Diageo Business Performance - Case Study Example

1.0 Introduction Diageo Plc was a company formed centuries ago. It roots can be traced in the eighteenth century. Since then, the Company has grown to become one of the most influential alcoholic manufacturers in the world. The business produces beers and spirits such as gins, vodkas and scotch. It is located in the United Kingdom and boasts of over twenty two thousand employees situated throughout the world. Besides this, it made close to 7.5 billion in sales during the year 2007. (Wright, 2008) 2.0 Company information 2.1Company history The Company began way backing the eighteenth Century. At that time (eighteenth century), it was identified mostly with spirit brands like Justerini, Malts of Scotland such as Talisker, Glenkinchie and Lagavulin. In the nineteenth century, the company introduced Johnnie Walker; one of the most popular whiskies to date. In that same century, there was introduction of Smirnoff and subsequently Bailey's. In the twentieth century, the company started getting associated with Captain Morgan rum and eventually adopted it. Ever since, the company has been characterized by numerous innovations and introductions of new alcoholic drinks the world over. 2.2 Products The Company has produced a number of beer brands that include Guinness stout. Other spirit brands that have been known all over the world include Bailey's Irish Cream Johnnie walker Smirnoff JK&B Scotch Whisky Crown Royal Canadian Whisky Windsor Premier whisky Jose Cuervo tequila etc Captain Morgan Rum (Wright, 2008) 2.2 Industry analysis The Diageo Plc Company falls under the food and beverages industry in general and in the distillers sub industry. Therefore all the factors affecting the company will be examined in against the backdrop of this industry. The industry analysis will be done through SWOT and PEST analysis. The former type of analysis is instrumental in identification of the internal and external factors affecting a given company. It is also crucial in identification of the factors impending growth of a particular company. PEST analysis is more useful in determination of the external environment. (United Nations, 2001) 2.21SWOT Strength Strong brand names Large markets all over the world Good quality beer Customer care Technology Weaknesses Innovation has not reached full potential Employee motivation and involvement Opportunities Expansion into Asian markets Threats New products from the global markets Government regulations in the alcoholic industry 2.211 Strengths The most outstanding feature about Diageo Plc is its brands. Some of the brands it offers have been around for centuries. This implies that the company has been able to secure brand loyalty. These include Smirnoff, Johnnie Walker and Bailey's. On top of this, the distiller has a huge size with branches all over the world. The advantage of such a large size is that the company can appeal to numerous market segments. Besides this, it can make up for weaknesses in one area with strengths in another country. (Hill, 2005) The Company also has confidence in the fact that it produces good quality beer. This means that sometimes the product 'sells itself' so to speak. It can also pride itself in the fact that it delivers lots of products in an efficient and fast manner. Actually most bars and pubs in the United Kingdom heavily rely on supplies from the company. Such an arrangement is only possible if the supplier has established a name for itself. This is definitely the case with Diageo. Another source of strength is the fact that the company promptly caters for its clients through efficient customer care. Responses to customer requirements and needs are done promptly and most of the time this is achieved through cooperation with the marketing and sales team. The Company has been at the frontline in employment of technological advancements in its production processes. For example, some of its distilleries are up to date in order to speed up the rte of production. On top of this, it is continuously introducing latest bottling technologies. It marketing processes have also been streamlined through the introduction of internet marketing. 2.212Weaknesses Because the company is located in different countries around the world, some of the branches have not been effective in the implementation of company policies and procedures. This implies that the company has not been as successful in certain countries as it is in some. The company has not achieved its full potential in the product innovation sections. There is plenty of room for improvement and it has not yet it has not embraced it yet. The Company's employee motivation skills are also wanting. The alcoholic producer does not fully involve its employees in the process of making its company objectives. On top of this, the method adopted by the company to motivate their client is not quite good. The company does not give good bonuses and other forms of encouragement. 2.213 Opportunities The company should concentrate on the Asian market. This is because the economy is quite promising in those areas. The consumer markets are expanding rapidly in India and China. There are other continents in the world that need to be embraced fully. Following the fact that some of their brands are distributed there, the company should intensify its marketing campaigns there. (Gerald, 2004) 2.214 Threats The Company is facing tiff competition from other beer and distilling companies in the United Kingdom. This is a very competitive arena and the Company needs to stay on top of their game in order to stay ahead. The Company has tried to do this through mergers and numerous acquisitions in the past. This has also been countered through the employment of technological advancements. This is something that will help the company become better. The world is becoming increasingly global. This implies that the company needs to watch out for competition from both internal and international markets. There are numerous