Business Policy Assignment-Us Wine Industry

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Differentiation Strategy:

The global wine production outstripped consumption by 15-20% from 1997 to 2001. The average growth rate of the wine industry was 1-2% from 1994 to 2001 and the number of companies in the industry grew over 400% from 1975. Thus, with little growth in demand and an increasing number of players in the market, downward pressure on price and margins set in. There were various varieties of wine, beer and alcoholic spirits being sold at nominal cheap rates. This left hardly any scope of differentiation for any new player to enter the market.

Strategy to Enter the Industry

Any new company should try to create a Blue Ocean

• Untapped market demand

• Unknown market space rather than fighting in the Red Oceans

The new entrant should expand the market rather than targeting the already overcrowded market. This can be achieved by:-

• Targeting the masses i.e the 90% population that doesn’t drink wine in exchange for letting some traditional customers go.

• Creating a new market between premium and budget segments.

• Solving major customer problems and change their perception about wine.

Applying Blue Ocean Strategy

Eliminate

What factors should be eliminated that the industry has taken for granted?

• Wine Industry jargon which is difficult to comprehend.

Reduce

What factors should be reduced well below the industry standard?

• Unnecessary focus on age, vineyard, grapes etc.

Create

What factors should be create that the industry has never offered?

• New price segment

• New varieties for a wide range of drinkers

• Ease of drinking wine

Raise

What factors should be raised well above the industry standard?

• General perception of wine among masses.