A brief description of the strategy of the Heineken Group and the challenges ahead.

1. Heineken
Strategy and Value Creation
The Lisbon MBA
Groups 2 and 7
Ana Santos
Bruno Oliveira
Caspar Guggenbühl
James Shannon
Jide Famuyiwa
Leonor Martins
Marixcela Victoria
Pedro Henriques
Rui Barata

2. Agenda
STRATEGIC ANALYSIS
• PEST Analysis
• Segmentation
• Attractiveness
• Key Success Factors
• Strategic Groups
• Resources
• Core Competencies
• Strategic Fit
STRATEGIC FORMULATION
• Vision & Mission
• Objectives
• Products-Market Evolution
• Vertical Integration
• Internationalization
• Organizational Development
• Organizational Structure
RECOMMENDATIONS
• New SWOT Analysis
• Strategic Initiatives

3. We are Heineken

4. STRATEGIC
ANALYSIS

5. PEST ANALYSIS

6. Pest Analysis
•Heavy Regulations
•Restrictions on drinking ages
•Taxes
•Government anti-alcohol
campaigns
Political - Legal
•Economic slowdown / recession
•Middle income growing
•Raw materials price fluctuation
and scarcity
•Infrastructure developments
Economic
•Awareness of alcohol negative
effect
•Healthy lifestyle
•Cultural and social side of drinking
•Premium and craft
Social - Cultural
•Innovative techniques in the
production
•Digital interaction with customers
•Environmental regulations
•Eco-friendly packaging
Technological -
Ecological
S

7. SEGMENTATION

8. Product
Beer
Spirits
Wine
Cider/Perry
RTDs/High-
Strength
Premixes
Geography
North
America
Europe
Asia Pacific
Rest of the
World (RoW)
Demography
Adult Men
Adult
Women
Minors
Price
Super
Premium
Premium
Regular
Packaging
Can
Glass Bottle
Draught
Psychographic
Premium
Consumers
Price
sensitive
Consumers
Social
consumers
Engaged new
comers
Brand
loyalists
Segmentation

9. ATTRACTIVENESS

10. Attractiveness

11. KEY SUCCESS
FACTORS

12. Key Success Factors

13. STRATEGIC
GROUPS

14. Strategic Groups
Price/PerceivedQuality
Geographic Market Scope
Global Brewers
Regional Brewers
Local Micro-Brewers

15. RESOURCES

16. Resources

17. CORE
COMPETENCIES

18. Core Competencies
COMPETENCIES VALUE RARENESS IMITABILITY ORGANIZATION VRIO
Brand / Image
Global Presence
Technology / Innovation
Product Portfolio
Customer Loyalty
Partnerships
Marketing and Sales
Culture
Manufacturing Skills
Operational efficiency / Distribution Channels
Customer Orientation
Flexibility

19. STRATEGIC FIT

20. Strategic Fit
Heineken has core competencies
that allows the company to
perform well in most segments, by
impacting positively on the
different key success factors.
Differentiation
Marketing
DistributionChannels
EconomiesofScale
CustomerExperience
Cost
Quality
BrandValue
Availability
Consistency
Marketing
Brand / Image 4 4 5 4 4 3 3 4 3 2 4
Product Portfolio 5 5 4 5 4 3 - 3 4 - 3
Marketing and Sales 4 5 5 4 4 5 4 4 4 3 5
Manufacturing Skills 3 4 3 4 3 5 3 - - - -
Operational Efficiency /
Distribution Channels
3 4 5 4 4 4 - 3 5 3 3
4.0 4.5 4.3 4.3 3.8 4.0 3.3 3.7 3.7 2.5 4.0
CORE
COMPETENCIES
BEER WINE
AVERAGE FIT
4.1 3.4
Quality
Differentiation
BrandValue
Marketing
CustomerExperience
Differentiation
Quality
CustomerExperience
DistributionChannels
Quality
EconomiesofScale
Cost
Differentiation
BrandValue
DistributionChannels
Brand / Image 4 3 5 3 4 5 4 4 3 4 - 3 4 5 -
Product Portfolio 4 4 4 4 3 4 5 4 4 5 4 - 5 5 4
Marketing and Sales 3 3 3 5 4 4 4 4 4 4 - - - 4 -
Manufacturing Skills 3 - 2 - - 3 3 - - 3 4 4 3 4 3
Operational Efficiency /
Distribution Channels
- 3 3 - 3 3 - - 4 - 4 4 3 3 5
3.5 3.3 3.4 4.0 3.5 3.8 4.0 4.0 3.8 4.0 4.0 3.7 3.8 4.2 4.0
3.5
AVERAGE FIT
3.9
CIDER / PERRY
RTDs / HIGH STRENGTH
PREMIXES
3.9
CORE
COMPETENCIES
SPIRITS

