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Case Study (Background to Mad Dog Craft Beer)

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Case Study (Background to Mad Dog Craft Beer)

Mad dog crafts is a beer producing company. It has not been in the in the beer producing aisle for a long time but it has been able to make remarkable progress. There products have been satisfying enough to maintain customer loyalty among its clients and at the same time attract new consumers of their products, as a result of increased recommendations of the loyal customers to other beer consumers. Consequently, the demand has risen and Mad Dog beer producers need to raiser there production levels. They need to invest more resources in production so as to ensure that they meet the demand in the market. There are several factors that has led to increased demanded which will be discussed in the pest analysis, under factor which make Mad Dog beer products stand out from the rest of the beers in the market hence comprising its strengths.

Mad Dog beer objectives and goals

Mad Dog beer producers are objected to come up with a new strategic plan that will allow them to adjust and make changes in there brewing process to accommodate for the ever growing demand of their products(market). New breweries are emerging and as a result, the Mad Dog need to focus on developing ways of coming up with better methods of improving their product to make sure that there place is assured within the industry. Some of the things to be improved include the packaging of the beers, where more attractive packaging methods can be used to make them stand out from the rest, and production of non- beer products to attract new clients who are not alcohol consumers.

Mad Dog company background and forecast

Mad Dog beer producers is a self-financed company which was brought into existence in 2914 by Alexis, who at that time had developed interest in the brewing industry. Since starting the company, Mad Dog has grown to become a household name. Starting from ten employers at its time of launching, Mad Dog beer now has over twelve both regular and seasonal brews in their portfolio.

The initial business plan created to serve the current financial year for Mad Dog forecasted $ 186,000 in the first quarter of the year with its major sales coming from pubs and general restaurants with $ 147000, and $40000 coming as grants and sponsorships from the restaurant and pubs which promote crafted Mad Dog beers. The plan also reflected an $114000 in sales to accrue from half barrel kegs and $33,000 from sales of quarter barrel. Gross margin projections for every half barrel and quarter barrel were 76% and 77%. For beers in standard bottles, which cost $3 each, sales of $6000 were projected in the first year with gross margins of 55% from every bottle.

Market analysis

a) Opportunities

1. Mad Dog have the opportunity to expand into new emerging markets. This is because it has not fully exploited its potential markets

2. Mad Dog can develop new products that can be considered not alcoholic. This is an opportunity because their products are not specialized all made for beer consumers.

3. It should keep building its brand by increasing advertisement activities like there competitors

b) Threats

1. There is a general trend of consumers being health conscious hence switching to healthier choices of food. This hence is like to interfere with the client base.

2. There exists a stiff competition from competitors like McDonald's and other retailers. They tend to offer cheap substitutes which offer almost the same satisfaction

3. The labor costs have been increasing, therefore, putting pressure on the profit margin costs.

Swot analysis

Strengths

1. Mad Dog occupy a strong market position. This gives it an upper hand over its major competitors.

2. Mad Dog produces high-quality products. This helps to maintain its customer's loyalty as well as attract new customers through referrals.

3. Its growth model is not capital intensive since most of its restaurants are owned by franchisees.

Weakness

1. Mad Dog outlets are highly concentrated in the US

2. Its target market is narrowly based. Therefore limiting the customers, it can serve.

3. High prices of its products are relatively high. This offsets most of the potential customers.

Mad Dog have a huge potential of increasing their productivity. Considering its weakness, Mad Dog should diversify its outlets to reach a wider market, rather than concentrating on the US market only. Additionally, in an attempt to reach a wider market, it can diversify its products to reach all the social classes of the society. Additionally, it can adjust its prices to be within the range of their competitors so as attracts clients who opt for other products of other companies which offer cheaper beers.

PEST ANALYSIS

Political Environment: political stability influences the profitability of Mad Dog. Considering that the beer producing company branches are scattered throughout the world, then it means that when the political environment is hot, beer production levels in this companies reduces, since at this times most people prefer to stay indoors in fear of security and hence failing to attend their favourite drinking joints to take the Mad Dog beer products.

