Which of the Europe's Beer Markets offers the highest unrealised Market Potential?

Market potential analysis of the European Beer Market in order to recommend a foreign market entry strategy for the fictive company OBUL

by Endrik Hasemann (Author) Andreas Spors (Author)

Master's Thesis 2004 93 Pages

Business economics - General


Table of Contents

Declaration on plagiarism

List of tables

List of Abbreviations

Executive summary

1. Purpose and Objectives of the project

2. Background and issues
2.1. Background
2.2. Issues
2.3. Market viability
2.3.1. Commercial viability
2.3.2. Technical feasibility

3. Literature Review
3.1. Entry strategies for International markets by Franklin R. Root
3.2. Global marketing strategy by Susan P. Douglas and C. Samuel Craig.
3.3. Global Marketing Strategy by J.P. Jeannett and H. D. Hennessey
3.4. Marketing in the International Environment by E. Cundiff and M. T. Hilger
3.5. Global Marketing Management by W. Keegan
3.6. Global Marketing by Svend Hollensen
3.7. International Marketing’ by L. S. Walsh

4. The questions
4.1. Consumer
4.2. Competitors
4.3. Merchants
4.4. Industry
4.5. Legal
4.6. Political
4.7. Financial
4.8. Infrastructure
4.9. Distribution

5. Methodology
5.1. The indexes
5.1.1. The indexes for the screening Market viability Commercial Viabilities External Technical feasibilities
5.1.2. The sub indexes for the screening Sub index consumers: Sub index merchants: Sub index competitors: Sub index industry Sub index Political Sub index Legal Sub index Financial Sub index Infrastructure Sub index Distribution
5.2. The criteria
5.2.1. The criteria for the preliminary and secondary screenings Population size Market size Market growth GNI per capita GNI growth rate Alcohol consumption Political stability Corruption level
5.2.2. The Criteria for the third screening Criteria concerning consumers index
Market Size
Market growth
GNI PPP per capita
GNI PPP growth per capita
Alcohol consumption
Percentage of habitants employed in agriculture Criteria concerning merchants index
Proportion between beer sales in retail and gastronomy Criteria concerning competitors index
Market share of the market leader
Market share of the top three market leaders
Number of competitors
Market share of local breweries
Market share of foreign breweries
Market growth of foreign breweries Criteria concerning the industry index
Average price in the retail channel
Average price in the gastronomy channel Criteria concerning Political index
Political stability Criteria concerning Legal index
FDI index
Corruption Criteria concerning Financial index
Inflation Criteria concerning Infrastructure
Motorway/ inhabitant
Harbour and airport/inhabitant Criteria concerning distribution index
Number of retailers
Number of wholesalers
Number of gastronomies
5.3. Weights
5.3.1. Weights for the preliminary and secondary screening Market size and market growth – the weight of 0.25 GNI per capita in PPP basis –the weight of 0.13 GNI growth rate – the weight of 0.12 Alcohol consumption – the weight of 0.10 Political stability – the weight of 0.1 Corruption level – 0.08
5.3.2. Weights for the third screening Market Viability – the weight of 70% Consumer index – the weight of 35%
Market size – the weight of 25%
Market Growth – the weight of 25%
GNI PPP per capita – the weight of 13%
GNI PPP per capita growth rate – the weight of 12%
Alcohol consumption – the weight of 10%
% of habitants employed in agriculture – the weight of 15% Competitor index – the weight of 35%
Market share of number 1 competitor – the weight of 25%
Market share of the top 3 competitors – the weight of 25%
Number of competitors – the weight of 25%
Market share of local breweries – the weight of 5%
Market share of foreign breweries – the weight of 5%
Market share growth rate of foreign breweries – the weight of 15% Merchant index – the weight of 15% Industry index – the weight of 15%
Average beer price by gastronomy – the weight of 50%
Average beer price by retailers – the weight of 50% The commercial viability – the weight of 15% The legal index – the weight of 80%
Taxes – the weight of 80%
Corruption – the weight 10%
FDI – the weight of 10% The political index – the weight of 10% The financial index – the weight of 10% The external technical feasibility – the weight of 15% The infrastructure index – the weight of 20%
Airports per habitant – the weight of 25%
Ports per habitant – the weight of 25%
Railway per habitant – the weight of 25%
Km highway per habitant – the weight of 25% The distribution index – the weight of 80%
No of retailers – the weight of 50%
No of wholesalers – the weight of 50%
5.4. How to class?
5.5. How to get the data
5.6. The countries
5.7. Preliminary Screening
5.7.1. Selecting 47 countries
5.7.2. Access to the relevant data
5.7.3. Countries distinction
5.8. Secondary Screening
5.8.1. Describing and defining all criteria
5.8.2. Which criteria for the Secondary Screening?
5.8.3. Why these Criteria for Secondary Screening?
5.8.4. Results of the Secondary Screening
5.9. Third Screening
5.9.1. Describing and defining the third screening process
5.9.2. Which criteria for the screening
5.9.3. Result of the screening process
5.10. Overview of the screening steps

