Introduction of the Heineken Premium brand in the Democratic
Republic of Congo
“An investigation into the opportunities of the Heineken brand in the current beer portfolio and building brand equity
in the capital of Kinshasa”
Organisation : Heineken International N.V.
Author : R.P.K. Sneep Studentnumber : 1152769 University of Groningen Date : 28-01-2005
Title:
Introduction of the Heineken Premium brand in the Democratic Republic of Congo, Kinshasa
Subject:
Research into the positioning of the Heineken Premium brand and building brand equity for this brand.
Author:
R.P.K. Sneep
Student number:
1152769
Supervisors:
N. Campbell, BA (Hons.) Msc State University of Groningen Mr. drs. H. Ritsema, State University of Groningen
Mr. B. Theys, Bralima S.A.R.L.
Course:
Final thesis to graduate in Business Administration
Company:
Bralima S.A.R.L.
1, Avenue du Drapeau BP 7246
Kinshasa (Gombe/Barumbu) Democratic Republic of Congo
Date:
January 2005
‘The author is responsible for the content of the thesis. The copyright of the thesis rest with the author’.
Preface
This thesis is written at the behest of completing my study Business Administration at the University of Groningen and contains the results of the thesis investigation, which I have carried out in order of the Bralima S.A.R.L. brewery, located in Kinshasa, Democratic Republic of Congo. Heineken International is the main shareholder for the Bralima brewery.
I would like to thank everybody, who contributed to the fulfillment of my investigation. First of all thanks to all the employees of Bralima, who freed time to help me making my project a success! Particularly I would like to thank my corporate supervisor, Bernard Theys, and the marketing director, Marc Henry Rouvroy, who guided me through all the processes in the organization and made my internship an unforgettable one.
Particularly the hands-on approach of Marc Henry Rouvroy made me realize that focusing on the practical site of the research is, certainly in Africa, necessary to make business successful. Besides the supervisors at Bralima, I would like to thank my supervisors at the university, Nicola Campbell and Henk Ritsema, whom guided me through the research and gave me valuable feedback and recommendations when needed.
Furthermore I would like to thank my parents and friends for all the valuable support during my study in Groningen!
It was an unforgettable time in Congo and I hope you enjoy reading my thesis!
Natonai bino mangi po eleki malamu!
Groningen, January 2005
Rogier Sneep
Table of contents
Chapter 1 : Introduction Heineken International and Bralima S.A.R.L. ...6
1.1 Heineken history and principles...6
1.2 Heineken International...8
1.2.1 Organisational structure Heineken International ... 8
1.3 Bralima brewery...10
1.3.1 History of the brewery ... 10
1.3.2 Facts about the brewery... 12
1.3.3 Internal environment ... 12
1.3.4 Strategy... 14
1.3.5 Structure and systems ... 16
1.3.6 Organisational configuration ... 17
Chapter 2: Research design ...21
2.1 Assignment...21
2.1.1 Situation ... 21
2.1.2 Background to the research ... 22
2.2 Research design...22
2.2.1 Problem and problem owner ... 22
2.2.2 Problem statement ... 24
2.2.3 Sub-questions ... 25
2.2.4 Definitions of important concepts ... 25
2.3 Conceptual model...27
2.4 Outline of research...28
2.5 Methodology...29
2.5.1 Type of research ... 29
2.5.2 Design of the research ... 30
Chapter 3: Market overview and positioning of Bralima’s Beer Brand portfolio ...34
Introduction...34
3.1 Characteristics of the market and Congolese consumer...34
3.2 Positioning of the brands in 2001...37
3.2.1 Brand Primus in 2001... 38
3.2.2 Brand Skol in 2001... 39
3.2.3 Brand Turbo King in 2001 ... 39
3.2.4 Brand Doppel in 2001 ... 40
3.2.5 Brand Mutzig in 2001 ... 40
3.2.6 Brand Castel in 2001... 41
3.2.7 Brand Guinness in 2001... 42
3.3 Actual positioning of the beer brands...43
3.3.1. Positioning Primus/Skol and recommendations for Primus... 43
3.3.2. Positioning Turbo King/Doppel and recommendations for Turbo King... 45
3.3.3. Positioning Mutzig/Castel and recommendations for Mutzig ... 45
3.3.4. Positioning Guinness ... 46
3.3.5. Positioning of beer into four categories ... 47
3.3.6. The convivial ones ... 48
3.3.7. The party animals... 48
3.3.8. The show offs... 48
3.3.9. The virile ones... 49
3.3.10 Final positioning diagram ... 50
Conclusion...52
Chapter 4 : Evaluating the positioning strategy ...54
Introduction...54
4.1.1 Occasion for the Heineken brand... 55
4.1.2 Opportunities for Heineken Premium Brand... 56
4.1.3 Definition Heineken Premium Brand ... 57
4.1.4 Segment/proposition Heineken brand ... 62
4.1.5 Cannibalisation effects ... 64
4.1.6 Brand positioning and communication strategy... 75
4.1.7 Marketing instruments introduction stage/anchor stage ... 77
Conclusion...80
Chapter 5 : Building brand equity for Heineken...82
Introduction...82
5.1 Customer Based Brand Equity according to Aaker, Lasser and Keller ... 83
5.2 General discussion: Managerial implications and recommendation for next two years... 89
Conclusion...92
Chapter 6: Conclusions and recommendations for further research...94
6.1 General conclusion ... 94
6.2 Recommendation for the Bralima marketing department ... 96
6.3 Evaluation of research process... 97
6.4 Recommendations for further research... 98
Bibliography ...100 Appendixes: ...Error! Bookmark not defined.
