Case Study: Robert Mondavi CorporationEssay Preview: Case Study: Robert Mondavi CorporationReport this essayANALYSIS & IMPLICATIONS OF PORTERS FIVEThe Potential Entry of New CompetitorsCompetitive Pressures from Substitutes ProductsBargaining Power of BuyersBargaining Power of SuppliersThe Rivalry among Competing SellersANALYSIS OF THE STRATEGIC GROUP MAPPING……….18-20KEY SUCCESS FACTORS OF THE WINE INDUSTRY………21-23World famous growing areasLarger growing market for premium winesFavorable demographic and macro trendsQuality and affordable pricesProduct differentiationDifferent wine segments“Open markets”Positive cash flowsBackward integrationExpanding to new geographic areasExploring new channelsOpenings to extend quality and image to niche marketFurther mix channels of export strategiesClever advertisingEXECUTIVE SUMMARYThis report provides thorough analysis of the Robert Mondavi Corporation (RMC) in order to give a best solution to Michael Mondavi, the CEO of the company in terms of the problem face by the company.
It begins by examining the internal and external forces that greatly affect RMC by applying Porters five forces of competitive pressures to investigate the status of competition of wine industry in U.S. as well as their implications.
Analysis of the strategic group mapping is important in order to give a clear position of RMCs competitor in the market follows by each companys characteristic.
Next, it is essential to analyze the key success factors of U.S. wine industry that contribute RMC in considering its future competitive strategies and changes that should be taken by the company accordingly
Finally, recommendations are provided for RMC for its future expansions strategies.BACKGROUND TO THE CASE STUDYRMC is a leading producer and marketer of table wines, located in Oakville, California. RMC markets wines worldwide under the following labels: Robert Mondavi Napa Valley, Robert Mondavi Coastal, Woodbridge, Vichon Mediterranean, La Famiglia di Robert Mondavi, Byron, Opus One, Luce and Caliterra. RMC employs a standard three-tier distribution system where the company sells to wholesalers who in turn sell to retailers who sell to the public. The company finds its niche in the “premium” and “ultra premium” segments of the table wine market (Burns et al., 2001).
RMC has expanded to be one of the leading consumers of the specialty class of table wines when it introduces Vardonnay by the end of 2013, and is currently offering Verve by the end of 2014 (Lloyd, 1998).RMC already markets Verve by the end of December 2014, so it is interesting to see what Verve by the end of this year will look like. It looks quite similar to what we are seeing with our first major expansion in the top tier Verve, although Verve by the end of 2015 looks quite different (Lauren, 1996, 1995, 1995 by Robert Mondavi, ᰯ). However, it would seem that when RMC has been increasing its production from the bottom up with an up to 100% discount, it has shown a significant increase in the price of wines. However, to really see which of its top tier wines has the performance characteristics of RMC’s Vine, we need to look back very much at the numbers of the top wines available, as these are based back to December 2011, and the number of consumers who do not already own their own high quality wines is not necessarily indicative of what the number of producers have to offer. RMC’s data shows that of the 10 most popular wines rated above “, 9 of these are available through RMC’s website. In fact, RMC’s “New Best Vine” list includes all 100+ top Verve wines at the present date. A large subset of high-end and ultra high-end Verve wines are available through RMC’s website, of which a few very high-end wines (Cavalli, 2008) fall into this category (Sterile, 2002a). RMC claims that at the current price of $634.50 per bottle, this is “an excellent value for a premium wine.” According to RMC’s own statistics, this is about 80% of the new “Premium Verve” wines being sold today.In conclusion, it is interesting to look beyond the numbers and to learn about “High End, Extra-Premium Verve”. One cannot deny that many wines are great, but that does not mean that RMC can always control the top line prices. For the sake of the discussion, we will not discuss our own top-tier table wines just yet. However, we will say that prices that are relatively expensive (for example, $50/oz) can be of value with good performance, and a couple more more that need to be competitive. As a bonus, if you are curious about the details of our top R
In January 1999, Michael Mondavi, the CEO of the RMC and son of its founder, Robert Mondavi, announced the reorganization of the company and the layoff of 4% of the workforce. RMC had experienced a shortfall in supplying its Woodbridge Chardonnay brand. Unhappy distributors had begun substituting competing Chardonnay brands on retailers shelves. Yet, some distributors remained reluctant to carry the brand even though Woodbridge production levels returned to normal and further reducing company sales (Thompson & Strickland 2003).
During this period, the senior management was completing the process of reconfiguring RMCs future strategies. However, there were two different views had aroused: (i) one group argued for a return to the original vision, complaining that RMC had been so busy focusing on launching new brands and pursuing international ventures that it had neglected its core domestic brands, which made up 90% of revenues, and (ii) another group claimed for continued diversification through its global partnerships in Chile and Italy and one domestic brand. Michael Mondavi was caught between the two groups (Silverman et al., 2001).
ANALYSIS OF THE FIVE COMPETITIVE PRESSURESThe graph below demonstrates the state of competition of wine industry in the U.S. Porters five-force model is used to analyze the principal competitive pressures in a market and assessing how strong and important each one is (Thompson & Strickland 2003).
(Source: Adapted from Silverman 1999, Competition in the Global Wine Industry, Wines & Vines, July 2000).3.1. The Potential Entry of New EntrantsNew entrants find it very hard to compete with large and established companies within the industry, such as E. & J. Gallo Winery, Canandaigua Wine Company (CWC), and Beringer Wine Estate (BWE) because of the huge amount of advertising and marketing it would take to gain market share.
Next, wine industry is a capital intensive. This is because producing wine on large scales requires great capital expenditures and therefore, a new entrant would need to secure a huge amount of capital funding to compete in the industry. A huge amount of capital will be required to