Mondavi Wineries - Strategy

1081 Words Oct 1st, 2012 5 Pages
I. Summary
Mondavi Wineries intends to grow the company’s wine market share organically, without benefit of established wine acquisitions or joint ventures. An analysis of the industry and competition should help establish future strategic course.
II.a. Barriers to Entry
The industry contains excessive barriers to enter the wine production market. First, the wine industry requires quite an extensive amount of financial resources. In New World and European markets, costs of premium wine land range from $100,000 to $250,000 per acre in addition to development and maintenance of a vineyard.
Premium grapes are also costly, and the wines have a maturation phase that must be passed before a rival firm can enter. In addition, the
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But this strategy puts these producers in direct competition with larger, established wineries, including large multi-national joint venture groups as well as the smaller, yet established, wineries in Europe.
The challenge isn’t to just “make a great wine”. The challenge is to get that wine to tables. There has to be extensive marketing and promotion and the marriage of what can be produced to what the public wants to drink. It could be “hit or miss” with a large investment gamble.
IV.a. Mondavi Key Strategies and Performance
Moving into the current century, Mondavi decided to control capital expenditures and not grow the company through acquisitions. It has instead decided that the brands are strong enough to capture additional market share organically. While COGS remained constant (45% gross margin return), EBIT and EBITDA ratios increased favorably. In order to maintain current debt coverage, Mondavi would be wise to continue the recommended course. The company has enough capacity to increase production of current brands, based on demand.
IV.b. Recommendations
Based on the Porter analysis, most of the forces are favorable to Mondavi, with the exception of the vast amount of competition in the industry. Based on the market distribution reports, it would appear Mondavi did a good job of

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