Wednesday, July 20, 2011
Diageo in India
A growing economy, expanding middle class and rising disposable incomes have given the Indian spirits market significant growth potential. India is home to 17% of the global population (close to 1.1 billion). India is now the largest international whisky market by volume, reporting 8-10% growth annually. This makes India one among the fastest growing whisky markets anywhere in the world. Diageo is the world‘s largest wine, beer and spirits company. It owns the brands like Smirnoff, Johnnie Walker, Guinness, Baileys, J&B, Captain Morgan, José Cuervo and Tanqueray. Diageo launched its operations in India in early 1990‘s. But, the UK headquartered giant, yielded ground to French ri4valPernodRicard in the early round of the Indian conquest. In the past 4-5 years, Diageo has taken a number of steps to revive its marketing strategies in the country. The biggest growth drivers for Diageo in India have been Johnnie Walker (Premium Scotch Segment) and Smirnoff (Premium Vodka Segment). In 2006, Diageo claimed to control 80% and 90% of the two respective segments with these brands. Diageo spotted two major trends in India markets – urbanization and premium-isation (based upon the aspiration levels of the people). Thus, they created price segmentation. There was a big gap between the prices of IMFL and premium alcohol. Haig was launched to target aspirants. So, there are different segments the takers for Haig, for existing brands like Black and White and VAT 69 and finally for Johnny Walker at the top-end. The aspirants eventually graduate to Johnny Walker. Similarly, in vodka, Shark Tooth which is mid-price, on a par with Fuel and Magic Moments and Smirnoff which is slightly more premium and Smirnoff Black which is at the top-end. So, here also three segments were created. Under its Smirnoff brand, the company introduced an array of festive drinks with Indian ingredients like Smirnoff Masala Marke, Smirnoff Jaljeera, and Smirnoff Katha Pudina esp. to cater to Indian taste buds. In 2001, Diageo had hurriedly exited Indian-Made Foreign Liquor (IMFL) to focus on its imported international portfolio but revised the strategy with the domestic market witnessing sustained robust growth. In 2006, Diageo announced a joint venture with homegrown liquor company RadicoKhaitan targeting the IMFL segment. Brands of RadicoKhaitan include 8 PM Whisky, Contessa Rum, Old Admiral Brandy and Whytehall Whisky. Bollywood king Shahrukh Khan was roped in as the brand ambassador for its first offering Masterstroke deluxe whisky. In Sep, 2006 Diageo decided to launch the indigenously develope5d vodka brand called Shark Tooth aiming to position it at prestigious vodka segment. In June, 2009 the Tamil Nadu government had cleared the decks for Diageo to start bottling in the state, making it the first MNC drinks company to list brands in the local retail trade. The company had sold its most successful brand Gilbey‘s Green Label to the country‘s largest spirits maker, UB Group, for Rs 60 crore in 2001. Diageo is also bringing back the Gilbey's trademark to India through the Tamil Nadu foray. Sources said that Gilbey's is now being readied as a brandy flavour as the drinks giant works on leveraging its brand equity in South East Asian markets. The company entered into the Indian beer market with its globally top-selling premium stout beer brand Guinness. Diageo bought a strategic stake in Nasik-based Sula Vineyards. They entered the Indian Rum market with their brand Captain Morgan. Despite the continuous efforts, the market share of Diageo in these other segments continues to be low. Roland Abella, managing director of Diageo India is clear that value, and not volumes, will drive Diageo India's growth, hence its focus on premium products. It has reorganised its product basket and has exited the wine business in India. It has taken off its only wine brand Nilaya (priced between Rs 395 and Rs 500) from the market so as to focus on its iconic brands like Johnnie Walker Scotch whisky, Vat 69, Ciroc and Smirnoff vodka. Now, says Abella, ''For us, the centre of gravity is spirits.‖ Diageo like other luxury retailers is betting on India's young demographic, rising consumer standards and exposure to sophisticated products. Another reason for Abella's optimism is that premium brands are less vulnerable to the fluctuations of the global economy. Diageo has made significant noise in India during the past two years in a bid to boost presence across trade channels for lifestyle drinks. In November, 2007 Diageo tied-up with 6retail giants Reliance Fresh and Shoprite Hyper to distribute its wines portfolio in cities like Mumbai and Pune. UB and Diageo initiated trade marketing activities with the alcobev channel in early 2008. Diageo helped revamp local wine shops and re-branded them as JW Select outlets. From a push effect earlier, Diageo initiatives like JW Select create the pull effect. Once the experience is created, offtake happens,‖ said Santosh Kanekar, then marketing director, Diageo India. Clubs like Johnie Walker Club & Lounge, Smirnoff Cafes were launched as a part of the surrogate advertising. These clubs aimed at giving the experience of drinks along with brand associated music, art events and Formula 1 races. Johnnie Walker Bartending Academy‘ was launched aiming at introducing world-class standards of bartending.
