BRL Hardy: Wine Company from Australia - Essay Example

? BRL Hardy Case Contents Introduction 3 Strategy developed by Carson 6 Outsourcing 10 Conclusion 13 References 14 Introduction BRL Hardy is an established wine company from Australia that started to focus on becoming global in the period of late 1990s. The essay carries out the critical assessment and interpretation of the case study regarding the approach of Steve Millar for handling the challenge of leading BRL Hardy to become one of the world’s first truly global wine companies and the company, and assessing the scope for local responsiveness within his global strategy. Further, there is discussion of the strategy developed by Christopher Carson, the marketing manager for the European segment to build and sustain BRL Hardy’s competitive advantage in the European wine market in 1995-1998. It also analyses the outsourcing challenges and strategic options available for meeting the challenges. Evaluation of Steve Miller’s approach Steve Millar’s approach of making BRL Hardy one of the world’s first truly global wine companies was based on the is based on the focus on three most important aspects of the company i.e. the world class production facilities of the companies, global brands of the company and its international distribution. Millar has the approach of making BRL hardy a true international company through the capability of global branding (Voelpel et al 2005). As the focus of Steve Millar is to establish the brand as truly international and global, integrated wine production is the approach followed that includes global branding strategy with strong marketing capability and distribution system. Strategic alliance is the model applied for executing global strategy of the company. The dynamic nee organizational capabilities are built through targeted strategic alliance building with companies situated in various parts of the world, such as Italy, USA and Spain (Bartlett and Beamish 2011). Critically evaluating the approach of strategic alliance for following the globalization, there are several advantages of this approach. Firstly, the company gets the access to supplementary services. It is important as well as quite critical for the success of the business that the business focuses on the core competencies (Stonehouse et al 2004). A strategic alliance enables the company to offer its clients a range of new services without making the client lose its focus on the capabilities and the specialized services. Secondly, the company gets the opportunity to reach new markets. When a company enters the strategic alliance, it automatically increases the brand awareness in an entirely new market venture which the company could not reach before because of the availability of the limited resources. It allows the business to expand the business and increase the market share (Frynas and Mellahi 2011). Thirdly, there is an increase in the brand awareness. When there is an opportunity to grow the size of the market with the alliance, it also presents an additional opportunity of increasing the brand awareness. One of the most important elements of the success of the business is constant as well as growing brand awareness (Campbell et al 2011). If there is no growth in brand awareness, then there is no growth in the business as well. Without putting extra cost and time, the brand awareness is grown among the wider audience. Fourthly, there is an increase in the number of customers and the clientele as strategic alliance exposes the company to new customer base in the target market (Dewit and Meyer 2010). As in the BRL hardy case, the company experiences huge success as strategic alliances with companies situated in Spain, USA and Italy, etc. has added essential infrastructure, expertise and finance including technological infrastructure. The main objective of the company i.e. global branding with strong distribution and marketing is attained through this approach of strategic alliances followed by Steve Millar (Voelpel et al 2005). Although, there are several benefits of strategic alliance, ye the approach is not away from the disadvantages. The potential challenges in strategic alliance are: firstly, choosing the right partner is a challenge for the company. If a wrong partner is chosen, it can lead to damage to the business of the company if it is not able to contribute to the growth of the business. Secondly, building of a mutually beneficial alliance is important (Deresky 2011). Thirdly, if there is no mutual trust and integrity, then the alliance cannot last longer. As in the case of BRL Hardy, the failure has been seen in the failure of the Mapocho brand project collaborated with Chilean sourcing partner and there has been deteriorating relations between the two partners. Decentralization is another approach followed by Steve Millar for global strategy concerning the management style. The approach enables the local subsidiaries of the company in different markets to take decisions but it holds the management accountable (Friedman 2005). It creates advantages in terms of having adequate management control, but the disadvantage of no allowing the local adaptation of the brand as decisions of labeling, pricing and the marketing are vested to the head quarter’s management (Grant and Jordan 2012). It is recommended that Millar allows more scope for local responsiveness within the global strategy framework. Following the strategy of consistent global branding in wine industry is a risky venture as the consumer needs are dynamic and changes continuously (Bartlett and Beamish 2011). The transnational management is suitable that works on the approach of combined centralized and decentralized organization in order to sell the global brands that constantly adapt to the local needs of consumers and serve different markets with local responsiveness. The wine industry is dependent on sources that are differentiated