Robert Mondavi Company Essay Example for Free

Robert Mondavi Company EssayCalifornia drink-maker Robert Mondavi has been one of the worlds to the highest degree innovative and high- step producers of fair wine-colored-coloured. The Mondavi family did significant effort on showing the Napa Valley region to the forefront of international winemaking. Robert Mondavi is an Italian migrant and started his winemaking business since 1960s. His intelligence and rage in wine lead him to be a legend in Californian premium wine industry and owned blemishs like Robert Mondavi Napa Valley, Robert Mondavi Coastal, Woodbridge, Vichon Mediterranean, Caliterra and Lucente. Since 1979, Mondavi has similarly produced, in joint partnership with the Baron Phillippe de Rothschild wine family, the ultra-premium Opus One label. The party sells about 10 million cases of wine per year, with Woodbridge as its top-selling label. In 2001, the go with earned $481 million in revenues and distributed wine in more than than 80 countries. The Rober t Mondavi Corporation went public in 1993, although the Mondavi family controls 92 percent of voting stock.Problem recitalHow can the Robert Mondavi Company strengthen their competitive advantages and thrive in the long run in the global wine industry with more established and consolidate competitors.External Analyses Porters Five ForcesBuyersThe bargaining force play of buyers in the wine industry is fairly high due to their concentrated control of gross sales at both wholesale and retail levels. Several large distributors control a substantial shargon of the market and generate most(prenominal) of the revenue for wine producers much(prenominal) as Mondavi. At the retail level, supermarkets and discount chains save become more concentrated, often accounting for 70% or more of off-premise sales in Europe. In fact, Mondavis largest wholesaler, Southern Wine and Spirits, accounted for 29% of the firms sales. And Costco, the largest wine retailer in US, in addition accounte d for 10% of Mondavis summarise sales volume. Theconcentrated bargaining index number of buyers gives the large wholesalers and retailers significant influence and power over wine producers business decisions.SuppliersThe bargaining power of suppliers is relatively wiped out(p) in the wine industry due to the large number of suppliers for raw materials such as corks, bottles, and grapes and prices for these raw materials atomic number 18 relatively stable as a result of significant rival. This situation creates less bargaining power of suppliers. On the otherwisewise hand, backward integration within the industry also weakens the bargaining power of suppliers because the companies can control their supply chain. For instance, Mondavi signs long-term contacts with its grape suppliers and works closely with growers to improve grape quality and availability. This practice increases the price stability and limits the suppliers bargaining power over the company.EntrantsThe threat of upstart entrants in the wine industry is fairly low. Winemaking is a capital-intensive business that requires significant investments in working capital, as headspring as the cost of acquiring land. For luxury wine producers, an acre of land can sell for as much as $150,000 in California and $250,000 in France. at that place is also the fact that a new plot of land cannot produce revenue for several(prenominal) years, due to the maturity of the grapes. A new entrant mustiness be able to sustain itself in the industry with no revenues or profits for a reasonably long start-up period. For these reasons, the threat of new entrants in the wine industry is fairly low.RivalryThe threat of rivalry is very high in the premium wine business. Major focused competitors in the premium wine market include Kendall-Jackson, Trinchero Estates, Southcorp and Robert Mondavi. Large-volume producers such as EJ Gallo and Constellation Brands are also shifting toward the premium wine market. And e ven large alcoholic beverage firms such as Diageo, Fosters Group, Brown-Forman and Allied Domecq are acquiring wineries to enter the premium wine business. The number of big competitors andaggressive acquisitions within the industry makes the competition of rivalry exceedingly intense in the premium wine industry.SubstitutesThe threat of substitution in the wine industry is high since there are many an(prenominal) alternatives including both alcoholic and non-alcoholic beverages. The alcoholic beverages mainly include beer and distilled spirits, while the non-alcoholic beverages include soda, coffee, and water. According to Exhibit 18a, beer accounts for nearly 55% of the World Market Share between the top 5 firms of beer, spirits, and wine, whereas wine only accounts for roughly 3%. Other substitutions include cheaper and large volume producers of wine such as EJ Gallo and Constellation Brands, which are both Mondavis competitors.Internal Analyses VIROAccess to capitalMondavi (MO ND) is a publicly traded company listed on NASDAQ, which enables the company to extensively finance its investments and expansion through its entryway to the capital market. Mondavis overture to capital is valuable as the firm raised approximately $600 million in exchange for its stock shares. Mondavis access to capital market is also obsolescent since many of its competitors are still privately held or independent. In addition, the huge expenses and complicated processes of an Initial Public pass make Mondavis access to capital market costly to imitate. Finally, Mondavi is organized to benefit from this imaging and the firm has utilized its capital to invest in several new production lines, new brands, land acquisition and winery acquisitions etc.Path colony on landOne resource of Mondavi is its cart track dependence on land. Robert Mondavi bought his first winery in Napa Valley in 1943 for $75,000. Today that land is worth more than five times that amount. Since 1943, Monda vi has made many similar purchases, and the land is only increasing in shelter. For this reason, Mondavis path dependence on land creates value for the firm.Mondavis path dependence on land is also rare in the industry. Not many of Mondavis competitors suck in the same report with purchasing real estate as Mondavi. Since path dependence on land results from past actions, and since real estate in the wine industry is always appreciating, it makes this resource very costly to imitate. Finally, the organization is benefiting from Mondavis path dependence on land. Without it, the company would be spending millions of dollars on purchasing land, and would most likely not have the same competitiveness that it has today. organizational complex body partMondavi has reorganized its organization structure into three distinct business units RMW, Woodbridge, and Joint Ventures Small Wineries. This structure is valuable to the firm as it helps to lift the brand clarity within the company. Customized sales and marketing strategies help shape the distinct competitive positioning for each of the firms brands. Although Mondavis organizational structure is not common in the industry, it would not be very costly for its competitors to imitate this structure.Variety of brandsOne