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INTERNATIONAL CONSULTING
DIAGEO 
DIAGEO
DIAGEO • World’s leading premium drinks business 
• 80 countries 
• 25,000 people 
North America 
£3,556m 
Europe 
£2,949m 
DIAGEO 
Africa 
£1,447m 
Latin America 
& Caribbean 
£1,239m 
Asia Pacific 
£1,501m 
Founded in 1997 
Grand Metropolitan 
United Distillers and Vintners 
2000 
Focus on Premium Drinks 
Sells Burger King and Pillsbury
Introduction - VMOST 
The Mission 
Vision 
Objectives 
As custodian of our brands, we will nurture them and optimize their value by 
driving brand equity, volume and market share in order to enhance our long term 
position in the market place. 
• To be Faster recognized organic as net the sales industry growth: leader 6% CAGR for the in distribution the medium of term 
deluxe wine 
spirits • Organic and champagne operating margin in the improvement: world market. 
200bpts by year ending 30 June 2014 
• Eps growth: Double digit growth in core* eps 
* excluding exceptional items and the exchange impact on operating profit
Agenda 
• External Analysis – Alcoholic Beverage Industry 
• PEST 
• Porter’s Five Forces 
• Industry Life Cycle 
• Key Success Factors 
• Customer Analysis 
• Competitor Analysis 
• Degree Of Turbulence 
• Internal Analysis - Diageo 
• Gap Analysis 
• Strategic Direction
External Analysis - PEST 
Political 
Social 
Technological 
Economic 
•Unemployment Rate in 
Europe 
•Price of Raw Materials 
Automation technology in 
distilleries 
•Laws to limit Alcohol 
Consumption 
•Regulation of bottle labelling 
•Licenses Trademarks and 
Patents 
Increased lobbying against 
alcohol consumption: alcohol 
awareness 
IT Technology 
•improve efficiency of 
•Environmental Import Supply and chain 
Excise Issues 
Duties 
•Improve business 
•Increase Intelligence 
in number of female 
consumers 
•Social Media and internet 
marketing
Porter’s Five Forces 
Bargaining Threat Rivalry Bargaining Threat of Among Substitute of Power Power New Existing of Entrants of Products Suppliers Buyers Competitors 
(Low) 
(High) 
((Low 
Low) 
but growing) 
(High) 
Switching Many High capital Supplier Cost requirement 
for Options 
buyers is low 
Indirect substitutes are present: 
•Soft Drinks 
•Coffee 
•Water 
•Juices 
Open competition for highest market 
share 
Many brand options are available to 
the consumer 
Exit Major barriers Competitors are high: buy difficult in Bulk 
to sell 
assets 
Long High Fixed term contracts Cost 
with Suppliers 
control price fluctutations 
Concentration of buyers is high 
Government Policy: tariffs and import 
duties, High Level distribution of Advertising 
channels 
Cost Disadvantage for new entrant 
2 
2 
4 
3 
4
Development Growth Shakeout 
Maturity 
Decline 
External Analysis - Industry Life Cycle Analysis 
• Overall 
unattractiveness 
• Excess capacity 
• High Price competition
External Analysis - Key Success Factors Ohmae’s 3Cs
External Analysis – Customer Analysis
Competitor Analysis 
Brown Pernod Bacardi 
Forman 
Ricard 
•Main Primary Strengthen focus focus on existing on Rum 
whiskey, brands especially through marketing its top brand: across Jack the Daniels 
board 
••“Couples Limited Premiumization” Diversification its product of with their in knowledge Vodka, brands Tequila to of attract 
cocktails and Wine 
and mixes 
•Focus on operational efficiency and agility
External Analysis – Degree of Turbulence 
Complexity National 
Economic 
Regional 
technological 
Global Socio 
political 
Familiarity 
of Events 
Familiar Extrapolable Discontinuous 
Familiar 
Discontinuous 
Novel 
Rapidity of 
Change 
Slower than 
Response 
Comparable 
to Response 
Faster than 
response 
Visibility of 
Future 
Recurring Forecastable Predictable Partially 
Predictable 
Unpredictable 
Surprises 
Turbulence 
Level 
1 2 3 4 5 
Degree of Turbulence: (4.7+4.6+3.8+4 )/4= 4.3 
