Strategic responses to changes in the external environment: a case of East African Breweries Limited
All organizations exist and carry out their activities within the environment. The environment provides the organizations with inputs which they transform to outputs through internal processes and then the outputs are given back to the environment. Therefore in order to survive in the environment, organizations have to pay attention to the environment and match their activities to the environmental conditions. The environment can be classified into the external and the internal environments. The external environment is made up those factors that are beyond the firm‟s control but which affect its operations. This environment is made of political, economic, sociocultural, technological, ecological and legal variables. The internal environment on the other hand consists of factors within the firm‟s control, which also influence the firm‟s activities. The internal environment is composed of factors like financial resources, technology, human resources, structures and processes. The environment is dynamic and keeps changing. Since the external environment is uncontrollable, the firm has to match its operations to the external environment in order to survive and succeed. Strategy is a firm‟s game plan for surviving in the changing environment. This implies that strategies are not static, they keep changing as the environment changes. For organizations to be effective and hence successful, they should respond appropriately to changes that occur in their respective environment. This is what is termed as strategic responses, which are the actions that an organization takes to align itself with the environment. Any firm that does not take actions to align itself with the environment cannot survive in the environment and is soon forced out of the market. This study set out to find out how East African Breweries Limited (EABL) had responded to environmental changes. EABL had been a successful company and even when it was faced by very fierce competition it managed to emerge successful. This study set out to address two main objectives which were to determine the environmental factors that had affected EABL and to determine the strategic responses that EABL had put in place to address these changes. In order to address these two objectives the study made use of both primary and secondary data. Primary data was collected through personal interviews with some members of the EABL management team. Secondary data was obtained from EABL‟s inhouse publications, websites and newspapers. A content analysis was then carried out on the data obtained and the findings were presented in form of brief discussions on the environmental changes and key strategic responses identified. The study found out that EABL carried out annual strategic planning sessions, which were guided by long-term goals the company was pursuing. At the time of the study, the long-term goals were summarized into what the company had termed as Vision 2010 whereby the company was targeting to be the number one drinks company in Eastern Africa. During the annual strategic planning sessions, the company‟s executives would determine the current environmental conditions affecting the company and expected changes in those conditions. The executives would then determine the actions that could be taken to deal with those changes and from that exercise they would determine the strategic responses to relate the company to the environmental changes. The study found out that the company did not respond to all the changes in the environmental conditions but to those changes which were deemed to impact on the company‟s activities to a large extent. The study identified the following factors to have elicited responses from the company. In the political-legal environment the key variable had been changes in taxation. In the technological environment the rates of obsolescence and new technological developments had played a major role. In the economic environment key variables had been the income levels and willingness to spend, cost of factors of production, business cycles and liberalization. In the socio-cultural environment, key variables had been gender, lifestyle changes, income distribution, lobby groups, accident rates and safety concerns. In the physical environment key challenges had been the weather patterns and in the competitive environment the key challenges had been from exports and illicit brews. EABL had put in place various strategic responses to address these changes in order for the company to attain its Vision 2010. These responses were market development, product development and modification, vertical integration, information systems change, innovation, product differentiation, outsourcing, shared services centre, culture and structure changes, aggressive marketing campaigns and corporate social responsibility. The study identified that the strategies EABL had employed were consistent with Pearce and Robinson‟s (1991) grand strategies. The study therefore concluded that even for a company that was successful strategic responses were still important in order to ensure continued success by aligning the company to the environment it operated in.