Art of War: A Book Review
The Art of War, is a Chinese military treatise, written by Sun Tzu, the sage Strategist, Military General and Philosopher. This book is speculated to be written somewhere in the 6th century B.C though the exact date is still considered to be a matter of dispute as different historians have different takes on the same. That was the time when Mainland China was fragmented into a number of smaller nations (some Chinese historians put the number at 7) and the nations were at constant war with each other in order to conquer control over a vast expanse of fertile territory in the Eastern China. Sun Tzu was the Military General of one of the warring nations named Wu, which was very successful in not only wading off the attacks from other aggressive nations but also many wars that it fought. The book is divided into 13 chapters where Sun Tzu writes about the nuances and knittygritties of warfare at great length. In the initial chapters, he talks about the traits that a General has to possess Wisdom, Sincerity, Benevolence,Compassion and Strictness. Sun Tzu focuses on the Deception as one of the primary weapons of military warfare. Some of the quotes on deception are:
“All warfare is based on deception.”
“Pretend inferiority and encourage his arrogance”
“Be extremely subtle, even to the point of formlessness. Be extremely mysterious, even to the point of soundlessness. Thereby you can be the director of the opponent's fate.”
“If you are far from the enemy, make him believe you are near.”
If one tries to draw an analogy to the real life business scenario it is pretty evident that, the advantages that one stands to gain out of keeping one’s opponent in the dark and mislead them are immeasurable. Here one has to remember that one can deceive or mislead someone only up to some point of time. One day the cloak of deception will fall down and may lay you bare. But it is here one needs to understand that the calculated and careful you are, the more one can extend the duration of keeping one’s opponents into believing something that’s not true and in the process draining their resources. Sun Tzu also focuses immensely on understanding one’s enemy as much as you understand yourselves.
“If you know the enemy and know yourself you need not fear the results of a hundred battles.”
“If ignorant both of your enemy and yourself, you are certain to be in peril.”
Sun Tzu writes about knowing one‘s enemy at great length as in order to outsmart our enemy one needs to know about him inside out. He also goes on say that-
“Keep your friends close and your enemies closer.”
Sun Tzu discourses about strategy by saying that the one who makes more number of calculations before the war has more number of chances of winning the war. Strategy is not all about sticking to one‘s plans but it‘s more about thinking on one‘s feet and to change it accordingly to suit to the ever changing scenario. If we try to draw a parallel with the real life business world where the situation changes faster than one could imagine, it makes all the more sense to immaculately strategize and implement it meticulously taking into consideration all the possible factors and variables involved. It goes without saying that the more holistically you look at the problem and plan accordingly the more are one‘s chances of avoiding the pitfalls of it. In this seminal work Sun Tzu also talks about the lead leadership qualities that are supposed to be possessed by a general (read as business leader) and the management of one‘s resources.
“A leader leads by example not by force.”
“Management of many is the same as management of few. It is a matter of organization.”
“Treat your men as you would your own beloved sons. And they will follow you into the deepest valley.”
“If words of command are not clear and distinct, if orders are not thoroughly understood, the general is to blame. But if his orders are clear, and the soldiers nevertheless disobey, then it is the fault of their officers.”
These are some of the quotes that one can find in this masterpiece regarding the characteristic traits that are to be possessed by a leader. He delves in depth as to how to manage one‘s resources and it is not a function of the amount of resources but it has more to do with the organization skills of the leader. These are some of the many things that the author has talked in the book. The book is as relevant today as it was when it was return speaks volumes about how farsighted the author is. This book is 7 highly recommended for Business leaders around the world because of the timeless pieces of wisdom the book provides. Such is the popularity of the book that it has seen a spin off in the form of Art of war for business, Art of war Executives, Art of war for Managers, Art of war for women, Art of war for teachers etc just to name a few. This book rightly places Strategy on the altar of business.
