MGMT614: Corporate Strategy for Diageo

MBA Class of ’14 MGMT614: Corporate Strategy| Group C

MBA Class of ’14 MGMT614: Corporate Strategy| Group C

World's largest producer

of premium drinks (spirits)

Market capitalisation of £47B, 8th-largest company on

London Stock Exchange

Sold in over 180 countries,

80 offices globally

Diverse portfolio of brands,

heritage tracing back to 1608

PERFORMANCE

AMBITION

HOW

CAN DELIVER ITS

MBA Class of ’14 MGMT614: Corporate Strategy| Group C

AMBITION

North America

33% Latin America

& Caribbean

13%

Asia-Pacific

15%

Africa, Eastern

Europe & Turkey

20%

Western Europe

19%

to create the

best performing, most trusted,

most respected consumer goods company

in the world

TOTAL

NET

SALES (F13)

PREMIUM

APPEAL

CORPORATE

SOCIAL

RESPONSIBILITY

INNOVATION

Forbes World’s Most

Innovative Companies (#27)

Strong brand heritage

& equity

DrinkIQ, Plan W,

various charities

By leveraging on

Healthy Free Cash Flow levels

Higher-than-average Return on Assets: 9.91% in F13 vs 6.78% (industry)

INTERNAL

& EXTERNAL

ANALYSES

STRENGTHS WEAKNESSES

OPPORTUNITIES

Diverse portfolio - steady revenues

& mitigates seasonality in demand

Extensive geographical reach

Global associations & partnerships

Escalating operating costs, profit

margin attrition

Substantial debt service: Debt-to-

equity ratio of 2.39 (2009), now at

1.17 (2013)

Heavy reliance on mature markets

Strategic partnerships for improved

routes-to-consumer

Fast-growing luxury markets

Anticipated growth of wine market

Intense competition from industry

players

Governmental regulations &

structural economic conditions

Counterfeiting

SAFEGUARD IMRPOVE ON

SEIZE UP

THREATS

NEUTRALISE

BUYERS SUPPLIERS

ENTRANTS SUBSTITUTES

RIVALRY

ENTRANTS

Considerable barriers to entry

Governmental regulations & tariffs

Established players enjoy significant

economies of scope & scale

Limited scope for disruptive

innovations

LOW

SUBSTITUTES

MODERATE

Availability of lower-priced

alternatives, low switching costs

Major players also own certain

substitutes for distilled spirits, e.g.

beer, wine

Health concerns may ‘shrink the

pie’ – decrease consumption of all

alcoholic beverages

BUYERS

Buyers: wholesalers & end-consumers

May be price sensitive

Reliance on traditional distribution

channels (on & off-trade) for access

to substitutes

MODERATE

SUPPLIERS

Sensitive to commodity (raw

materials) price changes

Various sources for raw materials

High cost of forward integration (to

cut out buyers), making it unlikely

LOW

RIVALRY

High fixed costs (exit costs),

advertising expenses

Four-firm concentration ratio of

49.8% in North America (2004)

HIGH

KEY

STRATEGIC

ISSUES

REVENUES BRAND

EQUITY GROWTH

SUSTAINING

Regulatory & tax

challenges

Over-reliance on existing

mature markets

Stagnating market share

of strategic brands

RE-FOCUS

ON CORE

BRANDS

LEVERAGE

ON

STRENGTH

OF RESERVE

BRANDS

INNOVATE

COST-

CONSCIOUS

CULTURE

RIGHT PEOPLE, RIGHT CAPABILITIES

BLUEPRINT

FINE PRINT

THANK YOU