Diageo Case Report
Diageo Case Report
Scott Johnsson
BMGT495
March 11, 2008
Strategic Issues In 2001, the conglomeration known as Diageo PLC became the world’s largest spirits and wine holding company in the world. This was the outcome of an intense acquisition of Seagram Company’s beverage assets for $8.15 billion. The resulting conglomerate faced complicated strategic issues concerning how it wished to move forward in its beer, wine, and spirits divisions. The subject of their inquiries focused mostly on marketing and acquisition decisions. The addition of Seagram’s upscale wine and spirits brands into Diageo’s portfolio caused the corporate-level management to rethink their global marketing strategy. The newly created Diageo Chateau & Estate Wines division was especially under examination for opportunities to create synergies with the other two beverage lines. Also because of the fundamental differences between the processes to produce wine and the processes to produce beer and spirits, Diageo faced questions on how to market the wines alongside the beer and spirits. Ray Chadwick, the newly appointed President of Diageo Chateau and Estate Wines, was fully aware that his division’s industry was undergoing dramatic changes that caused a great deal of uncertainty. It was evident that global consolidation within the wine-making industry by competing conglomerates was creating a follow or lead scenario. The main question that Chadwick had to answer was if it was appropriate for Diageo to diversify its holdings and become a first-mover in the uncertain global environment, or to focus on its existing brands as a safe alternative. Such issues would be largely dependent on Diageo’s marketing skills, innovations, and timely realization of global trends.
External Analysis [Exhibit 1] The turn of the millennium and the years that followed were an extremely dynamic period in the global environment. The economies of the world were suffering a downward trend following the
Scott Johnsson
BMGT495
March 11, 2008
Strategic Issues In 2001, the conglomeration known as Diageo PLC became the world’s largest spirits and wine holding company in the world. This was the outcome of an intense acquisition of Seagram Company’s beverage assets for $8.15 billion. The resulting conglomerate faced complicated strategic issues concerning how it wished to move forward in its beer, wine, and spirits divisions. The subject of their inquiries focused mostly on marketing and acquisition decisions. The addition of Seagram’s upscale wine and spirits brands into Diageo’s portfolio caused the corporate-level management to rethink their global marketing strategy. The newly created Diageo Chateau & Estate Wines division was especially under examination for opportunities to create synergies with the other two beverage lines. Also because of the fundamental differences between the processes to produce wine and the processes to produce beer and spirits, Diageo faced questions on how to market the wines alongside the beer and spirits. Ray Chadwick, the newly appointed President of Diageo Chateau and Estate Wines, was fully aware that his division’s industry was undergoing dramatic changes that caused a great deal of uncertainty. It was evident that global consolidation within the wine-making industry by competing conglomerates was creating a follow or lead scenario. The main question that Chadwick had to answer was if it was appropriate for Diageo to diversify its holdings and become a first-mover in the uncertain global environment, or to focus on its existing brands as a safe alternative. Such issues would be largely dependent on Diageo’s marketing skills, innovations, and timely realization of global trends.
External Analysis [Exhibit 1] The turn of the millennium and the years that followed were an extremely dynamic period in the global environment. The economies of the world were suffering a downward trend following the