Chapter 1 : Introduction Heineken International and Bralima S.A.R.L.
Heineken is one of the world’s largest and most advanced brewers and the Heineken brand is the most valuable international beer brand. Operating in over 170 countries, through its own breweries and through export and licensing partners, Heineken has the widest global presence of all the international brewers.
Europe accounts for over half of Heineken’s sales volume. At the end of 2003, Heineken owned over 115 breweries in more than 65 countries and employed 61.271 people 1
1.1 Heineken history and principles
Origins
Heineken has its roots in Amsterdam, where Gerard Adriaan Heineken purchases the brewery “De Hooiberg” in 1864. In the ensuing decades, under the leadership of three generations of the Heineken family and pursuing a policy of measured expansion and consistent brand development, Heineken has grown into one of the world’s leading brewing groups. Core values within the company include respect, enjoyment and a passion for quality.
Shareholders
Heineken seeks to secure long-term profit growth for its shareholders by expanding in existing markets and entering new markets. Heineken’s strategy creates added value for shareholders and generates returns, which are above the average for the brewing sector.
Distribution
Heineken seeks to achieve comprehensive coverage in each market, through alliances with independent distributors or via its own beverage wholesalers. Heineken owns numerous wholesalers in Europe, which, in addition to beer, also supply a supporting range of soft drinks, wines and spirits on trade. Some of the soft drinks are produced by Heineken. In Congo, the Bralima brewery has an agreement with the Coca Cola company to produce under licence and distribute the Coca Cola’s soft drinks to the customers in the market.
Innovation
Heineken works constantly to meet the consumer’s changing needs and improve the quality and safety of its processes and products, its cost structure and its environmental performance. For a leading company like Heineken, innovation in marketing, communication, packaging, brewing technology and supply chain management is important, especially in reinforcing the competitive position of the international Heineken and Amstel brands.
Ownership structure and stock exchange listing
Heineken Holding N.V. holds 50.005% of the Heineken N.V. shares. Heineken Holding N.V. has no operational activities: Heineken N.V. and its related companies carry these on. Heineken N.V. is responsible for the development and implementation of the strategy. Heineken Holding N.V. is concerned primarily with
1www.heinekeninternational.com/ Annual report Heineken 2003
safeguarding the long-term continuity, independence and stability of Heineken’s activities. The net asset value and dividend policy of the two companies are identical. The shares and options on the shares of both companies are traded on the Euronext Amsterdam.
Goal and strategy
Heineken’s goal at all times is to defend and strengthen its leading global market position and preserve its independence. Heineken’s strategy for attaining this goal is to:
• Achieve a level of sales and profitability, which makes it one of the world’s largest and financially best-performing brewing groups.
• Maintain a strong portfolio of beer brands, with Heineken as the leading international premium beer.
• Maintain strong local market positions, a good sales mix and an efficient cost structure by combining the sale and distribution of the international Heineken premium brand with that of strong local brands.
• Fulfil its corporate social responsibility, particularly with regard to policy on alcohol abuse, social and environmental issues.2
According to the CEO of Heineken, mr. A. Ruys, the aim for the Heineken corporation is formulated as follows:
Heineken aspires to remain the world’s leading international brewer. We are a top 3 brewer with the highest quality of earning in the industry offering the most valuable beer brands portfolio, with Heineken as the leading international premium brand. We intent to maintain independent.3
2 Annual report Heineken 2003, 2
3 Ruys, A. in President Letter 2003
1.2 Heineken International
1.2.1 Organisational structure Heineken International
Heineken N.V. head office, which employees about 250 employees, is located in Amsterdam, the Netherlands. The head office is made up of all staff departments, including the brand managers for Heineken and Amstel, and the Executive Board, which operates from the former residence of the company founder, Gerard Adriaan Heineken. Heineken employees a decentralised management model, which means that the staff departments and operating companies work within a clear framework set out by the Executive board, and bear responsibility for their results4. Heineken has as formal and prescribed structure a decentralized organisational structure consisting of a compact central organisation and result responsible business units.5
From the average of 61.000 people, which are employed at Heineken, 250 people form the relative small holding. Most of the decisions are made in the business units and not in the top of the organisation. The head direction develops the overall strategy and a clear framework for the staff departments and the operating companies, and beat responsibility for their results. The directions of the operating companies have as entrepreneurs a high degree of independency. This enables them to work flexible and market- oriented and give the highest priority to quality of the product and the business processes. In the different organisations, creativity and own responsibility of the employees is stimulated. As the factual procedure is investigated, it can be said that these (factual structure) is also decentralized. The actual decisions are being made in the subsidiaries themselves.
The question of how responsibilities are divided over the different managers in the line hierarchy, from the top of the organisation through the middle-level to the lowest executives, can be answered by using the Mintzberg’s term of vertical decentralisation.6 Due to the fact that the operating companies have a relative high level of independency, can take their own decisions and bear responsibility for their results, the level of vertical decentralization in the Heineken International structure is relatively high.
