Executive Summary
The report describes the background of the industry also include the purpose and aim of the report. Through out the analysis two problems are identified: (1) what are the key success factors of McGuigan Simeon Wines and (2) does McGuigan Simeon Wines have enough resources and capabilities to compete and grow during the next 5 years. The report is based on SWOT and PEST Analyses, Porter’s Five Forces model and financial ratio analysis.
- The main recommendations identified are
- Market expansion and international expansion
- Improved product line
- Maintain a strong brand image in the international arena
- Increase revenue growth
Introduction
Background
The aim of the report is to investigate market position of McGuigan Simeon Wines and analyze the main trends and factors affected the business. The report identifies the following issues: competitive position of the company and its current strategy. The main questions the report tries to answer: (1) what are the key success factors of McGuigan Simeon Wines and (2) does McGuigan Simeon Wines have enough resources and capabilities to compete and grow during the next 5 years. The report is based on SWOT and PEST Analyses, Porter’s Five Forces model and financial ratio analysis.
Strategy
McGuigan Simeon Wines is a typical marketing organization which has four basic functions: (1) marketing planning, (2) product and market management, (3) advertising and promotion, and (4) market and marketing research. Marketing channel members have a great impact on how McGuigan Simeon Wines can or should manage these functions. It is therefore essential that the selection of channel members and the development of channel programs be consistent with the objectives of the marketing organization that will manage the channel. Product and market management organizations like McGuigan Simeon Wines are given special attention as channel managers in the development and management of the marketing organization channel (Australian Wine Industry 2008). Society desires the preservation of small business, yet craves the benefits of efficient mass producers and distributors. It limits competition but seeks the low prices of vigorous competitive effort. it wants the lowest prices for consumers but high wages for labor. McGuigan Simeon Wines follow social corporate responsibility issues and introduces environmentally friendly policy in order to meet community demands.
Major Issues
- What are the key success factors of McGuigan Simeon Wines
- Does McGuigan Simeon Wines have enough resources and capabilities to compete and grow during the next 5 years. The report is based on SWOT and PEST Analyses, Porter’s Five Forces model and financial ratio analysis.
Internal Environment Analysis
SWOT is a widely used thinking framework for identifying Strengths, Weaknesses, Opportunities and Threats SWOT analysis shows that McGuigan Simeon Wines obtains a strong position of the market because of its unique vision and services proposed to customers. SWOT shows that McGuigan Simeon Wines successfully identifies the main advantages and threats of correct market position and company’s operations.
Strengths
The strengths are strong brand image and expert system, excellent web-site and customer support. Resource-based philosophy and innovations create new opportunities for market development and brand recognition. Customers’ loyalty can be achieved through the people who are employed by McGuigan Simeon Wines.
Opportunities
The opportunities include high potential to growth and profitability, professional management team and corporate culture, customized order system and free shipping. There is a great opportunities for the company is this field, because specialized shops, throughout the world are interested in goods produced in the environmentally friendly manner.
Weaknesses
The main weaknesses are low market potential and uniqueness of the product. Competition is the main threat for McGuigan Simeon Wines. In spite of weaknesses and threats, McGuigan Simeon Wines has an attractive position based on a combination of cost management and customer services (Chaffy et al 2000).
Threats
Limited geographical market and increased competition arethe main threats for McGuigan Simeon Wines.
External Analysis – PESTEL
Today, political situation is stable marked by democratic processes and liberalization reforms. Strong political traditions have a great impact on Australian market. Political interference and corruption are the main risks for a foreign company (Crawford 2003).
Legal Factors
Legal Environment: Australia introduces laws and regulations in order to support foreign subsidies and attract FDI (foreign direct investments). In order to support national economy, the governmental prevents price rises, or even to rolls them back in basic industries such as steel. Governmental involvement seems to relate price increases to the impact on inflation and increased productivity. Government has the influence to block or roll back price increases (Hollensen 2007).
Economic situation
Economic situation in the country is marked by low inflation rates and high income per capita. Thus, liberalization and high level of investments can be considered as opportunities for a company to enter this country. Australia has higher standard of living. For wine company, there are also the necessities of making long-run capital commitments, meeting the requirements of joint ventures with nationals, and the imposition of special income taxes and import duties on necessities, as well as differences in social legislation, location considerations, protection of home products, governmental attitudes and control, laws affecting labels and standards, transportation and communications problems, and the risks of inflation, currency devaluation, and expropriation (Hollensen 2007). All these create many additional uncertainties to those encountered in national marketing.
Social-demographic factors
Social-demographic factors suggest fast population growth and decreased mortality rates. Both in physical appearance and in most aspects of their culture-notably, their language, their traditional form of administration, and their religion. It is the northern half of Australia which has the larger population, and, in spite of provisions for moving refugees to the south, this distinction is not likely to disappear entirely (Johnson and Scholes 2003).
Technological factors
Technological factors involve the Internet access and development of telecommunication infrastructure, new methods of doing business and information availability (Innovation the key to a good drop 2007). Such factors as continued economic growth, increased disposable income, vigorous domestic and foreign competition, accelerating technology, automation, population decentralization, expansion, and innovation will spur the appearance of this new marketing form. The application of computer technology and the use of new analytical techniques has added greatly to the efficacy of planning activities. Such tools as critical paths, input-output analysis, payoff matrices, decision trees, linear programming, and simulations (Kotler & Armstrong 2005).
