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.