COLLEGE OF BUSINESS, ARTS AND SOCIAL SCIENCES COURSEWORK SUBMISSION COVERSHEET Coursework MUST be submitted online via Blackboard Learn under the relevant modular/study block/assessment block course page.

Student Number: 1108554

Module Code: MG5616

Module Title: CORPORATE BRANDING THEORY AND ISSUES

Module Tutor: BIDIT DEY

Assessment Number/Name:e.g. Coursework 1, Coursework 2, Presentation, Final Assessment

INDIVIDUAL REPORT

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Executive Summary

Diageo plc is a global-leading beverage alcohol (i.e. beer, wine and

spirits) company (Diageo plc., 2016).

Diageo’s macro- environment has been analysed using PEST analysis.

In addition, its micro-environment has been analysed using market

analysis.

Also, various strengths, weaknesses, opportunities and threats relating

to Diageo have been highlighted. The PEST analysis influences the

opportunities and threats sections of the SWOT analysis.

Additionally, the brand architecture, brand equity and challenges of

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Executive Summary

Diageo plc is a global-leading beverage alcohol (i.e. beer, wine and

spirits) company (Diageo plc., 2016).

Diageo’s macro- environment has been analysed using PEST analysis.

In addition, its micro-environment has been analysed using market

analysis.

Also, various strengths, weaknesses, opportunities and threats relating

to Diageo have been highlighted. The PEST analysis influences the

opportunities and threats sections of the SWOT analysis.

Additionally, the brand architecture, brand equity and challenges of

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Chapter 1: Introduction - An Overview Of Diageo Plc.

Diageo plc. is a global-leading beverage alcohol (i.e. beer, wine and spirits) company; whose headquarters is in London, England (Diageo plc., 2016). Diageo’s purpose is to celebrate life, every day and everywhere; this purpose links with the components of the name ‘Dia” [i.e. Day] – ‘Geo’ [i.e World.] (Diageo plc., 2015; Diageo plc., 2016). Diageo operates in over 180 countries and employs over 33,000 people worldwide (Diageo plc., 2016). Their products vary according to quality and price points; thus providing their consumers with numerous choices (Diageo plc., 2016).

Diageo is a fairly young company that was formed in 1997, as a result of a Merger and Acquisition between Grand Metropolitan plc and Guinness plc (Diageo plc, 2016); thus creating a conglomerate that houses the biggest collection of premium drinks in the world.

It is a corporate brand, whose products brand portfolio include the following (Diageo plc., 2015):

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Chapter 2: An Analysis of Diageo Plc. – Marketing Analysis

To provide a more in-depth overview of Diageo and the relevant factors that impact it, marketing audit tools will be used to perform a strategic marketing analysis/ evaluation:

2.1 – Micro-Environmental Analysis: Market Analysis

The beverage alcohol market sells approximately 6 billion alcohol units annually; thus generating £300 billion in net sales (Diageo plc., 2015). It is a profitable and growing market, which is equally split between emerging and developed markets, in terms of net sales; however, emerging markets experience quicker growth rates and are larger in volume (Diageo plc., 2015).

Diageo’s Market Positioning:Diageo operates in 21 markets worldwide - within the beverage alcohol market - because this 21-market model allows it to adapt to consumer needs, depending on their different geographical-locations; thus, each geographical-location uses specially tailored local strategies (Diageo plc., 2015).

Diageo is the global leader in spirits, owning 9.5% of the world Spirits total volume share in 2014 (Euromonitor International, 2015a; Euromonitor International, 2015b). Diageo possessed 1.0% of the world beer volume share in 2014, making it the world’s12th largest beer producer (passport wine and beer). Also, it is the world’s 23rd largest wine producer, owning 0.4% of the world wine volume share in 2013.

2.2 – Macro-Environmental Analysis: PEST Analysis

PEST analysis monitors the broad macro-environmental factors that have an impact on Diageo and on others within Diageo’s micro-environment (Jobber and Ellis). This PEST analysis will focus on the UK and will also reference to global issues:

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2.3 – SWOT Analysis

The aim of SWOT analysis is that the internal resources/capabilities of a company and its external possibilities should inform strategy (Agarwal, Grassl and Pahl, 2012).