Heineken Holding is a financial holding and takes care of the strategic steps within the organisation. The central organisation supplies the operating companies with supporting and coordinating services in the domain of marketing, finance, production, ICT, legal and business affairs, human resources and communication. This group is responsible for policy and control. Besides this the second group is responsible for the facilities and support staff. The most important unit within this group is Heineken Technical Services, which is responsible for the brewery construction, modernisation and expansion. The individual directions have to take their responsibility to the head direction of the Heineken Holding. Ideas or plans for expansion of an operating company must be approved by the Holding, before starting the planned expansion. In terms of Mintzberg, the Heineken International organisation, correspond as much with the configuration division organisation. The organisation consists of separate parts, the operating companies,
4 www.heinekeninternational.com
5 Paul e.a. , 1994, Jagers e.a., 1999
6 Paul e.a., 1994
which are held together by an administrative component, the holding. Each operating company had its own autonomy and structure. The emphasis is on training, managing and motivating the middle line managers, who have their own responsibilities and commercial/financial targets.7
The executive board is responsible for guiding four groups, including the “Policy and control”, the “Facilities and Support staff, the several “Clusters” and managing the “Operating Companies”. Understated figure (figure 1) gives a visual interpretation of the responsibilities and tasks of the Heineken’s Executive Board:
Figure 1: Responsibilities of the Executive Board of Heineken
The first group is responsible for policy and control. This group includes corporate staff departments and marketing, finance, production, ICT, legal and business affairs, human resources and communication. The second group is responsible for facilities and support staff. All the existing Heineken companies worldwide are supported by a number of services. The last group is primarily responsible for the operating companies.
Major brewer subsidiaries, found on all continents, form separate operating companies. Smaller operating companies are grouped into regional clusters and report to the relevant cluster management group in Amsterdam. Bralima S.A.R.L. is one of those smaller operating companies, which reports to the cluster Sub Saharan Africa in the head office at Schiphol Airport in The Netherlands. 8
7 Mintzberg, 1979
8 www.heinekeninternational.com
1.3 Bralima brewery
1.3.1 History of the brewery
After the First World War (1914-1918) Belgium businessman came to visit the present Democratic Republic of Congo to evaluate the opportunities to invest in this country. They heard that the government was interested in producing beer for the local population due to the fact that the beer produced by the inhabitants themselves caused major health problems. A brewery, which could brew a high quality beer, would be a good substitute for the current situation. The investors decided to set up a brewery with the support of the
“Banque de Bruxelles”. On 23 October 1923 the “Brasserie de Leopoldville” was established for only 4.000.000 Congolese Francs. After this decision the first beer was produced on 27 December 1926.
Major problems appeared in this first stage of the establishment of Bralima. The government did not authorize to sell beer to the neighboring countries. Other problems appeared with the level of price, which appeared to be too high according to the purchasing power of the population. Also a quantity of 35.000- 40.000 hectoliters of German beer was imported, which seems to have a superior quality in comparison to the locally produced beer. Finally the economical crisis in the world started which seemed to have its impact on the Congolese economy.
In 1933 the brewery went nearly bankrupt, because they sold only one tenth in relation to the total quantity of imported beer. At the end of 1933, a new managing director stepped forward and his mission was to improve the overall quality of the brewed beer. The beer was pasteurized and the production process was modified. Due to these improvements the brewery climb out of the valley and improved their financial results.
Also the economical grow of Congo, a consequence of the World War Two, seemed to have a positive impact on the brewery: Bralima’s production volume was growing up to 1.500.000 bottles a year.
Unfortunately these grow levels were not noticed by the Congo government, because communication between them and the Societies of Brussels was bad in these times, due to the fact that the country was involved in war. When the news reached Belgium, the enthusiasm about the growing levels of brewed beer was enormous and new investigations were made immediately.
Around 1945 the brewery is gaining benefits from the economical boom in the Democratic Republic of Congo. This result in a growing of confidence in the economical forecasts. Stakeholders were more likely to invest and Bralima decided to carry out a decentralized structure. From 1950 to 1958 Bralima decided to keep on five breweries in the Democratic Republic of Congo: Kinshasa, Boma, Bukava, Kisangini and Mbandaka.
Following the independence trends Bralima’ shareholders decided in 1960 to stay in Central Africa, keep the production facilities in working order, hire local people, train them and start to invest in soft drinks production plants within all breweries.
In spite of the zairianisation9 and the economical crisis in 1973, the brewery in Kinshasa was modernized with a new, stainless steel, Steinecker brewing room, with a capacity of more than 400.000 litres per day, giving away for good the old copper installations.
To send raw materials and spare parts to other plants in the country, Bralima bought 140 ton, self-motorized, boats with five rectangular 250 tonnes barges in the period 1979 until 1981. With the support of the ‘fond de relance economique ‘FREB’ two years later Bralima finances rice plantations in several regions of the Democratic Republic of Congo, just as the game tourist presidential park in the Nsele region.
In 1987 the Heineken Group becomes the major shareholder of all Bralima’s production plants. One year later Bralima inaugurates in Kinshasa the “Brasserie de l’an 2000” with twelve 250.000 litres capacity, new stainless steel tanks and a new 30.000 litres per hour Lochem beer filter. Operations are completely automatized with a central cleaning station, a water sterilizing installation, three yeast tanks and a 24.000 bottles/hour capacity labellers.
In 1992 Bralima bought CIB (Compagnie Industrielle de Boissons), mainly a Coca Cola bottler and owner of a soft drink plant in Lubumbashi. Four years later Bralima opened EBAC (Ecole de Brasseries de l’ Afrique Centrale) with as main purpose the training of technical employees for seven countries. In 1998, when it was the 75 years anniversary of Bralima, the brewery bought the BONAL Company (Boissons Nationales), Pepsi Cola’s main bottler.
In 2002 Bralima radically changed the Congo’s brewers local context, introducing ultra modern bottling lines, automates and EBI (Empty Bottle Inspector) and FBI (Full Bottle Inspector) machines. In 2003 Bralima received an ISO 9001 certification as a result of its excellent work and effort. Today Bralima is the only company in Central Africa to reach international standards for every level in the company10.