Legal: when setting up a new branches for production of beers, few legal documentation is required; hence this makes it easier for the company to set up new ventures. This has eased the company’s efforts to manoeuvre into new markets.

Production of alcohol is highly limited by the state laws. Therefore no matter how much mad dog are capable of producing beer, there is a regulation that limit to production of alcohol to a certain level.

Economic: economic recession periods leads to reduced spending of the consumers. Therefore, they tend to look for cheaper options, which are softer cheap drinks. As a result, sales reduce. And the vice versa is also true.

Taxes are based on the size of the brewery, thus as mad dog increases its operations, the more taxes it pays. This tends to discourage the growth of the company as it reduces the profits margins.

OCB members have to produce not more than 40000 hectolitres of beer yearly to be considered as independent.

Mad dog is concerned with the increased levels of production which has made the taxes significantly high as there tax rates are a tenth of what other commercial companies make.

Technological: enhancement in technology has led to increased quality production. Also, through technology, Mad Dog can increase their market since products can reach a wider potential market through advertisements. Additionally, products can be ordered online and delivered conveniently. This has led to increased sales of Mad Dog and hence profitability.

Societal/Sociocultural:

The founder made it he companies culture to always give producer high quality products

Local restaurants and pubs support Mad Dog products by stocking them more and recommending them to their customers.

Mad Dog is, majorly focused on getting there products to pubs and restaurants that are craft friendly.

It cut out the middle men and hence it distributes its products directly to the consumers who are the pubs and the restaurants.

Mad Dog has increased it advertisement activities on media stations and social media.

It has won a craft beer award at competitions involving top beer manufacturing competitors.

The social factor that is having a great impact is the health consciousness that people have adopted. This has led to some of the products Mad Dog produce to be considered unhealthy.

Mad dog case analysis using porter’s model

Industry rivalry: Mad Dog considers its main competition for beers to be beverage producing companies and hard liquor like rams and spirits. The US is the main market, and it is constantly growing. However, there is still demand from the international market.

· Concentration: it is characterized to be low. Even though there are large Mad Dog productions firms, the majority of the positions is invaded by the independent breweries producing almost similar products, and each of them has their eyes on the local market.

· Diversity of competitors: there is a high diversity of competitors as emerging breweries are slowly becoming specialized in this sector. This breweries mostly get their revenue from other products. As a result, they can under-price their beers and hence destabilize the market.

· Product differentiation- as much most beer breweries can provide similar products, the ambiance, image and location are factors that matter a lot.

· Excess capacity- Mad Dog in 2008-2009, Mad Dog had close down about nine hundred stores indicating that that have been excess coffee outlets. There is minimal exit barrier. This means that flooding of Mad Dog is less likely to cause price wars.

· Cost conditions-variable costs such as labor tend to be relatively constant depicting less likelihood of price wars.

In conclusion, the industry has a fair, high rivalry due to minimal concentration and product differentiation.

Threats of entry

Visibility, profitability, and growth are factors that attract entry.

Barriers to entry .

· Low capital costs- $200k is enough to rent a small space and set up a brewery.

· Low economies of scale- though Mad Dog is a big brand, it also competes with other small upcoming breweries to capture the attention of prospective clients. Moreover, since mostly the inputs are commodities, being a big brand name does not warranty them to get discounts on supplies, and usually, Mad Dog pays more to its workers. The only advantage that Mad Dog gets is when acquiring locations. Most owners of particular premises would prefer to rent space to Mad Dog because of its ability to attract many customers. However, key locations have ceased to be a barrier; these locations have increased.

· Access to distribution- as highlighted above, strategic places to position distributaries have ceased to be limited; hence this cannot be considered as a barrier anymore.

· Brand loyalty-as much large chains attract a huge following of clients; there is also a good number of people who prefer independent Mad dog products. This, therefore, poses little or no barrier to entry.

· There exist no government barriers.

In general, the entry thereat is high. This is because of the low barrier and the attractive nature of the industry.

Threat of substitutes

Substitute products include tea, home-made coffee, alcoholic drinks, and social locations.

· Buyer propensity to substitute- there is a great variation in the willingness of a buyer to substitute. This can depend on the customer's loyalty to Mad Dog or some personal reasons..

