Essay About Threat Of New Entrants And Us Wine Industry

Crafting Winning Strategies in a Mature Market : The Us Wine Industry in 2001 Case
Crafting Winning Strategies in a Mature Market : The US Wine Industry in 2001 caseHow attractive is this industry (based on Porter 5 forces analysis)Threat of new entrants : HIGHNew entrants have low barriers to entry, and also easy entrance for new wineries to the wine market.Bargaining power of buyers : HIGHMore wineries are entering the market because of low-priced grapes. Production surpass consumption by 15-20%A lot of consolidation between retailer and distributorSwitching cost is lowBargaining power of suppliers : LOWWine producers that having their own vineyards try to control from the operation from production line into distribution.Inexpensive options for wine machineryEasy availability of landSuppliers > consumersSwitching cost is lowThreat of substitutes : HIGHApproximately there are only 10% who categorized as wine regular customer.46% preferred beer or spirits.35% consumed alcohol beverage but not winelow switching costCompetitive Rivalry : HIGHNumber of US wineries increased more than 400%Downward pressure on price and marginsLarge companies spent around 40% as their marketing and distribution planOver-supply of wine to the marketFollowing the logic of competitive strategy, should a company enter this industry and if yes, what should their strategy be?Based on the porter 5 forces, if the company doesn’t have any differentiation than the competitor then the company should not enter wine business. The new company should try to create a blue ocean strategy such as untapped market demand and unknown market space, rather than competing in red oceans that already overcrowded. Basically, the new entrant should expand and create a new market rather than targeting the 10% regular wine customer. To achieve this, new company should work on several things :