capability of Mondavi is its modification of brands. A variety of brands creates value for the firm because they can sell to different customers in different markets, thus increasing their customer base. Many of Mondavis competitors also have a variety of brands, making it not rare in the industry.ReputationMondavi has 16 different wine brands through company-owned wineries and joint ventures. Each brand had a paper for quality in its market segment and good relationships with the independent growers. It is definitely a valuable source of the company. However, a resource is rare simply if it is not wide possessed by other competitors. In this case, most of the competitors of Mondavi all have high quality reputation and well-known brand name, so it is not rare in the premium wine industry.High qualityRobert Mondavi Winery has been recognized as one of Americas highest-quality winemakers since 1960s. Mondavi consistently uses only high-quality fruit along with traditional winemaking and aging processes to produce premier wines. RMC wines high quality has attracted a good number of loyal customers and rewarded the company a decent market share. Nevertheless, high quality is not exceedingly rare in the segment, competitors such as Trinchero Estates, Kendall Jackson and many other traditional European wineries also produce quality wines.HistoryRobert Mondavi founded the iconic Robert Mondavi Winery in 1966. As early as the late 1960s, Robert Mondavi Winery helped introduce to California such fine winemaking techniques as the use of cold fermentation, stainless steel tanks, and French oak barrels. The history is the valuable and intangible source of the company. But since most of Mondavis competitor also have remarkable histories, it is not rare in comparison with others.Process innovationRobert Mondavi became one of Americas most innovative winemakers by introducing many new methods and techniques. These techniques included cold fermentation, stainless steel tanks, and the use of small French oak barrels as a way to age fine wine. He also enhanced the company by working with NASA to apply remote-sensing and digital mapping techniques which in turn helped enhance the vineyard. The company also developed a capsule-free, flange-top bottle. Mondavis innovative process is very valuable, because it keeps his company at the top of the industry. For example, in 1972 his 1969 Cabernet Sauvignon was named the best wine produced in California. take for granted these techniques are firm specific, Mondavis process is very rare and costly to imitate. Overall, the new inventions and innovative processes have allowed the company to be successful and earn money end-to-end the years.Alternative SolutionsMergerMondavi is watercoursely competing in a market were consolidation has become thenew norm within the past decade. Many of Mondavis competitors have been aggressively consolidating, and the results have been profitable for them. An optimal amalgamater partner would be with a well- established firm that already has a market presence in different geographic regions, such as Constellation. The advantages of this strategy would be the opportunities that would arise from entering new markets and regions, as well as the opportunity to become more cost effective. By consolidating like operations in both firms, such as accounting, the firm can reduce cost and increase the bottom line. other advantage of merging would be that the new consolidated company would have a viable presence in more market segment. The disadvantages of this strategy are possible public disapproval, as well as loss of independent reputation. Another disadvantage would be the initi al be involved with consolidating like operations, and other predictable costs of merging. To stay competitive in the industry and to gain market share in new geographic regions, it would be beneficial for Mondavi to construe the consolidation strategyGlobal expansionMondavi sells 90.5% of its wine domestically, but the United States is only ranked ten in wine consumption worldwide. For this reason, Mondavi should consider a global expansion strategy. The advantage of a global expansion strategy is the increased market share, and exposure to a larger customer base. Only 12% of Mondavis customers consume 88% of their wine. Mondavi must increase their customer base to stay competitive in the long run. The disadvantage of this strategy is the risk and costs involved when entering new markets. It is very expensive to not only place a product in a new market, but to also market the product and build brand awareness. Global expansion also takes a major time commitment and investment in human capital. These costs make it a very risky venture with no guarantee for success, because early-mover competitors, such as Southcorp and EJ Gallo, already have significant market share and resource advantages in these foreign markets. For the necessary reason of increasing their customer base, Mondavi should consider a global expansion strategy.Sale of the firmThe entire Mondavi reputation and history are built around the legacy of Robert Mondavi. When Robert Mondavi is no longer active in the business, it may create financial distress for the company. Mondavi built his winery from the location of a family business that produces high quality products with innovative processes and environmentally friendly methods. Over the years, Mondavi introduced new techniques to the California wine industry, and he also hosted concerts, art exhibits, and other cultural events at the winery. Mondavi has built his reputation and customer loyalty by producing award winning products and being i nvolved with the community. If Robert Mondavi is no longer here, then his reputation and history may die with him. For these reasons, Mondavi might want to consider selling the company as an exit strategy.Recommendation and ImplementationOverall, we recommend Robert Mondavi Company to merge with another well-established firm such as Constellation that holds significant market shares in both domestic and international markets. The new consolidated company would have the opportunity to enter new market segments and geographic regions. Cost effectiveness would be another huge benefit when operations and processes are consolidated. This option of conjugation is superior to global expansion in term of cost and time efficiency. Merger is also better than sale of the firm because it will keep the marrow squash competencies of the company rather than abandon the entire business.Once all the formalities of the merger are complete, the new company must start an integration process. The comp any must decide what name to keep, as well as what to do about the shareholders. If the company that Mondavi merged with is a public company, they must decide on how to convert the shares. If the company is a private one, they must make a decision on issuing more shares or buying out the current shareholders. The newly merged company must also start consolidating like operations as soon as possible to benefit from the forecasted cost savings. Finally, the new company must decided which brands will sell in which market, along with the appropriate enter and exit strategies.