Wine Case

Case: Crafting Winning Strategies in a Mature Market: The US Wine Industry in 2001

1. How attractive is this industry?

--> No (there are many downward pressures on price and margin)

- Market is already crowded (too many players in not so big market)

- More wineries entering the market (because of low barriers for entrants - low start up costs) (In U.S, increased from 600 to 2500 in the past 30 years)

- Demand for wine is low and it is not growing fast (only 10% of American drank wine regulary in 2001 --> average global sales growth is 1-2% per year since 1994)

- Many substitutes (e.g., beer, spirits)

2. Following the logic of competitive strategy(e.g. Porter's 5 forces), should a company enter this industry and if yes, what should their strategy be?

- No

3. Following the logic of competitive strategy (e.g. (Porter's 5 forces), what strategy should an established player follow?

Create uncontested market space

Create and capture new demand

Break the value-cost trade-off

Align the whole system of a firm's activities in pursuit of differentiation and low cost

4. Following the logic of competitive strategy (e.g. (Porter's 5 forces), what strategy should an established player follow?

Create uncontested market space

Create and capture new demand

Break the value-cost trade-off

Align the whole system of a firm's activities in pursuit of differentiation and low cost

- chance to win by improving either quality or price

- bargaining power of distributors and major retailers (costco, sam's club, etc...) are very high + they focus on low priced/high volumn sell of wine

- "economies of scale" works well in this industry --> No wonder why most winery focuses on low priced/high volumn sell