Strategic Brand Management: Creating The Mist
This is an article that one of our recent alums (Amritanshu Pandey) wrote last year. hope you enjoy it
When presented with the more tangible‘ elements of sales and distribution management, the realm of branding strategy can often seem vague and misty. After all, how does one strategically‘ decide whether the logo‘s color should be green or red? What strategic models go into deciding whether to be a hip‘ and trendy‘ brand or a ‗sturdy‘ and ‗reliable‘ brand? Given that a brand is essentially the sum total of perceptions and attitudes towards a name, can there ever be a strategic approach to brand management? These are some of the questions that we are likely to face as we grow in our marketing education. The sales related experiences of the summer further seem to reinforce that barring sales all marketing is essentially a gut-feel‘ matter. We couldn‘t be further from the truth, for if strategic brand management was as flaccid as it seemed, then the value of the Coca Cola brand ($70 million) would not have been half its entire stock market value ($136 million1).
Why does branding strategy seem so vague? Increasingly the marketing paradigm is shifting towards the view that understanding consumers is the key to building great brands. In her ten steps to building a brand DNA, Carol Chapman2 observes the first step to be identifying
the perception that consumers hold about one‘s brand. Therein lies the problem. Our educational growth so far, and indeed professional conditioning, has more or less turned us away from the psychological and sociological towards the rational and empirical. This would be very fine if our subjects were the ‗rationally behaving‘ units of any economics model. The problem is that our subjects are real world consumers, and they cannot be counted on to be rational‘- consumers buy products with their minds, but they buy brands with
their hearts. The implication here is that strategic brand management involves a very penetrative understanding of both psychology and sociology, with all their precursor influences. The reason why the rational manager shouldn‘t worry however that branding strategy is still works on the same principles as any other strategy. This can be put into 3 steps:
Identify all the influencing variables
Determine which variables are pertinent in the decision making process
Take the Decision!
Let us take the case of conceptualizing a new logo for a brand- an exercise in brand revitalization. To make our job easier, let us assume that the logo has been created and we merely need to decide its final colors. What is the strategy? How can we strategically determine the optimum color combination? We take step one identify all the influencing variables. In this case the variables could range from local perceptions of color to the color schemes of competitors. Either way our goal is the same- to determine which color combination would best appeal to the consumers. It may seem like this is a matter of creativity and aesthetics, but it rarely is. Imagine selling agarbattis to Banarasi pundits in dark green packaging- in their minds it forms an instant association with another religion, and they will turn away from it. Imagine selling a children‘s toy brand with a logo that‘s color scheme is brown and black. These may seem like intuitive and common sense examples after
all everyone knows that to sell to children one must use bright and attractive colors. If you knew this too, then you‘re already on your way to understanding strategic brand management. In the above example our consumers were children, and the understanding is common that bright colors lure children. But what if our consumers are middle aged housewives? What if the target group is bald men in rural India? Then, understanding and knowing the consumers isn‘t so natural- but equally pertinent. Every individual‘s mental make-up is the sum of all nodes and associations that have formed in his/ her brain since the process of learning began- this explains why books on consumer behavior seem more like books on behavioral psychology. The chief element of branding strategy is to uncover these associations. In the larger context it is these associations that form the bulk of our influencing variables. All associations a consumer may have in his/ her mind can significantly influence the selection and purchase behavior. For example, if a consumer associate‘s pink with feminity or even a lack of masculinity, then it‘s probably a bad idea to sell him a brand with pink themes. He is very unlikely to form a relationship with such a brand. The implication here is that branding decisions are rarely whimsical and arbitrary- there is an underlying understanding of the target group
behind them. Step two is to determine the pertinent influencing variables. There may be some associations in the consumer‘s mind which are irrelevant to our brand, but there would be some that are highly critical. The brand manager‘s job is to separate these two and identify the critical associations. For example for a target group comprising largely of adventure sports enthusiasts, the associations formed towards personas and endorsers might not be as critical as their associations towards quality and reliability. In this case one need not
concentrate on choosing the right brand ambassador but on conveying to satisfaction the brand identity of being quality driven and reliable. Here again the key is in understanding the consumer. The implication is that
branding strategy is a rational process based on the identification and manipulation of emotional elements. But the last and final step is equally important- take a decision. There is no right and wrong in branding strategy, that luxury is available to us only in hindsight. But there is a veritable list of dos and don‘ts that act as guiding
