Environmental Analysis

Essay by itladyUniversity, Master'sA, October 2007

download word file, 6 pages 0.0

Diageo Environmental AnalysisThis is an environmental analysis of Diageo, PLC. Diageo is a conglomerate focusing on premium alcohol beverages. The firm originated in 1997 with the merger of Guinness and GrandMet. The company began with the mission to become the strongest premium alcoholic beverage producer worldwide. To that end, they have acquired a majority of the premium brands in the spirits industry and large portfolio of premium wines. Today they are the controlling producer of spirits in the US and UK, and compete globally in both spirits and wine. This paper will address the external environment around Diageo. It will review the competition in relationship to substitute products and possible new entrants into the industry. Additionally, it will review the remote environment involving industry trends and regulations that will influence the company's ability to operate successfully. Lastly, it will provide recommendations to overcome possible environmental threats, while capitalizing on the opportunities.

Competitor AnalysisDiageo has long been the front-runner in the premium drinks business. Its brands include Guinness, Smirnoff, Bailey's, Johnnie Walker, and Cuervo complimented by broad range of local and specialty brands from around the world. In 2006, Diageo held a 22.7% market share in the US followed by Fortune Brands and Pernod Ricard. In the global market, they have nine of the top 20 brands. The market is expected to have 3.3% (Annette, p. 11) growth in the next three years.

The acceptable growth rate will allow some new entrants into the market, but they must be competitive. The obstacle that new entrants will face is that the United States spirits market is an oligopoly dominated by Diageo, Fortune Brands and Pernod Ricard. On the horizon, threats from new entrants such as United Brands Co. Inc., which has done well with its Dooley's brand loom (Huddleston, 2005).