the results of managerial operations and the future sales of CBA.
Possibility of breach in security
One more source of risk for CBA is the possibility of breach in security as well as interruption of the company’s informational systems. This risk is mainly caused by the fact that the management of CBA (in the same manner as the set of the large-scale companies) relies on the computer information systems in almost entire set of manufacturing, supply and promotion-related operations (Craftbrew 1).
Even while there is a set of developed procedures and policies for protection of the company’s informational systems, and for minimization of the rate of the system failures occurrence, security breaches, etc., there is still no 100% guarantees that the breaches, interruptions and the system failures will be eliminated by such protection measures.
In the case of interruptions, failures, the loss of intellectual property of CAB may be caused within its computer systems. Additional managerial areas, which may be affected in such case, are the following: delays in manufacturing and delivering of the production, damage of the critically essential information etc. As a result, there may be the harm for the operating results of the company and its further sales rates. The management of CAB stores different information pertaining to the property issues as well as confidential and sensitive data, pertaining both to business practices and personal information of the employees.
The breaches in the security measures of CAB or the accidental illegal access to the information about the company, its clients, or employees (as a result of trickery, fraud, hacking, or other forms of deception) may expose the CAB, its clients or employees to the legal liability. This trend, in turn, would, negatively affect the image of the brand, as well as spoil its reputation. That is why, there is an urgent need of launching the new measure of informational security within the informational systems of this company. Only in such case, it is possible to protect the company from the significant risks of being harmed by illegal and non-authorized access to the confidential data.
Sensitivity of the business to the discretionary consumer spending reductions
The third issue to be considered in the scope of this section is that the business of CAB is rather sensitive to the discretionary consumer spending reductions. It means that the demands of the target audience for the luxury goods, such as craft beer, may be negatively affected by the economical situation in the country, which, in turn, affects the discretionary spending. The core factors, which define the preferences of the clients as well as their discretionary spending, are the following: actual or perceived economic conditions, high rates of unemployment, actual or perceived income of the clients and their wealth, and the confidence of the population in the economic system of the country. All these factors have the potential of making significant reduces of the clients demand for the perceived luxury items - such as crafted beer. In addition, the consumers may substitute this product in their basket of goods with more affordable ones, available in the market or chose the total elimination of the brewery products from their basket of goods. It is obvious that such trend may have negative effects on the operating results of CAB. In the case if significant changes occur in the preferences of the clients, or if there is a commonly-accepted social trend of decreased consumption of alcohol, it is obvious that the demand for expensive production of CAB may be significantly decreased. That is why, there is no assurance of the further growth and development of the craft brewing segment of beverage industry of US. In addition, in the case of the continuous growth of the winery and other alcohol production segments, there is a high probability that the clients would be drawn away from the as beer industry in general and the craft beer segment in particular.
Societal attention to misuse of alcohol
It is essential to note that recently, the beverage industry has faced the large-scale political as well as societal attention as there is a social trend pertaining to the set of alcohol-related problematic issues in society (Zsidisin and Ritchie 49). The major problems in this regard are the following: the health problems, related to the misuse of alcohol and the wide set of drunk-driving cases. That is why, there is a high probability of emergence of the set of corresponding policies, such as limited options for beer advertising; in addition, there are the projects of launching the cautionary labeling or changing the packaging requirements. Finally, additional taxes may be imposed for the brewery production.
These trends have the potential treats for the CAB. For instance, in the case if beer falls out of favor of the target audience or in the case of imposing additional taxes or changing the corresponding governmental regulations, there is a high risk for the financial condition of the Alliance, caused by the negative impacts, made on its cash flows or operation results.
Product quality or its safety
The adverse effect on the business of CAB and its profitability may be done by the concerns, related to the product quality or its safety. The core argumentation for such statement is the fact that there are the rigorous standards for the product safety and its quality in US, set for the beverage industry. At the same time, the top management of CAB is not able to give 100% guarantees regarding their further ability of matching these standards, even while taking into account the fact that currently, this business entity is committed to the high quality of its products as well as their safety. In the case if the management of this business entity fails to maintain the current rate of the quality, there is a high probability of getting the negative image or being required for making the expensive product recalls. Finally, the company may be subjected to the claims, concerning the product liability, which in turn, may lead to the negative publicity.
