Mergers and Acquisitions: A Case Study of Diageo's Expansion in Asia

Desklib provides past papers and solved assignments for students. This research project analyzes Diageo's market entry strategy in Asia.

RESEARCH PROJECT
DIAGEO

Table of Contents
TITLE......................................................................................................................................... 3
INTRODUCTION........................................................................................................................4
RESEARCH BACKGROUND.................................................................................................... 4
RESEARCH PROBLEM............................................................................................................4
AIMS..................................................................................................................................... 4
OBJECTIVES.......................................................................................................................... 5
RESEARCH QUESTION...........................................................................................................5
SCOPE OF THE STUDY...........................................................................................................5
LITERATURE REVIEW................................................................................................................ 6
RESEARCH METHODS............................................................................................................... 9
JUSTIFICATION OF THE CHOICE OF METHODS SELECTED BASED ON THE
PHILOSOPHICAL/THEORETICAL WORK...............................................................................11
PRIMARY AND SECONDARY RESEARCH..................................................................................12
ANALYSIS OF RESEARCH FINDINGS AND DATA.......................................................................14
MERIT, LIMITATIONS, AND PITFALLS OF APPROACHES TO DATA COLLECTION AND
ANALYSIS............................................................................................................................ 16
REFERENCES........................................................................................................................... 17
2

TITLE
“Analysing the impact of mergers and acquisition on the success of Diageo in emerging
Asian market”
3

INTRODUCTION
RESEARCH BACKGROUND
Diageo is a global alcoholic beverages company and a key producer of beer and largest
producer of spirits across the world. The company owns over 200 beverage brands at almost
every category and price range to successfully meet with the customers demand. The
company was founded in the year 1997 and based in London, UK. The leading Brands of the
company are Johnnie Walker, Smirnoff vodka, Scotch whiskey, and Guinness beer.
Currently, Diageo is serving in more than 180 countries across the world from more than
150 manufacturing sites in around 30 countries (Diageo, 2019). Globalization has played a
great role in the success and expansion of Diageo in the international market. Diageo is
increasingly expanding its business in the emerging market taking advantages of
opportunities caused due to globalisation. The company mainly focuses on the strategy of
mergers and acquisition to enter and expand into emerging markets. Now, it earns 50% of
its global revenue from the international market.
RESEARCH PROBLEM
Globalisation has integrated an economy with the world economy that has created
interdependence among the different economies. Through liberalisation and removal of
trade barriers, business organisations like Diageo had a great opportunity to expand its
business into other emerging economies. For its business expansions, Diageo has highly
emphasised on the strategy of mergers and acquisition to increase its presence in emerging
markets (Oh, et al., 2019). The market entry strategy of Diageo has greatly supported the
company in entering into emerging markets successfully. Therefore, this research study is
instigated to analyse the impact of mergers and acquisition on Diageo's success and identify
the advantages and disadvantages of mergers and acquisition to enter into a new emerging
market.
AIMS
The main aim of this research study is to analyse the impact of mergers and acquisition on
success and failure of Diageo in the emerging Asian market. This research would emphasise
4

on identifying the effectiveness of mergers and acquisition in entering into the new
emerging market.
OBJECTIVES
 To determine the key market entry strategies of Diageo to enter into the new
emerging market
 To analyse the effectiveness of mergers and acquisition for Diageo in entering into a
new market
 To identify the advantages of mergers and acquisition strategy to Diageo for entering
into Asian Market
 To assess the disadvantages and limitations of mergers and acquisition strategy
faced by Diageo
RESEARCH QUESTION
1. What are the key market entry strategies for entering into a new emerging market?
2. Is mergers and Acquisition strategy suitable for accessing emerging market?
3. What are the advantages of mergers and acquisition in entering into a new market?
4. What are the possible drawbacks of mergers and acquisition strategy while entering
into a new market?
SCOPE OF THE STUDY
This research study would support in identifying the major marketing strategies for entering
into the new emerging market to enable the global business organisations in formulating an
effective strategy for business growth and expansion. This study would analyse the
effectiveness of mergers and acquisition in expanding business in the global market through
which the global, as well as local business organisations, would be able to have a significant
understanding of the M&A. Moreover, the disadvantages and advantages of mergers and
acquisition would be determined in this study.
5

