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Transforming Carlsberg into a Cosmopolitan Firm

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The two breweries need to become one. The main goal of mergers and acquisitions ies in the creation of value that can be gained by such transactions. When integrating two different companies the core competences of both should be combined, in order to take advantage of the best possible benefits. Such benefits are e. g. , economies of scale, mutual learning benefits and getting access to unique resources, be it tangible, intangible or human assets. Therefore, mergers and acquisitions have to be conducted and implemented carefully so that organizations are able to create value.

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However, not only integration is necessary for successful mergers, firms also need to coordinate he merger in order to be efficient. This means, organizations need to match their organizational structures such as the management teams and the corporate functions to the strategy. Integration and coordination, therefore, has to take place not only at the top level of the company but in all levels as it concerns every single employee and process.

Formulating a Mutual Strategylntegrating Carlsberg and also forces the two companies to create a mutual strategy.

However, in order to effectively align the strategy on a group level, the history and previous strategies of Carlsberg and S&N ave to be taken into consideration. Due to the immense growth of Carlsberg Group their corporate philosophy “Local is King” is not valid anymore. The company had to change their strategy from a local to a glocal one which means integrating local and global strategy aspects. Therefore, the whole organization, including all departments and functions such as marketing, production and the company’s appearance in the society needs to be adapted to the new glocal strategy right down to the last detail.

However, enforcing a mutual strategy can be seen as a major challenge of aligning the strategy rocess to a group level as the local emphasis of Carlsberg encouraged its subsidiaries to focus different strategies. By conducting the merger, Carlsberg now has to bring all those different country and regional strategies on a common basis. Another complicating factor of the merger is the communication and information system of Carlsberg. Before the merger, the communication and information system of the organization mainly needed to function on a local basis not on a global one.

This system, though, would not be appropriate for the new corporate strategy as it does not really apply for a global communication. Therefore a well-organized mix of various communication and information tools is necessary for creating a mutual strategy. As Carlsberg Group wants its companies to be glocal, a balance between local and global strategy needs to be found. We are aware of the fact that such a huge organization as Carlsberg Group with all its various businesses in different parts of the world cannot have a perfectly mutual strategy that includes every single strategic aspect.

However, the task is to find a common umbrella strategy which contains the organization’s main goal, its vision statement, mission statement and corporate philosophy. Nevertheless, local conditions and environments need to be considered when formulating the secondary strategies that can vary for each subsidiary and location. We, therefore, see a major challenge in finding a strategy that is, on the one hand, specific enough to be target aimed, and on the other hand provides enough freedom to adapt to local conditions.

Looking at their slogan “the world’s fastest-growing global beer company” (Hoenen, Venzin, 201 3, 2) a further alignment difficulty can be identified. Fast growth nearly always brings problem with it, as the integrating process often takes a lot of time until the ew company becomes a well-functioning unit. As Carlsbergs last merger with Orkla had been conducted in 2001 , we doubt that the strategy of the n,vo companies had already become one when acquiring S&N. So this makes the integration and coordination of the merger with S&N even tougher.

Generally speaking, Carlsberg should notice that every merger and acquisition needs its time and so enforcing the slogan without looking at the consequences can cause serious damage to the company’s value. Seeking the perfect Balance between Global and LocalAs mentioned before, Carlsberg wants to align its new group strategy to become glocal. The challenge, therefore, is to find the right balance be?een the local and global market. Carlsberg owns sites in many different parts of the world, focusing on the Eastern, Western and Northern European and the Asian market.

Thus, the company has to deal with a huge amount of diversity. Particularly in formulating their strategies but also in conducting business the group needs to take the various cultures into consideration. Therefore, the subsidiaries not only need to have some certain amount Of freedom in defining their strategies – as aforementioned – but also in operating business. In order to e functional and efficient the roles of each subsidiary need to be defined clearly. They have to know exactly what they are responsible for and what they are allowed to do and decide on their own.

Moreover, the core competences and unique resources of each site should be taken into consideration in order to gain advantages for the whole company. Defining the Right Degree of Centralisation and Standardization As mentioned in the case of Carlsberg, the corporation tends to go towards a more centralized and standardized operating model. By this, the company wants to make the integrating process become much smoother. The benefits of centralisation and standardisation are the reduction of complexity, particularly of the supply chain and the production and administration, as well as the saving costs through economies of scale.

