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Pernod Ricard: Strategy analysis

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  1. Analysis of the external environment of the alcohol industry
    1. PESTEL Framework
    2. Porter's Five Forces
    3. Analysis of the competitors on the market
  2. Internal analysis
    1. Corporate level
    2. Business level
  3. Implementation of the strategies and the vision for the future of Pernod Ricard
    1. SWOT analysis
    2. Opportunities for growth
    3. Strategy evaluation

Pernod Ricard is the second largest group on the wines and spirits' market. For the financial year 2007/2008 the Group generated €6.589 billion in sales (95 million cases) with a net profit of €840 million. Pernod Ricard manufactures and distributes a wide range of alcoholic beverages.

The Group was created in 1975 after the merger of two of the biggest French producers of alcohol and it took the name of Pernod Ricard SA. Some of the most famous brands of Pernod are the following: Ballantine's, Chivas Regal, Jameson, ABSOLUT, Beefeater, Havana Club and Ricard. There is a steady increase of the sales from one year to another as we can clearly see in the chart on the left.

Currently, Pernod Ricard is number 1 in Europe and Asia and number 2 on the American continent after his biggest rival, the British group Diageo. Since the end of 1990's the group has widely diversified its portfolio by making numerous acquisitions of other famous alcoholic brands. In 2001 it acquired a share in Seagram, in 2005 the Allied Domecq Company and in 2008 Pernod bought the Swedish company Vin&Spirits (Absolut vodka).

The alcoholic beverage industry is composed of three major types of beverages: spirits, wine and beer. But we will consider only the first two, as Pernod Ricard does not produce beer.
First of all the spirits market is the one with the highest growth during the recent years. The demand of the European, Asian and American consumers for whisky and vodka has grown up. Surprisingly, there is positive effect of the high prices on the demand which is explained by the strategies undertaken by the leading companies.

[...] This is well developed and mature industry where only the competent and the experienced actors can survive Analysis of the competitors on the market Identification of the strategic group of Pernod Ricard: We have defined 3 of the major competitors which are Diageo, LVMH and Bacardi Martini. They all have similar strategic characteristics and follow similar strategies in terms of geographical coverage, distribution efforts, pricing policy and technical leadership. Their policy can be defined as a premiumization. The products of these companies have a very high perceived value and they are symbol of a high social status. [...]

[...] Some producers such as Pernod Ricard even promote sustainable agriculture, encouraging the responsible use of natural resources. Packaging and glass bottling come out to be a top priority and therefore steps are taken to reduce the impact of these activities. The supplies that are needed in order to produce the different kind of beverages are dependant on the crops. All the products are derived from agricultural commodities. In case of natural disasters or droughts the supplies can fluctuate, so the impact of the nature should not be underestimated. [...]

[...] The American wine producers hold strong positions there, so a possible acquisition on the long term or alliance with a major player there will be the aim of the wine division of Pernod Ricard Strategy evaluation Suitability: The proposed strategy addresses the key issues that have been recently appeared the maturity of the original markets and re-direction towards emerging markets. The strategy is mainly dealing with the activity of the Group as a portfolio manager. The proposed actions are directly linked to evolution of the economic environment in the recent years. [...]

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