Beer group strategic innovation: backus johnston

This second part of the project deals with the strategic innovation process for the Backus & Johnston Corporation, in order to maintain its leadership position in the local market, in an increasingly competitive environment, where there are no restrictions for the entry of competitors international.

For this purpose, an analysis of current trends and uncertainties has been prepared to recognize the environment in which the company operates. Subsequently, the current paradigms and the new value logic to create new market spaces have been defined.

beer-group-backus-johnston-strategic-innovation-1

On this basis, a new idealized company oriented to the beverage industry in general has been designed, ceasing to be a corporation involved only in the beer industry. For this, the new mission, the new strategies and the processes that support it have been proposed. An analysis of the new trends and uncertainties in this new industry is presented below, developing the new scenarios that Backus & Johnston will face.

CREATION OF NEW MARKET SPACES

Based on the Scenario Planning reading by Paul JH Schoemaker, we consider that scenario planning is important because it allows us to interpret events, identifying trends, which will facilitate going beyond an objective analysis to include subjective interpretations.

Scenario planning tries to capture those patterns that influence the decisions to be made, and that could be ignored. Therefore, we have identified a relationship of trends and uncertainties that we detail below.

DESCRIPTION OF TRENDS

Performing the analysis of the environment, the most relevant trends have been chosen within the beer industry in the Peruvian or local market.

1. Mergers and / or Acquisitions. From observing the behavior of large Latin American brewers such as Ambev, which has acquired participation in foreign companies such as Argentina (it has a stake in Quilmes) or the Bavaria Group that acquired the Backus% Johnston Corporation. Open Market: there are currently no government restrictions for the entry of new companies. As can be seen at the Latin American level, groups such as Quilmes, Bavaria, Ambev have ventured outside their countries Government regulation on the tax issue: basically it is focused on the Selective Consumption Tax (ISC) of beer because it is an important source of revenue tributary. This tax considerably affects the margins of the industry since given the low per-capita consumption of beer,This cost cannot be passed on to the consumer. A table is attached. Per-capita consumption tends to be low in both Peru and Latin America: the behavior of this indicator has shown to be stable in recent years, remaining at a low level in most countries. In 2001 the average for Latin America was 29 liters, compared to levels in European countries such as Spain (70 liters), England (99 liters) and Germany (128 liters) is low. A table with per-capita consumption in Latin American countries is attached:Compared with levels in European countries such as Spain (70 liters), England (99 liters) and Germany (128 liters) it is low. A table with per-capita consumption in Latin American countries is attached:Compared with levels in European countries such as Spain (70 liters), England (99 liters) and Germany (128 liters) it is low. A table with per-capita consumption in Latin American countries is attached:

Per-Capita Beer Consumption by Country,

1996 - 2001, in liters per inhabitant.

(Descending order)

COUNTRIES	nineteen ninety six	1997	1998	1999	Pos.99	2000	Pos.00	2,001	Pos. 01
Argentina	29.34	33.19	33.77	32.81	7	33.48	7	33.07	7
Bolivia	17.74	18.07	19.83	19.91	14	20.04	fifteen	19.64	14
Brazil	49.30	50.90	50.20	46.91	4	49.59	4	49.27	3
Chile	27.17	27.20	27.35	25.68	10	25.88	10	25.56	10
Colombia	46.04	42.10	40.68	33.15	6	30.34	6	29.64	6
Costa Rica	34.61	31.78	32.44	28.38	8	30.63	8	30.36	8
Cuba				21.14	13	20.70	eleven	20.34	12
Ecuador	19.27	19.94	19.69	18.83	fifteen	19.03	13	18.66	fifteen
The Savior	11.86	11.56	12.57	12.50	18	11.91	17	11.68	17
Guatemala	11.18	12.38	13.45	15.20	17	11.60	18	10.16	19
Honduras	15.87	17.63	18.22	15.61	16	14,19	16	13.59	16
Mexico	46.43	48.06	49.05	50.34	3	51.04	two	50.67	two
Nicaragua	10.92	11.95	12.19	12.31	19	11.54	19	11.26	18
Panama	45.86	49.18	52.28	52.81	two	45.14	3	44.46	4
Paraguay	26.50	25.05	26.20	28.37	9	30.51	9	29.41	9
Peru	29.56	29.51	27.57	24.36	eleven	20.18	12	19.85	13
Dominican rep	30.19	29.85	34.63	37.34	5	37.26	5	36.28	5
Uruguay	25.92	24.87	21.91	21.94	12	22.67	14	22.25	eleven
Venezuela	66.94	75.65	82.06	72.46	one	83.98	one	82.51

Source: América Economía - March 2002.

1. Improvement of economic and social conditions: within these trends are variables such as per-capita income, inflation, gross domestic product (GDP) and political stability. Per-Capita Income, the following table is presented:

The table shows a growing trend in GDP per capita, which constitutes a favorable factor in the demand for beverages.

• Inflation, the following table is presented:

In the past decade, an adequate control of inflation can be appreciated, which contributes to not reducing the income of the population as it happened in the 80's when there was inflation of more than 7 thousand%. Consequently this favors domestic consumption.

• Gross Domestic Product (GDP), the following table is presented:

In the last 10 years, a mainly positive behavior of GDP has been observed, which is synonymous with a gradual reactivation of the Peruvian economy.