principles in the formulation of a branding strategy. Once you‘ve understood your consumer- understood what motivates him and how, how he learns and from where, what is his attitude and how can it be changed (if need be), and what are his perceptions then you‘ve crossed over most of the vague and misty parts of branding strategy. The process of data gathering and assimilation is over and the stage for taking a decision is set. In choosing your logo color, ask yourself what color ignites what associations in my target group? If I choose red, does that evoke an aggressive or negative emotion or is it suitably attractive? If my color is blue,
will that put off the female consumers or is its association far too subtle for that? When determining the brand
identity you must go through the same series of questions, but the prime directive remains the same- filter every decision through the prism that is your consumer. For every decision variable, ask yourself what associations would it form in your target group‘s mind? How does your target group look at itself? Is its self-perception based on dynamism or more on stability and Constance? Remember that consumers are attracted
towards brands that reflect their own aspirations. To have your brand mirror them you must clearly identify those aspirations. Once that is done however, take your decision and stick with it. Sometimes the most thought-out strategies will fail before swiftly put together marketing mixes, but you can be sure that you‘ve learnt more about your consumer than the competitor- and are thus better prepared for round two. To conclude, strategic brand management is a process of understanding the psychological and sociological undercurrents in one‘s consumer base. The remaining is simply a process of implementation. This aspect of strategy can seem vague and misty because it borrows its learnings from disciplines based not on ‗rational assumption‘ but on ‗emotional assessment.‘ But once a process is put in place the steps can be as tangible as
those for any other aspect of strategic decision making.
Understanding the True Strategy of Blitzkrieg
The word Blitzkrieg, meaning lightning war, is most of the time simply described as the doctrine employed by the German Army in World War II. Blitzkrieg, according to many historians, was used to devastating effect in Poland in 1939, in France and the Low Countries in 1940 and in the Soviet Union in 1941; it harnessed the firepower and mobility of the German panzer divisions through aggressive leadership at both the strategic and tactical level.
Blitzkrieg was created out of necessity and is about annihilation of the enemy. It has been a strategy that influenced the German General Staff since the 1890s because of the fear of a two front war. A quick decision or victory was necessary in the West in order to be able to fight the Russians on the Eastern Front. In order to win decisively, annihilation of the enemy was necessary and the only complete way to annihilate the enemy is through encirclement. The strategy was formed prior to the use of these tactics of World War II, and can be traced back to the decades leading to World War I.
With the commencement of the First World War, the German General Staff was confronted with the possibility of the ultimate German nightmare, a two front war against numerous enemies strong enough to defeat Germany. The search for an answer to this problem fell to Field Marshal Count Alfred von Schlieffen who was the Chief of the General Staff. Schlieffen’s operational ideas dominated German military thinking until 1945 and it was from these ideas that the strategic concept of Blitzkrieg grew. Germany was virtually encircled by their enemies-- Britain and France to the west, Russia to the east and later Italy to the south. These enemies also possessed larger manpower reserves, greater industrial strength, and direct access to the resources of the rest of the world which could be denied to Germany by a blockade cutting off Germany from other continents. For these reasons, a short war was the only possible way to win a war because a long conflict was almost certain to drain Germany’s resources and end her chances to win. Schlieffen’s solution to this problem was deceptively simple. Germany had to annihilate one opponent speedily so that it could then throw its weight completely against the other. An enemy army will not allow itself to be annihilated if it possesses any means of escape and the only way to deny the enemy a means of escape is through encirclement. The reason for the emphasis on annihilation is that it makes the victory decisive. An army can be destroyed in battle but if most of its soldiers are able to escape, a new army can be formed out of the survivors. This is not possible if an army is annihilated. Furthermore, the prospect of one’s slaughtered countrymen thrusts iron into the soul of the survivors and renders them less likely to renew the struggle quickly. Schlieffen’s primary aim was the neutralization of a two front war through the quick defeat of the French army. The need to destroy at first the French forces on the Western Front, followed by an offensive against the Russians in the East created several challenges. The notion of operational flexibility was lost because in order for the operation to have even a chance to be successful, a complex series of mobilization and deployment schedules bound to an inalterable timeline had to be followed. This was one of the major challenges in the Schlieffen Plan. Because of these challenges, and subsequent modifications by his successors, Schlieffen’s “great wheel” through the Low Countries to encircle the French Army before it could effectively mobilize failed.