6. Entry mode
6.1. Exporting
6.2. Licensing/Franchising
6.3. Joint Venture
6.4. Creation of the subsidiary

7.1. Appendix I: About the preliminary Screening
7.2. Appendix II: About the Secondary Screening
7.2.1. The countries and Criteria Market Size Forecast of the beer consumption 2003 Market Growth GNI Growth Rate in %
7.2.2. The weighted points Market size Market Growth GNI per Capita GNI growth rate Alcohol Consumption Political Stability Corruption
7.2.3. Evaluation of the countries
7.3. Appendix III: About the third screening
7.3.1. The calculation of the sub indexes and indexes The result Overview of the calculation
7.3.2. Calculation of the weighted points per criteria Consumer Index The merchant Index Competitor index The industry index The legal index The political index The financial index The infrastructure index The distribution index
7.4. Appendix IV: The Diary
7.4.1. Diary of the Proposal Phase
7.4.2. Diary of the interim report phase
7.4.3. Diary of the final report phase

8. Reference list
8.1. References from the internet
8.2. References from books

Declaration on plagiarism

1. I am aware that plagiarism is the unacknowledged use of another person’s writing and is a form of cheating.

2. Where the writing of another person is reproduced word-for-word in this exam or assignment, it is always in quotation marks.

3. I am aware that the failure to put other people’s writing in quotation marks will result in a mark of zero for this exam/assignment, and that I will not be permitted to rewrite it.

4. Where I have used ideas or information from a particular source, but expressed it in my own words, I have supplied a reference, complete with page number.

5. I am aware that it is also unacceptable to reproduce another person’s writing nearly word-for-word, that is, to copy it with superficial modifications, even if I supply a reference.

6. I am aware that I will also receive a mark of zero if I violate Item 4 and/or 5 above.

7. For assignments, I have discussed this assignment with students whose names I have listed below but this assignment, which I am submitting, is my own original work.

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List of tables

Table 1: The criteria

Table 2: Weights

Table 3: Weights indexes and sub indexes

Table 4: Weights and criteria

Table 5: Screening

Table 6: Population below one million criteria

Table 8: All Criteria

Table 9: Beer Consumption Germany

Table 10: Market Size and Weights

Table 11: Evaluation Market Size

Table 12: Market Growth and Weights

Table 13: Evaluation Market Growth

Table 14: GNI per Capita and Weight

Table 15: Evaluation GNI per Capita

Table 16: GNI Growth Rate and Weights

Table 17: Evaluation GNI Growth Rate

Table 18: Alcohol Consumption and Weights

Table 19: Evaluation Alcohol Consumption

Table 20: Political Stability and Weights

Table 21: Evaluation Political Stability

Table 22: Corruption and Weights

Table 23: Evaluation Corruption

Table 24: Evaluation of the countries

Table 26: Results after third screening

Table 27: The calculation process

Table 28: Indexing

Table 29: Screening result consumer index

Table 30: Screening result market size

Table 31: Screening result market growth

Table 32: Screening result GNI PPP

Table 33: Screening result GNI growth

Table 34: Screening result alc. consumption

Table 35: Screening result consumer

Table 36: Screening result merchant index

Table 37: Screening result proportion

Table 38: Screening result competitor index

Table 39: Screening result #1 competitor

Table 40: Screening result number of competitor

Table 41: Screening result market share local

Table 42: Screening result market share foreign

Table 43: Screening result market growth foreign

Table 44: Screening result industry index

Table 45: Screening result average

Table 46: Screening result average price retail

Table 47: Screening result legal index

Table 48: Screening result corruption

Table 49: Screening result FDI

Table 50: Screening result taxes

Table 51: Screening result political index

Table 52: Screening result political stability

Table 53: Screening result financial index

Table 54: Screening result inflation

Table 55: Screening result infrastructure

Table 56: Screening result airports

Table 57: Screening result harbours

Table 58: Screening result motorway

Table 59: Screening result railway

Table 60: Screening result distribution index

Table 61: Screening result no. of gastronomy

Table 62: Screening result no. of wholesaler

List of Abbreviations

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Executive summary

The overview of the whole process that enabled us to suggest the final candidate country for the future business expansion in Europe presents steps that our consulting team had to take in order to present the best possible option.

According to our consulting team, Germany presents the strongest advantages for OBUL and should be chosen as the ideal for the business operation and also the base for the further European expansion. Thanks to the highest size of population in Europe and its overall wealthy condition from the very beginning of our analysis Germany became one of the possible final candidates.

However, during the whole process of defining attractiveness of individual markets, several other countries also presented strong advantages for the future investment. The strongest advantages were shown by Spain and Italy which presented nearly the same result in the evaluating process than Germany did.

