Ludwig Theuvsen and Christoph Niederhut-Bollmann 351
Perceived Market Risks and Strategic Risk Management of Food
Manufactures: Empirical Results from the German Brewing Industry
Ludwig Theuvsen and Christoph Niederhut-Bollmann
Institute of Agricultural Economics, Georg-August-University Goettingen,
Platz der Goettinger Sieben 5, 37073 Goettingen, Germany,
[email protected], [email protected]
Abstract
The food industry is currently facing huge structural changes, such as growing concentration
ratios and degrees of internationalization and as well as the reorganizations of food supply
chains. Such developments do not only contribute to growing market risks but also require stra-
tegic reorientations on the part of food manufacturers. So far, risk management and strategic
planning have been two fairly separated theoretical strands. In this paper we blend both schools
of thought and analyze food manufacturers' perceived market risks and strategic risk manage-
ment of food manufacturers. Empirical Our data stem from large-scale empirical research in the
German brewing industry.
Keywords: Brewing industry, market risks, risk management
1 Risk and Strategic Risk Management
Risk can be defined as any uncertainty about the achievement of a firm’s objectives. Risk ma-
nagement deals with the potential consequences of risks by identifying, measuring and manag-
ing risksthem. Basically, There are four basic categories of a company’s risks can be
distinguished into four groups (Romeike, 2005):
General risks stemming from the political system, legislation, disruptive technological changes,
or natural disasters.
Market risks, i.e.that is, risks associated with a company’s value-creating activities, such as pur-
chasing, production, marketing and R&D.
Financial risks due to, for instance, resulting from factors like volatile market prices, a lack of
liquidity or a the weak financial standing of customers.
Corporate governance and management risks concerning, for instance, such matters as organi-
zational structure and processes, leadership, communication and organizational culture.
In this paper we mainly focus primarily on how companies in the beverages industry perceive
market risks. Due to growing risks, risk management has gained much relevance. Nevertheless,
risk management does not aim at avoidingseek to avoid all risks, - which is usually impossible
in most cases, - but to manageing risks in such a way that they cannot endanger the company’s
existence and sustainable development due tothrough their immense consequences or high pro-
babilityies. Risk management strategies embrace all measures and mechanisms which allow to-
may influence the risk situation through reducing the probability and/or the consequences of
risks (Seidel, 2005). We can distinguish between four different types of risk management stra-
tegies: