Page 11 - AB INBEV 2018 Model Answer 2

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Overall, Mengzi city depot has achieved the best performance with 12 points; Dengzhou and Langfang
city depots have received a reasonable performance with 8 points; and Rongcheng city depot has
underperformed, gaining only 4 out of the available 12 points. Mengzhi is the only depot to have

achieved both an increase in revenue over budget and an increased profit: revenue percentage; it is
st
scored 1 placed in both the financial performance and competitiveness -and once again, it is
st
ranked 1 on Quality, Flexibility and Resource Utilisation. Although Dengzhou and Langfang have
scored the same overall, Langfang should be ranked 2 as it is ranked 1 on competitiveness, a key
st
nd
reason we are undertaking this evaluation (that is, to compete against Heineken in the wake of their
acquisition of China Resources).

City location advantage should not be ignored: Mengzhi city is situated very close to our new
brewery facility –this appears to provide a locational advantage, but this city only serves 5% of China’s
city population. Rongcheng is the least-performing and happens to be situated in the same city China
Resources’ brewery facilities are based -and this city happens to hold the largest population (25%) of

all China’s city population. The scope for growth should be relatively larger here –yet, it seems the city
(Rongcheng) provides locational advantages to China Resources, just as Mengzhi provides locational
advantages to AB InBev. This locational advantage for China Resources, could mean providing their

depots in Rongcheng (with over 25% of the population) to Heineken; potentially presenting a huge
challenge for our overall 16% market share in China!

Recommendation: Institute a detailed operational audit of all depots, but especially Rongcheng city
depot -and begin a programme of competitor benchmarking (rather than just internal benchmarking
between depots). Delay performance bonus awards until audit is concluded!

Justification: Rongcheng is the least performing depot, yet it serves the most densely populated
area, closest to China Resources, from where Heineken is likely to launch any aggressive distribution
initiatives. As majority of its points forfeited lie in the ‘Quality, Flexibility and Resource Utilisation’ KPA,

it is likely to be faced with operational challenges that prohibits its effective competition against China
Resources Beer (with a strong city home advantage). For example, late delivery of goods may be
caused by shortage of delivery trucks and/or drivers (arising from staff turnover, sickness, or problems

with delivery truck maintenance or availability); or it may just be the same loss of skills challenges we
face in Nigeria! Competitor -rather than internal – benchmarking will help track critical data such as
market share, which we currently do not have, yet, it is an even better indication of the competiveness
of our channel strategy (response). Although Rongcheng is the least performing, it delivers the biggest
contribution to revenue and profit; so, we have to delay performance bonuses until we get a full picture,

to avoid demotivating Rongcheng city depot managers, whom we will need most to defend against
possible market share intrusion -from the combined strength of Heineken and China Resources!

Developed by The CharterQuest Institute for 'The CFO Case Study Competition 2018'
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