Chapter 4- Evaluating Environmental Opportunites

When evaluating environmental threats, Sam Adams has focused on neutralizing and making some of those obstacles opportunities.

Through product differentiation, cooperation, supplier diversification, and new customer focus, Sam Adams has placed themselves as a model for 'craft' brewers throughout the world.  

Sam Adams culture focuses on unique quality, product knowledge and employee value.  Bringing all of these qualities together makes them a company that produces some of the best beer in the world.  

Sam Adams has a standard of their own.  They do not necessarily focus their attention on the competition but it is put into the practices that they adhere to with their business plan.  They differentiate their product to handle threats of entry, rivalry and substitutes. They work with multiple suppliers throughout the world to get the best ingredients for their beer and believe that only the 'best' will do.  Finally, to grow their company they seek new customers with regular promotions and charities to bring about public awareness of their product.  To give an example of this last point, I thought this might help...

Brewing the American Dream

In June of 2008, Jim and The Boston Beer Company launched a program called Samuel Adams Brewing the American Dream® to provide low and moderate income food & beverage small business owners (typically employing between 1-5 people) with the financial support and mentoring they need to achieve their dreams even when the odds are stacked against them. Jim has not lost sight of his humble beginnings or forgotten how hard it was in the early years, which is why he felt it was important to give back to other passionate small business owners. In launching the program, The Boston Beer Company partnered with ACCION USA, the domestic arm of Boston-based ACCION International, a global microfinance nonprofit. The Boston Beer Company committed an initial $250,000 to establish the Samuel Adams Brewing the American Dream Loan Fund, providing much needed capital to lower and moderate income small business owners whose businesses would not be approved for a bank loan. The microloans offered through Samuel Adams Brewing the American Dream range from $500 - $25,000 with an average loan size of $7,000.

In addition to providing loans, the Samuel Adams Brewing the American Dream program also seeks to assist hundreds of other microentrepreneurs through coaching and mentoring workshops offered to local small business owners. Through educational opportunities like Speed Coaching workshops developed by Samuel Adams employees, the program provides an opportunity for local entrepreneurs to meet one-on-one in 20 minute intervals with Boston Beer employees to get advice and ask questions about web development, marketing, packaging, design, publicity, pricing and sales & distribution for help in starting their own businesses.

   

Chapter 3-Evaluating Environmental Threats

With Sam Adams competing in the brewing industry they face many environmental threats that can dictate their performance and how the go to market.  The industry that Sam Adams performs in is considered a monopolistic competition type featuring thousands of breweries world wide with a heterogeneous make-up of the product and a low cost of entry.  To battle these competing firms Sam Adams has to use product differentiation to separate themselves from other breweries and give themselves a competitive advantage.

As far as the 5 Forces Model of Environmental Threats, Sam Adams environment looks as the following:
-Low-Moderate Cost of Entry- the making of beer is quite simple and can be done with a simple kit from home but turning a small outfit into a moderately sized company can be quite difficult.  With this said we have seen many small brewers start small and grow to a size that can be competitive.
-High level of Rivalry-  throughout the world there are thousands of micro-breweries and hundreds of large beer producers.  When it comes to beer labels, many of us can sit around and name off multiple companies.  With so many companies in the market the market share is hard to gain and no one company has the lions share of the pie.
-Moderate Power of Suppliers- Making beer is quite simple but the ingredients that you put into beer is what makes your product unique.  There a number of ways to make beer, but Sam Adams has a select number of suppliers that they buy from and many of those sellers are located outside the United States.  This is where the threat comes from.  Buying from outside the United States has problems in the fact that the countries they are buying from might be facing different economic and environmental problems.  Uncontrollable price fluctuations, supply shortage, bad crop yield and cost competition are some of the threats that can give suppliers power.
-High Power of Buyers-  When a customer sits down at a bar or goes to the store to buy beer they have different motives to buying.  Some are looking for quality, some are looking at the price and some are looking at where the beer was made. With this, the customer has the ultimate buying power being able to select from a number of products.
-High Threat of Substitutes-  As mentioned before, brewing is a easy process.  I can make my own beer from home.  If that works out, I can obtain a license and start selling locally to bars.  The process is a little more difficult than what I just explained but we see this happening everywhere.  Small operations are popping up throughout the world and access to customers are ample.

Overall, Sam Adams functions in a very diverse and dynamic industry where the large compete with smaller companies.  Product differentiation is the strategic plan when working in an industry like this and Sam Adams does a good job of doing this.