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Chapter 3: Literature Review

3.1 – What is a Corporate Brand?

Brands provide differentiation between competitive offerings and encourage preference; thus they are key to organisational success (Knox and Bickerton, 2003; Wood, 2000). Brand value is one of the most valuable assets [i.e. intangible] of a company (Keller and Lehmann, 2003).

A corporate brand is a brand that operates at a corporate level, where the corporation itself is branded with the aim to provide the corporation with a competitive advantage (Balmer and Gray, 2003). Corporate branding strategy focuses on the core values of the corporation; with the employees/management of the corporation communicating coherent values to an organisation’s internal and external stakeholders (Hatch and Schultz, 2001; Balmer and Gray, 2003).

The role/function of a corporate brand will differ depending on the brand architecture (Muzellec and Lambkin, 2009); which is an important component of corporate branding.

3.2. – Corporate Brand Architecture

Brand architecture is a valuable concept/framework that helps to plot or structure a company’s brand-portfolio (Muzellec and Lambkin, 2009). A company’s brand architecture defines the collaboration between its corporate and product/service brands (Muzellec and Lambkin, 2009). This literature review will be focusing on the two categories of brand architecture, which are a ‘house of brands’ and a ‘branded house’ (Muzellec and Lambkin, 2009).

In a ‘house of brands’ there is little-to-no association between the corporate brand and the product/service brand; thus resulting in less risk of the corporate brand affecting the image of the product/service brand and thus allowing the corporate brand itself to diversify into different product markets without jeopardising its corporate brand equity (Muzellec and Lambkin, 2009; Muzellec and Lambkin, 2006).

Contrastingly, a ‘branded house’ occurs when a master brand acts as an umbrella under which all of the other products/service sub-brands reside. (Muzellec and Lambkin, 2009). Thus, the master brand and the corporate brand are sometimes indistinguishable, with the master brand pushing the sub- brand associations (Muzellec and Lambkin, 2009).

The brand integration strategy ties a company and its brands under a master brand; thus, resulting in a branded house architecture (Muzellec and Lambkin, 2009). In contrast, a separation strategy dissociates the corporate brand from the product/service brands; thus resulting in a ‘house of brands’ (Muzellec and Lambkin, 2009).

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Another important component of corporate branding is the corporate brand equity.

3.3. – Brand Equity

3.3.1 - Corporate Brand Equity

In general, brand equity is used to describe the value of a brand (Heding, Knudtzen and Bjerre, 2009). Corporate brand equity is defined by Keller (2000), “as the differential response by consumers, customers, employees, other firms, or any relevant constituency to the words, actions, communications, products or services provided by an identified corporate brand entity.” Companies aim to achieve strong corporate brand equity, as it is an imperative measure of the success of a brand and it signifies that stakeholders have favourable associations towards the brand, thus differentiating it from its competitors (Shamma and Hassan, 2011).

The corporate brand equity of a corporation can be measured by assessing the intangible characteristics that add value to the corporate identity of an organisation, such as the ‘corporate image’, ‘corporation reputation’ and ‘corporate associations’ (Motion, Leitch & Brodie, 2003, cited in Shamma and Hassan, 2011).

‘Corporate reputation’ is determined by the perceptions about a company’s products/services, vision/leadership, workplace environment, social/environmental responsibility and the financial performance (Fombrun et al., 2000, cited in Shamma and Hassan, 2011). Additionally, ‘corporate associations’ comprise of corporate ability associations [i.e. R&D capabilities, industry leadership, etc.] and corporate social responsibility associations [i.e. environmental/sustainability concerns, concern for local

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(Muzellec and Lambkin,

2009)

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communities, charitable giving, etc.] (Brown and Dacin, 1997, cited in Shamma and Hassan, 2011). Lastly, the ‘corporate brand image’ is determined by the common attributes of the products and the attitudes towards the products, it also focuses on relationships, values and the credibility of the organisation (Keller, 1998).

3.3.2 – Product Brand Equity – How it is measured and constructed

Brand equity also includes product brand equity, which is measured from a customer perspective. Therefore, the total brand equity is an amalgamation of product brand equity and corporate brand equity (Shamma and Hassan, 2011).

