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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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