all over the world so as to guarantee the security that is best possible. The competitive advantage in the global economy lies increasingly on local things that include knowledge, motivation and relationships. In international expansion and strategic alliances, companies have to become insiders in every local market (Lawrence and Beamish 2012). It is important to act locally being global. Within clusters as explained in the Porter’s diamond model, there is existence of strong links with suppliers and customers along-with government agencies, which leads to generation of national competitive advantage. Companies can enter the new market or the location so as to join a new cluster. It requires adaptation to the new market which necessitates local responsiveness to become global in business operations (Porter 1998). The wine industry is fragmented and the habits of wine consumers are in contradiction with global brands. Adapting to the local needs can meet the demands of the customers by reaching them in their local perspective (Voelpel et al 2005). Balance between integration of operations and responsiveness can be attained through national responsiveness, global efficiency and worldwide innovation and learning, which is the result of efficient functional, business and area management. Therefore, it is recommended to follow the global strategy with local responsiveness so as to join clusters of new and different market and attain competitive advantage. Following the global strategy with local responsiveness and considerations can attract large customer base in the wine industry (Stacey 2011). Strategy developed by Carson 3. The strategy developed by Christopher Carson for building and sustaining the competitive advantage of BRL Hardy in the European wine market during the period of 1995-1998 was based on searching of different sourcing partners so as to focus on the strong distribution channels and making the brand known to most of the Europe through not only selling Australian wine, but also other wines from Italy, Spain, and other parts of the world. The strategy of Carson is based on following the strategy of joint ventures for accessing to the supplies of other types of wines from different parts of the world (Voelpel et al 2005). For instance, the European wine industry is highly fragmented and UK, specifically is not the market for global brands, therefore, Carson inherited non Australian product lines through joint ventures and sourcing from different suppliers. This led to achieving economies of scale to the operation of sales and distribution. Exploring of alternative European sources for wine was the part of the strategy of Carson executed under joint venture alliance (Som 2009). The distinctive strengths of the parent company lie in strong distribution system and marketing channels capability. These strengths have been leveraged by Carson through focusing on other non-Australian wine brands that minimize the risk of problems associated with weather problems due to vintage (Porter 1998). The focus of Carson was on distribution to generate sales in the European market for the parent company. The strategy of the company was to become the international wine company that has worldwide access to the product backed by strong marketing capability and channels of distribution. Distribution channels and marketing capability were the strengths of the company which were rightly leveraged by Carson. Joint ventures provided the advantage of gaining new expertise and capacity with access to greater resources (Sitkin and Bowen 2010). BRL Hardy could also access greater resources in terms of other non-Australian wines by sourcing from multiple regions through joint ventures. Companies can exit from non-core businesses through joint ventures. Carson also implemented this strategy through rationalizing and narrowing the product portfolio of the parent company for cost cutting and focusing only on core competencies of the company. However, there are some disadvantages of joint venture. It takes a lot of effort and time for building the right relationship in joint venture (Seitanidi 2010). There is presence of differences regarding management style, assets, investments and expertise, which can result in poor cooperation and integration. It is evident from the joint venture initiated by Carson to source wine from Chilean partner and the project failed (Rugman and Collinson 2009). However, there had been some successful joint ventures in which Carson used the strength of the company in technical expertise so that the farmers could yield a good amount of wine produce with expert technical advice from BRL Hardy and both could be benefited from the venture (Bartlett and Beamish 2011). The distinctive competencies and capabilities at the regional level of European unit can further be developed through repositioning of the branding, labeling and pricing of the products of the company according to the local needs and preferences (Voelpel et al 2005). The European wine industry market is fragmented and there is less scope for a consistent local brand. Implementation of adaptive strategy by the process of re-launching and re-positioning of the products of the company can be the potential and suitable strategy for European unit as major retailers are trying to limit their suppliers, therefore, providing of more variations in the products to retailers can help the company grab more market for the concerned products of wine (Voelpel et al 2005). There are certain drivers for globalization such as economies of scale, factor costs, and economies of scope and liberalization of trade. The distinctive drivers of globalization in each industry are PESTEL factors, competitive factors, resource-based view, and integration of the activities on the world-wide level so as to capitalize on strengths, building of economies of scale and scope (Mintzberg et al 2008). For BRL