De Chernatony and McDonald (2002) formulated a framework to display how product brand equity is constructed, called the evaluation of brand equity (see below). According to this framework, a brand is first birthed and the brand name and positioning is selected; then brand awareness and associations are created, through advertising/promotions; subsequently, as the consumers are encouraged to repurchase the product/service and as they are continually satisfied, positive perceptions of quality and value are developed; if the brand can satisfy these perceptions then brand loyalty results; finally, the brand can then transfer the values, qualities and reputations to other products in order to launch a successful brand extension (De Chernatony and McDonald, 2002).

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Keller’s (1993) customer-brand equity model, measures the brand equity of a product from a customer-based perspective. However, this does not measure the corporate brand equity, which involves the perceptions of other stakeholders and it also does not look at the associations that a corporate brand can have on a customer’s perception of a brand (Shamma and Hassan, 2011).

Chapter 4: An Analysis of Diageo Plc.’s Corporate Brand Equity, Corporate Brand Architecture and Challenges in Corporate

Branding

4.1 – An analysis of Diageo’s Brand Architecture

Diageo implemented a corporate rebranding strategy as a result of a merger and acquisition between Guinness plc. and Grand Metropolitan plc. (Jobber and Ellis-Chadwick, 2013). M&A’s can affect the coherence in a company’s brand-portfolio, therefore Diageo enacted a rebranding strategy in order to unify the company by giving it a coherent new corporate identify (Jobber and Ellis-Chadwick, 2013; Muzellec and Lambkin, 2006).

Diageo’s name change from Guinness signifies a strategy of brand separation; therefore, Diageo is now classified as a ‘house of brands’ (Muzellec and Lambkin, 2009). As a result of the separation strategy, the image of the corporate brand and the product brands also become separate; this can be seen as advantageous, as explained above (Muzellec and Lambkin, 2009).

Also, Diageo has a business brand identity, which is when the corporation has a strong name that produces different images and associations, to different stakeholders, e.g. for example it promotes an image of financial responsibility to its shareholders and corporate social responsibility to the government and the public (Muzellec and Lambkin, 2009). As a business brand Diageo also constantly adds new brands to their portfolio and new business units (Muzellec and Lambkin, 2009).

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An adaptation of Muzellec and Lambkin’s

(2009) corporate brand architecture

framework and business brand framework:

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4.2 – An analysis of Diageo’s Corporate Brand Equity

Corporate brand equity is built by sustained coherence over time and across all stakeholders (Balmer, 1998, cited in Muzellec and Lambkin, 2008). This coherence is maintained via continuous investment in the brand name (Kapferer, 1995; Keller, 2002, cited in Muzellec and Lambkin, 2008). However, in recent years many companies have changed their historical corporate name and have implemented new brand architectures (Muzellec and Lambkin, 2006).) Diageo is an example of this, as explained above.

It is argued that a change of brand name can result in a loss of values attached to the old name and thus a subsequent loss in brand equity (Muzellec and Lambkin, 2008). As a result of this change in brand equity, profit margins and consumer loyalty could be impacted (Muzellec and Lambkin, 2008). Thus, Diageo may have lost brand equity when it changed its name from Guinness.

As explained above, in order to build corporate brand equity; the corporate reputation, associations and image must be strong (Motion, Leitch & Brodie, 2003, cited in Shamma and Hassan, 2011). Diageo has a strong corporate reputation, being widely known as the global leader in beverage alcohol and for innovation through investments in its R&D capabilities (Diageo plc.,2016). In addition, both the corporate reputation and corporate associations are positive as a consequence of its sustainability and corporate social responsibility strategies; such as its ‘Alochol in Society’ and ‘DrinkiQ’ initiatives to prevent alcohol misuse, the ‘Diaego Water blue print’ to minimise environmental impact through its water-stewardship strategy and its contribution to the socio-economic development of communities (Diageo plc.,2016).

