Strategic Brand Management - Essay Example

Strategic management Operating any business at present without any strict strategy for its development, as well as without any knowledge in the field of strategic management means leading this business to decline and bankruptcy. Thus, the role and meaning of the strategic management as a whole and separate strategy is essential for the present day business development. The analysis of the present work is based on the description of the development and modern strategy of the Drambuie enterprise, and the aim of this work is to critically assess the ways which led to the appointment of the new CEO from the outside company, which first of all has become the first break of the tradition, but was led to by a number of serious factors, which should also be analyzed in the work. The development of the company and the factors which led to the appointment of the new CEO The company was founded in the 18th century and was made a family enterprise for the production of alcoholic drinks. What is seen through the history of the development of the enterprise, is that it was developing without any strict strategy or plan. As it is used at present, large and small companies have made a tradition to develop 3- and 5-year strategic plans to set the main objectives, with slightly shifting them according to the current situation. The resources of each enterprise should closely viewed and correspond to its objectives and goals. Drambuie was created as an accidental idea but it was also made a successful enterprise; though to keep this success there had to be developed a whole set of measures to keep the company from the fall and decline in sales. There has been a whole set of events, which made it obvious that Drambuie needs ‘fresh breath’ and absolutely new turn in its development. The main factors, which have led to the appointment of the new CEO and the creation of the new strategy were as follows: 1. The main strategy of the company was to keep secret the principal ingredient of the Drambuie production and keep to the line with the Scottish heritage. The management of the enterprise was always performed by the family members. Theoretical marketing and strategic management state, that management of the company should be highly qualified and have enough expertise in the field of management and strategic development. The lack of skill in managing the company, especially in the case with the Malcolm and Duncan MacKinnon, who have become the heads of management after the middle of 1970s, facing the inexorable decline in sales as well as lack of strategy. It is no doubt, that their activity in expanding the general portfolio of the expensive brands was a good step, but in the view of the general sales decline it was necessary to pay more attention to the brands and marks, which are more popular and were affordable by the average consumer. Traditionally the company was trying to target average and higher population, offering brands which were both affordable and high-quality. Through the decline of sales it would have been more profitable to develop the strategy of attracting the average consumer back to the brands through refreshing the product, making it new. One of the key principles of the strategic management is making the product in the line with the requirements of time and consumers. This principle has been forgotten by the previous management of Drambuie and it was the factor which made the company understand the necessity of hiring new experienced CEO. 2. Another unreasonable step of the MacKinnon management was absolute absence of budgeting in the company, the evidence of which was the purchase of the expensive office premises during the period of the sales decline. Budgeting is a part of any strategic planning and management, and planning without budgeting are the two areas which cannot exist separately. It is essential that the development of any company goes according to the cycles, thus periods of increase in sales is usually followed by certain declines, but through these short cycles the general line of the company’s development must display the tendency to growth. The period of the MacKinnon’s management until the year 2001, when the company faced the 3.3 million losses was the consequence of not only lack of vision, but lack of the proper knowledge in the sphere of management. It has become clear, that keeping to the principle of family heritage in managing business was not a good choice. Management needed qualified skill. (Proctor, 2000) 3. One of the profitable steps in the attempt to regain the positions of the enterprise was its joint venture with Glenmorangie. The benefits were perceived by the both companies, but the principal aspect was in the fact, that Drambuie was able to streamline its operations, simultaneously keeping its independence in management and decision-making. In the process of creating a marketing strategy you must consider many factors. Of those many factors, some are more important than others. Because each strategy must address some unique considerations, it is not reasonable to identify every important factor at a generic level. However, many are common to all marketing strategies. Some of the more critical are described below. The creation of the strategy begins with deciding what the overall objective of the enterprise should be. In general this falls into one of four categories: - If the market is very attractive and the enterprise is one of the strongest in the industry you will want to invest your best resources in support of the offering; - If the market is very attractive but the enterprise is one of the weaker ones in the industry you must concentrate on strengthening the enterprise, using the offering as a stepping stone toward this objective; - If the market is not especially attractive, but the enterprise