Steve Millars Approach to the Challenge of Leading BRL Hardy in 1998 - Essay Example

Question one: Steve Millar’s approach to the challenge of leading BRL Hardy in 1998 Introduction Steve Millaris using the best approach in leading BRL Hardy in “becoming one of the world’s first truly global wine companies’. Millar has first of all focused on the home market before focusing on brand introduction in the international market. Millar is critical of regional differences and tastes of wines. During the period prior to 1998, the global wine industry experienced numerous changes including the invention of scientific wine-making practices and production of high quality wines in countries such as South America and United States. The Australian industry was increasingly becoming competitive in the global markets with 27 percent of production being exported (Barlett & Beamish 2011). Steve Millar should continue protecting the share of bulk case business while committing resources to growth of bottled wine. Millar should first of all attain merger efficiencies in terms of scale of production and cost control. Millar is also keen at changing the leadership styles and culture of the new organisation. Barlett & Beamish (2011) assert that a decentralized approach is essential for local responsiveness in the global strategy since the regional management will be accountable for their decisions. For instance, Millar has delegated the small risks while keeping a close watch of the high risk decisions that affect the global strategic business. This is a good approach of global strategy since delegated authority will allow the regional management to challenge the authority and admit mistakes. This leadership approach will facilitate creativity and innovation in the fast changing global wine industry. Millar has ensured adequate delegation of authority and responsibility. For instance, he has appointed Stephen Davis, a seasoned strategic thinker as the group marketing and export manager tasked with establishing the international operations. Davies intended to build on the strengths of the company by proving quality wines and repositioning the superior brands in the global markets. At mass market prices, Nottage Hill and Stamps were essential while at the top end market points, Eileen Hardy brand was important (Barlett & Beamish 2011). The local responsiveness has in the global strategy yielded increasing profits for the company. For instance, Millar is critical in resolving disputes between Carson and Davies on the global strategy. For example, he is of the opinion that Carson should report directly to headquarters on profitability measures and work with Davies on the marketing and labeling issues of the wine brands in UK market since Nottage Hill and Stamps are cash cows for the group company in terms of sales value of Hardy brands. Both Millar and Davies are of the idea that the headquarters should be the global brand owners, but local responsiveness is essential in meeting the local needs of the consumers (Barlett & Beamish 2011). The overseas should be not only responsible for promotional strategies, distribution channels and profitability, but should also take up other important decisions pertaining the labeling and branding. In the global strategy, Millar should ensure that important aspects of the wine brands such as labeling, pricing and branding are controlled by the regional managers through delegated authority. However, he will accept proposals on design from the regional management and ensure common decision making in evaluating the proposals (Barlett & Beamish 2011). On the part of suppliers, Millar should minimize the risks of supplier failure due to bad weather, grape disease and other factors that can negatively affect the quality of grape supplies. Millar should source the grapes from multiple reliable suppliers. The regional managers such as the UK based market should be allowed to select their own suppliers depending the expected product quality and taste. Millar should institute more delegation on the brand production. For instance, Carson initiated a 50/50 joint venture agreement with Jose Canopa whereby Chileans would provide fruits and facilities while BRL Hardy would provide the human expertise for production of the Mapocho brand. Carson also explored alternatives in Europe such as contract with Casa Vinicola Calatrasi in Sicily (Barlett &Beamish 2011). Steve Millar should allow Carson to proceed with his new labeling and packaging that will depict the Mediterranean lifestyle and that would be marketable to the average wine consumer. The D’istinto brand name actually resonates with the Italian lifestyle where the product will be market and distributed. The brand image displays the romantic, warm, relaxed and mass appeal characteristics of the brand. The packaging also allows the distribution staff to collect the opinions of the customers and also prepare a database of target customers for future promotional activities. The idea of the brand is to leverage on the great distribution network in Europe and strong marketing efforts thus leading to global brewing company. Although local responsiveness is essential, Millar should be involved in the Chilean Joint venture negotiations and experts familiar with Chilean grape should be utilized in the production process through resource commitments (Barlett & Beamish 2011). Conclusion I would recommend Steve Millar to allow for more local responsiveness within his