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Additionally, Diageo’s focuses on building a safe working environment with a welcoming culture that supports human rights, diversity and development/training; which progresses the corporate reputation (Diageo plc.,2016). Lastly, Diageo’s seeks a positive corporate image by providing quality products through the setting of clear quality standards and by seeking to build customer relationships through trust and through its values, exemplified above (Diageo plc.,2016). All of these components help Diageo currently to build its corporate brand equity.

The re-branding of Diageo posed many challenges. This will be explained below.

4.3 – Diageo’s Challenges in corporate branding and Recommendations

4.3.1 – The Identity Approach

A corporate branding challenge is that a corporate brand must express a unified and coherent identity [i.e. the Identity Approach] (Harris and de Chernatony, 2001; Heding, Knudtzen and Bjerre, 2009). Corporate Branding relies on stakeholders possessing consistent perceptions about the corporate brand nature, identity and values (Harris and de Chernatony, 2001).

Diageo faced the challenge of brand identity coherence because of its corporate re-branding. (Jobber and Ellis-Chadwick, 2013). This is the main corporate branding challenge that Diageo has faced. Diageo changed its identity; thus changing perceptions that if not well managed could have resulted in incoherence and confusion, which can weaken the organisational performance (Jobber and Ellis-Chadwick, 2013). However, Muzellec and Lambkin (2008) argue that a small degree of misalignment is positive as organisations can adapt the corporate brand message to each stakeholder, especially in the case of business brands like Diageo (Muzellec and Lambkin, 2008).

Despite this counter-argument, coherence is recommended. This can be accomplished using a corporate brand tool kit, which ascertains that successful corporate brand identity, requires an alignment between strategic vision, organisational culture and stakeholder image (Hatch and Schultz, 2001). ‘The Diageo way of brand building’ is Diageo’s marketing/corporate brand tool-kit that is based upon its strategic vision and that embeds this vision within the company’s culture through learning events and employee training programs run by Diageo’s senior marketers (Coverdale, no date). Diageo also have a press kit, which helps to communicate the images of the brand (Diageo website). All 3 align to form the ‘Diageo way of brand building’. Hatch and Schultz (1997) argued that corporate brands gain full strength when vision, culture and image are aligned; thus the alignment of these three components produces brand equity, as strong brands are those which are brand-equity rich (Jobber and Ellis-Chadwick, 2013).

Also, the REDS ACID Test Process can be used to monitor the alignment of the 5 dimension of brand identity (Balmer, 1999).

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Chapter 5: Conclusions and Recommendations

To conclude, the corporate branding strategy of Diageo has been largely successful. Diageo

survived a big corporate re-branding strategy and it is now effectively building its corporate

brand equity. Additionally, Diageo is constantly building its product brand portfolio within its

‘house of brands architecture’. This is accomplished mainly through strategic mergers and

acquisitions; with the purpose/objective of increasing its revenues from its emerging markets,

strengthening its position as the world leader of premium alcohol products and growing the

company (Diageo plc., 2015). Thus, Diageo is reinforcing its strengths, aiming/trying to take

hold of its emerging market opportunities and mitigating its weaknesses (for additional detail:

see SWOT analysis and PEST analysis).

It is recommended that Diageo continues to push growth and expansion in its emerging

markets, as its UK core market is declining as a result of adverse changes in the macro-

economic societal factor (Wisson, 2015). Also, with threats of uncertainty, such as political

and economic instability, it is best for Diageo to diversify in this way, in order to reduce risk

(Diageo plc., 2015).

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Chapter 6: References

1. Agarwal, R., Grassl, W. and Pahl, J. (2012) ‘ Meta-SWOT: Introducing a new strategic planning tool’, Journal of Business Strategy, 33(2), pp. 1- 13.

2. Balmer, J.M.T., 1999. ‘The ACID Test of Corporate Identity Management’, Journal of Marketing Management, 15, pp. 69-92.

3. Balmer , J.M.T and Gray, E.R. (2003),"Corporate brands: what are they? What of them?", European Journal of Marketing, 37 (7/8), pp. 972 – 997.

4. Coverdale (no date) The Diaego way of Brand Building, Available at: http://www.coverdale.co.uk/files/case-studies/coverdale_diageo_case-study.pdf (Accessed: 8 March 2016).