- Financial Ratio
- This financial ratio technique highlights those factors that are critical to maintaining the strategic direction of a business. They are the foundations for ensuring a culture’ of continuous performance improvement and preparing the overall business for both the boom and recessionary periods which typify the economic cycles in which corporates operate (McDonald, 2003).
This technique of financial analysis is intended to provide an overview of the financial performance of the corporate. The financial ratios can be applied to the business to examine current achievement and trends. They can also be applied to competitors to enable external benchmarks’ of performance to be established.
The challenges at this stage are how to achieve rapid growth and how to finance it. The decision as to whether or not to enter this stage and pursue rapid growth may be influenced by the business leader wanting to make more money, desiring to lead a large business or perhaps for the status. Alternatively it could be driven by the demands of the customers who may want to put more trade with the business and who might take their trade elsewhere if the business cannot respond.
Competitive Environment
Threat of new entrants is low because entry barriers are high and competition among companies is strong. The problem is that volume size does not significantly change the cost base. Competitors provide commodities’ with little differentiation and customer loyalty is low. In addition, high inventory costs and competence barriers prevent many companies to enter this market.
Threat of substitute products is possible thus the majority of buyers will not easily switch purchasing to the substitute without penalty. Wines cannot be produced through a different technology and enter the market. This is a unique product which can be substitutes only by cheap products or cheap minerals.
Bargaining power of suppliers is high because McGuigan Simeon Wines relies heavily on high quality products and on time delivery. McGuigan Simeon Wines suppliers have a unique availability product they can exert a strong influence over prices and conditions of supply, therefore potentially putting pressures on the businesses purchasing their product. as the most important, there is a limited number of suppliers in this industry.
Bargaining power of buyers has a great impact on McGuigan Simeon Wines because there are a limited number of buyers who can afford its products. These facts show that competitive forces are strong and the rivalry is based on inventory management and ability of companies to deliver their products in the shortest period of time. In retail industry fixed costs are high, and McGuigan Simeon Wines has fewer inventories relative to annual sales than other companies (Chaffy et al 2000).
Resources, Capabilities, Competencies
Resources
- Quality and customer satisfaction
- Competitor orientation
- Customer service (IBM)
- Innovative culture (Hewlett Packard/3M)
- Willingness to change
- Staff retention
- High fliers vs team players
- Quality of resources
- Responsibilities and accountabilities defined
- Clear, relevant and simple
- Provides for career development and motivation of staff
- Flexible and responsive to change
Capabilities
- Strategic thinking ability
- Responsiveness to change
- Ability to analyse based on fact not opinion
- Ability to turn ideas into action
- Product development capability
- Entrepreneurial focus
- Marketing competence
- Production control.
Competencies
- Concentration on consensus building to ensure commitment to change
- Focus on external achievement and continuous progress
- Integrity
- Open’ culture
- Enthusiasm
- Ability to recruit, develop and retain staff of sufficient quality
Current Strategy
In considering marketing from a management point of view, McGuigan Simeon Wines are concerned with two perspectives. First, marketing must be regarded as a major viewpoint, a focus, or a purpose of the total business. Second, marketing must be viewed in terms of managing the activities of the marketing department. Prior to the 1990s, the activities bearing on marketing were viewed largely as sales management in character. Under the direction of a sales manager, marketing activities were often unplanned and conducted in a rather haphazard manner. A change has now occurred (Fill, 1999).
Even top-level marketing executives have a new designation; they are no longer sales managers but vice presidents or directors of marketing. The scope of their authority has broadened, and all marketing activities have been consolidated under their control. Moreover, the influence of marketing over other functions in the organization has spread. In short, the basic philosophy of operation for most companies has changed from a production orientation to a market orientation. In corporate decision making, the central role of marketing is now emphasized. Viewed as a key component in corporate survival and growth, marketing is becoming more of a planned and goal-oriented management activity. The corporate challenge has progressed from producing what is easiest to producing and marketing what consumers desire (Paley, 2006).
Recommendation
McGuigan Simeon Wines should view European market as a strategic local market and a location for global operations. the company should save costs on advertising and promotion selling directly to apparel manufacturers and small factories. This strategy will help to create a core of loyal supporters and repeat buyers. This strategy will help to overcome possible demographic changes and attract new market segment in order to sustain strong brand and market image as a leader in the wool industry. The sales strategy is to build and open new locations on schedule in order to increase revenue. McGuigan Simeon Wines is well-positioned to take on the leadership role. It has the resources and certainly had the technological capability (Stacey, 1996). The major responsibility of marketing is to deliver and maintain the highest possible standard of living, to see that products and services offered for sale are those desired by consumers, and to distribute them in the most effective manner possible from the point of view of both consumers and companies. Therefore, the delineation of profitable market segments becomes critical for individual companies. Markets are subjected to numerous contradictory pressures (Hamel and Prahalad 1996).
Conclusion
McGuigan Simeon Wines obtains a competitive position on the market and has all necessary resources and capabilities to remain competitive during the next five years. Thus, Australian market represents a limited geographical market with low potential to grow. European market can be viewed by McGuigan Simeon Wines asa strategic alternative for further growth. The main challenges with the new product line will involve competition, price level and customer’s loyalty. The new strategy should combine features of innovative design and unique brand image which has a great impact on decision to purchase. Strategic benefit can therefore be gained through the integration and coherence of the organizational market and new product strategies. This integration process can be achieved by the generation and sharing of a common ‘vision’.
Bibliography
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