global strategy. The regional management such as the UK management is better placed at understanding the needs of the local wine consumers. Steve Millar should create global distribution system but allow for the regional managers to participate in branding and labeling. Steve Millar should consider the differences in lifestyles, consumer behaviors, and tastes across the major markets in the product development decisions. Local responsiveness will ensure wine brands are customized for each target market just like the Mediterranean lifestyle market in Europe that prefers romantic and appealing wine brands. Local responsiveness in the global strategy will decentralize the control thus leading to faster decision making by the regional managers. Steve Millar should ensure localization in production since it will lead to wine brand differentiation, added variety and increased distribution channels such as retailers. I recommend that Millar should ensure more local responsiveness since this will also minimize any losses associated with the exchange rate risks or political risks in some of the major markets. Although several brands may be priced equally, the availability of variety will drive the international expansion and brand recognition. Question 2: Advantages and disadvantages of Australian wine cluster as home base supporting the international expansion of BRL Hardy in the 1990s Introduction There are numerous advantages and disadvantages of Australian wine Cluster as home base supporting the international expansion of BRL Hardy in the 1990s. Although BRL Hardy is capable of sourcing financial resources, information technology, wine brewing techniques and raw materials from the world, it derived several advantages while working as a cluster in Australia while supporting international expansion in 1990s. The Australian wine cluster allowed BRL Hardy to have access to cheap inputs such as grapes from Chile and also viticulture in the South Australia’s Riverland district. The cluster offered BRL Hardy with complementary services such as bottle manufacturing companies and also financial services. An extensive number of related industries existed such as companies producing irrigation and grape harvesting equipments, barrels and labeling companies. BRL Hardy was able to benefit from reliable grape suppliers and numerous wine advertising firms that created numerous linkages and synergies. Another advantage that BRL Hardy derived from the cluster while supporting international expansion is the quality of local business environment. For instance, BRL Hardy experienced high quality transportation network and logistical facilities (Porter 1998). The Australian wine cluster as a home base for supporting international expansion was crucial in promoting cooperation and competition (Hamilton & Webster 2012). Without adequate competition, BRL Hardy would fail in innovation and expansion to international markets. For example, Gallo brand wine brand provide adequate competition thus ensuring that BRL Hardy remained focused on the quality of production (Porter 1998). BRL Hardy enjoyed better coordination and trust due to the proximity of several companies in one location. For instance, BRL hardy could benefit from formal networks, linkages and also partnerships with other complementary industries (Huggins & Izushi 2012). The cluster was able to ensure competition and improvement in the overall productivity of Australian wine industry exports from 2 percent of the global wine production to 3.5 percent of the world export market in 1995. The wine cluster increased the pace of innovation that led to future growth and productivity. Indeed, Australian wine sales were projected to hit 1.7 million tonnes in 2025 that is double from the production in 1990s. BRL Hardy was capable of accessing more information on customer needs, sourcing inputs at cheap prices, and coordinating well with the related companies such as brewing equipment manufacturing companies (Barlett & Beamish 2011) Another advantage of BRL Hardy operating as Australian wine cluster while supporting international expansion in the 1990s was the easy access to qualified workforce and reliable suppliers of raw materials. BRL Hardy could benefit from an existing pool of experienced workforce from corporations such as Southcorp and other largest wine brewing companies in the cluster. The cluster enabled BRL Hardy to reduce costs associated with recruitment and training of employees. The Australian wine cluster also acted as an opportunity for employees thus creating switching costs for talented employees and making it easier for BRL Hardy to attract expatriates from other continents such as Europe and United Kingdom. BRL Hardy benefited from an efficient method of obtaining wine brewing supplies. The grape supplier base in Australia led to reduction in transaction costs and elimination of any importation delays and also reneging of contract commitments by the raw material suppliers. Additionally, the proximity to suppliers such as agricultural machinery supplying companies in Riverland provided BRL Hardy with support services from the complementary industries such as installation of the equipments and staff training (Peng 2008). Another advantage of BRL Hardy working as a cluster while supporting international expansion was easy access to specialized information. BRL Hardy had proximity to extensive market information, technical and competitive information (Huggins & Izushi 