21. Strategic Fit
Heineken has core
competencies that allows
the company to perform well
in most segments, by
impacting positively on the
different key success factors.
CORE
COMPETENCIES
BEER WINE
Differentiation
Marketing
Distribution
Channels
Economiesof
Scale
Customer
Experience
Cost
Quality
BrandValue
Availability
Consistency
Marketing
Brand / Image 4 4 5 4 4 3 3 4 3 2 4
Product Portfolio 5 5 4 5 4 3 - 3 4 - 3
Marketing and Sales 4 5 5 4 4 5 4 4 4 3 5
Manufacturing Skills 3 4 3 4 3 5 3 - - - -
Operational Efficiency
/ Distribution
Channels
3 4 5 4 4 4 - 3 5 3 3
AVERAGE FIT
4.0 4.5 4.3 4.3 3.8 4.0 3.3 3.7 3.7 2.5 4.0
4.1 3.4
CORE
COMPETENCIES
SPIRITS CIDER / PERRY
RTDs / HIGH STRENGTH
PREMIXES
Quality
Differentiation
BrandValue
Marketing
Customer
Experience
Differentiation
Quality
Customer
Experience
Distribution
Channels
Quality
EconomiesofScale
Cost
Differentiation
BrandValue
Distribution
Channels
Brand / Image 4 3 5 3 4 5 4 4 3 4 - 3 4 5 -
Product Portfolio 4 4 4 4 3 4 5 4 4 5 4 - 5 5 4
Marketing and Sales 3 3 3 5 4 4 4 4 4 4 - - - 4 -
Manufacturing Skills 3 - 2 - - 3 3 - - 3 4 4 3 4 3
Operational Efficiency /
Distribution Channels
- 3 3 - 3 3 - - 4 - 4 4 3 3 5
AVERAGE FIT
3.5 3.3 3.4 4.0 3.5 3.8 4.0 4.0 3.8 4.0 4.0 3.7 3.8 4.2 4.0
3.5 3.9 3.9

22. STRATEGIC
FORMULATION

23. VISION &
MISSION

24. Vision & Mission
Vision
• “To win in all markets with Heineken®,
and with a full brand portfolio in
markets where we choose.”
Mission
• A proud, independent, global brewer
committed to surprising and exciting
consumers everywhere.”
”A passion for quality, enjoyment of life, respect for
people and respect for our planet.”

25. OBJECTIVES

26. Objectives
Financial Other - Non Financial
o Lead by Innovation
o Opportunities in the emerging
markets
Shape the Cider market
o “Brewing a Better World”
o Global Business Services
o Lead by Cool Marketing
SMART
SMART
SMART
SMART

27. PRODUCTS-
MARKETS
STRATEGY

28. Products-Market Matrix

29. • Market Penetration
• Increasing market share in current
markets (North America and Europe)
• Market Extension
• Expansion into emerging markets in
South America, Asia and MEA
• Product Development
• Innovations with development of Radler
variants in 2014
• Diversification
• Introduction of innovative products to
new markets in Asia and MEA
Products-Market Evolution