5. Euromonitor International (2015a) ‘Diageo Plc in Beer (World)’. Available at: http://www.portal.euromonitor.com/portal/analysis/tab (Accessed: 20 March 2016)

6. Euromonitor International (2015b) ‘Diageo Plc in Spirits (World)’. Available at: http://www.portal.euromonitor.com/portal/analysis/tab (Accessed: 20 March 2016)

7. Euromonitor International (2015c) ‘Diageo Plc in Wine (World)’. Available at: http://www.portal.euromonitor.com/portal/analysis/tab (Accessed: 20 March 2016)

8. De Chernatony, L. and McDonald M. , (2002) Creating Powerful Brands, Oxford: Butterworth Heinemann.

9. Diageo plc., (2016) Diageo. Available at: http://www.diageo.com/en-row/Pages/default.aspx (Accessed: 20 March 2016).

10. Diageo plc. (2015) Annual report 2015. Available at: https://www.diageo.com/Lists/Resources/Attachments/2814/Diageo%20Interactive%20AR2015.pdf (Accessed: 20 March 2016).

11. Gov.uk (2016 ) Alcohol and Young people. Available at: https://www.gov.uk/alcohol-young-people-law (Accessed: 20 March 2016).

12. Harris, F. and de Chernatony, L., 2001. ‘ Corporate Branding and Corporate Brand Performance’, European Journal of Marketing, 35(3/4), pp. 441-456.

13. Hatch, M.J. and Schultz, M.(1997),"Relations between organizational culture, identity and image", European Journal of Marketing, 31(5/6), pp. 356 – 365.

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14. Hatch, M.J. and Schultz, M., 2001. ‘Are the strategic stars aligned for your corporate brand’, Harvard Business Review, February, pp. 128-34

15. Health Committee (2012) Governments Alcohol Strategy. Available at: http://www.publications.parliament.uk/pa/cm201213/cmselect/cmhealth/132/13206.htm#a4 (Accessed: 20 March 2016)

16. Heding, T., Knudtzen, C.F., Bjerre, M., (2009) Brand Management: Research, Theory and Practice, New York: Routledge.

17. Keller, K.L. (1993) ‘Conceptualizing, Measuring and Managing Customer-Based Brand Equity’, Journal of Marketing , 57(January), pp. 1-22.

18. Keller, K.L. (1998) Strategic Brand Management: Building, Measuring and Managing Brand Equity. New Jersey: Prentice Hall.

19. Keller, K.L. (2000). Building and Managing Corporate Brand Equity. in Schultz, Majzen, M.J.Hatch and M.

20. Keller, K.L., & Lehmann, D.R. (2003) ‘How Do Brands Create Value?’, Marketing Management , May/June, pp. 26-31.

21. Knox, S. and Bickerton, D. (2003), “The six conventions of corporate branding”, European, Journal of Marketing, 37 (7/8), pp. 998-1016.

22. Jobber, D. and Ellis-Chadwick, F. (2013) Principles and Practice of Marketing, 7th edition, Berkshire: McGraw-Hill .

23. Muzellec, L. and Lambkin, M. (2006) ‘ Corporate rebranding: destroying, transferring or creating brand equity?’, European Journal of Marketing, 40(7/8), pp. 803-824.

24. Muzellec, L. and Lambkin, M. (2008) ‘Corporate Rebranding and the Implications for Brand Architecture Management: The Case of Guinness (Diageo) Ireland’, Journal of Strategic Marketing, 16(4), pp. 283-299.

25. Muzellec, L. and Lambkin, M.C. (2009) ‘Corporate branding and brand architecture: a conceptual framework’, Marketing Theory, 9(39).

26. Shamma, H.S. and Hassan, S.S. (2011) ‘ Integrating Product and Corporate Brand equity into Total brand Equity Measurement, International Journal of Marketing Studies, 3(1), pp. 11-20.

27. Wisson, C. (2015) ‘Attitudes Towards Alcoholic Drinks - UK - July 2015’ [Mintel], Available at: http://academic.mintel.com/display/716157/# (Accessed: 20 March 2016).

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28. Wood, L. (2000) ‘ Brand and brand equity: definition and management’, Management Decision, 38(9), pp. 662-669.

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