Internal and External Environment Analysis in the

case Habesha Breweries

Group Assignment ONE

Group Members:
1) Bezawit Tesfaye UU 71350E
2) Eman Mecha UU 71505/E
3) Misganaw Asnake ye Hula UU 71455E
4) Aryam Brhanu UU 71608E
5) Selam Zeru UU 71473E
6) Ferdos Jamal UU 71596E

Submitted to ; Dr. Assefa Beyene

Date June8,2020
Contents
Executive Summary.....................................................................................................................................2
Part I. Introduction......................................................................................................................................3
Part II. Research Design and Methodology..................................................................................................4
Part III Company’s Vision and Mission.........................................................................................................5
Part IV. External Analysis.............................................................................................................................6
Summary and Conclusion..........................................................................................................................13
Part V Company’s performance.................................................................................................................14
Profitability of the company......................................................................................................................15
Company diagnosis using- McKinsey’s 7S Model.......................................................................................16
Strength and weakness of Habesha...........................................................................................................17
Summary and Conclusion..........................................................................................................................17
Appendix...................................................................................................................................................18
Reference..................................................................................................................................................21
Executive Summary
Internal and external environment analyses

Internal analysis allows us to identify both strong and weak aspects of an organization, without
considering the performance of external organizations and get a true understanding of how
resources are being used in an organization. By using the SWOT model as a tool which stands
for Strengths, Weaknesses, Opportunities, and Threats an organization will have a visual incite
to the internal factors of that organization.

External analysis is conserved with the business Environment by assessing wither the external
factors apply to the organization. external analysis is also very important in the context of
strategic management in evaluating an organization’s goals and resources. The external analysis
uses the PESTLE Model which stands for Political, Economic, Sociocultural, Technological, Legal,
and Environmental.

The selected company business is Beer manufacturing named Habesha Breweries, The main
result of the internal and external analysis shows how external factors such as the current
Excise tax declaration on sales value and the redefinition of the old excise tax proclamation No.
307/2002 stated that all companies were not paying excise tax as per the literal definition
stated on the declaration and forcing companies to pay backlog excise tax payments starting for
establishment date. And internal factors as to how to efficiently use financial resources in lite of
the current pandemic of COVID 19 as sales are slowing down.

Certain political unrest in areas that affect the major revenue generator of the company, as well
as environmental crisis due to the pandemic has forced the company to change their sales and
distribution method as a strategic method of action used due the political and environmental as
well as legal issues to continue sales.

The penalty imposed by the ERCA against company’s for not paying the correct amount of
Excise tax imposed on the due to misunderstanding in translation of the old excise tax
proclamation No. 307/2002 forcing companies to pay years’ worth of tax putting companies in
financial crises they can not mitigate as well as the high percentage of tax imposed on sales of
products manufactured locally by the new excise tax proclamation No.1186/2020.

Due to the current COVID 19 pandemic the company is internally trying to mitigate the issued
the pandemic as caused through door to door sales delivery as well as staff management in
regards to working hours.
Part I. Introduction
Company was founded in 2012 in Addis Ababa, Ethiopia. It was established about 8,000
Ethiopian shareholders including traditional associations like equbs, idirs and Ethiopians in the
Diaspora who contributed 4,000 birr to 5 million birr. Habesha built its beer manufacturing plant
in Chacha, DebreBirhan city, Amhara Regional State, 120km north of Addis Ababa and
technically acquired by a Dutch company which has distribution network all over the world.

The Bavaria N.V., second largest brewery, 300-year-old Dutch brewer, is initially a major
shareholder of Habesha Breweries with 39 percent stake and currently over 60 percent of the
shareholding is acquired by the Dutch company. It is headquartered in Amsterdam, the
Netherlands. In Ethiopia currently there is only one factory with a plan to expand across the
nation.

Major market served

Habesha Beer joined the local market in July 2015, has become a popular beer brand. The beer
has five percent alcohol content. Habesha has partnered with Ethiopian Airlines and began has
begun supplying canned Habesha Beer to Ethiopian Catering since July 2016. Canned Habesha
beer is now available on Ethiopian Airlines flights as Niche market. Habesha, has a motto to
“Reach and connect”, has an ambition to reach Ethiopians in the Diaspora.

