Internet Marketing Group Assignment

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We will be applying Porter’s Five Forces model to identify and analyse five competitive forces that shape Australian wine industry and helps to determine its attractiveness. Firstly, threats of new entrants to the industry is relatively low due to the large sum of capital that is required to start the wine business as well as to gain access to winemaking technology. Furthermore, there are many established wineries such as Greenstone Vineyards and Chandon that have economy of scale and the core competitive point in the wine industry is price (Anderson & Nelgen, 2013). Therefore barriers of entry to the wine industry are high.

Secondly, there are many substitute products with locals preferring beer to wine over the past few decades. However, this trend has seen a change as beer now accounts for 41% of all alcohol consumption down from 75%, while wine share has significantly increased from 12% to 38% of all alcohol consumed over the past years (Pearlman, 2015). However, the threat of substitute products is still high, with drinks like whisky, cocktail and many other alcoholic drinks are readily available and attractively priced. Furthermore, the US government has been tightening the wine distribution in the country, thus it could affect the Australian export market negatively in the near future (Esterl & Kelly, 2015). Thus, threats of substitutions in the Australian wine industry are relatively high.

As established winemakers, Greenstone Vineyards are known for producing their wine from scratch. They grow their own grapes for quality control and act as their own supplier. Therefore, there is a low supplier power over Greenstone Vineyards. On the other hand, there is a high bargaining power of buyer as due to consumers having many choices of different brands of wine to choose from. Furthermore, buyers are price sensitive and switching cost to different brands are relatively low. Additionally, consumers are not loyal to only one type of brand of wine (Lockshin, 2010). Finally, the Australian wine industry is extremely competitive. With over 900 producers in Victoria alone, Greenstone Vineyards need to stand out to gain attention from the market. They have successfully done this by competing in price war with their competitors and have achieved economy of scale through their expansion despite the high degree of rivalry.

References

Anderson, K. and Nelgen, S. (2013). Growth and Cycles in Australia’s Wine Industry. Adelaide: University of Adelaide Press

Esterl M. and Kelly, R. (2015). “Pour results: $145 million of wine, down the drain”. Retrieved 1st October 2016, from http://www.wsj.com/articles/SB10001424127887324348504578607221851262206

Carmody, B. and Creagh, S. (2013). “Australian wine industry tackling climate change”. Retrieved 29th September 2016, from http://theconversation.com/australian-wine-industry-tackling-climate-change-16758

Kimmorley, S. (2015). “Asia’s love for Australian wine has made exports boom”. Retrieved 29th September 2016, from http://www.businessinsider.com.au/infographic-asias-love-for-australian-wine-has-made-exports-boom-2015-10

Lockshin, L. (2010). “Consumer purchasing behaviour for wine: what we know and where we are going” Retrieved 5th September 2016, from http://academyofwinebusiness.com/wp-content/uploads/2010/05/File-030.pdf

Pearlman, J. (2015). “Australian ditch beer for wine as alcohol consumption at 50-yer low”. Retrieved 28th September 2016, from http://theconversation.com/australian-wine-industry-tackling-climate-change-16758

Winetitles. (2016). “Number of wine producers, by state”. Retrieved 29th September 2016, from http://winetitles.com.au/statistics/wineriestable21.asp

Winetitles. (2016). “Domestic wine sales”. Retrieved 27th September 2016, from http://winetitles.com.au/statistics/domestic.asp

Worthington, B. (2016). “Growth in China drives Australian wine exports to highest value in a decade”. Retrieved 28th September 2016, from http://www.abc.net.au/news/2016-01-21/australian-wine-exports-2015/7104022?pfmredir=sm