1. Political stability. With the departure from power of Alberto Fujimori in August 2000, a transitional government was entered in which the investment rules were not clear, however, as of July 2001, with an established government of 5 years, the trust of investors returned, since the new government could establish a stable legal and tax framework for private investments.Cost reduction, improving efficiency and technology: given that Latin American economies are characterized by a domestic market with low purchasing power, companies They are forced to carry out cost reduction programs to offer low, competitive prices, while still making profits. Hectares of hop production decrease worldwide:Given the overproduction of hops that the main European producers had, the trend is now to partner with brewers in order to produce what they require. Central America, South America, and Asia are increasing their participation in world beer production: this situation has led to its expansion into emerging markets, especially into Latin America, which represents more than 12 percent of world production of

Stable price: it is an important determinant of demand, which had to remain accessible to the purchasing power of the population as it has not improved substantially. The following table shows the evolution of prices:

• Growth in beer exports and imports: Exports show an upward trend in the last 6 years, which contributes to reducing dependence on the domestic market, reducing the risk of having low per capita consumption. On the other hand, it can be seen that imports have maintained a relatively stable behavior. The table below illustrates this.

DESCRIPTION OF UNCERTAINTIES

Based on the Learning From The Future reading by Liam Fahey and Robert Randall where it is indicated how to identify logical scenarios through an inductive and deductive approach, which considers the determination of uncertainty as an important step. To do this, we have determined the relevant uncertainties within the beer industry in the local market:

High or Low Competition:

• High competition has turned into uncertainty given M&A trends, and new entrants to the market. For example, Ambev has a project to build a plant in Peru which would be operational in 2004. Likewise, the entry of Bavaria is another clear example, who decided to acquire part of the Backus shareholding instead of establishing a factory. Low competition It is the counterpart of this uncertainty, since the government in safeguarding the Peruvian industry could decide to take protectionist measures.

Increase in prices of raw materials: this is an uncertainty because they depend on uncontrollable factors such as the weather, war events, possible exclusive alliances with suppliers.

High or Low Prices: with the possible entry of new competitors, such as Ambev, it is not possible to determine whether they will compete in a price war or enter with premium beers where prices could be maintained or increased.

Aggressiveness of substitute products: considering that alcoholic beverages such as wine have achieved greater acceptance in the market, increasing their production worldwide and people have a greater culture about it, since being a fermented drink like beer, It provides a health benefit as well as a moderate alcoholic strength.

Greater or Less Consumption:

• The higher per capita consumption of beer is influenced by various factors such as income, product image, population growth, foreign demand, prices of substitute products, etc. The lower consumption, based on the trend of low consumption per- capita.
  1. Government restrictions by the ISC, tariffs and prohibitions of consumption.

Due to the aforementioned, the uncertainties of Competition and Consumption have been selected, the ones that could affect the industry the most, because these factors constitute the market supply and demand.

• CURRENT INDUSTRY SCENARIO

Following the authors Liam Fahey and Robert Randall, the current scenarios of the beer industry in the local market have been outlined, based on a deductive approach that uses simple prioritization techniques for the construction of 2 x 2 matrix scenarios.

High consume
Low Competition	" I am myself " - Average variety of products. - Lower operating efficiency. - High prices. - Low level of quality and services.	"Few leaders" - Superior quality. - High levels of service. - High product specialization.	high Competition
" Reality" - Little variety of products. - Search for new markets. - Low price.	"Battlefield" - Price war. - High operating efficiency. - High variety of products. - Strategic Alliances
Low consumption

Taking into account the four scenarios presented, it is visualized where Backus unfolds, in the so-called “La Realidad”, corresponding to low competition and low consumption. This scenario has been used favorably by them, managing to be leaders. However, it is foreseen that they will go on to compete in the “Battlefield” scenario given the entry of new competitors such as Ambev.

Therefore, new strategies are proposed supported by a new structure and processes to cope with this new environment.

• CURRENT STRATEGIC PARADIGMS OF THE INDUSTRY

According to the Value Innovation reading by W. Chan Kim and Renée Mauborgne, the conventional logical strategies, called paradigms, and the new value innovation logics have been identified. This should determine the relevant concerns that managers must question, the opportunities they must pursue, as well as the understanding of market risks.

To determine the paradigms, the five dimensions proposed by these authors were used.

INDUSTRY PARADIGMS:

Strategy Dimensions	Conventional Logic	Value Innovation Logic
Industry Assumptions	The conditions of the industry are already given (mature market). The industry is an open market.	This manufacturing industry can provide complementary services. Any type of beverage can be developed based on key capabilities.
Strategy Focus	Increase per capita consumption. Maintain international quality standards (production and product).	Diversify products (drinks in general) and services. Refocus the positioning of the beer image.
customers	Loyalty to the brand. They will prefer beer to other liquors. Consumption only related to the emotional.	Cover customer needs with a wide range of beverages (alcoholic and non-alcoholic). Bring all types of products to the customer using key distribution capacity.
Assets and Capacities	It requires a high investment in technology and equipment. Inputs must be imported. There are high entry barriers.	Make strategic alliances to ensure supplies and markets. Promote the cultivation of the main raw materials.
Offer of Products and Services	Beer is mainly manufactured and marketed, the brands offered are according to each market segment.	Wide range of quality products (beverages) that compete internationally. Provide comprehensive services with easy accessibility.

CURRENT STRATEGIC PARADIGMS OF THE COMPANY

As mentioned in the previous point, we present the current strategic paradigms of Backus & Johnston.

BACKUS & JOHNSTON PARADIGMS:

Strategy Dimensions	Conventional Logic	Value Innovation Logic
Company assumptions	The industry will remain concentrated in a single producer.	Backus can develop any type of beverage based on its key capabilities and can provide complementary services.
Strategy Focus	Maintain leadership in the local market Maintain international quality standards (production and product).	Diversify products (beverages in general) and services Refocus the positioning of the beer image.
customers	Loyalty to the brand The main target market is young people.	Cover customer needs with a wide range of beverages (alcoholic and non-alcoholic). The target market has no limits.
Assets and Capacities	Maintain cutting-edge technology Maintain vertical integration.	Use the installed capacity for the production of beverages of the company and of third parties. Make strategic alliances to ensure supplies and markets. Promote the cultivation of the main raw materials.
Offer of Products and Services	Beer is mainly manufactured and marketed, maintaining regional brands.	Wide range of quality products (beverages) that compete internationally. Provide comprehensive services with easy accessibility using the internet.