4.7 
4.6 
3.8 
4.0 
Predictability and Changeability
• External Analysis – Alcoholic beverage industry 
• Internal Analysis - Diageo 
•Resource Audit 
•Value Chain 
•VRIO 
•BCG Matrix 
•Mc Kinsey 7S 
•Core Competencies 
•Distinctive Capabilities 
•Portfolio Analysis 
•Generic Strategies 
•SWOT 
• Gap Analysis 
• Strategic Direction 
Agenda
Internal Analysis – Resource Audit (Grant’s Model)
Internal Analysis – Resource Audit (Grant’s Model)
Internal Analysis – Resource Audit (Grant’s Model)
Internal Analysis – Value Chain 
Infrastructure 
Human Resource Management 
Technology Development 
Procurement 
Inbound 
Logistics 
Operations 
Outbound 
Logistics 
Marketing and 
Sales 
Service 
Margin 
Margin 
Secondary 
Activities 
Primary 
Activities
Internal Analysis – Value Chain (Primary Activities)
Internal Analysis – Value Chain (Secondary Activities)
VRIO Framework 
A sequential decision making approach by questioning each resource and asking if it 
is valuable (Lynch, pg 156) 
VRIO 
Framework 
VALUABLE RARE DIFFICULT TO 
IMITATE 
EXPLOITED BY THE 
ORGANIZATION 
Competitive 
Implications 
Brand Equity 
(Tacit knowledge) 
Yes Yes Yes Yes Sustained 
Advantage 
Effective 
Distribution 
Network 
(synergy) 
Yes Yes Yes Yes Sustained 
Advantage 
Leadership and 
innovative ability 
Yes No No Yes Competitive 
Parity 
Plant Facilities Yes No No Yes Competitive 
Parity 
Marketing Yes No No Yes Competitive 
Parity
BCG Matrix
MCKINSEY SEVEN S MODEL 
Strategy • Top line growth 
• To make selective acquisitions of companies with both strong local 
routes to market and brands that appeal to the growing number of 
middle class consumers in the emerging markets. 
• Develop a holistic world-class brand asset management system. 
Structure • Operational functions executed by geographic regional 
management, each responsible for meeting diageo strategic 
objectives thereby responding to regional market analysis and 
responsibilities. 
System • Internal control and risk management system in relation to the 
company financial reporting process 
• Automated systems for manufacturing 
• Waste disposal system
MCKINSEY SEVEN S MODEL 
Style Participative leadership in some regards: 
•Employees have the freedom to train themselves through eLearning 
courses. 
•Co-operative team dynamic 
Staff • Over 25,000 employees. 
• Staff required for operation of automated systems 
• Annual training 
• Internships for graduate 
• Rewards systems in place 
Skills Diageo’s Academy: home for global learning and development 
resources. Ranges from: 
•Classroom training events 
•E-learning courses 
•Self development materials 
•Virtual classes 
Research and Development 
Shared values • Customer and consumer oriented, team oriented, proud of what we 
do, strive to be the best, create mutual relationships and 
partnerships.
Core Competencies 
Key success Factor Core Competencies 
Customer - Brand 
Appeal 
Ownership of high end brands 
Cater for both genders: example in beer, they use snapp 
Variety of Brands across price range 
Competition - 
Competitive 
Pricing 
Economies of Scale 
Efficient production 
Supplier Relationships 
Corporation – 
Skilled personnel 
Diverse and Talented and people 
Corporation – High 
Quality Product 
Highly automated & mechanized. 
Quality control procedures 
Corporation – 
Efficient 
Distribution 
Efficient supply chain 
Partnerships with distributors in different markets
Distinctive Capabilities – John Kay’s Framework 
Architecture Employees: Developing World Class Talent: Career development 
process. 
Excellent relationship with supplier. 
Innovation 
Ownership of brand with heritage, tradition and unique tacit 
knowledge. 
Reputation Developed a reputation for ultra-premium blended scotch: 
Johnnie Walker 
Strategic Assets Patents of technology to protect their rights: 
-process technology, bottle marking technology.