In the final stage of the analysis Germany was selected form the group of four strongest European candidates. These were also Ireland, Italy and Spain. All of the candidate countries presented very strong and attractive beer markets in terms of beer and alcohol consumption as well as the GNI PPP income per capita. Moreover, the analysis of the infrastructure, legal and political environment also proved that these countries were the top four; amongst all of the candidate countries that were analyzed at the beginning of the selection process (42 countries took part in the first step of the selection, 27 in the second).

Germany proved to be the best possible choice for the future business expansion in Europe. The analysis showed that the German market was more attractive for OBUL in three main areas of operation: market viability, commercial viability and technical feasibility.

The analysis of the market viability as the most important area for a market entry showed, that the German beer market was very attractive in terms of its size and trends that appeared in it. Moreover, the overall financial situation of the customers was also considered to be strongly attractive.

In terms of the commercial viabilities, Germany also presented its strong position. Even though, the corporate tax was defined as a very high, the market size and its potential should compensate loses that company will have to face in terms of the taxation.

Finally, Germany’s infrastructure also confirmed to be well established and will definitely be able to cope with needs of OBUL.

1. Purpose and Objectives of the project

The purpose of this project is to evaluate the market viability, commercial viability and the external technical feasibility of the Overseas Beer Union Ltd. (OBUL) to enter one of the 47 European countries with its new Beer “Scal”.

The objective is to find out which of these countries OBUL should enter to get a new main pillar in the European market.

2. Background and issues

2.1. Background

Overseas Beer Union Ltd. was the result of a merger between the South African Company “Trinkmeister Brew”, founded in Cape Town, South Africa in 1905 by Klaus-Peter-Willhelm Trinkmeister and the Canadian company “Pijany Brew”, founded in Montreal, Canada in 1919 by Gregor Pijany, in 1970. Until the merger, both family owned companies signalized mediocrity. Since the merger, the company is reorganized as a public limited company, has its office in Montreal and become a big northern American and South African player in the beer industry. Because of the latest success, OBUL wants to expand its beer’s to the European market to confirm its leading position worldwide and to find a new main pillar outside America and South Africa.

2.2. Issues

To decide which country should be chosen, the following main issues should be discussed.

- market viability
- commercial viability
- technical feasibility

2.2.1. Market viability

This means the question: “Does the market offer sufficient opportunities that enable the market entry?”, and “what is the current competitor’s situation in the market?”

- Consumers
- Competitors
- Industry

2.2.2. Commercial viability

For OBUL and for each market entry the commercial environment is the most important. The commercial environment involves the basic issues that decide if a market is remunerative or not.

- Legal issues
- Political issues
- Financial issues

2.2.3. Technical feasibility

The project supposes indirectly that our company have the ability to enter a foreign market, so the question: “Does our company has the ability to execute internationally?” is answered with yes. Therefore we will just have a look at the external technical feasibility.

- External technical feasibility
-Distribution issues
-Infrastructure issues

3. Literature Review

3.1. Entry strategies for International markets by Franklin R. Root

Franklin R. Root “Entry strategies for International markets”. The whole book is divided into nine main parts which take a closer look on particular aspects of the international market decision entry issues.


The author provides in this book a detailed plan of the market entry strategies for the potential entrants. For this report, the chapter which provides the necessary information for the final decision of the target market country is very useful. This particular chapter also takes a closer look on the process of selecting the ideal product for the future market. In this part of the book, the author emphasises on the future managers and describes preliminary screening of potential country markets as vital for the whole further research. According to the author, the possible mistakes in this stage of the selection process could possibly play the vital role for the project as a whole. The author makes all the potential managers from two basic and very common mistakes they could make in the first stadium of the project. The first is the situation in which the particular countries could be ignored by the researchers even though offering high potential. Secondly, managers could pay far too much attention to the countries with low potential. Situations like these could be avoided if a proper and detailed preliminary screening would be done.

Moreover, the author also provides in this part of the book the additional information about the criteria that could be used to estimate the market size and industry potential.

Critique and comments:

Even though the book presents a big scope of information that is useful for the potential decision maker, some of the issues found in the book could be developed further. Not only for the purpose of this project, the chapter containing information about target country market selection could be expanded up to the size of the parts describing entry modes. In this case, the author concentrates mostly on the entry mode choice, and those parts are the widest and contain the deepest analysis of the decision made by the potential managers.

Moreover, the book also contains much information about potential risks in the host countries. Passable reason would be that in the time when this book was written and the ideas were created the international situation was different. It has passed ten years since the book was published and some of the information could no longer be as vital as ten years ago. For example: not so many Eastern European countries present the same political instability as they used to in the late eighties and the early nineties.