9 Zairianisation, which marked the beginning of the country’s long slide from prosperity into poverty : http://www.metro- press.com/congo/leopard.html
10 Bralima :Brochure 4*20 ans, 2003
1.3.2 Facts about the brewery
Founded in 1923, Bralima is one of the oldest breweries of the Heineken Group. It now has production facilities in five other cities in the Democratic Republic Congo, as well as one bottling plant of its own in the capital Kinshasa. Recently, an intensive program of modernisation was begun at the plants at Kinshasa and Boma, which were re-equipped with new, state-of-the-art machines. The other facilities will follow soon.
Bralima produces a wide variety of beers and other beverages, including the African favourite Primus, Mutzig, Turbo King, Guinness, alcohol-free Maltina and many soft drinks, which are bottled under license for the Coca-Cola Company.
Although Bralima’s sales were down for the last few years, restructuring of the production facilities, new marketing programs and focusing on costs enabled it to post an improved financial result. The current market share in the domestic market is 45% and the aim is to increase this share every year. Bralima employs over 950 people, whereas the brewery in Kinshasa is the largest employer inside the Bralima organization.11
1.3.3 Internal environment
The internal environment of Bralima can be described and analyzed by using different organizational models/theories. An example of this theory is the 7-S model of McKinsey and Levitt’s Diamond. The 7-S- Model is better known as McKinsey 7-S. This is because the two persons who developed this model, Tom Peters and Robert Waterman, have been consultants at McKinsey & Co at that time. They published their 7- S-Model in their article “Structure Is Not Organization” (1980) and in their books “The Art of Japanese Management” (1981) and “In Search of Excellence” (1982). Those seven elements are distinguished in so called hard S’s and soft S’s.12
The hard elements are feasible and easy to identify. They can be found in strategy statements, corporate plans, organizational charts and other documentations. The four soft elements however, are hardly feasible.
These are difficult to describe since capabilities, values and elements of corporate culture are continuously developing and changing. These are highly determined by the people at work in the organization. Therefore it is much more difficult to plan or to influence the characteristics of the soft elements. Although the soft factors are below the surface, they can have a great impact on the hard Structures, Strategies and Systems of the organization.
11 www.heinekeninternational.com/ interview F.Brun
12 Waterman, R. Jr., Peters, T. and Phillips, J.R., 1980. 14-26.
Pascale, R. and Athos, A., 1981 Peters, T., and Waterman, R., 1982
In the figure below (figure 2) the enumeration of the hard-and soft S’s can be analysed:
The Hard S’s
Strategy Actions a company plans in response to or anticipation of changes in its external environment.
Structure Basis for specialization and co-ordination influenced primarily by strategy and by organization size and diversity.
Systems Formal and informal procedures that support the strategy and structure. (Systems are more powerful than they are given credit)
The Soft S’s
Style / Culture The culture of the organization, consisting of two components:
· Organizational Culture: the dominant values and beliefs, and norms, which develop over time and become relatively enduring features of organizational life.
· Management Style: more a matter of what managers do than what they say;
How do a company’s managers spend their time? What are they focusing attention on? Symbolism – the creation and maintenance (or sometimes deconstruction) of meaning is a fundamental responsibility of managers.
Staff The people/human resource management – processes used to develop managers, socialization processes, ways of shaping basic values of management cadre, ways of introducing young recruits to the company, ways of helping to manage the careers of employees
Skills The distinctive competences – what the company does best, ways of expanding or shifting competences
Shared Values / Super ordinate Goals
Guiding concepts, fundamental ideas around which a business is built – must be simple, usually stated at abstract level, have great meaning inside the organization even though outsiders may not see or understand them.
Figure 2: 7-S-Model: “Structure Is Not Organization” (1980), “The Art of Japanese Management” (1981) /“In Search of Excellence” (1982)
The organisational model as described by Weggeman (1997) is an extension on the 7s framework and can be seen as an integrated model by which the internal organisation can be described, analysed and improved.
The integrally organisational model consists of the ESH framework, whereby the letters E, S and H stand for Balance, Coherence and Heterogeneity. The term balance means that a change in one of the five variables will always change the content of one of other variables in some way. Coherence is the level of consistent tuning between and an equal partition of time and energy over the six factors. Finally, heterogeneity means that every variable is related with beforehand considered formal aspects as well as informal aspects, which are raised in practice, on the measurable and non-measurable symptoms in organisations, on explicit and implicit knowledge and on internal and external defined operationalisations of the regarded variable1314.
The model of Weggeman exists of three overlapping and interacting processes. The core of the model (organising) exists of six management instruments, as can be seen in figure 3. For analysing and (re) design of the organisational context, the core is extended with a format for describing the primary and secondary
13 Weggeman, 1997 :87
14 http://www.tg.nl/OnsBureau/Kernvaardigheden/kijkoporg_organ.html
processes (realising) and the relation with the environment is getting more attention by introducing the concepts of Mission, Vision and Purposes 15 The internal organisational description will be limited by analysing three management instruments, including a description of the targets, mission and vision for the Bralima brewery. The description will be related to the concern as a whole, whereby the primary process will be treated as supposed: supplying the market with the Bralima’s products.
Figure 3 : Characteristics organisatoinal (ESH) model16
As investigated, the six variables are divided in the “strong” variables and the “soft” variables. Comparing the Weggeman model with the Mc Kinsey and Levitt’s Diamond model overlap in term and variables are measured.