Wine 6% of sales Spirits Beer 21% of sales 
Ultra Moet and Shadon 
Chalone 
Johnnie Walker 
Blue 
Ciroc 63% 
Super Dom perignon Baileys 
Captain Morgan 9% 
Premium Blossom Hill 
Justerini 
Sterlin Vineyards 
Jose Cuervo(5%) 
Smirnoff 5% 
Johnnie Walker 
Black 
Guiness 3% 
Popular JNB (5%) 
Black and White 
Harp Lager 
Red Stripe Lager 
Bell Lager 
Portfolio Analysis
Porter’s Generic Strategy 
Narrow Broad 
Differentiation in two dimensions: price differnces, product 
differentiation: wine, beer and spirits (vodka, gin scotch and rum) 
Use of premium brands 
Cost Differentiation
Agenda 
• External Analysis – Alcoholic Beverage Industry 
• Internal Analysis - Diageo 
• Gap Analysis 
• Strategic Direction
Gap Analysis - EVR
Gap Analysis - EVR
Gap Analysis - EVR

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20130425 do s 2

  • 3. DIAGEO • World’s leading premium drinks business • 80 countries • 25,000 people North America £3,556m Europe £2,949m DIAGEO Africa £1,447m Latin America & Caribbean £1,239m Asia Pacific £1,501m Founded in 1997 Grand Metropolitan United Distillers and Vintners 2000 Focus on Premium Drinks Sells Burger King and Pillsbury
  • 4. Introduction - VMOST The Mission Vision Objectives As custodian of our brands, we will nurture them and optimize their value by driving brand equity, volume and market share in order to enhance our long term position in the market place. • To be Faster recognized organic as net the sales industry growth: leader 6% CAGR for the in distribution the medium of term deluxe wine spirits • Organic and champagne operating margin in the improvement: world market. 200bpts by year ending 30 June 2014 • Eps growth: Double digit growth in core* eps * excluding exceptional items and the exchange impact on operating profit
  • 5. Agenda • External Analysis – Alcoholic Beverage Industry • PEST • Porter’s Five Forces • Industry Life Cycle • Key Success Factors • Customer Analysis • Competitor Analysis • Degree Of Turbulence • Internal Analysis - Diageo • Gap Analysis • Strategic Direction
  • 6. External Analysis - PEST Political Social Technological Economic •Unemployment Rate in Europe •Price of Raw Materials Automation technology in distilleries •Laws to limit Alcohol Consumption •Regulation of bottle labelling •Licenses Trademarks and Patents Increased lobbying against alcohol consumption: alcohol awareness IT Technology •improve efficiency of •Environmental Import Supply and chain Excise Issues Duties •Improve business •Increase Intelligence in number of female consumers •Social Media and internet marketing
  • 7. Porter’s Five Forces Bargaining Threat Rivalry Bargaining Threat of Among Substitute of Power Power New Existing of Entrants of Products Suppliers Buyers Competitors (Low) (High) ((Low Low) but growing) (High) Switching Many High capital Supplier Cost requirement for Options buyers is low Indirect substitutes are present: •Soft Drinks •Coffee •Water •Juices Open competition for highest market share Many brand options are available to the consumer Exit Major barriers Competitors are high: buy difficult in Bulk to sell assets Long High Fixed term contracts Cost with Suppliers control price fluctutations Concentration of buyers is high Government Policy: tariffs and import duties, High Level distribution of Advertising channels Cost Disadvantage for new entrant 2 2 4 3 4
  • 8. Development Growth Shakeout Maturity Decline External Analysis - Industry Life Cycle Analysis • Overall unattractiveness • Excess capacity • High Price competition
  • 9. External Analysis - Key Success Factors Ohmae’s 3Cs
  • 10. External Analysis – Customer Analysis
  • 11. Competitor Analysis Brown Pernod Bacardi Forman Ricard •Main Primary Strengthen focus focus on existing on Rum whiskey, brands especially through marketing its top brand: across Jack the Daniels board ••“Couples Limited Premiumization” Diversification its product of with their in knowledge Vodka, brands Tequila to of attract cocktails and Wine and mixes •Focus on operational efficiency and agility
  • 12. External Analysis – Degree of Turbulence Complexity National Economic Regional technological Global Socio political Familiarity of Events Familiar Extrapolable Discontinuous Familiar Discontinuous Novel Rapidity of Change Slower than Response Comparable to Response Faster than response Visibility of Future Recurring Forecastable Predictable Partially Predictable Unpredictable Surprises Turbulence Level 1 2 3 4 5 Degree of Turbulence: (4.7+4.6+3.8+4 )/4= 4.3 4.7 4.6 3.8 4.0 Predictability and Changeability
  • 13. • External Analysis – Alcoholic beverage industry • Internal Analysis - Diageo •Resource Audit •Value Chain •VRIO •BCG Matrix •Mc Kinsey 7S •Core Competencies •Distinctive Capabilities •Portfolio Analysis •Generic Strategies •SWOT • Gap Analysis • Strategic Direction Agenda
