global appeal. These factors show that the industry has a high global appeal with above average financial stability and growth opportunity. Although the growth opportunity is above average, continue mergers and acquisitions will eventually lead to lower growth as a ceiling of market share is reached competitors attempt to out-manoeuvre each other to increase limited share. The analysis concludes that the type of business or industry is desirable with an average rating of five out of a possible seven. The overall strength of the industry has a direct relation to the environmental stability. Instability within an external environment would negatively impact the industries strength.
The external environment criteria and rating is determined using a mix of processes. Three of the factors measured are determined by the previous analysis of Porters five forces, these forces are: threat of substitutes, client bargaining power and competitive advantage (Porter, 1998 c1980:447).The last two factors are: rate of inflation and price elasticity of demand. These factors have an economic impact on the company’s ability to achieve a reasonable profit. The threat of substitutes is particularly high within the industry with hot beverages, soft drinks and other alcoholic beverages competing for consumer demand. Competitive rivalry is also intense with few competitors with similar products and capability competing in a market in decline. Added to this is the fact that the brewer cannot deal directly with the retailer or consumer which increases the distributors bargaining power. The overall results indicate that the environment in which the business operates is highly competitive with negatives partially offset by the control of price and low inflation rate. After completing the individual analysis and obtaining an average score per quadrant, a calculation is performed to determine the x and y axis position of the results. To determine the x and y position on the Cartesian graph the following calculation is used: competitive advantage (CA) + industry strength (IS) = X axis and environmental stability (ES) + financial stability (FS) = Y axis. From the results of this calculation, the xy intersection plotted is drawn (Rowe, Mason & Dickel, 1982 as cited in David, 2013:209). A directional vector from the point of origin through the intersection is drawn. The figure below represents the final strategy choice indicated by the solid arrow, as well as a second weighted position indicated by the divided arrow. This discussion of the second position is in the overview of the matrix.
Figure 3.5 SPACE matrix (adapted from (Rowe, Mason & Dickel, 1982 as cited in David, 2013:209)
The opportunities and threats identified affirm a competitive strategy as the correct choice for SABMiller to follow within its American operations. The actual position at the upper portion of the quadrant indicates that SABMiller are doing well competitively in a high growth industry. To...