COMPANY VALUE CURVE

Based on the reading Creating New Market Space and Value Innovation by the authors W. Chan Kim and Renée Mauborgne, who point out that the logic of innovation of value of a company must be translated into an offering of the company to the market. The application of this methodology is useful to identify what consumers want and those offers from the company that are not necessary or valued by them.

First, we have defined seven variables to define the Backus & Johnston current value curve, which we describe below:

1. Accessibility: it is the availability in store of the products for customers. In this regard, Backus has a high rating given its extensive distribution network, as we know this is its key capacity.Variety of products: it has been considered a medium level in this regard because, although it is the leader in the local market, the The consumer is almost limited to 3 main brands (Cuzqueña, Pilsen and Cristal). Price: the price tends to be perceived as moderately low, because as seen in the trends, the price has remained stable and accessible to consumers despite the changes in the ISC, inflation and costs. Quality: it was considered a moderately high value since, since it is a “monopoly” market, there would be no greater incentive to push this variable. Complementary services:moderately low because there is still a lack of development of services that facilitate the purchase of consumers, for example an internet portal. In addition, there are not even more after-sales services such as promotions, contests, raffles or gifts.Health damage: moderately low since compared to other drinks it does not present a high degree of alcohol.Variety of presentations: moderately high since it has different sizes of packaging for your products.

Therefore, the current value curve of the company is presented:

Likewise, this curve has been compared with other industries of distilled and fermented alcoholic beverages given that Backus is the only beer manufacturer in Peru, and the closest substitutes are those mentioned above.

We can conclude from the previous table that Backus has a competitive advantage in accessibility with respect to its substitutes because they do not have the capacity to reach greater distribution channels, that is, they include supermarkets but they do not manage to have a presence in warehouses.

Regarding the variety of products, they are above the Backus level given the great diversity of types and brands of fermented and distilled beverages such as rum, whiskey, vodka, wine, brandy, pisco, among others.

The price level of Backus is equally perceived to the distillates, while fermented are well above; It is explained by the differentiation of the price that the producers establish according to productive processes and uses of raw materials.

In quality, Backus is far above competitors who are at an average level; the differentiation is based on the raw materials used.

In complementary services, all are at a moderately low level because, due to the nature of the product, companies have not bothered to provide additional services (internet, call center, among others).

Regarding health, it is appreciated that distilled products register the highest values ​​due to their high alcohol content.

Variety of presentations, Backus offers a wide range of litrages while in substitutes the presentations are generally uniform (750 ml.)

Second, for the development of a new concept of supply and the creation of new market spaces, it is useful to answer four key questions suggested by the authors; which are presented below:

What factors should Backus & Johnston have below the industry?

• It should have a lower price to be more competitive, given the entry of new competitors.

What factors should Backus & Johnston increase above the industry?

• Increase your corporate image through cultural, social, sporting, charitable, educational events, etc.

• Carry out greater promotions focused on increasing customer loyalty, such as gifts, sweepstakes, exchanges, contests and other entertainment.

What factors should Backus & Johnston eliminate from the industry?

• Of the factors that we have identified for Backus & Johnston, we consider that there are no factors to be eliminated.

What factors should Backus & Johnston create in the industry?

• Create innovative products for the market such as "Beer Without Alcohol"

• Position the image of beer as more functional than emotional, highlighting its natural properties and health benefits (if taken in moderation).

• Create a beer that has the property of quenching thirst.

• Complementary services such as online orders, Call Center establishment, which are capable of serving the customer 24 hours a day.

Likewise, an analysis of the conventional boundaries of the industry has been developed, which is shown below:

Conventional Borders	Current Industry	Creating New Spaces
Seeing through surrogate industry	Compete with beer companies	Seeing through the beverage industry in general.
Seeing through strategic groups	Mainly oriented to the young segment	Focused on all market segments to offer alcoholic and non-alcoholic beverages.
Viewing through the chain of buyers	The current buyer is the one who wants a beer.	By selling beverages for different segments, buyers may not only be the final consumer, but also parents who will buy soft drinks and juices for their children, and these in turn will also influence the purchase of beverages.
Viewing through complementary products and service offering	It is only about serving better by reaching distributors and end consumers on time.	Provide everything necessary for clients' events (chairs, tables, premises, hostesses, etc.)
Seeing through the functional approach to the emotional	Beer has a more emotional approach	Shift the attractiveness of the product towards its functional properties, such as health and thirst quenching.
Looking through time	Adapt to current external trends such as globalization.	Anticipate future trends and changes by offering products for all kinds of needs such as beer, water, juices, isotonic, etc.

As a result of seeking to create new market spaces, a new company value curve is proposed for the beverage industry in general and where new variables of supply for the consumer stand out.

Before showing the new curve, we will define by general beverage industry the following product lines:

1. BeersSoft Drinks or SodasJuices and NectarsCocktailsNatural, carbonated and non-carbonated watersIsotonic or rehydrating

At the end of the previous analysis, the new value curve is presented:

This new curve reflects the variations that should occur according to the responses given to the questions made by Kim and Mauborgne, it also reflects three new variables that contribute to creating the new market space in this new approach of the company towards beverages in general.

We describe the three new elements below:

1. Non-alcoholic beer: this innovative product, which does not exist in the domestic market, is aimed at a segment that does not like the effects of alcohol but prefers the sensation of the taste of beer. Emotional approach to functional: this aspect tries to change the perception of beer to focus communication on natural qualities and health benefits Internet: the beverage industry has not yet exploited this communication and sales channel, being a tool of great potential since it can be used for reception and placement of purchase orders, information transfer, service channel and even become a form of e-business.