is one of the strongest in the industry then an effective marketing and sales effort for the offering will be good for generating near term profits; - If the market is not especially attractive and the enterprise is one of the weaker ones in the industry one should promote this offering only if it supports a more profitable part of the business (for instance, if this segment completes a product line range) or if it absorbs some of the overhead costs of a more profitable segment. Otherwise, it is necessary to determine the most cost effective way to divest your enterprise of this offering. (Nichols, 1996) Not only has not the management concentrated on the target markets, which could be attractive for the Drambuie products at that period, but it had also kept a declining car company, which it had to finally sell through the management buyout. It is accepted, that the company could have survived through the proper management and clearly defined strategies, but with the lack of both, Drambuie had not only to sell the company too late, but was keeping it without bringing any additional profits, contributing into the company’s general line of decline. However, in relation to the research of the target markets and the definition of those which could be the most attractive for the Drambuie products, it should be noted, that the attempt of the enterprise to win the cream market was a step aimed at the expansion of the assortment as well as acquiring the bigger market share. Drambuie aimed these liquors for the separate markets and the separate consumers; however, it should be noted that the fact of putting this brand under Gleinard wing to coincide with its other similar products was not a beneficial step for the fact that the brand itself has to stand separately and not be lost or coincide with other similar brands; theoretically, a brand is the name which makes the product recognized by the consumer and carries certain impression and information of the product quality. This is why despite the fact that the sales could have increased with the line of Glenaird being one and the same with the one of Drambuie cream, it still appears that the company has to make everything possible to keep its brand separate, and to develop a thorough strategy for the restoration of the product under this brand. One of the mistakes was that Drambuie has not researched the cost of entering the market of cream liquors, and the factors, which are essential when entering the new market: marketing strength. access to low cost materials and effective production. the experience of the enterprise. the complexity of introduction problems such as lack of adherence to industry standards, unavailability of materials, poor quality control, regulatory problems and the inability to explain the benefits of the offering to the prospect. the effectiveness of the enterprise infrastructure in terms of organization, recruiting capabilities, employee benefit programs, customer support facilities and logistical capabilities. distribution effectiveness as measured by history of relations, the extent of channel utilization, financial stability, reputation, access to prospects and familiarity with the offering. technological efforts likely to be successful as measured by the strength of the development organization. the availability of adequate operating capital. (Stone, 2004) The analysis of Phil Parnell’s strategy Phil Parnell has become the first externally appointed CEO of Drambuie, and as it has already been seen, the number of serious failures in creating the strategy of the company has led to this appointment. As it was noticed, strategic management, being the core of the company’s performance, as it is the means of distinguishing the strategic objectives and the means of their achievement, needs thorough expertise and the appointment of Parnell has become the turning point in the Drambuie development. The main points, to which Parnell paid attention immediately after being appointed, were that the traditional market, which Drambuie had used to take (after-dinner drinks) was coming to the end, and thus ro survive, the company needed to keep to the requirements of the time and invent the products, which would both keep the brand name, the quality for which Drambuie had been known for decades, and attract more customers. He was sure, that the market of the long mixes was the most perspective for Drambuie to regain its positions. ‘Potential for competitive retaliation is based on the competitors resources, commitment to the industry, cash position and predictability as well as the status of the market; the enterprises ability to construct entry barriers to competition such as the creation of high switching costs, gaining substantial benefit from economies of scale, exclusive access to or clogging of distribution channels and the ability to clearly differentiate your offering from the competition; the intensity of competitive rivalry as measured by the size and number of competitors, limitations on exiting the market, differentiation between offerings and the rapidity of market growth; the ability of the enterprise to limit suppliers bargaining power; the enterprises ability to sustain its market position is determined by the potential for competitive imitation, resistance to inflation, ability to maintain high prices, the potential for product obsolescence and the learning curve faced by the prospect; the availability of substitute solutions to the prospects need; the prospects bargaining power as measured by the ease of switching to an alternative, the cost to look at alternatives, the cost of the offering, the differentiation between your offering and the competition and the degree of the prospects need; market potential for new products considering market growth, prospects need for your offering, the benefits of the offering, the