How Heineken obtains its competitive advantage refers to several innovative and flexible management information systems. Based on Michael Porter’s 5 Forces, the competitive rivalry will be analyzed for Heineken:
Threat of New Entry: Since Heineken is very successful company and the threat of new entry to the beer industry is not high enough to worry about. Heineken has earned customer loyalty over the years and many consumers would prefer quality over quantity, which refers to even new entries keep the beer products price low, this does not affect Heineken. Since the company always tries to be innovative and efficient in terms of its internal operations as well as marketing.
Buyer Power: Heineken pays attention to buyer power a lot. Buyers are intermediaries and retailers. The company understands that Buyer power is very important to be preferred among consumers in terms of pricing, beer quality and other factors. To keep up with new trends or holiday sales, Buyers have a power to control Heineken’s sales. Therefore, Heineken outs a lot of efforts in intermediaries and retailers on Heineken’s side to get extra attention to Heineken’s products.
Threat of Substitution: To ensure Heineken’s competitive advantage, the company works on innovative management systems that only top beer companies use to manage its operations. The system is vey flexible and avoids extra costs in its supply chain. Meanwhile, Heineken works on quality of its production. Raw materials and the process of production are the key areas that maintain Heineken’s competitive power over its competitors in the beer industry.
Supplier Power: Heineken is already one of the top beer companies in the worlds. To keep the track, the company manages its supply chain very efficiently. Knowing the supplier and making great deals with them over best-qualified raw materials is one of the reasons behind Heineken’s sustainable profitability. The quality of raw materials for producing the beer is as important as marketing the finished the product. Heineken outsource the ingredients of beer production and the bottle and other products that are required by design team to make the finished Heineken product.
What Heineken tries to do is to build strong brands, consumer pool. This is the reason for consumers choose Heineken products over other competitors. That is why Heineken spends more than billion US dollars on marketing directed towards consumers since consumers are asking for it. Next reason of Heineken’s competitive advantage comes from Buyer Power force, which means that the company puts a lot of effort on getting intermediaries and retailers on theirs side so intermediaries and retailers give a lot of extra attention to Heineken. For instance, in any retailer store, the Heineken products should be located in more visible area that catches consumers’ attention and lead them to purchase. This kind of psychological tips that retailers and intermediaries use lead to increase sales. Therefore, Heineken really works on buyer power to make Heineken’s beers more preferred over other competitors in the beer industry.
Here is the summary of Heineken’s framework based on MICHEAL PORTER’s FIVE FORCES: