Introduction
Whisky is probably the product considered as most indigenously Scottish, and it is also one of Scotland’s most important industries. Although direct employment in the whisky industry is fairly modest it is responsible for the indirect employment of thousands more. Throughout the 1970s, the whisky industry was buoyant. During that decade, distilling capacity rose by fully 50 per cent, the vast majority of this increase being achieved by the expansion of existing distilleries rather than the building of new ones. The reason for this lies in the fact that the precise characteristics and individual character of the whisky from each malt distillery is highly prized, making it difficult for recent additions to establish themselves in the market (Ashcroft & Love 1993). Whisky distillers have great difficulty in forecasting future demand, because the spirit must by law be matured for at least three years before it can be called whisky, and maturation periods of over eight years are by no means uncommon. Scotch whisky has succeeded in becoming popular with young, discerning drinkers in countries like France, not least because of considerable effort on the part of the Scotch whisky industry in terms of marketing and promotion. The sale of every bottle of Scotch whisky involves an input from Scottish agriculture, the glass industry, the paper and packaging industry and a host of other manufacturing and service sectors (Ashcroft & Love 1993). There are various companies that produce Scotch whisky, one of which is Drambuie. The paper will conduct an environmental analysis of the drinks company Drambuie for the periods before and after the chief executive Phil Parnell took over.
Environment Analysis
The whisky industry
Whisky distilling in Scotland has a long history and was certainly well established by the end of the sixteenth century. The small traditional distillery had a number of distinctive buildings, including floor maltings and kiln, a large building for the mash tuns and fermenting vessels and the still room where repeated distillation took place in pot stills made of copper. Because whisky has to mature for several years in the cask, particularly the single malts, and did not pay excise duty until it was sold, distilleries had to provide large bonded warehouses where the spirit could be kept under lock and key. The blending of whisky, using grain spirit and a number of single malts, was not necessarily done at the distillery, but from 1860 was carried out, along with bottling, in bonded warehouses often in ports. The initial malting processes in distilling were similar to brewing, but here, too, floor maltings are now almost completely replaced by the pneumatic or drum process (Palmer & Neaverson 1994). For the initial drying of the germinated grains, anthracite was used as fuel followed by peat to impart the required flavor. Malt-houses existed alongside many Scottish distilleries, but the malting process, as in brewing, is now generally carried out by specialist maltsters in the east of Scotland. The Scotch whisky industry has become increasingly concentrated into large production units centralized in the barley-growing area of eastern Scotland. However, many small traditional distilleries remain elsewhere from the nineteenth century, a few operational, others surviving as tourist attractions and some adapted for other purposes. In the south and west of England, the traditional drink produced was cider from locally-grown apples. The apples first had to be crushed to a pulp and this was originally carried out in a horse-driven mill, which consisted of an edge runner in a circular stone trough. These are still familiar sights in cider-making areas, although often now used for decorative purposes. The pulp was then placed in Hessian bags and the juice squeezed out in a hand-operated press, examples of which may also still be seen on many farms. The apple juice was then fermented in casks, supplied by local cooperages. The industry is now almost entirely factory-based but still located in the traditional cider-making regions (Palmer & Neaverson 1994).The Scotch whisky industry provides a good example of the strategic interdependence that often is present within regional clusters. Some firms distill whisky and sell it to blenders, whereas others firms do not do any distilling, but focus on blending. Other firms are partially integrated, supplying part of their own needs and sourcing the remainder externally. The whisky firms engage in a complex web of purchase and trade arrangements. The blend masters from the different companies know each other and are familiar with each others’ operations. They frequently discuss the availability of different types of whiskies and work out trades. One company will often supply another with the understanding that there would be reciprocity at a later date. The proximity of major industry participants and rapid information flows ensure that attempts at opportunistic behavior would be punished swiftly and surely (Chandler, Hagstrom & Sölvell 1999). The whisky industry is one of the most hotly contested industries because of the high success and attractiveness of whisky and other liquor products.