High rates of competition
Significant competition to the production, offered by the CAB is posed by the Pacific Northwest and California. This competition is not limited to the manufacturers of the craft beers only; it is also imposed by the set of the core brewers of domestic scales, flavored alcohol beverages and manufacturers of vine.
There is a direct interrelation between the prosperity of the organization and its key personnel. There is a high probability that in the case of losing some experts and managers from the key positions within the company, there won’t be an option of employing corresponding professionals - the ones, who may have the adverse effect on the operations within CAB. As an evident example from 2014, it is possible to refer to the loss of chief executive officer - Andrew Thomas as well as the failure of the management to find the successful, effective and proficient candidature for fulfilling this vacancy (CBA 15).
Probability of fluctuation of the gross margin
The next issue to be considered in the scope of this paper is the high probability of fluctuation of the gross margin – as it was calimed by Hubbard et al (2014). This trend as well as the high probability for decline in the gross margin, is caused by the set of the following factors: the levels of the prices for the production, offered by CAB, mix of sales between the packaged and drafted products as well as among the different packages of the bottled production, the rate of operating costs – both semi-variable and fixed, manufacturing level, the rate of manufacturing at the beverages of CAB - as it relates to the current capacity of production, the prices for the raw materials as well as their availability, the cost and availability of the materials, used for packaging, the cost of energy resources, taxes - both state and federal and the charge rates for freight (Lee Resources 23). The high rate of both semi-variable and fixed operation costs makes the gross margin of CAB sensitive to the rather insignificant changes in the volume of company’s sales.
HR- related questions and aspects of company’s activity
While discussing the major strategic issues, faced by CAB, it is essential to refer to the HR- related questions and aspects of company’s activity, which may pose the threats for the company’s prosperity and normal functioning (Boje 254). Recently, the management for this business entity has faced with the increased rate of costs, spent for the health care services of the employees. This trend has the potential of making an adverse effect for the operating outcomes of CAB. Even while this business entity is self-insured in terms of the expenses for the employees’ healthcare, the higher rate of the average claims for medical expense was recently experienced by CAB. In such manner, the administrative, general and selling expenses were increased. It is claimed by Shin (2014) that in the case if this trend is left unchanged, there is a high probability of making the negative effect on the operating results of the Company.
High probability of failure in supply chain of the company
One more treat, faced by CAB is high probability of failure in supply chain of the company. The core argumentation for such statement is that there is a direct interdependence between the business outcomes and the ability of the management for making accurate and well-grounded forecasts and maintain all the processes, which take their places within the supply chain: forecasting the rates of the sales, finding and purchasing the high-quality raw material; manufacturing process’ maintenance and distribution of the production to the end-consumers. The operating complexity of this business has been increased by the integration of the recent growth and expansion of the business operations as well as increased complexity of its brand. In the process of managing this complexity, the top management of CAB may face with the set of various failures as well as the low rate of effectiveness within different parts of operational process.
High probability of error’s occurrence in the electronic communication
Finally, CAB, as a successful business, operating in the 21st century, has been actively engaged into the process of electronic communication with its stakeholders. That is why, in the case of the errors occurrence there is a risk of losing data, its misinterpretation and fraud ant activities in relation to the protected information. This question should be also addressed in a prompt and effective manner.
Multiple Alternative Courses of Actions Available To the Corporation and Assessments of These Options
After conducting an assessment of the current problems, which are faced by the company, it is possible to state a fact that there is a set of the alternative solutions for the business expansion and its proper functioning.
Defending with the home field advantage
The first option is to defend with the home field advantage. It means that the top management of CAB should concentrate on the major advantages, which are already enjoyed by them on the local market. As it has been already stated, this company has faced with the well-endowed foreign competitors and that is why, in accordance with the theory of Kozami (2002), it needs to make some small adjustments to the currently existing product line - for addressing the unique needs and preferences of the clients. In addition, it is critically important for CAB to resist the temptation and to make some attempts of reaching all potential clients or to make some imitations of the business practices of the multinational organizations, which currently operate in the US market. It is possible in the case of putting an emphasis on the clients, who appreciate the local brands, while at the same time the management of CAB may ignore the customers, preferring the global brands.