2012). For instance, it could easily gain information on market trends from the Australian wine brewing association. BRL Hardy also benefited from the superior reputation of Australia as a prime source of global quality wine. The company could also enjoy joint marketing mechanisms such as customer referrals from business partners like the suppliers, trade magazines, and trade fairs (Porter 1998). However, there are several disadvantages of Australian wine cluster as a home base supporting the international expansion of BRL Hardy in the 1990s. For instance, the cluster could suffer from Groupthink that leads to rigidities. In such circumstances, it would be difficult for BRL Hardy to embrace new wine brewing practices and innovation (Porter 1998). The cluster could further increase if the Australian government intervened in the wine brewing business to curtail market competition. BRL Hardy could also suffer low market share if the companies in the cluster such as Southcorp Corporation maintained the old fashioned non-competitive behaviours in the industry (Simmie & Sennett 1999). Another possible disadvantage of BRL Hardy working in operating as Australian wine cluster while supporting international experience is the congestion and stiff competition in the output markets. For instance, BRL Hardy might have experienced harsh competition in the Australian market due to the proliferation of other small wine making companies. The Australian wine cluster could also disadvantage BRL Hardy in the competition of input resources such as raw materials and labour. Clusters mainly benefit the well established big companies with the ability to attract and retain key resources like talented workforce and long term supplier commitments (Karlsson 2008). Focusing on the Australian wine cluster while supporting international expansion could also disadvantage BRL Hardy in its marketing and distribution efforts. BRL Hardy could be disadvantaged in understanding the needs of the global market and the appropriate distribution channels. The final disadvantage include is an inability to understand the changing customer wine preferences and tastes in the foreign markets and their needs in terms of product labeling, branding and pricing (Piperopoulos 2011). Conclusion Some of the module concepts and frameworks that are useful in my analysis include the economies of scale derived by the clusters. Another useful concept is the cooperation and competition that occurs naturally within a cluster. The proximity to complementary industries such as advertising industries and suppliers will also reduce the transaction costs of operations. Another useful framework is the localization of economies within a cluster such as the creation of a pool of talented workforce and public infrastructure investments such as transportation systems. Another useful concept that I found important is the need of innovation in the wine industry and close working relationships with suppliers. The branding, labeling and distribution channels are essential in creating a competitive edge in the global wine industry. For instance, majority of wine customers will only remain loyal to high quality wine brands and switch to another brand if they perceive it to be more quality that the previous brand. Labeling and pricing are also important in the global wine industry since they influence the brand recognition and loyalty. Question 3: strategic challenges involved in outsourcing and alternative options of meeting the challenges Introduction Outsourcing can be a highly strategic alternative for business environment; however, there are numerous challenges that are associated with outsourcing. One of the leading challenges of outsourcing is supplier performance and compliance with the outsourcing contract. In order to ensure compliance, considerable efforts should be committed to the planning, selection, and contracting phases of the contract. This challenge is further complicated by unclear outlining of both supplier roles and the company roles in the contract. An example is the outsourcing contract with Casa Vinicola Calatrasi, a winery in Silily for the development of branded wines. In this case, the supplier obligations are not clear on the quantity and quality of grapes that Chilean farmers are expected to supply and also the price of the outsourcing contract (Harrigan 2003). Another challenge with outsourcing is lack of commitment from the management of the company receiving the services. Lack of buy-in from the top management of BRL Hardy led to outsourcing challenges with Chilean co-operatives. The senior management of BRL Hardy did not participate in the outsourcing evaluation. Another challenge of outsourcing is the poor mutual understanding of the outsourcing contract by both parties. For instance, the service provider staff or the client staff may be emotional or the outsourcing decision or may lack common understanding on the services that should be provided under the outsourcing contract (Harrigan 2003). Another challenge that is common in outsourcing contracts is lose of expertise when the client team is not included in the outsourcing processes and contract performance processes. Outsourcing is also associated with limited or lack of knowledge transfer. This practice usually creates uncertainty on the future employability prospects of the current employees (Harrigan 2003). This uncertainty may lead to high employee turnover and lack of morale in their work