BRL hardy case

BRL HARDY:GLOBALIZING AN AUSTRALIAN

WINE COMPANYGROUP 3: HENDRY – PAUL - VANIA

MULTINATIONAL CORPORATION MANAGEMENT

“GOOD COMPANY, GOOD WINE, GOOD WELCOME, CAN MAKE GOOD PEOPLE.” - WILLIAM SHAKESPEARE (1613)

BRL Hardy Background

OUTLINE

• Industry Background

• BRL Hardy Background

• Success in Europe

• If you were Steve Millar, what would you do?

• Any suggestions to your Dream MNC?


Industry Background

Success in Europe If I were Steve Millar

suggestions to Dream MNC


INDUSTRY BACKGROUND


Industry Background



1788 Introduced by Captain

Arthur Phillip

1969 wine consumption was 8.2 liters

1990 Consumption reached 18.5

liters per person

1995 27% of the

Australian wine

production is exported

2025 Potential Exports

Increased

fortified wines table wines two-liter “bag

in a box”

US$360 million (3,5% worldwide) US$2 billion

(16% worldwide)

United Kingdom / United States

Germany / Japan


BRL HARDY BACKGROUND


Industry Background



BRL Hardy Ltd.

HardyThomas Hardy &

Sons

BRL

Renmano Wine Coop

Berri Coop




Industry Background



Items Hardy BRL

Founded

Founded by Thomas Hardy in 1853

Win first international gold medal in 1882

Founded in 1916 as Renmano Wine Coop.

Merged with Berri Coop. in 1982 Berri Renmano Limited (BRL)

Known for Australia’s largest

winemaker Award-wining quality wines

Fortified, bulk, value wines “The oil refinery of the wine

industry”

Culture/ Values Polite and traditional ,

Family ownership Aggressive and commercial

Cooperative (1916: 1st cooperative winery, 130 Italian grape growers)

Core competencies

“Marketing expertise, brands, and winemaking know-how”

Huge-volume grape crush Bulk packaging operations “access to fruit, funds, and

disciplined management”




Industry Background



Items Hardy BRL

Export Experience

Track record at export 1989: acquisition of Whiclar

and Gordon

Limited international experience in Scandinavia

Goals

Looking for wineries in Europe to reach critical mass + credibility to give access to Europe.

Looking for multiple sources of supply

Struggling and looking for ways to expand and upgrade its business


REASON OF MERGING


Industry Background




NEW MANAGEMENT


Industry Background




POST MERGER SUCCESS


Industry Background



1992 1993 1994 1995 1996 19970.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

500.00

Sales revenue; 375.60

Net after tax profit; 28.40

Total liabilities; 205.80

Operating profit 49,20

Total assets; 455.50

Shareholders’ equity; 249.70

Post Merger Success

Year

Val

ue (

in 1

,000

)


SUCCESS IN EUROPE• Involving 2 key people: Stephen Davies & Cristopher Carson

Stephen Davies Strategy:• Building strengths, starting with U.K. market• Make “Quality Wines for the World” slogan• Initiated a program to rationalize product portfolio• Repositioning a few key brands

Christopher Carson Strategy:• Implementing cost-cutting plan• Reduce the product line from 870 items to 230• Reduce the headcount from 31 to 18• Install strong systems, controls, and policies put him as key

decisions makerMULTINATIONAL CORPORATION MANAGEMENT

Industry Background




SUCCESS IN EUROPE


Industry Background



1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 20010

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

BRL Hardy Europe Historical Data

Net Sales ROI

Year

Sale

s In

£0

00

RO

I Per

cen

tage

BRL Hardy forecast


STEPHEN DAVIES VS. CHRISTOPHER CARSON

Industry Background





STEPHEN DAVIES VS. CHRISTOPHER CARSON

• Centralized Approach vs. Decentralized Approach• Centralized approach (Stephen Davies)

• Central control of branding, labeling and pricing decisions

• Long-term strategy to become a global player centralize key decisions

• Decentralized approach (Christopher Carson)• UK market is not influenced by branded bottles but by the pushing of

commodities through retailer

• Labeling should not be a centralized decision due to local market condition

• Steve Millar point of view

• Handled their differences not directly through instructions

• Valued progress more and saw the conflicts as the constructive tool

• Instead they clashed together - resulting in a volume quadruplicating BRLH UK


Industry Background



IF I WERESTEVE MILLAR


“QUICKLY, BRING ME A BEAKER OF WINE, SO THAT I MAY WET MY MIND AND SAY SOMETHING CLEVER.” - ARISTOPHANES (424 B.C.)