Number of employees.

Habesha beer has employed 201 up to 500 employees since the establishment date. They value
all of their people and their desire to grow personally and professionally and their dedication to
brewing the best Ethiopian beer! They really care about having a company where employees
love what they do and consider themselves as the ultimate consumers of their own Habesha Beer.

The company has shaped responsible management in environmental issues from its very
beginning, due to its social standards and values by recycling waste water for surrounding
farmers irrigation use as well as reuse of creates and bottles in its normal course of operations.
 1.3 The business objective of the company includes to;
 To Produce, sell and distribute alcoholic bottled beer
 To Produce, sell and distribute nonalcoholic beer branded as Negus
 To produce bottles and crates of beer
 To import raw materials and spare parts needed for the production of beer

Part II. Research Design and Methodology

Data and information resources

Preferred data used for this subject paper is from secondary data such as
proclamations, News and also primary data of verbal interview of the company’s
staffs.

The data and information gathered are from the official website of the company for
the company’s background and from the linkedin account of the organization for
the company’s vision and mission statements as well as information regarding the
companies number of employees.

Secondary data from the publicly published online company report books was used
for the financial background and the industries compotators analyses of the
organization.

Based on the secondary information data gathered the information is portrayed by

quantitative and qualitative methods to show the effect on the industry analysis.
The information gathered is shown through graphical representation as to how the
company is currently competing against its rivals.

Data analysis,

All numerical figures are from company provided data and the analytical
calculation are conducted and presented in ratio or percentage form supported with
descriptive explanation of what the analysis means,
The data analysis are supported and a graph and tabular form to show clearly the
level of performance and rate.

Part III Company’s Vision and Mission

Vision

To reach and connect with every Ethiopian

 As per the standard of a vision statement Habesha’s breweries vision statements clearly states
what they want to become as well as how the future will look if there mission statement is
achieved. There vision is short and concise so that it is easily remembered and shows the big
picture.

Mission

To build and run an efficient customer-oriented business that will deliver the most sought-after
beverage brands to Ethiopians

 Habesha’s mission statement clearly stats what the business is and it gives guidance and it
shows what the business potential can be because it is realistic and achievable. It defines what
the organization is it clearly state it is a beverage organization for Ethiopians.
 The mission statement also answers the procedural question for defining a business mission, the
opportunities addressed is that the organization will build and run efficient customer-oriented
business and addresses the needs as that It will deliver the most sought after beverage to
Ethiopians and the organization makes the most quality brand beverage to address the need.
 And the organization defines its business, purpose and Values as the most sought after and
effective as well as customer-oriented beverage brand and this are its principals as well.

We recommend that the company have Objectives that are stated along with the Vision and Mission
statement in order to communicate to better communicate the vision and mission to employees and
stakeholders so that they can have a clear view of the desired outcome of the company.

Having an objective will help the company to better follow through their performance and know
how to archive it as well as measure it so that responsible people know how to accomplishes their
performance with in a given period of time.

Suggested objective statement,

 Habesha will double its revenue in sales by 15% with in 2021.

Part IV. External Analysis
A. General Environment

The external factors currently impacting the company in great deal are as follows
 Political, legal, governmental aspects
 Socio-cultural, demographic trends, lifestyle changes

Political, legal, governmental aspects

The factors in this aspect that greatly affect the company mainly is the ongoing change is
tax laws regarding excise tax in produced good on the selling price. On Yekatit 6, 2020 the
ministry of revenue declared excise tax on produced goods a high rate of 40% on the sales
price for alcohol beverages produced and 30% on non-alcohol beverage produced. This has
a great impact on the company’s financial status as well as sales.

Due to the Ministry’s sudden declaration the company underwent various negative
situation such as;
 The company was forced to change distributional strategies
 Had to under go one week of sales revenue loss and sales until it was accustomed
and ready for the new sales system.
 In order to stay in competition, the company had to change sales strategies. Such as
price reduction

Governmental aspects; such has curfew hours for heavy load trucks in the city played a
great impact in the sales volume and revenue mostly in a negative way. The company had
to strategies a new way of distributing its products to there loyal customer in a way such
as;

 Using small pic up trucks that are allowed to in the city after curfew
 Door to Door delivery in which also they use currently against the impact due to the
pandemic of COVID 19.