  • 14. Internal Analysis – Resource Audit (Grant’s Model)
  • 15. Internal Analysis – Resource Audit (Grant’s Model)
  • 16. Internal Analysis – Resource Audit (Grant’s Model)
  • 17. Internal Analysis – Value Chain Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing and Sales Service Margin Margin Secondary Activities Primary Activities
  • 18. Internal Analysis – Value Chain (Primary Activities)
  • 19. Internal Analysis – Value Chain (Secondary Activities)
  • 20. VRIO Framework A sequential decision making approach by questioning each resource and asking if it is valuable (Lynch, pg 156) VRIO Framework VALUABLE RARE DIFFICULT TO IMITATE EXPLOITED BY THE ORGANIZATION Competitive Implications Brand Equity (Tacit knowledge) Yes Yes Yes Yes Sustained Advantage Effective Distribution Network (synergy) Yes Yes Yes Yes Sustained Advantage Leadership and innovative ability Yes No No Yes Competitive Parity Plant Facilities Yes No No Yes Competitive Parity Marketing Yes No No Yes Competitive Parity
  • 22. MCKINSEY SEVEN S MODEL Strategy • Top line growth • To make selective acquisitions of companies with both strong local routes to market and brands that appeal to the growing number of middle class consumers in the emerging markets. • Develop a holistic world-class brand asset management system. Structure • Operational functions executed by geographic regional management, each responsible for meeting diageo strategic objectives thereby responding to regional market analysis and responsibilities. System • Internal control and risk management system in relation to the company financial reporting process • Automated systems for manufacturing • Waste disposal system
  • 23. MCKINSEY SEVEN S MODEL Style Participative leadership in some regards: •Employees have the freedom to train themselves through eLearning courses. •Co-operative team dynamic Staff • Over 25,000 employees. • Staff required for operation of automated systems • Annual training • Internships for graduate • Rewards systems in place Skills Diageo’s Academy: home for global learning and development resources. Ranges from: •Classroom training events •E-learning courses •Self development materials •Virtual classes Research and Development Shared values • Customer and consumer oriented, team oriented, proud of what we do, strive to be the best, create mutual relationships and partnerships.
  • 24. Core Competencies Key success Factor Core Competencies Customer - Brand Appeal Ownership of high end brands Cater for both genders: example in beer, they use snapp Variety of Brands across price range Competition - Competitive Pricing Economies of Scale Efficient production Supplier Relationships Corporation – Skilled personnel Diverse and Talented and people Corporation – High Quality Product Highly automated & mechanized. Quality control procedures Corporation – Efficient Distribution Efficient supply chain Partnerships with distributors in different markets
  • 25. Distinctive Capabilities – John Kay’s Framework Architecture Employees: Developing World Class Talent: Career development process. Excellent relationship with supplier. Innovation Ownership of brand with heritage, tradition and unique tacit knowledge. Reputation Developed a reputation for ultra-premium blended scotch: Johnnie Walker Strategic Assets Patents of technology to protect their rights: -process technology, bottle marking technology.
  • 26. Wine 6% of sales Spirits Beer 21% of sales Ultra Moet and Shadon Chalone Johnnie Walker Blue Ciroc 63% Super Dom perignon Baileys Captain Morgan 9% Premium Blossom Hill Justerini Sterlin Vineyards Jose Cuervo(5%) Smirnoff 5% Johnnie Walker Black Guiness 3% Popular JNB (5%) Black and White Harp Lager Red Stripe Lager Bell Lager Portfolio Analysis
  • 27. Porter’s Generic Strategy Narrow Broad Differentiation in two dimensions: price differnces, product differentiation: wine, beer and spirits (vodka, gin scotch and rum) Use of premium brands Cost Differentiation
  • 28.
  • 29. Agenda • External Analysis – Alcoholic Beverage Industry • Internal Analysis - Diageo • Gap Analysis • Strategic Direction

Editor's Notes

  1. The word Diageo comes from the Latin for day (dia) and the Greek for world (geo). We take this to mean every day, everywhere, people celebrate with our brands 1997 Diageo was created through the merger of Guiness PLC and Grand Metropolitan Public Limited Company [Note: PLC means Public Limited Company. Its shares are freely sold and traded in the public] 2000 a strategic move was made to get out of the food industry and focus soley on premium drinks.
