This summary deals with a German company planning to enter the US market. The company “Oettinger Brauerei GmbH” is engaged in the business of beer brewing. It is a well established brand on the German market with a rapidly growing market share. The company has discovered a competitive gap in brewing a brand beer and distributing / selling it at a low price – they promote their products with the slogan “Germany’s price-worthiest brand beer”. The same strategy could be pursued on the US market, as there are already foreign beers (e.g. from Belgium, Netherlands, and from Germany), but those are relatively expensive. This is due to the fact that only upper scale brands from Europe have yet entered the American beer market. Furthermore, as the total percentage of beer brewed in Germany is declining, there is an upcoming need for German beer producers to search for new markets abroad. A strategy including new markets will help the German company to extend its safety margin. Therefore, it is essential that it is sufficiently sure that the company is able to break even with its products in a new market.
To successfully transfer its strategy of cost leadership, Oettinger will have to produce its beer locally in the USA to save import fees and distribution costs. There are some issues that arise with this option concerning accounting, taxes, finance, and law – this summary will concentrate on the facets and problems the company may face before breaking even in the US market.
Additionally, because the company is a rather small brewery considering its market capitalization, it has not the financial strength like for example the giant brewer Inbev. The economic side of entering this new market should include both economic and risk related aspects. This paper will therefore primarily deal with the concept of the break-even point (BEP) and some options to reach it. Therefore, the German business approach will be taken into account to depict Oettinger’s cost-saving strategies.
Inhaltsverzeichnis (Table of Contents)
- 1. Introduction
- 2. Breaking Even on the US Market
- 2.1 Strategic issues
- 2.2 Calculating the BEP for Oettinger
- 3. Recommendation
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This executive summary analyzes the feasibility of Oettinger Brewery GmbH entering the US beer market. The primary objective is to determine whether the company can achieve a break-even point (BEP) given its cost leadership strategy and the challenges of a new market.
- Break-even analysis for market entry
- Strategic considerations for entering the US market
- Cost structure and its impact on profitability
- Market research and sales estimations
- Risk assessment related to market entry
Zusammenfassung der Kapitel (Chapter Summaries)
1. Introduction: This chapter introduces Oettinger Brewery GmbH, a German brewery with a strong domestic market share, and its plans to expand into the US market. It highlights the competitive advantage of Oettinger's low-price strategy and the potential market gap in the US for affordable European beers. The chapter emphasizes the necessity of a break-even analysis to assess the viability of this market entry, considering the challenges of establishing local production and navigating the complexities of a new economic environment. It also underscores Oettinger's smaller size compared to major players and the need for a comprehensive economic and risk assessment. The chapter sets the stage for the subsequent analysis by focusing on the crucial role of the break-even point in determining market entry success.
2. Breaking Even on the US Market: This chapter delves into the strategic and calculative aspects of achieving a break-even point in the US market. The strategic issues section discusses the importance of market research in determining realistic sales figures for the break-even analysis, emphasizing the role of marketing strategies in achieving sales targets. The chapter establishes that successful market entry relies on a well-defined strategy preceding the break-even analysis, enabling Oettinger to identify the necessary sales volume to reach profitability and informing production capacity decisions. The break-even point is presented as the balance between gains and losses, and the chapter also presents an alternative approach to calculating it – where fixed costs equal the contribution margin. This managerial tool is emphasized as essential for evaluating strategic requirements and potential success. The chapter then moves into the calculation of the BEP for Oettinger, estimating sales numbers, costs, and the resulting profit zone. It underscores the importance of accounting for expenses over a defined period and the distinction between internal cost structures (fixed and variable costs) and external accounting practices. By differentiating these cost categories, the chapter reveals strategic opportunities to enhance profitability.
Schlüsselwörter (Keywords)
Break-even analysis, market entry strategy, cost leadership, Oettinger Brewery, US beer market, fixed costs, variable costs, sales estimation, market research, risk assessment, profitability, contribution margin.
Oettinger Brewery's US Market Entry: A Break-Even Analysis - FAQ
What is the main objective of this analysis?
The primary objective is to determine the feasibility of Oettinger Brewery GmbH entering the US beer market by calculating whether the company can achieve a break-even point (BEP) given its cost leadership strategy and the challenges of a new market.
What key themes are explored in this analysis?
The analysis explores break-even analysis for market entry, strategic considerations for entering the US market, cost structure and its impact on profitability, market research and sales estimations, and risk assessment related to market entry.
What is covered in the Introduction chapter?
The introduction introduces Oettinger Brewery GmbH and its plans to expand into the US market. It highlights Oettinger's low-price strategy, the potential market gap for affordable European beers in the US, and the necessity of a break-even analysis to assess market entry viability. It also emphasizes the challenges of establishing local production, navigating a new economic environment, and Oettinger's smaller size compared to major competitors.
What does the "Breaking Even on the US Market" chapter cover?
This chapter details the strategic and calculative aspects of achieving a BEP in the US market. It discusses the importance of market research for realistic sales figures, the role of marketing strategies, and how a well-defined strategy informs the break-even analysis and production capacity decisions. The chapter explains the calculation of the BEP for Oettinger, considering sales numbers, costs, and the resulting profit zone. It highlights the importance of accounting for expenses over time and the distinction between internal cost structures (fixed and variable costs) and external accounting practices.
How is the break-even point calculated?
The analysis utilizes a standard break-even point calculation, where the point of equilibrium between gains and losses is determined. An alternative approach, where fixed costs equal the contribution margin, is also presented.
What are the key factors considered in the analysis?
Key factors include fixed costs, variable costs, sales estimations derived from market research, and a thorough risk assessment. The analysis also emphasizes the importance of a robust market entry strategy and understanding the competitive landscape of the US beer market.
What is the significance of cost leadership in this analysis?
Oettinger's cost leadership strategy is central to the analysis, as it directly impacts the feasibility of achieving a break-even point in a new, competitive market. The analysis examines how efficiently Oettinger can manage costs to reach profitability.
What are the overall conclusions of the analysis (as previewed)?
The provided preview does not offer explicit conclusions, but it strongly suggests the analysis will determine whether Oettinger can realistically reach profitability in the US market based on its break-even point calculation and strategic considerations.
What are the keywords associated with this analysis?
Break-even analysis, market entry strategy, cost leadership, Oettinger Brewery, US beer market, fixed costs, variable costs, sales estimation, market research, risk assessment, profitability, contribution margin.
- Quote paper
- Erik Silge (Author), 2009, Breaking Even in the US Market: The Oettinger Brewery, Munich, GRIN Verlag, https://www.grin.com/document/129809