Moreover, the marketing department has more time to focus on innovation and product development and all processes are optimized, hence faster. Disadvantages include the increasing amount of bureaucracy which is shown by the statement of one employee “Headquarters are good at making presentations. No harm – but no use” (Hoenen, Venzin, 2013, 9). Also the inflexibility of standardized process and he resulting dissatisfaction Of employees, who are restricted in their freedom, are problems of standardisation and centralization. The challenge, thus, lies in defining the right degree of centralisation and standardisation on a group level strategy.

Finding an Efficient Decision Making ProcessHaving an efficient decision making process is a precondition for a successful alignment of the strategy process on a group level. First of all, it is crucial to find the right persons that can make well-thought through and efficient decisions that are in the best interest of the firm. These individuals also need to have assertiveness, can eal with their power but at the same time have to be trusted in by the employees. The area of responsibility should be clearly defined for top management as well as for middle and lower management.

Secondly, decisions have to be made and communicated clearly and successfully to the lower levels. Then decisions need to be implemented by middle and lower managers. However, an efficient decision making process is only possible when evaluating and giving feedback to higher levels. For this, adequate measures need to be found. When the feedback is analysed the decision needs to be adapted once again. ImplicationFor successful mergers and acquisitions it is crucial to first become aware and define the challenges that come with such a huge transition.

When realizing the challenges, organizations can set regulating actions in advance so that the alignment process of the strategies becomes much easier. In the case of Carlsberg, the integration of Carlsberg and S&N is the major challenge of the merging process. It is essential to know that integration must not only take place in the top management level but also in every other management level including every employee and working process. Therefore formulating a mutual trategy is an essential aspect in the case of Carlsberg.

As the merger makes Carlsberg group become a fully international company, the organization has to find the right balance between being local and responsive and global and efficient. Besides, the right degree of centralization of standardisation must be defined carefully as these orientations provide Carlsberg with benefits and drawbacks. Last, responsibilities must be clearly distributed and implemented, and feedback of employees on those decisions has to be taken in consideration. Critically assess the changes that have been made to the strategy process of Carlsberg.

Discuss the rationale for the changes and their effectiveness. Due to the merger of Carlsberg and S&N many challenges that needed to be solved have occurred. Not only was the integration of both organizations a main challenge but all the little but complex adaptions that came along with the coordination and integration. On the website of Carlsberg Group their business model can be found which perfectly reflects the results of the changes, Carlsberg has made in order to successfully become a fully global player. Figure SEQ Figure ARABIC 1 – Business Model (Carlsberg, n. d. As visible in Figure 1 Beer is Carlsberg core product. So the whole business concept, including the strategy, is built around Carlsbergs various beer brands. One of the first changes that have been made to Carlsbergs strategy is the glocal orientation. By being glocal, the organizations want to be local, by taking local differences, diversities, values into consideration while, at the same time, being global and therefore present every,vhere. Balancing growth and mature markets indicates that Carlsberg tries to act sustainably and strengthen their position in mature markets.

However, the firm also wants to grow and expand its business activities all over the world. Last but not least, they again emphasise the importance of being a powerful player in their markets. In order to successfully implement their business model after the merger with S&N, Carlsberg Group had to introduce many changes, most of them on the strategy process level. One significant modification was the introduction of the formal, W-shaped planning process. This new model takes place at three steps, the global, the regional and the country level.

At each steps inputs for strategy development are given. Particularly the two way communication, which goes from global to country and from country’ again to lobal level, allows the firm to get crucial feedback on the inputs. However, not only the strategic planning is being done by the W-shaped model, but also the financial perspectives are considered in the second phase of the model. The main advantages therefore are the integration of the regional and country level, which allows the company to get more and more precise inputs that reflects the local needs and demands.

Moreover, the higher levels also get constructive feedback by all levels of the organizations. So the strategy planning process becomes increasingly practicable. Unfortunately, the mplementation of the model also brings some difficulties with it. First, the W shaped model is not really working fast. It takes a lot of time until the feedback comes back to the higher levels. However, the process is not finished then. The budget phase also requires inputs and feedbacks. So when fast decisions, regarding the strategy planning, are needed the W-shaped model cannot be seen as adequate.

Besides, the fixed model does not leave room for individual strategic planning processes, which might limit the creativity and decreases the satisfaction of the employees, as they always need to stick to the pre-set model. Another significant change was the implementation of the “CEO toolkit’ (Hoenen, Venzin, 2013, 9). By this, a common language for the strategy formulation has been established which definitely lead to a better communication system concerning strategic issues. This toolkit might have its benefits.