IDEALIZED DESIGN

Based on Russell Ackoff's Creating The Corporate Future reading about the “Idealized Design” of a company, the following steps are followed:

NEW MISSION

The new mission of the company is:

“To be a company with global reach, producer and marketer of beverages in general, using cutting-edge technology, highly trained and motivated personnel, with efficient and innovative processes, whose objective is the satisfaction of its customers, contribute to the development of its employees and the society, as well as the protection of the environment ”.

This new mission has been confronted with the new paradigms following the dimensions proposed by Kim and Mauborgne. In this regard, the following table is shown:

Strategy Dimensions	Value Innovation Logic	Mission Relevant Points
Company assumptions	Backus can develop any type of beverage based on its key capabilities.	Producer and marketer of beverages in general.
Strategy Focus	Diversify products (beverages in general) and services Refocus the positioning of the beer image.	Drinks in general refers to the production of juices, cocktails, waters, soft drinks, beers and other alcoholic and non-alcoholic beverages.
customers	Cover customer needs with a wide range of beverages (alcoholic and non-alcoholic). The target market has no limits.	Since the mission aims to manufacture beverages in general, the market's attention is not restricted.
Assets and Capacities	Use the installed capacity for the production of beverages of the company and of third parties. Make strategic alliances to ensure supplies and markets. Promote the cultivation of the main raw materials.	The company must use state-of-the-art technology, trained and motivated personnel, as well as have efficient processes, to be able to serve its local market and third parties. The company is oriented towards society and the environment.
Offer of Products and Services	Wide range of quality products (beverages) that compete internationally. Provide comprehensive services with easy accessibility using the internet.	Offer a variety of high quality beverages, at affordable prices, with complementary services. Based on its key capabilities, its products will have international reach.

NEW STRATEGIES THAT CREATE MARKET SPACES

Having evaluated the new mission and value curve for Backus & Johnston within the beverage industry, the following strategies are presented:

1. To develop a beer without alcohol content, for this the following steps are suggested:

• Development of product design considering packaging, brands, presentations. Use intensive advertising focused on highlighting that it does not generate side effects, and quenches thirst. Give accessibility to all market segments.

The promotion of this product should focus on offering a beer that can be consumed on any occasion and has the facility to be bought without restrictions and anywhere, such as in vending machines. Additionally, this product can be consumed by all types of people including those who do not drink alcoholic beverages.

1. Develop a shift in focus from the emotional to the functional.

• Highlight the health benefits of the product Encourage consumption at all times.

The promotion of this product should highlight the health benefits of beer if taken in moderation (it prevents heart disease). It should also be emphasized that consumption can be done in all kinds of situations.

1. Internet

• User friendly and entertaining website development. Must have the ability to receive purchase orders and clients to be able to track their placed orders. In the same way with suppliers. Communication and sales channel. Being an international medium for companies to be interested in the distribution and sale of Backus products.

The development of this new channel seeks to facilitate access to complementary products and services, such as receiving orders from customers at any time and space, achieving greater knowledge of them such as their purchasing habits and preferences, and being a channel that provides information such as for example cultural, social, entertainment events, etc.

NEW SKILLS AND KEY COMPETENCIES

In order to carry out these strategies, Backus & Johnston will have to extend its key production capabilities, that is, to be flexible to be able to produce all types of drinks and flavors, and their distribution. Likewise, it must develop new capacities such as:

• Personnel with an innovative spirit that favors the permanent development of new products, applying the lead-user-research methodology.

To streamline the learning process, it should be supported by the knowledge that its shareholder Bavaria has in the beverage industry.

IDEALIZED PROPERTIES

As Russell Ackoff suggests, when proposing idealized properties, they must be thought without restrictions and breaking paradigms to reinvent the company. Here are the properties for Backus & Johnston:

The business:

• Be known as a beverage company in general. Company that uses a quality system based on the ISO 9001 and ISO 14000 system. Have all business processes integrated, in order to eliminate redundancies, reduce errors, improve efficiencies, reduce costs and increase the speed of response and delivery times of products to the market. Company committed to the development of the country.

Markets and marketing:

• A market without borders. Serve all types of segment given the diversification of products.

Distribution:

• Ability to deliver the products where the client requests it. Without limitations of time and space. Have your own convenience stores or make exclusive strategic alliances. Using the internet platform, orders will be received from customers, as well as informing the customer of their status. In the same way for the relationship with suppliers.

Products / Services:

• Known products in international markets Have a wide range of beverage products and services, being able to develop what the market requires.

Production:

• Be the most efficient and flexible Manufacture with high quality standards Achieve Six Sigma standards Use the minimum of resources

Logistics:

• Close relationship and communication through electronic means with suppliers and customers, achieving just-in-time. Having the minimum inventory.

Support Services:

• Establishment of a call center service for its customers and its distributors, which must operate 24 hours a day.

Organization and management:

• Flexibility to adapt to change Fluid exchange of ideas Customer orientation.

Personal:

• Highly motivated and trained staff. Development and practices of virtues and values ​​to achieve personal quality.

Finance:

• Profitable company Attractive to investors (high share value).

Environment:

• Be able to recycle water. Raw materials such as malt, barley, hops are grown without artificial fertilizers. Avoid environmental pollution in the production of beverages.

Government:

• That taxes are not applied to alcoholic beverages. That they do not limit the consumption of alcoholic beverages.

