BRL Hardy: Globalizing an Australian Wine Company - Essay Example

Case study ‘BRL Hardy: Globalizing an Australian Wine Company’ Table of Contents Table of Contents 2 Evaluation Steve Millar’s Approach  4 Advantagesand Disadvantages of the Australian Wine Cluster and Analysis of the Framework 9 Evaluation of Strategy Developed By Christopher Carson 13 Conclusion 16 References 17 Introduction Wine is the world’s one of the oldest commodities. However, its packaging, labelling and marketing functions have developed considerably in the recent years (Aylward, 2006). Today, there are various wine manufacturing companies operating all around the world maintaining a corporate ambiance. Contextually, BRL Hardy, which can be identified as a major Australian wine producing company, was formed after the merger of the two major wine companies, i.e. BRL and Thomas Hardy & Sons (Hardy). BRL is renowned as the first cooperative winery of Australia formed by Italian grapes growers in 1916 in Adelaide; while Hardy was formed by Thomas Hardy in the year 1853. The major reason behind the merger of these two wine companies was due to the consistent financial losses suffered by both the companies. In such circumstances, merger between these two wine companies was considered as to be best alternative for compensating the regular losses that they suffered. Hardy was well known and respected in the Australian wine market for its quality of wines. On the other hand, BRL was specialized in producing high volume of wines and was known as ‘oil refinery of the wine industry’ in Australia. Nonetheless, both the companies prior to their merger used to have different views and operated as market rivals for each other. Moreover, both the companies possessed diverse organisational structures as well as managerial approaches. However, as considerable profit was emerging from the home market in Australia, owing to which, both the companies merged to form BRL Hardy and concentrated in Australian Wine market in order to earn substantial profits and stabilise their financial elements. Later, when BRL Hardy started emphasising on foreign markets to expand its business, Europe became one of its most preferred destinations as a promising export market for BRL Hardy (Bartlett & Beamish, 2011). Based on this case scenario, the essay intends to identify various strategies initiated by the company during its post merger operations and analyse the pros and cons of these strategies to evaluate its overall managerial effectiveness. Furthermore, the essay also intends to render rational recommendations that could have been effective for the company’s expansion in overseas. Evaluation Steve Millar’s Approach  Steve Miller, the CEO of the newly merged company BRL Hardy, during the mid 1990s, began to view the organisation not just as a ‘quality exporter’, but also to be the ‘world’s first global wine company’. Consequently, the notion of becoming world’s first global wine company has been constantly conceived throughout the company. Contextually, there was a rigorous change in the strategies of the company initiated by Steve Millar. He was determined to protect the company’s share of the bulk cask business simultaneously focusing on branded bottle sales for growth. In order to realize the aforesaid commitment, the company intended to recognise the importance of quality for consolidating its brand. Notably, Steve Millar’s management concentration was initially based on the domestic market for ensuring the favourable results from the merger of the two companies. Later, it was expected to implement new strategies after attaining post merger success in the domestic market. As a part of accomplishing the determined goal of being the first global wine brand, Steve Millar firmly concentrated on improving the company’s culture as well as management style. Furthermore, he undertook a more decentralized approach accompanied with delegation of less-risky decisions. Contextually, the objectives of Steve Millar towards decentralization of the decisions became concentrated upon attaining greater management accountability (Johannsen, 2012). Through the initiatives of decentralisation, Mr. Millar wanted to establish a healthy environment within the company and prevent any sort of clashes or misunderstanding among the managers. In the course of implementation of new strategies, apparently tension was prevailing between the two managers, Stephen Davies and Christopher Carson. Davis, who was group marketing and export manager, was firmly supporting the idea of centralization. According to him, all the decisions related with labelling, pricing and branding should be centralized within the home management in Australia. On the other hand, Carson, designated as managing director of BRL Hardy Europe, stressed against the centralized key decision-making mechanism. Accordingly, he stated that the UK market is different from the Australian market, owing to which, decisions made in Australia may negatively influence the UK market. However, it was observed that Mr. Millar deciphered a passive attitude in resolving the conflicts between the two managers getting