activities thus leading to decline in work efficiency and productivity. For instance, the outsourcing contracts will limit the ability of BRL Hardy to attain employee expertise in viticulture and operation of the wine brewing equipments (Tallman 2009). Just like in the case of BRL Hardy, outsourcing suffers from the inability to meet pent-up demand for products. For instance, BRL Hardy has to wait for the Chilean co-operatives to grow and harvest the fruits before the company can begin the wine brewing process. Scheduling the outsourcing contract performance timelines may be difficult thus leading to shortages or delays in wine production. According to McDonald & Burton (2002), outsourcing has the likelihood of supplier failure. The client should conduct due diligence on the potential of the service provider fulfilling the requirements of the contract adequately. Another mitigating factor to outsourcing failure is sourcing from different vendors in order to minimize losses of vendor failure. For instance, in the mapocho project, the Chilean company made other several commitments and wanted to renegotiate the contract before allowing BRL Hardy to pick the 1997 harvest. The wine maker also complained about the quality of the quality of the fruits. For instance, Carson has focused all his efforts on the terms and conditions of the outsourcing contract, but has paid little attention on the actual pricing or any other post-contract issues such as the escalation of the cost of fruit production or bad weather. Outsourcing can have long term impacts on the business processes, the final product quality and reputation of the company. Another challenge is lack of adequate skills by the client staff that is retained on the outsourcing contract. For instance, the Chileans claimed that BRL Hardy’s wine maker from London had little knowledge on the Chilean wine making process. This could be true since Chilean fruit quality may be also different from London fruits thus necessitating a change in ingredients in wine making process (Tallman 2009). The last challenge associated with outsourcing is a culture clash between the client and service providers. For instance, corporate culture will influence the decision making urgency and speed of fulfillment of the contract. Another element of cultural clash is the distrust and poor working relationship between the client and service provider. For instance, Chilean co-operatives are not fully committed to the joint venture and their corporate culture does not embrace quality. In order to meet these challenges, there are alternative options that BRL Hardy can utilize. Firstly, the company can use multiple and reliable suppliers of the grapes. This will reduce the possibility of losses due to bad weather or failure by one of the suppliers. Another measure that BRL Hardy can implement is contract manufacturing in order to avoid the challenges associated with outsourcing of raw materials. In this case, the company will approach as reputable winery that will be tasked with production of the wine and at already pre-agreed price. BRL Hardy should ensure that its employees are involved in the farming phase of the grape in order to facilitate knowledge acquisition. BRL Hardy should also ensure the commitment of all the senior management to the contract and proper documentation of the contract terms and conditions, including the post-contract issues. The company should conduct due diligence on the ability of the vendors in delivering the raw materials reliably and ability to meet the pent-up demand (Greaver 1999). In order to avoid a cultural clash, BRL Hardy should ensure close working relationships and trust are maintained with suppliers. For instance, the outsourcing contract should have an amicable dispute resolution mechanism. Conclusion Since BRL Hardy is interested in maintaining the quality of wine products, outsourcing challenges may lead to poor quality and also loss in market share. Some challenges of outsourcing include service provider failure or reneging of the contract. Cultural clash and lose of confidentiality of the intellectual property right may also be a challenge. The supplier may not meet the pent-up demand due to the time taken before the delivery of the raw material. Again, outsourcing will limit knowledge acquisition and transfer in the organisation. For instance, BRL Hardy is likely to experience high employee turnover due to uncertainty of employees on the future of their jobs in the company. BRL Hardy can manage the challenges associated with outsourcing through implementing contract manufacturing or even using multiple suppliers. References: Barlett, C.A & Beamish, P.W. (2011) Transnational management: text cases, and reading in cross-border management. 6th edn. New York: McGraw-Hill. (Available http://books.google.co.ke/books?id=2wN- PwAACAAJ&dq=Transnational+management:+text+cases,+and+reading+in+%09cross- border+management.&hl=sw&sa=X&ei=uh7vULGoC9O3hAe384D4Dg&ved=0CCoQ6 AEwAA. Greaver, M. 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(Available: http://ner.sagepub.com/content/170/1/87.abstract. Tallman, S. (2009) Global strategy: global dimensions of strategy. West Sussex: John Wiley & sons. (Available: http://books.google.co.ke/books?id=lB7U7VrC6fEC&pg=PT3&lpg=PT3&dq=Tallman,+S.+%282009%29+Global+strategy:+global+dimensions+of+strategy.&source=bl&ots=8UI9XveikH&sig=dOgV8NWy5hCqH7OpnCysIK12QT4&hl=sw&sa=X&ei=kSXvUJjTG8SChQfE0IHoBQ&ved=0CG0Q6AEwCQ. Read More