Hardy, the European market is a good market for establishing the brand of the company. The international expansion has the key variables in the business model which is linked to the global expansion. These include coordination and configuration dimension, integration dimension and standardization dimension. BRL hardy has to focus on these three dimensions for standardizing the offerings, integrating competitive moves across the country with proper coordination (Merchant 2008). Local responsiveness is necessary considering the long-term strategy of the company of being global. The local control regarding the decisions for labeling, branding and pricing can enable the company to establish itself in the fragmented wine industry market of Europe as local adaptation along-with sourcing from multiple regions can help the company to compensate in the shortages of the Australian red wine, if it occurs, with the distribution of alternative sources leverage. Following this strategy can serve the whole European market in an effective manner (Lawrence and Beamish 2012). The transnational growth can be realized through diversifying the suppliers and maximizing the power of the company as a distributor. In addition to this, sourcing from multiple regions can reduce the risk related to markets (Kay 1993). Building of economies of scale is an important factor in the process of globalization. Earlier in 1990s, Carson had initiated cost cutting plans so as to establish strong operations in the UK and other European market. Same strategy can be followed by BRL Hardy for expansion in European market as cost cutting increases the resource capability of the company and it can take better pricing decisions as compared to competitors because it has more control over its resource capabilities due to cost cutting steps in place (Bartlett and Beamish 2011). Following these strategies can enable Carson to take effective steps for creating the fit between the global strategy of the company with regional developments so as to attain the desired growth and development in the European market. Outsourcing 4. There are certain strategic challenges related with outsourcing of the product or techniques. Outsourcing encompasses the functions that are related to the core functions of the company. The suppliers become more integrated into the basic business operations of the company due to which the risk of facing strategic challenges become more evident (Jones 2004). There are six major strategic challenges associated with process of outsourcing. The first challenge is emphasis on simple stuff which ultimately ignores most of the cost base. Secondly, the company can wish to outsource most of its operations except the core competencies; however, the market may not prove to be mature enough in certain specific areas for accommodating the needs of the company (Lasserre 2012) The third challenge is present in the form of insufficient consideration to the full costs of outsourcing. The external supplier initially offer cost advantages that might seem to the company to be quite profitable in regards to the low labor costs, or high rate of utilization (Johnson et al 2011). But later, outsourcing is revealed to be an expensive option for the company. This happened in the case of the BRL hardy when its Mapocho project did not yield required results. Doubts were raised by the outsourcing firm regarding the venture, such as claiming of rising in costs, want of renegotiation of the supply price and so on (Bartlett and Beamish 2011). The fourth challenge for the company in outsourcing is selection of appropriate supplier. The two main reasons for which the company remains dissatisfied with their sourcing partner are the supplier overdependence and the lock-in (House et al 2004). It is a strategic challenge related to implementation. The fifth strategic challenge lies in the inadequate management of the ongoing relationship with the supplier. The execution problems create differences in the relationship leading to failure of clearly setting the levels of service or the appropriate incentives (Hill 2011). It is evident from the BRL hardy case when the company initiated an outsourcing venture with the Chilean supplier. There were certain execution problems and a low level of mutual understanding between the sourcing partners. The Chilean partner held the winemaker sent by BRL Hardy to be responsible for failure of the project as he was unfamiliar with the Chilean wine. On the other hand, the winemaker argued that the Chilean partner did not provide him the quality fruit. It can inferred from the case that lack of proper execution of the outsourcing led to reduced level of understanding between two partners that ultimately affected the results of the sourcing in terms of production (Bartlett and Beamish 2011). The sixth challenge is to change the organization and managing new processes and relationships. Outsourcing is the activity that implies the loss of direct control leading to cultural adjustments for many companies substantially (Henry 2011). Some companies remain overly prescriptive, thus specifying the sourcing partner on how to get the process completed rather than showing reliance on the greater skills and experience of the supplier. Chilean partner blamed the winemaker for understanding the Chilean wine and did not show reliance on skills and technology offered by the wine company (Bartlett and Beamish 2011). The strategic options available for the companies to do away with the challenges associated with outsourcing are as follows: Firstly, the company can negotiate the parameters of the relationship with the sourcing partner related to whether the supplier will act as an independent contractor, a partner in joint venture or as a wholly owned subsidiary (Friedman 2005). The outsourcer and the supplier have to together establish the measures for objectives performance along-with designing of