Macro-Environment
The British premium drinks company ‘Diageo’ founded in 1997, is the largest multinational company in terms of alcoholic beverages. Therefore, it is inevitable that Diageo has had to, and will continue to find ways to adapt to various factors that are external and overwhelming. These factors are known as the macro-environment, and will be discussed further.
The activities of Diageo’s direct competitors, such as the Carlsberg Group, will affect how Diageo prices some of its products. For example, if Carlsberg decide to lower the price of their beer, Diageo will have to react, as beer is a price elastic product. Therefore, Diageo will have to either lower their price, or further market their product to illustrate to customers why they charge a more premium price through a more premium service.
Although beer is a huge revenue generator for Diageo, it is under constant pressure from the government’s pint duty tax which is currently at 52 pence a pint. This was reduced from 2014's duty tax by 1%. With many pub landlords struggling to keep their businesses a float during these tough economic recovery times, this led to many pubs shutting down as they were not being profitable. This would have a devastating effect on major beer brands that Diageo owns such as Guinness, as they will lose the income streams they once had from many pubs.
Another uncontrollable factor is that some cultures and religions do not consume alcoholic beverages. For example, in the Middle-East, where the majority of people are Muslim, Diageo has had to adapt by selling their products through third party distributors. This may be due to either alcohol consumption being banned, controlled to an extent, or the fact that advertising is limited.
Diageo has also recently targeted the female population by creating a which was solely advertised towards females, and by holding research and development in the second largest continent in the world; Africa. The drink Snapp, is considered a “female friendly” substitute to beer. The motive behind this launch was to target an increasingly growing market, which has undoubtedly proven successful, as Snapp managed to generate more than £10 million sales in the first year alone, leading to being established as the most successful new release, in terms of branding.
Additionally, as Diageo is a multinational, they have had to adjust the prices of their goods according to exchange rates to ensure that all of their customers across the 180 countries that Diageo have presence in, are receiving a fair price.
Nowadays, technology has also had a huge impact on the macro environmental aspects within the company, Diageo. Innovative concepts are taken and developed further to ensure that the company can construct new ideas to help give them the extra competitive advantage against their rivals. Recently, Diageo have used their status to create a programme called “Diageo Technology Ventures”. The programme has been developed to individually target previous and current business setbacks which will in turn allow the company to expand on their growth as a whole, by working with newly developing technological companies. They aim to work on and promote several different innovation briefs, where they work on the various challenges and opportunities for the business to expand. The programme allows a budget of $100,000 and a current team of Diageo to work with prosperous candidates. This also links into bridging the gap of unemployment within the economy.