Grand Metropolitan is a multi-industry company that originally operated in hospitality industry but later expanded into food and beverage. The firm later focuses on the latter industry. Due to the economic growth in developing countries, Grand Metropolitan has the opportunity to expand their target markets abroad. However, political and social factors pose some threats to the company to reach their potential revenue. The company’s strengths include the firm infrastructure, procurements, human resource management, and technological developments being valuable and costly to imitate. The firm’s weaknesses, however, are their support activities not being rare in the industry except for the human resource management. Some strategic options recommended to exploit opportunities and defend against threats are merger and acquisition as well as backward integration through the procurement of raw material suppliers.
Table of Contents
Grand Metropolitan is a multinational conglomeration established in England founded by Maxwell Joseph. The company went public in 1961 on the London Stock Exchange and later merged with Guinness in 1997 to form Diageo.
They initially operated in hospitality industry but later on expanding their markets into several industries but mainly focusing on food and beverage. Grand Metropolitan first entered the food and beverage industry through the purchase of Bateman Catering and Midland Catering in 1967 and 1968 respectively. Other major acquisitions include The Pillsbury Company, Smirnoff, and Ligett.
The first part of the assignment is going to analyze the external and internal factors that could have an impact on Grand Metropolitan’s business and suggest strategic options to combat their competitors. Deeper analysis on the strategic implementations is going to be discussed further in the second part.
2. External Analysis
2.1. PEST Analysis on the Five Forces
Factors that affect an industry externally can be political, economical, social, or technological. These factors have a direct impact on the five forces of the industry framework, which include threats from new entrants and substitutes, and bargaining power of buyers and consumers.
Political factors that affect the food and beverage industry include the minimum drinking age in certain countries and obesity laws in Japan. The minimum age for alcoholic consumption is 18 years old in most countries and 21 years old in America (Potsdam). In 2011, Japan legalized their obesity law, meaning that it is now illegal to be overweight in Japan (Onishi 2008). New entrants will have limited target markets due to the minimum drinking age and obesity laws. Substitutes that offer healthier options will have an advantage since they fight obesity and do not have a minimum age for the consumption of their products. The obesity law which limits the population’s waistline to “33.5 inches for men and 35.4 inches for women” (Onishi 2008) makes people in Japan to be more reluctant to consume fast food thus increasing the potential reduction in fast food prices. Consumer’s reluctance increases their bargaining power and thus lowering supplier’s bargaining power.
The factor influencing the food and beverage industry economically is economic growth. “Many transnational food corporations are moving into emerging markets because their markets in developed countries are at a ‘saturation point’” (Bankman 2013). New entrants and substitutes now have the opportunity of new target markets. Due to the international market expansion, competition is high for the companies in the industry. This makes the bargaining power of buyers high since they determine the demand of the products. The change in demand allows suppliers to ask for higher price for the same quantity they offer.
The social factors that have...
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