Following the horrific experiences of World War I, the German High Command knew that a prolonged stalemate of trench and positional warfare could not be the answer for any future war. Hans von Seeckt, the chief of the Army Command of the German Reichswehr from 1921 to 1926, became the father of the new German Army which was designed not on masse but mobility. Seeckt knew that only the offensive, and so the destruction of enemy forces, would bring final victory. He further believed that the German experience in both 1914 and 1918 had proved that an effective regular army must in future meet three demands: first higher mobility by the fullest possible use of motor transport; secondly a logistical system strengthened by increased motorization which was capable of continuous replacement of men and material at the front; and thirdly a greater degree of independence from the civilian reserves so that the Army might mobilize more rapidly, take the initiative, and perhaps be able to strike before the enemy’s Nation in Arms could mobilize. In the Second World War, the danger of a two front war was avoided with the lightning attack and conquest of France in 1940 which furthermore resulted in the gain of raw materials such as ore as well as military equipment that was extremely needed for future Blitzoperationnen. In order to understand the thesis, that Blitzkrieg is a strategic term that needs to be redefined, a closer look at the different levels of Blitzkrieg is helpful.
Blitzkrieg can be separated into three levels. First, at the tactical level, the aggressive use of “combined arms” is usually described as Blitzkrieg. Next is the operational level, in which higher commands plan and conduct campaigns which are aimed at creating the conditions to achieve strategic objectives. This includes not only movement and manoeuvre, but also a speedy mobilization of troops and equipment. Lastly, there is the strategic level which is the responsibility of the highest command and where cooperation among political, economic, and military agencies work together to accomplish political wartime objectives, which is the true Blitzkrieg strategy of Germany.
The different preparation phases of Blitzkrieg can be described as the planning phase, in which the Germans select the point or points of attack, the reconnaissance phase, during which the plan is finalized; and the surprise phase, which includes measures to make the enemy unaware of imminent attack at the precise time and location. The next phase, the actual combat or action phase, can be divided into the roles of the Air Force and Army. The mission of the Air Force is to destroy the enemy’s air force, preferably on the ground during the first 24 hours, in order to gain air superiority and free the German Air Force to provide close air support for ground units, including interdiction of enemy supplies and communications to bring about enemy paralysis. The mission of the Army is to conduct a concentrated ground attack which followed a brief artillery bombardment, and included Panzers, mechanized infantry and mobile artillery in an effort to force a breach in enemy defences. Army forces pour through the breach and punch deep into enemy territory, using speed to maintain the advance and keep the enemy off balance. Due to the importance of speed, enemy strong points are bypassed until the panzer pincers gradually encircle whole enemy armies in giant pockets and then hold this perimeter until the slower moving infantry divisions catch up and annihilate these pockets, bringing a quick and decisive victory.
There are three factors which form the basis for an offensive action. They are surprise, speed and superiority in material or firepower. Surprise can take three forms: strategic, technical and tactical. Strategic surprise is gained by the concentration of forces and by movement towards action carried out in such a way that the attacker strikes on a certain front with a force considerably larger than that of the defence. Technical surprise derives from the use in battle of an unknown weapon or means of movement; and tactical surprise derives normally from the combination of technical surprise and the use of new tactics that are more suitable than the old for the new weapons and material. Speed, the second factor in successful attack, is the necessary complement to surprise. Because surprise can only gain temporary success, speed is needed to further exploit the success. Speed usually depends on preliminary planning as well as co-operation between units which results in the enemy’s inability to develop effective counter measures to defeat the attacker’s initiative. The third factor, superiority in firepower and material is necessary because without superiority, movement is difficult or ceases. Therefore, firepower is considered to be the driving force behind manoeuvre. All these factors were improved by technical advances not only in weapon systems such as tanks and airplanes, but also through advances in communication between combat units.
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