Introduction
BRL Hardy is one of the most popular wine companies in Australia. It was started in 1853. The company is associated with Thomas Hardy. At 23 years, the vineyard worker established his farm in Australia. His first production was in 1857, four years after he started working towards his dream. By his death in 1912, he had established one of the largest wineries in Australia (Bartlett 3). After his death, the company went through various phases of transformation to respond to changes in the wine distillery market.
In this paper, the author will address several issues related to the BRL Hardy case study. The case study is part of Harvard Business School’s learning resources. To start with, the factors behind BRL Hardy’s post-merger success will be reviewed. Secondly, the tensions between Steven Davies and Chris Carson will be analyzed. The different marketing strategies promoted by these two administrators will be highlighted. In addition, the issue of whether or not D’istinto should be launched will be addressed. Finally, a number of recommendations pertaining to the case study will be provided.
Factors behind BRL Hardy’s Post-Merger Success
A number of issues are associated with the success of the company after the merger. The key factors include the new management structures and operational strategies embraced by the wine-producing firm (Bartlett 4). Prior to the merger, both Thomas Hardy & Sons and BRL were struggling financially and with respect to their operations. Before the two companies came together, BRL had the capability to handle bulk production and accommodate massive operations. As a result, most people referred to it as “the oil refinery of the wine industry” in Australia (Bartlett 3). In addition, the firm had adopted an aggressive and commercial oriented culture.
On its part, Hardy & Sons exhibited qualities that were different from its future business partner. The operations of the company made it a prominent player in the wine industry. According to Bartlett, Hardy & Sons focused on the award-winning quality wines (3). It was not overly concerned with the fortified, bulk, and value wines marketed by BRL (Bartlett 3). In addition, the firm’s organizational culture was less aggressive. As a result, the company was described as “polite and traditional” (Bartlett 3).
The combination of the two organizational structures was one of the factors behind the success of the new company. It provided BRL Hardy with the capability to dominate the Australian local wine industry. The increased capacity enabled the organization to increase its impact on the previously individual international operations. According to Bartlett, both entities had extensive international ties in spite of the financial and operational problems they faced before the merger (3).
According to Boeh and Beamish, the founding of organizations is basically associated with the activities of entrepreneurs (19). However, numerous firms arise from others that already exist. The new entities are formed through mergers, acquisitions, and spin-offs. Such firms as BRLH are distinguished from their previous selves due to inheritance of skills and other capabilities (Boeh and Beamish 19). It is noted that mergers bring together divergent strategic orientations, cultures, and practices. The varying dispositions are merged into new configurations, which allow for creativity and intra-firm variations (Bruner and Perella 71; Lemon and Nowlis 173). The development contributed immensely to the success of BRL Hardy.
Bartlett postulates that upon merging, Hardy & Sons and BRL embarked on two major projects to facilitate their local and global operations (4). It is noted that the two organizations combined their diversity to strengthen the new entity, BRL Hardy. For instance, after the merger, BRL Hardy went public. The Initial Public Offering (IPO) was aimed at enhancing the financial position of the firm. In addition, to maximize the potential of personnel from both entities, organizational restructuring through decentralization of authority was implemented (Bartlett 5).
The post-merger success of BRL Hardy can, as a result, be attributed to a clear mission for the union. In addition, the new management restructured BRL Hardy to align the strengths of both entities with the desired targets. Ultimately, the implementation of the strategies and the dedication of the personnel in charge focused on the broader organizational objectives.
The essence of Tensions between Steven Davies and Chris Carson: A Review in Relation to Differences in Terms of Marketing Strategies
Stephen Davies is the Group Marketing and Export Manager at BRLH. On the other hand, Christopher Carson works as the Marketing Manager for BRLH U.K. The tensions between the two can be traced to the restructuring of BRLH. Upon the merger, Steve Millar (CEO BRLH H) promoted a number of new management strategies. A chief feature of the new management structure was a delegation of authority to middle managers. Bartlett poses that “The prerequisite to delegation (…) was that managers had to be willing to challenge the status quo, accept responsibility for the outcome of decisions that were delegated, and admit when they had made a mistake” (5). The disputes between the two administrators can be traced back to the resulting organizational structure.
According to Keller, the integration of employees in the process of merging firms constitutes one of the major issues affecting the smooth transition and running of the new firm (18). Upon their appointment, both Davies and Carson had realized that BRLH was in a critical financial situation. However, their approach to resolving the problem led to a conflict of strategies between the two.
Bartlett argues that “Davies agreed with Carson’s plans, particularly endorsing the focus on the Hardy brands. Yet the relationship was an uneasy one in the post-merger management uncertainties” (6). The two managers had numerous disagreements in relation to the authority held by each. In addition, they failed to agree on who between them would report to the headquarters.