LITERATURE REVIEW
The introductory literature review has been directed in order to attain the required
knowledge and information about the research area. The research project is based on
determining the impact of merger and acquisition on the success of Diageo in the emerging
Asian market. Here, the literature review has been carried below:
According to Cavusgil, et al., (2014) Globalization introduces many ways and opportunities
to enhance the prosperity and fortify better jobs. It provides a wider range of products for
the consumer to choose from in a variety of prices. It provides opportunities for higher
productivity and growth in the business. However, it also presents some challenges that can
affect the success of the firm. In this era of globalization, organisational success depends on
the innovation and combination of firms as it plays an important role in this competitive
world. Thus, awareness about the importance of innovation and merger must be there in
the businesses. This study aims to develop awareness about the importance of acquisition
and merger in the success of the firm. Yu, et al., (2014) has stated that the processes of
globalization are inseparably bound to agnostic. The national competitiveness grows in
global system by following the global economy, to understand this outlook firm needs to
analyse the current trends that can ensure the long-term growth of the firm. Diageo can
capitalize to get this advantage and position in the hierarchy of the international business
system.
Tsai and Eisingerich, (2010) have stated that there are a variety of ways through a business
organisation can enter into a foreign market. there is no single market strategy that could
work for the international market. In one market, direct exporting can be an appropriate
strategy while in another the companies may need to adopt the strategy of mergers and
acquisition and some licensing could work. there is a large number of factors that could
influence the choice of strategies such as tariff rates, government regulations, the degree of
adaption of a new product, marketing cost and transportation cost. The key marketing
strategies that could be adopted by the businesses in the international market are direct
exporting, Licensing, franchising, partnership, joint venture, and mergers and acquisition
(Ramamurti, 2012).
6

According to Erel, et al., (2012) Purchasing of an existing business could be the most
appropriate strategy for entering into the emerging market for the multinational business
organisations. because the companies, that have large market share may be a direct
competitor in the emerging market or the government regulations enforces to adopt
merger and acquisition for entering into the domestic market. This market entry strategy
provides instant access to the local market with the standing of being a local company. with
mergers and acquisition, the companies can receive the benefits of the local market such as
established customer base.
According to Bainbridge (2012), Mergers and acquisition can be termed as the combination
of the two or more firms to make a new organisation. a mutual resolution of the two
organisations through structural and operational benefits. According to O'Regan and
Ghobadian, (2010) Diageo is established with the M&A of Guinness and Grand
Metropolitan. In present Diageo has acquired around 15 organisations and its recent
acquisition was Belsazar in March 2018. In 2011, Diageo has acquired Turkish liquor
company Mey Icki, in 2012, Ypioca is acquired in Brazil, in 2012 an Indian spirit company
United Spirits is acquired. similarly, Diageo has continued to acquire in different emerging
markets like Denmark, Maryland, and several other markets (Tuncalp and Ozturkcan, 2017).
In the present business environment, African market creates a great opportunity for
expansion for Diageo. This has suggested that mergers and acquisition are surely the best
market entry for Diageo for entering into the new markets. As the alcoholic beverages and
liquor industry are highly regulated across the world (Obot, 2013). Thus, the company can
effectively attain high market share while dealing with government regulations in the local
market.
Coffey, et al., (2012) has stated that the M&A provides great benefits to the global brands as
it facilitates in increasing value generation for the company. The tax gains and enhancement
of the company's revenue through increasing market share are the most advantageous
outcomes of M&A. It also supports reducing the cost of operations and gaining
competitiveness in the new market. it facilitates financial leveraging for the companies.
Economies of scale can be formulated through M&A by sharing resources and knowledge.
7

While considering the disadvantages of the M&A, Gaughan (2010) has stated that with the
several benefits M&A also created some difficulties for the companies. Primarily, the
acquisition requires higher cost and investment and may be riskier than other market entry
strategies. The companies can face uncertainties and difficulties due to friction and internal
competition in the local market. There is a threat to the productivity of the company as the
employees may lack in required skills (Lebedev, et al., 2015). the M&A could create cultural
and integration challenges for the acquiring firms and it is very difficult for the companies to
realise synergies in the company’s operations.
8

