Evaluation of the Structure of the Global Wine Industry
The current structure of the global wine industry exists due to major and consistent changes that have occurred over the decades. Time brought in new investors and the industry changed enormously due to the consolidation of new competitors. Consequently, it is necessary to explore a few factors that led to such changes in the global wine industry.
The structure of the global wine industry has been constantly changing to reflect a more competitive and open business environment. One of the key factors pioneering the structural changes in the industry is the fact that interested parties learned the art of wine making. This was inevitable because Mondavi in his endeavour to promote wine drinking as a culture encouraged visitors to tour his winery and taste the new wines (Roberto 6). As a result, interested investors managed to get firsthand knowledge concerning the entire procedure.
Industry Analysis
A closer look at the industry in which Robert Mondavi runs business reveals two environments, each with different opportunities and challenges. These environments are the new world and the old world (Roberto 3). Although both sets of milieu provide opportunities for growth, the new world proved to be more promising in terms of acquiring a competitive edge. One of the outstanding factors that would make it more beneficial for Mondavi to operate within the new world is the fact that the environment emphasises on the use of machinery and technology. Although this would increase the cost of production, technology and automation would enable Mondavi to enhance the consistency and quality of wine produced (Roberto 2). Considering the echelons of competitiveness, the new world becomes recommendable if Mondavi is to maintain a brand that would traverse both domestic and global markets. Secondly, unlike the old world, the new world emphasises on consumer branding making it more attractive (Roberto 2). Consequently, Mondavi will experience increments in sales because consumers like to associate the flavour of wine with a particular variety of grapes rather than geographical location as deployed by the old world.
Threats Faced by Robert Mondavi
Robert Mondavi faced three categories of threats.
Competition and rivalry: The first appearance of this form of threat occurred when consolidation hit the wine industry. New world producers engaged in three types of acquisitions to counter Mondavi’s resilience and grip in the wine market (Roberto 3). Premium wineries purchased or merged with direct rivals, jug wine producers started acquiring premium wineries to take advantage of altering consumer tastes, and other alcoholic beverage firms diversified into the premium wine business (Roberto 4).
Capital related threats: Operating under the cover of the old world may have been a little friendly in terms of inputs required. However, Mondavi still operated within the parameters of a capital-intensive environment because of the need to acquire large pieces of land. The stability of the new world forced Mondavi to invest heavily in machinery and technology unearthing a new threat in the face of his faltering economy.
Marketing and distribution: Conventionally, Mondavi was in control of the channels used in distribution, selling much of his wine off-premise through supermarkets, wholesale price clubs, mass merchandisers, and liquor stores (Roberto 5). However, the intervention of the government delinked Mondavi from all established channels of distribution. This threatened his existing level of market command.
Entrance of Diageo, Foster’s, and Allied Domecq into the Premium Wine Business
There are two key reasons why the companies entered the premium wine business. Firstly, the stage had already been set and Mondavi had efficiently done the groundwork for other companies to thrive. The second and most important reason for their entry derives from the opportunity presented by premium wines in terms of the growing customer base – a loophole that Mondavi had failed to utilise. The demand for premium wines escalated consistently as well as the profit margins.
Diageo, Foster’s, and Allied Domecq all sought to use a similar strategy. Their strategy was to capitalise on the growing demand for premium wines using already existing brand names as dealers in alcoholic beverages through aggressive acquisition (Roberto 16). The strategy made a lot of sense because it immediately placed their wine in a position of authority concerning the already existing market share. Mondavi decided to affirm his authority in the market by engaging to focus on the organic growth of his premier brands (Roberto 16).
Strategic Alternatives for Mondavi and Recommendation
Mondavi deployed two instinctive strategies. He worked on the current positions of premium wines to ensure that the positions improved compared to other competing brands. In addition, Mondavi assigned competent personnel to manage each specific brand of premium wine. Nevertheless, an additional recommendation would suffice to keep the company afloat even in the toughest of challenges.
It is important for the management to keep a close watch on changing trends in the industry especially concerning competitive strategies used by rivals. For instance, the management should cease from overlooking a strategy as simple as aggressive acquisition by new market entrants. Although countering such stratagems with organic growth proved to be effective, it would have been more advantageous to consider using the same strategy to acquire the most competitive brands in the market as well.
Works Cited
Roberto, Michael. “Robert Mondavi and the Wine Industry.” Havard Business School 3.1 (2005): 1-32. Print.