Guinness and Its Competitive Scenario

Beer Industry Oligopoly

PORTER'S FIVE FORCES ANALYSIS ON THE BREWING INDUSTRY

Porter’s five forces analysis ‘‘is a means of identifying the forces which affect the level of competition in an industry’’(Johnson & Scholes).

Threat of potential new entrants

                     The threat to entry is low due to moderate entry barriers. This depends on the country, but includes the following:

                     Large capital requirements needed to set up and expand as well as high economies of scale, forcing entrants to come in at large scale or to accept cost disadvantages.

                     Access to distribution channels between different countries may make entry difficult with established brewers controlling a large part of retail outlets.

                     Different regulations in different countries; some nations adopt various tactics to discourage new entrants into home markets. Germany, for example, has purity laws, whereby every brewer has to comply with strict standards set by the government. Whilst, Denmark enforce a policy of returnable bottles indicating firms have set up plants to collect their bottles, which is expensive and cuts profitability.

                     Fairly strong brand identification supported by heavy advertising and marketing campaigns, together with rising sponsorship. Guinness, for example, “signed £10m deal to become the first worldwide sponsor, and official beer supplier of the 1999 Rugby World Cup tournament”(Marketing, 24th July 1997). This results to customer loyalty.

                     The market have become increasingly concentrated during the last few years and now largely restricted to specialist brewers, therefore barriers to entry are relatively high on a national level, given the fact that very powerful brewers now control most of the market. Despite the concentrated national structure barriers to entry are not particularly high for those interested enough in beer to invest in real ale...