Situation Analysis Mazen Hajjar : Hajjar had worked in Investment banking and set up a national airline. He had an acumen for business and strong entrepreneurial desires, else the move from CEO of a national Airline to a craft beer manufacturer would be considered a step down by many. He was problem solver by nature, from brewing his own beer to setting up factory equipment on his own and using ice cream refrigerator to cool beer. He was also enthused by change which was the central motto of 961 beer. Henrik : Henrik : Henrik was a Danish investor with a knack of turning bad situations to his advantage. He used the war as a background to register the company so that it had a great story. Market Analysis : The Lebanese market was dominated by the local brewing company, Almaza, a subsidiary of Heineken .The beer market was largely standardised, in spite of the rich food and wine culture of Lebanon. The country did not have a microbrewery of its own and the consumers were accustomed to light lager beer. However the city Beirut, with its residents harbouring an appetite for trendiness and novelty was promising. 961 beer was well received and had exhausted its production due to high demand. Problem Diagnosis 961 beer had been facing a decreasing frequency if visitors owing to political unrest in the country. Also there were low off premise sales, since 961 beer was considered a threat to central business of restaurant owners and they were reluctant to stock the beer. Inspite of all this the beer manufacturer had built up steady following and had reached its capacity twice; but scaling up was not easy given the uncertain political environment of the country. Also the lack of economics of scale forced the manufacturer to sell the beer for less than production costs in order to remain competitive. Hajjar was faced with a situation where he wanted to increase the customer base while maintaining its quality, simultaneously ensuring the sustained long term growth of the brand. Problem Definition What should Hajjar do expand the 961 Beer customer in such a way that the customer base is increased without compromising on its central values and quality amidst difficult local conditions. Options One among the various options available to Hajjar is maintaining the current capacity. He could also Increase capacity in Lebanon and expand throughout Lebanon or increase capacity in Lebanon, export and expand globally. Yet another option would be to build production facilities abroad, import to Lebanon and export to other countries. Criteria Will the decision result in an Increase in the customer base and would it lead to new markets. Also, What would be the amount of new investment required and will the decision lead to preservation of company values and quality Evaluation If Hajjar decides to maintain its current capacity then he can actively preserve the quality and values of the the brewery while minimising the need for capital infusion at the same time. However, he would not be able to increase the customer base and 961 beer would be severely constrained in its reach for new customer base. If the beer manufacturer expands to other Lebanese cities beyond Beirut, such as Tripoli and Sidon, They would gain access to new markets and new consumer base. However expansion to new cities would require ramping up the production facilities to serve customers countrywide. This would require new investment, though not a lot; while the company can still have a great control on the manufacturing process, thereby preserving the quality. However, the beer manufacturer would still be susceptible to demand fluctuation owing to political unrest in the country. country.
If the beer manufacturer expands to other geographical areas beyond its own country it would open a whole new market of consumers, however serving foreign countries requires increasing the production capacity substantially and developing new distribution networks. However keeping the manufacturing facility within the country will allow the company to have a greater control over the manufacturing process and maintain the quality of its beer. This would also mitigate the risk of demand fluctuation due to political turmoil in Lebanon. If the beer manufacturer decides to move all of its operations to abroad, it would require setting of new factories and a new supply chain from scratch. This would require significant upfront investment. Also, the manufacturer might not be able to impose stringent quality control checks if the manufacturing was done in another country. However, the manufacturer would be safe from political repercussions in both demand and supply, if they were to relocate manufacturing facilities. However, much of the cultural heritage and the story of “We registered under siege” would be lost. It would also fail to hold interest of customers who had a great interest in locally produced goods. Recommendation Hajjar should choose option 3 as it meets most of the criteria namely ; increase in customer base, tapping new markets, and preservation of company values and quality. Though the amount of investment required to expand globally would be more than that required to expand nationally, the potential benefits outweigh the potential risk by far. Also getting the customers to try a craft beer would be a little challenge in global market as compared to the national market since craft beer is not novelty in majority of the world as opposed to Lebanon. Action Plan Hajjar should meet his partners and explain the situation, that how his beer has a great following but the uncertain political conditions are leading to demand waning off.They would need new investment if they were to expand globally. He should ask Henrik to help him get new investors on board.He should find a reliable and trustworthy supplier of craft brewing equipment to set up new facilities and ramp up production levels. He should also market aggressively in local restaurants in order to improve local footprint during the period new facility is being built.He should tie up with leading and cost effective distribution channels to export his beer globally. He could also develop partnerships with a leading craft brewery in each country to market its products for a commission. Contingency Plan In case the operations cannot be enhanced due to extreme political turmoil, Hajjar should consider marketing aggressively to local restaurants and bars, increase his local footprint and wait for an opportune time to expand.