As mentioned before, some chapters, especially those related to the entry mode strategies, contain much more information than others. In our opinion, the author paid far too less attention into the target country market issues. As a very important and one of the first stages in the decision process, this particular issue should be described with bigger scope. The author suggests in the preliminary screening stage to collect data from only a few areas (like market size and industry potential) and as a result omit some important areas (like cultural differences, human factor).

3.2. Global marketing strategy by Susan P. Douglas and C. Samuel Craig.

This book was written by professors from the Stern School of Business in New York and contains two chapters with information about possible strategies in the process of target country markets selection. It offers a number of examples from the real business operation that enables the readers to understand the discussed topics better.


This book describes some very important issues in the target country selection and divides the entering foreign market process into three steps. These are: initial international market entry, local market expansion and the global rationalization.

In the first phase, initial international market entry managers face vital business decisions to be made. The authors describe this stage as a very important one because possible mistakes in it could be crucial for the company and could result in the withdrawal from the market and even “damage a firm’s reputation”.

The first phase also contains the number of moves that should be taken by the company. Firstly, using criteria describing “general business climate of the country and the specific product market of service” the country should be chosen. It suggests to us, that in our first country screening some macroeconomic data (like GNP, inflation, economic growth etc) and data from the beer industry (market size, growth rate) should be used. Secondly, the authors discuss the timing of the entry issues which is mostly related to the resources available for the company. Finally, the issue of the possible entry mode is also presented.

In the second phase of the internationalization process, the final target country market is being developed and the business operations are expanded. In this phase managers face the problem of the further market and the product line expansion. In this phase the initial entry strategy is modified and adopted to the market needs.

In the last phase, the company adopts its global orientation inside of the particular host markets. The whole idea of globalization enables the company effective strategy for all the markets without loosing its local responsiveness. It means that in this stage the several market strategies are synchronized to make the company more effective and more competitive in the particular country markets.

The authors also pointed out that in many cases, in the target market selection process, similarities are very important between the domestic countries and potential host countries. As an example, the book refers to all the American companies which for their first international market chose Canada as the most similar.

Critique and comments:

Even though the book provides a wide scope of information which could be used in the process of the target country market selection, the particular ideas were questioned by our team.

According to the authors, the strategy present on the local market plays the vital role in the international operation strategy creation. “Strategy is designed based on information relating to customer needs and interests,….,in the domestic countries. In our opinion this statement is incorrect as it omits the very important aspect of the cultural differences between domestic and host markets. As many cases already have shown, some of the companies paid too much attention into the strategy based on its domestic market. For example, the retailing giant Wal-Mart had to withdrawn from the Indonesian market because of lack in understanding the local customer needs. The Wal-Mart managers thought that its American strategy would be the best for every market without understanding importance of the cultural factor.

Moreover, the authors paid much attention to other aspects of the business presence in the international markets and as a result did not extend the part which describes the most important for our company issue, the steps in the target country selection process.

3.3. Global Marketing Strategy by J.P. Jeannett and H. D. Hennessey

Jean-Pierre Jeannett and H. David Hennessey show in their book “Global Marketing Strategy” (fifth edition, 2001) the need for a company to act in the more global environment and describe strategies how to manage the process. The following review and critique is based on chapter 5 “Global Markets and Buyers”.


In the chapter “Global Marketers and Buyers” the authors describe four analytical steps to find a target market for a company. The authors based their country screening process on the fact that a company should analyse all countries worldwide, to not ignore countries with good potential and not to spend too much time in investigating the countries with poor potential.

The authors describe four filter processes to find the target market out of all the countries. The first filter is described as the macro level. This first stage of selection uses macro variables to discriminate between countries that represent basic opportunities and countries with little or no opportunity or with excessive risk. Macro variables describe the total market in terms of economic, social, geographic, and political information such as, GDP, GNP, and political instability.[1]

In the second stage of filtering, the view is still based on macro variables but on those, that indicate information about the specific product in the market like potential market size and acceptation of the product. With this step, the number of potential countries is reduced again.

In the third stage the author focuses on micro level considerations such as competitors, cost of entry, and profit potential.

The forth stage of the screening process is an evaluation on rank ordering of the potential target countries, based on objectives and strategies.[2]

Furthermore, this chapter offers a number of criteria for the different screening filters.

Critique and comments:

The book offers a very good framework for selecting countries. The framework is divided into four different screening filters that start with more general filters to reduce the number of countries easily, and end with a very detailed view on the remaining countries. This makes it very easy to focus on the most important markets without the waste of time and financial investment.

In this chapter the authors also mention very good criteria for the filtering process countries. They also give the reader good information how to find important information about the different countries.

What is missing in this book is the evaluating process of the countries and the fact that the different criteria are unequal. In practise, the criteria for evaluating countries are differently important. We are missing a weight system for the criteria.

The fact that the authors want the company to look at all countries around the world might not fit into the practise. Normally a company will have an idea which area of the world it is going to target.

