Carlsberg Diversification or Expansion
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Summary of Case ABC Consulting Sdn. Bhd. is a specialized consultancy firm which deals with businesses who are in financial distressed and turning them around. Despite being profitable in the services that they have provided to variety of businesses, Mr. Stanley felt that the firm spent too much time in handling business turnaround services that the cash flow of the firm had become irregular. The firm was suggested to start looking into proposing schemes to cash-rich companies that wanted to expand, diversify or venture into profitable businesses. David who has been working at the firm for three years, begun to research on the beer and stout industry as there might have been suggested that businesses are facing hurdles due to high excise duties. Carlsberg was one of the largest market holders in that industry became a target for the firm to provide these consultancy services.Carlsberg Company Background – miroleVery profitable – largest market holder – incorporation in ___ – share prices has been on a high – excise duties increasing Competitors – MiroleGuinness Anchor Bhd. (GAB) one of competitors in beer industry in Malaysia Diverse into Halal product – sparkling fruit beerIssues of CaseBasically, Carlsberg is currently operating its business at a steady level in Malaysian market. But there are concerns about the current business operations as to it profits from the few years back have been decreasing and the excise duties have been increasing gradually every year. Even when their profits were decreasing, the share price of the business was still at a high compared to other competitors. Excise duties in Malaysia have been increasing throughout the years and it is a concern to all companies in the beer and stout industry as they might not be able to cope wit the high costs of the business. These excise duties are increased by the government to reduce consumptions of these types of products. Thus, these taxes are expected to increase further in the future and might be a going concern for companies.To add…Ratio Analysis Carlsberg Malayia Sdn. Bhd. CategoriesRatios 20082007LiquidityCurrent Ratio3.244.12Quick Ratio2.663.47ProfitabilityROA0.120.13ROE0.160.17Profit Margin0.080.09Gearing Debt Ratio0.250.21Debt-Equity0.340.26Market Dividend Payout1.081.00
Guiness Anchor Berhad.CategoriesRatios 20082007LiquidityCurrent Ratio2.152.30Quick Ratio1.011.06ProfitabilityROA0.200.20ROE0.310.29Profit Margin0.110.10Gearing Debt Ratio0.340.31Debt-Equity0.520.46Market Dividend Payout0.790.82Comparison between Carlsberg and GAB Based on the figures in the table above, Carlsberg is in a good position to diverse its current business operation. The liquidity ratio for Carlsberg is more than 1 which means its business is liquid enough to diverse into new market segment. The gearing ratio for Carlsberg is more than 1 which means that it can pay back its debts with its current assets. Based on the dividend payout calculation made above, the company is reflecting a high dividend payout to its shareholders given the increasing cost in excise duties. Therefore, Carlsberg have slight advantage over Guinness Anchor Berhad based on overall ratios calculated above. Thus, it should diverse its business into halal market segment to further increase its profits and rising it portfolio in Malaysian market. SWOT AnalysisStrengths – miroleGlobally well-known Strong customer brand loyalty Market leading position Large scale of production Capabilities of adapting to new environmental policies Weaknesses – taufikLack of expertise to create new thingsHigh production costs Deficiency in technology Opportunities – zarilAttract more investors Increase growth in premium segmentPossible for greater advantage of economic scale Threats Strict rules and regulations When diverting into a Halal market, there are many rules and regulations that Carlsberg must comply. Â Especially when moving into a Halal product operation. Carlsberg would need to get the authorities to approve their product and its operations to ensure that it is within the Shariah Law. Plus, their factory would need to be regularly checked for health and cleanliness issues. Carlsberg might have difficulties into complying with these regulations as they are not familiar with this.