Another legal and governmental aspect can be

 The new law banning all alcoholic beverage advertisement on public medias. For
Habesha it was a very effective investment for the product because of it’s strong
brand and advertise ability.

 The company uses social medias such as online ads on Facebooks and Instagram’s
as well as donation as a new strategy to advertise it’s products to the public.
Non the less all this aspect happening in one year has been a great challenge for the
company as it has lost in millions worth of revenue so far. The bright side to this is that it is
not just I one company or industry it is affecting all alcohol and production industries.

B. Industry and Competitor Analysis

Problems in the industry

According to Africa business Journal, describes the mega giants in beer manufacturing
companies of Ethiopia in terms of distribution areas and capacity as well as foothold in the
market.

When Diageo acquired Meta Abo Brewery in 2012, there were only five distribution points in
Addis Ababa that were so small they almost didn’t warrant their claimed status, says Francis
Agbonlahor, managing director of Meta Abo Brewery.

In 2012, only 38% of the bars in the city stocked Meta beer, with the Ethiopian capital
representing a significant 40% of Ethiopia’s beer market. Although Agbonlahor declined to give
precise current market share figures, he pointed out that Meta beer can now be found in 98% of
the city’s bars and, as a result, the brand’s market share is well in the ascendant from 15% in
2012.

There’s less caginess when it comes to discussing who represents the main competition. BGI’s
longevity in Ethiopia – during most of which it was the only privately-owned business, alongside
state-owned companies – has given it a clear and big head start.

It currently controls about 50% of the market, helped in no small part by its main brand being the
hugely popular and bestselling St George lager. Meta beer used to have the Number 1 spot – and
those at Diageo want it back, and think they can get it back, as well as gaining 50% market share.

Obstacles to achieving that include problems that are typical of any developing country and not
particular to Ethiopia, such as lack of availability of foreign exchange to buy raw materials, and
long-lead times for logistics and customs clearance,
Agbonlahor says. Though there are some challenges that are more Ethiopia-centric.

“The whole private sector is in its infancy,” Agbonlahor says. “Hence it doesn’t always have the
talent availability found it other African countries.”

Another big problem is power supply. Currently Meta’s main brewery has to run on generator
power 15 hours a day. The company applied for a direct power supply that it would finance but
is still waiting after a year.
Government efficiency and willingness to work with the private sector were also evident in the
tender process for Meta Abo Brewery, which was transparent, objective and well managed,
Agbonlahor says.

Currently the beer manufacturing industry faces certain situation and prospects.

Studies have indicated that suction aspect such as Market Mix , customer or buyer
preferences, production volume as well as technological aspects allows companies in the
same industry to compete and shows the level of performances in the industry.

Intermits of market aspects; such as promotion, product and distribution, it is known

that Habesha has a strong promotable brand along with St.Goarg given its long history and
foothold in the country.

According to Berhan Taye better information about bear brand are goatherd form TV
commercial giving it 63.8 % while the other 36.2% percent is left for print advertisement
and store promotion. Online media only accounts for 8.1% which means majority of
consumers dot use or refer to online media to get information or awareness about beer
brands.

For beer companies in Ethiopia such as ST.George, Habesha Beer, BGI, Waliya, brand image
is very essential means of competition. Since Marketing Mix or aspects such as advertising,
sponsorship and non-monetary promotions have a positive effect on brand image which is
the main method of competition mechanism for Habesha Beer.

Buyer/customer preference; is also another means of competing in the industry which is

also the current situation the industry is facing due to, cost of production increase because
of the penalty induced by the revenue minister (ERCA) which intern increases the price
there for in the future decreases customer preference.

