Assessing Organizational Opportunities and Threats of the Boston Beer Company

Angelina Spaulding
OGL 355: Leading Organizational Innovation
College of Letters and Sciences
Arizona State University

Assessing Organizational Opportunities and Threats of the Boston Beer Company

Introduction
Organizations are systems that interact and respond to the environment (Coulter, 2013).
Meaning that as organizations operate, within any respective industry, driving forces outside of
the external environment of a firm can dictate the strategic positioning a business may take
within a marketplace (Lusthaus, et al., 2002). The environment can be viewed as a provider of
information, or as a provider of resources. The resources perspective of an environment
examines the scarcity of a resource, or how difficult it is to obtain a required resource. The
scarcer the resource is, the more hostile the environment is considered. Thus driving strategic
managers into action to help mitigate lost opportunities to obtain a resource. This would be like
a pet food company deciding to own the farms that sources the ingredient for its products. The
information perspective helps to determine the level of uncertainty within an industry. Is the
industry stable, or is the industry dynamic? Then based on the level of uncertainty of the
industry, managers determine the type of data that will be gathered to aid in strategic planning
(Coulter, 2013).
This documents purpose is to conduct an external analysis of an organization's specific
environment. Which means, that analysis of the external environment will focus on the five
competitive factors that influence a firms competitive advantage: existing competitors, possible
competitors, consumers, resource providers and alternative industry providers (Coulter, 2013).
The external environment in this examination will center around an information gathering
perspective of a specific external environment to benefit strategic planning for a firm.
The product of interest for this analysis is Samuel Adams beer. This product is
considered an arm of the Boston Beer Company and categorized as being part of the Food,
Beverage & Tobacco industry according to Forbes (2016). The Boston Beer Co. Inc. has many
divisions in addition to Samuel Adams Brewing; which are, Twisted Tea, Angry Orchard Hard
Cider, Traveler Shandies, Angel City, Coney Island Craft Lagers, Concrete Beach and Alchemy

& Science (a subsidiary brand) (Notte, 2015; Reuters). The company owns five brewers
throughout the United States, and produces small batch and limited edition beers exclusively at
its Boston location. The company also sometimes offers special edition beers, and sometimes
brews exclusive beers for beer week celebrations and festivals throughout the national and
internal market. At the end of 2014, the brewing company sold 4.1 million barrels of beer
(Reuters). Even though the business does have international reach, it is categorized as a small
business with only 1,120 employees (Forbes, 2016).
Below is an external sector analysis of the five major competitive factors:
Existing Competitors
Coulter (2013) discusses various conditions that strike up competition between
competitors within an industry. Within the Food, Beverage and Tobacco industry that amount of
competitors all seeking a portion of the industrys market share is arguably very large. Since
this analysis is focusing on the product Samuel Adams the main consideration for this study will
be other alcoholic beverage producers. Jason Notte (2015) of National Public Radios Market
Watch reported that eleven major brewers in the United States make up 90% percent of beer
distribution within the country (this does not account for microbreweries and brewpubs, which
will be considered later). Ten of eleven companies are active competitors against the Boston
Beer Co, which is considered part of the elite eleven. These ten companies and some products
are: Anheuser-Busch (Budweiser and Goose Island), MillerCoors (Coors Light and Blue Moon),
Constellation Brands (Corona and Modelo), Heineken USA (Dos Equis and Amstel light), Pabst
(Pabst Blue Ribbon and National Bohemian), North American Breweries (Labatt and Magic Hat),
Craft Brew Alliance (Kona and Redhook), Gambrinus (Shiner and BridgePort), Duvel Moortgat
USA (Duvel and Firestone Walker) and Diageo North America (Guinness and Red Stripe)
(Notte, 2015). These businesses are the major drivers of commercial production and
distribution of alcoholic products in todays domestic marketplace.

How do these competitors impact the environment within this alcoholic beverage sector?
First, as the above list notes, ...numerous and equally balanced competitors (Coulter, 2013,
pp. 60-61) exists. With so much even competition across the country, firms generally attempt to
take strategic action and hope that none of the other competitors take notice of the tactics. This
can be viewed in the concept of Coors Light color-changing beer cans. This niche move did not
seem to be that impactful and almost gimmicky to drive business, however MillerCoors saw a
3% raise in Coors Light sales the year the can was released over the previous years sales
(Alsever, 2009). Thus, taking potential market share away from the Boston Beer Co. This tactic
by MillerCoors can also be viewed as an aggressive tactic dictated by slow industry growth that
had occurred in the years prior to the cans release.
Another current competitive factor to consider is the, ...lack of differentiation or
switching costs (Coulter, 2013, p. 62). This idea considers products that are a commodity or
are commodity like, and are driven by consumers decision making in regards to price and
product. Each of the main competitors all have various product lines from beer, to cider, to male
beverages for consumers to choose. A consumer may choose a lower costing higher quantity
beer purchase, such as Bud Light, over a higher cost lower quantity purchased such as Samuel
Adams. Then it also comes down to consumers likes and dislikes when choosing a product
(which, will be discussed further in the consumers section of the analysis).
The final influencing factor to consider is the diversity of competitors. When competitors
differ in their strategic approaches, philosophies, or circumstance, its hard to judge how they
are going to act and react as they compete (Coulter, 2013, p. 63). Even though the main
competitors have such a strong share of the beer industry, it is the diversity in product offerings
that helps to increase rivalry within the industry. Essentially, companies have so many different
options when it comes to developing strategic competition based on the internal driving factors
of a firm (Lusthaus, et al., 2002) that competition between firms can be sparked at any moment.

