Heineken Case

Anh Pham
BUSI 528-International Business

1

Heinekens Global Reach
1. Describe the fundamental issues in foreign market analysis for a firm like Heineken.
Before entering a new market, MNCs such as Heineken must take these four fundamental
issues into consideration to ensure to success of its entrance. First is the product sales
potential and product attractiveness in the new market. Second, local competitors and the
competition level should be analyzed to measure the possible success/failure of the
products and how competitors will react for marketing purposes. Local laws and
regulations regarding the products present the third issue that can directly affect the
operation of firm within that host country. Lastly, factors such as taste preferences,
customs, and other sociocultural issues must be considered as well in order to adjust
certain aspects of the products and make them more appealing and attractive to the local
customers.
2. Discuss the advantages and disadvantages for Heineken of exporting its beer from one
country to another.
Heineken choses exporting as its mode of entry to many markets in order to differentiate
its beer with local competitors by labeling itself as the imported beer. This label can be
very appealing in many markets, especially in the U.S., where Anheuser-Busch is the
dominant domestic beer. If Heineken chose to produce in the U.S., its beer would be
another domestic beer and the firm must compete directly with Anheuser-Busch, instead
of enjoying the attractiveness of imported beer. The disadvantage is that producing
beer within the host country can reduce the cost of distribution, tariffs or NTBs against
imported goods.

3. What are the key-issues facing Heineken insofar as international licensing is
concerned?
_ Quality control: an international license agreement between the licensor and the
licensee must contains adequate quality control provisions to enable the licensor to
check that goods on which the license trademark are being used are of an appropriate
quality (International Licensing). This is especially important to imported food products
such as Heineken beer to protect the brand image and reputation on its taste across the
globe.
_ Revelation of valuable information: to ensure the consistency of the product quality,
licensor must provide information such as formulas or brewing secrets, which are crucial
to the success of the brand. By giving the licensee this valuable information, Heineken
faces the possibilities of creating future competitors once the agreement is expired and
the licensee decides to create the same products.
_ Product liability and licensors reputation: in many cases, especially in the
trademark area, the owner of a trademark that is used by a licensee on a product that is
defective and causes [damage] may itself be liable to the victim as well as the licensee
that actually made or sold the defective product (International Licensing). Heineken
must keep a strong and close relationship with its licensee to make sure the
manufacturing, distribution of raw materials, and quality control process be performed
accurately and carefully. Any damages or problems made by licensee can potential harm
the reputation of the overall brand because in the consumers eyes, the defected product
bears the brands name, not the licensee name.

Anh Pham
BUSI 528-International Business
3

4. Why is Heineken so focused on expanding its global sales?
Heinekens headquarter and home country is Netherlands, a small market of
approximately 16 millions people - ranked 65 in world population (Netherlands). Because
of its small domestic market, Heineken must reach out to the global market for extra
revenues and opportunity to grow. Furthermore, Heineken must focus on global sales to
stay in the game when other beer MNCs such as Anheuser-Busch and Miller are also
expanding their territories around the globes. Budweiser is reported to have grown 6.3%
in 2012, with international markets leading the way, and have achieved more than 51%
sales from 85 foreign countries of all continents (Anheusesr-Busch). Miller also reported
significant growths in all foreign markets, except for Eastern Europe in 2012, with 12%
increase in reported earnings before interest, tax and amortization (SabMiller).
Heinekens strong effort in expanding global sales is a must to compete internationally
with these MNCs in many new emerging and potential markets.
5. Which markets offer Heineken the best prospects for revenue and profit growth? Are
there any markets you would recommend that Heineken abandon? If so, why?
According to Heinekens 2012 Annual Report, its total revenue was 18,393 millions.
Western European market contributed 42.3% of that revenue, while Americas came in
second with 24.6%, Central Eastern Europe with 17.8%, Africa and Middle East with
14.4%, and last, Asia Pacific with 2.9% (Heineken). Total revenue in 2012 increased
7.4%. The consolidated beer volume from emerging markets has increased from 51% in
2007 to 64% in 2012. The company gained shares in Europe (UK, Belgium, France and
Ireland) and consistently gained group beer volume in all other markets. Overall,
Heineken is doing very well in all of its markets, regarding revenue and potential profit
growth. Under the reports Outlook 2013 section, the brand is expected to outperform

the international premium segment and overall beer market (Heineken). Under special
circumstances of current political instability of the Eastern Europe market, the Americas
market appears to be very promising. Furthermore, there is no market that Heineken
should abandon right now as all of them are growing demands for Heineken products.

Work Cited overall beer market in 2013
Heineken. Annual Report. N.p., 5 May 2012. Web. 3 Oct. 2013.
<http://www.theheinekencompany.com/investors/reports-and-
presentations?tab=financials>.
Anheuser-Busch. Annual Report. N.p., 2012. Web. 3 Oct. 2013. <http://www.ab-
inbev.com/pdf/AR12/AB_InBev_AR_global_flagship.pdf>
"International Licensing." Ladas & Parry LLP. N.p., n.d. Web. 03 Oct. 2013.
<http://www.ladas.com/IPProperty/Licensing/InternationalIPLicensing/Agreemen
tProvisions.html>.
"Netherlands." The World Factbook. Central Intelligence Agency, 2013. Web. 03 Oct.
2013. <https://www.cia.gov/library/publications/the-world-
factbook/geos/nl.html>.
SabMiller. Annual Report. N.p., 2012. Web. 3 Oct 2013.
<http://www.sabmiller.com/files/reports/ar2012/2012_annual_report.pdf>

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Anh Pham

BUSI 528-International Business

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