Executive Summary
The company was founded in 1966, and has evolved into one of the world’s finest and pioneer winemakers, currently having sales for 480 millions, and firm’s market value about $ 600 million.
They are facing fierce state of competition, where competitors are focusing on acquisition and merger they are opting for long term sustainable goal of organic growth for its premier brands. They have a quality well positioned brand portfolio. There focus on organic growth is expanding their business effectively. They are effectively positioning & strengthening themselves in the premium quality product segment. In this project we will analyze Robert Mondavi firm competitive strategies, and its competitors strategies for survival would be discussed under porter five forces model.
Introduction
Robert Mondavi Company is famous for its innovative high quality winemakers in American history. Company is effectively competing with the state of rivalry in the market; the competitors are increasingly giving tough competition in the segment of premium wine. The company is analyzed by its external factors directly influencing the competitive state in the market. In this regard strategic analysis of Robert Mondavi as well as its major competitors would be analyzed how they are effecting to change the Robert Mondavi strategies and how affective they are in attainment of sustainability
Industry Overview
Old world wine countries include France, Italy and Spain, it was difficult for these countries to compete with aggressively increasing market and continuous increase in new entrants who are not typically the vine growing countries but still exploring the potentially attractive business of wine making. This state increased the competition between old world and new world wine countries. New world wine countries included Asia, Australia, America, Chile etc. wine producers of these countries were ready to compete with old world wine countries on the basis of quality, variety, innovation, environment friendly technology. Due to such practices companies were rapidly gaining competitive advantage over others.
The old world market is highly uneven. The competitive market state was like various small privately operated wineries which were used to be family business and transfers in next generations. But the new world wine businesses were expanded publicly owned large corporations, which started to make their mark through their strategies and practices. For instance the France which comes under the old world market has over 230,000 wineries and none of them is having a considerable market share. If we analyze old world and new world wine markets with respect to Porter Five Forces.
Porter Five Forces
Model which is
Buyer Bargaining Power
If we consider the power of buyer it appears to be high in old world as compared to the new world wine market. The consumers are more sensitive to price. Their preferences are highly affected by the prices. The sale of wine mostly occurs through super markets, who offer private label wines but not in new world wine market except Wal-Mart who introduced a wine through coalition with E&J Gallo in United States, this element is influencing to increase the buyer bargaining power. But in new world wine market the products are differentiated through branding which ultimately effect and increase the price and reduces the bargaining power of buyer.
Bargaining Power of Supplier
The bargaining power of suppliers for old world market are high because it mostly comprises of privately owned small firms who do not have effective and broad network to out source suppliers on their own, for this they are highly dependent on suppliers, therefore the bargaining power of supplier is high in their case. But new world market players are publicly owned large corporations, finding new ways to get premium goods for which they are acquiring suppliers which reduces the bargaining power of supplier and save their cost of out sourcing the supplier.
Threat of New Entrants & Substitute Products
The threat faced by the old wine producers is higher because the demand for premium wine increased which was offered by new world companies. Consumption growth is expected to be 1-2%. The increase in consumption pattern growth is proving to be an opportunity for new entrants. And it was also expected that demand in Europe to increase. New world companies are dealing with it by increasing production & offering diverse range of products.
Competitive Rivalry
The competitive rivalry has increased and has become fierce for old wine market, due to acquisition & merger by new world wineries. But comparatively new world markets are dealing with it strategically. Major consolidation is occurring as well as atomization in industry. They are doing heavy investment, bringing innovation, and finding new avenues for sourcing critical input, which is resulting in more extensive & well developed market
Similarities among these two world are they are working in common industry, both were practicing marketing strategies to different extent, they are targeting a common market, facing somewhat same kind of challenges like threat of new entrants, changing technology.
Structural Differences
The primary strategic vision of Southcorp to become leading global branded premium wine company to accomplish this goal they acquired and merged with various companies for expansion and got three core exporting product in result of it. They were competing in a range of diversified business but shifted their focus exclusively on premium wine business.
The foster’s group strategic vision is to be a “global wine company with a leading presence in every premium wine market worldwide”. Foster’s main area of business used to be beer production but later they shifted to wine production. They conducted expensive merger which gave them one of the top ten wine brands.
Another rival of Mondavi is Allied Domecq was also not a pure player it was world’s second largest distilled spirits producer and also fourth largest wine maker in the world, the CEO Philip Bowman of Allied Domeq described his strategic vision as “developing a world class premium wine business” they adopted acquisition strategy for expansion.
To deal with such strategic trend in the industry of acquisition and merger Michelle Mondavi devised a plan B to deal with competitive strategies effectively, the company expanded by adapting organic growth strategy rather than acquisition. The company was already having a portfolio of high quality wines with strong market position and excellent management. They were focusing to improve their current system rather than acquiring another and not managing anyone. They were offering wide range of wine to their customers therefore has a large market share.
Advantages Mondavi were immediately getting by adapting organic growth strategy was that they focused to improve their current system therefore increasing their capacity & capability. Small competitors were exiting from the market. The disadvantage in this regard was its competitors were now increasing its share and tough competition was expected in future due to it. The organic strategy adapted by the Mondavi is targeting long term but fruitful goals.
Recommendations
The major rivals present in the industry were focusing either to merge, acquire or to do a joint venture just to attain immediate expansion. In this scenario there were only two available options for Mondavi either to choose and go for acquisition or to merge with another organization. But the decision to adapt organic growth was right and recommended which was directed to achieve long term goals. In that market scenario it was not right to blindly follow the practices of competitors, to attain long term sustainability organic growth strategy is right and recommended.
References
- Ebers, M & Wied, S. (2007). SWOT Analysis Robert Mondavi and the Wine Industry Akademische Schriftenreihe: GRIN Verlag:
- Roberto, M. A, (2002). Robert Mondavi &Wine Industry. Revised. Harvard Business School Pub. Philips, C. Doole, I. Lowe, R. (1994). International marketing strategy: analysis, development, and implementation. illustrated, reprint. Routledge.
- Carosso, V. P.(1976). The California wine industry, 1830-1895: a study of the formative years California library reprint series. Reprint. California: University of California Press