Macro environment analysis
PEST
Political
Drambuie made sure that they were aware of the political situation of every country they have operated in and the company has made sure that it has a reasonable position with regards to political issues Drambuie is continuously prepared for any problems concerning the political sector. Any political noise is irrelevant to the company. Unless the political environment will change rules that relate to their operations Drambuie prefers to stay away from such subject. The political environment has allowed the liberation of the market, liberation of the market paved the way for improvement of services. The laws of the US and other markets for Drambuie are not a hindrance to the growth of the company. . The laws of the US and other markets for Drambuie provides the much needed help in making sure that the company will achieve its goals. The laws of Drambuie’s markets tend to give guidance to the organization so that the company can achieve its goals without major issues from the government.
Economic
Drambuie Liquor Company can be said to be economically stable for the past years after Phil Parnell became chief executive. The appointment of Parnell introduced some changes that benefited the economic stature of the firm. It is not only the internal economic situation of the company should be taken note of but also the economy of the country. Drambuie Liquor Company checks first the economic status of the country they are operating in before making decisions if they will have a branch in that area and since the US recently has been doing well economically then there is no reason for Drambuie Liquor Company to abort entering that market. The economic forces can dictate the actions of Drambuie Liquor Company if the economy is doing well then Drambuie Liquor Company can offer new services but if the economy is in a worse state then Drambuie Liquor Company have to reduce unnecessary expenditures and un important actions. The economy of Drambuie Liquor Company’s markets has given opportunities to whisky and Liquor The status of the economy has paved the way for various makes of liquor products to prosper in the region and help in proving that Drambuie Liquor Company is one premier company in the liquor industry.
Social
The socio cultural force serves as the conscience to Drambuie Liquor Company. This force ensures Drambuie Liquor Company will not do things they know can ruin Drambuie Liquor Company’s reputation with the society. This force ensures that Drambuie Liquor Company will consider first its environment before making any decisions. Drambuie Liquor Company makes sure that the products and services they offer will be accepted by the public. Drambuie Liquor Company does not authorize the delivery of some products they know will cause outbursts or complains from different groups in the society Drambuie Liquor Company also engages in social activities that tend to develop a better relationship between them, the clients and the society they are operating in.
Technological
Drambuie Liquor Company offered new innovations in its technological aspect and introduced new concepts with regards to its industry. Drambuie Liquor Company through Parnell introduced better manufacturing systems that ensured that they create the best products. It also makes use of commendable safety and security systems to the plants and other vital facilities. Since technology rapidly changes. Drambuie Liquor Company makes sure they are updated to what is happening and they can adjust to these changes. The technological forces dictate the trends in the liquor and whisky industry, these forces is the one that determine what should be used to create a product. Drambuie Liquor Company relies on the products created by the technological forces.
What is the five forces analysis?