IF I WERE STEVE MILLAR…A mixed of centralized and decentralized structure is the right thing.


Industry Background




IF I WERE STEVE MILLAR…• Set a framework to maintain a clear policy regarding the

areas in which the headquarters would have control over and the areas which Mr. Carson can have independent control over.

• Let headquarter maintains control of the number of competing brands at a given time.• Allow regional operations a certain number of brands to capture

local markets segments that do not interfere with a global brands

• The two lines of reporting decision is pretty ambiguous Let Christopher Carson Stayed under Stephen Davies More fair


Industry Background




D’ISTINTOLaunch D’Istinto – Why?• Organizational Factors

True Partnership, unlike Mapocho from ChileDoes not target the same consumer as Stamp and Nottage Hill

• Financial FactorsCheap Launch (£ 100,000)Good forecast of selling (made by Carson)

• Other FactorsDiversify its suppliers (reduce risk)Providing more varieties to the retailersBrand for average consumer (£3.49 to £6.99)


Industry Background

Success in EuropeIf I were Steve

Millarsuggestions to

Dream MNC


KELLY’S REVENGE VS BANROCK STATION Launch Kelly’s Revenge – Why?• Local responsiveness product for U.K. market

• Backing of U.K. sales management team

• Full fill the low range of Hardy’s brand since Nottage Hills and Stamps went up• 80% of wine market in Europe was priced below £4.49

• Launching Banrock Station Ignoring local knowledge and underutilizing subsidiary strength, also demotivating their managers

• Risk of currency fluctuation will be there if the company comes up with global product price standardization will be very difficult.


Industry Background


Millarsuggestions to

Dream MNC

SUGGESTION TO DREAM MNC


"FROM NOW ON I WANT EVERYBODY TO PUT THEIR EFFORTS TOGETHER AND UNITE IN FINDING A WAY TO MAKE SUPERIOR VEHICLES.“ - KIICHIRO TOYODA 1939


TOYOTA IN SOUTH AFRICA• Since June 1962, Toyota has been established a manufacturing

operations in South Africa (Toyota South Africa Motors Ltd.)• Main Products: Corolla, Hilux, Fortuner, Dyna

• Average of 125,000 vehicles produce per year with 7,000 employee

• Main Supplier for Europe and Africa market

Industry Background


MillarSuggestions to

Dream MNC



TOYOTA’S APPROACH• Toyota is using a regiocentric approach to deliver its

global product.• Toyota does not offer the same products across those regions as

it would not be adapted to the local demand• Offering products to continental regions with similar economies

and culture.

• Some report notes that Toyota’s operation is too centralized• Major decision comes from Japan (recalls, communications, marketing,

and vehicle design and development)

• In North America Toyota doesn't have a single executive in charge each major department head reports to Japan.• Dismissive of outsiders

Industry Background



Dream MNC



GLOBAL VS LOCAL

Industry Background



Dream MNC



DECISION MAKING PROCESS (CURRENT)

Industry Background



Dream MNC


• Executive Vice President• Executive responsible for the operations

involved• Chief Officer

Three-layer Decision making

procedure


DECISION MAKING PROCESS (SUGGESTION)

Industry Background



Dream MNC


• Eliminating The executive between the Chief Officer and vice president

• By doing that:• Reducing Chance of conflicting ideas• Swifter flow of information from Divisional General

Managers to Executive Levels.• Increased clarify in organizational responsibilities• Decision making closer to frontline operations.

• Executive Vice President• Chief Officer

Two-layer Decision making

procedure


PRICING STRATEGIES

Industry Background



Dream MNC


• Toyota offers similar products but there are huge differences concerning the price between some countries.

• It´s a difference of $8,000 considering that the purchasing power for Germany are much higher than people in South Africa.

• Toyota should find the way to adapt not only their products to the each region but also its Price.

Toyota PriusGermany$34,000

South Africa$42,000


KEY LEARNING

•More need of cooperative effort and co-option of dispersed capabilities of national units instead of a very centralized direction and control by the parent company

•Need for global integration as well as local responsiveness

•Organization design is also a key factor in organizing global operations

Industry Background



Dream MNC


THANK YOUFOR YOUR ATTENTION


Documents

BRL hardy case