involved directly within the conflicting situation. Rather, he decided to tactfully deal with the situation to resolve the conflicts between the two managers without disturbing the working culture of the organisation on the whole. Hence, the efficiency of handling the conflicts of the managers indeed reflects the true leadership qualities of Mr. Millar and his strategies towards making BRL Hardy a global wine company (Shivendu, 2011). In order to address the strategic issues witnessed by BRL Hardy, when growing global it would be more effectual to use a theoretical framework of Porter’s Five Forces Analysis and PESTLE analysis related with wine industry. The process of globalization and worldwide access to information has resulted in more empowered customers with variable demands in relation to the products offered at the marketplace. Consequently, the bargaining power of consumers for the wine industry has become relatively high due to the existence of numerous wine companies operating at the market. At the same time, the bargaining power of suppliers is also observed as quite high with the prevalence of lower switching costs in the wine industry. However, the threat of substitutes in wine industry can be examined as stable to a certain degree as the current trend in customers behaviour depict that people who prefer drinking wine is reluctant to switch to other substitutes, such as beer (Scribd Inc., 2013). Threat of new entrants in wine industry is relatively less, as it takes a considerable time period to create demand for the newly entered firms. Moreover, the threat of new entrants at the international level can also be examined as low for BRL Hardy due to the lack of presence of global wine companies. Contextually, rivalry among the existing firms can be observed as considerably high due to the presence of numerous firms in the global market. Moreover, the intense competition among firms, producing wine, can be observed as the consequence of the existence of multiple dominant global firms within the marketplace (Rooyen & et. al., 2010). PESTLE analysis, as a framework to BRL Hardy’s strategies, shall further provide adequate insights about the external environment of its operations. Political factors play a crucial role with respect to the current trend of the global wine industry. It is in this context that with the virtues of encouraging political reactions, the Australian wine industry has been able to demonstrate itself as a producer of clean, green and fresh wine across the world (Prime Ministers Science, Engineering and Innovation Council, 1999). In addition to these, European wine markets constitute lesser regulations for international trading activities of wine in the global context. Similarly, UK is regarded as the largest importer of wine from Australia which has grown substantially over the past few years being competent enough to support the demand of the product in the European market. European Union also has entered into an agreement with Australia relating to the acceptance of wine, provided the wine exported to EU is according to EU standards which depict the economic and legal elements also to be in favour of BRL Hardy (Mounter, 2011). Additionally, the current industry trends in the global wine market deciphers a certain degree of changes in customers’ tastes and availability of a wide variety of flavours which has substantially influenced customers to compare the healthiness of various wine products obtaining greater awareness regarding the commodity. Over the past few years various technical requirements related with wine has also emerged. Consequently, it has been made mandatory in EU for other countries exporting wine to comply with labelling rules which imply legal as well as environmental constraints to be persisting in the global wine industry (Foster & Spencer, 2002). When concerning the industrial trends and other constituents of the external environment in the wine industry, it is advisable that BRL Hardy should formulate its strategies towards developing a single brand that can generate premium price for the product offered at the market to attain competitive brand recognition in the global platform. The company should also get engaged in developing quality products and simultaneously provide wide choices of products to its discriminating customers at much affordable prices than its competitors, in its initial stage of brand development. This particular strategy shall be beneficial for the company to segment its target market based on the demand of its products efficiently. Accordingly, as the customers in the international wine industry are becoming increasingly aware of the industry structure, the company should focus on understanding the needs and preferences of its customers, to satisfy them adequately in the global context. It is also recommended that the company should strictly follow the decentralization approach in its decisions as this will enable BRL Hardy to understand the needs and preferences of different markets efficiently and formulate policies accordingly. This is fundamentally because the market conditions in Australia are