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The case study on Samuel Adams, the Boston Beer Company, has been developed using information from the company’s annual reports, the website, and articles from mass media.
The case presents a background of the company, and then shows the present problems faced by the company and how they are related to the centralized hierarchical structure. Further, the case study will attempt to understand if such a structure is affecting the company’s performance and strategy.
Samuel Adams – the Boston Beer Company
The company under consideration is one of the largest brewers of handcrafted beer in America . The founder of the company Jim Koch maintains the traditional method of brewing which makes the company distinct in style. It brews 30 different styles of beer and has won numerous prizes.
The beer brewing industry has undergone considerable changes over the last several years. The Boston Beer Company is a leader in the better beer segment in the US and sells almost 18 percent of the beer in the country’s field . It also covers 1.3 percent of the overall sales in the American beer market .
Since its inception in 1984 the Boston Beer Company has been micromanaged by the founder Jim Koch who went bar-to-bar to promote Samuel Adams beer as well as appear in TV ads for the product in order to convince customers to purchase it.
Though many believe that Koch was a brilliant marketer, but the fear of an entrepreneur to micro-manage the company was evident in the operations and the strategy making of Samuel Adams. However, the Boston Beer Company went public in 1995, but the top-down approach of making strategy in the company remained with Koch leading the centralized decision-making process.
The next section shows how the strategy has been affected by the structure and control system of the company. Further, an analysis of the income statement of the company over the last three years shows that the net income of the company has fallen from 2011 to 2012 from $66,059 to $59,467 .
Structure and Control System of Samuel Adams
The BBC breweries have around 900 employees in Boston, Pennsylvania, and Cincinnati. The risk the company faces presently is the expansion of the market both in domestic and international markets. This results in no assured growth of the company making its future uncertain.
In addition, the company has increased its brands and products offering at the risk of eroding the sales of its already existing products. There is also a risk of the company owned breweries not to meet production target in future. Such problems that are impending on the company show that there are certain inherent challenges within the company that must be addressed immediately to remove the coming risks .
The first factor that we will consider in analyzing the internal problem of the Boston Beer Company is its structure. The organization’s control system is unpredictable, which has affected its stock prices. The company endeavors to make substantial expenses in marketing and promotional activities to promote its brand.
However, these expenditures have not resulted in higher sales in case of BBC. The increased expenditure in this sector has led to higher expenditures but sales have not picked up as expected. This has adversely affected the income amounts of the company.
It should be noted that the Boston Beer Company changed its strategy since 2008. Before 2008, it had employed a production-oriented strategy, which included that the company owned breweries worked in close coordination with the third party breweries that worked for the company.
The arrangement with the third party brewers allowed the Boston Beer Company to utilize excess capacity that gave the company flexibility to maintain full control over the brewing process, which its competitors could not. Nevertheless, since 2008 the company has acquired all the other third party breweries, increasing the company owned breweries’ production from 35 percent to 100 percent of its sales.
Though the management believes that this increased control over the production process will give them an edge over their competitors, it should be considered that such production complexities has led to “operation inefficiencies and control deficiencies” .
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Such inefficiencies may have a negative effect on the company’s business. Moreover, this may affect the growth of the company and its performance as changes in its operations would lead to increased capital investments and increased complexities.
Another problem that the company faces is its dependence on distributors. Changes in the control of the company’s ownership in the distributorship network could hamper the distribution channel.
The CEO heads the company and the management include the CEO (Chief Executive Officer) and the CFO (Chief Financial Officer). The company structure of the executive body is presented below.
Figure 1: Structure Strategy, Structure and Control System
The structure and control system that the company utilizes to implement its strategy is highly centralized. The control system is becoming more and more centralized as the company has aimed at gaining complete control over all its breweries. This move is carried out by putting the production process under direct control of the CEO of the Boston Beer Company.
Further, the organization’s structure, as presented in Figure 1, shows that the CEO and the President of the company directly control the whole functioning process. The operations and the sales are under the supervision of the CEO and the CFO. Now, any of the operations of the breweries for any particular label are managed by the VP operations and the VP sales.
This demonstrates the degree of centralization in the operations and control of the company. Such increased supervision over the production and marketing processes is helpful when the company operates in a small market. However, when expansion is a strategy that the organization aims to employ, such a structure may become a hindrance.
It is caused by the fact that it operates on the basis of micromanagement, which is not possible in case of a larger company. Instead, it must be outlined that the company should operate with less centralization.
The structure of the company is hierarchical in nature, which enables the company management to have close control over the financial and operational processes of the company. However, the centralized structure of the company deterred its operations. Further, the hierarchical structure prevented the Boston Beer Company from expanding its operations.
The control structure and centralized structure adversely affected the performance of the organization. Hence, it can be said that the company needs to decentralize its operations to help expand its operations scale and gain a greater market.
The Boston Beer Company not only continues to succeed in their niche market but also thrives as a miracle. The article drills into the industry and the company’s evolvement, and discovers the secrets that make the company sustainable in three aspects: culture revolution, marketplace innovation, and operational innovation.
Coffey, Brendan. “How Boston Beer’s founder became a billionaire.” 16 September 2013. The Boston Globe. Web.
Samuel Adams. The Boston Bear Compny. 11 October 2013. Web.
The Beer Company. Annual Report 2012. 2012. Web.
US Securities and Exchange Commission. The Bostoon Beer Company FORM 10-K. 2012. Web.
Yahoo Finance. The Boston Beer Compnay. 2013. Web.