Founded in 1966, Robert Mondavi launched his namesake winery in Oakville, California and went on to become one of the most prominent names in premium wines in the United States in addition to establishing a significant presence on the world stage. A pioneer in the use of new technologies, wine education, and unique marketing, Mondavi established himself as a well-known name in the wine industry.
Mondavi’s success from its founding to the late twentieth century can be attributed to a number of factors. A VRIO Analysis (See Figure 1 VRIO Analysis) shows some of the distinct resources and capabilities that Mondavi employed that helped attribute significantly to his success over the years.
Resource/Capability Value Rarity Inimitability
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Each of these, at the time, would have fit the requirements to make Mondavi more competitive from a VRIO perspective, at least over the short term. Each clearly added value to the production of wine, would be considered rare and temporarily inimitable as these were often pioneered by Mondavi, and were certainly exploited by the company for their various wines. Unfortunately, each of these, although pioneered by Mondavi, were eventually replicable by rivals in the industry as well as new entrants.
What was more substantial to the success of the company in the early stages were the capabilities and resources that were sustainable over the long term that helped to provide an edge over the competition. The use of a gravity flow system at the Oakville location to move the juice to the fermentation tanks added to operational efficiency, reduced costs, and would have been difficult to reproduce due to the capital requirements. Also, partnering with other international winemakers would have required an established reputation and brand that would not be easily attainable and take years to attain. As for the advanced marketing, the wine tours, education, and ads in fine wine magazines – these all would have required substantial capital to make this achievable by others; certainly inimitable by any new entrant. And lastly, to improve the quality of the wine and the aging process, the purchasing of French Oak Barrels would have also have been
Key success factors in the winery industry include competitive pricing, high grape quality, label and blend differentiation, and diverse distribution channels.
Its bread and butter products face severe competitions. Woodbridge, for example, contributes to 57% of Mondavi’s total revenue but the competitors such as Gallod or Beringers’ are trying to penetrate into the market with aggressive prices and new brandings. Also, the competitors are spending money for marketing and promotion activities in sophisticated ways while Mondavi revamped its marketing messages recently.
Due to the fact that consumers have a plethora of premium wines (substitutes) to choose from and there is no penalty for switching between brands consumer buying power is fairly high, making consumers sensitive to price increases. As previously mentioned, the competition for sourcing quality grape growers is high making switching costs high as well. In order to circumvent the dependency on outside growers, Mondavi is starting to increase its internal sourcing capabilities.
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