3.4. Marketing in the International Environment by E. Cundiff and M. T. Hilger

The purpose of the book is to show the world as a potential marketplace rather than the local or domestic economy. The book presents analytic tools to act in an international marketing environment. The following review and critique is based on chapter 2 “The Organisational and Financial Environments of International Marketing”.


The authors had developed a framework that shows the way to select one country as a target market. In the first step, they argue that a company has to analyse the purpose of their decision to enter a foreign market first. This step is called internal evaluation[3]. This step is divided into company objectives: This should help the company to find the right criteria, and company resources: This step is designed to find criteria that can eliminate countries that do not match the firm’s resources and the characteristics of a foreign market. The goal from the internal evaluation is to identify and develop criteria for the selection of foreign markets.

The second step the Evaluation of Foreign Markets[4] is designed to evaluate the countries along the criteria from step 1. The purpose of this step is to identify the target market.

Critique and comments:

The framework starts with the logical beginning, the internal evaluation. Without the internal evaluation that includes the company objectives and recourses, no company is able to find a market that fits in its needs, because without that a company would not even know which its needs to a target market are.

However, in general the framework is too superficial. Nor do the authors explain the criteria for evaluating a country; neither do they weight them to give the evaluation a clear focus. Unfortunately, they also do not separate the screening process into different steps. That means that the so called step “evaluation of foreign markets” will be very time intensive because every country has to be evaluated in all criteria that are standard for the evaluation process. Nevertheless, the authors do not tell the reader with which countries a company should start the evaluation process.

3.5. Global Marketing Management by W. Keegan


In the first part, Keegan gives an overview over the global marketing and marketing basics were explained. As in every chapter case studies are included.

In the second part, the global marketing environment is illustrated in all relevant aspects: economic environmental, social and cultural environment, political, legal and regulatory environment. Management information systems and market search are shown.

Part three’s topics are strategies concerning expansion (segmentation, targeting and positioning), sourcing (ex- and importing), global market entry as well as strategic factors of competitive advantage.

In part IV Keegan discusses the four P’s, marketing basics were explained again.

At the end Keegan describes organizational structures styles of leadership which are appropriate for global marketing.

Critique and comments:

Overall, the book is too general to help to develop a methodology. Marketing and management basics are explained. Chapter seven in the third part gives some inspirations for the country selection process but all approaches are too general so this publishing is not helpful for the purpose of our project.

3.6. Global Marketing by Svend Hollensen

In his book: ‘Global Marketing’ in part II chapter five, Svend Hollensen describes the process to decide which market to enter.


The international market selection is different for small and medium sized enterprises compared to large-scale enterprises.

Table 1-1: International market segmentation

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Hollensen explains every step. Step 1 and 2 defines the criteria; in the third step he differentiates between preliminary screening of minimum requirements (screened primary with external screening criteria) and fine-grained screening (The firm’s competitive power and special competences in the different markets are relevant). In Step 4 he develops sub segments through the cluster analysis to avoid national stereotyping which occurs by segmenting by countries and by buyers.

After this, Hollensen describes market expansion strategies as well as global product/market portfolio.

Critique and comments:

Hollensens’ framework that is shown in his book is a good basic. The chapter about the process to decide which market to enter is useful to develop a methodology. But the shown framework in general is too basic. We found some interesting points in chapter seven for defining criteria and for evaluating the market.

3.7. International Marketing’ by L. S. Walsh

The handbooks ‘ International Marketing’ by L. S. Walsh (1993) provide the paths of doing marketing internationally to guide the domestic marketer taking over international responsibilities for the first time.


The author develops a concept on to make decision in dealing with global market that embrace the concept of international marketing, marketing environment, and principals of international marketing followed by the overview marketing in selected countries. The UK is chosen as a benchmark on the market research paths to describe more details about market selection, market entry, marketing mix and marketing organization.

The framework of international market selection adopts “possible and probable country” for the screening result. The diagram shows the country selection model is equipped with a cluster of six major screening stages that most of stages concentrate on research assessment of product potential. None of specific industry is mentioned in this concept, even though on the some certain points the author is using hospital equipment as an example.

In the first stage, the author points out the economic strength, political and financial risks as broad category to select possible or potential countries. In the second stage, it is argued about product potential assessments which consist of ‘market accessibility’ (tariff is the main concern) and ‘market size on variable’ to determine the probable countries. Based on the second stage the author develops the filter to choose very probable countries by using the ‘market size and growth’, ‘product acceptability’ and ‘technical standards’, ‘competition’ and ‘securing distribution’. The next stage is designed to get highly probable countries; the author refines the third stage by using omnibus survey. The following step is undergoing deep research on ‘detail reassessment of terms of reference’, and ‘desk and initial exploratory field’. As a result this step shows the most attractive market. The last stage is main field research abroad to examine the very real prospects countries by digging more deeply on sales levels, cost and profit.

