Five Star Beer Case Analysis

Five Star Beer

Problems Analysis

Decreasing Market Share

Five Star Beer had a great history. This was closely related to the policy of China at that time. Before 1978, Chinese government controlled almost all Chinese economy and resources. Every company was owned by government. Every activity was under the control of Chinese government, including what the prize was, how much beer it should make, where to sell, and how much the employees should earn. Five Star Beer served Beijing and the surrounding Hebei province. After reform and opening-up policy was established in 1978, there were more and more brewers throughout China. But Five Star still enjoyed a majority of the Beijing market prior to the early 1990s.

However, by the early 1990s, Five Star had to compete in the Beijing area with Three Ring Beer. Also, not only in Beijing area, Five Star had to compete throughout the country because in the earlier time, it gained some market share in other area by establishing of licensing agreements between itself and other regional brewers. At that time, Five Star would not be the “only one” any more. It had to consider how to sell the bear.

Quality Problem

It was also the time that ASIMCO discovered Five Star Beer had a great quality difficulty, leading the second and also the most important thing that Five Star Beer should deal with --- quality. Products from the same company should have nothing different except variety, taste, and characteristics, which points out that quality issues will not be tolerated. Quality is the life of the company. However, ASIMCO found there was a severe quality problem within Five Star Beer. The reason may be that Five Star developed too fast and signed too many licensing agreements within its capacity. Just giving other regional brewers a “Five Star” brand instead of giving them technical support and standard procedure could lead to produce unqualified products. From another aspect, Five Star never used to think about its quality because it never worried about selling. People would buy it whether it’s good or bad because they didn’t have too many choices. Now, brewer industry is growing fast. Unqualified product must be cleaned out.

Pay-for-Performance System

In Jan. 1997, Mr. Zhao began to develop a specific pay-for-performance system for Five Star. He believed that monetary punishment should be a good method to improve employee’s performance, which is like McMullen referred to as “more stick than carrot”. One example is that once an empty or short-filled product was found in the marketplace, all six people, who belonged to the originating filling line, would be fined 500 RMB.

However, this pay-for-performance system was efficient for Five Star Beer Company.