TEST OF THE IDEALIZED DESIGN

Having followed the four steps above, Russell Ackoff suggests testing the model by applying the three required properties of the idealized design of any system:

1. Technologically feasible.- We have analyzed the following technological components

1. • Acquisition of state-of-the-art technology: Given that the company will now expand its business to the production of alcoholic and non-alcoholic beverages, it will have to acquire new technology both for the production itself, as well as for the handling of this type of products that would be even within the field of food. To delve further into this point, we have divided the technology needs in two:

• Technology for production that corresponds to the acquisition of plants for the production of these new beverages, for which Backus will have to make a strong investment in fixed assets, as well as start a training plan for its workers. water treatment, involving the acquisition of technologies for food handling (natural juices), from the conservation, transformation and modifications of their qualities. Likewise, the management of its physical-chemical foundations, and the application of these in the aspects of composition and nutritional qualities; as well as technologies for its conservation (refrigeration and freezing), which has to do with quality in turn.

In both cases, Backus & Johnston must implement a policy of continuous Benchmarking to those leading companies in the world in the production of this type of beverages, in order to know both their technologies and their skills.

1. 1. Expansion of the Installed Capacity for the Production and Storage of Products: Definitely Backus must expand its production capacity to be able to enter this new business. To do this, we think that given the similarity in the production processes and the existence of unused plants, such as Callao and Rímac in Lima, they could be adapted or remodeled to start the production of non-alcoholic beverages. Likewise, the need for the construction of new plants or the acquisition of small regional companies, which are even in the free zones of Selva, where you can have access to the raw material (fruits) for the production of natural juices, should be considered a tax benefit Technology and Processes in accordance with ISO 9000 quality standards: Since within the idealization,We believe that Backus should be at the forefront of compliance with standardized processes that allow it to print its seal of quality worldwide; The technologies to be acquired have to be in accordance with these quality standards, as well as the processes to be developed within this business expansion. Improvement of Current Information Technologies: Our idealized design includes that all Backus business processes meet integrated using a technological platform as a base, with the aim of improving their response capacity to the client. Since the SAP system already exists in the company, it can allow such integration in a more viable way.The technologies to be acquired have to be in accordance with these quality standards, as well as the processes to be developed within this business expansion. Improvement of Current Information Technologies: Our idealized design includes that all Backus business processes meet integrated using a technological platform as a base, with the aim of improving their response capacity to the client. Since the SAP system already exists in the company, it can allow such integration in a more viable way.The technologies to be acquired have to be in accordance with these quality standards, as well as the processes to be developed within this business expansion. Improvement of Current Information Technologies: Our idealized design includes that all Backus business processes meet integrated using a technological platform as a base, with the aim of improving their response capacity to the client. Since the SAP system already exists in the company, it can allow such integration in a more viable way.understands that all Backus business processes are integrated using a technological platform as a basis, with the aim of improving its response capacity to the client. Since the SAP system already exists in the company, it can allow such integration in a more viable way.understands that all Backus business processes are integrated using a technological platform as a basis, with the aim of improving its response capacity to the client. Since the SAP system already exists in the company, it can allow such integration in a more viable way.

On the other hand, the integration that we propose with both suppliers and clients will require that this system have to be connected to an internet platform, which allows Backus to develop an e-Business, and thus streamline and automate the chores.

1. 1. Distribution channels: The design proposes to reach different countries in the world, satisfying the customer's needs, through a distribution channel that guarantees the customer the timely delivery of the product. For this, we think that strategic alliances with shipping companies, insurers that facilitate their transportation will be necessary; as well as with convenience stores, supermarkets or even with companies dedicated to e-commerce to support the distribution of the product.

To carry out this direct relationship with the client and satisfy their demand and concerns, we think about the implementation of a Call Center, within the national territory.

1. 1. Implementation of Just In time in the supply chain: Promoting the cultivation of some raw materials within Peru and on the other hand, conducting negotiations with suppliers in such a way that although the negotiations are in advance, the supply is achieved using the right on time, in order to reduce inventories.Water Recycling and Environmental Protection: As the basis of the beverage process, we think it would be important to incorporate water recycling to have a greater availability of the resource, and it could be provided to society an added value when it comes to protecting the environment.

1. Operationally feasible.-Organizational Structure: The organizational structure is divided by business units, so the incorporation of new units will not have a significant effect. However, the options to be adopted should be reviewed so that the company remains agile in its organization.Distribution structures: This being a key capacity of Backus and given that the beverages to be incorporated as new lines of business have physical characteristics of the product (packaging, weight, among others) and channels necessary for similar distribution; Backus will have no difficulty in placing them on the market.Trained, committed and motivated staff: There is a training center that provides staff with continuous education in technical and leadership aspects. Likewise,The staff has been a key point in the development and leadership of Backus, so there will be no greater resistance to the proposed change. Technological Support: As mentioned in the technologically feasible section, Backus has an information systems platform that will allow integrate new processes with current ones.Able to learn and adapt quickly.

Among the factors that we consider Backus has to learn and adapt quickly to this proposed change we have:

1. Knowledge of the Beverage Business: Backus is currently in part of the beverage business and even ventured into the soft drink segment; For this reason, the expansion of the business lines within this category will not be totally alien to it.Access to Industry Knowledge: Complementing the previous point, Backus has the knowledge of its partner, the Bavaria Group, which can support the development of this new line of business.

On the other hand, it will be important the participation of both managers and operating personnel of the food and beverage fairs that take place around the world, in order to get to know and learn new technological trends.

• Adaptation of Company Personnel.- Continuous mergers and technological changes and innovations have helped both managerial and operational personnel to quickly adapt to changes in a successful way, despite the risk of job insecurity and anxiety. Likewise, the organizational culture of the company is based on communication, innovation, continuous improvement, among others, which are the key to Backus' success today and which will enable it to develop new skills in the future.

NEW ORGANIZATIONAL STRUCTURE

Currently Backus is organized under a scheme of economic activities (groups of activities) and within them they are then organized by products as shown below:

• Beer Group
  • Beers
  Food and Beverage Group
  • Agribusiness Maltware Bottling plant

The structure that we propose for the Backus Corporation based on the reading of The Design of the Organization as a Competitive Weapon, is primarily organized by economic activities as it currently stands, and then by product lines as shown below only for groups of beer and drinks, the other groups would be the same as shown in Annex 1.