In general, the frame work gives useful guidance of how to select potential countries in doing market internationally.

Critique and comments:

Looking on the market selection decision, the author points out that commercial viability is counted as the last filter by using ‘sales level cost’ and ‘profit’ instead of positioning on the second filter or after broad category as the first filter. It will eliminate numbers of very profitable countries.

The book describes how important the cultural and social environments, in the international market that the companies should perceive are. However, on the contrary the author does not mention anything about the market selection in detail.

The author also concentrates too much on the assessments of product potential that consists of market size and growth, market accessibility, competition without arguing which are the major issues in each of those assessments. Consequently it create confusion to the reader.

After establishing the criteria, Walsh points out straight away that the company should be on the final decision stage to enter one or more markets. Consequently the companies should compute indexes of market potential from weighted averages of each criterion to conclude the most potential countries

4. The questions

We developed to investigate the market viability, the commercial viability and the external technical feasibility questions to evaluate the European countries. The questions for each issue lead us e.g. to the criteria in the preliminary and secondary screening and they give us as well an understanding for the criteria when we examine the four best markets concerning market entry possibilities.

We choose this modus operandi because if you have to solve a problem, you first have to verbalize it. This is very important. After that, you can disaggregate the issues and differentiate between key and non-key questions in the special case. By this we find the appropriate criteria to screen the European countries.

The criteria in the preliminary screening (population size) is the result from a question concerning the market viability and in detail the consumer. Most criteria result from questions about the consumer as well as corruption is concerning the legal issues and EU membership to the political issue (both major points is commercial viability)

4.1. Consumer

(1) Who are our consumers?
(2) How much beer do they annually consume?
(3) How much alcohol do the habitants annually consume in the countries?
(4) How much wine do the habitants annually consume in the countries?
(5) What is the GNI per capita PPP, and how much is that in future?
(6) How many people live in the countries?
(7) How many habitants are employed in the agricultural sector?
(8) What is the male / female ratio?
(9) Are there any differences in the drinking habits of beer between male and female?
(10) Are there any differences in the drinking habit in the view of the taste between the different countries?

4.2. Competitors

(11) Who are the major competitors in the different countries?
(12) What is the market share of the #1 competitor?
(13) What is the market share of the top 3 competitors?
(14) What is the market share of the foreign breweries in the different countries?
(15) What is the market share of the local breweries in the different countries?
(16) What is the growth rate of the foreign breweries?
(17) How many competitors are in the countries?

4.3. Merchants

(18) Who are OBULs merchants in the future?
(19) How much beer is sold by retailers in the different countries?
(20) How much beer is sold by the gastronomy in the different countries?
(21) Are there merchants that do not carry beer?
(22) What is the proportion of sells by retailer to gastronomy?
(23) Is there a higher profit by selling to retailers, wholesalers, or the gastronomy?
(24) Is there a merchant buyer power in the different countries?
(25) How much market share do the top retailer / wholesaler have?

4.4. Industry

(26) What is the average price of beer sold by the gastronomy?
(27) What is the average price of beer sold by retailers?
(28) Is there a trend in the beer production that helps OBUL to orientate?
(29) How much beer is sold by drought?
(30) How much beer is sold by can / bottle?
(31) Are there substitute drinks in the markets?

4.5. Legal

(32) Is there a sign of corruption in the different countries?
(33) Are there any taxes that influence OBULs profits or sales?
(34) What are the average corporate taxes in the particular markets?
(35) Is the foreign investment quote promising?
(36) Are there any laws that have an effect on the beer production?
(37) What is the size of the FDI inflow into the individual countries?
(38) What is the trend in the FDI inflow?
(39) How is the distribution of beer organised in the different countries?
(40) What is the minimum age to be allowed to drink beer?

4.6. Political

(41) Are the countries political stable?
(42) Is the country in the EU?
(43) Are there import registrations for beer in the countries?
(44) How much do the countries government influence the e economy?

4.7. Financial

(45) What is the inflation rate in the countries?
(46) Are there different inflation rates?
(47) What is the GDP of the countries?
(48) What is the GNI of the countries?
(49) Where is the difference between GDP and GNI?

4.8. Infrastructure

(50) Is the infrastructure capable for OBULs needs?
(51) How many Ports do the countries have?
(52) How many Airports do the countries have?
(53) How many km of highway do the countries have?
(54) How many km of railway do the countries have?
(55) Is there a toll for using the highway?
(56) What are the patrol prices?
(57) What is the most common transportation for beer?

4.9. Distribution

(58) What are the main distribution channels?
(59) Are the distribution channels capable to carry OBULs beer?
(60) How many retail stores exists that sell beer?
(61) How many wholesalers exists that sale beer?
(62) How many gastronomies exists that sell beer?
(63) How is the quality of the distribution?