In this section, strategy, structure and systems will be analyzed as the ‘strong’ variables. It is not in the scope of this research to focus on the whole internal environment, so the culture, personnel and management style, as ‘soft variables’ will not be analyzed. Strategy is interesting for this research, while one of the key objectives of the commercial department is to focus on brand portfolio management. Investigation and giving recommendations for the positioning of the beer brands and focusing at the opportunities for the Heineken Premium brand must be structured referring and in line with the overall formulated strategy for the coming three years. Besides focusing on the strategy, several problems seem to occur during my internship with managing the internal structure and procedures. Analyzing the internal structure, focusing on the
“strong variables” enables the researcher to investigate into the actual problems and give recommendations for the improvement of the internal environment within the Bralima brewery.
1.3.4 Strategy
Strategy is the way in which (and the whole of means) predetermined goals can be reached. Strategy can be seen as an action plan by which the operational organization can be managed. According to consulting firm Twijnstra & Gudde, the strategy of an organization is established short and briefly, is based on internal an external exploration: based on feelings and facts, and has support by the management and is also based on suggestions of employees. Some remarks about strategy are being made. There will always exist a gap
15 Weggeman, 1997; 87
16 www.tg.nl/.../ kijkoporg_organ.html
between the formulated and realized strategy. Besides that the determination of strategy is usually an ongoing process. Finally the execution of strategy has to deal with pocket vetos.17
Business is all about creating value.18 Bralima’s most important objective is to create value for its shareholder Heineken as well as its customers and employees. 19 Bralima’s management is responsible for creating opportunities, rather then just reacting to threats. The corporation is built around a core of shared competences and foundations for further growth are based on the strength of the operational capabilities20.
Hoekstra 21 distinguish three value strategies, on which a company can distinguish itself, and these are operational excellence, customer intimacy and product leadership. In the value discipline operational excellence, the emphasis is delivering reliable products for competitive prices. The business processes are designed on the most efficient way. Secondly, customer intimacy is a value discipline for continuously adapting the wishes and needs of the consumer towards the delivered products of the organisation. Finally, the value discipline product leadership is about delivering continuously innovations on the base of detailed market research, making use of creativity and fast commercialisation of new product ideas. The organisation Bralima fits most with the first discipline, operational excellence, when the whole brewery is set up in a most efficient way in order to produce, market and deliver the beer-and soft drinks.
The strategy of the Heineken Corporation as a whole is described in chapter 1.1, Heineken history and principles, on page 7. Breweries around the world have to develop their strategy as formulated by Heineken Amsterdam.
17 www.twijnstragudde.nl
18 Ameels, A., et Al., 2002
19 Benson-Armer, R.J. et Al, 2004
20 Hamel, G., Prahalad, C.K., 1996
21Hoekstra, 2001 :57
1.3.5 Structure and systems
Mintzberg22 argues there is no “one best way” approach to design and describe an organisational structure.
Recent management theory has moved away from the “one best way “ approach, toward an “it all depends“
approach, formally known as “contingency theory “. Structure should reflect the organization’s situation, the extent to which its environment is complex and dynamic.
At the base of any organisation can be found its operators, those people who perform the basic work of producing the products and rendering the services. They form the operating core. All but the simplest organisations also require at least one full-time manager who occupies the strategic apex, where the whole system is overseen. And as the organisation grows, more managers are needed and the result is that a middle line is created, a hierarchy of authority between the operating core and the strategic apex. As the organisation becomes still more complex, it generally requires another group of people, whom are called the analysts. The analysts form the techno structure, outside the hierarchy of line authority.
Most organisations also add staff units of a different kind, to provide various internal services, like a legal counsel or public relations office. Bralima is provided with such kind of support units and this part of the Bralima organisation, to deal with legal issues and provide adequate public relations with their clients and other stakeholders. A new program for Public Relations has recently be implemented by inviting public into the brand new production process in order to inform them about the latest techniques and show them the quality and processing of the Bralima products. According to Leeflang23, the term ‘Public Relationship Management’ can be seen as “systematically improvement of the mutual understanding between the organisation and its public groups”. This organisational part is called the support staff.
Finally, every active organisation has a sixth part, which is called the ideology (by which is meant a strong culture). Ideology encompasses the traditions and beliefs of an organisation that distinguish it from other organizations and infuse a certain life into the skeleton of its structure.
22 Mintzberg, 1979
23 Leeflang, 1995: 399
At Bralima the division of labour is as follows 24: 550 FTE in Production, 50 FTE in Distribution, 300 FTE in Commercial and 205 FTE in General and Administrative: typically for a brewery, a product oriented organisation, the production and commercial part of the organization is relatively large comparing with the other departments.
The six basic parts of an organization, according to Mintzberg25, can be found in figure 4:
Figure 4 : Six basic parts of an organization 26
1.3.6 Organisational configuration
Bralima, seen as a whole, is most similar to a machine organization, in line with the theories of Mintzberg27. This machine organisation is the offspring of the industrial revolution, when jobs became highly specialized and work became highly standardized. It has a relatively large techno structure to design and maintain the systems of standardization, notably those that formalize its behaviours and plan its actions. Systems for planning and managing the supply chain in the logistics department and systems as Micha Sales, Micha SRD and Micha Budget Control are examples of the techno structure in the organisation. Every department has to work with these systems and for the management these systems are the main source of information.
The organisational structure is characterized by a limited amount of horizontal decentralisation, reflecting the pull to rationalize. A large hierarchy of middle-line managers emerges to control the highly specialised work of the operating core. But the middle line hierarchy is usually structured on a functional basis all the way up to the top, where the real power of coordination lies. The organisational structure tends to be rather centralized in a vertical way. To enable the top managers to maintain centralized control, both the environment as the production system of the machine organisation must be fairly simple, machine organisations fit most naturally with mass production. The production of the beers and soft drinks is rather mass production and the market environment is relatively simple: there is only one competitor operating in the market and the products they sell are almost the same as Bralima.