different from the conditions prevailing in Europe owing to which, the policies and strategies that might prove extremely effective in the Australian market, may not work in European market with similar advantages (Spencer, 2002). Furthermore, the company should be very careful in choosing its suppliers. It is worth mentioning in this context that trusted suppliers and quality of materials are required for producing wine to ensure enhanced quality offered to its wide-ranging customers that in turn can help the company to retain the existing customers and attract potential customers in the long-run. Understanding the market requirements and offering products accordingly at affordable price, shall further create a win-win situation for the company. Advantages and Disadvantages of the Australian Wine Cluster and Analysis of the Framework Before identifying the advantages and disadvantages of Australian wine clusters, it is important to gain an insight about concept of market clusters. The term ‘Cluster’, in its general meaning have multiple connotations (Mueller & Sumner, 2006). However, Porter (1998) defines clusters as, geographic concentration of related companies in a particular field. Additionally, clusters represent a wide range of interrelated firms and other business enterprises that are important to competition within an industrial context. Clusters are critical to competition affecting in three major ways, i.e. in terms of increasing productivity in the areas where the companies operates, encouraging continuous innovation and generating scopes for the formation of new businesses (Porter, 1998). It is important to remember that like most of the wine industries across the world, the Australian wine industry had also unfavourable beginnings, which are observable in relation to the clusters formed in the market context (Aylward, 2006). The Australian wine clusters primarily encompass grape flowers, vertically integrated wine producers and brand owners who source grapes from the growers for the purpose of production. One of the major strengths of the Australian wine industry has been the richness and diversity of its geographic conditions. However, the high labour costs as well as high water costs have resulted in reduced profitability for the companies engaged in wine production. The changes in climate and uncertainty of weather, altogether with drought conditions in the past had further intensified the risks associated with the market which had also threatened the long term viability of wine industry in Australian cluster. At the same time, grape growers in Australia are usually price takers, and dependent on product quality as well as on the recognition of wine producers. It should be noted in this regard that during 1990s, there was rapid increase in the quantity produced in vineyards being supported by various firms (National Land & Water Resources Audit, 2008). Furthermore, the most importantly related and supporting Australian wine cluster has been the Food and Tourism industry of the nation (Nipe & et. al., 2010). Based on the above discussion, the observed advantages and disadvantages of Australian wine cluster have been depicted below. Advantages Favourable climatic conditions for growing grapes and producing wine The Australian wine cluster is an efficient low cost producer of grapes Sustainable quantity of regular supply by grapes growers The quality of wine produced in the Australian wine clusters are recognised in the world standard Disadvantages Volume producer image of wine producing companies in the Australian wine clusters lacking in quality recognition Lack of sufficient information among grapes growers concerning the quality of grapes grown High labour and water costs in the Australian clusters Rising cost of grapes production within the nation (McGrath-Kerr Business Consultants Pty Ltd., 2002) After analysing the advantages and disadvantages of Australian wine cluster, it can be identified that during the 1990s there was a considerable scope for BRL Hardy to expand its business globally. Since, the domestic market for wine was growing and demand for Australian wine in other parts of the world, particularly that in UK was increasing, BRL Hardy had an opportunity to make substantial profits from the domestic market and establishing itself as a successful brand. At the same time, the quality of grapes and climatic conditions in Australian wine clusters were much favourable for producing quality of wine than the current day context owing to which exporting a larger quantity of wine products to overseas’ market and establishing itself as the first global wine producing company had been an achievable objective for BRL Hardy (Marsh & Shaw, 2000). As far as the effectiveness of concepts and framework is concerned, Porter’s five force framework has significantly proved to be useful in analysing the strategies adopted by BRL Hardy in accordance with the characteristics of Australian wine cluster. Porter’s five forces framework has considerably helped in understanding the behaviour of Australian wine clusters including customers, suppliers, barriers related with entry