Chinese Business Management Pernod - Ricard

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  • Topic: Pernod Ricard, Absolut Vodka, Martell
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  • Published : February 11, 2013
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Written work
Guylain MARINO (32657)

I) Pernod Ricard’s axis of development
II) The firm’s strategy
III) Implementation of the strategy
IV) Management of the Chinese subsidiary
V) Results and perspectives (SWOT Analysis)

Introduction

Created in 1975 through the merger of Ricard and Pernod, this French spirits giant is specialised in making and distributing wine and distilled beverages.

This is the second group worldwide in this division, just behind Diageo and before Bacardi-Martini thanks to the acquisition of Vin & Sprit which produce especially the vodka Absolut in 2008. In France the group is a leader in the liquor sector with more than 27% of the cumulated market share. The company generates most of its sales in Europe, followed by Asia.

1. Pernod-Ricard’s axis of development

The market maturity of the developed countries encouraged Pernod Ricard to target new geographical areas with high potential. The company accelerated its deployment in the emerging countries, especially in Asia.

The Asia-Pacific area (beside Japan) counts for a growing part of the world luxury market : 14% in 2009 and only 11% in 2006. The booming Chinese economy maintains high the demand in luxury products of the Asian area. China counts 360 000 millionaires in dollars (5% of the world population of millionaires). The rapid increase of the living standard leads the Chinese to a showy and statutory consumption, synonymous with success. Nowadays, according to Pierre Pringuet, Pernod Ricard’s CEO, “China is the second-largest market of Pernod Ricard. Second to the US.” The luxury image of the Pernod Ricard’s products meets success among the young Chinese generation (20 – 35 years old), which is the heart of the clientele of the premium brands in China. The company targets also other countries in Asia such as South Korea, Thailand or India. In opposition to its strategy in other Asian countries, the company does not own local brands in China. It directly exports the foreign production and most of the customers have to be educated about these new alcohols. One of the burning issues for the company is the protected origin designation. The following matrix is a PESTEL analysis that describes the environment in which Pernod Ricard is investing.

2. The firm’s strategy

Premium could be defined as a quality brand positioned in the top segment. Indeed, special events or special services for customers are created in order to make the customer feel rewarded for having buy the product, and to make him feel as if he was part of a privileged group. Premium leads to high return on investment. Thank to the high positioned product, Pernod Ricard is allowed to sells its product very expansive compared to classic liquor. Indeed 69% of the Pernod Ricard’s worldwide turnover for the year 2010 comes from its high quality brands. A special effort is made for marketing in order to make the product unique: PR invested 19% of the annual turnover in the marketing budget. For instance, Absolut Vodka or Martell Cognac have special packaging and limited edition designed especially for China.

Ten years ago, Diageo was far stronger than Pernod Ricard, thus Diageo did not rush on the Asian market but just strengthen its position in the Eastern whereas Pernod Ricard decided to be the first on this market. Finally, there is no leadership without a deep sense of responsibility. This approach is historically rooted in the history  of the Group. Its commitment to civil society, unchanged from the beginning, is the best evidence. Formalized by a new platform of social responsibility (CSR), this commitment is illustrated concretely by four priorities: * reducing environmental impact,

* policy of responsible consumption,
* sharing of cultures,
* promotion of corporate culture.

PR is also making awareness campaign in China in order to prevent people from the danger of the excess of alcohol. It allows the...
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