• Beer Group
  • Beers
  Drinks Group
  • Soft Drinks / SodasWaterJuices and Natural NectarsCocktailsIsotonic or Rehydrating
  Food and Raw Materials Group Containers and Packaging Group Transportation Group Services Group Social Projection Companies Securities Investment Companies.

This new organizational structure that is proposed only covers aspects of the strategic design of the organization, and does not take into account the operational design.

It is worth mentioning that the beverage group will not be shown within the beer organization, but will be a different organization and may have the following characteristics:

• Buy companies that are dedicated to the manufacture of these products that have the machinery, technology and facilities Third-party service for the manufacture of the products, which will carry the Backus brand Use part of the idle capacity of the beer company, only for products that can be adapted to its machinery, technology and facilities. Build an independent plant that has state-of-the-art technology to manufacture these products.

In order to carry it out, the Backus Corporation must take into account the following:

• Make a financial analysis of which of the options is more profitable for the corporation. The "Best Practices" of the beer and beverage industry must be implemented. Supply companies will have to be trained to obtain the quality characteristics designed by Backus.The distribution channels that it currently has for beer will be used. Financial support to supplier companies for the acquisition of cutting-edge technology, those that have obsolete or limited technology.

NEW BUSINESS PROCESSES

According to the new structure that we are proposing where it is shown that the corporation must be primarily divided into economic activities and then within it, into product lines; The main business processes that the new structure would imply would be the following:

Processes	Current (Beer)	New (Drinks)
Internal logistics	Receipt of raw materials in our own warehouses in each brewing plant.	Receipt of raw materials in different warehouses (own and external) and located by product lines.
Production	Production system typical of a brewing industry.	Use of the idle capacity of beer, for the elaboration of beverages that have similar processes.
Distribution	Distribution of beer to the main wholesalers.	Distribution of all beverages with the same beer channels, and in some cases reaching the main retail and final consumer stores.
Market and Sales	Sale of different beer brands according to geographic regions and advertising throughout the year.	Sale of a whole range of alcoholic and non-alcoholic beverages nationwide with the same sales force for all beverages, with great promotions and advertising.
Service	Promoter and sponsor of social, cultural, sporting, artistic events, fairs for the youth segment (beer).	Promoter and sponsor of all types of events, to promote the wide range of beverages in all segments.
Address	Focused on the beer industry.	Focused on the entire beverage industry.
Human Resources	Human resources management with a vision of the beer industry.	Human resources management with a global vision of the market and with a high quality of people and professionals.
Technology	Use of the highest technology in the beer production process.	Use of technology in all processes, such as logistics, production, distribution, marketing, post-sale and administration. Work with information in real time.
Catering	Purchase of raw materials and other supplies for the manufacture of beer with suppliers of international quality products.	Coordinate purchases at the aggregate level of all beverage supplies to achieve lower costs and ensure supply.

USE OF INFORMATION TECHNOLOGY

The information technology that this new company should have are the following:

• Electronic Data Interchange System (EDI), both with its suppliers and with its distributors and wholesalers An Internet portal that contains information on this new company, its products, receives orders, displays information on events, entertainment, and above all you can Learn more about the needs and requirements of customers Build an Intranet that allows coordinating the different product lines for distribution and sale Incorporate a good database (Data Warehouse), and customer management technology (CRM) to have more knowledge of customers and be more focused on their needs.

BENCHMARKING

Based on the new strategic focus of Backus, which considers among its key points to consolidate even more in the national and international market, expand its range of production to other alcoholic and non-alcoholic beverages, promote the change of value of beer towards the functional and put greater emphasis on its production processes, mainly in the one that has to do with ecology; It is necessary to determine the critical processes that the company must study and measure, in order to discover the level of excellence performance of other companies in the world and define how to make adaptations of these good practices and they are reflected as positive changes in the company.

To do this, we have carried out an analysis of the processes that will require greater emphasis within this proposed change in order to prioritize them and, based on this, identify the levels of action of the same by other companies, both in Latin America and worldwide. As a second step, we have evaluated Backus's performance and compared it with other companies, already chosen for their key competencies, and finally we identified the gap that Backus has with respect to these current trends, projecting our planning horizon to reach those levels o adapt them to the company.

• Backus as a brewing company

We evaluate the main beer companies in the world, to serve as a starting point, obtaining the following result:

Within the list we can observe or classify the two main Latin American companies such as Brama, now Ambev, and Grupo Modelo. Likewise, we have Anheuser - Busch which is the main exporter and partner of Grupo Modelo, and Heineken.

Evaluating the performance of Backus in terms of the internationalization of its products and the lower level of production, we think that it could benchmark production practices as well as international distribution or penetration into new markets of these brewing companies.

• Backus as a beverage company

One of the main focuses that Backus wants to give corresponds to both the production of natural juices and soft drinks.

In both cases, there are already established competitors in the well-positioned juice market in Peru, such as Jugos Selva and Laive. This experience can be beneficial to know the Peruvian market and the supply of inputs.

On the other hand, it will be important to carry out an analysis of world technology regarding the production and commercialization of this type of product, considering that the United States and the European Economic Community are good markets in which we can look for important producers.

Regarding carbonated beverages, Backus has knowledge of the market since it ventured into this branch, however we think that for it to be intense it will have to do a Benchmarking with Inka Kola, leader in the Peruvian market.

• International and National Distribution Capacity

Although within the first point in which it is proposed to benchmark the main beer companies, we consider that Coca Cola Femsa is a leader in distribution channels and has been adapting to the various Latin American markets. In addition, Femsa has 6,000 routes in Mexico, and 500 storage warehouses. It has access to the consumer through 4,000 owned stores and 500,000 retailers.

