Crafting winning strategies in a mature market - US wine marketSaurabh Arora
The Industry Landscape in 2001
US: 4th largest wine producer in the world
US: 34th in world per capita wine consumption
Top 8 firms produce more than 75% of all the wine volume
Estimated 2500 firms produce the remaining 25%
Dominance of few large players in the low price market
Greater shelf space & high marketing budget
1990s: Consolidation of retailers and distributors across US
No of distributors fell from 5000 to 250 by 2000
Only 50 to 100 left with access to widespread national distribution
Large retail consolidation in US
Top 10 supermarkets control 55% of the US market in 2000
Majority of producers are focused on low volume/high price to gain maximum return/margin
Distributors are focused on high volume/low price to maximize economies of scale
Near impossible for a new company to establish itself
Low barriers invite more players to wine market
Porter’s five forces analysis
Threat of new entrants – HIGH
Low barriers to entry for new players in wine industry
Firms spent 40% of their expenditures on marketing and distribution
Existing rivalries in industry – HIGH
Total no of wineries in US increased by more than 400%
Glut of grape supply due to low growth in demand
This put downward pressure on price and margins
Bargaining power of Buyers – HIGH
More players are entering the market
Production outstripped demand by 20%
Consolidation of retailer and distributor
Bargaining power of Suppliers – LOW
Wine producers with their own vineyards attempts to control the operations starting from production to distribution
Threat of Substitutes – LOW for Budget
Only 10% people drank wine regularly
Of the remaining 90%, 46% preferred beer or spirits
35% drank alcoholic beverages other than wine
Crafting winning strategies in a mature market - US wine marketSaurabh Arora
The Industry Landscape in 2001
US: 4th largest wine producer in the world
US: 34th in world per capita wine consumption
Top 8 firms produce more than 75% of all the wine volume
Estimated 2500 firms produce the remaining 25%
Dominance of few large players in the low price market
Greater shelf space & high marketing budget
1990s: Consolidation of retailers and distributors across US
No of distributors fell from 5000 to 250 by 2000
Only 50 to 100 left with access to widespread national distribution
Large retail consolidation in US
Top 10 supermarkets control 55% of the US market in 2000
Majority of producers are focused on low volume/high price to gain maximum return/margin
Distributors are focused on high volume/low price to maximize economies of scale
Near impossible for a new company to establish itself
Low barriers invite more players to wine market
Porter’s five forces analysis
Threat of new entrants – HIGH
Low barriers to entry for new players in wine industry
Firms spent 40% of their expenditures on marketing and distribution
Existing rivalries in industry – HIGH
Total no of wineries in US increased by more than 400%
Glut of grape supply due to low growth in demand
This put downward pressure on price and margins
Bargaining power of Buyers – HIGH
More players are entering the market
Production outstripped demand by 20%
Consolidation of retailer and distributor
Bargaining power of Suppliers – LOW
Wine producers with their own vineyards attempts to control the operations starting from production to distribution
Threat of Substitutes – LOW for Budget
Only 10% people drank wine regularly
Of the remaining 90%, 46% preferred beer or spirits
35% drank alcoholic beverages other than wine
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This slideshow was created to showcase the marketing research involved in the strategic decision-making process. This presentation represents a decision for the marketing team at Barco Projection Systems, on how to combat the incoming Sony 1270 projector model. This presentation includes a brief history, situation analysis, options for Barco, and an ultimate decision based on this research. This Powerpoint presentation was completed for a Marketing Management & Strategy course.
This presentation illustrates the analysis of Harley-Davidson's competitive strategy. It is based on the case from Grant, R., 2010. Contemporary Strategy Analysis. 7th edition, pp. 636-654
Case Analysis |Altius Golf and the Fighter Brand|Anahit Babayan
Questions covered.
1. If Altius implements the Elevate strategy what are the risks to the brand and how can they be managed?
2. What sales result would you expect for each item in the line if Elevate is introduced?
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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
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
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
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.
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.
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.
High concentration of Buyers:
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.
http://www.ft.com/cms/s/0/b9a6190e-8a28-11e2-bf79-00144feabdc0.html#axzz2OghI3hNP
Quality Global Policy 2012
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.
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.
Owns 90% of their manufacturing, distilling, brewing, bottling and admin facilities
Definition of Product Differentiation: Beniefits, price, quality, style, service.
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