The five forces address the question why are some markets more attractive than others?’ The collective strength of these five competitive forces determines the ability of firms in an industry to earn, on average, rates of return on investment in excess of the cost of capital (Kermally 2003). The five forces analysis developed by Porter is a framework for the industry analysis and business strategy development. The five forces compose of factors that affect the company’s ability to satisfy clients and gain profit. The five forces help the company in determining the competitive intensity of the market. The essence of Porter’s analysis is that the strategizing business needs to assess the strengths of these separate five forces in its specific industry context and then to position itself/check them/alter them in its favor so as to optimize its own sustainable competitive advantage within the structure. The Five Forces Framework may thus only provide a one-sided or distorted perspective on strategy options that need to be considered by an international business in the contemporary setting. The extended Porter analysis provides a valuable general framework for the analysis of the strategic management of international businesses in the contemporary era, providing an understanding of the growth of international competition and the emergence of global firms in some industries (Mudambi & Ricketts1998). The five porter analysis is beneficial because it is one of the models that are easy to learn and understand. It does not require much specialization to understand the model. The five forces analysis helps the company to analyze their current situation in an organized and structured way. This kind of analysis provides the reason for people to be attracted into the company and the industry it belongs to. The five forces plays a big part in developing strategic options that can be used to improve the performance of the company or influence the movement of the company into its desired direction. Moreover the five forces provide the leaders of the firm on what can be its opportunities and threats so that they can advance or maintain their competitive advantage. Lastly the five forces provide what aspect of the company or the industry can be profitable and what aspects of the firm should be changed in order to achieve relative success. The following part will concentrate on the five forces of Drambuie Liquor Company
Porter’s five forces
Potential Entrants
Drambuie Liquor Company has been around for a quite some time and the company is not greatly affected by the new entrants. The influence of potential entrants to the company is weak. Any new entrant will have difficulty in gaining clients not unless they can provide innovative strategies that can thwart Drambuie Liquor Company from its position and get the company’s clients. The services offered by Drambuie Liquor Company is unique in terms of appearance if any new entrant want to compete with Drambuie Liquor Company’s standards of products and creation of products they need to have a huge investment to create products that have the same caliber as the products of Drambuie Liquor Company. They also need to make use of better strategies that will give them an instant brand identity.
Competitive rivalry
Competitive rivalry has a high influence on Drambuie Liquor Company. The company has high concerns on its competitors since there are many competitors in Drambuie Liquor Company’s industry. The competitors contribute to the current problems of the company since it already acquired a good percentage of the buying public the company has some assurance that it will not easily lose to competitors. But if the company will plan to enter a new market, competitive rivalry will become a concern to the company. Drambuie Liquor Company through their chief executive Phil Parnell needs to make sure that it makes cautious decisions in current and future markets.
Substitutes
Substitutes give high influence to Drambuie Liquor Company and its different products since substitutes can make a company lose the clients it has. The substitutes can be in the form of other liquor products. The whisky and liquor industry is continuously growing and continuously changing strategies. Substitutes come in the form of beer, wine or other intoxicating products. Drambuie Liquor Company makes sure that the substitutes won’t give them much problem. They do this by proving that the products they offer and the technologies they use to provide the service are the best quality and are better than substitutes or any other company.
Bargaining power of buyers
The bargaining power of buyers highly influences the whisky and liquor industry and Drambuie Liquor Company It shows how the industry tries to create good relationships with clients. As much as possible the company maintains reasonable prices for their products. They also have promos that intend to make the clients have second thoughts on purchasing products from other companies. When the clients try to dictate lower prices Drambuie Liquor Company tries to know whether it is reasonable. Drambuie Liquor Company sees to it that a big part of decisions on prices of whisky and other products will be based on suggestions of the clients. For Drambuie Liquor Company the bargaining power of its buyer is gradually increasing as they are more and more similar types of products and services available in the market.
Bargaining power of sellers
The bargaining power of sellers highly influences Drambuie Liquor Company. The company makes sure that their suppliers have high bargaining power through helping them show their importance in the industry Drambuie Liquor Company makes sure that the price being asked for a material has the same value as the same materials’ quality. This will ensure that budgets will not be wasted. Drambuie Liquor Company has to be aware of its partnership with its materials partners. Drambuie Liquor Company has to make sure that every part of the agreement with the partners will be followed. Any adverse changes or violations in the partnership agreement will incur a certain amount of risk to Drambuie Liquor Company
SWOT Analysis
Strength
The company’s strength includes its integrated management systems (IMS). This system makes sure that the company’s systems are maintained well so that it can meet expectations. The IMS focuses on the systems of risk management, quality, injury prevention, damage control, emergency plans, and environmental safeguards. The IMS helps Drambuie Liquor Company have advantage against competitors through preventing any delay in the operations of the business. A strength for Drambuie Liquor Company is its well established values. The values help the company achieve its goal and maintain its stature in the liquor and whisky industry. A strength for the Drambuie Liquor Company is its high regard for its community wherein the company provides sponsorships and the provision of education opportunities. This ensures that the company has a good relationship with its environment. Moreover a strength for Drambuie Liquor Company is its high regard for the safety of the workers. The company has acquired certification for its health and safety practices, this shows that the company uses strategies that have high standards towards the personnel and contractors. Lastly a strength of Drambuie Liquor Company is its website that is informative and attractive. The website provides information about the company and information on the services of the port and how service is delivered.