Various studies conducted and published by the International journal of business and
economics have shown that shows clear analysis of customer beer preference by taking
inconsideration Inferential and Descriptive Analysis Result for Variables that Determine
Respondents' Beer Brand Preference you will find variables attached on the Appendix

The graph below depicted that respondents percentage beer preference for St. George,
Habesha, Others (Meta, Bedele, Harar & Dashen), and Walia is 39.85% (104) , 28.35% (74),
19.16% (50), and 12.64% (33) respectively.
Major factors currently affecting cost of doing business; is the fact that the tax
authorities places excise tax on all alcohol beverages which forces beer companies to
increase celling price and may result in losing customers and incur loss in order to certain
the current market share as a coast of doing business

Studies have shown that the majority of 74% (192) respondents enjoyed normal to fair
price while only 20% (52) of the respondents perceive that they are enjoying cheap to low
beer price. The remaining 7% (17) of the respondents perceive that they are affected by
expensive beer price. (Fereja, T. & Demeke ,L.B 2019) Statistical analysis in presented on
the Appendixes.

competitor analysis

Habesha’s Major competitors are other beer manufacturing company such as BGI ( St
Gorge) , Heinken ( Walia), and Dashesn. Theas Beer brands are the currently main
competitors against Habesha Beer.

Industry data analysis summary was collected form the company conducted by the
research and audit department. Data from 2019 shows the complete status for the
company’s industry level.

For this evaluation purpose the compotator brands as well as Habesha Beer will be
represented and differentiated by colure identification on the displayed graphs or tables.

We have selected Market share, industry volume and Brand development to show
competitors analysis. All comparison is displayed in a percentage form per Quarter (Q)

Market share
According to the analysis the Beer brand that has the highest market share in the country
and similar sailing areas is BGI’s ST Goarge, followed by Heineken the Habesha falls on the
3rd level. The reason for this may be because both BGI and Heineken have various beer brands
selling across the country. The analysis is represented in the table and graph bellow.
Table 1 Competitor Market share per company

Industry Market share for 2019

2019 Q1 Q2 Q3 Q4
Dashen 14. 16. 17. 18.
10 0% 20 60
% % %
Habesha 19. 20. 21. 20.
10 60 20 50
% % % %
Heineken 28. 27. 26. 25.
20 10 10 70
% % % %
BGI 32. 32. 31. 31.
30 80 0% 60
% % %

Graph 1Competitor Market share per company

competitor Market share

35.00%
30.00%
Market share %

25.00% Dashen
20.00% Habesha
15.00% Heineken
10.00% BGI
5.00%
0.00%
Q1 Q2 Q3 Q4
Year 2019

However when it comes to individual beer brands Habehsa falls on the 2 nd level next to
St.George, as displayed in the bar graph 2 below, this is due to the nearly a century old foot
hold in the industry.

Graph 2 Market Share per individual brand

Industry sales Volume

Sales volume for the hole year of 2019 is displayed on Table 2 below in percentage
contribution per breweries, it shows BGI has the lion share in the hole industry this is due
to large market share of the popular beer St,Goare and due to the numerous beer product a
while Habesha beer only has one beer product there for falls in 4th place.

Table 2 Industry sales Volume

Industry sales Volume Graph 3

Contribution
Industry sales Volume % Contribution
Breweries Total Rank 40%
35%
BGI 37% 1
30%

Heineken 31% 2 25%

20%
Dashen 18% 3 15%
10%
Habesha 8% 4
5%
Diageo 6% 5 0%
BGI Heineken Dashen Habesha Diageo

Brand Development
When it comes to branding for Habesha beer it a sort of secret weapon that allows the beer
to compete for market share next to the big giant’s brands such as St.Geoarde and the other
beer brand that have a strong foot hold In the country because it the brand blends very
well to the customer environment and the gold in black color also is very catchy.

However due to the banning of TV commercials that shows the strength of the brand, the
company has started to decease in brand development throughout the end of the year of
2019.

The percentage contribution of top brands is shown on the table 3 bellow.

