Diageo Marketing Strategy

Diageo Marketing StrategyIntroductionDiageo began as a world leader in branded foods and drinks, formed in December 1997 by dint of a merger of Guinness PLC and alcoholic drink and Grand Metropolitan plc (The Gale Group Inc, 2006). In 2000 2002, a strategic decision by Diageo was made to exit the c in aller-outs food interests by divesting its food companies and exclusively focusing on premium alcohol. A detailed history of Diageo plc up to and immediately after its creation is set out in Figure Our Business Diageo History Family TreeDiageo is currently the worlds largest drinks gild by volume, net sales and operating profit (Diageo PLC, 2012) with a large collection of brands which include spirits, beer and wine. There are currently 14 brands which Diageo identifies as global priority brands. These areJohnnie Walker whiskySmirnoff vodkaCrown Royal whiskyCiroc vodkaJB whiskyKetel iodin vodkaWindsormaitre dhotel Morgan rumBuchanans whiskeyJose Cuervo tequilaBushmills whiskeyTa nqueray ginGuiness stoutBaileys liqueur(Diageo PLC, 2008)Diageos Current Business StrategiesDiageo owns seven of the worlds top 20 spirits brands. Diageos beer brands include the nevertheless global stout brand, Guinness, and together these beer brands account for approximately 20% of net sales while Diageos wine brands represent approximately 5% of Diageos net sales. This delegacy that Diageos size provides for scale efficiencies in fruit, selling and marketing. This enables cost efficiencies and the dissemination of best pract sparklers in business operations across markets and brands tolerateing Diageo to serve its customers and consumers better.From 2005 to the end of financial twelvemonth 2011 (ending 30 June 2011), Diageo managed its operations by quadruple regions Europe, North America, International and Asia Pacific. In financial year 2012 (FY 2012) the International region was split into Africa and Latin America sections, producing louver geographical regions globally . This general twist brought about life-threatening results. Analysis of Diageos annual reports from 2007 to 2012 shows that gross sales rose from 9,704,000 to 14,594,000, an annual average increase of 7%. due to the level of continued change in global markets and the requisite innovation necessary, it has Diageo completed an operating review in 2011 which recommended changes in structure and focus, and this resulted in a net movement of personnel from developed market regions to emerging market regions. The changes are expected to be fully implemented by 30 June 2013 (Diageo PLC, 2011) (Diageo PLC, 2012) . This restructuring should al deplorable Diageo to improve its effectiveness and the productivity of its operations and to position resources nearer to the market and to the geographical regions where at that place is a great potential for gain.Read through and brand the different strategies under headings .i.e. Business strategy- Generic strategies (Diageo commits focused and differentiation) and Interactive strategies. Put everything under headingsCompetitive Strategies(Johnson, Whittington, Scholes, 2011, p. 199) define competitive strategy as being concern with how a strategic business unit achieves competitive reinforcement in its domain of activity. Therefore a strategic Business Unit (SBU) creates competitive advantage when it creates value for its users where the cost effectiveness of plying it is superior to that of rival SBUs. (Johnson, Whittington, Scholes, 2011) further add that Porter defines three generic strategies which create competitive advantage for a company are differentiation, cost leadership and focus strategies.This report has seen that Diageo uses some(prenominal) Focused and Differentiation strategies when pushing its products to its target market. This is because Diageo focuses on premium liquor that is targeted to a ill-tempered market. Tools advertising (localisation), vertical integration, premiumisation, season al pricing strategy, primary-mover advantage, employee training SABMiller. Diageos strategy is to drive top line growth and margin improvement in a sustainable and trusty panache, to deliver consistent value creation for shareholders over the great term. It bequeath do this through its geographic breadth, its outstanding brands across swallow alcohol categories and the expertness of its people. (Diageo PLC, 2012).Production and provideDiageos supply organization is responsible for producing, distilling, brewing, bottling, packaging and distri aloneing its brands. It is committed to efficient, sustainable production. Diageo has created a competitive advantage in both its cost base and in the first family unit customer service it delivers. Investment in production facilities is focused on building capacity for the production of scotch, beer and rum, with both high speed and high volume, cost efficient production lines and with flexible production facilities to create an indus try leading supply chain for innovation, curiously in luxury products. The business recognizes that it operates in a world where natural resources are