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Introduction
Diageo began as a world leader in branded foods and drinks, formed in December
1997 through a merger of Guinness PLC and alcohol and Grand Metropolitan plc
(The Gale Group Inc, 2006). In 2000 - 2002, a strategic decision by Diageo was
made to exit the company's food interests by divesting its food companies and
exclusively focusing on premium alcohol. A detailed history of Diageo plc up to and
immediately after its creation is set out in Figure ??:
Our Business - Diageo History Family Tree
Figure : The Diageo Family Tree
Source: (Diageo PLC, 2008)
Diageo is currently the world's largest drinks company by volume, net sales and
operating profit (Diageo PLC, 2012) with a large collection of brands which include
spirits, beer and wine. There are currently 14 brands which Diageo identifies as
global priority brands. These are set out in Table ??
Johnnie Walker whisky
Smirnoff vodka
productivity of its operations and to position resources nearer to the market and to
the geographical regions where there is a great potential for growth.
Read through and differentiate the different strategies under headings .i.e. Business
strategy- Generic strategies (Diageo uses focused and differentiation) and Interactive
strategies. Put everything under headings
Competitive Strategies
(Johnson, Whittington, & Scholes, 2011, p. 199) ?? define competitive strategy as
being "concerned with how a strategic business unit achieves competitive advantage
in its domain of activity." Therefore a Strategic Business Unit (SBU) creates
competitive advantage when it creates value for its users where the cost effectiveness
of supplying it is superior to that of rival SBUs. (Johnson, Whittington, & Scholes,
2011) ?? further add that Porter defines three generic strategies which create
competitive advantage for a company are; differentiation, cost leadership and focus
strategies.
This report has seen that Diageo uses both Focused and Differentiation strategies
when pushing its products to its target market. This is because Diageo focuses on
premium liquor that is targeted to a particular market. ?? Tools: advertising
(localisation), vertical integration, premiumisation, seasonal pricing strategy, firstmover advantage, employee training ?? SABMiller. Diageo's strategy is to drive top
line growth and margin improvement in a sustainable and responsible way, to deliver
consistent value creation for shareholders over the long term. It will do this through
its geographic breadth, its outstanding brands across beverage alcohol categories and
the expertise of its people. (Diageo PLC, 2012).
Differentiation strategy
Products
For a company to use this strategy it should prove unique products for which their
customers will be prepared to pay a premium price. This is seen in Diageo's recent
launches which focused on the consumers' wish for luxury, the tastes and increasing
affluence of the emerging middle class consumer which ultimately increased the
accessibility of spirits through flavor extensions and packaging and drink formats
(Diageo PLC, 2012). Premiumisation [jubilee scotch] innovation around RTD
products, adult progressive drinks.
Eco-friendly technology
Diageo's production teams have created award winning technologies to meet these
targets with the aim of reducing Diageo's environmental footprint, delivering
business efficiencies and securing supply into the future. Diageo is committed to
generating prosperity in the communities in which it operates, especially in the
emerging markets by integrating its supply chain into the local community and via
direct community initiatives such as 'Learning for Life' and 'Water of Life' (Diageo
PLC, 2012).
Development of the workforce
Diageo believes that industry leading performance will be delivered through a
talented and diverse workforce and great leadership. The company has active
programs that ensure the development of its management and leaders. Great
leadership combined with a culture of good governance and ethics protects Diageo's
reputation and supports the sustainable efficient growth of the business (Diageo
PLC, 2012).
Focus Strategy
(Johnson, Whittington, & Scholes, 2011) state that focus strategy focuses on a
particular segment of market and modifies its products and services to fulfill the
needs of that exact segment while excluding others. In terms of relationships with
distributors and suppliers Diageo has strong routes to market which leverage local
expertise. In the United States Diageo is required by law to operate via a three-tier
distribution system which separates suppliers, distributors and retailers.
Diageo works with distributors who provide a substantial dedicated sales team of
over 2,900 people. Outside of the United States Diageo owns and controls the route
to market in many markets, and where Diageo has not established its own subsidiary,
the route to market is through joint ventures, associates and third party distributors
(Diageo PLC, 2012). This kind of command on distributorship and supply is why
Diageo is known for its quality products and this ensures customers get what they
pay for.
Strategic Planning
Four key pillars of the formulated strategic plans can be identified as:
Promotion of the global strategic brands
Vertical integration
Cost reduction
campaign which has been progressively adapted to different regions is the 'Walk with
Giants' campaign which in FY 2012 featured the respected long distance Olympic
champion Haile Gebrselassie in an Africa campaign.
Vertical integration
Diageo has taken considerable control of the supply chain, being involved in
developing, brewing, distilling, bottling, packaging, distributing, and marketing. It
has physical plant which covers the previously listed activities as well as specialised
functions such as malting, packaging plants, vineyards, maturation warehouses,
cooperages, distribution warehouses, and bottle manufacturers (Diageo PLC, 2007).
In Kenya the process goes as far as involvement in the growing of input cereals to
brewing ?? ref. In the USA, total vertical integration is moderated by law, which
states that there should be three levels of supply: manufacturing, distribution and
retail. In that market therefore, Diageo works to identify solid partners in
distribution, usually only one partner per state.
Cost reduction
??
Acquisitions, mergers and divestments
Strategic acquisition and sale of unfocussed business units was in Diageo's business
genes, as it was formed from a succession of such moves. It has continued to be a key
part of its growth. Since 2000 the organic growth of the company looks like Figure ??
[extend figure]
The acquisitions have extended Diageo's range, for example the acquisition of Mey
Iki in Turkey and investment in ShuiJingFang in China have opened access to four
new production sites in the middle East and production of ?? in China. ?? SABMiller.
on Diageo's products in particular, has not historically been as great but where there
are prospects for growth" (Diageo PLC, 2007, p. 17). This arm of the business was
only delivering 20% of the revenue in 2007, despite representing considerable
complexity in management. Emerging markets can be difficult to manage due to the
relatively low purchasing power, poor infrastructure, and traditional local
involvement in distribution channels. However this persistence has clearly paid off
for the company. From a small but hopeful difference in growth compared to
developed country markets in 2007, the emerging markets have increased in
strength and importance, until in 2012 they represented 40% of revenue, which is
expected to reach 50% by ??.
.
'Diageo's strategy is to drive top line growth and margin improvement in a
sustainable and responsible way, to deliver consistent value creation for shareholders
over the long term. It will do this through its geographic breadth, its outstanding
brands across beverage alcohol categories and the expertise of its people.' (Diageo
PLC, 2012)
Levels of distribution.
2008 credit crunch - emerging market growth - smarter at localised promotion?
Diageo hiding behind EABL - my country my beer.
limited edition gift boxes boast a beautiful design that allows each variant to stand
out on shelves, with impressive and refined packaging including an embossed box
and gold foiling (Diageo, 2012).
Conclusion
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