Weakness
Drambuie Liquor Company main weakness is minimal advertisements. The company doesn’t use many advertisements that can help it be known to more people. A weakness of Drambuie Liquor Company is the limited area that has been reached by the company. The company has a small market; this makes it hard for the company to reach newer clients. The company can only offer its product to those of age to drink liquor products. This prevents the company from offering products to diverse clients and clients of all ages and gender. It also hampers the chance for the company to innovate its products. Lastly a weakness for Drambuie Liquor Company is its culture of putting much power on the top management. The company has the tendency to put less decision making capabilities to their divisions. The top management cannot always have the information needed to make decisions on the company’s processes; some decisions may need some inputs from other sectors in the firms,
Opportunities
An opportunity for Drambuie Liquor Company is to find out more ways to give a distinctive look and features to their products. The company can continue to make sure that their products are uniquely packaged. The company can create attractive and trendy packages that will attract their target market. By doing this the company will have competitive advantage over other firms. An opportunity for the company is to improve the features of their website. The website can be improved by adding online communication systems that will help the company communicate with perspective and regular clients or retailers. By doing this it can attract more clients and retailers from various parts of the world. An opportunity for the Drambuie Liquor Company is to continue to make use of newer technologies that will provide better service to clients. The Drambuie Liquor Company can use the advancements in manufacturing facilities and technologies to make sure that the clients will achieve satisfaction. The company can make use of newer technologies to create the best product possible. An opportunity for the Drambuie Liquor Company is to continue to reach newer markets where it can offer its products. The company should consider making products that can be given to minors. This will divert itself from other companies and will help the company achieve higher income rates. Lastly an opportunity for Drambuie Liquor Company is to increase public knowledge about the company and the product it provides. This could be done through the use of internet and other media. This will help have higher rates of profit and it can help the company maintains its business survival.
Threats
Globalization affected greatly almost all the industries of the world. It brought about the need for change. The changes created a new competitive environment in this industry. Globalization is one of the threats to Drambuie Liquor Company. Globalization can be a threat to port because Globalization can produce alternative intoxicating that can reduce the need for Whisky. A threat to Drambuie Liquor Company is the competitors. The competitors will try everything they can to gain a better standing against Drambuie Liquor Company. The competitors might discover systems that are better than Drambuie Liquor Company’s system. Drambuie Liquor Company needs to be always prepared for the threats brought by other ports. The threat to the company includes the laws in the country they are operating in. There may be some future laws that will hinder the creation of products. The laws may be used against production of liquor products. There maybe laws that can change the age restriction for those who will drink liquor. If the age restriction is lowered, this means that younger people can buy the company’s products and this will add more income to the company but if the age restriction is heightened the result would be a need to change the target market for the firm. Another threat to the company is the tariffs and taxes that the company has in different countries, each countries has its own rate of taxes and tariff that creates additional expenses for the company. A threat to Drambuie Liquor Company is the environmental issues that might be raised by certain groups. The environmental concerns on the creation of liquor products can be used as propaganda against the company.
References
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Golembiewski, RT 2000, Handbook of organizational
consultation, Marcel Dekker, New York.
Kermally, S 2003, Gurus on marketing, Thorogood, Thorogood,
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Mudambi, R & Ricketts, M 1998, The organization of the
firm: International business perspectives,
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Palmer, M & Neaverson, P 1994, Industry in the landscape,
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