Additionally, a process recently implemented by Femsa, which could be of interest to us in order to strengthen our local and international distribution channels, is its new secondary distribution scheme based on knowledge and the relationship with the channel through the pre-sale system..

On the other hand, their relationship with retailers such as OXXO convenience stores, where they often test new product launches, can help us penetrate this type of distribution chain, which has not been fully exploited.

• Refocusing Beer from Emotional to Functional

We evaluate data published by the Spanish Beer Association, which shows how beer is perceived in the Spanish market. According to surveys, beer is perceived by 73% of Spaniards as a refreshing drink. Additionally, 70% perceive it as a natural and healthy product with a low alcohol content.

This is a good experience of perception of beer, which was worked little by little by said Spanish Association and that has made beer can be considered as a mixture of food and drink that is fundamentally drunk for pleasure, focusing on its properties beneficial to health, which could be replicated in Peru in order to increase per-capita consumption.

• Environmental care

There are many experiences in terms of caring for the environment, but the Spanish market attracted us, since its recycling efforts as a union of breweries has allowed it to reach a percentage of 75% recycling of all its containers, contributing to the conservation of the environment.

In addition to preserving the environment, the recycling of water, which was also proposed within the new policies, helps to reduce costs. We are looking for information and the companies in this field in the United States are the ones that have been using this technique, reducing the use of water by approximately 50%, so efforts to know the application of these process flows and water treatment should focus on major juice producers in the United States.

• THREE ALTERNATIVE SCENARIOS OF THE FUTURE INDUSTRY

Just as the trends and uncertainties were analyzed in the second point of this work, we now present those that we consider relevant for our new industry.

NEW TRENDS IN THE BEVERAGE INDUSTRY

Our value proposition of Backus's entry into the beverage industry allows us to observe new trends, in addition to those you already face in your current beer industry. We detail them below:

1. The beer companies are diversifying their production towards other products. This trend is based on the behavior followed by companies such as Ambev from Brazil, which has beers, soft drinks, water, cocktails and juices, Other companies are Bavaria from Colombia, Femsa from Mexico and Compañía de Cervecerías Unidas A (CCU) from Chile. Appearance of independent soft drink brands on the market. This is based on the fact that the companies are manufacturing and marketing their own brands. In Peru, brands such as Kola Real from Grupo Añaños have emerged with success, and at the Latin American level, CCU has the BILZ brand and PAP, which ranks second in the Chilean market. Ambev also has its own brands such as Sukita, a flavored soft drink, launched in Brazil in 1976. This shows us that the markets not only prefer classic soft drinks like Coca-Cola or Pepsi,rather, it is possible to market different products. The advantage of this type of private label drink is that you do not have to pay royalties. Price War. Given the competition and the low purchasing power that characterizes the Peruvian population, companies in the soft drink industry entered a price war in the past decade to increase sales. It is to be expected that given the still depressed characteristics of the Peruvian economy, this trend will continue to be reflected in this industry. Variety of presentations and high litter. There is a wide variety of presentations in local carbonated drinks, with sizes of 1 liter, liter and a half, 2 liters, 3 liters, among others.Variety of flavors. The production of a carbonated drink is not a complex process and requires few raw materials,the main component being the flavoring used. There are companies dedicated to making various flavors for the industry, which are a differentiating factor against the competition.

NEW UNCERTAINTIES IN THE BEVERAGE INDUSTRY

The uncertainties that we pose for the beer industry are valid for this new industry, since the characteristics and behavior are similar.

Therefore, we have chosen the following uncertainties to formulate our scenarios:

1. High or Low Competition:

• High Competition has become an uncertainty given the trends in the market income of new manufacturers of beverages and beers, such as Ambev, who have a project to implement a plant in Peru which would be operational in 2004. Likewise, the same income of Bavaria, who instead of establishing a factory decided to acquire part of the shareholding of Backus. The entry of new competitors, and the permanence of the current ones, makes it difficult to determine the aggressiveness with which they act in the industry. Low Competition is the counterpart of this uncertainty, since the government, in safeguarding the Peruvian industry, could decide to take protectionist measures.

1. Greater or Less Consumption:

• Higher Consumption is an uncertainty because per capita consumption for both beers and beverages in general is influenced by various factors such as income, product image, population growth, foreign demand, prices of substitute products, etc. Lower Consumption, based on the trend given that a low per capita consumption of beer and soft drinks has been recorded.

It should be noted that the following uncertainties have not been selected because we consider that they are involved in the aforementioned, as indicated below:

1. Increase in raw material prices: if this situation occurs, it would affect the costs of the industry, and could be reflected in higher prices to the consumer, discouraging consumption High or Low Prices: we consider that the uncertainty of greater or lesser competition involves it, because it may be a consequence of the aggressiveness in prices that is generated by the competitiveness of the market, or vice versa.Aggressiveness of substitute products: the uncertainty of greater or lesser consumption involves it because as per capita consumption increases, the competition of current substitute products or new ones may intensify.Government restrictions: the increased competitiveness of the industry can be seen by the government as a source of tax revenue, or enter to protect the local industry.

POTENTIAL SCENARIOS OF THE BEVERAGE INDUSTRY

According to the analysis of trends and uncertainties, we have defined the following scenarios:

High consume
Low Competition	" The Paradise " - Average variety of products. - High prices.	"The best will remain" - Superior quality. - Imports are growing. - High product specialization.	high Competition
"Discover other Worlds" - Little variety of products. - Search for new markets. - Low price.	"Fight to Survive" - Price war. - High operating efficiency. - High variety of products. - Strategic Alliances
Low consumption

IDEALIZED SCENARIO "EL PARAÍSO"

The ideal setting for the design outlined above considers a context of high consumption and low competition, called “El Paraíso”, because we consider that it fits our idealized design.