24 Interview F. Brun, 01-08-04, Financial manager
25 Mintzberg, 1979
26 www.valuebasedmanagement.net/ methods_mintzberg
27 Mintzberg, 1979
At the marketing department, the organisational structure is relatively new. In February 2004 a new structure has been implemented. The marketing department, according to Mintzberg’s 28 configurationally perspective, can be seen as an entrepreneurial organization. The structure can be found in Appendix 1 (figure A1-A6).
As the name entrepreneurial organisation suggests, the structure is simple. There is not much more than one large unit consisting of one or a few top managers, one of whom dominates the pull to lead, and a large group of operators who do the basic work. Little of the behaviour of the marketing department is formalised and minimum use is made of planning, training, or any such devices. The absence of standardization means that the structure is organic and has little need for staff analysts. Likewise there are few middle-line managers because so much of the coordination is handled at the top. Even the support staff is minimized, in order to keep the structure lean and the organisation flexible. An organization with a simple structure does not have an elaborate, formal arrangement of reporting relationships. Its "structure" and coordination/control enables the organization to respond quickly to environmental demands. Work relationships are more fluid.
There is a small, centrist management hierarchy. There are few functional specialists. People doing core operational tasks are often interchangeable. The division of labor is more flexible with people carrying out multiple roles. There are fewer roles for differentiation. 29
The Marketing Director has a wide span of control. He is the key decision-maker/controller and typically everyone reports to them directly and informally. Thus it is the Marketing Director that shapes strategy. The stereotype of this dynamic, decision-maker is entrepreneurial, intuitive, non-analytical and a risk-taker. He feeds off the cut and thrust of uncertainty and pursues business opportunities relentlessly30.
However,the marketing department has grown a lot in recent years. New products and tools are introduced and centralized control is becoming more difficult. It is difficult for the marketing director to check all the outcomes of the processes in the organisation and manage the department with its few middle line managers. The marketing director and other middle management staff tend to spend their time more and more on checking the department and programs and do not have much time to think about and develop a sustainable strategy for the future. Much of their time is spend by managing the operating core and direct supervision. Besides this employees do not have standardised working programs, do not know exactly what their tasks and responsibilities are and used towards the whole marketing organisation. Some employees spend their time on tasks of others and due to the low coordination it happens that employees work on the same job or project, without contacting neither consulting each other. It is also difficult for the management to manage the employees and settle up on realised results. Finally, the coordination between the marketing department and other departments is low, resulting in biased information. An organisational change in the marketing department is recommended in order to manage that department more efficiently and effectively.
The structure for the marketing department in the coming years is recommended to tend from an entrepreneurial organisation to a machine bureaucracy.31 This means that job descriptions become more
28 Mintzberg, 1979
29 Mintzberg, 1979
30 Mintzberg H and Quinn J, 1988
31 Mintzberg, 1979
specialised, work becomes highly standardised and systems must be developed to formalise behaviours and plan actions. Trained staff departments and a sophisticated techno structure should be added to the department. Other characterisations of the machine bureaucracy can be found at page 18.
Implementing the machine bureaucracy, as a Mintzberg configuration32, at the marketing department will have the following advantages for the marketing department at Bralima, as well for the management as for the employees and the whole organisation. First of all the tasks, responsibilities and commercial targets for all individual employees can be predetermined, in order to create clearance for both employees and management. Employees know exactly what to do, do not have to “invent the wheel again” and are able to spend their time more efficient and effective. Furthermore, a clearer job description will enable employees to know exactly what his/her job is about and can be an efficient and effective tool for the management team to manage the department. It will be easier and more effective to check and track employees and the processes in the internal departments. Thirdly, coordination of work and responsibilities between employees and management is more effective and less management bias is expected to occur. Due to the standardization and formalization, documents will become understandable for anyone and interchangeable documents and programs possibilities are possible.
For enabling a structured input of information, reproducing the information and make structured marketing decision, the use of Marketing Information Systems (MIS) need to be extended. MIS can be seen as a set of procedures and methods for the regular, planned collection, analysis and presentation of information for use in making marketing decisions. The key word in this definition is regular, since the emphasis in an MIS is to produce information on a recurring basis rather than on the basis of one-time research studies 33. The advantages of a MIS will create the ability to plan on a structural way in order to diminish ad hoc and short- term strategies. Besides these items, the department will have the advantage of using historical information and plans, which are used, standardized and tidily stored through the years, and employees can have an advantage of that. Finally, standardization and using the same programs and procedures in the whole organization will enable Bralima to obtain improved coordination between all departments in order to create scale advantages.
As with all changes in the organisational context, disadvantages can rise. Employees at the marketing department can start to behave themselves towards a too individual and inflexible approach, due to the standardization and predetermined formalisation. A risk can rise employees lose the bigger picture of the strategy of the organisation and will only focus on their own job responsibilities and tasks. Besides this, the organisational structure can become tighter and less flexible. Also, learning by mutual adjustment is less likely to appear.
