Robert Mondavi and the Wine Industry

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Threat of Substitution. The threat of substitution is rated at high because there are so many choices to choose from in the alcoholic market. One such example is beer and there are more variations of beer than there is of wine. Other options also include non-acholic beverages and sparkling drinks.

Bargaining Power of Suppliers. Bargaining power of suppliers is rated at moderate because grape producers are the source of wine production. Without these sources, many of these firms would go out of business. If seasons fluctuated the products for wine will also see a significant price fluctuation due to demand has to meet supply. If there is low supply and demand is high, prices will increase. Producers can also grow their own grapes but this would be a bad idea since they are not specialised in growing and cannot meet demand on their own.

Bargaining Power of Buyers. The bargaining power of buyers is high due to the fact that about 30% of Southern Wine and Spirit accounted for the firm’s sales. That being said, the firm has to provide what buyers want not what company thinks they want. A large focus has to go where the business is making the most profit and that is where consumers will thrive the most. If the buying power of the consumer is low in one area of the businesses this shows that the consumers are less interested in buying the products offered.

Recommendations

If we take a look at the old world of making wind, this was based on quantitative orientation, small family owned, the consumer produced a lot of their wine for self consumption, it was an art based wine making process and most of all it was an high regulated production of critical inputs, finally it was a product driven market. In the new world, we find that the production is more geared towards quality and that many of the firms have grown so large that they are publicly traded. The reason for the explosion of the new world, is due to technology and automation which have high start up costs but have long term reduced costs. We also see that the new world of wines, invest heavily into marketing and have a product line and not just a product. Taking these into consideration, the business should differentiate in order to gain market share by diversifying its target market segments. It should also work on capital efficiency that way it can measure how long it takes for its inventory to turn into cash. Furthermore, it should focus on using the internet to target untapped markets like India, Spain, Japan and China.

Conclusion

In conclusion, Mondavi has created an wine empire business in the United States, with state of the art facilities. However, none of this happened over night and have taken years to perfect its craft. Mondavi, has the skill and the craft and the knowledge to be able to follow the market trends however they must make strategic alliances with other suppliers and firms. They should also look into eliminating their lowest brands off the shelfs and focus on the top selling brands first. The firm must also be able to adapt to change and if that means merging with other entities then it will not only benefit the firm but also help expand its resources capabilities.

References:

Roberto, M. (2005). Robert Mondavi and the wine industry. Harvard Business Publishing. 9-302-102. Retrieved from https://hbr.org/product/robert-mondavi-and-the-wine-industry/302102-PDF-ENG