Many employees, though, see it as useless PowerPoint slides that only are a further working burden. Two years after the implementation of those two strategic planning and formulating models, Carlsberg recognised the drawbacks of the models and updated them. Therefore they separated the “where to win” choices from the “how to win”. The “how to win” choices can be found in the company’s strategy wheel which was established to visualize their strategy. So employees and other stakeholder such as customers, consumers and suppliers, can better understand what Carlsberg’s strategy aims at (see Figure 2).

The strategic wheel represents the umbrella strategy of Carlsberg which also resembles the glocal strategy (being global and local at the same time). The umbrella strategy needs to be implemented in each headquarter of the company, however, the sub strategies can vary and thus be adapted to local circumstances, needs and realities. Depending on the given situation in the ountry and company site the different levers of the strategy wheel, such as people, customers and society and reputation, can be of various importance. So one country might focus more on people, whereas at another site the effectiveness and efficiency is quite essential. 7997155794375Figure SEQ Figure ARABIC 2 – strategy Wheel (Carlsberg, n. d. )Figure SEQ Figure ARABIC 2 – Strategy Wheel (Carlsberg, n. d. )279971 5291782500Concerning the levers, all except for people which emphasises the importance of develop competences of employees and the establishment of a leadership culture that is based on trust, have been changed. First, consumers, brands and innovations have been combined as consumers have an important influence on innovations and brands. In our view, the restructuring of this lever IS highly efficient.

Nowadays consumers have great impact on a company’s products, hence on their brands and innovations. Due to the globalisation and the importance of the internet, consumers have access to information about new products and processes, so they will always demand the best and newest goods. When seeing this lever through a consumer perspective, Carlsberg can fully focus on its consumers and provide them exactly with the wanted and needed goods. Another lever that has been changed is customers. Costumers have been separated from consumers so that the importance of customers is pointed out clearly.

Also the point of sales can be emphasized much better by having a unique customer lever. We agree with the authors, saying that customer and consumers should be separated. In our view, consumers concern a greater amount of people than customers. Therefore, special attention should be given to those individuals that purchase their beer at Carlsberg. When looking at customers, particularly the field of customer retention is essential whereas for the consumer lever, customer attraction is mportant. Hence, the customer lever can better focus on loyalty and membership programs that help to reduce the fluctuation rate of customers.

The next lever is called society and reputation and shows the importance of a good and valuable brand name for Carlsberg. This lever can also be found easily on the company’s website under CSR practices. The organization uses e. g. sustainable packaging promotes responsible drinking and tries to reduce their impact on the environment. In our opinion, CSR practices should be implemented in the strategy of every company as this topic has gained mmense importance in the field of business. The last lever that has been changed is effectiveness and efficiency.

Before, the focus only lay on efficiency. However, the firm wanted to stake out that saving cost is not the only important factor. Instead, doing the right things is what makes a firm successful. Carlsberg is absolutely right in their argumentation. We believe, that it is essential for a functional business to reflect on their actions and to remind itself that it is not only about reducing costs but also to implement the right processes and have the right strategies. All the single actions in a ompany should be deducted from this effectiveness and efficiency doctrine.

Last, the main strategy slogan has been changed from “Being the fastest growing global beer company/’ to “Thirst for Great”. This change is very reasonable as focusing only on the word fast does not say so much about the company’s values or qualities, it is simply about growing. Whereas “Thirst for Great” implies that the company wants to do and achieve something more than size. In order to be great, the employees need to be great, the brans need to be exceptional and the drinking Carlsberg should create beautiful oments for its customers.

Looking at the whole Strategy Wheel, we have to argue that all the changes seem to be justified and will definitely make future strategy production and formulation much easier. However, we are concerned about the implementation of the Wheel. Saying is still different from doing. So we are curious if Carlsberg can really apply the Strategy Wheel in its daily business or if all the good practices mentioned above are not taken seriously by the company. In order to make the strategy process of Carlsberg efficient also the organizational structure needed to be changed.

The rganization transformed their geographical structure into a matrix, which simultaneously focuses on the various regions as well as on the business functions. Due to the merger with the pure geographical structure was not suitable any more as the area was too distant and too expensive. By introducing a matrix with business functions a certain degree of standardization and centralization could be reached. The standardized processes helped to save costs. Furthermore the new structure allows the company to be global and local at the same time, thus reach the glocal level that it has strived for.

