MGT 4227
Group 10
Case analysis (Question 1)
Wong Kit Shan 53034871
Lau Po Yan 53024994
Chan Yan Fu 52632479
Ho Ho Ting Alan 53117283
Global Wine War
Q.1.1 how did the French become the dominant competitor in the increasingly global wine industry for centuries?
In the beginning during the Middle Ages, the Europe nobility began planting vineyards as a mark of prestige, this started the market for premium wine.
In the production aspect, the introduction of vineyard horses in the early 19th century led to vines being planted in rows and thus, each farmer can work a plot of 7 hectares. This made the vineyards in France producing more efficiently.
In terms of distribution and marketing, rich French merchant traders called négociants would handle exports, and with the
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More subsidies
The French Minister of Agriculture can provide more subsidies for the agriculture in order to develop some new technologies, which can speed up the time on production and increase the quality of the products.
3.2 What advice would you offer to the French wine industry association?
1. Holding international wine-tasting festival
In order to raise the competiveness of the wine industry in France, there should be some large wine festival held. Due to the decrease of the demand on wine in France, it is important to encourage the interest of the public on wine again. It is believed that some large wine-tasting festival can attract wine companies from around the world to join and create the atmosphere of wine drinking in France.
2. In-depth research on customers’ taste
It is suggested that the French wine industry association should do some in-depth research on recent customers’ wine taste to help the wine companies to have better understanding on customers. For example, the demand of French on wine has decrease but the demand on high quality wine has increase. It would be better to even know which specific grape French people like nowadays.
2. Freedom to
The winery industry can be categorized into red and white wine segments. The red wine segment, measured by tonnage of varietals crushed, has grown at a compounded annual rate of 4.7% for 10 years from 1989 to 1998, and a year over year growth rate of 8.2% from 1998 to 1999. Judging by the strong growth rate experienced in the red wine segment, it is reasonable to conclude that the red wine segment is in the growth phase of the life cycle model. In addition, production of red wine varietals which are relatively unknown such as syrah and sangiovese nearly doubled in a year from 1998 to 1999. The white wine segment, however, is at the mature phase of its life cycle as the segment shrunk slightly by 0.42% from 1998 to 1999. Overall, the industry is still at the growth stage lead by growth in the red wine segment.
The structure of the wine industry is quite different around the world. The barrier to entry is relatively higher in the New World than in the Old World. Referring to the market data on the level of concentration in 1998, people can see a few players dominate the markets in Australia and the U.S. while the level of concentration is quite low in Europe. Therefore, the rivalry in Old World is intense there.
The premium wine segment is quite concentrated with high barriers to entry making mergers and acquisitions a strong and prevalent growth strategy. With industry analysts forecasting the demand for premium wine to grow at 8% to 10% per year, many former non-rivals are now becoming a threat. Jug wine producers are entering the premium market and beer and spirit producers
The dynamics of the global wine industry are better understood through a brief history of wine as well as an overview of the wine making process. Some countries have longer historical and cultural ties with wine then others and that can affect the quality and perception of the product in the eyes of the consumer. Also, the conditions in which the wine grapes are raised and the processes used to make the wine can create a superior wine and therefore a competitive advantage.
Wine production involves two parts of economic activity – viticulture and wine making in the winery. In the global context, wine production is dynamic due to the influence of globalization, technological advancements and extensive research. These have essentially influenced the nature, spatial patterns and the ecological dimensions of the wine industry.
The buyer’s power within the wine industry varies between different places in the world. There are for example strategic differences between Europe and the “New World”. The “New World” includes countries like the US, Australia, Chile and South Africa. In Europe there is a big competition
MontGras, a medium-size Chilean winery, has to formulate an export strategy. It has to decide whether to emphasize the U.S. or U.K. markets, which also offer different positioning and pricing proposals. It has twice failed to penetrate the U.S. market, because distributor relationships fell through, and is deciding between two new potential partners. In the United Kingdom, it is offered participation in a supermarket promotion that will boost volumes but at the expense of price maintenance.
The treat of new entrants is low. The cost to start a vineyard is really expensive. Most wine firms have been around for a while and are some sort of family business or a major corporation. So their industry know-how, economies of scale advantage, and learning curve cost advantage makes them hard to imitate. Plus when you start a vineyard, there is no payback for at least five years.
The United States wine industry is a 12 billion dollar industry and is composed of 7,000 wineries and around 1,800 different companies. The three major companies within the industry are Constellation brands, E&J Gallo, and The Wine Group Inc. The industry has made its way through the economic crisis at a better rate than some of the other U.S industries however in order for them to continue to see any type of growth it is important that they acknowledge their issues and find ways in which they can rectify them. The majority of the issues among the industry are problems that cannot be directly controlled by individual wine companies. Therefore it is imperative that wineries find away to use these issues to their
This industry has seen very limited growth since 1986. Based on Exhibit 4 (C-271, the total wine consumption in the US) and Exhibit 5 (C-271, per capita wine consumption in the US) the wine industry is in the maturity stage. It could
Chateau Margaux is one of the five first-growth Bordeaux wine producer; it and has one of the finest names of Bordeaux and the number of drinkers worldwide is growing through the years. Chateau Margaux’s wines are used by the connoisseurs and luxury consumers. They are facing an uncertain future, because of losing market to New World producers (such as California, Australia, South Africa and New Zealand) which have lower prices and more accessible flavours. Nowadays wine drinkers are changing tastes, which could cause a big problem.
Lowered domestic sales may result in a greater emphasis on exports, however the recent trend showed how French exports continue to loose market share to the New World (see diagram below).
The report first delivers a background of market attractiveness and uncontrollable macro-economic factors relevant to market entry such as the political and economic climate, socio-cultural, legal, environmental and technological factors that may effect and influence the international marketing practices of the organisation in entering the Chinese Wine Market.
Nowadays, in the “Old World” countries of Europe, where the bulk of the volume is still produced, this is of great concern. However, consumers, especially younger drinkers, prefer the high quality wine from famous brands which are imported into Europe by the “New World” player, and the growth rate is at average10% per
This paper will outline an executive summary of a marketing strategy of a new wine brand to a targeted audience that will incorporate the buyers motivation, psychographics, and demographics. A description of the overall marketing strategy will include advertising, customer relationship manager and a Public Relations campaign. Finally, a an overall strategy to position the brand against the competition will be outlined.