number of barriers to immediate use, the credibility of the offering and the impact on the customers daily operations; the freedom of the enterprise to make critical business decisions without undue influence from distributors, suppliers, unions, investors and other outside influences’ (Proctor, 2000) – these are the aspects which should have been taken into account with considering the potential profit of the company. Thus, Parnell saw the main source of profit for the company in keeping to the brand, making it work in the line with the name of Drambuie, which has been known for many years. Parnell was able to set clear strategic goals, which are the first step in creating any strategy, and which are one of the considerable parts of the company’s success. ‘Parnells target was to achieve case sales of 400,000 within three years with the primary focus being the US. In the past 30 years the US market had declined from 400,000 cases to 80,000. To achieve this he envisaged eliminating anything impacting on the managing of Drambuie. To this end his strategy was predicated on the retention of very few fixed assets with the aim of delivering a shareholder value of between £60 to £75m. The family had been given no indication that they wanted to sell out. Communication and remuneration have become one of the key points in the new strategy developed by Parnell. Communication in business strategy is important for the following reasons: communication is the means of carrying the main idea of the enterprise to the workers, making it perform effectively; communication is essential in branding, as each employee should not only know the idea of the brand, but be able to carry this idea and feedback for the up-to-date reaction at the changes, which take place in the consumer requirements and at the market. Communication is also very important for the developing of the high skills of the customer service, which again is one of the key factors in promoting brand. Customer service regularly works as the instrument of creating the image of the enterprise. The strength of the customer service function has a strong influence on long term market success. Factors to consider include: - Experience of the Customer Service manager in the areas of similar offerings and customers, quality control, technical support, product documentation, sales and marketing. - The availability of technical support to service your offering after it is purchased. One or more factors that causes your customer support to stand out as unique in the eyes of the customer. - Accessibility of service outlets for the customer. - The reputation of the enterprise for customer service. (Peppers, 2004) Thus, Parnell’s understanding of the communication importance may become beneficial in the future for not only the enterprise as a whole, but for each employee to make the best for carrying the idea to the customer, thus making the Drambuie brand known for the unique quality, service and associations with the good customer service. Parnell has recognized that both internal and external communication was something that Drambuie was not good at. Consequently as well as including people in the loop the staff for the first time were being "incentivised", targets assigned and the measures of performance redrawn. Moreover, Parnell took it upon himself to embark on global forays to ensure his message was fully understood both internally and externally. Even more important has become rebranding, which Parnell undertook in his strategy for Drambuie. Branding is the means of making the products recognizable at the market. The brand should always be associated with the quality – actually, brand is the instrument, which makes the customer understand what he buys before he has bought it, and Parnell understood this. Thus, in increasing the sales and making the product promoted at the market, rebranding has become one of the key priorities. It appears to be essential in promoting any product, especially when it relates to drinks. Successful branding assists the company to show its strength at the market. Its strength is in the ability to correspond to the requirements, which the customers represent towards the brand. Drambuie was the one to make branding overt, thus creating well-known brand which would be familiar to the customers. Brand will untimately become the best means for Drambuie to communicate the brand values. However, in the attempt to expand the market and to enter the new markets, the branding options should be reconsidered and made optimal. The key areas to be addressed in this relation are the particular names, which are given to the brands, slogans and the use of those slogans. The brand should be associated with the way customer management is performed, as well as with the way the products are packaged and sold. All the values and strengths of the company’s profile should be made in line with the brand. The beneficial and profitable step will also to make this brand in the cultural and national peculiarities of the country, in which it is planned to be promoted. It is also important to appoint a person who will be directly responsible for the branding inside UK and in other countries. The recruitment and choice of the employees is one of the important factors in making brand work, because their behavior, conduct and service creates the reputation of the brand, the idea for which it stands and delivers this idea to the customers. Branding should be discussed, changed an adjusted for the needs of the global market on the regular basis through the meetings, and through the use of the already mentioned CRM systems. On the one hand, the employees should understand the importance of the brand and their role in presenting this brand to the consumers; on the other hand, they should also understand the proper ways of delivering branding information