  2. The word Diageo comes from the Latin for day (dia) and the Greek for world (geo). We take this to mean every day, everywhere, people celebrate with our brands 1997 Diageo was created through the merger of Guiness PLC and Grand Metropolitan Public Limited Company [Note: PLC means Public Limited Company. Its shares are freely sold and traded in the public] 2000 a strategic move was made to get out of the food industry and focus soley on premium drinks.
  3. Vision: What the org aspires to be Mission: We must deliver sustained outstanding performance – year in year out Our business and our people must do the right thing every day everywhere – so driving growth and adding value We must be famous for great people , brands and holistic performance Objectives: Corporate Objectives are derived out of the Corporate Mission. Corporate Objectives relate to the entire organization, they are long term and broad in their coverage. Corporate Objectives are : Specific Measurable Achievable Realistic Timed Corporate Objectives are influenced by stakeholders and represent the expectations of senior management and stakeholders. The term "organic sales" refers to revenue generated from within a company. Organic sales encompasses those streams of revenue that are a direct result of the firm's existing operations. To generate external sales, the company would look for potential acquisition targets which would help increase top line growth. Bpts: 1 Basis Points: 1/100th of 1% so 200bpts = 200/100*1% = 2% Tactics: Strategic capability refers to the resources and competences of an organisation needed for it to survive and prosper. Strategy: A plan of action or policy designed to achieve a major or overall aim. Tactics: An action or strategy carefully planned to achieve a specific end.
  4. High concentration of Buyers:
  5. Average: (4.7+3.5+3.8+4 )/4= 4 (Total Degree of Turbulence) In the US Diageo is required by law to operate a three tiered distribution system which separated suppliers distributors and retailers(2900 people). Outside the US Diageo own and controls the route to market in many markets. Complexity: 4.7. Also changes in the economies of the local countries around the world add to the complexity. Familiarity of Events are 3.5 because we can predict and see changes with emerging middleclass however there is the risk of customer preferences and tastes changing. Maintaining competitive position depends on its continuing ability to offer products that have a strong appeal to consumers. Rapidity of change: 3.8 Because of global strategy of premiumization, if consumer taste change and they go more economic, this will change the environment because of other options. According to finincial report they recorded the highest number of sales in Scotch (29% of all sales). So customer taste will adversely affect them in all geographic locations. Visibility of the future: can be rated as 4, due to past events in the alcoholic beverage industry, the may be partial prediction of the future. In cases Overall there is a high degree of turbulence in the alcoholic beverage industry.
  6. Why do customer
  7. Why do customer
  8. Why do customer
  9. http://www.ft.com/cms/s/0/b9a6190e-8a28-11e2-bf79-00144feabdc0.html#axzz2OghI3hNP Page 30
  10. http://www.ft.com/cms/s/0/b9a6190e-8a28-11e2-bf79-00144feabdc0.html#axzz2OghI3hNP Quality Global Policy 2012
  11. to make selective acquisitions, in particular the acquisition of companies with both strong local routes to market and brands that appeal to the growing number of middle class consumers in the emerging markets. The BAM programme took a holistic approach: - Change internal ways of working, - Changing the interaction with third party suppliers who all contribute to the creation, evolution and maintenance of our assets.
  12. to make selective acquisitions, in particular the acquisition of companies with both strong local routes to market and brands that appeal to the growing number of middle class consumers in the emerging markets. The BAM programme took a holistic approach: - Change internal ways of working, - Changing the interaction with third party suppliers who all contribute to the creation, evolution and maintenance of our assets.
  13. Owns 90% of their manufacturing, distilling, brewing, bottling and admin facilities
  14. Definition of Product Differentiation: Beniefits, price, quality, style, service.
  15. Taking control of NorthAmerical distribution China: S- to promote responsible drinking worldwide where they share programs and tools designed to fight alcohol misuse and help individuals make responsible decisions about drinking. In addition to 2 television add campaigns encouraging persons to not drink in excess. Wine is becoming increasingly popular as female consumers are demanding variety and a milder drink as appose to the stronger brands such as scotch which is aligned for masculinity. Diageo can build on this wine opportunity. Tap into a segment that can be exploited. Raise in consumption in middle income earners.. Emerging markets. Current in the process of taking over a local company in which they can expolit and utilized existing distribution networks WTO… when they implement it globally diageo wont have a problem because of their experience. They are familiar Nothing is different with the technology used the difference lies among the variety of blends T- govt policy adv is one of their major strategies