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Strategic Management: Individual Report on Horizontal Integration on Coporate Strategy at Grand Metropolitan - Essay Example

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THE GRAND METROPLITAN The history of Grand Met is full of mergers and acquisitions. Throughout its course of operations, Grand Met has expanded by conglomerate mergers throughout the United Kingdom and the United States. From hotels to betting business and from catering to tobacco and brewing business, Grand Met marks its presence in different businesses…
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Strategic Management: Individual Report on Horizontal Integration on Coporate Strategy at Grand Metropolitan
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Download file to see previous pages The company’s initial success can be owed to its original owner Max Joseph’s experience in the real estate business. This is one of the major strengths of Grand Met which lead to many acquisitions under the supervision and leadership of Max Joseph. Grand Metropolitan is currently known as Diageo plc which was formed after a merger with Guinness, another business leader in the industry of alcohol and beverages. Diageo plc’s span of operations spreads across the globe in 80 countries and has a strong portfolio of brands such as: Smirnoff vodka, Bailey’s Irish Cream liqueur, Johnnie Walker Scotch whisky etc (Aaker, 1992; Blackmur, 1990; Helpman, 1983). STRENGTHS AND WEAKNESSES OF GRAND MET’S STRATEGIES Another one of Grand Met’s strengths was its sound cash flow. Grand Metropolitan’s strategy of expansion was to finance its acquisitions via debts. ...
However, in the long-run, the company almost faced bankruptcy. In the 1970s, Grand Met acquired Watney Mann, another brewery relying once again on heavy loans. This put a lot of pressure on the company’s financial standing to the extent that it had to generate enormous trading profits in order to survive as the cost of borrowing and servicing its debts had become cumbersome. Alternatively, Grand Met should not have been this aggressive in expanding and must not have relied on external debts but rather, play more safely by strengthening itself internally. Coupled with the recession in the economy of the UK in the 1970s property values had gone down and hence, the company’s balance sheets inevitably showed weaker assets. Had been the company internally strong and had not rushed into expanding its operations across gambling, catering and restaurant businesses, it could not have lost so much money by servicing its debts. Besides this, amongst many acquisitions, only IDV was the one which stood out. Max did prefer decentralization but this lacked vision for Grand Met and rather, the company made many irrational investments in acquiring businesses which were later sold out so as not to continue losing money (Aaker, 1992; Helpman, 1983; Reader, 1988; Nupponen, 1995). The opportunity of un-catered markets was noticed by Grand Met as it expanded in the United States. Once again, the company chose Forward Vertical Integration with a mixture of diversification. Grand Met’s subsidiary IDV’s distributor (Paddington) in the United States was acquired however, the acquisition also lead to taking over of Paddington’s parent company Liggett which was in cigarette manufacturing along with other diverse businesses of soft drinks, bottling, dogs food and ...Download file to see next pagesRead More
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