limited. Diageo has set itself challenging environmental targets covering water efficiency increase use of sustainable packaging and reduction in pollution, carbon emissions and waste-to landfill (Diageo PLC, 2012).Differentiation strategyProductsFor a company to use this strategy it should prove unique products for which their customers will be prepared to pay a premium price. This is seen in Diageos recent launches which focused on the consumers wish for luxury, the hears and increasing affluence of the emerging middle class consumer which ultimately increased the accessibility of spirits through flavor extensions and packaging and drink formats (Diageo PLC, 2012). Premiumisation jubilee scotch innovation around RTD products, adult progressive drinks.Customer care and retentivenessWhen it comes to customer care and sale of its pr oducts, Diageo works in collaboration with its customers to drive profitable category growth, by building partnerships with retailers and on-premise customers. The Diageo Way of Selling program equips both Diageo and its customers with the as well asls to be the best sales force in the industry and to create commercial and strategic value for all parties. The European Customer Collaboration midsection provides a state of the art facility to bring consumer, shopper, retailer and distributor insights together to facilitate integrated planning with customers. These tools enable Diageo to realize its ambition to stimulate an indispensable business partner to its customers (Diageo PLC, 2012). This means that when the customers go to buy their products its a fulfilling experience and they get all their questions or suggestions met and this works well with Diageo as they use this as feedback.Environmental and socially responsibleDiageo being the socially and environmental responsible co mpany, it has a history of being a sustainable and responsible company dating from Arthur Guinness who was responsible for philanthropic residential district programs and through the 1930s when its predecessor companies marketed their brands in a responsible manner. Diageo understands the social, environmental and economic impact of its activities and has adopted a structured approach to manage these impacts, to build engagement across stakeholders, to create value, especially in emerging markets and to protect Diageos license to operate (Diageo PLC, 2012).Balance of alcohol in the community(Diageo PLC, 2012) states that the company is not all about profits and losses, it ensures that even the employees are proud of the responsible manner in which its brands are marketed and the situation that moderate consumption of its brands can play as part of the balanced lifestyle for millions of people. Diageo seeks to be at the forefront of industry efforts to promote responsible insobrie ty and works with key stakeholders to combat alcohol misuse.Eco-friendly technologyDiageos production squads have created award winning technologies to meet these targets with the aim of reducing Diageos environmental footprint, delivering business efficiencies and securing supply into the future. Diageo is committed to generating prosperity in the communities in which it operates, especially in the emerging markets by integrating its supply chain into the local community and via direct community initiatives such(prenominal) as Learning for Life and Water of Life (Diageo PLC, 2012). outgrowth of the workforceDiageo believes that industry leading performance will be delivered through a talented and diverse workforce and great leadership. The company has active programs that ensure the development of its management and leaders. Great leadership combined with a culture of good governance and ethics protects Diageos reputation and supports the sustainable efficient growth of the busine ss (Diageo PLC, 2012).Focus Strategy(Johnson, Whittington, Scholes, 2011) state that focus strategy focuses on a particular atom of market and modifies its products and services to fulfill the needs of that exact divide while excluding others. In terms of relationships with distributors and suppliers Diageo has strong routes to market which leverage local expertise. In the United States Diageo is required by law to operate via a three-tier distribution system which separates suppliers, distributors and retailers.Diageo works with distributors who provide a substantial dedicated sales team of over 2,900 people. Outside of the United States Diageo owns and controls the route to market in many markets, and where Diageo has not established its own subsidiary, the route to market is through joint ventures, associates and triplet party distributors (Diageo PLC, 2012). This kind of command on distributorship and supply is why Diageo is known for its quality products and this ensures cu stomers get what they pay for.The Strategy processIntended Strategy DevelopmentStrategic Leadership the role of vision and commandIn 2000, the new-madely appointed CEO of Diageo, Paul Walsh, embarked on a strategic review of all operations and was determined to recreate Diageo as the worlds leading