In this environment, the beverage industry is characterized by the following elements:

• Great acceptance of the products: they are products with high market share and that satisfy the tastes and needs of the consumers of the target segments High prices and margins: given the high production volume, linked to the acceptance of the products in the market Both prices and cost efficiency allow for better margins. Variety of Products: in this scenario, the variety of products on the market is wide and therefore covers the needs of various segments for which many companies could enter to compete. For this reason, it is important to focus on the market segments with the highest potential growth Barriers to entry: the development of various distribution channels, the strategic location of the plants, the technology developed and market knowledge,They would make it difficult for a potential competitor to enter the market. Little aggressiveness from competitors: in this environment there is a limited price war.

The main strategies that will allow us to reach and develop in the chosen scenario are proposed:

• Constant innovation: it is important for the company to permanently renew its products, since the tastes and preferences of consumers are not static. In this context, the development of products such as non-alcoholic beer, cocktails. New approach and communication strategy that highlights the functional values ​​of the products, such as the benefit of beer, juices and soft drinks as "natural" drinks. An adequate distribution system to meet the high demand in a timely manner, which means having the means of transport, warehouses, close relationships with wholesalers and distributors, appropriate use of information technologies (eg EDI), among others.Make intensive use of new information technologies such as the Internet to serve as a sales and communication channel with customers and suppliers Training of personnel to adapt to the new needs of the company by entering new businesses and markets.Sales: strategy of permanent contact with the client to know the changes and needs of the consumers and to be able to propose the development of new products (application of "lead user research"). Production: the use of cutting-edge technology must be maintained to enter in new businesses, so that they represent key capabilities for the company. There must be flexibility to respond to demand and to develop new products.Training of personnel to adapt it to the new needs of the company by entering new businesses and markets Sales: strategy of permanent contact with the client to know the changes and needs of consumers and to be able to propose the development of new products (application of “Lead user research”) Production: the use of cutting-edge technology must be maintained to enter new businesses, so that they represent key capabilities for the company. There must be flexibility to respond to demand and to develop new products.Training of personnel to adapt it to the new needs of the company by entering new businesses and markets Sales: strategy of permanent contact with the client to know the changes and needs of consumers and to be able to propose the development of new products (application of “Lead user research”) Production: the use of cutting-edge technology must be maintained to enter new businesses, so that they represent key capabilities for the company. There must be flexibility to respond to demand and to develop new products.the use of cutting-edge technology must be maintained to enter new businesses, so that they represent key capabilities for the company. There must be flexibility to respond to demand and to develop new products.the use of cutting-edge technology must be maintained to enter new businesses, so that they represent key capabilities for the company. There must be flexibility to respond to demand and to develop new products.

ALTERNATIVE SCENARIOS

The strategies that would be taken if our idealized company is in the alternative scenarios would be the following:

SCENARIO "WAR FOR THE MARKET"

• Manufacture of differentiated products Better complementary services Greater promotion and advertising Creation of entry barriers, be more competitive in efficiency, technology and quality Enhance customer loyalty with products that represent their tastes, customs and regional identification Improve the relationship with distributors, wholesalers and retail stores, trying to obtain exclusivity for our products.

SCENARIO "DISCOVER OTHER WORLDS"

• Show a more functional than emotional image of beverages, especially non-alcoholic beverages, to increase consumption Seek new market horizons at an international level Strategic alliances to provide services to third parties, distributing and marketing complementary products Use flexibility of the company, to seek alternative and profitable businesses Reduce (cost savings) and eliminate unprofitable products Seek less expensive sales processes, giving greater emphasis to the use of the Internet.

BIBLIOGRAPHY

• (1) Backus & Johnston Corporation. www.backus.com.pe (2) América Economía Magazine. www.americaeconomia.com (3) Grupo Empresarial Bavaria. www.grupobavaria.com (4) Polar Company. www.empresaspolar.com.ve (5) Cervecería Modelo. www.gmodelo.com.mx(6) Russell L. Ackoff. "Creating the Corporate Future". The Wharton School, University of Pennsylvania. (7) Paul. JH Schoemaker. "Scenario Planning: A Tool for Strategic Thinking". Sloan Management review, Winter 1995. (8) Rick Whiting. “Benchmarking: Lessons From the Best In Class.” (9) Robert Hiebeler, Thomas B. Kelly & Charles Ketteman. "Best Practices". Arthur Anderson. (10) Gregory H. Watson. "Strategic Benchmarking". (11) "The Design of the Organization as a Competitive Weapon" (12) "The New Structures". Course Manual (13) W. Chan Kim, Renée Mauborgne. "Creating New Market Space". Harvard Business Review., 1998. (14) W. Chan Kim, Renée Mauborgne. "Charting Your Company's Future". Harvard Business Review., 2002. (15) W. Chan Kim, Renée Mauborgne. ”Value Innovation: The Strategic Logic of High Growth”. Harvard Business Review., 1997.(16) Benjamin Games-Casseres. "Group Versus Group: How Alliance Networks Compete." Harvard Business Review., 1994. (17) CK Prahalad and Gary Hammel. "The Core Competence of The Corporation". Harvard Business Review., 1990. (18) Management Magazine. www.gestion.com.pe (19) Exporters Commission.http: //www.comexperu.org.pe/pdfs/rni/julio02/producto.pdf

APPENDIX 1

NEW ORGANIZATIONAL STRUCTURE

Rafael Gaspar Wong Ruiz

[email protected]

GRUPO CERVECERO: BACKUS & JOHNSTON - STRATEGIC INNOVATION

Contributed by: Rafael Gaspar Wong Ruiz - [email protected]

Download the original file