RESEARCH METHODS
Selection of a research method is the most critical part of any research project. An
appropriate research method would support in moving research work in the right direction
by providing a relevant and systematic understanding of conducting successful research.
The three key research approaches are;
 Qualitative research approach: the qualitative approach enables to explore an
understanding of the perception and opinions of a person or a group regarding a
specific situation or problem. It involves the interpretation of collected information
to obtain related information to answer the research questions. A qualitative data
can be obtained through the interviews, case study, through text or image data and
narratives (Bell, et al., 2018). the qualitative research applied inductive approach by
emphasising on the complexity of the situation and individual meaning. The
qualitative research is based on the philosophy of constructivist or transformative
knowledge.
 Quantitative research approach: quantitative research produces hard facts and
numerical data. It relies on the methods of natural sciences and establishes cause
and effect relationship between two variables by applying computational and
statistical methods. The graphs and tables of raw data are constructed to simplify
the analysis of the results. A deductive style is involved in the quantitative research
that replicates and generalise the obtained data. Experiments and surveys are the
most effective methods for obtaining relevant quantitative data. the philosophy of
post-positivism is used in this approach.
 Mixed research approach: a mixed research approach combines both qualitative and
quantitative data in distinctive ways to obtain detailed information in relation to the
research study. The qualitative and quantitative data are collected analysed and
integrated into this research approach (Bell, et al., 2018). It facilitates the
triangulation of data by using multiple theories, methods, and data sources. A
combination of qualitative and quantitative data can be applied in the
transformative, sequential or concurrent forms.
9

By considering the nature of the study, the mixed research approach would be more
suitable for this research. The qualitative and quantitative research would be applied in the
sequential form where qualitative research is performed through looking at available
literature sources related to the research topic and the quantitative research is performed
through applying the method of the interview (Creswell and Clark, 2017). The different
aspects of mixed research approach are:
o Timing: time is a critical aspect in every research project therefore, it should be
properly managed to collect qualitative and quantitative information for the
research study. In this research project, qualitative or quantitative data is collected
in a sequential order where the qualitative data is collected prior to the quantitative
data collection. The overall research would be conducted within the timeframe of 6
months.
o Weighting: weighting may be referred to as importance; it involves how much
importance is given to a single approach. An approach could be given higher weight
or equal weight could be given to both the approaches (Creswell and Clark, 2017).
Here, both the qualitative or quantitative approach would be given equal weight.
o Mixing: it is related to the mixing of collected research information. In this research,
the collected data will be merged at the stage of data analysis.
o Theorizing: it involves utilisation of theories to make inquiries in relation to the
research project.
By considering the mixed research approach, the qualitative method of literature review will
be used for collecting the secondary research data and the quantitative method of the
interview will be used for collecting primary data for this research work.
10

JUSTIFICATION OF THE CHOICE OF METHODS SELECTED BASED ON THE
PHILOSOPHICAL/THEORETICAL WORK
From the aforementioned analysis, it is clear that a mixed research approach would be more
suitable for this research. By applying a mixed research approach, an in-breadth and depth
understanding of the research subject could be significantly obtained. The secondary
literature review would support in identifying the key market entry strategy of for entering
into internal market and the primary interview would support in analysing the effectiveness
and impact of mergers and acquisition on the Diageo. The combination of primary and
secondary research sources would enable in answering the research questions successfully.
The mixed research approach would provide a complete overview of the research topic.
11

PRIMARY AND SECONDARY RESEARCH
Both the qualitative and quantitative research approaches are employed in a research
project where the qualitative data is collected through the method of literature review and
the quantitative data is collected through the method of the interview (Bernard, 2017). The
literature review and interview will be performed in a sequential manner where the
literature review would be followed by an interview by collecting systematic information
regarding the research topic.
The primary research or the quantitative is performed through an interview. The interview is
conducted among the employees of Diageo at the headquarters of the company in London.
Around 5 open-ended questions is set to ask from each participant. The interview is set to
be performed among 15 senior employees i.e. managers of the company. The participants
are selected through a non-probability sampling technique. The sample of the interview
questions is;
INTERVIEW QUESTIONS
1. What is the most common market entry strategy of Diageo?
2. Which is the best emerging market for Diageo?
3. Do you think mergers and acquisition are profitable for entering into the emerging
market for Diageo?
4. Does M&A strategy support in the successful expansion of the company in the
international market?
5. What are the consequences of mergers and acquisition of the company?
COST AND ACCESS
This research study has employed the approach of mixed research that involves both the
types of qualitative and quantitative research methods. This research approach requires a
higher cost in comparison to the application of a single research approach. The secondary
research i.e. literature review is performed by accessing sources from the university library,
city library and some other online sources (Creswell and Poth, 2017). This requires a
maximum of £70. On the other hand, the primary research is performed among the
12