According to Bartlett, the major conflicts between the two managers were related to their marketing strategies (6). They were especially at loggerheads in relation to branding and labeling of products (Bartlett 6). Hardy offered various brands in the U.K market. Stamps and Nottage were the main entry-level brands. The two accounted for more than 80% of Hardy’s sales in both value and volume (Bartlett 6). In spite of the good performance of these products, Carson advocated for their relabeling, repositioning, and re-launching. Davies, on the other hand, did not agree with the proposition. He felt the products were core to his operations in the U.K. However, in spite of the delegation of authority to the various branch heads, Australia regulated all elements of the brand (Bartlett 7). As such, Davies, who was the head of the entire firm’s marketing and export operations, felt he had the authority over decisions touching on the brand.
A new firm resulting from a merger of organizations with different structures should establish a coherent framework (Glynn, Motion and Brodie 406; Kilsun and Dilip 220). Apparently, Davies and Carson had differing viewpoints on marketing strategies and final authority due to their varying backgrounds. According to Bartlett, Davies’ viewpoint was that the management from the headquarters had the responsibility of “deciding on issues relating to labeling, pricing, and branding, and overseas should be responsible for sales, distribution, and promotion strategy” (7). On his part, Carson believed that the branch managers had a deeper understanding of local matters compared to international administrators. As such, they were better placed to make these decisions.
The Launch of D’istinto Brand
D’istinto was a strong, branded product by Carson. It was aimed at addressing the needs of the average wine consumers. It was targeted at those customers with limited knowledge regarding these products (Bartlett 9). The proposed product design was meant to appeal to the consumers through labeling and the use of the brand name. Bartlett notes that the product would also address the gaps left by Nottage Hill and Stamps as their prices went up (9).
However, the launch of D’istinto is not advisable for BRLH. Carson argued that the line could help the company increase its European market (Bartlett 10). Such a belief was reasonable. However, the brand posed a lot of risks and burdened the organization. First, Carson was focusing on various lines and setting unrealistic objectives. The parent organization could not promise to deliver these pledges.
According to Wilcox et al., wine producers, such as BRLH, have the alternative of utilizing either brand portfolios or line extensions in extending their products (202). D’istinto qualifies as a line brand. Line extensions have the benefits of addressing the need for variety among consumers. In addition, their risks are minimal. They also allow a company to offer several price points.
In spite of the advantages of line extensions, previous branding, and labeling initiatives by Carson had already put the company in difficulties. For instance, Millar argued that Carson had lost focus in his bid to strengthen sales in the European market. Apparently, the European division was already having problems with Mapocho (Bartlett 10). Carson himself acknowledged that the expenses associated with the brand were not much. However, he admitted that the problems associated with sales of the brand could jeopardize the company’s financial position (Bartlett 10).
The strategic development and launch of D’istinto reflect the ingenuity of Carson in marketing. However, the line extension does not really carry the anticipated returns due to the already high risks. Line extensions into other brands in the portfolio, such as horizontal extensions, can also lead to the cannibalization of existing sales (Sivakumar 278; Ritson 87). Considering the issues surrounding D’istinto, the likelihood of eating into the sales of existing brands is heightened. Consequently, it is not advisable for BRLH to go ahead with the launch of the brand.
Recommendations with Regards to Kelly’s Revenge and Banrock Station
Both Kelly’s Revenge and Banrock Station target the same price point, albeit using different approaches. According to Bartlett, Kelly’s Revenge “(appeals) to a younger consumer, perhaps a first-time wine drinker, who would later trade up to Stamps and Nottage Hill” (11). In addition, like Banrock Station, the “brand (was) positioned at the £3.99 price point, but (can) be promoted at £3.49” (Bartlett 11).
As Carson, my recommendations to the management would be to develop a single product under the common brand name. However, the product should be tailored to the needs of specific locations. Since Banrock Station is already in production, the development of Kelly’s Revenge can be paused. According to Bartlett, Banrock Station has greater potential as a global brand compared to Kelly’s Revenge (11). In addition, BRLH subsidiaries in such regions as America and Europe are already supporting the product. Consequently, it would be wise to alter the branding and labeling of Kelly’s Revenge. Such a move will make it possible to distribute the brand in the U.K market under Banrock Station.
The decision by Millar as the greater authority should be to support the proposal by Carson. The decision to delegate authority in BRLH was taken to attract the contribution of employees in lower management positions in decision making. However, the top management has the responsibility of taking control where necessary and to be held accountable (Ritson 90). Millar’s decision should be supportive of Banrock Station as a line extension brand.
Failure of Millar to exercise his authority may jeopardize the performance of both products. Fighting for one customer group using similar products in the same organization may help competitors exploit this weakness (Ritson 90). If Millar cannot offer firm direction on the way forward, the management should vote for the product to be endorsed.
Conclusion
Numerous factors influence mergers and operations of firms in the wine industry. Some of the key issues, which are made evident in the BRLH case study, entail relationship structures, and branding. BRLH should reconsider its organizational structure and the nature of responsibilities given to the various managers. The post-merger success of the new firm was influenced by an opportunistic merger. It was also bolstered by the acquisition and utilization of strong capabilities and brands. However, as made evident in the long run operations of the company, the relationships between various authorities can substantially harm a merger.
Works Cited
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