Furthermore, it is very important that marketing management keeps rewarding personal initiatives and allows for flexibility and new innovative ideas and initiatives, because in a more bureaucratic organisation these factors are less likely to be developed. In a dynamic marketing environment it is of biggest importance
32 Mintzberg, 1979
33 Churchill, 1996 : 31
to adapt on changes in the market and new initiatives must be stimulated. Finally, continuously training of employees is important, especially changing to the new configuration and must be treated as a continuously ongoing process. Developing the internal EBAC training centre is a tool towards a more efficient and effective configuration. The EBAC centre is described in chapter 1.3.1, page 11. Training given by Heineken Amsterdam at the Heineken University and implementing standardized programs as used by other operating companies is another tool that can be used for developing the department. Also extensive HRM programs for personal development, coaching and training should be developed. Employees need to understand why a structural change has a positive impact for the department as well for them and training has to guide them through the change process.
Management must be aware of these disadvantages and these shortcomings of the machine bureaucracy and try to stimulate employees to behave active, innovative and flexible. Reward programs for successful innovative and creative ideas can be an effective tool to stimulate these items.
To complete, the configurational change form entrepreneurial department towards a machine bureaucracy can be found in figure 5 below.
Figure 5: Configurational change from entrepreneurial department towards machine bureaucracy 34
34 www.churcher.com/FOSM/
Chapter 2: Research design
This chapter will give an overview of the occasion of the research for the writing of this thesis and the research that has been done during my time at the Bralima Company in the Democratic Republic of Congo, Kinshasa. The situation and the occasion will be discussed and the design of the investigation will be described. The problem statement, the raised sub questions and the edge conditions will be described.
2.1 Assignment
2.1.1 Situation
The beer market in Kinshasa stands under pressure. The two competitors in the market, Bralima S.A.R.L.
and Bracongo, fight for every client in the dynamic market. This duopoly is a situation in which two companies own all or nearly all of the market for a given type of product or service.35 The competition strategy of Bracongo is hyper-aggressive and suicide: every action taken by Bralima to increase market share and fulfil in the wishes of their clients is exceed by another action of Bracongo.
It is evident that Bralima is situated in a mature market. This mature phase characterises itself, according to Leeflang36, through a degressive grow as a consequence of the fact that the products reached its maximal penetration level in the market. This means that all type of consumers tried the product at a minimum of one time. The mature phase is furthermore characterised by a maximum number of competitors (the market shape can tend towards a monopolistic one), an intense struggle regarding market share and an incline of contribution margin/net profit per unity. The strategy of Bralima for the coming years refers to the stage in which the organisation stands at the moment. This formulated strategy, which is mostly focussed on increasing market share, can be found in chapter 1, page 15.
The pressure on profit grows and the pressure on market share is increasing. The profit grow in this kind of market can be realised theoretically by increasing the volume and/or increasing the price and/or improving the product mix. Innovation is a combination of increasing price, improving the sales-mix and realising a change in volume numbers. This assignment will do research into the product mix and improving the sales mix by investigating the opportunities of introducing the Heineken Premium brand.
The marketing department is responsible for carrying out the overall marketing strategy and has to make sure that the portfolio is efficiently and effectively managed in order to increase the market shares and control the cost and profit figures. Marketing within Bralima is divided into two parts: the first part contains marketing the soft drinks while the second part contains the beers and malt drinks. This research will be focussed on the second part, including the beer brands.
35 http://www.investopedia.com/terms/d/duopoly.asp
36Leeflang, 1995
Recently Bralima faced problems with managing its beer portfolio. Competition in Kinshasa is aggressive and managing the portfolio in the most efficient and effective way is essential. Furthermore Heineken Amsterdam asked Bralima to invest in the opportunities for the Heineken Premium brand in the market.
2.1.2 Background to the research
The final assignment, which is given by the management of the Bralima Company, is to evaluate the positioning of the beer-brands in the portfolio in the market of Kinshasa. The brand portfolio should be designed optimally in order to increase market share, as described in the strategy in chapter 1, page 15.
Besides that the management wants the researcher to invest in the opportunities for the Heineken Premium brand in the market and give recommendations how to position the brand within the existing beer portfolio and how to built brand equity for this brand. Introducing new products is way to innovate, improve the sales mix and to increase market share.
The assignment for the research is formulated as:
“Define the brand positioning strategy for the Heineken Premium brand, to be introduced into the current beer portfolio, in order to build brand equity.”
The research should give an answer on the actual positioning of the beer brands in the market. Furthermore the research should reflect the opportunities for the Heineken Premium brand in the market. Besides these items the introduction strategy for the Heineken Premium brand must be designed and the way to build brand equity for the brand must be formulated. The research should help the Bralima management to improve their brand portfolio and increase market shares in the existing duopolistic market.
2.2 Research design
2.2.1 Problem and problem owner
Bralima has a diverse variety of beer brands in its portfolio. For the management of the company the positioning of the brands is not completely clear and research into the brands in necessary. Investigating in this problem will provide the management with valuable information about the actual positioning and will give them the opportunity to either revise the strategy of the brands and manage their portfolio in the most valuable and optimal way. Furthermore, the management of Bralima S.A.R.L. would like the researcher to invest in the opportunities for the Heineken Premium brand in this revised portfolio and recommend strategies to built brand equity for this brand.
In this situation the actual problem owner can be seen as B. Theys, marketing manager and his supervisor, M.H. Rouvroy, the marketing director. Problem owners are the individual members of the organisation to which problems can be ascribed. Problem owners can be considered as actors according to the action theory of De Leeuw.37 A problem can be seen as a situation of a subjective discomfort of the problem
37 De Leeuw, 1996 : 208
owner, mixed with the wish of the problem owner to solve the problem.38 This problem is a scientific problem, because there is a gap between an actual and a desired situation, the knowledge to solve this problem is not directly available and solving this problem is desirable and theoretically feasible.39
According to Churchill, the actual problem can be seen as a decision problem. This is a problem facing the decision makers, in our case the direction of the marketing department, for which the research is intended to provide answers. The following research problem is a restatement of the decision problem is research terms
40. In our situation, the actual problem is a reality problem. The reality problem is an operation problem of the problem owners.41 The problem owners would like to invest in the problem of the positioning of the beer brands and would like to achieve solutions for this problem. Furthermore the problem owners would like to receive recommendations for introducing the Heineken Premium brand and strategies for building brand equity for this brand.