market forces that also come with the introduction of international markets especially because the company itself is an international one. It has to be careful about government policies that will favor more investments. There also other subsidies that may discourage the introduction of their products. This is especially because alcoholic products have been discouraged by a lot of countries through the imposition of tariffs and other regulations. This is something that could reduce the company's profitability if it does not improve soon. (Le Corre, 2005) 2.22 PEST analysis Political Inflation rates Investor friendly countries Economic Purchasing power Economic growth and GDP Social Drinking culture is widespread Well educated and informed clients Technological Embrace internet marketing Procurement and supply management through the internet Technology in production 2.221 Political The company has to tackle inflation rates and market stability in all the countries it has chosen to invest in. There are certain countries that are generally not investor friendly. There policies and regulation impede their development. Diageo needs to watch out for these particular characteristics in specific countries and avoid them all together. 2.222 Economic The United Kingdom's economy is doing very well currently. This means that consumers have greater purchasing power. They can afford to engage in social arrangements where they consume a range of alcoholic drinks that will include those ones coming from Diageo. However, these same factors can turn against the company when considering other regions of the world. Certain markets may look upon Diageo products as expensive ones and too sophisticated for their taste. This could deter their sales in some of these countries. Such countries are normally characterized by low GDP and poor economies. 2.223 Social In the United Kingdom; where most of the company's products are sold, most consumers are well educated. They know what they want in their alcoholic products and therefore this must be incorporated into the way the company deals with their marketing. They must use all the avenues available to them to influence such an informed market. (Horbach, 2005) The culture of drinking alcohol is something that is spread world over. This is a huge advantage to the company because they are not restricted. They can exploit as many outlets as they can. 2.224 Technological The internet has changed the way marketing is conducted by most of companies especially in the retail sector. Diageo can use this to their advantage through the introduction of feedback systems in their company website. This could serve as a rich source of information for them about their consumer's preferences. Besides, they have already started securing some procurement though the internet. On top of this, it is now possible to manage supplies and procurement through the internet. This could be a fast and efficient way for the company to improve its supplies. Lastly, the distilling industry is always susceptible to new technological advancements in production. This is something the company needs to incorporate and deal with adequately. 3.0 Recommendations for change First of all the company could introduce other products into the market that have not been associated with it. It could venture into the energy drinks segment. This market has shown a lot of promise and can attract clients who want nothing to do with alcohol. (Goldman, 2000) Besides this, the company should try to include certain additional features onto its spirits in order to add value to them. For example, it could offer bonus spirit cases for every consumer who purchases a certain brand of theirs that has not been selling very well. In addition to this, the company could try to include some accessories such as corkscrews and foil cutters with its slow moving spirits to attract clients there. Alternatively Diageo could merge with certain glass making companies so as to have more control in the production section. This could mean that the company will be able to have more influence in the marled and will also reduce costs of raw materials. Smother suggestion that Diageo could adopt is the creation of a product that has fairly different flavors. It is a common feature to find most spirit drinkers mixing soda with the alcoholic drink. Diageo could try creating a product that is a blend of say a whisky and a soda or a gin and another soft drink. However, this means that the company should go into an arrangement with one well know oft drink maker like Coca cola. 4.0 Conclusion Diageo Plc is undoubtedly one of the most successful distilling companies in the world. This is deduced form the fact that its products have been sold all over the world. However, the company has some challenges it needs to watch out for like exploiting more of its potential and including more technology in production. If it can introduce some of the products above, then it will solidify its market position and remain on top. (Geuna, 2003) Reference: Geuna, A. (2003); Syngenta's Approach on Science and innovation: rethinking the rationales for funding and governance, Cheltenham, UK: Edward Elgar Goldman, C. (2000); Paying for Research Facilities and Administration, Santa Monica, CA: RAND, Science and Technology Policy Institute. Horbach, J. (2005); Indicator systems for sustainable innovation, Heidelberg: Physica-Verlag Le Corre, A. (2005); The innovation game: a new approach to innovation management and R&D, New York: Springer Gerald, L. (2004); The measurement of scientific and technological activities: proposed guidelines for collection and interpreting technological innovation data, Oslo manual, Paris: OECD, Hill C. (2005); Global business today, 4th Ed. New York: McGraw/Irwin United Nations (2001); Global impact: corporate leadership in the world economy, United Nations office, New York Wright (2008): Diageo Plc -Company Profile, retrieved from https://wrightreports.ecnext.com/ accessed on 9th April 2008 Read More