to the management of the company for its more effective performance. (Keller, 2002) Branding is the means of keeping the product on the market for a continuous period of time. That is why in branding strategies of Drambuie it is also essential to perform regular review of brands, how they work and what changes should be needed to make the brand work on the constant basis. Branding needs thorough budgeting and costs should be reviewed constantly. In branding Drambuie internationally it is necessary to focus on the needs of the customers abroad, but it is also essential to know what message should be delivered to them. It is important to know that any changes in relation to brand are not negative, but are rather the proofs of the fact that branding is the strategy pearly viewed on the side of management as well as on the side of employees. (Keller, 2002) Getting distributors such as Bacardi and Suntory on board was crucial as they contributed to the marketing plans, checking out local dos and donts and sending out their own "recon teams" to assess the market. The US is still Drambuie’s biggest market with 50% of sales going there. This is followed by the UK and Greece both of whom account for about 15% each. Countries such as Spain, which enjoy dark drinks, are seen as having real potential. Russia is another target. Parnell’s target of achieving case sales of 450,000 a year by 2008 with operating profits of £5m which would represent a return on net sales of about 20% was boosted by better stock management. The marketing and sales organization is analyzed for its strengths and current activities. Factors to consider include: - experience of Marketing/Sales manager including contacts in the industry (prospects, distribution channels, media), familiarity with advertising and promotion, personal selling capabilities, general management skills and a history of profit and loss responsibilities. - the ability to generate good publicity as measured by past successes, contacts in the press, quality of promotional literature and market education capabilities. - sales promotion techniques such as trade allowances, special pricing and contests. - the effectiveness of the distribution channels as measured by history of relations, the extent of channel utilization, financial stability, reputation, access to prospects and familiarity with the offering. - advertising capabilities including media relationships, advertising budget, past experience, how easily the offering can be advertised and commitment to advertising. - sales capabilities including availability of personnel, quality of personnel, location of sales outlets, ability to generate sales leads, relationship with distributors, ability to demonstrate the benefits of the offering and necessary sales support capabilities. - the appropriateness of the pricing of the offering as it relates to competition, price sensitivity of the prospect, prospects familiarity with the offering and the current market life cycle stage. (Proctor, 2000) It is agreed, that the threat of the European legislation to make liquor manufacturers show the list of ingredients on the labeling of the product could become a negative factor due to the possible obligation to reveal the secret ingredients which Drumboie has for long used in the production, and which for long has been the key of its success on the market. The acquisition of the fact that Drambuie products use some secret ingredient does not make them first of all – to reveal this product, and second, in case it is revealed, to show its dose in the product. Thus, the real threat to the enterprise is not what the new legislation may bring, but what should be done from inside of the company to make it work for the benefit of its owners, customers and employees. Conclusion Based on the knowledge of the theoretical strategic management and the case study on the Drambuie enterprise, working in the sphere of the alcohol drinks, and as well as looking through the history of the development of this enterprise, it has become clear, that a number of serious strategic failures in managing company have led to the necessity of appointing the first external CEO with the high level of experience and expertise in the sphere of strategic management. it has also become understood that any enterprise, at any stage of decline, may restore its marketing positions through the properly developed marketing strategy. The main factors which have led to the Parnells appointment as a CEO of Drumboie were as follows: lack of clear strategic objectives; lack of budgeting; lack of skilled managerial staff to amend the strategy of the enterprise with the requirements of time and consumers; absence of any strategic plan of development as well as the absence of any clear vision of the way the enterprise should expand and develop. The appointment of Parnell as Drambuie CEO has led to the considerable changes in the company: he has recognized the need to change the development of the company and introduced the new vision; he has set clear strategic objectives; the need of entering the market of long drinks and mixes with the rearrangement for the younger population was admitted; the need of rebranding as a part of the general strategy was adopted. Thus, the appointment of Parnell as CEO has become the means of restoring Drambuie and getting back its marketing positions with the perspectives for expanding. References Keller, Kevin Lane 2002, Strategic brand management, Pearson US. Nichols, Grove 1996, Strategic plans that work are a must, ABA Banking Journal, 88, p. 27-34 Peppers, Don 2004, Managing customer relations: A strategic framework, London: Wiley & Sons. Proctor, Tony 2000, Strategic marketing: An introduction, London: Routledge. Stone, Marylin 2004, International strategic marketing: A European perspective, London: Routledge. Read More