Boston Beer Case Study Analysis Essay example

1860 Words Feb 28th, 2013 8 Pages
Boston Beer Company
Case Study Analysis

1. Boston Beer’s strategy is primarily focused on growth through differentiation. The sources of its competitive advantage can be classified as a company that provides high quality beer with unique flavors, a market driven approach, and a very efficient contract brewing strategy. In terms of quality, the company created a premium beer by its selective use of ingredients and less water. Boston Beer has won honors such as being the first American beer sold in Germany due to its use of only barley, yeast, hops, and water as its ingredients. With the increase in health consciousness among beer drinkers and the rise in more distinctive and flavorful brews, the Boston Beer Company has been able
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In November 1995 the limited partnership that made up Boston Beer Company was going to be dissolved and, “at the time of dissolution, the company would distribute $12.5 million to its existing partners by using $1,552,000 in cash and borrowing $10,948,000 against its line of credit at Fleet Bank” (pg. 5). The cash raised from the IPO was planned to be used to allow them to immediately pay back the debt of dissolving the original partnership as well.
To address the question of the possibility of a firm being overcapitalized, we can look in even greater detail at what Boston Beer plans to do with its proceeds from the IPO. The case states that Boston Beer plans to pay back its debt to Fleet Bank, $10,948,000, use $7 million to fund capital expenditures in 1996, and use the remaining proceeds to fund working capital expenses or be invested into investment grade securities. Since repaying the debt and funding capital expenditures add up to almost $18 million, it leaves about $8 to $16 million for working capital expenses and investment grade security investments. Judging by Boston Beer’s past financial data, working capital expenses will not eat up an overwhelming portion of the remaining proceeds, thus leaving a substantial amount of money to be invested in

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