Bonny Doon Analysis

1379 Words Apr 5th, 2015 6 Pages
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Bonny Doon
Case Analysis

Table of Contents

Introduction 1

Industry Analysis 1

Firm Analysis 2

Strategic Issues 3

Evaluation of Alternatives 4

Recommendations 5

Implementation 5

Appendix
Figure 1 - Porter’s 5 Forces Model

Figure 2 - Bonny Doon Growth & Distribution

Figure 3 - Implementation Plan

Introduction
Bonny Doon currently has an enviable position in the 1990’s Californian wine-producing industry. The company has successfully differentiated itself from its competition and achieved a first mover advantage in terms of selling “undervalued” wines. However, due to increased rivalry and a changing and increasingly challenging market,
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However, Bonny Doon is vulnerable and reliant on its suppliers, as 80% of the firm’s grapes are bought from external growers. Bonny Doon requires unpopular grape varieties and grapes that meet high quality specifications (which decreases agricultural yields and creates a trade-off for growers). They need to develop long-term relationships with the growers to ensure uniformity and high production quality with respect to the firm’s key product input: grapes. On the other side of the value chain, the firm has preferred small-medium sized distributors for their product. This has enabled them to retain higher profits, despite selling wine in smaller quantities.
Profitability Analysis
During the last two quarters of 1999-2000, the company has experienced increasing revenues but profit margin contraction. There is insufficient information disclosure in the financials to source the driving factor. However, the largest driver of sales is through its distributors and Bonny Doon’s EuroDoon products (Figure 2). From a P/L standpoint, we believe that the margin fluctuations can be ignored, with a view of focusing on strategic initiatives to maximize revenue and the quantity sold. Although there is a need for expansion financing, Grahm (82% ownership) does not want to lose control of how he produces wine through diluting ownership. Finding an appropriate source of financing continues to be an issue for the company.

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