38 De Leeuw, 1996 : 209
39 Oppeland H,J, 1988
40 Churchill, 1996 : 87
41 De Leeuw, 1996 : 215
2.2.2 Problem statement
A problem statement is the whole of reasoning’s with which the researcher the phenomenon defines as a scientific researchable and relevant research problem. A problem statement is a ‘product’ of the researcher who has chosen formulations in order to bring the problem out of his point of view.42
A problem statement consists of an objective statement and a derived question statement, which record together what will be the research, why this subject will be investigated and under which edge conditions this research will occur.43
The objective statement for this research is formulated as follows:
Investigation into the positioning of the brands in the Bralima beer portfolio in order to define the beer portfolio as well as defining the brand positioning strategy for the Heineken Premium brand in order to build brand equity.
The question statement for this research is formulated as follows:
What is the brand positioning strategy for the Heineken Premium brand, to be introduced into the current beer portfolio, in order to build brand equity?
In the objective statement is recorded what will be investigated in the research, for whom this research will be done, what the outcomes will be (knowledge, model, improvement proposals) and why this (for the persons involved) is relevant. To testify whether the problem statement is a “good” problem statement, Jonker & Pennink work with three criteria to assess the problem statement: relevancy, efficiency and research-ingot-driven.44
To assess the problem statement, according to Jonker & Pennink45, first of all the relevancy of the problem statement should be assessed. The problem statement is relevant, while it has a clear connection with the problems of the principal and the organisation. It has to provide the organisation and problem owners with an answer of how to position the brands and introduce the Heineken brand within the portfolio. It will provide the organisation with an concrete answer. To assess the efficiency, the ideas of the design, composition and execution of the research should contribute to the answering of the research question. Extensive quantitative and qualitative research in the market on a structured and efficient way has been done to give an concrete answer to the research question, so that the efficiency-target has been satisfied. Finally the research-ingot-driven criteria should be checked. The research is reachable in the given situation: research companies are available and the marketing department has freed time to employees to develop research and to help the researcher. The research is adequate, cause it is formulated consistently according to the scientific rules of the university of Groningen.
42 Jonker & Pennink, 2000 : 11
43 Jonker & Pennink, 2000 : 11
44 Jonker & Pennink, 2000 : 12
45 Jonker & Pennink, 2000 : 12
Several terms of the problem statement need to be defined for better understanding. With the Heineken Premium brand, the imported Heineken brand from the Netherlands is mend. The term current brand portfolio refers to adaptation of the outcomes of the quantitative and qualitative studies compared with a brand positioning framework, which will be explained in chapter 3, and the result of combining both. The term brand positioning strategy refers to the strategy that must be followed by the Heineken Premium brand to be successful in the market. The term brand equity refers to the differences in added value of a brand in the mind of consumers, due to marketing activities.
Since the main question is clear, it is important to split the question into sub-questions. The sub-questions split up the assignment into manageable pieces. When all sub-question are answered, an answer to the main question can be given.
2.2.3 Sub-questions
According to the objective and question statement, the actual positioning of the Bralima beer brands as well as the Bracongo beer brands should be investigated. The first sub question below relates to this part of the research. Secondly, the introduction strategy of the Heineken Premium brand should be defined, together with the brand positioning strategy, which is outlined in the second and third sub question. Finally, the strategy for developing the Heineken Premium brand from introduction till the next two years should be defined, in order to build sustainable brand equity for the brand. In sub question four, the development of the brand is investigated. In part 2.3, the conceptual model is shown, in which the sub questions are outlined.
Combining the four sub question result in an answer to the overall question statement and should result in an answer to the problem statement in general.
1. What is the actual brand positioning and values of the existing Bralima beer brands?
2. How can the Heineken Premium brand be introduced in the Bralima beer brand portfolio?
3. In what way can the brand positioning strategy ensure that the Heineken Premium brand can achieve a successful positioning into the Bralima beer portfolio?
4. How can the Heineken Premium brand be developed, in order to build brand equity?
2.2.4 Definitions of important concepts
In this thesis, several important concepts and definition will be used. For a better understanding and diminishing reader’s bias, the following items will be explained briefly:
Organisations:
Directed and mutual adjusted arrangement of executed activities46
46 Leeuw, de, 1996 : 18
Positioning:
Establishing a specific place for the brand in the mind of the consumer by designing the brand and communications around the brand in a specific way.47
Brand:
A brand is a word, a name (brand name), a symbol, letter or sign or a combination of both), which can be used by an organisation in order to distinguish the products/services of the organisation from other products/services.48
Strategy:
Strategy is a way in which (and the whole of means) predetermined goals can be reached. Strategy can be seen as an action plan by which the operational organization can be managed. 49
Brand portfolio:
The formulation of the product market combinations within the organisation.50
(Customer based) Brand equity:
The differential effect that brand knowledge has on consumer response to the marketing of that brand. 51
47 Leeflang, 1995 : 249
48 Leeflang, 1995 : 323
49 www.twijnstragudde.nl
50 Leeflang, 1995 : 235
51 Keller, 2003 : 60
