Executive Summary The aim of the study is to analyze the environmental factors that have contributed to the decline of the European beer industry using PESTEL and Porter’s five forces analysis. The results were used to perform a SWOT analysis for Heineken. The findings reveal that the decline of European beer industry has been caused by high competition and government campaigns against alcohol consumption. Additionally, the industry has a low growth rate since it has reached its maturity stage. Brewery companies are responding to these trends through mergers, acquisitions and alliances. Heineken’s main strength is its strong brand image. Over reliance on few brands and the European market is the main weakness of Heineken. The opportunities available for Heineken include introducing new products and joining overseas markets. Overall, the environmental trends are likely to have a negative effect on Heineken’s future competitiveness. Introduction Purpose The purpose of this report is to analyze the environmental factors that have contributed to the decline of Europe’s beer industry. In particular, PESTEL and Porter’s five forces analyses will be used to analyze the European beer industry. The results will be used to conduct a SWOT analysis in order to determine the effects of the industry trends on Heineken’s competitiveness. Scope The study focuses on the trends in the external and competitive environment of the European beer industry. Additionally, Heineken’s internal environment will be analyzed. Background The study focuses on the European beer industry. It investigates the effect of the competitive global environment on the European beer industry. Assumptions and Limitations Lack of current or updated information about the trends in European beer industry is the main limitation of the study. Thus, the statistics and data used in the report are assumed to be accurate. Methodology The data used in the study was collected through secondary literature review. The main sources of data included journals and strategic management textbooks. Industry Analysis PESTEL Analysis PESTEL analysis is a tool used by managers to assess the effects of the trends in the external environment on their businesses. PESTEL analysis considers the influence of political, economic, social, technological, environmental and legal trends on businesses. Political Trends Europe has a relatively stable political environment which promotes investment and trade between member countries. The formation of European Union led to the removal of tariff and non-tariff barriers to trade in Europe (Rojas and Tianji, 2011, pp. 10-12). This enabled beer producers to join European countries of their choice through exports and foreign direct investments. Trade liberalization in the region has led to an increase in cross-boarder mergers and acquisitions, thereby increasing competition. Economic Trends In 2010, the economy of Europe, as a region, grew by 1.8%. The region also recorded an inflation rate of 3.1% in 2010. About 17% of Europe’s population leaves below the poverty line. In general, the production costs for beer have increased by approximately 24% since 2006. Additionally, nearly half of the European countries have