Table 4 Top brand development in the year 2019

Top brand development
for 2019
2019 Q Q Q Q
1 2 3 4
St.Geor 2 2 2 2
ge 2. 2. 0. 2.
4 1 8 0
% % % %
Habesh 1 2 2 2
a 9. 0. 1. 0.
1 6 2 0
% % % %
Walia 1 1 1 9.
7. 4. 2. 0
5 6 0 %
% % %
Dashen 1 1 1 1
3. 5. 6. 8.
0 1 6 0
% % % %

Graph 4 Top Brand Development

 Top Brand of 2019
25.0%
20.0%
Top Brand %

St.George
15.0% Habesha
10.0% Walia
5.0% Dashen
0.0%
Q1 Q2 Q3 Q4
Year 2019

Supplier preference

According to the audit study in the industry analysis by the company, suppliers seams to
prefer Habesha beer compared to other brands to sell.

Graph 5 Supplier preference

Summary and Conclusion
 Opportunities identified in regards to the tax authorities demanding tax payment
recalculation starting for the company establishment date is the fact that Habehsa is
a young company so they may not have accumulated excise tax to pay to ERCA in
comparison to beer companies that have long stayed in the country for over 20
years breweries such as BGI, Meta and as such who have larger production capacity
that Habesha.
 Threat is that when the government drafted a low that prohibits alcohol companies
from advertising on TV or give sponsorships, this has gravely impacted the
company’s brand and threatening the brands visibility to the public.
 Another threat can be the increase of Price due to the Excise tax rate increase on the
total sales amount before VAT that affect the end consumer sales price and that
affect the sales volume for the company.
 Currently factors such as the COVID 19 pandemic, New and old excise tax
amendments and price increase, sales and distribution change is threatening the
industry. The beer companies will need to come up with sales strategies that is
going to blend with the current environment. The beer industries forecast a great
loss in the year 2020 due to a really though beginning.
 Habesha breweries competes strongly as compared to other beer companies given it
young age and single product. The is due to the customer preference and brand
image according to the Audit research study conducted in the industry.
 Beer industries such as Habesha we forced to change the sales and distribution
strategy because of the external environment changes such as the Pandemic and the
excise tax laws that forced the company to change for self-distribution providing
storage areas to only providing the product and suppliers are forced to pick up
supplies from factory.
 The pandemic had forced the sales and distribution system of the industry to change
is a way that beer brands such as Waliya, Habesha have started DOOR to DOOR
delivery for consumers as a strategic coping mechanism
Part V Company’s performance
Habesha breweries revenue has progressively increased throughout 2017 to 2019
however not as Mach as it should since the company production capacity has increased
from 750,000 HL to over 1,000,000 HL by the time in 2019 there for the revenue should
have increased in a higher percentage.

Table 5 Revenue of 2017-2019 Graph 6 Revenue performance

Revenue for the past 3 years( ETB)

Year Revenue
2017 1,786,768,118.00
2018 2,329,041,280.00
2019 2,909,728,900.35

Compared to other brands in the company Habesha falls in the 2nd level, the company has
grown significantly in the past 2 years. Inters of brand and product preference as well as
production volume and sales volume. However the company is still on the 3 rd level in
market share due to the singular beer brand.

Graph 7 Market share growth from 2018 to 2019

Graph 8, Brand development growth 2018 to 2019

Profitability of the company

Habeshas profit margin is 6.7, 7.0 and 11.6 cents for each Birr of sales in 2017, 2018 and
2019 respectively. With the increase in one birr sales the profit also increased. This Is
derived in increase in sales volume.
Profitability for the past 3 years( ETB)
Year Revenue Net income Profit margin
2017 1,786,768,118.00 120,197,890.00 6.7%
2018 2,329,041,280.00 162,096,622.00 7.0%
2019 2,909,728,900.35 336,831,544.84 11.6%

Habesha ROA is 4.6, 4.8 and 7.3 cents for each birr of asset used, this shows that the
company is using its asset efficiently and effectively. ROA is high there for the company is
efficiently using its asset.
Return on Asset for the past 3 years( ETB)
Year Net income Total Asset ROA
2017 120,197,890.00 2,588,409,912.00 4.64
2018 162,096,622.00 3,323,863,204.00 4.88
2019 336,831,544.84 4,577,182,740.19 7.36
Habesha’s Gross profit does not fluctuate drastically from one period to the other, therefor the
company gets to keep a lot of profit relative to the cost of it’s product due to high gross profit.

