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 case

1. How attractive is this industry (based on Porter 5 forces analysis)

1. Threat of new entrants : HIGH

New entrants have low barriers to entry, and also easy entrance for new wineries to the wine market.

1. Bargaining power of buyers : HIGH

More wineries are entering the market because of low-priced grapes.

Production surpass consumption by 15-20%

A lot of consolidation between retailer and distributor

Switching cost is low

1. Bargaining power of suppliers : LOW

Wine producers that having their own vineyards try to control from the operation from production line into distribution.

Inexpensive options for wine machinery

Easy availability of land

Suppliers > consumers

Switching cost is low

1. Threat of substitutes : HIGH

Approximately there are only 10% who categorized as wine regular customer.

46% preferred beer or spirits.

35% consumed alcohol beverage but not wine

low switching cost

1. Competitive Rivalry : HIGH

Number of US wineries increased more than 400%

Downward pressure on price and margins

Large companies spent around 40% as their marketing and distribution plan

Over-supply of wine to the market

1. Following 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 :

...