Competitive strategy of wine industry Essay

The fuddle may appear to be a simple drink with limited form available, has turned into a multibillion dollar a year industry with enormous variation and an increasingly sophisticated consumer base. The variation available and changes in the age groups who argon becoming the major market places for wine producers have created visible market trends that heapnot be ignored. These trends also affect the global market. Focusing on market scale and brand expertise, these opponents have capitalized on the globalization of the wine industry.Recently, more and more wine production is taking place in New founding regions such as parts of Australia, Chile, and the United States, which have gained a strong comparative advantage in the wine industry. Another problem is that some wine firm (usually cut or Italian) are not capable to satisfy the demand of country such as China which has a huge population and even if the quite a little who drink wine are not a lot the level of wine consu mption is increasing and as a consequence the amount of trade is growing as the graph below shows. Source All material 2010 2012 Twisted Pine Productions.Imports of bottled wine in China increased by 94% year-on-year (y-o-y) to US$1. 27bn in 2011, according to data provided by the China Culture Association of Poetry and Wine (CCAPW). According to CCAPW, the total volume of imported wine climbed 76. 5% y-o-y in 2010, while it increased by 80. 9% y-oy in 2011. CCAPW also revealed that sales of domestically produced wine grew 36. 3% y-o-y to CNY34. 2bn (US$5. 4bn) in 2011. Wine continues to be dominated by domestic brands, and although imports from major producing nations such as France have grown, they remain beyond reach in price terms for all just now the most affluent of Chinese consumers.As a consequence of these barriers, winemakers from leading winemaking countries have entered the Chinese market via joint ventures, providing expertise and advice to local vineyards, gum olib anum finding a means of capitalising on this growing market. Its very important distinguish the industry of wine in 2 main grade Small producer who has high prices, low level of competitors but low production capacity focused on niche Big producer who has medium/low prices, more competitors and high production capacity focused on economies of scale RivalryBarriers to Entry The wine industry represents substantial barriers to entry. The most large of these barriers is the price of land. Prices of land for vineyards has risen sharply. Along with the initial investment in land, thither is a large capital investment in equipment. There are requirements for routineing facilities and for storage facilities of large barrels of wine. Time is also against the new comer to the wine industry. It will often take years of aging beforehand a wine can be brought to market making the return on investment very slow.Degree of Rivalry The wine industry is an industry with many competitors. A high number of competitors suggest that price competition is very high. Along with the high number of competitors, there is also substantial consolidation of larger brands. Companies such as Foster Brands, Constellation, and Gallos have been purchasing smaller wineries and often have brand portfolios with as many as one century plus wine brands in the portfolio. These larger producers are using their power to push smaller manufacturers off the shelves. Power of BuyersBuyers in the wine industry can be grouped into two categories, distributors and retailers. The distributor market has undergone intense consolidation with the five largest liquor distributors having over thirty percent of the market. The retailers also have a great deal of power over producers. The two largest wine retailers are Costco (with 10%) and Wal-Mart (with 9%). Threat of Substitutes Brand loyalty is depend of the country, there are some countries accustomed to the use of wine which have acquired expertise allowin g to learn about wine and to be loyal to a certain producer.Though there are other customers, such as Americans which has not the knowledge of the product that may be loyal to a certain product such as a merlot, they do not care who makes it. Supplier Power There are several suppliers. One supplier is the vineyards. These vineyards lack power, the global market has been deluge with grapes from California, Australia, and several other countries. With all of these pressures, there is very high competition and low power of suppliers. Other suppliers such as bottlers are also considerably substituted so they lack significant buying power. Conclusion regarding rivalryThe problem with the wine industry is the consolidation of distributors and buyers. With so much power in the reach of buyers, a winery postulates to be large so that they cannot be pushed around by the buyers. This is why many small wineries have consolidated they need to be larger to gain bargaining power. key success f actors in the wine industry BEING DIFFERENT J. Lapsley and K. Moulton 2001 explain in their book sure-fire Wine Marketing how crucial it is that wine products seek a real identity. An appellations success is based on its ancestral and rigorous attributes, and of course, on the growers competence.A newer approach consists of developing branded wines and assuming that a brand conveys a particular identity derived from its specific competitive military position and astute advertising. SEGMENTING THE MARKET The advantage of having real market segmentation is that consumers can be grouped homogeneously. This helps to improve the efficiency of any commercial actions undertaken. McKinna 1987 showed that wine consumers could be classified into four main market segments connoisseurs (25%), students (51%), new consumers (10%), and bulk consumers who drink wine served in boxes, etc. (14%). These averages may cover significant national variations.The market breakdown will vary depending on wh ether the country in questions is Old World and accustomed to well established benchmarks like appellations, or New World and more spontaneously interested in specific branded wines or grape varieties. MOVING CLOSER TO THE MARKET Mudill, Riding, Georges and Haines 2003 have highlighted distribution channel denseness as the key variable in the world wine market. Like wine producers, actors in these channels have engaged in countless mergers and acquisitions in their attempts to gain more power vis-a-vis the major retailers and to shorten the logistics chain.In many sectors of activity, value added has steadily moved downstream, benefiting retailers instead of entrepreneurs who are in the process far upstream. This has triggered a merger-mania with companies trying to move as close as possible to the end user by eliminating intermediaries. FINDING A DIFFERENT instruction TO COMMUNICATE It is known that amongst the various marketing mix tools available to wine sector product managers , conferences advertising plays a role that is all the way important. Furthermore, although one of communications main goal is to attract new (and often young) consumers.The Internet can help sponsors here by providing an additional vehicle for media communications. Kehoe and Pitkow 1996 have clearly shown that the Web targets a mainly male population that is relatively young, influential, and which enjoys above-average education. Their E-commerce has increase sales by 11% in the year 2011. Conclusion To achieve a good ranking in the wine industry it is necessary to analyze the own product, the global market and figure out what yours goals and objectives are. After having settled this, follows the knowledge of an international strategy. Srategy suitable for the wine industryIn the wine industry, the used strategies change depending the dimension of the companies. In the small company is recommended use the home reverberation strategy, selling the alike products in both domestic and foreign markets, having a strong name and characteristic to loyalty a specific consumers grouped in a niche. Instead in the big companies is recommended penetrate the market using a transnational or even global strategy since rivals are the same in most country markets so there is a strong competitiveness that has to be attacked by low costs and global standardization strategy. MARCO SIMONINI