The structure helps Carlsberg to be near to the customers, to adapt to market changes and to understand the preferences of the local consumers. Unfortunately, the matrix structure is extremely difficult to successfully implement. Many companies that have tried to apply the matrix have changed back to a geographical orientation after some years. By coordinating function and region the matrix structure is extremely difficult. It is hard to make decisions that are suitable for both sides. So when not handled appropriately the matrix structure will not help Carlsberg to fully achieve the aimed restructuring.

Last but not least, also the Executive Committee has been changed to fit to the new strategy process. Before the merger the committee existed Of three Danish CEOs. Now, ten top managers of the regional and functional branches make part of the Executive Committee. This allows the organization to simultaneously focus on the various regions. Dealing with diversity becomes, thus, less a problem of the company as all the regions are integrated in the decision making process of Carlsberg. Also better and more input is gained by the ten individuals.

However, a bigger Executive Committee needs more time to come to a ommon decision as the coordination of the various opinions is more difficult and complex to handle. ImplicationAs the merger of Carlsberg and is relatively young it is of crucial importance to critically reflect on the changes that have been made. Not only top managers but all employees need to observe the new processes and structu res and see if they work well. Furthermore, it is essential that the CEOs of Carlsberg get feedback of the implemented changes at each company level and analyse the various transformations.

If a process is not working smoothly it then has to be adapted to be more effective. Besides, it can be that some fields have not be changed but still need to be adapted due to the merger. So managers should become aware of these business areas. What role should the regional headquarters play in the strategy process? For facilitating a better balance between global integration and local markets Carlsberg strengthened regional management teams. This was important for controlling the regional headquarters.

After the acquisition of BBH and its East European operation, Carlsberg regrouped its markets in 2008 and split Western Europe in two regional teams: Northern Europe and Western Europe. Now, these teams act s separate organizational units. Another regional team was the East European region which is covering the markets of Russia, Ukraine, Kazakhstan, Uzbekistan, Belarus and Azerbaijan. However, each regional management was located at the group headquarter in Copenhagen. Even the regional team of Asia was initially located in Copenhagen. Later, it was relocated to Hong Kong to be closer to the markets.

The challenge of Carlsberg was to make the regional structure work. Therefore, the company had to define clear roles and responsibilities as well as integrative processes. First, regional headquarters and offices were not really developed and eeded to be improved. They had no dedicated business development or commercial team resources, such as regional marketing or sales directors. The problem of Carlsberg was that they are struggling to make structure work in terms of accountability and defining clear roles and responsibilities at all levels.

Their key rationale for establishing regional teams and headquarters was to push the corporate innovation agenda, facilitate the global management of their international brands and advance regional key accountant management. Regional headquarters play an important role in the strategy process because they are in control for crucial tasks. The main function are controlling, budgeting, developing a regional strategy and the planning of marketing, regional staff training and sales. Furthermore, they are responsible for Human Resources, financial management and the coordination of the IT system.

As mentioned in the sections before, Carlsberg wants to follow a glocal strategy, being local and global at the same time. This implies that the regional headquarters need to be perceived as extremely important, particularly for Logistics, Marketing and Sales. Especially in these fields of business Carlsberg relies heavily on local circumstances. For glocal Logistics the company needs to establish well-working relationships with suppliers and adapt its logistic strategy to the local or regional infrastructure.

Glocal Marketing means that the Marketing campaigns as well as market research is conducted on a local and regional level, but global methods are being used. Also Sales need to focus on a local level as the success of Carlsbergs various beer types depends heavily on local tastes. In China, Carlsberg will certainly offer other beer brands than in the US. Furthermore, being glocal and particularly being local, allows the company to be near to its ustomers, get immediate feedback from them and react quickly on changes and crises.

So, especially for these three business functions the regional headquarters play an essential role as these HQ act as the connection between the global, rational, cost-saving, standardized business operations and the local, adapted actions that are near to the customer. As aforementioned, Carlsberg sees the strategy wheel as its umbrella strategy, thus, as the main guideline for strategy process.

Cite this Transforming Carlsberg into a Cosmopolitan Firm

Transforming Carlsberg into a Cosmopolitan Firm. (2018, Apr 10). Retrieved from https://graduateway.com/transforming-carlsberg-into-a-cosmopolitan-firm-essay/

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