· Relative price- many substitutes offer competitive prices for the products offered

· Relative performance- there is a whole range of products that customers can consider to be perfect substitutes of coffee in terms of performance in relation to what the customers use the beer for.

· In general, the level of threat of substitutes is high due to the close proximity of performance and prices of substitutes.

Bargaining power of buyers

· Clients of Mad Dog are end consumers only.

· The cost of Mad Dog products is relatively small compared to the total expenses.

· Product differentiation- factors that are differentiated include the, locations, style, and quality of services.

· There exists no competition between clients or rather buyers.

· Switching costs-there is no switching costs on both sides as consumers have a whole range of alternatives and only loyalty cards and switching costs are distant.

· Buyer’s information- customers, have pretty good knowledge of the costs and the products. This, therefore, makes information to be an important factor.

· In general, consumers have high bargaining power because there are many alternatives, minimal switching cost and their ability to backward vertically integrate. Despite all these advantages, the customers rarely exercise their bargaining power most probably they loyal to the brand and are relatively insensitive to prices because of it just but a small portion of their total purchases.

Bargaining power of suppliers

· Product cost relative to total cost- the price of beans is fairly low as well as the equipment and packaging. Labour is the only input whose price is relatively high.

· Product differentiation- it is very low with the exception of exclusive crops such as Nariño supremo. The supplies are major commodities that can be acquired from numerous suppliers. There is also very minimal differentiation to labor.

· There is a very high competition between the suppliers

· Concentration and size of suppliers in relation to producers- the suppliers, are all non-concentrated. The employees are non-unionized except for nine Canadian stores with Mad Dog majorly getting its dairy inputs from two suppliers. However, Mad Dog can easily switch with little or no challenges. Recently there has been the emergence of cartels in coffee as a result of the formation of trade unions. But because of the existence of wide varietals for different chains and distributors, there exists less probability of the unions gaining much power to realize their objectives.

· Switching costs are fairly low with the exception of training costs of new employees

· The suppliers have full knowledge of the information about the industry.

· The ability of the suppliers to forward vertically integrate is close to none.

· The ability of the firm to backward vertically integrate is also very low.

Key success factors

Quick response to customer

What are Mad Dog’ strengths and weaknesses? Does it have any sources of sustainable competitive advantage?

Generally, Mad Dog real image lies with the strong brand image of Mad Dog, its culture, leadership, and reputation.

How is Mad Dog' product positioned in the market? How do its functional level strategies align (or fail to align) with this positioning?

Quality

Mad Dog is dedicated to providing reliable quality and reliable products and services.. Combination of these standards demonstrates the devotion that Mad Dog has towards providing quality products to its customers.

Customer responsiveness

Mad Dog accomplished better responsiveness to clients by concentrating on the customers and fulfilling their needs. In structuring this competitive advantage, Mad Dog inspired the whole organization and shaped their worker mentalities in building a long-term association with clients. In the event that client was unsatisfied, workers pursued the "Latte Method": Listen to the client, acknowledge their grumbling, Take activity by taking care of the issue, Thank them, and afterward Explain why the issue happened. In the event that a client complained about the item, frontline, for example, the part-time worker was ready to fulfill and take care of the issue on the spot without requiring manger approval.

Recommendations

1. Mad Dog should introduce home delivery services as soon as possible. It’s a trend that nowadays people prefer to stay indoors to going to social or public places to eat. Therefore this will open the Mad Dog market tremendously, which will in return lead to increased sales thus profits.

2. Mad Dog should invest more advertisement considering the growing competition. This will act as a reminder to the customers of their existence. Additionally, it will act a means to gain new clients who for one reason or the other was never aware of its existence. This will, therefore, help it tap into newer markets.

References

Bernárdez, M. (2005). Achieving business success by developing clients and community: Lessons from leading companies, emerging economies and a nine year case study. Performance Improvement Quarterly, 18(3), 37-55.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: Theory & cases: An integrated approach. Cengage Learning.

Wetherly, P., & Otter, D. (Eds.). (2014). The business environment: themes and issues in a globalizing world. Oxford University Press.

Mankiw, N. G. (2014). Principles of economics. Cengage Learning.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.