Brief Analysis of Johnnie Walker in Chinese Scotch Whisky Market, with a Focus in Beijing

Brief Analysis of Johnnie Walker in

Chinese Scotch Whisky Market,

with a Focus in Beijing

CONTENT

1. Abstract        1

2. Remote Environment Analysis        2

2.1. Political environment        3

2.2. Economic environment        3

2.3. Social environment        4

2.4. Legal environment        5

3. Industrial Analysis        5

3.1. New entrance        6

3.2. Threat of Substitutes        6

3.3. Bargain power of Consumers        7

3.4. Bargain Power of Suppliers        7

3.5. Industry rivalry        8

4. Internal Analysis        8

4.1. Strength        8

4.2. Weakness        9

4.3. Opportunity        9

4.4. Threat        9

5. Conclusion        10

Appendix        11

Reference        13

Bibliography        14

1. Abstract

Diageo takes up the biggest market share (36%) in Scotch Whisky market according to a Forbes report and is behind more than one-third of all the whisky produced in Scotland (Schrieberg, 2016). Owned by Diageo, Johnnie Walker, is one of the best known whisky brand. It is true that blended whisky is not of the best quality compared to superb single malt Scotch Whiskies, yet 95% of Whiskey being produced is blended made by above 100 malt whiskey distilleries within Scotland (Scotch whisky suppliers, n.d.).

A good bartender knows the differences between whiskey and whisky. Whiskey refers to all kinds of whiskey that are produced wherever, while whiskey legally represents Scotch whisky, which is “made in Scotland” and has been “aged for at least ten years” exclusively. The following report will be an brief analysis among Scotch Whisky in Beijing, China, starting from the macro-environment analysis using PESTEL model (Pearce & Robinson, 2015), subsequently moving on to the company external analysis with help of Michael Porter’s Five Forces Model (Porter, 1980; Grundy, 2006; Hanlon, 2013; Pearce & Robinson, 2015) and SWOT matrix (Thompson & Martin, 2010; Weinstein, 2013; Pearce & Robinson, 2015), in particular, the situation in Beijing, China will be addressed.  

For the Five Forces investigation part, the threat of new entrants, bargaining power of suppliers and buys, substitutes and rivalry will be taken in to consideration. (Porter, 1980; Grundy, 2006; Hanlon, 2013; Pearce & Robinson, 2015) The SWOT matrix includes four segments each respond to the abbreviation: strength, weakness, opportunities and threat (Thompson & Martin, 2010; Weinstein, 2013; Pearce & Robinson, 2015).

1. Remote Environment Analysis

PESTEL analysis is expended by denoting P as political, E as economical, S as social, T as technological, E as environmental, and L as logical. Together, environment of all these aspects form an overall remote environment analysis.

1. Political environment  

2017 is a year for the 19th National Congress, in which anti-corruption is addressed every time. During such a period, the bribery would be under close watch and government officers’ consumption of high end spirits could catch some attention and rise questions. Even Sun Zhengcai, such a powerful person as the Communist Party chief of Chongqing, a significant metropolis, was caught because of his corruption acts. He would have attended the 19th National Congress and enjoy the honer of turning into one of the “next generation of leaders”, until his behaviour is disclosed. As the political center of China, it’s foreseeable that the attention on corruption would be a negative force of luxury spirit sales in Beijing, including Scotch Whisky.

1. Economic environment

Both GDP per capita and GDP has been increasing during the four year period after 2012, from 6,333 to 8,109 and 8,575 to 11,212 respectively. Although the annual variation rate had slipped quit noticeably from 7.9 in 2012 to 6.7 in 2016. Beijing, as the capital of China, presents a leading position in national GPD contribution with a figure of 2133.083 billion RMB in 2014 and 2301,459 billion RMB in 2015 (Lavan, 2016). Noticeably, Beijing was the one of the cities with the highest GPD seconded to Shanghai, a city with a larger population than Beijing.

The annual variation in consumer price index (CPI) shows an declining trend though out this time, dropped form 2.6 to 2.0 meeting a bottom value in 2015 at 1.4, which resulted to a substitution of imported products with domestic products and a declining import total value. As for the exchange rate, there has been a overall growth of RMB exchange rate verses US dollars from 2012 (at 6.23) to 2016 (at 6.95), despite a marginal slip in 2013 (at 6.05).

1. Social environment  

As stated by Mark Edwards, the marketing director of Moet Hennessy Diageo, “Then consumers (in China) is becoming much more sophisticated and demanding.” (Lynch, 2013) and the status showing off is one crucial influences. The “face” has more than one meaning in China. Other than the biological meaning of the front side of the head, “face” (mian zi) also refers to a person’s reputation, dignity, and basically the way others look at this individual. This “face” oriented way of consumption makes China one of the leading consumers in the luxury market since having a posh bottle of whiskey shows the social status of the host in an important occasion (Mukherjee, 2013). As stated in Shanghai Daily, with the development of Chinese people’s purchase power, they show a favor to brands that contain “history”, “substance”, “craftsmanship” and “heritage”. These facts apply to the whole China (Mukherjee, 2013). Statistically, 80% of the Chinese millionaires, the highly potentiality market segment are under the age of 45, which are young enough to consume spirit in a healthy amount, knowing that by definition, Scotch Whisky must contain more than 40% alcohol (Qian, 2016).

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