premium drinks business (Davidson, 2004). By selling off the companys food concerns and concentrating on the marketing and innovation of its union premium drinks brands, Paul Walsh refocused and reenergized the company (Encyclopedia of Business, 2012). Walshs leadership gravitates towards the visionary style since it more(prenominal) closely follows one that motivates others, helps create the shared beliefs, and shapes more detailed strategy (Johnson, Whittington, Scholes, 2011, p. 400).Strategic PlanningFour key pillars of the formulated strategic plans can be identified asPromotion of the global strategic brandsVertical integration apostrophize reductionAcquisitions, mergers and div estmentsExploring new territoriesPromotion of global strategic brandsStrategic brands (formerly global priority brands) have always been a key pillar of its strategy. In 2007 there were eight of theseJohnnie Walker whiskySmirnoff vodkaJB whisky superior Morgan rumTanqueray ginJose Cuervo tequilaGuiness stoutBaileys liqueur(Diageo PLC, 2007)These are brands which Diageo considers to have the greatest current and future wage potential (Diageo PLC, 2007, p. 9). By 2012 the number of brands in this category had risen to 14 as set out in Table .Although the company was structured into four distinct geographical regions, the global priority brands took precedence over the regional divisions. ref Since the eight brands constituted the lions share of earnings, it was considered important to manage these products at the highest level. outgrowth strategy and promotion was engineered at the corporate level. However that did not mean that regional business units were spoon-fed material from corporate level. There was a great recognise of localisation in promoting these products. An example of a major long-running campaign which has been progressively adapted to different regions is the Walk with Giants campaign which in FY 2012 featured the respected long distance Olympic champion Haile Gebrselassie in an Africa campaign.Vertical integrationDiageo has taken considerable control of the supply chain, being involved in developing, brewing, distilling, bottling, packaging, distributing, and marketing. It has physical place which covers the previously listed activities as well as specialised functions such as malting, packaging plants, vineyards, maturation warehouses, cooperages, distribution warehouses, and bottle manufacturers (Diageo PLC, 2007). In Kenya the process goes as faraway as involvement in the growing of input cereals to brewing ref. In the USA, total vertical integration is moderated by law, which states that there should be three levels of supply manufac turing, distribution and retail. In that market therefore, Diageo works to identify solid partners in distribution, usually only when one partner per state.Acquisitions, mergers and divestmentsStrategic acquisition and sale of unfocussed business units was in Diageos business genes, as it was formed from a succession of such moves. It has continued to be a key part of its growth. Since 2000 the organic growth of thExploring new territoriesAlthough Diageo had possession of many of the worlds strongest liquor brands, and could have been satisfied with continuing to depend on this cash cow business, it has as a company been quite adventurous and curious in enacting a deliberate policy of exploring emerging markets. Part of Diageos growth strategy includes expanding its business in certain countries where consumer disbursement in general, and spending on Diageos products in particular, has not historically been as great but where there are prospects for growth (Diageo PLC, 2007, p. 17 ). This arm of the business was only delivering 20% of the revenue in 2007, despite representing considerable complexity in management. Emerging markets can be difficult to manage due to the relatively low purchasing power, poor infrastructure, and traditional local involvement in distribution channels. However this persistence has clearly paid off for the company. From a small but hopeful difference in growth compared to developed country markets in 2007, the emerging markets have increased in strength and importance, until in 2012 they represented 40% of revenue, which is expected to reach 50% by .Diageos strategy is to drive top line growth and margin improvement in a sustainable and responsible way, to deliver consistent value creation for shareholders over the long term. It will do this through its geographic breadth, its outstanding brands across beverage alcohol categories and the expertise of its people. (Diageo PLC, 2012)Emergent Strategy DevelopmentLogical incrementalismPE STEL reactionsAdvertising in US about spirits on TV product changeLevels of distribution.2008 credit travail emerging market growth smarter at localised promotion? Diageo hiding behind EABL my country my beer.Managing Strategy Developmentfigure with the five regions and amended brand strategyReconfigured structure concentrating more on emerging markets.Overall growth highlighted graph showing growth.Evaluation of Innovation and Entrepreneurship