5. Methodology

The methodology is the way we work in this assignment. It is based on the group member intuition, brainstorming, literature and the internet sources. The framework shows the way that we use to find the one target market. The framework includes the question tree, the criteria, the weights, the classification, the preliminary, secondary, and third screening process, as well as the entry mode for the chosen country.

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5.1. The indexes

5.1.1. The indexes for the screening Market viability

The market viability index is the most important index in order to analysis which target country OBUL should take in account for a prospective and successful market entry. By this index we can assess the attractiveness of the consumer, merchants, competitor, and industry structure in the four countries in order to be able to give OBUL an objective recommendation. Commercial Viabilities

As commercial viabilities are amongst three main areas that our company should analyse, it is natural that we will put strong emphasis on it. In order to provide full description of commercial viabilities we decided to analyse in details all of the sub criteria belonging to this index. These are:

- Political index
- Legal index
- Financial index External Technical feasibilities

We strongly believe that efficient infrastructure will also play vital role in the business operations of OBUL. As the company will have to deal with it in everyday bases, we want to make sure that our analysis will also take into consideration this factor. The sufficient infrastructure of the country will enable OBUL to operate efficiently in the market.

5.1.2. The sub indexes for the screening Sub index consumers:

We choose the subindex consumer because of the immense relevance for the revelation of the right target market. The consumer index consists of evaluation of the consumers within six different criteria.

It is absolutely necessary that the merchants are included because they are an important part of the selling process.

We need to know more about the consumer for the further analysis of the four countries in order to determine which country can be recommended for a market entry. The consumer are one of the most essential issues to look after because their consumption decisions are ultimately critical for OBUL’s market entry success in the recommended country. Therefore, our consulting team has to think about the later on discussed customer criteria. Sub index merchants:

In this subindex we ask questions in order to find out what the main source of the beer purchase is? Where do consumers mainly buy beer? That means in detail: Do they buy beer directly, on the same place and simultaneously with the consumption of beer (bars, restaurants, and clubs) or is there a time lag between purchase and consumption of beer, does the purchase and the consumption takes places on different locations (purchase in retail stores)? What is the proportion of sales in the gastronomy and retail channel?

The more equal the proportion between sales in retail and bar the better because of a less strong merchants pressure towards the producer. Sub index competitors:

The competitor issue has to be analysed because of the overarching relevance of the competitor’s position in the potential target markets. The consulting task group for OBUL’s market entry has to take in account the current competitor’s structure in order to give the right recommendation. A potential target market with only a few competitors with high market shares for example is not an optimal target market and our consulting team should recommend under this aspect another more attractive target market. It is also important to take in account if foreign breweries in general are widespread in the particular market, which means if foreign breweries have a good chance to be successful on the basis of a good consumer acceptance of foreign beer. Another important point to look after is the growth rate in order to evaluate the future potential of the market. That is important because a market can have a lot competitors, each has only small market shares. That for itself would be attractive but if the market is saturated it is more difficult to gain market share from existent competitors than to gain market share in a growing market. Therefore, OBUL should prefer a growing market even if this market has currently an unattractive competitor structure. With all the criteria for the competitor sub index which will be shown below we will get a comprehensive assertion of the competitive structure in the four countries. Thereby our consulting team will be able to give propounded and objective recommendation. Sub index industry

This subindex issue consists of the selling price in the retail channel and the selling price in the gastronomy channel.

The more expensive the selling prices in retail and in gastronomy, the more attractive the country’s profit potential. Sub index Political

We decided that political index is still an important factor influencing the attractiveness of environment in individual markets. The overall country stability could only positively impact the business operations of the OBUL. Our consultant team wants to make sure that OBUL will have an opportunity to invest in the market that is politically stabile. Sub index Legal

As legal issues strongly influence the attractiveness of the potential candidate markets, it has been decided to take this issue into the consideration. In our opinion, three sub indexes belonging to this group could play very important role in the business environment of all countries. Sub index Financial

As an integral part of the commercial viability index, we decided that also financial aspects should be analysed. It will enable us to provide the full analysis of all areas in which OBUL will have to operate. Sub index Infrastructure

The infrastructure is in the view of the distribution process very important for OBUL. This index measures the capability of each countries transportation possibilities and if they are matching OBUL’s needs. Sub index Distribution

The distribution index covers the number of the selling infrastructure to customers. OBUL do not sell its beer directly to the end consumer. Therefore the local infrastructure and its capability are crucial for a market entry.

5.2. The criteria

5.2.1. The criteria for the preliminary and secondary screenings

In this chapter we describe all criteria that we use for the preliminary and the secondary screening. Furthermore, we show the reader why we used these criteria. The criteria are in the order that we will use them for the screening processes.


