όραση INTERNATIONAL

CONSULTING

DIAGEO

DIAGEO

DIAGEO • World’s leading premium drinks business• 80 countries• 25,000 people

North America£3,556m

Europe£2,949m

Africa£1,447m

Latin America & Caribbean£1,239m

Asia Pacific£1,501m

DIAGEOFounded in 1997

Grand Metropolitan

United Distillers and Vintners

2000Focus on

Premium DrinksSells Burger King

and Pillsbury

Introduction - VMOST

The Vision

To be recognized as the industry leader for the distribution of deluxe wine spirits and champagne in the world market.

MissionAs 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 termposition in the market place.

Objectives

• Faster organic net sales growth: 6% CAGR in the medium term• Organic operating margin improvement: 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

• 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

Agenda

External Analysis - PEST

Political

•Laws to limit Alcohol Consumption

•Regulation of bottle labelling

•Licenses Trademarks and Patents

Economic

•Unemployment Rate in Europe

•Price of Raw Materials

•Import and Excise Duties

Social

•Increased lobbying against alcohol consumption: alcohol awareness

•Environmental Issues

•Increase in number of female consumers

Technological

•Automation technology in distilleries

•IT Technology •improve efficiency of Supply chain•Improve business Intelligence

•Social Media and internet marketing

Threat of New Entrants (Low)

High capital requirement

Exit barriers are high: difficult to sell assets

Government Policy: tariffs and import duties, distribution channels

Cost Disadvantage for new entrant

Bargaining Power of Suppliers (Low)

Many Supplier Options

Major Competitors buy in Bulk

Long term contracts with Suppliers control price fluctutations

Bargaining Power of Buyers (High)

Switching Cost for buyers is low

Many brand options are available to the consumer

Concentration of buyers is high

Threat of Substitute Products (Low but growing)

Indirect substitutes are present:•Soft Drinks•Coffee•Water•Juices

Rivalry Among Existing Competitors (High)

Open competition for highest market share

High Fixed Cost

High Level of Advertising

Porter’s Five Forces

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

Pernod Ricard

•Strengthen existing brands through marketing across the board

•“Premiumization” of their brands to attract

•Focus on operational efficiency and agility

Bacardi

•Main focus on Rum

•Couples its product with knowledge of cocktails and mixes

Brown Forman

•Primary focus on whiskey, especially its top brand: Jack Daniels

•Limited Diversification in Vodka, Tequila and Wine

Competitor Analysis

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

Pred

icta

bilit

y an

d Ch

ange

abili

ty

• 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)

Infrastructure

Human Resource Management

Technology Development

Procurement

Inbo

und

Logi

stics

Ope

ratio

ns

Out

boun

d Lo

gisti

cs

Mar

ketin

g an

d Sa

les

Serv

ice

Margin

Margin

Seco

ndar

y Ac

tiviti

es

Primary Activities

Internal Analysis – Value Chain

Internal Analysis – Value Chain (Primary Activities)

Internal Analysis – Value Chain (Secondary Activities)

VRIO Framework

VRIOFramework

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 CompetitiveParity

A sequential decision making approach by questioning each resource and asking if it

is valuable (Lynch, pg 156)

BCG Matrix

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 dynamicStaff • 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 classesResearch 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.

MCKINSEY SEVEN S MODEL

Core Competencies

Key success Factor Core Competencies

Customer - Brand Appeal

Ownership of high end brandsCater for both genders: example in beer, they use snappVariety of Brands across price range

Competition - Competitive Pricing

Economies of ScaleEfficient productionSupplier Relationships

Corporation – Skilled personnel

Diverse and Talented and people

Corporation – High Quality Product

Highly automated & mechanized.Quality control procedures

Corporation – Efficient Distribution

Efficient supply chainPartnerships with distributors in different markets

Architecture Employees: Developing World Class Talent: Career development process.

Excellent relationship with supplier.

InnovationOwnership 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.

Distinctive Capabilities – John Kay’s Framework

Wine 6% of sales Spirits Beer 21% of sales

Ultra Moet and ShadonChalone

Johnnie Walker BlueCiroc 63%

Super Dom perignon BaileysCaptain Morgan 9%

Premium Blossom HillJusteriniSterlin Vineyards

Jose Cuervo(5%)Smirnoff 5%Johnnie Walker Black

Guiness 3%

Popular JNB (5%)Black and White

Harp LagerRed Stripe LagerBell Lager

Portfolio Analysis

Porter’s Generic Strategy

Nar

row

Broa

d

Cost Differentiation

Differentiation in two dimensions: price differnces, product differentiation: wine, beer and spirits (vodka, gin scotch and rum)Use of premium brands

• External Analysis – Alcoholic Beverage Industry

• Internal Analysis - Diageo

• Gap Analysis

• Strategic Direction

Agenda

Gap Analysis - EVR

Gap Analysis - EVR

Gap Analysis - EVR