Extending the local advantages to the foreign countries
The second option is to extend the local advantages to the foreign countries. There are the cases when the companies, operating in the local industries only, have an option of going beyond their local markets. It means that in the case of having the right transferable assets, such extenders may use their experience of running the local business in a successful manner - as a start point for its further expansion in the foreign markets. For this purpose, it is essential to have the selective policy of international expansion, which is properly-integrated into the key assets of the Alliance. In addition, the assets may be effectively leveraged by the extenders in the case if they look for the analogous markets - the ones, which are almost similar to the domestic market in terms of the following aspects: geographic proximity, clients preferences, governmental regulations as well as the channels for distribution. It is estimated that one of the most effective choice in this regard is the Canadian market.
Omitting the onslaught
The next option to be considered is to omit the onslaught. This statement may be supported by the fact that in the industries, where there are the strong globalization-related pressures, the managers lack the options of relying on the local assets of their business entity only. It means that the managers of CAB need to re-consider the currently existing business model. It means that in the case if the company’s assets are valued in the domestic market only, there is an option of creating the joint venture with the multinational corporations or selling the products to the foreign markets in a direct manner (Dawar and Frost 1).
Recommendations
After conducting the analysis of the major risk factors, faced by CAB as well as the set of alternative options for addressing these risks, it is possible to offer the set of the following recommendations.
Contending on the global level
CAB should contend on the global level. Even while taking in consideration the wide set of the advantages of the multinational rivals of this business entity, CAB, as the company from the US market, should direct its strategic course for globalization. In the case of making the global assets transferable, this company may gain an option of becoming a multinational company by itself. Thus, the core success factor is to win the competition in the beverage industry on the global scales.
Taking into account both options and constraints
At the same time, the top management of this organization should take in consideration the wide set of the corresponding constraints and options. CAB should also manage the transitions, which means representation of the flexibility in relation to the currently existing market opportunities for business development. The managers of this organization should take into account the fact that the government mandate establishes and maintains the boundaries of their industry. In addition, there is a fluid global liberalization of the structure of beverage industry. It means that the market of the craft beers is exposed to new types of competitors, and thus, the management of CAB needs to realize that they have an option of responding through positioning of CAB within the market in the set of the ways – offering new products, maintaining the classical approaches towards craft beers manufacturing, etc.
Re-structuring the human resource management
Finally, it is essential to note that the human resource management of this organization should be re-structured for reaching the maximal possible rates of effectiveness. This question should be addressed in the following aspects: insurance, motivation, training and development as well as attraction of the new resources - for maximization of the effectiveness of CAB. Only in such case, it is possible to be competitive, effective and prosperous business entity.
Works cited
Boje, D.M. Organizational Change and Global Standardization: Solutions to Standards and Norms Overwhelming Organizations. Routledge, 2015. Print
CBA. Craft Brew Alliance, Inc. 2014 form 10-k annual report table of contents. 2015. CBA. Print
Craftbrew Conference . Craft Brew Alliance shares 2015 plans at second annual national conference. 2016 <http://craftbrew.com/2014/10/01/craft-brew-alliance-shares-2015-plans-at-second-annual-national-conference/>
Craftbrew. About. 2016 <http://craftbrew.com/about/>
Dawar, N., Frost, T. Competing with Giants: Survival Strategies for Local Companies in Emerging Markets. 1999 < https://hbr.org/1999/03/competing-with-giants-survival-strategies-for-local-companies-in-emerging-markets>
Hubbard, G., Rice, J., Galvin, P. Strategic Management. Pearson Australia, 2014. Print
Kozami, A. Business Policy and Strategic Management,2e. Tata McGraw-Hill Education, 2002. Print
Lee Resources. Gross Margin: 26 Factors Affecting Your Bottom Line. 2003., Lee Resources. Print
Shin, K.Y. Corporate Social Responsibility Reporting in China. Springer Science & Business Media, 2014. Print
Zsidisin, G. A., Ritchie, B. Supply Chain Risk: A Handbook of Assessment, Management, and Performance. Springer Science & Business Media, 2008. Springer Science & Business Media, 2008