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Table 1: The criteria Population size

In the preliminary screening process we established the criterion that all countries under a minimum population size are excluded. As a result, they are not examined further on. In this case, the critical size is one million habitants.

The reason for this criterion is that a country with a population below a critical size is not attractive for a market entry, because it is impossible for the company to gain enough sufficient revenues. Even if all other country criteria are optimal, a market entry is in this case not recommended. So we set this critical size, all countries below this are not examined further on.

We set this size because of literature study, experience and intuition . Market size

We multiply population size with beer consumption per capita to establish the market size. That is equal to the total amount of consummated beer per year in the country. So with this criterion, we combine the population size with the beer consumption p. c. and get a good indicator for evaluating the countries.

By this we try to estimate the total amount of potential consumers and can compare the different countries.

Our intention was to identify the critical market size. Below this size a market entry isn’t profitable enough. Thus, larger markets in general are better for a market entry and should be preferred than smaller markets. According to this we assess a country with a large market as more recommendful for a market entry. Market growth

In order to calculate the market growth we compare the market size development from 1996 to 2001, so this criterion shows us if the total amount of beer consummated in one year and in one country increased, decreased or stagnated.

We examine the development of the per capita beer consumption growth rate to find a trend in the beer market because the per capita beer consumption rate is a good indicator for market attractiveness. If the beer market in the special country is increasing it is definitely an opportunity to enter the market. GNI per capita

The Gross National Income (formerly known as a Gross National Product) shows a nations economic performance. It enables researchers to define the economic potential of the particular country. The company needs to measure the growth potential of market in every possible country.

This economic dimension is used to help the company to examine the purchasing power of people primarily on leisure needs in this case beer. Some countries have high levels of GNI per capita but they have a low rate on annual beer consumption which means their people do not spend much money on beer likewise on the other way around. Consequently, the company should concentrate only on the countries with high rate of GNI per capita and high level of beer consumption per capita.

One of the main reasons of entering a foreign market is to get as many opportunities as possible.

Before jumping on the further indicators, it is very important to make prediction about the development of the economic strength based on the fluctuations of inflation and exchange rates. It will possibly expose the potential countries that can provide sufficient profit. GNI growth rate

Gross National Income (formerly known as a Gross National Product) shows a nations economic performance. It enables researchers to define the economic potential of the particular country.

GNI growth rate has been calculated using data from five different periods of time to enable definition of the trends. The numbers were shown in PPP dollars to avoid misunderstandings based on the differences in the price index between countries.

The GNI growth rate enables us not only to know the size and market potential of the country, but more importantly show us if the GNI is growing and with what dynamic. It could help our company to define trends in all countries and predict the future size of the market and its’ potential. In our opinion, it could show us which countries could be our future target markets. In some cases, particular countries still do not have GNI as high as others, but has a much higher GNI growth rate. As a result, these countries could in the future be much more attractive than those with the strong GNI at this moment. For example: the Chinese economy should be mentioned. With its level of the economy and high growth rate of the GNI it is predicted that the Chinese economy will eventually catch up with world leaders including USA, Japan and European Union members. Alcohol consumption

This criterion will be calculated by multiplying the population and the alcohol consumption per capita. It will enable us to define the size of the potential market in terms of alcohol consumption.

Alcohol consumption will show us the size of the alcohol markets amongst our candidate countries. The numbers presented in the table “Alcohol consumption”[5] are shown in liters of the pure spirit consumed in the particular countries. It means that all alcohol was converted into the strength of the pure spirits (e.g. vodka, whisky and brandy, which contains 40%alcohol by the volume)

Alcohol consumption was chosen as a secondary screening criterion due to its substitutive role. In our opinion, markets with high alcohol consumption might present stronger market potential than others. In this case, our company hopes that it will be able to change consumers’ alcohol preferences and possibly switch their drinking habits from other alcohols into beer consumption. The possible reason would be the trend which was observed in Poland at the beginning of the nineties, when alcohol consumers partly gave up drinking full spirits (vodka) and switch ed themselves into beer drinkers. Moreover, according to Douglas and Craig (“Global marketing strategy”) this strategy was presented by some of the biggest breweries (Heineken, BSG and Guinness) which focused its marketing operation in the wine-drinking South European markets.


[1] JEANNETT, Jean-Pierre and HENNESSEY, H. David (2001); Global Marketing Strategies; page 171

[2] JEANNETT, Jean-Pierre and HENNESSEY, H. David (2001); Global Marketing Strategies; page 172

[3] Cundiff, Edward and Hilger, Marye Tharp (1988); Marketing In The International Environment; page 67

[4] Cundiff, Edward and Hilger, Marye Tharp (1988); Marketing In The International Environment; page 67

[5] See appendix


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University of Western Sydney
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Which Europe Beer Markets Market Potential Master’s Project International Business




Title: Which of the Europe's Beer Markets offers the highest unrealised Market Potential?