30. Cost Leadership
• Size and scale through major acquisitions
in Mexico, Southern Africa and other regions
• High bargaining power with suppliers and economies of scale
Differentiation
• Strong brand established for products across geographies
• Industry leader in sustainability efforts.
• Top 5 globally
Competitive Advantage
COST LEADERSHIP
Low High
DIFFERENTIATION
High Pure differentiation Differentiation with cost leadership
Low No advantage Pure cost leadership

31. Heineken embraces “moment marketing”
 Your best moments
 Your most premium moments
 Your most irreverent moments
 Your good moments
Key Product Differentiation Elements

32. Evolution of Products-Market Strategy

33. VERTICAL
INTEGRATION

34. Vertical Integration
Integratedby Heineken
Forward IntegrationBackward Integration
• Eat or be Eaten
• Smallholder farmers
• Three tier system

35. INTERNATIONALIZATION

36. Internationalization
*Only Product extension so far has been Heineken Light for the US market
Local Adaptation
Low High
Global
Integration
High
Low
Culture/Habits Design Language Size/Package
Technical
System
Concept Standardized Standardized Standardized Standardized Standardized
Marketing Adapted Standardized Adapted Standardized Standardized
Technology Standardized Standardized Standardized Standardized Standardized
Product Standardized Standardized Standardized Standardized Standardized
Culture/Habits Design Language Size/Package
Technical
System
Concept Adapted Adapted Adapted Adapted Standardized
Marketing Adapted Adapted Adapted Adapted Standardized
Technology Standardized Standardized Adapted Adapted Adapted
Product Adapted Adapted Adapted Adapted Adapted
Portfolio
Heineken

37. Internationalization
Attractiveness Factors Weight (%) Asia Pacific Americas
Africa Middle
East and East
Europe
West Europe
Market evaluation 35% 2,51 2,43 1,93 2,34
Operational evaluation 35% 1,95 2,15 1,95 1,95
Risk evaluation 30% 1,64 1,9 1,64 2,3
Overall attractiveness 100% 6,1 6,48 5,52 6,59
Competitive Strength
Low Medium High
Country
Attractiveness
High
W. Europe/Pacific
Asia
Medium US/Canada/Africa
Low Middle East

38. Organizational Development
Products-
Markets
Heineken Light /
Draught
Experience
Buy Strongbow
Vertical
Integration
Efficiency /
Distribution
Breweries
Channels
International.
Partnerships /
Exports
Buy Breweries
Related
Diversification
Low/no alcohol
/ Radler /
Desperados
Cider / Craft
Beer
Internal
External

39. ORGANIZATIONAL
STRUCTURE

40. Organizational Structure

41. Simple Structure
Functional Structure
Divisional structure or by
strategic business units
International structure
by strat. b. units or
network
Divisional Structure
International structure by
strat. b. units, matrix or
networks
Functional Structure
International functional
or divisional structure
Expansion of the products-markets matrix
Related
Diversification
Internationalization
Related Diversification
Related
Diversification
Internationalization
Non - Related Diversification
Internationalization Activities
Recentering
Activities
Recentering
STRATEGY AND STRUCTURE
Organizational Structure

42. NEW SWOT
ANALYSIS

43. WEAKNESSES
STRENGTHS
TIME
PREMIUM
BRANDS
CONSOLIDATE PRESENCE IN ASIA,
AFRICA AND LATIN AMERICA
LOW / NON-
ALCOHOLIC
FEMALE
CONSUMERS
LEGISLATION
INCREASE
READY-MIXED AND
FLAVOURED
DRINKS
New SWOT
STRENGHTS
•Brand Portfolio
•Strong Breweries Network
•Excellent Brand Image
•International Development
•Product Differentiation
•Brand Marketing
WEAKNESSES
•Difficulties to penetrate some
countries
•Lack of young consumers
•Average higher prices compared
to competition
•Premium Prices
•Lack of female consumers

44. STRATEGIC
INITIATIVES

45. Strategic Initiatives
Diversification and Expansion
Consolidate presence in certain markets
Anticipate regulation increase

46. “Brewing a
better future”