certain incentive schemes so as to encourage innovation (Grant and Jordan 2012). The second strategic option is to make the parameters clear between both the partners so as to make the execution better. The parameters regarding the degree of integration, the extent to which the customer retains the responsibility of management and the comprehensiveness of the arrangement, etc. should be set properly so as to make the company execute well in terms of the partnership and results. There is need to leverage the traditional outsourcing experience so that the mistakes are not repeated and there are no flaws in the decision making or implementation of the product (Dewit and Meyer 2010). The third option is to target the functions that have significant impact on the operations in the business. The decisions regarding which functions to outsource should be made after thorough evaluation of whether the activity that is to be outsourced can be done in the most effective manner with the services of the external provider (Stonehouse et al 2004). Moreover, the supplier has to be chosen with great care. The right supplier is the one who is chosen by thoroughly reviewing the qualifications of the supplier, the track record of the supplier, and the structure of the cost. Along-with this, a full cost benefit analysis can show the impact on the productivity due to the execution of the outsourcing function (Grant and Jordan 2012). Thus, by following any of the above strategic options, the company can effectively do away with the challenges related to outsourcing. Outsourcing is becoming common and is emerging as a good business model for globalization of operations and achieving consistency in the company. There are certain challenges present in the process of outsourcing, such as execution problems, failure in maintaining relationships with the suppliers, etc. (House et al 2004). These challenges or flaws can be effectively solved by the company’s consideration of various strategic options, such as setting up of parameters regarding functioning, setting the type of outsourcing clearly in the very first step whether it has to be a joint venture, independent contracts or a wholly owned subsidiary (Mintzberg et al 2008). With the help of these strategic options, the venture of outsourcing becomes quite easy and the company can do away with the strategic challenges it faces while dealing with the partners in outsourcing. Conclusion BRL Hardy followed the strategy of developing strategic alliances in the form of joint ventures that helped the company attain its objective of becoming a global brand. Strong marketing capabilities and distribution channels are the key strengths of the company. Local responsiveness should be given due importance in global strategy and outsourcing challenges can be met with strategic options available. References Bartlett, C.A. and Beamish, P.W. 2011. Transnational management: text, cases, and readings in cross-broder management. Sixth edition. New York and London: McGraw-Hill/lrwin. Campbell, D., Edgar, D. And Stonehouse, G. 2011. Business Strategy: An introduction.Third edition. Basingstoke: Palgrave. Deresky, H. 2011. International Management: Managing across borders and cultures. Seventh edition.Harlow: Pearson Education. Dewit, B. and Meyer, R. 2010. Strategy Synthesis: Text and readings. Third edition. London: Cengage Learning. Friedman, T. 2005. The World is Flat: A brief history of the globalized world in the 21st century. London: Penguin/ Allen Lane. Frynas, J. G. and Mellahi, K. 2011. Global strategic management. Oxford: oxford university press. Grant, R.M. and Jordan, J. 2012. Foundations of Strategy.Chichester: Wiley. Henry, A.E. 2011. Understanding Strategic Management.Second edition. Oxford: Oxford University Press. Hill, C.W.L. 2011. International Business. Eighth edition. New York and London: McGraw-Hill/Irwin. House, R.J., Hanges, P.J., Javidan, M., Dorfman, P.W. and Gupta, V. 2004. Culture, Leadership and Organizations: The GLOBE study of 62 societies. Thousand Oaks, California: Sage. Johnson, G., Scholes, K. and Whittington, R. 2011. Exploring Strategy: Text and cases. Ninth edition. Harlow: Pearson Education / FT Prentice Hall. Jones, G. 2004. Multinationals and Global Capitalism. Oxford: Oxford University Press. Kay, J. 1993. Foundations of Corporate Success.Oxford: Oxford University Press. Lasserre, P. 2012. Global Strategic Management. Third edition. Basingstoke: Palgrave. Lawrence, J.T. and Beamish, P. (eds.) 2012. Globally Responsible Leadership: Managing according to the UN Global Compact.Los Angeles and London: SAGE. Merchant, H. 2008. Competing in emerging markets: cases and readings. New York and Abingdon: Routledge. Mintzberg, H., Ahlstrand, B. and Lampel, J. 2008. Strategy safari.Second edition. London: Prentice Hall. Porter, M.E. 1998. Cluster and the New Economics of competition. Harvard Business Review, 76(6), 77-90. Rugman, A.M. and Collinson, S. 2009. International business.Fifth edition. Harlow: Pearson Education / Prentice Hall. Seitanidi, M.M. 2010. The politics of partnerships: a critical examination of nonprofit-business partnerships. Heidelberg: Springer. Sitkin, A. and Bowen, N. 2010. International business: challenges and choices. Oxford: Oxford University Press. Som, A. 2009. International management: managing the global corporation. Maidenhead: Mc-Graw-Hill Education. Stacey, R.D. 2011. Strategic Management and Organisational Dynamics: The challenge of complexity (to ways of thinking about organisations). Sixth edition. London: FT/Prentice Hall. Stonehouse, G., Campbell, D., Hamill, J. and Purdie, T. 2004. Global And Transnational Business: Strategy And Management. Chichester: John wiley & sons, ltd. Voelpel, S., Leibold, M., Tekie, E. and Krogh, G.V. 2005. Escaping the Red Queen Effect in Competitive Strategy:Sense-testing Business Models. European Management Journal, 23(1), pp. 37–49. Read More