Providing a main example of the importance of conducting external environmental sector

analysis.
The Boston Beer Co. has ten major competitors within the industry. These competitors,
plus the Boston Beer Co., share 90% percent of the market share for alcoholic beverages. This
strong holding helps to establish an equal sense of competition, a lack of differentiation and
switching costs to drive consumers choices and a lack of diversity among competitors product
offerings. These three examples are just a few of the factors that can influence the external
sector environmental analysis when gathering data to conduct strategic planning.
Potential Competitors
The next category that will be reviewed are possible competitors. Possible competitors
can be a concern for organizations if other industries attempt to take hold of current market
share and bring new capacity to an industry, and possible has enough of a resource arsenal to
combat against major competitors (Coulter, 2013). Potential competitors can be looked in the
form as import brewers, microbreweries, brewpubs and even other alcoholic beverage
producers (Wine Producers and Distillers).
According to the Brewers Association (2016) in 2014, 11% of market share came from
the craft producers (microbreweries and brewpubs). As was noted earlier, in 2009 90% of the
share of sales came from major competitors (Notte, 2015). Meaning that from 2009 to 2014 the
craft brewing industry was able to gain 1% of the beer industry market share.
Potential competitors face entry barriers into the mainstream marketplace. A main
barrier that can be seen as a cost disadvantage from other than scale (Coulter, 2013, pp. 6465). Meaning that established competitors might have advantages that small craft breweries do
not have, such as premium location and distribution points and protected product technology
(Coulter, 2013). Another barrier could be product differentiation, which comes from having
strong customer brand loyalty, ability to spend heavily on research, stronger advertising and
marketing that smaller craft breweries may not be able to reproduce (Coulter, 2013). Capital

requirements that firms need to establish themselves in the marketplace can be a barrier for
potential consumers (Coulter, 2013). Access to distribution channels, (Coulter, 2013, p. 65) for
smaller business may be difficult as larger competitors potential have already established
outlets for distribution. Finally, government policy and regulation over craft brewers creation
and distribution from state to state can also be considered a barrier for potential competitors
within a marketplace (Coulter, 2013).
Even though potential competitors have barriers to entering within the marketplace, it
seems that the craft beer brewing portion of the alcoholic industry has been able to carve out
some increased market share over the last few years. However, other alcoholic beverage
producers are also seeking out share of the alcoholic beverage industry by providing its own
strategic planning to sway consumers towards alternative libations, thus again taking away
potential revenue gains from the Boston Beer Co. All in all the potential competitive market
seems to have a combination of major threats, such as craft brewers, and not so major threats,
such as wine producers who are making a completely different alcoholic beverage option for
consumers.
Consumers
Consumers are individuals and business that purchase a product. The Boston Beer
Company, ...sells its products to a network of approximately 350 wholesalers in the United
States and to a network of distributors, who in turn, sell the products to retail outlets, where the
products are sold to drinkers (Reuters). Primary consumers for large packaged products, like
kegs, are generally sold to bars, restaurant and other large venues. Bottled beers are generally
sold to grocery stores, club stores, convenience stores, and liquor stores (Reuters). Then the
general public, over the legal drinking age of 21 in this country (Alcohol Policy Information
System), helps to dictate the purchasing power that distributors have.
Consumers can play competitors against each other trying to see who will give the best
deals (Coulter, 2013, p. 65); which can be seen at liquor stores or convenience stores.

Consumers can shop around for the best prices. Consumers can also face little switching costs
when moving from brand to brand. Even though the general public is not purchasing directly
from a producer, it is the main distributors purchasing power as a consumer to the direct firm
that can influence competition within a marketplace.
Resource Providers
Resource providers supply an industry with the products and services required that help
a business to formulate a product. In the case of the beer industry resource providers can be
considered Branding suppliers, brewing equipment suppliers, ingredient suppliers, packaging
suppliers and dispensing suppliers (Brewers Association, 2016, Commercial Brewing
Equipment Suppliers). According to Coulter (2013) resources providers can be dominated by a
few companies, offer substitute products, the importance of the provider's product to a firm and
specific concentration within the industry are all driving forces of competition. Specifically
speaking about beer, the Brewers Association lists thousands of providers that are specific to
the industry. This diversity in resource provider competition can allow big brewers, like Boston
Brewing Co., to search out the best providers available for the firm's products. These give more
of a competitive advantage to the individual brewers, over resource providers.
Alternative Industry Provider
Finally, that last competitor to be considered is a alternative industry provider. The best
way to evaluate this threat is to see whether other industries can satisfy the consumer need
that...the industry is satisfying (Coulter, 2013, p. 68). The beverage industry is vast, but when
specifically honing in on alcoholic beverages that industry in itself can also seem epic. Major
alternative industry providers can be looked at as Wine Producers and Distillers. Commercial
and craft producers of both sprites can impede on beer sales. Consumers have a huge amount
of choice when seeking various libation brands within the marketplace. These alternate
industries can influence consumer choice, thus taking away market share for the beer industry.

Conclusion
Organizations as open systems must interact and react to an ever-changing
environment. The ability to gain information or resources from an environment are dictated
based on the type of industry and strategic planning a firm wishes to conduct. An external
sector environmental analysis can help strategic leaders within an industry obtain data about
competition within the industry. In regards to the case of the Boston Brewing company all five
sectors of competition, existing competition, potential competition, consumers, resource
providers and alternate industry providers, can all impact the competitive advantage and market
share the firm sees within the marketplace. From other major big brewing companies, to
microbrewers, to brew pubs, to suppliers and to other alcoholic beverage providers the range of
impact that can be felt at the Boston Brewing Company can be great. By conducting external
sector analysis it can help a firm plan and execute strategic tactics that ideally will place the firm
under stronger competitive advantage over other firms inside and outside of any respective
industry.

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