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Montgras Essays

Current Position
Financial Overview
Proposed Strategy
Marketing
Competition
Risks and Contingencies

MontGras, a medium-size Chilean winery, has to formulate an export strategy. It has to decide whether to emphasize the U.S. or U.K. markets, which also offer different positioning and pricing proposals. It has twice failed to penetrate the U.S. market, because distributor relationships fell through, and is deciding between two new potential partners. In the United Kingdom, it is offered participation in a supermarket promotion that will boost volumes but at the expense of price maintenance.

Current market situation

Wine market is shifting from old-world wine to new-world wine
New world wine exports is expected growth at 18.3% per year
Increasing consumption per capita consumption in UK and US
Level of consumption of wine below $5 is on the decline
World wine business is uncounted $150 billion in consumer value and $60 Billion in wholesale value.
Chile 10th wine producer country due to climate enjoys more regular harvest then the Old World countries, but its wine is perceived as the low quality, because country of origin determines quality.
In the New World wine industry, main player is Californian E&J Callo, with the 1.5 % world wide market share.
Chile as a low developed countries group member is an agrarian country tries to penetrate markets in developed countries where there is a shift to service from the industry.

The export for Chile was survival not only because of overproduction in the country of the origin, I think one more aspect is population characteristics-as main major dimension in economic forces, their income and purchasing power creates market more attractive, as we know
Asia, Europe are big emerging markets. (BEM)

We see from the case government’s role is promotional. Montgras  and in general, medium –sized and small companies needs assistance in international marketing then the big companies, because they have more resources.
Government export promotion programs are design to deal major barriers:
lack of motivation
lack of info
Operational based resource limit.

Export Marketing planning requires a knowledge of 1)the structure of competition and its types and 2)the action companies recognizable international marketing.

SWOT Analysis

Strengths
Weaknesses
–          Largest winery boutique in Chile
–          Differentiation: Focus on export quality wines
–          Estimated 117,125 sales to United Kingdom in 2001

-Exports to US dropped about 130,000 to 8,394 cases over 4 years
-Two previous unsuccessful partnerships in the US
Opportunities
Threats
-Promotions in UK supermarket chains to increase sales volume
-Joint venture between two US importers to penetrate US market
-New marketing channels: “Wines of Chile” campaign
-Intensifying global competition due to overproduction.
-Chilean wines perceived as low-price alternative due to grape oversupply.
-Deals with UK supermarkets could threaten distributor’s long-run position
-40 more Chilean wineries exporting to the US since 1995.

Proposal

Export to UK and US
&
Offer two types of products

      Mid-Low End: MontGras Reserva

      High End: DeGras

Overall Target Sales

2001
2002
2003
2004
2005
2006
US
8,394
31,296
54,197
77,099
100,000
122,902
UK
117,125
150,344
183,563
216,781
250,000
283,219
Total
125,519
181,639
237,760
293,880
350,000
406,120

UK Market Solutions

Partner up with Tesbury supermarket to sell MontGras at $14.99
Partner up with Resaurants and Specialty Stores to sell DeGras at $50

Profit from UK Sales

Market share
Market Price
Costs
Marketing cost/case

Reserva
65%
6.79
4.13
1.2

DeGras
35%
25.99
8.02
6

2002
2003
2004
2005
2006
montgras

cases
97723
119316
140908
162500
184092

sales revenue
663542
810153
956764
1103375
1249986

cost
403598
492774
581949
671125
760301

marketing costs
117268
143179
169089
195000
220911

total profit
142676
174201
205725
237250
268775

degras

cases
52620
64247
75873
87500
99127

sales revenue
1367602
1669776
1971951
2274125
2576299

cost
422015
515260
608505
701750
794995

marketing costs
315722
385481
455241
525000
594759

total profit
629865
769035
908205
1047375
1186545

total profit

772541
943236
1113930
1284625
1455320

US Market Solutions
Partner up with World Wine Importers to sell MontGras at (price)
Partner up with Cabo Imports to sell DeGras at (price)

Profit from US Sales

market share
market price
costs
marketing cost/case

montgras
40%
14.99
5.31
3.67

degras
80%
50.99
10.03
9.85

2002
2003
2004
2005
2006
MontGras

cases
12518
21679
30839
40000
49161

sales revenue
187648
324965
462283
599600
736917

cost
66472
115114
163757
212400
261043

marketing costs
45942
79561
113181
146800
180419

total profit
75234
130290
185345
240400
295455

DeGras

2002
2003
2004
2005
2006

cases
25036
43358
61679
80000
98321

sales revenue
1276606
2210804
3145002
4079200
5013398

cost
251115
434877
618638
802400
986162

marketing costs
246609
427072
607536
788000
968464

total profit
778882
1348855
1918827
2488800
3058773

Total Profit

854117
1479145
2104172
2729200
3354228

5 year export strategy in US and UK

4 P’s for US Wines

Price
MontGras
•          $14.99
•          best low-end quality out of all Chilean wines
DeGras
•          $50.00 and above
Product
MontGras
•          Best quality for super-premium wines
•          Package black paperboard box from recycled material
DeGras
•          Best and highest quality of imported Chilean wine
•          The box will be lined with white velvet.
•          On the inside cover will be the MontGras wax seal,  which signifies the authenticity of the wine.
•          MontGras certification, history, and values included.
Promotion
MontGras
•          Wine tasting at markets and wineries
•          Advertisements in magazines and TVs
DeGras
•          Newspapers (WSJ, NYTimes, etc)
•          Professional sports suites
•          Sponsorships from country clubs
•          Business class airlines
•          Partnership with Del Rey chocolates and Bolivar
Place
MontGras
•          wine shops exclusively
DeGras
•          cigar shops
•          4-star restaurants
•          country clubs
•          1st class plane cabinets

4 P’s for UK Wines
Price
MontGras
•          $14.99
•          best quality out of all Chilean wines
DeGras
•          $50.00 and above
Product
MontGras
•          Best quality for super-premium wines
•          Package in black paperboard box
DeGras
•          Best and highest quality of imported Chilean wine
•          The box will be lined with white velvet.
•          On the inside cover will be the MontGras wax seal,  which signifies the authenticity of the wine.
Promotion
MontGras
•          15% discount during “Wines of South America”
•          Advertisements in magazines and TVs
DeGras
•          Newspapers (London Times, etc)
•          Professional sports suites
•          Sponsorships from country clubs
•          Business class airlines
•          Partnership with Del Rey chocolates and Bolivar
Place
MontGras
•          supermarkets
DeGras
•          cigar shops
•          specialty stores, such as delicatessens and gift shops
•          1st class plane cabinets

MontGras is fighting a battle on two fronts: foreign and domestic

 

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