modes and the overall competitors’ behaviours. The proper understanding of the Porter’s five forces analysis has further helped to identify strategic gap of BRL Hardy and make few useful recommendations (Lima, 2006). Evaluation of Strategy Developed By Christopher Carson Mr. Christopher Carson was appointed as the managing director of BRL Hardy Europe in February 1991. Immediately after assigning him in the role of the managing director, he began to implement cost-cutting plans quite broadly. The initial 18 months of Mr. Carson’s role as managing director resulted in dramatic reduction in the product line to 230 items from an average of 870 items. He also reduced the numbers of executives in Europe to 18 from 31 executives earlier. Furthermore, Mr. Carson initiated stronger system of controls and implemented policies that firmly made him in charge of the key decisions, particularly in the UK wine market. In the year 1992, Mr. Carson in discussion with Mr. Davis, the group marketing and export managers of BRL Hardy, highlighted some of the major problems confronted by the company during early 1990s and priorities as he viewed them. Mr. Carson recognised that unlike Australian wine market, the wine market in United Kingdom is not a branded market. Consequently, he argued that in the UK retailers, local brand tends to dominate the wine market. Hence, he firmly stressed that strategies that were brand driven would not work properly in the UK industry. Later, in 1995 Mr. Carson was appointed as the CEO of BRL Hardy Europe due to the company’s excellent performance in the UK market. He recognized that sourcing of grapes for the production of wine may have dramatic influence due to the weather factors on the quality and quantity of grapes and thereby create an impact on the wine produced by the company. In order to tackle this problem Mr. Carson, decided to source quality grapes from multiple regions to eliminate the aforesaid risks. In this relation Mr. Carson considerably devoted more time and effort towards sourcing of grapes from non-Australian wine producers (Bartlett & Beamish, 2011). Again, during the year 1997, Mr. Carson aimed to develop wine that would meet the requirements of average wine customers. The objectives of Mr. Carson were concentrated towards offering wine that could be enjoyed by the European customers and establish their confidence on the particular brand. Later, Mr. Carson unveiled his idea of offering strongly branded product in the form of D’istinto in the UK market to obtain brand recognition and thereby capture a certain percentage of the total market share in the national context. Concerning the implemented strategies, it can be affirmed that the strategies initiated by Mr. Carson to attain and preserve BRL Hardy’s competitive advantages in the European wine market within the period of 1995-1998, can truly be appreciated. It can also be observed from the above discussion that the strategies initiated by him depict Mr. Carson to possess a good marketing insight. The launching of a newly branded product, D’istinto, can also be regarded as a wise move of Mr. Carson to diversify suppliers and further strengthen its distribution power (Bartlett & Beamish, 2011). The launching of new wine product would also assist the company against the currency fluctuations persisting within the global market. The launching of new products would also facilitate in greater market control and further provide opportunities to the company to grab larger market share for the company’s products. Thus, it can be stated that Mr. Carson’s strategies were indeed very effectual for BRL Hardy to gain competitive advantages in the European wine market (Tomsik, 2002). Conclusion With reference to the above case study, it can be apparently observed that external environmental elements play a vital role in determining the competencies as well as the sustenance of a particular business organisation. The case study of BRL Hardy can be illustrated as a noteworthy example of cultural, social as well as economic impacts on the development and growth of a particular organisation in today’s modern day business context. Simultaneously, the significance of the internal organisational culture and the leadership styles deciphered and likewise practiced by the management of a particular company can also be revealed with reference to the above case study analysis. For instance, it can be stated that the leadership qualities of Mr. Millar as well as Mr. Carson has played a fundamental role in determining the successes of the organisation in the global context, by mitigating the identified risk factors and at the same time, attaining the opportunities in the targeted market. Conclusively, it is worth mentioning that businesses, when operating in the global context must render due attention towards the industrial trends along with the strengths and weaknesses possessed by the company in their internal business environment when attempting for strategic changes and progress both in the short-run as well as in the long-run. References Aylward, D. K., 2006. 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