Case of Fosters

INTERNATIONAL TRADE

CASE of FOSTERS

Question 1

Outline the changes in China’s beer market over the last two decades or so.

Until about the mid.1980's, the market was supplied only by state-possessed makers costs settled by government at low levels. As an aftereffect of change, the China's brew showcase has known a high rate of development. Over 1986-1997 the Chinese beer production had increased 4.5 times to 18.7 million tons in 1997. It was estimated at 18.88 million tons in 1998. Afterwards over the period 1986-1997, beer consumption per capita has increased over 6 times from only 2.2 litres in 1986 to about 14.1 litres in 1997.

Nonetheless, the Chinese level of brew utilization is still a long ways behind the retail deals in some European nations. A general back off in China's economy has affected on lager utilization also, which was developing in 1999 only 5 % every year. The most recent authority figures demonstrate that by 1999 abroad speculators controlled 45 breweries in China.

Question 2

What were Foster’s initial foreign business strategies in China? Was it successful? Explain.

Foster’s initial foreign business strategy in China as a direct investor in growing beer industry, but it was not successful. Forster was overconfident because they believe their product can be sold all across the country. The distribution system is very difficult in China as the distribution system may capture in foreign market but not in China market. To a great extent, the Chinese distribution system hinder the supply of goods. Foster’s try to have a comparable price, may be slightly higher, than Budweiser. The issue was that all outside bottling works focused on the 'eatery premium lager' showcase, which was generally little, while the 'volume brew market' was overwhelmed by the nearby brands, controlled 45 bottling works in China. Furthermore, focus the restaurant premium beer was comparatively small market, and the truth is only a tiny market of less than 10% was willing to pay any premium. But hardly anyone would want to pay the 12 yuan that the most optimistic of foreign brewers had been charging.

Question 3

Why has SAB been more successful in China than Foster’s and other foreign brewers? Would SAB strategy work as well in a Western market?

      SAB been more successful in China due to the company does not focus to creating a premium brand and accepted success would be determined by sales in the city closest to the brewing procedure. This is because, people in China looking beer for cheap price rather than brand or expensive beer. Based on the article, Foster’s and other foreign brewers focus on ‘restaurant premium beer market’ which relatively small compared to ‘volume beer market’ contain of local product. The offer price on their product relatively higher than the domestic beer.

At the same time, SAB teamed up with the Chinese Ministry of Foreign Trade and Economic Co-operation to arrange for new investment and technical skill for breweries. This shows that SAB known the China market better than Foster’s and foreign breweries in terms of community preference. They capture the China market by top-down approach which is analyze the overall market and economy of China, before made the full investment. Whilst, Foster’s made false opinion that they could capture the global market. They were made the direct investment without the knowledge and supporting by any government or ministry of China.

In my opinion, every country is not similar; therefore SAB strategy will be not work in Western country. At China, people prefer local brand and looking for a cheap price, but Western country people, might look for a brand rather than price.

Question 4

What appears to be recent change in Foster’s global strategy and how does it translate in the China market?

The recent change that applied by Foster is the sale of the 50 per-cent stake in Molson Breweries in Canada in June 1998 proclaimed from the undertaken review of Foster’s entire assets based, Foster’s emphasis on being a global brand manager and only own breweries and wineries when the location was enough strategic to operate. As a result, in the year 1999 Foster’s has been focusing on its Shanghai and Mumbai (India) breweries and other two Vietnamese breweries in Ho Chi Minh City and Danang for earning growth.