Gross profit for the past 3 years( ETB)

Year Net sales/ Revenue Cost of Goods sold Gross profit Margin ratio
2017 1,786,768,118.00 (873,922,152.00) 912,845,966.00 51.1
2018 2,329,041,280.00 (1,151,590,927.00) 1,177,450,353.00 50.6
2019 2,909,728,900.35 (1,453,771,821.47) 1,455,957,078.88 50.0

Company diagnosis using- McKinsey’s 7S Model

By considering the 7S in the McKinsey’s 7S Model the hard S (Strategy, structure, system ) and the
soft S (style, staff, skills, shared values) we evaluated if the company fulfills all the characters in the
organization.

Strategy; currently the company is undergoing expansion which is said to be a part of the
company’s strategy to be one of the biggest brewers in the next five years, according to the
management of the company. Upon completion, in the coming years, the company is targeted to
raise its annual sales and revenue by 28pc.

“The surge in demand for Habesha beer in various parts of the country necessitated for the
expansion of the company,” reads the report which was presented to its shareholders three weeks
ago.

The expansion also involves introducing a new brown beer into the market. In 2020, the
company also aims to complete further expansion which produces the brown beer and start
selling the new product in the respective year.

Structure; The company dies have a well prepared and divided organizational structure
separated by each organizational division as Support, Sales and Operation. Each devision have a
branch of hierarchy of responsibility.

System. within the organization the job procedure as a written and sealed prosses and procedure
for every job activity within the companies work discretion.

 However the structure and system of the company in confidential and can not be issued to
the public there for we were not able to attain the structure and system layout.

Skills; Habesha has skilled staffs that have both communication, knowledge and technical skills,
the company also assigns training station in order for the staffs to develop and certified on there
skills. This has benefited the company to retain its employed staffs.
Allowing the staffs to develop on there skills allows them to do an efficient job in regards to
there work.

Staffs; The company employees more that 500 employees currently, the staffs are recruited
through vacancy advertisement on ETHIO Jobs and have to pass 3 level of assessment.

 Level,1 Written examination

 Level 2 Group Interview and assessment

 Level 3 Individual interview

Habesh beer conducts a station knows as Discover Habesha for new hires in order to train them
about the company when they join.

Shared Values: The companies shared values are the core values that the company shares with
its customers and employees;

“ Habesha: the authentic, golden beer. Founded and owned by thousands of proud Ethiopians.

Habesha stands for gratitude, and the celebration of togetherness. It defines the shared pride and
culture of all Ethiopians, and encourages those who dare to be authentic. “The shared values are ;

 Collaboration with team work

 Commitment of the staffs and the Brand

 Customer focus

 Create value

 Integrity

Strength and weakness of Habesha.

Strength Weakness

Strong brand, Requires state and foreign loans

Skilled staff Not as Mach capacity as its competitors

Flexible strategic implementation Young brand

Adoptable to the environment Lack of Foothold in the market

 Technology and research and development
affiliated No Objective in Black and white
Young brand Few beer brand types

Summary and Conclusion

-The company may address issues regarding sales reduction, due to the external environments
impacts, low revenue may mean lack of cash to cover expenses both fixed and variable, which
may result in structural change is the organization.

-The increase in tax rate may drive out Habesha beer’s major foreign investors and result in
layoffs.

-The company will need to internally change its sales and distribution strategies and merge
position to feel out layoffs.

-The common purpose of the company to be the best brand in the country may help Habesha to
retain it visibility. The coordinated effort of the sales team to participate in the door to door
delivery will enhance the company’s productivity and shows that employees are hardworking
and have love for the company and for the brand.

-Over control or bureaucracy will hinder the company’s staff’s willingness to work together.
Hierarchy of authority may not work properly if the hierarchy is subject to bureaucracy. This will
have a negative effect on the productivity.
Appendix
Reference
 International Journal of Economics & Business ISSN: 2717-3151, Volume 3,
Issue 1, page 140 – 157, Fereja, T. & Demeke, L. B. 2019

 Ethiopian revenue and customs declarations, issue Yekatit 6, 2012

 Africa Business Journal ( https://africanbusinessmagazine.com/)