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D I A G E O
Transcript of D I A G E O
Threat of Substitutes Product
One of the largest producers of alcohol.
There are many substitute products in the alcohol industry thats keeps this for low.
Diageo is the producer so they are not subject to their supplier trying to enter the market.
Diageo has a very differentiated line which weakens this force.
Substitute products is a high force in the alcohol industry.
Diageo is producing a premium product so it can charge a premium for its product despite so many substitute products.
2 Billion Liters
Bargaining Power of Customer
One of the world's largest producers of alcohol
Diageo can raise prices and earn a profit without worry that another company will try to enter at a better price.
Diageo is trying to achieve a superior quality in their production, and because they are the produce they are not subject to a buyer demanding higher quality
Inside the International Empire
D i a g e o
WHO is Diageo?
DIAGEO FAMILY TREE
1759 Aurthur Guinness signed a 9,000 year lease on St. James's Gate brewery in Dublin
1971 MRMA changes its name to Grand Metropolitan ltd
1973 Grand Metropolitan enters the brewing industry by acquiring Truman, Hanbury & Buxton ltd and Watney Mann ltd of which International Distillers & Vintners ltd is a subsidiary
1986 Guinness acquired Distillers Company ltd
1987 United Distillers is formed from combining Distillers Company & Arthur Bell & Sons, both owned by Guinness
1997 Guinness & Grand Metropolitan MERGE
DIAGEO CREATED ! ! !
Snapshot of External & Internal Analysis
Business & Corporate Level Strategy
Should you invest in DIAGEO??
R O A D M A P
Diageo is actively expanding into new high growth markets.
They're seeing growth in sales and operating profit.
CEO Paul Walsh steps down after a decade + of leadership
By: Alma, Bruno, Jenna, Michael & Jessica
Competitive Rivalry within an Industry
Threats of New Entrants
+Wide Range of Spirit Brands
+Global Distribution Network
- Reliant on Mature Market
- Wine Brand is Weak Compared to Spirits
244 Billion Liters
Hard for newer smaller companies to enter and compete with the alcohol giants.
Brand loyalty created from superior productsis a barrier for entry.
Economies of scale is another barrier Diageo has over companies trying to enter.
189 Billion Liters
Handful of large alcohol companies competing.
High demand for alcoholic products
Diageo enjoys a cost advantage over other companies
28 Billion Liters
20 Billion Liters
Diageo - 4.6%
4 Billion Liters
Diageo - 9.5%
Recognition of global power
Focused on core brands: developed strategy to leverage brands globally
International markets account for 40% of net sales
Selective acquisition strategy
Reduce/eliminate competition and intensity of rivalry
Less competitors = Greater market share, higher profit
Strategic management of tangible & intangible resources
TANGIBLE Resources: distilleries, fields, bottling facilities
Vertically integrated to ensure quality
INTANGIBLE Resources: brand names
Skilled implementation of primary activities: MARKETING
Creates barriers to imitation for competitors
World's largest producer of spirits, major producer of beer & wine
Over decade- maintained above a 30% ROE in comparison to industry average of 15.78%
Alcoholic Beverages Industry
Creation of SG
Categories to exploit
Tax, Prohibition, Advertising, Trade
Consumers Health Concern
Economies of Scale
Control to Local Manager
Million Dollar Question:
Growth in Net Sales of 5%
$7,825 million $8,235 million
Growth in operating profit of 9%.Free Cash Flow increase by $100 million to total $7 billion
Earning Per Share (EPS) increased 9%
Interim dividend increase of 9%
Will Diageo Unlock Potential to your $$$?
Lower Cost Production
Business Level Strategy
Reduces regional structures
Value Creation Frontier
What are 3 of DIAGEO's top selling brands?
Three reasons why you should invest in Diageo?
What company did Diageo sell in 2002?
A) Gleneagles Hotel
B) Ben & Jerry's
C) Grand Metropolitan
D) Burger King
Quality as Excellence
Must Maintaitn Uniqueness
Barrier for new Entrants
Diageo's Global Strategy
Single Industry Model
Pillsbury - $10.5B
Burger King - $1.5B
Sustained Competitive Advantage
17 of 28 whiskey distilliries in Scotland
Prime Location for clients
Big Events - 2014 Ryder Cup
Backward Vertical Integration
Protects Product Quality
Enhances Company Efficiency
Decreases risk of holdup within the Industry
28 Malt Whiskey Distilleries
Vineyards and Fields
Acquisitions and Mergers
Merger - Guinness & Grand Metropolitan
Mey Icki - Turkish
Ypioca - Brazil
United Spirits - 53%
Lowers cost structure
Increases product differentiation
Replicates business model to different market segments
Increases bargaing power
Pressures for Cost Reductions
Pressures for Local Responsiveness
Low Pressures for Cost Reduction
Low Pressure for Local Responsiveness
Diageo Runs Global Production & Distribution Facilities
maltings, distilleries, breweries, packaging plants, botteling facilities, maturation warehouses, cooperages, vineyards, wineries and distribution warehouses
Diageo is cost efficient by acquiring diverse range of companies
Our Product is Universal
Top two markets (US & EU) consume similar products:
Scotch, Beer & Vodka
Our Business Model
How we Deliver value to our Shareholders: