Problem Statement
Cork’d is a New York based wine social network. The site has been very successful; however, it is at a point where it is encountering financial distress. Cork’d’s start-up funds are diminishing and they are shorthanded on developers. The company is confronted with two major alternatives (1) Stay with their current business model or (2) Create a different business model in order to not only stay on business but to compete and regain the members both individuals and wineries that they have lost to their competitors.
Situation Analysis
Since Cork’d inception in February 2006, the company was designed for and by wine lovers. Time showed that this industry had such a demand that needed more dedication and that is when
…show more content…
Major Strategic Alternatives
There are two major alternatives, which may be considered by Cork’d:
1. Current model is good but execution is weak
2. Different model is needed for generating revenues
Staying with the current model
This alternative would imply that only one source of income would be utilized. Therefore, their major marketing campaign would have to be concentrated on aggregate value to wineries through the website. However, Cork’d is behind building the website, which only indicates that not enough time is dedicated to the same. Emphasis would need to be put in how to provide better value to both wineries as well as users.
Adopting another business model
This alternative would imply a consideration to the following models:
- Advertising
- User fees
- Selling wine (becoming an online distributor to member wineries or commissions from various online distributors linked from the site)
The more advertisement, the more exposure the company will have. Even though, Gary mentions the website when he is invited to different shows; additional advertisement campaigns could be launched, such as advertisements on the website (wine related, i.e. wine accessories).
At the same time Cork’d is trying to make a decision, Cellartracker.com, a competitor is charging an user fee according to the amount of wines and comments each user has. That is a great idea. Cork’d needs to keep in mind
“The size of global wine industry in terms of revenue , at the beginning of 21st century ranged from 130 to 180 billion in retail sales.” Furthermore, There are over 1 million wine producers in the world.
During the last decades, some remarkable evolutions of the global wine industry have dramatically influenced the base of the industry structure, with technological update, innovation, and new players coming in, the wine market as well as the competition within this market have come to a new dimension. In the following, we will analyze briefly the main points of this evolution and group those points into several categories. Change on the demand side ‐ Demand went down in the traditional market. There is a huge geographic shift in demand from the traditional highest-consumption countries like France, Germany, and Italy to the new markets in countries like the USA and Australia. In addition, there is
This is bringing about a glut of cheap, decent wine into the market at a time when Napa real estate is pricey and our wines expensive as a result. Economically, we have a price sensitive market and our sales as a result can be expected to decline in the event of a difficult economy. The Congressional Budget Office is expecting slow growth for another two years. We face a couple of key domestic risks as well. The first is that some of the best retail outlets for our audience (like Trader Joe's and Whole Foods) are driving costs down with their own budget lines. In addition, we still face challenges in developing a direct-to-consumer business across state borders.
As the industry changes, wineries offering wine clubs must also change, and always promote the wine club as something fun to do. Fresh ideas and changes to wine will ensure the club keeps up with consumer tastes, competitive pricing, and sustainable farming practices. As more consumers formulate ideas based on website information in making decisions to visit a winery on an upcoming vacation, a well-written website is important. Most wine club members are tourists with only about 20% being “day trippers” (Penn, pg. 73). Therefore, use good strategy when developing a website and hire professionals (Williamson, 2014). Furthermore, wine club members enjoy wine and make it almost a hobby. For some collecting wine is a “cultural and educational experience” (Williamson, 2014). Providing what a wine club member needs and desires, can deliver greater commitment and interest to the wine, leading to purchases
I’m fascinated with wine, and I want to know all I can about wine: how it’s made, and how the industry works. I daydream about working long hard days on a vineyard, I tear up with happiness while watching documentaries and reading books and articles about wine, and I always find myself thoroughly investigating wine labels. Wine is interesting to me because so many components go into the process of making it. Agriculture, science, communication, physical labor. It’s thrilling, social, personal, artistic and a learning process that never ends.
Create a core list of wines to appeal to most all customers. Make sure these wines can be stocked by all distributors and insist that they are. Eventually add specialized wines and adapt the online store to display location-specific inventory.
The US winery industry had a growth rate of 4.7% between 2006 and 2011, and is expected to grow by a rate of 4.9% over the next five years [ (IBISWorld) ]. In California alone an average of 175 wineries have opened every year since 2000 [ (Richard Green) ]. The states of New York and Virginia have been major players in the US wine industry. The data shows that the demand for wine has been increasing at an exponential rate over the past 5 years. Average annual revenue for the wine industry is expected to be estimated at $20.2 billion through 2016 [ (IBISWorld) ]. The growth of the wine industry, particularly over the past 10 years, can be attributed to a few key drivers in the market. Per capita consumption of alcohol has increased
Amazon.com is currently working on an online store that would sell wines direct from the manufacturer to the consumer.
Today, wine continues to play an important role in society from both an economic and social perspective. Wine was conceived to be a sophisticated product with the level of sophistication varying based on the value proposition of the brand, market positioning and consumers socio-economic status.
Many factors contribute to the intense competition between wine-producers. The end consumers of wine have many product options available to them along and a vast array of available substitutes, including beers and spirits. The product differentiation between producers cannot be easily interpreted by most purchasers, which leads to premium wines having lower revenues.
Access to distribution channel measures barrier to entry due to the secure distribution channel created by the existing wine companies. This is especially true in the case of RMC since the company employs a three-tier of distribution system as described earlier. By doing so, RMC secures its distribution channel by having its own wineries as well as strengthen its relationship with wine suppliers, wholesalers and local retail businesses in the U.S. market (Thompson & Strickland 2003). Therefore, it is clear that local distribution channels for wine is already served by RMC accordingly. Silverman & Castaldi (1999) explains that this situation makes a new firm must persuade the channels to accept its product through price breaks, cooperative
Since RMC has established its brand image as the top quality premium wines through years of wine development and partnerships with top world brands like Marchesi de’ Frescobaldi, the Chadwick, and Opus One, it is more attractive for RMC to pursue higher income market segment. The high earnings associated with greater wine consumption. This market segment is less sensitive to price changes, high-end wines demands usually exceed supply which creates an opportunity for this segment, and retailers have lass of bargaining power since producers can sell high-quality wines through restaurants, hotels, and wine shops.
Analyzing the External environment is important in the strategic decision making for the organization in that these factors will affect the company’s choice of direction and its internal processes. There are two specific categories of the external environment factors that will be discussed, the remote environment and the industry environment. The remote environmental factors important to the success of the organization are the economic, political, technological factors. In order to create their strategic action plan, the company must also have a clear understanding of its competitive forces included in the industry environmental factors. The factors the company must look at are the entry barriers
Information seems to be the most valuable asset in any business situation. It is essential to A& A 's success that new data is gathered in order to prioritize its actions. This data should include everything possible dealing with the wine market. Specifically A & A needs to continue to find the statistical relationship between its end user customer demand and supply figures. Forecasting for this new business model has become difficult and this data would help objectify the problem.
Businesses can be recompensed for their advertisements to perform on the sheets of a variability of websites, most normally in the method of banner promotion. The admiration of a website typically commands the price of enlisting an advertisement. Some businesses involve themselves in mutual marketing, which can benefit amended expenses. Many promoters also aimfor consumersby using mailing lists and by inflowingdeliberations in online mediums and chat areas, though this is sometimes disheartened by the group’s mediators.