Ash Breweries

Ashai Breweries case summery.

Problem statement/Key issues.

As Ashai Breweries experiencing significant sales growth over the last years. Hirotaro Higuchi is now concerned how the company should react to increase demand for beer using the new investment plan of increasing capacity by investing 230 billion  As of the above problem the key issues are the  Lack of proper forecasting for the future growth possibility to justify increased capacity is not available,  Problem of justifying the fiancé is available for the project, the issues of management, process and sales team malfunction

What case data/facts used.

1. Forecasting - Changing customer behavior and beer taste from time to time, Seasonal effect involved with beer selling, well targeted product with current high capacity can easily grab market share, high competition in the industry.  Industry growth of  7% compared to Asahi sales growth 17%.
2. Financing – Increasing competitors limiting the price increase per beer case of 20, Ratios from Exhibit 5 (Current and the capital ratio 1984-1987 indicates ability to pay its current liabilities and finance increasing capacity up to an extent without borrowing outside, however there is always calculated and non-calculated risk attached.)
3. Management and sales malfunctions – Quality control of draft beer was difficult, Push production system to process, unnecessary team cohesiveness people speak about how unnecessary and unstable product have been produced over time. Product taste been different as it is been in the stock for a long time.

Business Acumen.

1. In order to properly identify the situation of the business carrying out an internal analysis based on a resources based approach as per strategy class is key. This basically includes identifying a resources, capabilities and the core competencies of Ashai Breweries. As an example The company president Hiltro Higuchi has long history of success and achievement in the company, And market reputation for the beer, strong market position etc., After analyzing the internal analysis it is equally important to carry out an external analysis SWOT factors. And porter’s five forces concept. As per the case as the switching cost from one beer to another is relatively low bargaining power of the buyers are high, As there is a monopoly in the market and only one set of suppliers the supplier power is also relatively high, High industry rivalry have been talked throughout the case, There is an increase tread of substitute as people tend to move healthy drinks with more health concerns, And there is high entry barrier as the high startup cost.
2. The ration analysis from the finance class 1 and 2 and the Net present value concept (NPV) , internal rate of return concept  (IRR) could be used here.  The strong leverage ratio, the long term debt to equity ratio of the years shows the Ashai Breweries ability to take external finance when needed. In the case Ashai Breweries finace director indicate that it had undervalued its assets by 700 billion.  
3. Having a proper organizational structure with participative style to leadership by increasing the communication could solve the problem and apart from that proper motivation for the demotivated sales team. This can be done through theory X,theory Y approach. Here the people are currently motivated by the theory X this should be move to Theory Y as the sales of beer mostly depend upon the passion and inner drive of the sales team, Proper process management, supply chain management could be invented apart from that LIFO method to control inventory.

Solution.

The case data of industry growth of 7% and Asahi’s sales growth 17% justify the need for an expansion, The previous achievement, market growth and High advantage from resources based marketing approach and as explained in the business acumen proper management, minimizing employee dissatisfaction and strengthening process control and proper analysis of the internal and external environment could lead to success of the investment plan as its justify the need for growth and as the Asahi company has proper visible financial succession plan.

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