PracticesDiageo is always innovative and this is in its strategies all through the company. completely the stakeholders know what is expected of them and there is always something new that Diageo is coming up with. Below are some of the new ideas that have been rocking DiageoInnovation unlocks growth in developed markets. In Ireland, for example, we have introduced new dispense technology to bring perfect cocktails to bars which do not usually serve cocktails. Smirnoff Mojito is available in over 600 Irish outlets which are now sellin g a total of nearly 40,000 cocktails a week (Diageo, 2012).Diageo entered the Indian made foreign liquor segment (IMFL) with the launch of Rowsons Reserve, a premium IMFL whisky. It is a go bad of selected premium Indian whiskies and reserve stocks of the finest aged Scotch whisky matured in American oak casks that are mellowed to give a rich smooth finish. It has a well-rounded and balance flavour profile, with a soft, lingering aftertaste. Its distinctly superior smooth-spoken and premium packaging allows it to stand out as a premium offering (Diageo, 2012).Smirnoff, the worlds number one vodka, revealed an exciting new flavour rendering, exclusive to jaunt retail. Smirnoff Gold Collection with the luxury of gold in every drop is unique, cinnamon spiced vodka. Gold cues feature prominently in all executions and the gold etch bottle itself showcases a flurry of real, edible gold leaf flakes, magically suspended in this truly indulgent vodka (Diageo, 2012).Guinness Black Lag er has the refreshing taste of lager, but all the character of Guinness which consumers love. We take immense pride in the quality of our product and ensured that we built on the Guinness legacy. The refreshing taste is locked in by the bespoke amber Guinness bottle. The contemporary packaging design combines premium, detailed silver and blue colour with hallmark symbols of Guinness brewing provenance and heritage (Diageo, 2012).This March motto the launch of Orijin, the latest drinks innovation from Guinness Cameroon. Perfect for all social occasions, this authentic ready to drink alcoholic beverage ,an alternative to beer, is made from a blend of traditional African herbs such as kola nuts, ginger and cloves, and sweet tropical fruits, giving it a refined, bitter-sweet and uplifting taste (Diageo, 2012).We need to offer more choices to female consumers. In Kenya, we launched Snapp. Women there told us they didnt like drinking beer, particularly in the on trade because both the pa ckaging and the liquid were viewed as too masculine. Snapp is a premium, crisp apple tasting drink that provides women with a more stylish and sophisticated alternative to beer (Diageo, 2012).As a darker, spiced rum from Captain Morgan, Captain Morgan Black Spiced expands the brands footprint into the bolder, more masculine whiskey occasion. The brand honors the legend of the real Captain Morgan, whose spirit is said to still roam the waters of the Caribbean today. Captain Morgan Black Spiced Rum is best enjoyed on the rocks, but is also delicious as the key ingredient in edgy, new twists on classic cocktails, such as Henry Morgans Old Fashioned (Diageo, 2012).The new frozen Ready to Serve pouch format from Parrot Bay offers consumers an easy and affordable way to enjoy the drinks they love. Parrot Bay frozen tropical drinks are your favourite tropical drinks perfectly mixed every time, available in Pia Colada, Strawberry Daiquiri, and Mango Daiquiri. Just freeze, squeeze and enjoy (Diageo, 2012).Offering a credible, exciting new alternative to beer for British males, Jeremiah Weed Brews is a range of deuce products Mash and Root Brew. The combination of an authentic American brand, independent positioning, simple design and a unique jam jar serve over ice has helped deliver the masculine credibility of beer with an enjoyable taste. Jeremiah Weed has now been rolled out to 7,000 on trade outlets in Great Britain (Diageo, 2012).Harp calcium hydroxide is Nigerias first flavoured beer. With a clean and crisp taste, and just a hint of lime, it is uniquely refreshing. Harp Lime has been well received, with distribution growing steadily, and the distinctive Harp Lime advertising impacting positively on the Harp Trademark equity. Harp Lime is available in both sleek 30cl bottles and cans (Diageo, 2012).The Tusker brand has been enjoyed in Kenya since 1922, and now new Tusker Lite keeps the brand innovative and relevant by addressing todays consumers balanced lifesty le choices with a refreshing low calorie beer. Tusker Lite is positioned within the same mainstream segment as the parent brand Tusker Lager (Diageo, 2012).This years Asian Festive season gifting design was inspired by the characteristic big, bold flavors of the Johnnie Walker brand. The packs were launched in stages, from India for Diwali and then across Asia Pacific for Chinese New Year. The eye-catching limited edition gift boxes boast a beautiful design that allows each variant to stand out on shelves, with impressive and refined packaging including an embossed box and gold foiling (Diageo, 2012).