COOLEY DISTILLERY THE INDEPENDENT SPIRIT OF IRELAND Harvard Case Solution & Analysis

COOLEY DISTILLERY THE INDEPENDENT SPIRIT OF IRELAND Case Study Solution

The case “Cooley Distillery: The Independent Spirit of Ireland” is basically a story of Cooley Distillery which is the only independent Irish owned distiller of Irish whiskey in the world. The company has been facing severe stiff and rigorous competition for the past twenty five years and has been a part of the oligopolistic Irish whiskey market and the global spirit industry. Moreover, the company has been able to earn reasonable profits and has been able to achieve stellar reputation for the innovation and the quality Cooley Distillery has been offering. Along with this, the company has been a niche player in the market.

The company is a non-listed organization where it has 290 shareholders who have never been given a dividend for a long time. With such intense competition in the market, the chairman and founder of Cooley Distillery, John Tee ling who owns more than 36% of the outstanding stocks has been looking for various strategic options which shall help the company expand and grow in the future. The four options indicated in the case are continuing to do it alone, a joint venture with another firm, selling out to a larger multinational player and taking the company private in a management buy-out.

EXTERNAL ANALYSIS

Porter’s five forces model

Bargaining Power of Supplier: Low

The bargaining power of suppliers in the industry is low. The reason is simple; the numbers of suppliers in the global spirits industry are high. Moreover, the different suppliers look to offer economies of scale in order to increase their sales and attract customers. Moreover, another reason it is low because the suppliers do not have control over the product offerings which generally does not allow the suppliers to enforce their prices.

Bargaining Power of Buyers: High

The bargaining power of buyers is high for the industry. The reason it is high because the industry has many competitors which are offering high quality products which makes it difficult for them to differentiate with the competitors. Moreover, the prices are also low for the products in the industry and the switching cost is also low. Along with this, the number of options available in the market makes it difficult for the players to compete.

Threat of New Entrants: Low

The threat of new entrants in the industry is low. The reason it is low because of the high capital investment that is required to enter the industry. Along with this, it takes almost three years to produce anything that can be sale able. Moreover, the government restrictions and the laws that have to be followed in the industry are quite stiff and challenging which makes it difficult to compete in the market.

Competitive Rivalry: High

The competitive rivalry for the industry is quite high. The reason it is high because of the number of rivals that are already present in the market. For instance, the major players in the market are Diageo plc, Pernod Ricard Group, William Grant & Sons, Ltd, Sidney Frank Importing, etc.

Threat of substitutes: Moderate

The threat of substitutes for the industry is moderate. The reason is simple; the alternates for substitutes are quite large in number. For instance, the substitutes which are available in the market are soft carbonated drinks, juices, beer, etc. All these products are actually direct substitutes for the existing industry products.

Competitor Analysis

The company Cooley Distillers has many competitors in the market. All the competitors pose severe threat to the company in different ways and manners. The major competitors in the Irish Whiskey Distillers are the Diageo plc, Pernod Ricard Group, William Grant & Sons, Ltd, and Sidney Frank Importing. Along with this, the many players that do not operate in the Irish whiskey market at the moment are, Beam Inc., Constellation Brands, Brown Forman, Bacardi Ltd., Remy Cointreau Group and the Davide Campari Milano S.p.A.

The most successful and the largest competitor in the market is Diageo Plc which is the largest spirits company headquarters in London.The total sales for the company in the year 2010 have been $15.9 billion and the overall profits have been $2 billion approximately.

Second in line is the Pernod Ricard Group that accumulates total sales of $11 billion and the profits for the company has been $1.6 billion in the year 2010.The third most successful competitor in the market is William Grant & Sons, Ltd. the company is a Scotch based firm that has become quite successful in the industry.

Capabilities

The major capability of the industry that has been available in the market has been the fact that the different rivals in the industry have been looking to reach out maximum customers by offering reduced prices. Moreover, another capability of this industry has been the aspect of offering variety of different products in the market to the customers and the consumers.

Industry success factors

The major success factors for the industry that Cooley has been operating is the fact that each and every rival or competitor in the industry has been looking to offer high quality products to the customers. Moreover, the prices have been limited so that the customer base can increase for the industry.

Along with this, another major success factor for the industry has been the fact that the distribution network for all the players is quite strong and each firm is looking to expand itself in the market. Furthermore, the technical innovation has been a major success attribute for the players. Along with this, different players based upon their capacity have looked to increase the products they offer. For instance, most of the players offer whiskey, scotch, beer, etc. which provides the customer with more options.

Opportunities and threats

The major opportunities for Cooley Distiller have been the fact that it should look to expand its reach in the global market. Moreover, the company shall develop a joint venture with a local firm that shall provide Cooley with the finances it requires. Along with this, another opportunity for the company to sell out to a larger multinational player and finally, Cooley can take the company private in a management buy-out.

The major threat for the company has been the increasing competition. The major rivals for the firm have been Diageo plc, Pernod Ricard Group, William Grant & Sons, Ltd, Sidney Frank Importing, Beam Inc., Constellation Brands, Brown Forman, Bacardi Ltd., Remy Cointreau Group and the Davide Campari Milano S.p.A. Another major threat for the company is the strict government rules and regulations that are imposed on the company.

COOLEY DISTILLERY THE INDEPENDENT SPIRIT OF IRELAND Harvard Case Solution & Analysis

 

INTERNAL ANALYSIS

Financial Analysis

Profitability ratio-Gross Profit Margin

Cooley Distillery was able to attain an average of 48% gross profit margin, while in year 2009 it was highest at the rate of 51%. Higher gross profit margin is good and positive as it will be have positive end results on net profits.............

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